Quantum Capital Ventures v. Evans, 2004 Ohio 3173 (OH 6/21/2004)

• Decision Date: 21 June 2004
• Docket Number: Case No. CA2003-03-032.
• Citation: 2004 Ohio 3173
• Parties: Quantum Capital Ventures, LLC, et al., Plaintiffs-Appellees, v. Carlton Evans, et al., Defendants-Appellants.
• Court: Ohio Supreme Court

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2004 Ohio 3173

Quantum Capital Ventures, LLC, et al., Plaintiffs-Appellees, v. Carlton Evans, et al., Defendants-Appellants.

Case No. CA2003-03-032.

Court of Appeals of Ohio, Twelfth District, Warren County.

June 21, 2004.

Civil appeal from Franklin Municipal Court Case No. 01-05-CVF-251 with 02-02-CVF.015.

Christopher J. Cornyn, 10 Fairway Drive, Springboro, OH 45066, for plaintiff-appellee, Quantum Capital Ventures, LLC.

Gwendolyn R. Bowers, 1712 W. Third Street, Dayton, OH 45407, for defendant-appellant, Carlton Evans.

OPINION

YOUNG, P.J.

{¶1} Defendant-appellant, Carlton Evans, appeals a $9,519.23 judgment in the Franklin Municipal Court in favor of plaintiff-appellee, Quantum Capital Ventures, LLC. ("QCV").

{¶2} In 2001, QCV filed a complaint against appellant and Oak Hills Bank (n.k.a. Towne Bank) seeking to recover funds improperly withdrawn by appellant from QCV's account at Oak Hills Bank. QCV settled its claims against the bank for $10,000 immediately prior to trial, leaving appellant as the sole defendant. A bench trial held in August 2002 revealed the following facts:

{¶3} In the summer of 1999, following numerous meetings, Paul Nagy, Thomas Reichl, David Reichl, and appellant agreed to enter into a business venture for the purchase of real estate to be rehabilitated and resold. The business venture was to be composed of two limited liability companies and one corporation, all formed in the state of Nevada for favorable tax treatment purposes. Their intent was memorialized in an agreement (the "initial agreement") dated August 6, 1999 and signed on August 17, 1999. The agreement provides in relevant part that:

{¶4} "It is agreed that [appellant], Tom Reichl and David Reichl will each contribute *** $35,000.00 in cash for a *** 25% ownership of the business venture. Paul Nagy will contribute organizational and operational services valued at and for an equal share of *** 25% of the total business venture. *** In the event the business does not go forward, all remaining funds above or below *** $100,000.00 shall be returned to [appellant], Tom Reichl and David Reichl. It is agreed that we should proceed with this venture immediately, time being of the essence. Until the business is formally, legally and officially structured[,] no decisions or actions will be taken without the full consent of each of the four participants in this venture."

{¶5} The two limited liability companies, including QCV, were filed of record in Nevada on August 11, 1999. On August 20, 1999, the four individuals entered into and signed a written operating agreement setting forth their duties and obligations as QCV's members/managers. Pursuant to their initial agreement, Thomas, David, and appellant each deposited $35,000 into a business account at Community National Bank. On September 30, 1999, due to more favorable banking terms, the funds were withdrawn from Community National Bank and deposited at Oak Hills Bank, where two accounts were opened, one with $90,000, the other with $15,334.76. The parties agreed, and it was made clear to them that two signatures were required to withdraw any funds.

{¶6} In addition to his initial contribution of $35,000, appellant had also advanced $2,820 in expenses. The four members agreed that appellant would be reimbursed for those expenses. In furtherance of the business venture objectives, Thomas and appellant looked for favorable prospects of real estate to buy. Two proposals were made by appellant, however no purchase occurred. On October 1, 1999, Oak Hills Bank agreed to loan $ 100,000 to QCV. The loan was raised to $350,000 two weeks later.

{¶7} Meanwhile, as a result of the slowness in starting the business and concerns over Paul's honesty, appellant decided to withdraw from the business venture. On October 8, 1999, during a heated telephone conversation, appellant notified Paul of his intent and advised him he wanted his money back. On October 11, 1999, appellant unilaterally withdrew $37,820 from QCV's account at Oak Hills Bank. It is undisputed that the withdrawal was made without the required two signatures, without telling the other three members, and without their consent. Following an exchange of letters between appellant and Paul, the four members met on October 20, 1999. At that meeting, appellant confirmed his intent to withdraw from the business venture. He received a $2,820 check as reimbursement of the expenses he had previously paid. Appellant did not tell the other three members he had withdrawn $37,820 from QCV's account. That fact was discovered by Paul after the meeting.

{¶8} Despite efforts to convince appellant to redeposit the $37,820 into QCV's bank account and proceed with a withdrawal pursuant to the operating agreement, appellant refused to do so. QCV subsequently filed a complaint against appellant and the bank alleging breach of contract, conversion, breach of fiduciary duty, and impairment of business investment opportunity and reputation.

{¶9} On January 28, 2003, the trial court granted judgment in favor of QCV in the amount of $9,519.23. The trial court found that appellant unilaterally withdrew $37,820 in violation of the operating agreement, and that the withdrawal exceeded appellant's interest in the business venture at the time by $9,519.23. The trial court declined to grant a setoff for the $10,000 QCV received as a result of its settlement with Oak Hills Bank. This appeal follows.

{¶10} In his sole assignment of error, appellant argues that the trial court erred by ordering him to pay $9,519.23 to QCV.

{¶11} Appellant first contends that the trial court's finding he violated the operating agreement by unilaterally withdrawing $37,820 is against the manifest weight of the evidence. Appellant asserts that he had the authority to withdraw the money under either the initial agreement or the operating agreement.

{¶12} Judgments supported by some competent, credible evidence going to all the essential elements of the case will not be reversed by a reviewing court as being against the manifest weight of the evidence. See C.E. Morris Co. v. Foley Construction Co. (1978), 54 Ohio St.2d 279. A reviewing court should not substitute its judgment for that of the trial court when there exists competent and credible evidence supporting the trial court's findings of fact and conclusions of law. See Seasons Coal Co. v. Cleveland (1984), 10 Ohio St.3d 77.

{¶13} In addition, a reviewing court is guided by a presumption that the trial court's findings of fact and conclusions of law were correct. Id. The underlying rationale of giving deference to the trial court's findings rests with the knowledge that the trial court was best able to view the witnesses and observe their demeanor, gestures, and voice inflections, and use these observations in weighing the credibility of the testimony. Id. See, also, Myers v. Gibson, 66 Ohio St.3d 610, 1993-Ohio-9.

{¶14} Appellant asserts he had the authority to withdraw the money under the initial agreement because the business venture had not gone forward. We disagree.

{¶15} In its decision, the trial court found that the business venture had been formed: "two limited liability corporations were formed along with a regular corporation under the laws of Nevada in accordance with the earlier discussion of the parties. All parties executed an Operating Agreement, deposited the capital contributions ***, and began an initial search...