State ex rel. McGirr v. Winkler

• Decision Date: 05 October 2017
• Docket Number: No. 2017-0474,2017-0474
• Citation: 93 N.E.3d 928,2017 Ohio 8046,152 Ohio St.3d 100
• Parties: [The State ex rel.] McGirr et al. v. Winkler, Judge.
• Court: Ohio Supreme Court

152 Ohio St.3d 100

93 N.E.3d 928

2017 Ohio 8046

[The State ex rel.] McGirr et al.

v.Winkler, Judge.

No. 2017-0474

Supreme Court of Ohio.

Submitted May 16, 2017

Decided October 5, 2017

Dinsmore & Shohl, L.L.P., and Brian S. Sullivan, Cincinnati, for relators.

Joseph T. Deters, Hamilton County Prosecuting Attorney, and James S. Ginocchio and Christian J. Schaefer, Assistant Prosecuting Attorneys, for respondent.

Robbins, Kelly, Patterson & Tucker, L.P.A., Michael A. Galasso, and Jarrod M. Mohler, Cincinnati, for intervening respondent.

Per Curiam.

{¶ 1} This case is the latest chapter in the ongoing campaign by disbarred attorney Stanley M. Chesley to shelter assets from his judgment creditors. In this original action, relators, Connie McGirr and 18 other judgment creditors ("the creditors"), seek a writ of prohibition to halt an action for an assignment for the benefit of creditors ("the ABC action") pending before respondent, Hamilton County Probate Judge Ralph Winkler.

{¶ 2} Judge Winkler has filed a motion to dismiss the petition. In addition, intervening respondent, Eric W. Goering, as assignee of Waite, Schneider, Bayless & Chesley Co., L.P.A. ("WSBC"), has filed a motion for judgment on the pleadings. The creditors have filed a motion to strike a memorandum filed by Goering in support of Judge Winkler's motion to dismiss. And lastly, Goering has filed a motion to clarify or modify this court's stay order.

{¶ 3} For the reasons set forth herein, we deny the motions and grant a peremptory writ of prohibition.

Background¹

{¶ 4} In December 2004, the creditors filed a lawsuit alleging that Chesley and three other attorneys had stolen millions of dollars in settlement funds while representing them. On August 1, 2014, the Kentucky trial court ruled that Chesley was jointly and severally liable for $42 million. The Kentucky Court of Appeals affirmed the judgment in all respects. Chesley v. Abbott , 524 S.W.3d 471 (Ky.App.2017).

{¶ 5} On March 21, 2013, the Supreme Court of Kentucky permanently disbarred Chesley for his conduct in the underlying representation. Kentucky Bar Assn. v. Chesley , 393 S.W.3d 584 (Ky.2013). Before he was permanently disbarred, Chesley was the president and sole shareholder of WSBC. On April 15, 2013, Chesley executed a wind-up agreement, pursuant to which Thomas Rehme agreed to hold the shares of WSBC in trust for the purpose of winding up operations.

{¶ 6} On June 23, 2015, Boone County Circuit Court Judge James R. Schrand ordered Chesley to transfer his beneficial interest in the WSBC shares to the creditors. Chesley has not transferred the shares to the creditors.

{¶ 7} On August 30, 2016, Rehme incorporated "Thomas F. Rehme, Trustee, Inc." as an Ohio for-profit corporation. Two days later, on September 1, 2016, he transferred the WSBC shares to the new corporation. On September 9, the corporation executed a "Deed of Assignment for the Benefit of Creditors" transferring the WSBC shares to Goering. On September 12, 2016, Rehme filed the deed in probate court, commencing the ABC action.

{¶ 8} On April 7, 2017, after Judge Winkler denied their motion to dismiss, the creditors commenced the present action for a writ of prohibition. At the same time, they filed a motion for an emergency stay of the ABC action.

{¶ 9} On April 12, 2017, Goering, as the assignee of WSBC, filed a motion in this court for leave to intervene. The next day, Judge Winkler filed a motion to dismiss the prohibition case. On April 17, 2017, this court granted the emergency stay and also granted Goering's motion for leave to intervene. 148 Ohio St.3d 1439, 2017-Ohio-1411, 72 N.E.3d 653.

{¶ 10} On April 24, 2017, the same day the creditors filed their brief in opposition to the motion to dismiss, Goering filed a pleading captioned "Memorandum in Support of Judge Winkler's Motion to Dismiss." Then, four days later, Goering filed an answer and a separate motion for judgment on the pleadings. The creditors responded with a motion to strike Goering's memorandum supporting Judge Winkler's motion. Lastly, on May 4, 2017, Goering filed an emergency motion for clarification or modification of this court's stay order.

The motion to strike

{¶ 11} S.Ct.Prac.R. 4.01(B) provides, "If a party files a motion with the Supreme Court, any other party may file a response to the motion within ten days from the date the motion is filed, unless otherwise provided in these rules or by order of the Supreme Court." (Emphasis added.) Thus, the Rules of Practice expressly authorized Goering to file his memorandum in support of Judge Winkler's motion to dismiss, and it was filed within ten days of the motion. We therefore deny the motion to strike.

The motions to dismiss and for judgment on the pleadings

{¶ 12} In order to dismiss a complaint under Civ.R. 12(B) for failure to state a claim, it must appear to the court that the plaintiffs can prove no set of facts in support of their claims that would entitle them to relief. O'Brien v. Univ. Community Tenants Union, Inc ., 42 Ohio St.2d 242, 327 N.E.2d 753 (1975), syllabus. Likewise, a Civ.R. 12(C) motion for judgment on the pleadings presents only questions of law. Whaley v. Franklin Cty. Bd. of Commrs. , 92 Ohio St.3d 574, 582, 752 N.E.2d 267 (2001). In this case, the two motions present the same question of law: whether Judge Winkler lacks jurisdiction to preside over the ABC action.

{¶ 13} There are three elements necessary for a writ of prohibition to issue: the actual or imminent exercise of judicial power, the lack of authority for the exercise of that power, and the lack of an adequate remedy in the ordinary course of law. State ex rel. Elder v. Camplese , 144 Ohio St.3d 89, 2015-Ohio-3628, 40 N.E.3d 1138, ¶ 13. However, if the absence of jurisdiction is patent and unambiguous, then the petitioner need not establish the third prong, the lack of an adequate remedy at law. State ex rel. Sapp v. Franklin Cty. Court of Appeals , 118 Ohio St.3d 368, 2008-Ohio-2637, 889 N.E.2d 500, ¶ 15. "Absent a patent and unambiguous lack of jurisdiction, a court having general subject-matter jurisdiction can determine its own jurisdiction, and a party challenging the court's jurisdiction has an adequate remedy at law by appeal." State ex rel. Enyart v. O'Neill , 71 Ohio St.3d 655, 656, 646 N.E.2d 1110 (1995).

{¶ 14} In this case, the first element is not in dispute: Judge Winkler is plainly exercising, or is about to exercise, judicial power. State ex rel. Vanni v. McMonagle , 137 Ohio St.3d 568, 2013-Ohio-5187, 2 N.E.3d 243, ¶ 7. Judge Winkler and Goering, in their respective motions, contend that the second element is likewise not in dispute, because Judge Winkler has clear statutory jurisdiction over the ABC action. We agree.

{¶ 15} The Ohio Revised Code establishes a comprehensive scheme governing voluntary assignments for the benefit of creditors, under the jurisdiction of the probate court. R.C. Chapter 1313. The probate court assumes jurisdiction upon the filing of the transfer deed (so long as the filing occurs within ten days of its execution). R.C. 1313.01. The probate court then has the authority to, among other things, appoint and remove trustees, R.C. 1313.03 ; remove an assignee, R.C. 1313.07 ; appoint appraisers, R.C. 1313.15 ; and order the private sale of property, R.C. 1313.24. And as R.C. 2101.24(A)(2)(a) and (b) make clear, the probate court's jurisdiction over a particular subject matter is exclusive when the Revised Code expressly confers jurisdiction over that subject matter upon the probate court and not upon any other court or agency.

{¶ 16} The evidence establishes that the transfer deed from the trust corporation to Goering was filed with the probate court within ten days of its execution, which is all that is necessary to vest the probate court with jurisdiction.

{¶ 17} The creditors challenge Judge Winkler's jurisdiction on three grounds. First, they contend that Judge Winkler lacks jurisdiction because Judge Schrand in Kentucky has already declared the wind-up agreement to be a sham and ordered Chesley to transfer his interest in WSBC to the creditors. But even assuming that it applies, res judicata is an affirmative defense the validity of which a second tribunal has jurisdiction to decide. State ex rel. Lipinski v. Cuyahoga Cty. Common Pleas Court , Probate Div. , 74 Ohio St.3d 19, 20–21, 655 N.E.2d 1303 (1995) ; State ex rel. Flower v. Rocker , 52 Ohio St.2d 160, 162, 370 N.E.2d 479 (1977).

{¶ 18} Second, the creditors argue that permitting Judge Winkler to proceed with liquidating WSBC despite Judge Schrand's orders would violate the Full Faith and Credit Clause, Article IV, Section 1 of the United States Constitution. However, we agree with the Supreme Court of Colorado that an assertion of finality based on the Full Faith and Credit Clause is "in effect a plea of res judicata based upon a foreign judgment" and that the second court has jurisdiction to decide the applicability of that plea. Leonhart v. Thirteenth Judicial Dist. Court, Sedgwick Cty. , 138 Colo. 1, 6–8, 329 P.2d 781 (1958).

{¶ 19} Third, the creditors argue that the ABC action is an "end run" around fraudulent-transfer litigation already pending before a federal court and the federal case should take precedence. The jurisdictional-priority rule provides that as between state courts of concurrent jurisdiction, the tribunal whose power is first invoked acquires exclusive jurisdiction to adjudicate the whole issue and settle the rights of the parties. State ex rel. Dunlap v. Sarko , 135 Ohio St.3d 171, 2013-Ohio-67, 985 N.E.2d 450, ¶ 9. The rule does not apply to proceedings in federal court. Wellman v. Salt Creek Valley Bank , 10th Dist. Franklin No. 06AP-177, 2006-Ohio-4718, 2006 WL 2614243, ¶ 8.

{¶ 20} In sum, we conclude that Judge Winkler does not patently and obviously lack jurisdiction over the ABC action. The creditors have an adequate remedy at law by way of appeal from any order Judge Winkler may issue, including an...