Wilson v. Ward

• Decision Date: 04 May 2009
• Docket Number: No. 08CA0071-M.,08CA0071-M.
• Parties: WILSON, Appellee, v. WARD et al.; Stabile, Appellant.
• Court: Ohio Court of Appeals

917 N.E.2d 821

183 Ohio App.3d 494

2009-Ohio-2078

WILSON, Appellee, v. WARD et al.; Stabile, Appellant.

No. 08CA0071-M.

Court of Appeals of Ohio, Ninth District, Medina County.

Decided May 4, 2009.

John M. Manos, for appellee.

Harry A. Tipping and Christopher A. Tipping, Akron, for appellant.

DICKINSON, Judge.

INTRODUCTION

{¶ 1} Nicholas Ward and Howard Stabile persuaded William and Sheryl Wilson to invest $120,000 to produce and market a document holder that Ward had created to ease getting through airport security. According to the Wilsons, Ward and Stabile lied to them about the number of other investors, the number of orders that had been placed, and how their money would be used. They sued Ward and Stabile for fraudulent inducement and for violating state securities law. The trial court entered a default judgment against Ward. Following a jury trial on the claims against Stabile, the court granted Stabile a directed verdict on the fraudulent inducement claim. A jury found in favor of the Wilsons on their claim that Stabile aided and abetted Ward in selling securities to them in violation of R.C. 1707.44. Stabile has appealed, raising six assignments of error. This court affirms because the trial court correctly instructed the jury on the burden of proof, the Wilsons properly tendered their shares, Stabile forfeited his argument that the Wilsons' claim is barred by the statute of limitations or the doctrine of laches, the trial court correctly refused to give an instruction on mitigation of damages, the jury's verdict is not against the manifest weight of the evidence, and the trial court correctly denied Stabile's motions for judgment notwithstanding the verdict and for a new trial.

FACTS

{¶ 2} After Ward lost his driver's license going through airport security in 2001, he developed a clear plastic document holder that a person could wear on a lanyard that would not have to be removed while passing through a metal detector. He obtained a patent for his design and formed a company called Skeye-ID to produce it. He thought he could sell the document holders to companies for use as a promotional device because their names could be printed on the lanyards.

{¶ 3} Ward had worked for a number of years selling computers to businesses. To promote his idea, he contacted Stabile, who he knew had contacts with a number of large corporations. He asked Stabile to promote Skeye-ID in exchange for a 20 percent share in the company. For financing, Ward contacted the Wilsons. Mr. Wilson also sold computers to businesses, and he and Ward had become friends while working on several deals. Ward offered the Wilsons a 15 percent share in Skeye-ID for $120,000.

{¶ 4} According to the Wilsons, while they were deciding whether to invest in Skeye-ID, Stabile also called them and pressured them to invest. He allegedly told them that he and another person were invested at 20 percent and that there was over half a million dollars invested in Skeye-ID. He told them that the company was seeking additional investors so that they could increase production to meet the big orders that they had received. Stabile allegedly told Mrs. Wilson that Skeye-ID had orders from Citigroup, Continental, Austin Travel, and Station Casinos.

{¶ 5} The Wilsons eventually agreed to invest $120,000 in Skeye-ID, but they had only $75,000 available. According to them, they paid $75,000 to Ward, but he did not use their money to produce document-holders. Instead, he gave $18,000 to Stabile and used most of the rest to pay his own personal expenses. After a few months, Ward and Stabile pressured the Wilsons for the other $45,000 they had promised. Stabile allegedly told the Wilsons that Skeye-ID had a deal to produce items in China, but they needed $45,000 up front. After the Wilsons told Stabile that they did not have that much, Stabile offered to cover the start-up costs if the Wilsons executed a promissory note for the $45,000. The Wilsons agreed and sent Stabile $45,000 over the next six months.

{¶ 6} Although Stabile used his contacts to promote Skeye-ID, the company earned only a few thousand dollars in income. Ward entered into licensing agreements with a couple of companies, but those agreements failed to produce much income. He eventually sold his patent to another company for $50,000 plus a percentage of whatever proceeds were earned from the patent. Skeye-ID, however, did not receive any additional income.

{¶ 7} The Wilsons received tax documents from Skeye-ID for 2002 indicating that it had a small loss. They did not receive any tax documents for 2003 but were told that it was because the company had not made a profit. The Wilsons received $22,500 in 2004 after Ward sold the patent. According to Mr. Wilson, he started to become suspicious that something was wrong with Skeye-ID in September 2004. He therefore hired a lawyer to look into the company. In the spring of 2005, the Wilsons received Skeye-ID's financial statements and learned that they had been the only investors. In October 2005, the Wilsons wrote Ward and Stabile asking for them to return their investment. In May 2006, the Wilsons sued Ward and Stabile. They dismissed their case after Ward agreed to repurchase their stock.

{¶ 8} In October 2006, the Wilsons sued Ward and Stabile again because Ward had not repaid them. They alleged that Ward had breached their settlement agreement and that Ward and Stabile had engaged in fraud and violated R.C. 1707.44. In January 2007, the Wilsons obtained a default judgment against Ward. Their claims against Stabile proceeded to trial, and a jury awarded them $120,000 on their statutory claim. Stabile has appealed, assigning six errors.

BURDEN OF PROOF

{¶ 9} Stabile's first assignment of error is that the trial court incorrectly concluded that the Wilsons had to prove their statutory claim by only a preponderance of the evidence. He has argued that to be entitled to rescission of their transaction, the Wilsons had to prove their claim by clear and convincing evidence. In support of his argument, Stabile relies on Cross v. Ledford (1954), 161 Ohio St. 469, 53 O.O. 361, 120 N.E.2d 118. In Cross, the Ohio Supreme Court held that "[i]n order to maintain an action to rescind a contract on the ground that it was procured by fraudulent representations," plaintiffs must prove their claim "by clear and convincing evidence." Id. at paragraph two of the syllabus.

{¶ 10} Stabile's argument fails because the Wilsons' claim was under R.C. 1707.44(B)(4), not common-law fraud as in Cross. See id. at 475, 53 O.O. 361, 120 N.E.2d 118. R.C. 1707.44(B)(4) provides that "[n]o person shall knowingly make * * * any false representation concerning a material and relevant fact, in any oral statement * * * for any of the following purposes: * * * (4) Selling any securities in this state." R.C. 1707.43(A) provides: "Every sale or contract for sale made in violation of Chapter 1707. of the Revised Code, is voidable at the election of the purchaser. The person making such sale or contract for sale, and every person who has participated in or aided the seller in any way in making such sale or contract for sale, are jointly and severally liable to such purchaser, * * * for the full amount paid by the purchaser * * *."

{¶ 11} "In civil cases * * * the burden of proof is ordinarily carried by a preponderance of the evidence * * *." Cincinnati Hamilton & Dayton Ry. v. Frye (1909), 80 Ohio St. 289, 88 N.E. 642, paragraph two of the syllabus; see also Cincinnati Bar Assn. v. Young (2000), 89 Ohio St.3d 306, 314, 731 N.E.2d 631. When a statute is silent regarding the appropriate burden of proof, this court infers that the common preponderance-of-the-evidence standard applies. Wilburn v. Wilburn, 9th Dist. No. 05CA008740, 2006-Ohio-2553, 2006 WL 1409784, at ¶ 9, citing Felton v. Felton (1997), 79 Ohio St.3d 34, 41-42, 679 N.E.2d 672. As this court noted in Wilburn, "`[h]ad the General Assembly intended that [an alternative] standard apply, it certainly knew how to specify [one].'" Id., quoting Felton, 79 Ohio St.3d at 42, 679 N.E.2d 672; see also Walden v. State (1989), 47 Ohio St.3d 47, 53, 547 N.E.2d 962 (concluding that "the General Assembly intended to apply the usual preponderance of the evidence standard" when it did not "specify a `clear and convincing' standard"). Stabile's first assignment of error is overruled.

TENDER OF SHARES

{¶ 12} Stabile's second assignment of error is that the trial court incorrectly concluded that the Wilsons properly tendered their shares. R.C. 1707.43(A) conditions liability "upon tender to the seller in person or in open court of the securities sold or of the contract made." Stabile has argued that the Wilsons did not comply with that requirement because they did not tender their shares to Ward, either in person or in open court. The Wilsons have argued that they satisfied the requirement because they tendered their shares to Stabile at trial.

{¶ 13} In Crane v. Courtright (1964), 2 Ohio App.2d 125, 31 O.O.2d 202, 206 N.E.2d 913, the Tenth District considered the same issue. In that case, Mr. Crane alleged that Mr. Courtright had assisted Mr. Richmond in selling him an interest in a lease. Id. at 128, 31 O.O.2d 202, 206 N.E.2d 913. Courtright argued that R.C. 1707.43(A) "requires tender to the seller in person or tender to the seller in open court." Id. at 129, 31 O.O.2d 202, 206 N.E.2d 913. The court, however, rejected his interpretation of the statute. Id. It explained that although Courtright's interpretation was plausible, it was "equally grammatically correct to say that the antecedent of `in open court' is the word `tender,' i.e., `tender to the seller in person,' or `tender * * * in open court.'" Id. The court noted that under R.C. 1707.43, "liability is imposed individually or `severally' upon a person who has participated in or aided in the sale." Id. Under Courtright's interpretation, "there would be very little...