COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 60730 ILLINOIS CONTROLS, INC., ET AL. : : : JOURNAL ENTRY Plaintiffs-Appellants : : AND vs. : : OPINION J. MICHAEL LANGHAM, ET AL. : : : Defendants-Appellees : : DATE OF ANNOUNCEMENT OF DECISION: SEPTEMBER 17, 1992 CHARACTER OF PROCEEDING: Civil appeal from Common Pleas Court No. 141811 JUDGMENT: AFFIRMED IN PART AND REVERSED IN PART. DATE OF JOURNALIZATION: APPEARANCES: For Plaintiffs-Appellants: JOHN J. EKLUND WILLIAM E. COUGHLIN DAVID J. CARNEY Calfee, Halter & Griswold 1800 Society Building Cleveland, Ohio 44114 For Defendants-Appellees: JOEL LEVIN DAVID M. PARIS Nurenberg, Plevin, Heller & McCarthy Co., L.P.A. 1370 Ontario Street Standard Bldg. - First Floor Cleveland, Ohio 44113 - 2 - KRUPANSKY, J.: The appeal and cross appeal sub judice stems from a failed business venture to form a corporation to manufacture and sell a newly invented product. For the sake of simplicity, the Court shall refer to the parties by their designation in the trial court. Plaintiffs Illinois Controls, Inc. ("ICI"), Balderson, 1 Inc. and S. Clark Balderson filed a seven-count complaint in the trial court December 23, 1987 in response to a prior demand for arbitration by defendants J. Michael Langham ("Langham"), his wife Pat and her parents Joseph and Catherine Flaherty. The complaint alleged, inter alia, breach of a pre-incorporation agreement (the "PIA"), breach of fiduciary duty and sought a declaratory judgment regarding ownership of certain shares of stock in the corporation. Defendants denied the substantive allegations of the complaint and asserted seventeen counterclaims including fraud, breach of the PIA and failure to assume various business-related debts incurred by Langham. The record demonstrates that Langham invented and received a U.S. patent for a device, called a cross slope monitor ("CSM"), used on road grading equipment to measure the relationship of the blade to the road surface. Prior to the within venture, Langham and various business associates produced and marketed a CSM for John Deere road graders under the name of Langham Engineering 1 When the initials "CB" or merely "Balderson" are used in the various documents and text herein they refer to S. Clark Balderson. - 3 - from a plant in Spring Valley, Illinois. The enterprise sold approximately 100 CSM devices at $4,000 per unit from 1983 to 1985 and incurred substantial start-up costs for business assets from local banks, the Flahertys and other creditors. Langham eventually contacted Balderson, who was the president of Balderson, Inc., an established company which sold various products and attachments for Caterpillar ("CAT") construction equipment. The parties believed that CAT equipment users presented a larger potential market for the CSM than John Deere equipment users. Langham, Balderson and Balderson, Inc. subsequently executed the preincorporation agreement concerning the CSM business October 4, 1985. The parties agreed in the PIA to form a new Ohio corporation, subsequently known as ICI, to conduct the business pursuant to the following provisions: ARTICLE I. Formation of New Company. Promptly after the date of this agreement, Balderson, [Inc.] CB [Balderson] and Langham shall cause, in collaboration with each other, a new company (hereinafter referred to as "Newco") to be incorporated under the laws of the State of Ohio. The parties likewise agreed to make the following respective capital and asset contributions to ICI: 2 The new company referred to in Article I as "Newco" was later incorporated under the name of Illinois Control, Inc. ("ICI"). - 4 - 3 ARTICLE IV. Capital Investment, Additional Shares, and Additional Funds and Borrowings. The parties agree that the initial funds for the capitalization and operation of Newco shall be obtained through the capital contributions of the parties. 1. Payment for Initial Shares. The initial capital of Newco shall be invested by the parties hereto in the following amounts and in full satisfaction of the shares to be issued pursuant to article III: Langham $12,500 CB $37,500 Balderson $250,000 Hereinafter the parties' initial capital contributions shall be referred to as "Invested Capital". It is understood and agreed that the payment of initial shares by Langham shall be accomplished by his con- tribution to Newco of all of his assets currently being employed in Langham Engineering and any other company he has an interest in that in any way engineers or manufactures the cross slope monitor. Further, it is understood and agreed that Newco shall assume and be fully responsible for those current liabilities of Langham and Langham Engineering that are set forth on Exhibit A hereto. Futher [sic] it is understood and agreed that Langham shall assign to Newco under a license all of his right, title and interest in the patent application currently pending on the cross slope monitor, all as is more fully set forth in Article IV below. 3 The PIA contains two Articles IV, viz., the one herein quoted and the following entitled "Patents." - 5 - The payment of initial shares by CB and Balderson shall be in cash. (Emphasis added.) Schedule A to the PIA listed $651,000 in debts incurred by Langham in connection with the CSM business for land, capital and equipment, including an $84,000 loan from the defendants Flaherty. The provision governing the assignment of Langham's patent provides as follows: ARTICLE IV [SIC] Patents. 1. Assignment of cross Slope Monitor Patent Application. For the additional consider- ation set forth in numbered paragraph 2 below, Langham shall assign to Newco all of his right, title and interest in and to the patent pending on the cross slope monitor, which assignment shall last for so long as the patent subsequently issued shall last. 2. License. The assignment of the patent pending on the cross slope monitor shall be pursuant to a license to be given by Langham to Newco, which shall be exclusive in all regards, which shall continue for the life of the patent, and which shall pay to Langham a royalty of 5% of the sales price of each and every cross slope monitor sold by Newco, or any assignee, sublicensee or successor of Newco. Article III of the PIA provided in turn that Balderson or his designees would receive 760 of the 1000 shares of common stock in ICI together with 500 shares of preferred stock and Langham would receive the remaining 240 shares of common stock. Clark Balderson, the president of Balderson, Inc., John - 6 - Fruhwirth, the vice president of Balderson, Inc. and Langham agreed to serve as directors and officers of ICI pursuant to Article V of the PIA. ICI was not a party to the PIA since it was not formed until approximately two months after Balderson, Balderson, Inc. and Langham entered into the PIA. Balderson and Balderson Inc. contributed approximately $450,000 for ICI operating expenses in addition to their initial $275,500 total capital contribution. Langham modified the original CSM, originally built for the John Deere equipment, to make it compatible with CAT equipment. Balderson Inc., which was to purchase CAT CSM devices and sell them to customers through its existing CAT auxiliary equipment distribution network, scaled down its original marketing plans. Sales of the CAT CSM devices did not meet projections and amounted to less than 50 devices over approximately the next year and a half. The parties became dissatisfied with each others' performance under the PIA. Langham maintained ICI did not assume all of the $651,000 in debts listed in Schedule A to the PIA and that Balderson was attempting to obtain control of the CSM patent without assuming these debts. Balderson and Balderson, Inc. complained that Langham failed to transfer any of the Langham Engineering assets or grant ICI an exclusive license to use the CSM patent despite their infusion of substantial capital and paying all of ICI's operating costs. ICI subsequently ceased - 7 - operation approximately September 1987 after the parties were unable to reach agreement concerning these issues. The case proceeded to a two-week jury trial commencing August 6, 1990. The trial court submitted the case to the jury with nine separate interrogatories relating to the parties' respective claims without requesting a general verdict. The jury returned a verdict against plaintiffs on their breach of PIA and fiduciary duty claims and in favor of defendants on defendants' counterclaims for breach by plaintiffs of the PIA and failure to assume the Flaherty debt. The award by the jury in favor of defendants was $2,666,000, plus the Flaherty debt of $110,000 including interest, and judgment was entered against Clark Balderson and Balderson Inc. in the grand total of $2,776,000. The jury's answers to interrogatories apportioned liability against plaintiffs for breach of PIA on Count I of the counterclaim in the following manner, viz.: (1) Balderson $539,000, (2) Balderson, Inc. $1,375,000 and (3) ICI $752,000. The answer to Interrogatory No. 9 relating to Count VIII of the counterclaim for failing to assume the Flaherty debt was assessed against ICI but no monetary amount was assessed by the jury against ICI. After the jurors determined the corporate veil should be pierced, they assessed liability against Clark Balderson in the amount of $66,000 and Balderson, Inc. in the amount of $44,000. As a result, Balderson's total liability was fixed in the amount of $1,059,000 and Balderson, Inc.'s totalled - 8 - $1,717,000. No judgment was entered by the trial court against ICI. The trial court subsequently entered judgment in the total amount of $2,776,000 and granted a declaratory judgment in favor of plaintiffs on Count IV of their complaint finding Langham did not have any ownership interest in ICI "based upon his failure to pay the agreed consideration." The trial court denied post- judgment motions by plaintiffs for j.n.o.v. and new trial or remittitur and by defendants for an award of prejudgment interest and taxation of certain costs. Plaintiffs filed a notice of appeal October 26, 1990 raising nine assignments of error. Defendants filed a notice of cross- appeal November 2, 1990 raising five assignments of error. Plaintiffs thereafter filed a supplemental tenth assignment of error pursuant to leave granted by this Court. The Court shall address the parties respective arguments in a different order than was briefed by the parties in order to attempt simplification. I. Plaintiffs supplemental assignment of error contends the trial court's failure to require the jury return a general verdict in addition to the nine interrogatories constitutes per se reversible error as follows: SUPPLEMENTAL ASSIGNMENT OF ERROR NO. 1: THE TRIAL COURT ERRED BY FAILING TO REQUIRE THE JURY TO RETURN A GENERAL VERDICT AS REQUIRED BY CIV. R. 49 (A). - 9 - Plaintiffs' supplemental assignment of error lacks merit. Plaintiffs contend the trial court committed reversible error by failing to require the jury return a general verdict pursuant to Civ. R. 49(A) citing Schellhouse v. Norfolk & Western Ry. Co. (1991), 61 Ohio St. 3d 520. Plaintiffs note the Ohio Supreme Court reversed the judgment in Schellhouse based solely upon jury interrogatories, stating in the syllabus as follows: Compliance with Civ. R. 49(A) is mandatory. A trial judge must require the jury to return a general verdict in a civil action for damages. Id. at 520. We are unpersuaded by plaintiffs argument that Schellhouse establishes a per se rule and mandates reversal in all cases where the jury fails to return a general verdict. The Ohio Supreme Court has rejected such a wooden reading of a case syllabus and has recognized the following principle for interpreting the syllabus of a particular case: The syllabus of a decision of the Supreme Court of Ohio states the law of Ohio, but such pronouncement must be interpreted with reference to the facts upon which it is predicated and the questions presented to and considered by the Court. Williamson Heater Co. v. Radich (1934), 128 Ohio St. 124, syllabus paragraph one. The following passage from Schellhouse indicates the Court relied upon narrower grounds than that asserted by plaintiffs: - 10 - Without a general verdict to tell us what overall result the jury intended, however, there is no hope, on this record, of reconciling the interrogatory answers. The judgment entered by the trial court cannot be sustained. An attempt by us to reconstruct the jury's reasoning would be speculation. Our only option is to remand the case. Id. at 526 (Emphasis added). We are not faced with the same problem in the case sub judice. None of the parties in this appeal asserts the existence of any inconsistencies in the jury interrogatories and the Court finds none. Neither Schellhouse nor any of the cases cited therein warrant reversal of a jury verdict based solely upon interrogatories to the jury without a showing of prejudice when the contention is belatedly raised for the first time on appeal as a supplemental assignment of error. Plaintiffs waived any objection to the form of the verdict in the case sub judice by deliberately inviting the error, if any, and agreeing with the trial court to the proposed form of the verdict and failing to raise the issue in the trial court. It is well established that errors not raised in the trial court may not generally be raised for the first time on appeal. Kalish v. Trans World Airlines (1977), 50 Ohio St. 2d 73. Plaintiffs attempt to invoke the "plain error" doctrine under these circumstances is unpersuasive. A reviewing court takes notice of "plain error" only with the utmost caution under exceptional circumstances to prevent a manifest miscarriage of justice. Shade v. Carnegie Body Co. (1982), 70 Ohio St. 2d 207, 209. Plaintiffs citation to Calmes v. Goodyear Tire (1991), 61 - 11 - Ohio St. 3d 470, 475, is misplaced since the Ohio Supreme Court applied this doctrine in a case where the jury apportioned liability against a non-party based upon erroneous instructions. Plaintiffs have failed to demonstrate any similar prejudice from the form of the verdict in the case sub judice. In addition, Calmes, supra mentions no invited error contrary to the facts of the case sub judice. Under the circumstances error, if any, was harmless. App. R. 12(B); Civ. R. 61. Accordingly, plaintiffs' supplemental assignment of error is overruled. II. Plaintiffs Balderson and Balderson, Inc. challenge the judgment against them imposing liability under the PIA in their first assignment of error as follows: ASSIGNMENT OF ERROR NO. 1: THE TRIAL COURT ERRED BY DENYING CLARK BALDERSON'S AND BALDERSON INC.'S MOTIONS FOR DIRECTED VERDICT AND JUDGMENT NOTWITHSTANDING THE VERDICT/NEW TRIAL ON COUNTERCLAIM COUNT I BECAUSE THE ALLEGED CONTRACTUAL DUTIES UPON WHICH THE CLAIMS WERE BASED DID NOT EXIST AS A MATTER OF LAW. Plaintiff Balderson and Balderson, Inc's first assignment of error is well-taken. Balderson and Balderson, Inc. argue the trial court improperly permitted the jury to find they breached the PIA by failing to provide reasonable leadership and marketing for the CSM since the PIA created no such leadership or marketing duties. - 12 - Defendants argued at trial the following provision in the PIA expressly or impliedly created these respective leadership and marketing duties. However, a reading of Article II reveals only the objectives of the new corporation and assigns no duties to any of the parties. Article II provides as follows: ARTICLE II. Newco Objectives. The object of Newco is to combine the resources, technical capabilities and production experience of Langham with the resources, engineering expertise and marketing capabilities of Balderson and the leadership capabilities of CB in order to establish operating efficiencies in the production and marketing of cross slope monitors and such other related products as is mutually acceptable to the parties by maintaining the capability to provide an assured source of such products to Balderson for marketing. (Emphasis added.) Defendants contend this provision is a "mutual covenant" creating enforceable obligations rather than a mere recital of the purpose for which ICI was to be formed. Merely identifying a provision as a "mutual covenant" does not make it a covenant. Defendants' tortured construction of this provision is unpersuasive. This Court has held that prefatory language in agreements such as the PIA in the case sub judice does not create enforceable contract obligations. See, Cleveland Trust Co. v. Snyder (1978), 55 Ohio App. 2d 108. Interpretation of such unambiguous contract provisions is a question of law for the trial court rather than of fact for the jury. Alexander v. Buckeye Pipeline Co. (1978), 53 Ohio St. 2d 241. Submitting such - 13 - matters to the jury constitutes reversible error. Seringetti Constr. Co. v. Cincinnati (1988), 51 Ohio App. 3d 1. Defendants also contend "reasonable" leadership and marketing duties may be implied from this provision based upon various cases involving exclusive licenses. E.g., Ohio Turnpike Comm. v. Texaco, Inc. (1973), 35 Ohio Misc. 99 (citing Wood v. Lucy, Lady Duff Gordon (1922), 222 N.Y. 88); Bailey v. Chattem (6th Cir. 1982), 684 F. 2d 386 (patent license agreement). The evidence reveals that no such license exists in the case sub judice since Langham failed to assign and license the CSM patent to ICI pursuant to Article IV of the PIA. Moreover, defendants have cited no authority implying such duties among the parties in the context of an agreement to form a corporation such as the PIA contemplates in the case sub judice. This Court has rejected efforts to imply contractual duties which would alter the unambiguous express terms of an agreement as in the case sub judice. Fodor v. First National Supermarkets, Inc. (July 5, 1990), Cuyahoga App. No. 58587, unreported at 4-7, aff'd on other grounds, 63 Ohio St. 3d 489. Parole evidence is not admissible to vary the terms of unambiguous integrated written agreements. Id.; Aultman Hosp. Ass'n v. Community Mut. Ins. Co. (1989), 46 Ohio St. 3d 51. The parties expressly agreed in the PIA to form ICI and make specific capital contributions to enable ICI to conduct the CSM business. Article II merely states the "objectives" of ICI, - 14 - "Newco", which is to "combine the resources" of the parties "in order to establish operating efficiencies." The PIA does not specify any means of marketing the CSM by ICI or Balderson, Inc. or assign any leadership duties to Balderson. Finally, assume arguendo the PIA assigned "reasonable" leadership and marketing duties to Balderson and Balderson, Inc., any failure to perform such duties would not have been actionable because the agreement was terminable at will by any of the parties as a matter of law since the PIA contained no express provision governing termination. Cf. Miller v. Wikel Mfg. Co. (1989), 46 Ohio St. 3d 76. Accordingly, plaintiffs Balderson and Balderson, Inc.'s first assignment of error is well-taken and the judgment against them on Count I of the Counterclaim in the amount of $539,000 and $1,375,000 respectively is reversed and final judgment on this issue is entered for Clark Balderson and Balderson, Inc. III. Plaintiff ICI challenges its liability for breach of the PIA in the fourth assignment of error as follows: ASSIGNMENT OF ERROR NO. 4: THE TRIAL COURT ERRED IN DENYING ILLINOIS CONTROLS' MOTION FOR DIRECTED VERDICT ON AN UNPLED PROMOTOR LIABILITY CLAIM AND DENYING ILLINOIS CONTROLS' MOTION FOR JUDGMENT NOTWITHSTANDING THE VERDICT/NEW TRIAL ON COUNTERCLAIM COUNT I WHERE THERE WAS A COMPLETE FAILURE OF PROOF THAT ILLINOIS CONTROLS ADOPTED OR RETAINED THE BENEFITS OF THE PARTIES' CONTRACT, A LEGAL REQUIREMENT FOR IMPOSING LIABILITY AGAINST A CORPORATION ON A CONTRACT THAT HAD BEEN MADE BY ITS PROMOTERS. - 15 - Plaintiff ICI'S fourth assignment of error lacks merit. Plaintiff ICI contends it should not have been held liable on the PIA since it was not a party to the PIA and was not yet formed as a corporation when the PIA was executed and plaintiffs failed to plead or prove its liability under corporate law promoter's liability principles. Although this assignment of error is moot since the trial court entered no judgment against ICI, we shall address the parties contentions pursuant to App. R. 12(A). Plaintiff ICI's argument is unpersuasive. Count I of defendants' counterclaim asserted that ICI failed to perform its obligations under the PIA. Although the counterclaim did not expressly assert ICI's liability on the PIA based upon promoter liability principles, the counterclaim adequately provided ICI with notice that defendants' asserted ICI was liable for breach of the agreement. Moreover, even if the issue had not been sufficiently pled, ICI has failed to demonstrate the trial court abused its discretion by permitting the jury to consider this issue. City of Willoughby Hills v. Cincinnati Ins. Co. (1984), 9 Ohio St. 3d 177; State, ex rel. Evans v. Bainbridge Twp. Trustees (1983), 5 Ohio St. 3d 41. ICI merely claims that it would have conducted further discovery and sought "summary disposition" of this claim. However, under the circumstances ICI was not entitled to "summary disposition" of the claim since defendants presented - 16 - some evidence to support a finding the ICI was liable under the PIA. ICI correctly notes that a corporation does not automatically assume all contracts made on its behalf prior to its incorporation after its formation and that defendants presented no evidence ICI expressly ratified the PIA after its formation. However, the record demonstrates defendants presented some evidence that ICI received and retained some benefits under the PIA to render ICI liable under promoter's liability principles. The record demonstrates Langham did not transfer title to ICI of most of the assets described in the PIA. However, there is some equivocal conflicting testimony by Lanham concerning the transfer of title to one or two vehicles to ICI. (Tr. 260, 337). We assume arguendo title to the pickup truck and sedan were in fact transferred. Although there was no evidence ICI used either of these vehicles after it ceased operations, at least one of the vehicles apparently remained titled to ICI and was available at the Spring Valley facility. Consequently, ICI's citation to Hamilton Hotel Corp. v. Bee Hotel Management, Inc. (Butler, C.P. 1965), 12 Ohio Misc. 114, where the newly formed corporation did not receive any of the assets pursuant to an agreement is misplaced. Moreover, the evidence is undisputed that ICI had exclusive use of all Langham Engineering's remaining assets when it began manufacturing the CAT CSM devices for sale. Under the circumstances, defendants - 17 - presented some evidence ICI received or retained benefits under the PIA. C.E. Morris Co. v. Foley Construction Co. (1978), 54 Ohio St. 2d 279 (a reviewing court may not reverse judgments supported by some competent credible evidence). Accordingly, plaintiff ICI's fourth assignment of error is overruled. IV. Plaintiff ICI makes the related argument in its sixth assignment of error that ICI'S failure to sign the PIA precludes its liability based upon the statute of frauds as follows: ASSIGNMENT OF ERROR NO. 6: THE TRIAL COURT ERRED BY DENYING ILLINOIS CONTROLS' MOTIONS FOR DIRECTED VERDICT AND JUDGMENT NOTWITHSTANDING THE VERDICT/NEW TRIAL ON COUNTERCLAIM COUNT VIII WHERE THERE WAS NO WRITTEN AGREEMENT SIGNED BY ILLINOIS CONTROLS MAKING IT ANSWERABLE FOR LANGHAM'S DEBT TO THE FLAHERTY'S AS REQUIRED BY REVISED CODE SECTION 1335.05. Plaintiff ICI'S sixth assignment of error lacks merit. ICI contends that its failure to execute the PIA which created a duty to assume the $84,000 Flaherty debt listed in Schedule A precludes liability based upon the affirmative defense of statute of frauds set forth in R.C. 1335.05. Although this assignment of error is moot as to ICI since the trial court did not enter any judgment against ICI and Article VII of the PIA expressly disclaimed the creation of third-party beneficiary - 18 - status to the Flahertys, we shall address ICI's contentions pursuant to App. R. 12(A). The record demonstrates ICI failed to raise this affirmative defense in its reply to defendants' counterclaims pursuant to Civ. R. 8(C). Accordingly, ICI waived any defense based upon the statute of frauds by failing to raise it in a timely manner. Fox Radio Parts Co., Inc. v. Sales, Inc. (Nov. 7, 1985), Cuyahoga App. No. 49706, unreported. Accordingly, plaintiff ICI's sixth assignment of error is overruled. V. The parties' contest certain evidentiary rulings by the trial court concerning the admissibility of testimony from defendants' expert, Dr. John Nevin, relating to the adequacy of the CSM marketing efforts and defendants' lost profit damages. Plaintiffs Balderson, Balderson, Inc. and ICI challenge the admission of testimony relating to the failure to adequately market the CSM in their second assignment of error as follows: ASSIGNMENT OF ERROR NO. 2: THE TRIAL COURT ERRED BY DENYING APPELLANTS' MOTION IN LIMINE REGARDING THE MARKETING TESTIMONY OF LANGHAM'S EXPERT, JOHN NEVIN, AND BY ADMITTING HIS MARKETING TESTIMONY OVER APPELLANTS' OBJECTIONS AT TRIAL INASMUCH AS THERE EXISTED NO DUTY TO MARKET THE CROSS SLOPE MONITOR. Defendants argue the trial court improperly excluded testimony from their expert concerning potential lost profits and failed to - 19 - instruct the jury on this issue in their first and second assignments of error on cross appeal as follows: 1. THE TRIAL COURT ERRED IN NOT PERMITTING DEFENDANTS' EXPERT TO TESTIFY IN RESPECT TO LOST PROFITS. 2. THE TRIAL COURT ERRED IN NOT INSTRUCTING THE JURY ON LOST PROFITS. Plaintiffs' second assignment of error is well-taken in part, but defendants' first and second assignments of error on cross appeal lack merit for the reasons set forth below. Since the PIA did not create any enforceable leadership or marketing obligations concerning the CSM as discussed in their first assignment of error supra, the testimony from defendants' expert was not admissible against Balderson and Balderson, Inc. and the trial court should have instructed the jury not to consider such evidence against them. However, since plaintiff ICI became obligated on the PIA by receiving and retaining title to some assets under the PIA, ICI had a duty to market the CSM under the PIA as discussed in its fourth assignment of error supra, the trial court properly admitted the testimony from defendants' expert concerning the adequacy of ICI's efforts to market the CSM. However, defendants' contention the trial court improperly excluded testimony from Dr. Nevin and failed to instruct the jury concerning potential lost profits is not well-taken. The record demonstrates defendant's expert based his estimates of lost profits solely upon various Balderson Inc. and Fruhwirth future - 20 - CSM sales and marketing projections. However as noted by the trial court, defendants presented no evidence concerning the reliability of these projections. It is well established that a party may not recover lost profits resulting from a breach of contact which are not proven with reasonable certainty as in the case sub judice. AGF, Inc. v. Great Lakes Heating Co. (1990), 51 Ohio St. 3d 177, 181 ("in order for a plaintiff to recover lost profits in a breach of contract action, the amount of lost profits, as well as their existence, must be demonstrated with reasonable certainty" quoting Gahanna v. Eastgate Properties, Inc. (1988), 36 Ohio St. 3d 65, syllabus). The trial court correctly stated in the transcript and applied these principles when declining to instruct the jury on lost profits in the case sub judice based on the following conclusions: [THE COURT:] Here we have absolutely no expert testimony whatsoever as to the reliability or accuracy of any plans or statements made in the marketing plans. And not that we necessarily have to have any expert testimony, but we have no testimony from anyone as to the accuracy or reliability of the statements made in the marketing plans, nor do we have anyone speaking to the specific methodology and how the figures were even arrived at. Dr. Nevin himself stated that he could not verify the figures, he couldn't stand behind the figures, he may not have even arrived at the same figures because he did no independent analysis of his own. - 21 - We have Cindy Peters [who worked in marketing for Balderson, Inc.] stating that she all along disagreed with the figures contained in the marketing plans. * * * But the fact of the matter is, that it is simply too speculative. The law is clear it has to be established with reasonable certainty. We have absolutely no testimony that the marketing plans, that the figures contained in the marketing plans are accurate or reliable. We don't even have any testimony as to how they were arrived at. * * * Therefore I'm simply not allowing a jury instruction on lost profits. (Tr. 1393-1395) (Emphasis added). Case law cited by defendants involving lost profit calculations based upon future sales projections demonstrated to be reliable in the cases cited provide no support in the case sub judice since the sales projections in this case were unreliable. As recognized by the trial court no evidence concerning the reliability of the projected sales figures was presented in the case sub judice. We note that defendants made no effort to base their lost profit calculations upon the sales experience of Langham Engineering prior to entering into the PIA with plaintiffs. The trial court properly concluded Dr. Nevin's lost profit testimony was based upon inherently speculative data which failed to demonstrate the existence or amount of lost profits with reasonable certainty. - 22 - Accordingly, we find plaintiffs' second assignment of error is well taken in part as it relates to Balderson and Balderson, Inc., but overrule the remainder of the second assignment of error concerning ICI and defendants' first and second assignments of error on cross appeal. VI. Plaintiffs Balderson, Balderson, Inc. and ICI argue in their third and fifth assignments of error that defendants failed to prove the existence or amount of any of the $2,776,000 in damages for breach of the PIA awarded by the jury as follows: ASSIGNMENT OF ERROR NO. 3: THE TRIAL COURT ERRED IN DENYING CLARK BALDERSON'S AND BALDERSON INC.'S MOTIONS FOR DIRECTED VERDICT AND REMITTITUR ON COUNTERCLAIM COUNT I WHERE THERE WAS A COMPLETE FAILURE OF PROOF ON LANGHAM'S CONTRACT DAMAGES. ASSIGNMENT OF ERROR NO. 5: THE TRIAL COURT ERRED BY DENYING ILLINOIS CONTROLS' MOTION FOR JNOV OR REMITTITUR ON COUNTERCLAIM COUNT I WHERE THE VALUE TO LANGHAM OF HIS NON- PERFORMANCE OF HIS CONTRACT DUTIES EXCEEDED HIS ALLEGED CONTRACT DAMAGES. Plaintiff ICI make the additional related argument the damages awarded defendants for its breach of the PIA by failing to assume the $84,000 Flaherty debt amounts to a double recovery in its seventh assignment of error as follows: ASSIGNMENT OF ERROR NO. 7: THE TRIAL COURT ERRED BY DENYING ILLINOIS CONTROLS' MOTION FOR JNOV OR REMITTITUR ON COUNTERCLAIM COUNT VIII, THE FLAHERTY DEBT, WHERE THE DAMAGES AWARDED UNDER THAT CLAIM CONSTITUTED A DOUBLE RECOVERY ON LANGHAM'S BREACH OF CONTRACT CLAIM. - 23 - Plaintiffs third, fifth and seventh assignments of error are well-taken. We note that although ICI's seventh assignment of error is moot since the trial court entered no judgment against ICI, we shall address the parties contentions pursuant to App. R. 12(A). Plaintiffs argue defendants failed to establish the existence of any damages attributable to the breach of the PIA since the trial court properly excluded evidence concerning defendants lost future profits. Moreover, plaintiffs argue any damages resulting from the breach of the PIA must be reduced by the value of relief from not performing Langham's obligations under the PIA. Digital & Analog Design Corp. v. North Supply Co. (1989), 44 Ohio St. 3d 36, 40 (citing Allen, Heaton & McDonald v. Castle Farm Amusement Co. (1949), 151 Ohio St. 522); accord Rhodes v. Rhodes Industries, Inc. (March 28, 1991), Cuyahoga App. No. 58359, unreported. Defendants argue they sufficiently established damages under three alternative theories, viz.: (1) lost wages and royalty payments on past and future CSM sales, (2) various reliance losses, and (3) lost opportunity. However, the record demonstrates defendants failed to establish the damages awarded by the jury under any of these theories as follows: Lost Wages and Royalty Payments 1. Defendants voluntarily dismissed their claims for lost wages in response to plaintiffs' motion for a directed verdict - 24 - since the PIA did not establish any period of employment or rate of compensation. Moreover, defendants arguments for lost royalties of 5% on future CSM sales fail for the same reasons as the lost profits since the projected sales data are speculative and unreliable. Defendants established at most only $10,850 in outstanding royalties for past CSM sales and $6,375 for the proposed but uncompleted sale of 100 CSM devices to Spectra Physics for a grand total of $17,225. Reliance Losses 2. Defendants' reliance damages argument is likewise unpersuasive. Defendants conveyed titles to only one or two vehicles to ICI, the only assets of the corporation. The record does not contain any valuation of these assets, and the benefit, if any, to ICI. Defendants' claim the CSM patent had a value of $4,000,000 prior to the breach is likewise unsupported since the record demonstrates Balderson's valuation proposal for a sale to Spectra-Physics included all the business assets not only the CSM patent. Moreover, defendants failed to produce any evidence relating to the loss in value of the patent, if any, resulting from the breach. (Tr. 1036-1038). Lost Opportunity Damages 3. Defendants likewise produced no authority that "lost opportunity" damages are recoverable under Ohio law. Brown Deer Restaurant, Inc. v. New Market Corp. (March 28, 1985), Cuyahoga App. No. 48910, unreported at 6. - 25 - The record demonstrates that ICI did not assume all the debts listed on Schedule A appended to the PIA. The evidence presented at trial indicates the total amount of the unassumed and unpaid debts at the time of trial follows: (1) $441,592.74 to Spring Valley City Bank, (2) $110,880 to the defendants Flaherty, and (3) $26,000 to Balderson Inc. The total amount of these debts, $578,472.74, together with the royalties of $17,225 discussed above, amount to $595,697.74. However, any damages resulting from the breach should be offset by the value to Langham of his obligations to transfer all his business assets to ICI. Langham admitted that he retained the CSM patent and his other business assets with the exception of one or two vehicles. Although the parties presented conflicting evidence concerning the total value of these business assets, the lowest valuation of the Langham assets was $663,500 by John Fruhwirth, which exceeds the maximum damages of $595,697.74 resulting to defendants from the breach of the PIA by $67,802.26. Based upon the record sub judice, defendants should have been awarded at most nominal damages. Plaintiff ICI correctly notes the judgment double counts the Flaherty debt. The record indicates the Flaherty debt is an element of the general damages awarded by the jury against ICI and constitutes the sole element of damages on the Flahertys' counterclaim for failure to assume the debt. Moreover, the Flaherty's counterclaim against ICI for failure to assume this - 26 - debt should not have been submitted to the jury since the PIA expressly states that the PIA creates no rights for third-party beneficiaries such as the Flaherty's. Article VII of the PIA. Accordingly, plaintiffs third, fifth and seventh assignments of error are well-taken. VII. Plaintiffs Balderson and Balderson, Inc. contend ICI's liability under the PIA was improperly assessed against them by improperly piercing ICI's corporate veil as follows: ASSIGNMENT OF ERROR NO. 8: THE TRIAL COURT ERRED BY DENYING CLARK BALDERSON'S AND BALDERSON INC.'S MOTIONS FOR JUDGMENT NOTWITHSTANDING THE VERDICT/NEW TRIAL ON COUNTS I AND VIII OF THE COUNTERCLAIM WHERE THE JURY EXPRESSLY FOUND THAT CLARK BALDERSON AND BALDERSON INC. DID NOT ENGAGE IN FRAUD, A LEGAL PREREQUISITE TO CORPORATE VEIL PIERCING. Plaintiff Balderson and Balderson, Inc.'s eighth assignment of error is well-taken. Balderson and Balderson, Inc. argue ICI's liability for breaching the PIA was improperly assessed against them since defendants failed to establish sufficient grounds to disregard ICI as a distinct corporate entity. The Ohio Supreme Court has recently stated the standards necessary to "pierce the corporate veil" as follows: Courts have been reluctant to disregard the corporate entity and have done so only where the corporation has been used as a cloak for fraud or illegality or where the sole owner has exercised such excessive control over the corporation that it no longer has a separate existence. North v. Higbee Co. (1936), 131 - 27 - Ohio St. 507. It has been stated that the corporate entity should be disregarded only when justice cannot be served in any other way. Auglaize Box Board Co. v. Hinton (1919), 100 Ohio St. 505, 518-519. E.S. Preston Assoc., Inc. v. Preston (1986), 24 Ohio St. 3d 7, 11; see also Midea v. Denver Clarkson Barry (Jan. 7, 1988), Cuyahoga App. No. 52649, unreported. Based upon our review of the record sub judice, defendants have failed to demonstrate Balderson or Balderson, Inc. used the distinct corporate status of ICI to commit fraud or other illegality against defendants or exercised excessive control over ICI to warrant piercing the corporate veil. We note that in the case sub judice the jury specifically rejected defendants counterclaim for fraud. Moreover, defendants remaining claims submitted to the jury were for breach of contract which does not constitute grounds to disregard ICI's corporate veil. Absent such circumstances, this Court has held that incorporators, such as Balderson and Balderson, Inc. in the case sub judice, are not liable to assume debts absent an express agreement to do so when forming a corporation if the corporation is in fact formed. Floyd v. Swiler (1926), 23 Ohio App 367. Defendants obtained no such express agreement in the case sub judice from Balderson or Balderson Inc., and defendants should not be permitted to enjoy the advantages from creating ICI as a distinct legal entity and then disregard its distinct corporate character under piercing the corporate veil principles when the - 28 - distinct corporate character works to their disadvantage. E.S. Preston Assoc., Inc. v. Preston, supra at 11-12. The Ohio Supreme Court noted in this context as follows: *** In the present case, those who created the corporation in order to enjoy advantages flowing from its existence as a separate entity are asking that such existence be disregarded where it works a disadvantage to them. We do not consider it good policy to do so. Id. (citation omitted). Accordingly, plaintiff Balderson and Balderson, Inc.'s eighth assignment of error is well-taken and the judgment of the trial court assessing the liability of ICI against them is reversed and final judgment is entered in favor of Clark Balderson and Balderson, Inc. on these issues. VIII. The parties also raise conflicting arguments concerning the trial court's declaratory judgment that Langham did not own various common shares of ICI stock. Plaintiffs Balderson and Balderson, Inc. contend the trial court's finding concerning Langham's failure to pay the agreed consideration affirmatively establishes their claims for breach of the PIA and breach of fiduciary duty as follows: ASSIGNMENT OF ERROR NO. 9: THE TRIAL COURT ERRED BY DENYING CLARK BALDERSON'S AND BALDERSON INC.'S MOTIONS FOR DIRECTED VERDICT AND JUDGMENT NOTWITHSTANDING THE VERDICT/NEW TRIAL ON COMPLAINT COUNTS I AND III WHERE THE TRIAL COURT EXPRESSLY FOUND THAT LANGHAM FAILED TO PERFORM HIS CONTRACTUAL OBLIGATION TO TRANSFER HIS ASSETS TO ILLINOIS CONTROLS. - 29 - Defendants argue to the contrary the trial court improperly granted the underlying declaratory judgment in favor of plaintiffs under their fifth cross-assignment of error as follows: 5. THE TRIAL COURT ERRED IN ENTERING JUDGMENT IN FAVOR OF PLAINTIFFS ON THEIR COUNT FOR DECLARATORY JUDGMENT. Plaintiff Balderson and Balderson, Inc.'s ninth assignment of error and defendants' fifth cross-assignment of error lack merit. Balderson and Balderson Inc. contend the trial court's declaratory judgment in their favor that Langham had no ownership interest in ICI since he failed to perform all of his obligations under the PIA demonstrates the jury improperly denied recovery on Balderson and Balderson, Inc.'s claims against Langham for breach of the PIA and fiduciary duty. However, we are not persuaded that there is any conflict between these determinations. The trial court declined defendants' motions for directed verdict on the breach of PIA and fiduciary duty claims and subsequently submitted these claims to the jury. The jury may have denied recovery for breach of the PIA and Langham's fiduciary duties despite Langham's failure to transfer title to his assets to ICI based upon plaintiffs' failure to demonstrate any damages proximately resulting from such breach. The interrogatories submitted by plaintiffs to the jury do not demonstrate the jury ignored Langham's failure to transfer - 30 - the assets to ICI. Although no general verdict was rendered in favor of defendants on these issues, plaintiffs failed to demonstrate the special verdict was not based upon plaintiffs' failure to demonstrate damages proximately resulting from Langham's breach. Accordingly, Balderson and Balderson Inc.'s ninth assignment of error is overruled. Defendants' contention in their fifth cross-assignment of error that the trial court improperly entered declaratory judgment in favor of plaintiffs is unpersuasive. Defendants do not contest the longstanding principle of Ohio law that consideration for stock purchases must be fully and actually paid before a prospective purchaser such as Langham in the case sub judice may exercise an ownership interest in the company. See R.C. Sections 1701.18, 1701.20 and 1701.44; State, ex rel. Cullitan v. Stookey (1953), 95 Ohio App. 97 (former General Code provisions). Contrary to defendants' arguments, a declaratory judgment proceeding is an appropriate mechanism to resolve disputes concerning the ownership of shares of corporate stock. Rempel v. BancOhio National Bank (May 26, 1982), Summit App. No. 10443, unreported. Moreover, since the trial court did not submit these issues to the jury, defendants contention that the declaratory judgment entered by the trial court was barred by res judicata lacks merit. Finally, defendants have failed to demonstrate the - 31 - trial court abused its discretion in finding the declaratory judgment action was not barred by plaintiffs' "unclean hands." Accordingly, plaintiff Balderson and Balderson Inc.'s ninth assignment of error and defendants' fifth cross-assignment of error are overruled. IX. Finally, defendants contend the trial court improperly denied their post-trial motions to tax costs and for prejudgment interest in their third and fourth cross-assignments of error as follows: 3. THE TRIAL COURT ERRED IN DENYING DEFENDANTS' MOTION TO TAX COSTS. 4. THE TRIAL COURT ERRED IN DENYING DEFENDANTS' MOTION FOR PREJUDGMENT INTEREST. Defendants' third and fourth assignments of error on cross appeal lack merit. Defendants' contend the trial court improperly denied their post-trial motions to tax transcript expenses as costs pursuant to R.C. 2303.21 and Civ. R. 54(D) and for pre-judgment interest pursuant to R.C. 1343.03. Costs awarded to a prevailing party ordinarily include transcript fees unless such expenses are unusual in type or amount so that it would be inequitable to assess them against the nonprevailing party. Gilley v. Huron Road Urgent Care Center (May 24, 1990), Cuyahoga App. No. 57588, unreported. A trial court abuses its discretion by refusing to tax transcript costs - 32 - when it denies a motion for such costs without making a finding that such costs were unusual. Id. at 5. However, based upon our disposition of the case sub judice, error, if any, by the trial court in failing to tax such costs was harmless since defendants cannot be properly considered to be the "prevailing" party. Defendant's have likewise failed to demonstrate the trial court committed prejudicial error by declining to award prejudgment interest. Such motions are properly denied when the damages are not liquidated or readily ascertainable based upon the parties conflicting claims. Frank Novak & Sons, Inc. v. Crest Masonry Inc. (June 20, 1991), Cuyahoga App. No. 58863, unreported at 8-10 (citations omitted). Accordingly, defendants' third and fourth assignments of error on cross appeal are overruled. In summary, the judgment of the trial court against S. Clark Balderson and Balderson Inc. for breach of the PIA in the amount of $539,000 and $1,375,000, respectively is reversed and final judgment is entered for S. Clark Balderson and Balderson Inc. since the PIA assigned no leadership or marketing duties to S. Clark Balderson and Balderson Inc. as a matter of law. The judgment of the trial court assessing the liability of ICI for ICI's breach of the PIA in the amount of $752,000 against S. Clark Balderson and Balderson Inc. by piercing ICI's corporate veil is likewise reversed and final judgment is entered for S. Clark Balderson and Balderson Inc. since the jury failed to find - 33 - any fraud, illegality or excessive control to disregard ICI's independent existence which Langham agreed in the PIA to create. Although the jury found ICI liable for breach of the PIA in the amount of $752,000 based on promoter's liability principles, the trial court rendered no judgment thereon. Under the circumstances, however, any judgment rendered against ICI would not have been collectible as a practical matter since ICI has few if any assets due to Langham's admitted failure to transfer the Langham Engineering assets to ICI in accordance with the PIA. Langham retains the CSM patent and other Langham Engineering assets not transferred to ICI amounting to approximately $663,500, the lowest estimate established by the evidence. Finally, the trial court's judgment in favor of the defendants Flaherty for the $110,880 Flaherty debt is reversed as a matter of law. Article VII of the PIA expressly disclaimed creating rights enforceable by third-party beneficiaries such as the Flahertys against the plaintiffs and the issue should not have been submitted to the jury. The $110,880 Flaherty debt may have been subsumed in the $752,000 general damages assessed by the jury against ICI. However, the trial court did not enter any judgment against ICI for this debt and the jury did not assess liability against ICI for any monetary amount in a separate interrogatory. The trial court's judgment imposing liability for the Flaherty debt against S. Clark Balderson and Balderson Inc. - 34 - in the amount of $66,000 and $44,000, respectively is reversed and final judgment is entered for S. Clark Balderson and Balderson Inc. since S. Clark Balderson and Balderson Inc. did not agree in the PIA to personally assume this debt and the jury did not find any fraud, illegality of excessive control to pierce ICI's corporate veil and impose liability against S. Clark Balderson and Balderson Inc. Judgment affirmed in part and reversed in part. Judgment accordingly. - 35 - It is ordered that each party pay its own costs of this appeal. The Court finds there were reasonable grounds for this appeal. It is ordered that a special mandate issue out of this Court directing the Common Pleas Court to carry this judgment into execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. JAMES D. SWEENEY, CONCURS; NAHRA, P.J., DISSENTS (See Dissenting Opinion attached) JUDGE BLANCHE KRUPANSKY N.B. This entry is made pursuant to the third sentence of Rule 22(D), Ohio Rules of Appellate Procedure. This is an announce- ment of decision (see Rule 26). Ten (10) days from the date hereof, this document will be stamped to indicate journaliza- tion, at which time it will become the judgment and order of the court and time period for review will begin to run. COURT OF APPEALS OF OHIO EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 60730 ILLINOIS CONTROLS, INC., ET AL., : : : Plaintiffs-Appellants : D I S S E N T I N G : vs. : O P I N I O N : J. MICHAEL LANGHAM, ET AL., : : : Defendants-Appellees : DATE: SEPTEMBER 17, 1992 NAHRA, P.J., DISSENTING: I disagree with the majority's reversal of the jury's verdict in this case. There was substantial evidence from which the jury could conclude that Clark Balderson and Balderson, Inc. promised to market cross-slope monitors in the pre-incorporation agreement and that Langham's actual losses resulting from the breach of those promises totalled $2.7 million. The lengthy record in this case reflects that Michael Langham's incentive to enter into the pre-incorporation agreement was Balderson's promise to market his invention. Marketing was in fact the overall purpose of the deal. Langham had already engineered and patented the device and had sold the device - 2 - directly to John Deere equipment users. The impetus to contact Balderson was to use Balderson to market the device to the larger Caterpillar market. Balderson was the company which sold attachments to Caterpillar and was thus well-positioned to market the monitors to Caterpillar. Langham had no reason to sign away his patent and increase his debt but for Balderson's promises to assume his debts and market cross-slope monitors to Caterpillar. Clark Balderson himself stated that the deal was for Balderson, Inc. to market and sell the product. Transcript at 134. The pre-incorporation agreement states that Illinois Controls was formed "to combine the resources, technical capabilities and production experience of Langham with the resources, engineering expertise and market capabilities of Balderson [Inc.] and the leadership of [Clark Balderson]." Although the PIA did not detail Balderson's marketing obligations, Balderson's duty to make reasonable efforts to market CSMs is "indispensable to effectuate the intent of the contract," and was reasonably implied by the jury. Kretch v. Stark (1962), 92 Ohio Law Abs. 47, 61; see also Ohio Turnpike Comm'n. v. Texaco, Inc. (1973), 297 N.E.2d 557, 560,561, where the court stated that contractual language can be "instinct with obligation, imperfectly expressed". The court did not err in giving this issue to the jury because the contract language regarding marketing is not clear. Inland Refuse Transfer Co. v. -3- Browning-Ferris Industries of Ohio, Inc. (1984), 15 Ohio St.3d 321. The jury did not err in determining that Clark Balderson's and Balderson, Inc.'s breach of their promises to market the device cost Michael Langham $2.7 million. The jury "shall determine the amount of the recovery in its verdict." R.C. 2315.18. There was evidence that the breach cost Langham the full value of his patent, which was set by Clark Balderson at $4 million. Transcript at 238, 1036-1038. Clark Balderson testified that the $4 million value he assigned to the patent was accurate. Transcript at 238. Therefore, an award of compensable damages to Langham of up to $4 million is sustained by this record, even though the jury subtracted $1.3 million, apparently including Balderson, Inc.'s $1 million plus investment in the venture, to arrive at a verdict of $2.7 million. The jury also did not err in assessing Illinois Controls' liability against Clark Balderson and Balderson, Inc. by piercing the corporate veil. There was substantial evidence in the record that Clark Balderson exercised such excessive control over Illinois Controls that it had no separate existence pursuant to E.S. Preston Assoc., Inc. v. Preston (1986), 24 Ohio St.3d 7, 11. Balderson admitted that he controlled Illinois Controls and did not conduct meetings or follow other corporate formalities. Transcript at 173. He admitted that by 1987 he no longer wanted to sell CSMs, and that he singlehandedly fired Illinois Controls' -4- president, John Fruhwirth, because he was "of little worth to Balderson, Inc." Transcript at 244. Michael Langham testified that his stock was never issued as set forth in the PIA and that corporate formalities were not followed. Transcript at 550. Both Langham and Fruhwirth, who were corporate officers of Illinois Controls on paper, testified that Clark Balderson overrode their recommendations and made the decisions of the Illinois Controls. Transcript at 550-551; 561; 812; 852-853. Accordingly, I would affirm the jury's award. .