Reid v. Wallaby's Inc.
| Decision Date | 30 March 2012 |
| Docket Number | Appellate Case No. 2011-CA-36,Trial Court Case No. 2009-CV-0774 |
| Citation | 2012 Ohio 1437 |
| Parties | MARILYN REID Plaintiff-Appellant v. WALLABY'S INC., et al. Defendants-Appellees |
| Court | Ohio Court of Appeals |
(Civil Appeal from
Common Pleas Court)
OPINIONRendered on the 30th day of March, 2012.
JOHN D. SMITH, Atty. Reg. #0018138, John D. Smith Co. LPA, 140 North Main Street, Springboro, Ohio 45066 Attorney for Plaintiff-Appellant
BENJAMIN J. HELWIG, Atty. Reg. #0079184, Taft Stettinius & Hollister LLP, 40 North Main Street, Suite 1700, Dayton, Ohio 45423 Attorney for Defendants-Appellees
{¶ 1} Plaintiff-appellant Marilyn Reid appeals from a judgment rejecting her claims against Defendants-appellees Tony Peh and Wallaby's Inc., following a bench trial.Reid contends that the trial court erred in failing to render a verdict related to Wallaby's. Reid further contends that the trial court erred in holding that the doctrines of unclean hands, laches, and accord and satisfaction warrant judgment in favor of the defendants.
{¶ 2} We conclude that the trial court erred in failing to properly render a verdict against Wallaby's. We further conclude that the trial court erred in applying the doctrine of unclean hands, because that defense was not raised in the answers that were filed. The trial court did not err in considering laches, which was tried by implied agreement, but the evidence does not justify a finding of laches on Reid's part. The trial court also erred in applying the doctrine of accord and satisfaction, which was raised in the answers.
{¶ 3} Finally, we conclude that the doctrine of estoppel, which was properly raised and argued in the trial court, does not preclude recovery by Reid against Wallaby's and Peh. Accordingly, the judgment of the trial court is Reversed, and this cause is Remanded for further proceedings.
{¶ 4} Marilyn Reid and Tony Peh became acquainted through Peh's junior high and high school friendship with Reid's son, David. Peh and David Reid had been very close friends. Around 1994, Peh came up with the idea of starting a restaurant in Beavercreek, Ohio. This occurred after Peh had launched a successful restaurant project called Shades of Jade. Peh had already begun to move forward with the Beavercreek project, and the location was already chosen - the land had been purchased by Peh's father, Dr. Peh. Reid expressed interest in the project, and a corporation, Wallaby's Inc., was formed, with the following shares: Tony Peh was the majority shareholder, with 65%; Marilyn Reid owned 5%; NelsonReid, Marilyn's son, owned 5%; Peh's uncle, Wang Chao Chung, owned 5%; Mike Buckwalter owned 5%; David Reid, Marilyn's ex-husband, owned 10%; and Anita Lehman, the wife of the builder, Rich Leman, owned 5%.
{¶ 5} Due to construction cost overruns, there was not enough capital left to purchase kitchen equipment. Peh approached a kitchen leasing company about equipment, and received their standard lease form for the equipment he had selected. Because the leasing company required that someone other than Peh be the surety, Peh took the lease agreement to Marilyn Reid. Reid erased the name of the equipment leasing agent on the form, and inserted her own name as the leasing agent. She also erased her own name, which had been on the lease as the surety, and inserted Peh's name. Reid then paid $100,000 to purchase the equipment, which was placed in the restaurant. Both Peh and Reid signed the lease agreement, with Peh signing on behalf of Wallaby's and as surety.
{¶ 6} The lease provided for 36 payments of $3,519.64, plus applicable sales tax, beginning in March 1996, and ending in March 1999. In addition, the lease stated that the first and last month's payments, plus a $100 documentation fee, were to be paid at the inception of the lease, with total lease payments, including interest, to be $126,707.04. The monthly payments were due upon receipt of a statement, and the lessee had the option to purchase the equipment at the end of the lease for $1.00.
{¶ 7} After the lease was signed, no statements or invoices for the equipment rental were ever sent to Wallaby's bookkeeper, Debra Sullivan, who worked at Wallaby's between 1996 and 2006, or to Peh or his wife, Renee, who also managed Wallaby's for quite some time. No payments were ever made on the lease, {¶ 8} The evidence was disputed with regard to whether Reid ever made a demand for payment. Reid testified on this point as follows. Peh told Reid in July 1999, that he wanted to quit the business, and asked Reid to call a meeting of stockholders. Reid, who was the acting secretary of Wallaby's, sent out notices for an August 25, 1999 shareholder's meeting. Two days before the meeting, Reid handed Peh a list of things that the company needed to do try to do (identified as Plaintiff's Exhibit 2 at trial). Reid also handed Peh a written demand for payment on the equipment lease (identified as Plaintiff's Exhibit 3 at trial). According to Reid, the lease was discussed at the meeting on August 25, and Peh agreed to make arrangements to satisfy the lease obligation. Reid claimed this was documented in the minutes of the meeting that she had typed. She also stressed that when she referred to Peh making payment, that she was referring only to Wallaby's, not to Peh.
{¶ 9} In contrast, Peh testified that he never told Reid he wanted to quit. He told her only that he was tired, because the restaurant business is a long, grueling job. He acknowledged receiving Exhibit 2 (the list of items) a few days before the August 25 meeting, but denied that he had ever received Exhibit 3 (the written demand). Peh brought an attorney, Carolyn Mueller, to the August 25 meeting. He acknowledged that the equipment lease was discussed during the meeting, but stated that this was in the context of discussing all of Wallaby's outstanding debts. Peh denied that a demand for payment was made at the meeting, and denied agreeing to make arrangements to satisfy the equipment lease.
{¶ 10} Mueller testified at trial, and stated that Peh had called her on August 24, 1999. He had just received notice of a meeting, was very upset, and was afraid they were going to put the business in receivership. Peh sent Mueller documents, but there was nothing that asked for payment on an equipment lease. Mueller attended the meeting on August 25,1999, and took some notes. The meeting consisted mainly of bickering going back and forth about construction documents and not receiving things. Everyone was just kind of angry. Reid mentioned a lease, and Mueller asked if she had any documents, but Reid had none. Reid did not demand payment on the equipment lease at the meeting.
{¶ 11} The Wallaby's property was listed with a realtor at the time of the August 1999 shareholders' meetings. Thereafter, the property was listed off and on with different realtors. After August 1999, Peh did not make payments on the equipment lease, and Reid did not send written statements or invoices, nor did she make written demands for payment. Reid did turn in receipts for many other purchases she made for Wallaby's, like tables and decorations, and was paid by Wallaby's bookkeeper for these items. Reid had also been paid in full for expenses she incurred in obtaining a liquor license for Sunday sales.
{¶ 12} Concerning why the lease payments were not made, Peh stated that when Wallaby's first opened in 1996, it was very busy, as all new places are. Turning a profit in the beginning was difficult, because of the number of staff that had to be trained. After the "honeymoon" period, things died down, and the business did not do as well. Money was coming into the restaurant, but Peh had to pick and choose what bills to pay. Peh found out from reviews that Wallaby's was not very aesthetically appealing to people - people said that it looked like a bomb shelter. Wallaby's remained in business until 2007, more than ten years after the equipment lease was signed. During that time, Peh spent around $100,000 remodeling, trying to make the restaurant look better. He added tile floors, walls, and wood on the walls. If Reid had made demand for payment during this time, Peh would have made other choices of what to pay, and would have paid on the equipment lease, rather than spending money on remodeling and paying other bills. Based on discussions with Reid, Pehwas under the impression that Reid was relying on the equity in the building to get her money back. Reid also acknowledged at trial that the collateral may have depreciated over the time the restaurant was in operation.
{¶ 13} Unfortunately, Wallaby's never became profitable, and the restaurant stopped serving food in 2006, or early 2007. The bar side, which was called "The Gin Mill," remained open, because it would be easier to sell Wallaby's if it still had a liquor license and appeared to be a going concern.
{¶ 14} Reid testified that she learned in January 2007, while having lunch at Wallaby's, that Wallaby's was going to stop selling food on the restaurant side. Reid stated that she realized then that she was unlikely to be paid by Wallaby's for the lease. Consequently, Reid prepared a mortgage on the Wallaby's real estate for $100,000 plus interest, and filed the mortgage on January 17, 2007, with the Greene County Recorder. Peh signed the mortgage after being told by Reid that she was entitled under the lease to a mortgage.
{¶ 15} Previously, on January 4, 2007, the Ohio Secretary of State had sent a letter to Nelson Reid, Wallaby's statutory agent, indicating that Wallaby's articles of incorporation had been cancelled, based on Wallaby's failure to pay the necessary corporate franchise tax. The letter was addressed to Nelson Reid at the law offices of Marilyn Reid, but Marilyn Reid claimed that she was not aware of the letter at the time the mortgage was signed. Reid understood that the building was going to be put up for...
To continue reading
Request your trial