Miller v. Miller

• Decision Date: 16 May 2019
• Docket Number: No. 107319,107319
• Citation: 135 N.E.3d 1271,2019 Ohio 1886
• Parties: Cody A. MILLER, et al., Plaintiffs-Appellees v. David MILLER, Defendant-Appellee [Appeal by Karen Michael, Proposed Intervenor-Appellant]
• Court: Ohio Court of Appeals

135 N.E.3d 1271

2019 Ohio 1886

Cody A. MILLER, et al., Plaintiffs-Appellees

v. David MILLER, Defendant-Appellee[Appeal by Karen Michael, Proposed Intervenor-Appellant]

No. 107319

Court of Appeals of Ohio, Eighth District, Cuyahoga County.

RELEASED AND JOURNALIZED: May 16, 2019

Edgar H. Boles, Dinn, Hochman & Potter, L.L.C., 5910 Landerbrook Drive, Suite 200, Cleveland, OH 44124, ATTORNEY FOR APPELLANT.

Scott J. Orille, Susan M. White, Weston Hurd, L.L.P., 1301 East 9th Street, Suite 1900, Cleveland, OH 44114, ATTORNEYS FOR APPELLEES For Cody A. Miller and RAM Sensors, Inc.

David Miller, pro se, 650 Station Boulevard, Suite 419, Aurora, IL 60504, For David Miller.

BEFORE: Sheehan, J., Boyle, P.J., and Headen, J.

JOURNAL ENTRY AND OPINION

MICHELLE J. SHEEHAN, J.:

{¶1} Proposed intervenor-appellant Karen Michael ("Karen"), f.k.a. Karen Miller, appeals from the trial court's denial of her motion to intervene and motion to vacate judgment in Cuyahoga C.P. No. CV-15-854301, an action involving plaintiffs-appellees Cody Miller ("Cody") and RAM Sensors, Inc. ("RAM Sensors") and defendant-appellee David Miller ("David"). For the reasons that follow, we affirm the trial court.

I. Procedural and Factual History

{¶2} Cody is the son of defendant-appellee David Miller and proposed intervenor-appellant Karen Michael. Cody's grandfather (David's father) gifted Cody and David each 50 percent of the shares of RAM Sensors' stock in 2009, when Cody was 15 years old. David was the director and president of RAM Sensors at that time.

A. Divorce Proceedings

{¶3} In November 2013, Karen filed a complaint for divorce against David. Karen and David entered into a separation agreement that was adopted by the court on January 12, 2015. The separation agreement provided for spousal support in the amount of $ 15,000 per month for 20 years, terminating December 2034. The agreement also provided that upon completion of the current spousal support, David was required to pay Karen additional support of six quarterly payments totaling $ 450,000. A term of the separation agreement provided that Karen relinquishes all rights and interest she may have to the assets and income of RAM except that David shall secure his spousal support obligations by executing a cognovit note and stock pledge to secure his payments. The separation agreement further provided that David shall not encumber, transfer, assign, pledge, or otherwise alienate his interest in RAM without Karen's prior written consent. Section 2(E) of the separation agreement provides:

E. Business Interests

[David] has an interest in * * * Ram Sensors, Inc. in consideration of the terms of this Agreement and the specific terms set forth hereinbelow, [Karen] relinquishes all right title and interest she may have to the assets and income of both entities except that [David] shall secure his obligations by assigning to [Karen] his interest in Ram Sensors, Inc. to secure the payments due to [Karen]. [David] shall execute a Cognovit Note and stock pledge to secure the payments and he shall not encumber, transfer, assign, pledge or otherwise alienate his interest in Ram Sensors, Inc. without [Karen's] prior written authorization until he has satisfied his obligations herein.

Finally, the domestic relations January 12, 2015 order provides that the domestic relations court "shall retain jurisdiction to effectuate the terms of the September Agreement, including the collection of spousal support due to plaintiff from defendant."

{¶4} 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 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 stock to be registered in her name, or (b) sell David's interest in the RAM stock at a public or private sale.

{¶5} 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.

{¶6} According to Cody, during divorce proceedings between his parents, his mother informed him that David had stolen funds from Cody's Vanguard account, which included distributions to Cody from RAM Sensors, and David was deliberately mismanaging and attempting to destroy RAM Sensors so that he would not have any assets with which to pay Karen spousal support. Karen urged Cody to file a lawsuit against David.

B. Trial Court Action

{¶7} On November 13, 2015, when Cody was 22 years old, he and RAM Sensors filed a verified complaint for money damages, declaratory relief, and injunctive relief against David in this underlying action. Specifically, the complaint alleged that (1) as an officer, director, and shareholder of RAM Sensors, David breached his fiduciary obligations by misappropriating funds belonging to Cody and RAM Sensors, competing with RAM Sensors, dissipating and committing waste of RAM Sensors' assets, and failing to disclose to Cody the records and financial statements of RAM Sensors despite repeated demands; (2) David exercised dominion and control over funds belonging to Cody and RAM Sensors, which amounted to theft and conversion from Cody's Vanguard accounts as well as distributions made by RAM Sensors to Cody; (3) David exercised dominion and control over funds belonging to RAM Sensors and its shareholders, which included Cody, for personal use and amounted to theft and conversion; and (4) David's use of his position and control over the accounts of RAM Sensors and Cody constituted unjust enrichment. The complaint also sought declaratory judgment regarding the parties' rights, obligations, and ownership interests in RAM Sensors and an injunction, prohibiting David from maintaining possession of funds belonging to RAM Sensors, writing checks on the company's accounts, or otherwise exercising any control over any of RAM Sensors' funds or taking any action that would impair the value of RAM Sensors.

{¶8} In February 2016, the trial court granted a temporary restraining order, removing David from control of RAM Sensors. Thereafter, the parties consented to a preliminary injunction. Because David failed to answer or otherwise defend the action, in January 2017, the plaintiffs-appellees filed a motion for default judgment against David to recover damages allegedly sustained as a result of David's theft from Cody and RAM Sensors. Based upon a forensic audit performed by Stephen Nelder, a certified fraud examiner, Cody and RAM Sensors sought 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. Subsequent to the filing of the motion for default judgment, David began settlement discussions with Cody and RAM Sensors.

C. Outstanding Spousal Support

{¶9} According to Karen, David was in default of his current support obligation in excess of $ 100,000. In January 2017, Karen and David purportedly entered into a second agreed judgment entry in the divorce case, which provided that David pay Karen spousal support, attorney fees, and travel expenses in the amount of $ 119,907.18. Under this agreement, 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. 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.

D. Trial Court Settlement Agreement

{¶10} As a result of settlement negotiations between Cody, RAM Sensors, and David, on April 13, 2017, the parties entered into a settlement agreement wherein 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.

E. Domestic Relations Court Filings

{¶11} 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...