Court Opinion

ID: 2718592
Source: CourtListenerOpinion
Date Created: 2014-08-18 19:07:18.017137+00
Date Added: 2024-06-11T13:26:02.223674
License: Public Domain

[Cite as Garver Road Invest., L.L.C. v. Diversapack of Monroe, L.L.C., 2014-Ohio-3551.]

                                     IN THE COURT OF APPEALS

                           TWELFTH APPELLATE DISTRICT OF OHIO

                                            BUTLER COUNTY

GARVER ROAD INVESTMENT, LLC,                            :
                                                                   CASE NOS. CA2013-10-181
        Plaintiff-Appellee,                             :                    CA2013-10-183

                                                        :                   OPINION
   - vs -                                                                    8/18/2014
                                                        :

DIVERSAPACK OF MONROE, LLC, et al., :

        Defendants-Appellants.                          :

            CIVIL APPEAL FROM BUTLER COUNTY COURT OF COMMON PLEAS
                              Case No. CV2012-03-1075

Millikin & Fitton, Steven A. Tooman, Heather Sanderson Lewis, Salvatore A. Gilene, 9032
Union Centre Blvd., Suite 200, West Chester, Ohio 45069, for plaintiff-appellee

Myron A. Wolf, Dennis L. Adams, 120 North Second Street, P.O. Box 741, Hamilton, Ohio
45012, for defendants-appellants, Diversapack of Monroe, LLC and Alan Kristel

Wachtel Masyr & Missry LLP, Julian D. Schreibman, One Dag Hammarskjold Plaza, 885
Second Avenue, 47th Floor, New York, New York 10017 and Fred S. Miller, Baden & Jones
Bldg., 246 High Street, Hamilton, Ohio 45011, for defendant-appellant, Euroamerican
Investment Corp.

Jeffrey J. Harmon, 537 East Pete Rose Way, Cincinnati, Ohio 45202, for defendant, First
Capital

        RINGLAND, P.J.

        {¶ 1} Defendants-appellants, Alan Kristel and EuroAmerican Investment Corp.

(Appellants), appeal a decision of the Butler County Court of Common Pleas granting a
                                                                      Butler CA2013-10-181
                                                                             CA2013-10-183

motion to compel production of tax returns.

       {¶ 2} Diversapack of Monroe, LLC ("DPK Monroe") entered into a commercial lease

with Garver Road Investment LLC ("GRI") for a manufacturing facility.           DPK Monroe

subsequently defaulted on the lease and filed for bankruptcy. Prior to the bankruptcy filing,

GRI filed suit against DPK Monroe, EuroAmerican Investment Corp. ("EuroAmerican"),

Diversapack LLC ("Diversapack"), who is DPK Monroe's parent company, and Kristel, one of

its principals, among others.

       {¶ 3} The lease was secured by a "Parent Guaranty," executed by Diversapack, and

by a conditional guaranty executed by Kristel (the "Kristel Guaranty") that could only be

triggered by the occurrence of a "Parent Capital Default." The Parent Capital Default was

defined in the Parent Guaranty as the withdraw of a capital contribution made by

EuroAmerican DP Holdings, LLC ("EADP"), before DPK Monroe had been profitable for at

least two consecutive full fiscal years.

       {¶ 4} In its complaint, GRI alleges that Kristel is liable under the Kristel Guaranty.

GRI sought to compel production of tax returns from Diversapack and Kristel to determine

whether a Parent Capital Default occurred. Appellants argue that the information necessary

to determine whether the Kristel Guaranty was triggered is available from the Diversapack tax

returns, and thus Kristel's returns are unnecessary.

       {¶ 5} In turn, GRI argues that Kristel put his tax returns at issue by asserting that

Kristel's contributions to Diversapack should be imputed to EADP in satisfaction of the

requirements of the Parent Guaranty. GRI also argues that Kristel's tax returns are relevant

to Kristel's credibility based on potential inconsistencies with Diversapack's returns.

       {¶ 6} GRI also sought to compel production of EuroAmerican's tax returns. GRI

asserts that it had a first priority security interest in DPK Monroe's equipment, and that DPK

Monroe improperly granted a security interest in its equipment to EuroAmerican.
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                                                                        Butler CA2013-10-181
                                                                               CA2013-10-183

Accordingly, GRI argues that EuroAmerican's tax returns are at issue because EuroAmerican

has alleged that it "recovered nothing by way of its security interest." Thus, GRI argues that

EuroAmerican's tax returns are at issue because they would contain information as to

whether EuroAmerican truly recovered nothing by way of its security interest. In addition,

GRI argues the tax returns are relevant to issues of credibility because they may reveal

inconsistencies with Diversapack's returns.

       {¶ 7} After considering the parties arguments, the trial court ordered that

EuroAmerican, Kristel and Diversapack produce their tax returns. Appellants now appeal,

separately but similarly raising a single assignment of error for our review.

       {¶ 8} Kristel's Assignment of Error No. 1:

       {¶ 9} THE TRIAL COURT ERRED TO THE PREJUDICE OF APPELLANT WHEN IT

GRANTED APPELLEE'S MOTION TO COMPEL PRODUCTION OF PERSONAL TAX

RETURNS,      WHERE       APPELLANT'S        TAX     RETURNS      WERE      DEMONSTRABLY

IRRELEVANT AND WHERE THE INFORMATION PURPORTEDLY SOUGHT WAS

READILY AVAILABLE FROM ANOTHER SOURCE.

       {¶ 10} EuroAmerican Investment Corp.'s Assignment of Error No. 1:

       {¶ 11} THE TRIAL COURT ERRED TO THE PREJUDICE OF APPELLANT WHEN IT

GRANTED APPELLEE'S MOTION TO COMPEL PRODUCTION OF TAX RETURNS

WHERE APPELLEE MADE NO SHOWING OF NEED AND WHERE THE INFORMATION

SOUGHT WAS READILY AVAILABLE FROM ANOTHER SOURCE.

       {¶ 12} GRI notes that Appellants did not provide the transcript of the hearing on the

motion to compel. Accordingly, our review is limited to the record before us. However, the

record before us provided sufficient information to allow us to rule on the merits of Appellants'

assignments of error.

       {¶ 13} A trial court maintains discretion to manage the discovery process. Bank of
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                                                                        Butler CA2013-10-181
                                                                               CA2013-10-183

Am., N.A. v. Singh, 12th Dist. Butler No. CA2012-07-146, 2013-Ohio-1305, ¶ 17. This court

reviews a trial court's decision to impose discovery sanctions for an abuse of discretion.

Lucchesi v. Fischer, 12th Dist. Clermont No. CA2008-03-023, 2008-Ohio-5935, ¶ 6, citing

Nakoff v. Fairview Gen. Hosp., 75 Ohio St.3d 254 (1996), syllabus. A decision constitutes an

abuse of discretion only when it is found to be unreasonable, arbitrary, or unconscionable.

State ex rel. Ebbing v. Ricketts, 133 Ohio St.3d 339, 2012-Ohio-4699, ¶ 13; Blakemore v.

Blakemore, 5 Ohio St.3d 217, 219 (1983).

       {¶ 14} Tax returns, while subject to heightened protection from disclosure, are not

privileged. Civ.R. 26(B)(1) provides that "[p]arties may obtain discovery regarding any

matter, not privileged, which is relevant to the subject matter involved in the pending action."

This standard is much broader than the test for relevancy used at trial. Covington v. The

MetroHealth Sys., 150 Ohio App.3d 558, 2002-Ohio-6629, ¶ 20 (10th Dist.). "Matters are

only irrelevant at the discovery stage when the information sought will not reasonably lead to

the discovery of admissible evidence." Id.

       {¶ 15} Appellants cite a two-step analysis utilized by various federal and state courts

when determining whether to order the production of personal tax returns. We note that no

such test has been adopted in Ohio, and the scope of discovery is instead governed by

Civ.R. 26(B)(1), as described above.

       {¶ 16} Applying Civ.R. 26(B)(1), we do not find that the trial court abused its discretion

in ordering the production of Kristel and EuroAmerican's tax returns. Given the broad scope

of discovery, and the reasonable likelihood that those tax returns could lead to the discovery

of admissible evidence, we find no error in the trial court's decision. The information or lack

thereof contained in those returns goes to the heart of this case. Accordingly, they should be

deemed discoverable even if they are found only to corroborate the information in

Diversapack's returns.
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                                                                     Butler CA2013-10-181
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      {¶ 17} In light of the foregoing, having found that the trial court did not abuse its

discretion in ordering the production of Appellants' tax returns where they could reasonably

lead to the discovery of admissible evidence, Appellants' assignments of error are overruled.

      {¶ 18} Judgment affirmed.

      S. POWELL and PIPER, JJ., concur.

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