Court Opinion

ID: 3173356
Source: CourtListenerOpinion
Date Created: 2016-01-29 14:06:36.624145+00
Date Added: 2024-06-11T12:02:50.731155
License: Public Domain

[Cite as Whitman v. Gerson, 2016-Ohio-311.]
                          IN THE COURT OF APPEALS
                 FIRST APPELLATE DISTRICT OF OHIO
                           HAMILTON COUNTY, OHIO

VIRGINIA WHITMAN,                                :     APPEAL NOS. C-140592
                                                                   C-140595
BRUCE WHITMAN,                                   :     TRIAL NO.   A-1209426

ANDREW WHITMAN,                                  :
                                                          O P I N I O N.
   and                                           :

JACOB WHITMAN,                                   :

   Plaintiffs-Appellants/Cross-                  :
   Appellees,
                                                 :
   vs.
                                                 :
MICHAEL GERSON,
d.b.a. THE GERSON COMPANY, LTD.,                 :

   Defendant-Appellee/Cross-                     :
   Appellant,
                                                 :
   and
                                                 :
MARCUS TORAN, et al.,

   Defendants.                                   :

Civil Appeals From: Hamilton County Court of Common Pleas

Judgment Appealed From Is: Affirmed

Date of Judgment Entry on Appeal: January 29, 2016

Lindhorst & Dreidame, James F. Brockman and David E. Williamson, for Plaintiffs-
Appellants/Cross-Appellees,

Law Office of Terrence L. Goodman and Terrence L. Goodman, for Defendants-
Appellees/Cross-Appellants.

Please note: this case has been removed from the accelerated calendar.
                         OHIO FIRST DISTRICT COURT OF APPEALS

STAUTBERG, Judge.

        {¶1}    This case arises out of a serious dog bite suffered by plaintiff-

appellant/cross-appellee Virginia Whitman that occurred on September 22, 2012.

On that day, Mrs. Whitman was on Winton Road knocking on doors to inquire if she

could place signs in yards for her husband’s political campaign.                    When Mrs.

Whitman knocked on the door of the home on Winton Road that was occupied by

defendants Marcus Toran, Charles Toran, and Kimberly Toran, she was allegedly

attacked by a dog owned, kept or harbored by the Torans, and suffered serious

injuries.

        {¶2}    The Winton Road home was owned at that time by Charles and

Kimberly Toran. The Torans had purchased the property in August 2008 from

defendant-appellee/cross-appellant Michael Gerson, d.b.a. The Gerson Company

Ltd., (“Gerson”)1 for $120,000. At that time, Charles and Kimberly Toran executed a

note for that amount payable to Gerson, and also executed a mortgage on the

property as security for the note.

        {¶3}    Four days after the dog-bite incident, an entity known as Woods Cove,

LLC, filed a foreclosure action against Charles and Kimberly Toran and Gerson based

on a tax certificate it obtained through a public auction. On October 17, 2012,

Charles and Kimberly Toran conveyed the Winton Road property to Gerson via a

deed in lieu of foreclosure (“deed in lieu”).

        {¶4}    Joining Mrs. Whitman in the case as plaintiffs-appellants/cross-

appellees are her husband, Bruce Whitman, and their children. The Whitmans filed

1 The Gerson Company Ltd. was, at all pertinent times, a separately organized legal entity. It was
the mortgagee and transferee of the Winton Road property. However, throughout the
proceedings, little or no distinction has been made between Michael Gerson and The Gerson
Company Ltd. and we will not do so here.

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                        OHIO FIRST DISTRICT COURT OF APPEALS

the underlying complaint against the Torans,2 and also against Gerson, claiming that

the property transfer from Charles and Kimberly Toran to Gerson was a fraudulent

conveyance and subject to rescission. The Whitmans moved the trial court for a

temporary restraining order and preliminary injunction to prevent further transfer of

the property. Initially, Gerson entered into an agreed order prohibiting further

disposition of the real estate, for which no bond was required, pending further order

of the court. Thereafter, Gerson moved the court to dissolve the restraining order or

require a bond. The trial court denied the motion to dissolve the restraining order,

but ordered that the Whitmans post a bond in the amount of $10,000, which they

did. Gerson answered the complaint and counterclaimed for quiet title, a declaratory

judgment that the property transfer was not fraudulent, and damages for slander of

title, including attorney fees incurred in defending the action and injunctive relief

sought by the Whitmans.

       {¶5}    Thereafter, Gerson filed a “Motion for Summary Judgment, Motion to

Terminate Restraining Order, [and] Motion to Forfeit Security.” Approximately nine

months later, while the motion for summary judgment was pending, Gerson moved

the trial court to increase the amount of the bond to $50,000, claiming that a

proposed deal to sell the property fell through due to the existence of the restraining

order. Shortly thereafter, the Whitmans voluntarily withdrew the restraining order

and requested an order from the trial court releasing the previously posted bond.

Gerson, in turn, opposed the Whitmans’ request for release of the posted bond, and

reiterated his claim that the bond should be forfeited and that he should recover the

proceeds therefrom. Gerson also filed a motion to dismiss the complaint and for

sanctions on the basis that the Whitmans did not serve the Torans with the

complaint within the time allowed by Civ.R. 4, and failed to prosecute the claim.

2 The claims against the Torans allege liability based on owning, harboring, or keeping the dog
that attacked Mrs. Whitman. Those claims are not at issue in this appeal.

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                        OHIO FIRST DISTRICT COURT OF APPEALS

       {¶6}      On December 2, 2013, the trial court granted summary judgment in

favor of Gerson on the Whitman’s fraudulent conveyance claim. On that same day,

the trial court entered two additional separate orders; one that granted plaintiffs’

motion releasing the bond and denied Gerson’s motion for forfeiture of the bond and

award of attorney fees; and another that denied Gerson’s motion to dismiss the

claims against it, and for sanctions.

       {¶7}      The Whitmans obtained a default judgment and award of damages

against the Torans. The Whitmans then moved for summary judgment on claims

remaining against them on Gerson’s counterclaim.          The trial court granted the

Whitmans’ motion for summary judgment, bringing finality to the previously-

entered orders.

       {¶8}      The Whitmans filed a timely notice of appeal from the trial court’s

entry of summary judgment in favor of Gerson. Gerson filed a timely notice of cross-

appeal of the trial court’s summary judgment against him on his counterclaim, its

denial of his motion for forfeiture of bond, and its denial of his motion to dismiss and

for sanctions.

       The Whitmans’ Appeal

       {¶9}      In their appeal, the Whitmans argue that the trial court erred in

granting summary judgment to Gerson on their claims against him. We review the

granting of summary judgment de novo. Grafton v. Ohio Edison Co., 77 Ohio St.3d

102, 105, 671 N.E.2d 241 (1996). Summary judgment is appropriate when (1) there is

no genuine issue of material fact, (2) the moving party is entitled to judgment as a

matter of law, and (3) the evidence, when viewed in favor of the nonmoving party,

permits only one reasonable conclusion and that conclusion is adverse to the

nonmoving party. Civ.R. 56(C); Grafton; State ex rel. Howard v. Ferreri, 70 Ohio

St.3d 587, 589, 639 N.E.2d 1189 (1994).

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                       OHIO FIRST DISTRICT COURT OF APPEALS

       {¶10} Essentially, the Whitmans argue that the trial court erred in finding
that Ohio’s Uniform Fraudulent Transfer Act, R.C. 1336.01 et seq., did not apply to

the October 2012 transfer of the Winton Road property. We disagree.

       {¶11} R.C. 1336.043 establishes the following:
       (A)    A transfer made or an obligation incurred by a debtor is

       fraudulent as to a creditor, whether the claim of the creditor arose

       before or after the transfer was made or the obligation was incurred, if

       the debtor made the transfer or incurred the obligation in either of the

       following ways:

               (1) With actual intent to hinder, delay, or defraud any creditor

               of the debtor;

               (2)    Without receiving a reasonably equivalent value in

               exchange for the transfer or obligation, and if either of the

               following applies:

                      (a) The debtor was engaged or was about to engage in a

                      business or a transaction for which the remaining assets

                      of the debtor were unreasonably small in relation to the

                      business or transaction;

                      (b)    The debtor intended to incur, or believed or

                      reasonably should have believed that the debtor would

                      incur, debts beyond the debtor’s ability to pay as they

                      became due.

       {¶12} The Whitmans claim that the transfer of the Winton Road property
from Charles and Kimberly Toran to Gerson was done with actual intent to hinder,

3R.C. 1336.04 was amended effective March 27, 2013, but that amendment has no effect on this
case.

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                      OHIO FIRST DISTRICT COURT OF APPEALS

delay or defraud them.      There is no direct evidence of such an intent, so the

Whitmans look to R.C. 1336.04(B) to establish badges of fraud to make their claim:

       In determining actual intent under division (A)(1) of this section,

       consideration may be given to all relevant factors, including, but not

       limited to, the following:

               (1) Whether the transfer or obligation was to an insider;

               (2) Whether the debtor retained possession or control of the

              property transferred after the transfer;

               (3) Whether the transfer or obligation was disclosed or

              concealed;

               (4) Whether before the transfer was made or the obligation was

              incurred, the debtor had been sued or threatened with suit;

              (5) Whether the transfer was of substantially all of the assets of

              the debtor;

              (6) Whether the debtor absconded;

              (7) Whether the debtor removed or concealed assets;

              (8) Whether the value of the consideration received by the

              debtor was reasonably equivalent to the value of the asset

              transferred or the amount of the obligation incurred;

              (9) Whether the debtor was insolvent or became insolvent

              shortly after the transfer was made or the obligation was

              incurred;

              (10) Whether the transfer occurred shortly before or shortly

              after a substantial debt was incurred;

              (11) Whether the debtor transferred the essential assets of the

              business to a lienholder who transferred the assets to an insider

              of the debtor.

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                        OHIO FIRST DISTRICT COURT OF APPEALS

R.C. 1336.04(B).

       {¶13} The Whitmans argue that Gerson was aware of the injury to Mrs.
Whitman when the property was transferred, and that the transfer was fraudulent

and done to help the Torans avoid responsibility for the injury. The Whitmans

argue, inter alia, that the Torans retained occupancy of the property; that the transfer

was concealed from the Whitmans; that it was made after the Whitmans threatened

a lawsuit; and that it left the Torans with no other assets.

       {¶14} Regardless of the badges of fraud alleged, however, the Whitmans
must first demonstrate that there is a genuine issue of material fact concerning

whether a transfer of an “asset” occurred as contemplated by R.C. 1336.04. R.C.

1336.01 provides the following definitions:

       (B) “Asset” means property of a debtor, but does not include any of

       the following:

               (1) Property to the extent it is encumbered by a valid lien;

                                                  ***

       (L) "Transfer" means every direct or indirect, absolute or conditional, and

       voluntary or involuntary method of disposing of or parting with an asset or an

       interest in an asset, and includes payment of money, release, lease, and

       creation of a lien or other encumbrance.

       The pertinent question is, therefore, whether the Winton Road property was

an “asset” of the Torans such that the deed in lieu to Gerson would be a “transfer”

covered by the Fraudulent Conveyance Statute.

       {¶15} Gerson argues that the property was not an “asset” of the Torans as
defined in R.C. 1336.01(B) because the property was encumbered by the $120,000

mortgage securing the note. Gerson also argues that the property is worth less than

$120,000, and points to evidence that the Hamilton County auditor valued the

property at $85,000.

                                            7
                        OHIO FIRST DISTRICT COURT OF APPEALS

       {¶16} To deal with this problem, the Whitmans first argue that the mortgage
on the property held by Gerson was a sham and illusory, and was not a valid lien.

The Whitmans support this position by pointing to the fact that Gerson did not

enforce the terms of the land contract with the Torans prior to the sale in 2008, and

did little if anything to enforce the payment of the note subsequent to that sale. The

Whitmans argue that Gerson’s failure to enforce the terms of a contract or a note

renders the underlying security—the mortgage—void. The Whitmans supply no legal

authority for this proposition, and we are not persuaded that this argument raises a

genuine issue of fact concerning whether the mortgage was a sham.

       {¶17} There is no doubt that Gerson owned the property prior to 2008. The
trial court found a valid mortgage lien existed on the property prior to Gerson taking

back the property via the deed in lieu. Gerson’s lack of diligence in enforcing the

terms of the note is of no consequence. He clearly made efforts to protect the

underlying property, and took action to further protect his interests upon learning of

the tax certificate sale.

       {¶18} The Whitmans next argue that the value of the property at the time of
the 2012 deed in lieu exceeded the $120,000 lien on the property. The Whitmans

supply no evidence that the value of the property exceeded $120,000. They only

point to an insurance declarations page that shows Gerson had the property insured

for $239,500. There is nothing in the declarations page which suggests this is a fair

estimate of the existing market value of the property. Indeed, an affidavit of Gerson’s

insurance agent dispels any notion that the amount for which the property was

insured was to represent the fair market value.

       {¶19} The trial court looked to the value of the property as determined by the
Hamilton County auditor, which was $85,000 at the time. R.C. 5713.03 provides:

       The county auditor, from the best sources of information available,

       shall determine, as nearly as practicable, the true value of the fee

                                          8
                       OHIO FIRST DISTRICT COURT OF APPEALS

       simple estate, as if unencumbered but subject to any effects from the

       exercise of police powers or from other governmental actions, of each

       separate tract, lot, or parcel of real property and of buildings,

       structures, and improvements located thereon * * * .

       {¶20} In Rhodes v. Sinclair, 7th Dist. Mahoning No. 08-MA-23, 2012-Ohio-
5848, the court was faced with a similar situation.           Sinclair was accused of

fraudulently transferring property, including an office building that housed his law

practice, in order to avoid recovery by judgment holders. The court noted that the

auditor’s valuation was not contested, and with the encumbrances on the property in

question exceeding the valuation, the property did not qualify as an “asset” under

R.C. 1336.01(B). Id.

       {¶21} Similarly, the Whitmans have not supplied evidence sufficient to raise
a genuine issue of material fact concerning whether the value of the property

exceeded the $120,000 owed on the note secured by the mortgage. We agree with

the trial court that the Winton Road property was not an “asset” of the Torans as

defined in R.C. 1336.01(B) at the time it was conveyed back to Gerson via the deed in

lieu, and that Gerson was entitled to summary judgment on Whitmans’ fraudulent

conveyance claim. The Whitmans’ sole assignment of error is overruled.

       Gerson’s Cross-Appeal

       {¶22} Gerson cross-appealed the trial court’s denying his motion for
forfeiture of the Whitmans’ bond; granting the Whitmans summary judgment on his

counterclaims; and denying his motion for sanctions against the Whitmans. Gerson

asserts three assignments of error.

       {¶23} In his first assignment of error, Gerson argues the trial court erred in
denying his motion to order plaintiffs to forfeit their bond. Gerson argues that,

because the Whitmans eventually withdrew their claim for a preliminary injunction,

                                         9
                       OHIO FIRST DISTRICT COURT OF APPEALS

he is entitled to attorney fees incurred in defending the claim for injunctive relief.

The trial court denied Gerson’s claim for forfeiture of the $10,000 bond posted.

       {¶24} Civ.R. 65(C) provides:
       No temporary restraining order or preliminary injunction is operative

       until the party obtaining it gives a bond executed by sufficient surety,

       approved by the clerk of the court granting the order or injunction, in

       an amount fixed by the court or judge allowing it, to secure to the party

       enjoined the damages he may sustain, if it is finally decided that the

       order or injunction should not have been granted.

       {¶25} The operative question is whether “it [was] finally decided” that the
injunction “should not have been granted.” In this instance, there was no finding

that the injunction should not have been granted. As noted by the trial court, the

injunction was withdrawn by the Whitmans when they learned of Gerson’s plan to

sell the property. Although the voluntary withdrawal of the injunction could still be

followed by a determination that it “should not have been granted,” that was not the

case here. The trial court found that the Whitmans acted in good faith in obtaining

the injunction. Therefore, the trial court did not abuse its discretion in denying

Gerson’s motion seeking forfeiture of the Whitmans’ bond. See Del-fair v. Conrad

Seyferth, 1st Dist. Hamilton No. C-800277, 1981 Ohio App. LEXIS 13801 (May 6,

1981). Gerson’s first assignment of error is overruled.

       {¶26} In his second assignment of error, Gerson argues that the trial court
erred in granting the Whitmans’ motion for summary judgment on Gerson’s claims

for slander of title and quiet title. Gerson claims that the existence of the Whitmans’

lawsuit against him alleging fraudulent transfer of the property continues to cloud

the title of the property, and constituted a slander of title.

       {¶27} In Green v. Lemarr, 139 Ohio App.3d 414, 430-431, 744 N.E.2d 212
(2d Dist.2000), the Second District found,

                                            10
                         OHIO FIRST DISTRICT COURT OF APPEALS

       Slander of title is a tort action which may be “brought against any one

       who falsely and maliciously defames the property, either real or

       personal, of another, and thereby causes him some special pecuniary

       damage or loss.”        Buehrer v. Provident Mut. Life Ins. Co. of

       Philadelphia (1930), 37 Ohio App. 250, 257, 174 N.E. 597, affirmed

       (1931), 123 Ohio St. 264, 175 N.E. 25. To prevail, a claimant must

       prove: (1) there was a publication of a slanderous statement

       disparaging claimant's title; (2) the statement was false; (3) the

       statement was made with malice or made with reckless disregard of its

       falsity; and (4) the statement caused actual or special damages.

Id., citing Colquhoun v. Webber, 684 A.2d 405, 409 (Me.1996).

       {¶28} Gerson claims there are questions of fact regarding the malice or
reckless disregard of the falsity of the statements in the pleadings alleging a

fraudulent conveyance. However, before the allegations are evaluated, we must

determine whether the statements are the type upon which a claim for slander of title

can lie. We find that they are not.

       {¶29} The Whitmans did not record any affidavits, claims, liens, or other
encumbrances with the county recorder, and the Whitmans do not claim title to the

Winton Road property.        Gerson bases his claim for slander of title upon the

allegations   in   the    Whitmans’   complaint   for   fraudulent   conveyance   and

accompanying filings for equitable relief. However, court filings are privileged from

any tort action, and no slander of title claim can be based merely upon allegations in

a complaint and filings, even if later found to be unsupported. Buehrer v. Provident

Mut. Life Ins. Co., 123 Ohio St. 264, 273, 175 N.E. 25 (1931); see Surace v. Wuliger,

25 Ohio St.3d 229, 230, 495 N.E.2d 939 (1986), syllabus (“As a matter of public

policy, under the doctrine of absolute privilege in a judicial proceeding, a claim

alleging that a defamatory statement was made in a written pleading does not state a

                                          11
                      OHIO FIRST DISTRICT COURT OF APPEALS

cause of action where the allegedly defamatory statement bears some reasonable

relation to the judicial proceeding in which it appears.”). Accordingly, we find that

the Whitmans’ complaint and claims of fraudulent conveyance cannot form the basis

of a slander of title claim, and that the trial court correctly entered summary

judgment on this claim.

       {¶30} Gerson also argues that the trial court wrongly granted summary
judgment in favor of the Whitmans, finding that the quiet title action was resolved

when the trial court previously granted Gerson summary judgment on the

Whitmans’ fraudulent conveyance claim. Gerson argues that the Whitmans’ appeal

of the fraudulent conveyance claim keeps it alive as a cloud on his title to the

property.

       {¶31} To accept Gerson’s argument, we would have to accept the underlying
premise that the allegations of fraudulent conveyance clouded his title to the Winton

Road property. And we do not. The Whitmans did not file or record an affidavit,

deed, or mortgage with the county recorder. They filed a lawsuit, and the allegations

made therein were privileged from any claim of defamation, libel, or slander of title.

       {¶32} “A cloud upon title is a title, or incumbrance, apparently valid, but in
fact invalid.” (Citations omitted). Novogroder v. Di Paola, 11 Ohio App. 374, 377, 30

Ohio C.A. 421 (8th Dist.1919). Here, the Whitmans do not claim title to the property,

and the lawsuit is not an encumbrance.          Rather, the Whitmans’ complaint, if

successful, would have simply rescinded the transfer to Gerson and restored the

Torans as the owners. The Whitmans’ complaint never was a cloud on the title, and

the trial court did not err in dismissing the counterclaim for quiet title. Gerson’s

second assignment of error is overruled.

       {¶33} In his third assignment of error, Gerson argues the trial court erred in
denying his motion for sanctions. Gerson essentially seeks an award of sanctions

based on the costs incurred in defending the fraudulent conveyance action. He

                                           12
                      OHIO FIRST DISTRICT COURT OF APPEALS

alleges entitlement to damages pursuant to R.C. 2323.51, arguing that bringing the

fraudulent conveyance action was frivolous, and the Whitmans further acted

frivolously in failing to take steps to perfect service in a timely manner and obtain

judgment against the primary tortfeasors, the Torans.

       {¶34} We review the trial court’s actions under an abuse of discretion
standard. State ex rel. Striker v. Cline, 130 Ohio St.3d 214, 2011-Ohio-5350, 957

N.E.2d 19, ¶ 11. In order to succeed on appeal, Gerson must show that the denial of

sanctions was “unreasonable, arbitrary, or unconscionable.” Id.

       {¶35} First, the trial court found that the Whitmans’ actions in filing and
maintaining the lawsuit against Gerson did not constitute bad faith. Second, the

failure of the Whitmans to perfect service on the Torans within six months of filing

the lawsuit cannot be considered frivolous conduct. Although the Whitmans could

have been more diligent in pursuit of obtaining service on the Torans, and the trial

court could have dismissed one or more of the Torans pursuant to Civ.R. 4(E), the

failure to accomplish service within six months did not impact Gerson and could not

constitute frivolous conduct. The record reflects that the Whitmans did ultimately

obtain service on the Torans within one year as required by Civ.R. 3, and obtained a

default judgment in their favor. We do not hold that the trial court abused its

discretion in failing to sanction the Whitmans. Gerson’s third assignment of error is

overruled. The trial court’s judgment is affirmed.

                                                                  Judgment affirmed.

HENDON, P.J., and FISCHER, J., concur.

Please note:

       This court has recorded its own entry this date.

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