Michael v. Miller

• Decision Date: 04 February 2021
• Docket Number: No. 109121,109121
• Citation: 2021 Ohio 307
• Parties: KAREN MICHAEL (F.K.A. MILLER), Plaintiff-Appellee/Cross-Appellant, v. DAVID MILLER, Defendant-Appellee, [Appeal by Cody Miller, Third-Party Appellant/Cross-Appellee.]
• Court: Ohio Court of Appeals

2021 Ohio 307

KAREN MICHAEL (F.K.A. MILLER), Plaintiff-Appellee/Cross-Appellant, v. DAVID MILLER, Defendant-Appellee,

[Appeal by Cody Miller, Third-Party Appellant/Cross-Appellee.]

No. 109121

COURT OF APPEALS OF OHIO EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA

February 4, 2021

JOURNAL ENTRY AND OPINION

JUDGMENT: AFFIRMED

Civil Appeal from the Cuyahoga County Court of Common Pleas Domestic Relations Division

Case No. DR-13-349594

Appearances:

Weston Hurd L.L.P., and Scott J. Orille, for appellant/cross-appellee.

John V. Heutsche Co., L.P.A., and John V. Heutsche, for appellee/cross-appellant.

ANITA LASTER MAYS, J.:

I. Introduction

{¶ 1} Third-party appellant/cross-appellee Cody Miller ("Cody") is the adult son of plaintiff-appellee and cross-appellant Karen Michael formerly f.k.a. Karen Miller ("Karen") and Karen's former spouse defendant-appellee David Miller ("David"). This case arises from the divorce of Karen and David initiated by Karen in November 2013. The parties were married for 22 years at the time of their divorce journalized on January 12, 2015. Cody was approximately 20 years old at that time.

{¶ 2} The current issue on direct appeal is the trial court's postdecree determination of the scope of a lien that secures support payments pursuant to the separation agreement. Karen's cross-appeal advances that the transfer of certain assets from David to Cody requires that Cody be held personally liable for the nonpayment of spousal support by David.

II. Background

{¶ 3} David's father and Cody's grandfather, founded RAM Sensors, Inc. ("RAM Sensors"). In 2009, the grandfather gifted 50 percent of the shares of RAM Sensors to David and 50 percent to then 15-year-old Cody.

{¶ 4} There have been numerous filings in this case regarding property division and support. For efficiency, we extract additional background information from Miller v. Miller, 2019-Ohio-1886, 135 N.E.3d 1271 (8th Dist.) ("Miller I"). In that case, Karen appealed the "trial court's denial of her motion to intervene" and "to vacate judgment" in Cody A. Miller, et al. v. David Miller, Cuyahoga C.P. No. CV- 15-854301. Cody and RAM Sensors sued David for various counts including misappropriation of funds and requested a "declaratory judgment regarding the parties' rights obligations, and ownership interests in RAM [Sensors]." Id. at ¶ 7.

{¶ 5} "According to Cody * * * Karen urged Cody to file" suit against David in Miller I for stealing funds from Cody and "mismanaging and attempting to destroy RAM Sensors so that he would not have any assets with which to pay Karen spousal support." Miller I at ¶ 6. Faced with claims of "total compensatory damages against David in favor of Cody in the amount of $2,874,437.56, and in favor of RAM Sensors in the amount of $3,554,891.00, plus attorney fees and costs," settlement negotiations ensued.

{¶ 6} During Karen's attempted intervention, Karen stated that in January 2017, David and Karen alleged "entered into a second agreed judgment entry in the divorce case * * * for spousal support, attorney fees, and travel expenses in the amount of $119,907.18."

David was also required to execute any documents "necessary to secure funds and/or payment as to subject spousal support obligation owed to [Karen], including * * * assignment of [David's] interest in any and all corporate distributions from RAM Sensors, a new promissory note, cognovit note, and stock pledge agreement" concerning David's 50 percent of RAM Sensors' stock. Karen maintains that this second agreement secured the current support obligations.

Miller I at ¶ 9. "Both Cody and David deny Karen's claim, and there is no evidence in the record that the parties executed any new documents establishing the alleged new lien on the current support obligation." Id.

{¶ 7} In April 2017, David and Cody reached a settlement agreement in Miller I:

David consented to judgment in the case, the judgment being stayed, and the judgment being deemed satisfied upon the surrender of David's stock in RAM Sensors to Cody and the payment of certain life insurance proceeds to be received by David. The settlement agreement stated, in part, that David is the true and lawful owner of David's 50 percent stock and he has not sold, transferred, or otherwise encumbered the stock "except pursuant to the certain stock pledge agreement provided in favor of * * * Karen." Adopting the settlement agreement, the court granted a permanent injunction in favor of Cody and RAM Sensors, entered judgment in favor of Cody for $2,874,437.56, and ordered David to surrender and convey to Cody all of his interest in RAM Sensors as partial satisfaction of the judgment.

(Emphasis added.) Id. at ¶ 10.

{¶ 8} Subsequently,

On May 4, 2017, Karen filed a "motion to transfer [David's] 50% corporate stock * * *" and a motion for declaratory judgment in the domestic relations court, asking for the court (1) to find that David had assigned his interest in his 50 percent RAM Sensors stock to Karen at the time of the divorce and the stock pledge agreement remains in full force and effect, (2) to find that David's transfer of stock to Cody in partial satisfaction of the judgment in the general division common pleas case was an illegal transfer, and (3) to effectuate the transfer of his stock to Karen due to his wrongful transfer and his failure to pay current spousal support. Cody filed a motion to intervene in the domestic relations case to file a motion to dismiss, arguing that Karen's motion was not properly before the court because Karen's interest in RAM Sensors stock is a lien to secure the debt David will owe in 2034, and if David misses a current support obligation, the 2034 support obligation does not immediately become due and owing. Cody further argued that Karen cannot foreclose on the RAM Sensors stock because Cody is owner of all RAM Sensors stock, yet he was not a party to Karen's domestic relations action.

After Karen filed the motions in domestic relations court, counsel for Cody and RAM Sensors engaged Karen in settlement negotiations. Cody maintained that he received David's stock in partial satisfaction of the judgment against David subject to Karen's lien. He stated that he fully intended to protect and preserve his mother's lien and that the transfer of David's stock to Cody was expressly made subject to Karen's stock pledge agreement. According to Karen, because none of the purported settlement offers duplicated Karen's rights under the divorce decree, settlement negotiations failed.

On February 23, 2018, Karen voluntarily dismissed (withdrew) [without prejudice] her domestic relations motions, and on March 21, 2018, nearly one year after the final agreed judgment in the underlying matter in the general division court, Karen filed a motion to intervene and motion to vacate the agreed judgment entry in the underlying action. Cody and RAM Sensors opposed Karen's motion. On May 17, 2018, the trial court denied Karen's motion to intervene, finding the motion untimely. The court also concluded that it had subject matter jurisdiction over the plaintiffs' claims and, therefore, the agreed judgment entry was not void. Karen then filed a separate motion to vacate, which the court also denied.

Miller, 2019-Ohio-1886, 135 N.E.3d 1271, at ¶ 11-13 (8th Dist.).

{¶ 9} This court affirmed the denial of Karen's intervention for reasons that included the motion was untimely and Karen's abandonment of the alternative remedy available through the 2017 motion for declaratory judgment filed in the domestic relations court. We also explained that Karen's interest in the RAM Sensors stock was not impaired while prejudice to the parties, if intervention was allowed, would be substantial. Id. at ¶ 44.

David executed a cognovit note for the $450,000, which was secured by a stock pledge agreement on January 22, 2015. The pledge agreement provided that as security for payment of the $450,000 to Karen under the note, David pledged all of the equity interest he held in RAM Sensors, which was 50 percent of RAM Sensors' stock. The pledge agreement further provided that as long as David is not in default for the principal amount owed in the cognovit note of $450,000, David "shall have the right to exercise all rights, powers and privileges" as the owner of the RAM [Sensors] stock. Only if David fails to pay the principal of the $450,000 owed per the cognovit note can Karen have the right to (a) cause David's ownership interest in the RAM [Sensors] stock to be registered in her name, or (b) sell David's interest in the RAM [Sensors] stock at a public or private sale.

After executing the stock pledge agreement, Karen recorded a UCC financing statement on September 23, 2016, with the Ohio Secretary of State, which provided as follows:

Pursuant to the terms of a certain agreement between the Debtor [David Miller] and Secured Party [Karen Miller] entitled "Pledge Agreement," dated January 22, 2015, the security interest described herein is the first position lien on all of Debtor's right, title, and interest in and to Debtor's equity interest in RAM Sensors, an Ohio Subchapter S corporation, including all classes of stock whether certificated or uncertificated.

Miller I at ¶ 4-5.

{¶ 10} Also in Miller I, Karen argued that "the conveyance of David's interest in the stock as partial satisfaction of the judgment was illegal." This court disagreed.

Karen's interest in David's share of the RAM Sensors stock, however, is a lien that becomes due in the future; it is not a present interest in ownership of the stock. As part of the divorce settlement, David agreed to pay Karen $450,000 in additional support beginning December 2034. He then executed a cognovit note in the amount of $450,000 and secured it with a lien on his share of RAM Sensors stock, which was perfected by a stock pledge agreement and recorded with the Ohio Secretary of State. And the record shows that the transfer of David's 50 percent share to Cody was made subject to Karen's interest.

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