COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 67990 TOM KING : : Plaintiff-Appellant : : JOURNAL ENTRY -vs- : AND : OPINION EMI MUSIC PUBLISHING, ET AL. : : Defendants-Appellees : : DATE OF ANNOUNCEMENT OF DECISION AUGUST 24, 1995 CHARACTER OF PROCEEDING Civil appeal from Court of Common Pleas Case No. 261553 JUDGMENT Affirmed DATE OF JOURNALIZATION APPEARANCES: For Plaintiff-Appellant: For Defendants-Appellees Anthony J. Nuccio and Antoinette KENNEE SWITZER, ESQ. Nuccio: 23651 Hazelmere Road Cleveland, Ohio 44122 RONALD C. SWENCKI, ESQ. Ronald C. Swencki & Associates MARK BARBOUR, ESQ. 950 Standard Building Jeffries, Kube, Forrest Cleveland, Ohio 441113 & Monteleone Co., L.P.A. 1650 Midland Building For Defendant-Appellee Roger Cleveland, Ohio 44115 Karshner: MICHAEL DAVIS, Of Counsel DANIEL J. RYAN, ESQ. Cleveland-Marshall College 2000 Standard Building of Law Cleveland, Ohio 44113 Cleveland, Ohio 44115 - 2 - JAMES M. PORTER, P.J., Plaintiff-appellant Tom King appeals from the entry of summary judgment by the Common Pleas Court in favor of the defendant- appellee EMI Music Publishing, et al. arising out of his fraud claim for defendants' misappropriation of ownership rights and royalties of a certain song ("Time Won't Let Me") composed by plaintiff and his brother-in-law, Chet Kelly. Plaintiff and Kelly each owned 50% of the rights to the song. Plaintiff composed the music and Kelly wrote the lyrics. Plaintiff claims the trial court erred in holding his claim barred by the four year statute of limitations (R.C. 2305.09(C)), laches and a judicial admission made in bankruptcy court. We find no error in the grant of summary judgment and affirm for the reasons hereinafter stated. This case arose from a relationship between the plaintiff (a song-writer/musician) and defendants Anthony Nuccio (an attorney) and Roger Karshner (a musical promoter) that originated in 1965. On October 14, 1965, plaintiff and the defendant Nuccio entered into an Agreement in which King agreed to sell, assign and transfer all his "right, title and interest" in the musical composition "Time Won't Let Me" for $300. Kelly retained a 25% share of the rights to "Time Won't Let Me." Plaintiff further agreed "to enter into a written assignment conveying" his interest and "to execute any and all documents necessary to perfect said transfer." Plaintiff later executed a formal assignment (dated January 11, 1966) in compliance with the Agreement. - 3 - Plaintiff contends herein that defendant Nuccio took advantage of his youth and inexperience in buying the song cheap and without advising him of other ways to raise money for his financial needs. On October 25, 1965, eleven days after the sale of "Time Won't Let Me," defendants Nuccio and Karshner entered into a Managerial Agreement with the plaintiff. On November 18, 1965, plaintiff entered into an artist's recording agreement with Capitol Records, Inc. Under that recording agreement, plaintiff contracted to give his exclusive personal endeavors in the production of records as a vocalist and/or musician for Capitol. As noted, "Time Won't Let Me" was formally assigned to defendants on January 11, 1966. On January 17, 1966, Capitol publicly released a recording of "Time Won't Let Me" which achieved modest popular success. On January 21, 1966, defendant Karshner purchased all the plaintiff's right, title and interest to another musical composition ("Was it Really Real") and plaintiff executed an Assignment of all his interest therein to Karshner for $125. Plaintiff also shared ownership rights of this song with Chet Kelly. On February 3, 1966, the parties amended their October 25, 1965 Managerial Agreement, thereby authorizing defendants Nuccio and Karshner to each receive 12 % of plaintiff's gross earnings as related to his musical work. Plaintiff then entered into a Songwriter's Contract on February 12, 1966, transferring his - 4 - interest in the two musical compositions to Beechwood Music Corporation (predecessor to defendant EMI Music Publishing), incorporating the respective interests of defendants Nuccio, Karshner, and Peter and Antoinette Nuccio in the same two musical compositions. The agreement also included Chet Kelly's remaining interest in "Time Won't Let Me." The Assignments of "Time Won't Let Me" and "Was It Really Real" were made subject to a Songwriter's Contract between the plaintiff and Beechwood Music Corporation, with beneficial interests, as set forth therein, to the defendants. Shortly thereafter, the parties experienced a falling-out, whereupon plantiff attempted to terminate the agreement between them. On March 1, 1967, defendants Nuccio and Karshner commenced suit in the Common Pleas Court against plaintiff for breach of the Managerial Agreement. The case was entitled Anthony J. Nuccio, et al. v. Thomas King, Cuyahoga County Common Pleas Court, Case No. 841055, ("the 1967 lawsuit"). On March 29 and April 6, 1968, the parties to the 1967 lawsuit entered into a release prepared by King's counsel, Timothy Sweeney, Esq., wherein the first paragraph of the release states: In reference to the above captioned litigation, (Case No. 841055) this letter is to evidence settlement of the controversy which exists between the parties to that litigation and termination of the action itself ***. The release specifically referred to the payments of monies ($2,500) to Nuccio and Karshner and the manner of payment. No - 5 - mention was made of the two songs. The 1967 lawsuit settlement was memorialized in a journal entry on May 21, 1968, in Vol. 67, Page 344. Pursuant to the settlement agreement, plaintiff agreed to pay defendants the sum of $2,500 in exchange for his release from the managerial agreement. The sale of the two songs was not part of the managerial agreement. It was not until November 15, 1991 that plaintiff began the instant action relative to the ownership and royalty payments on the two compositions and claiming that it was "in the last few months [that] King just discovered that publisher's royalties on the songs *** have been paid over the last 25 years to defendants 1 ***." Defendants filed a motion for summary judgment on May 2, 1994, contending that plaintiff's claims were barred by the four year statute of limitations, laches and a judicial admission against interest in his bankruptcy court filing. The parties filed transcripts of depositions, affidavits, other discovery materials and briefs pro and con on the legal and factual issues. The trial court granted summary judgment for the defendants on September 2, 1994, followed by an expository Memorandum of Opinion and Order, dated October 13, 1994, from which this appeal was taken. 1 This case was originally commenced as C.P. No. 221819 on November 15, 1991, but was voluntarily dismissed without prejudice on November 20, 1992 and refiled on November 22, 1993 as C.P. No. 261553. - 6 - In its Opinion, the trial court dealt with plaintiff's arguments that he did not know since 1966 that defendants were receiving royalties that were rightfully his. The court stated at pp. 4-5: Plaintiff insists that royalty statements sent to him were unclear and that he did not know the statements excluded mechanical licensing rights. Further, Plaintiff argues that the settlement and release of the 1967 lawsuit returned to him the rights to all royalties - for writing and for publishing. In support of his claim, Plaintiff also maintains that he was young and unsophisticated and that Nuccio and Karshner took unfair advantage of him with regard to business, legal and promotional matters. The evidence in this case belies Plaintiff's arguments. In his affidavit of May 26, 1994, at paragraph 14, Plaintiff avers: "I continued to receive royalty statements and checks periodically from 1966 to the present time." Beechwood Music Corp., EMI's predecessor, issued the royalty statements and checks to Plaintiff. These statements specifically recited the musical compositions for which Plaintiff was paid mechanical license fees. Nowhere in these records does the composition "Time Won't Let Me" appear. A cursory review, let alone the diligent examination suggested by the fraud statute, would have put Plaintiff on notice as to any royalty income for the song in question here. Thus, Plaintiff had the opportunity to discover the alleged fraud as early as 1966; and accordingly, the statute of limitations (modified by the discovery savings clause) operates as a bar to his claim. Moreover, Plaintiff cannot successfully maintain that the settlement and release in the 1967 breach of contract lawsuit restored his mechanical licensing royalties. Exhibit J-4 of Defendants' Motion for Summary Judgment is a copy of the journalized settlement agreement. It speaks of a dollar figure to be paid to Nuccio, et al. by Tom King, and it sets out a - 7 - payment schedule. In addition, that lawsuit claimed breach of the managerial contracts. Tom King answered, through attorney Timothy R. Sweeney, without asserting any counterclaims regarding royalties or licensing rights. Res Judicata principles bar Plaintiff from raising now that was, or could have been, litigated previously between the same parties or their privies. Eminently conclusive on the issue of the import of the release and settlement is the affidavit of Timothy R. Sweeney, Esq. who represented Tom King at that time. In pertinent part, Sweeney says: Affiant further says that any musical compositions written by Thomas King, in whole or in part, were never a consideration of the lawsuit or settlement; that the settlement of this matter was totally unrelated to any musical compositions written, in whole or in part, by Thomas King, relative to the plaintiffss [sic]; that the settlement consideration was pecuniary in nature; that Thomas King never challenged the ownership by the plaintiffs [in this litigation] of musical compositions written, in whole or in part, by Thomas King, specifically, but not limited to "Time Won't Let Me," "Girl In Love," "Was It Really Real," and all other musical compositions, written in whole or in part, by Thomas King, and which the plaintiffs had interests in. The court went on to hold that plaintiff's claims were barred by the four year statute of limitations, laches and his bankruptcy court admission. We will address plaintiff's Assignments of Error I and IV as we find them dispositive of this appeal. - 8 - I. THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT ON BEHALF OF APPELLEES-DEFENDANTS AND DISMISSING APPELLANT-PLAINTIFF'S COMPLAINT WHEN THE RECORD CONTAINS GENUINE ISSUES OF MATERIAL FACT REGARDING WHETHER THE LIMITATION PERIOD HAD RUN UNDER O.R.C. 2305.09(C). IV. THE TRIAL COURT ERRED AS A MATTER OF LAW WHEN IT GRANTED SUMMARY JUDGMENT BECAUSE THE LIMITATION PERIOD UNDER O.R.C. 2305.09(C) HAD RUN BECAUSE THE PLAINTIFF, BY THE EXERCISE OF ORDINARY PRUDENCE, COULD HAVE DISCOVERED THE FRAUD EARLIER, EVEN THOUGH THE PLAINTIFF HAD NO ACTUAL KNOWLEDGE OF THE FRAUD AND EVEN THOUGH HIS LACK OF KNOWLEDGE WAS DUE TO DEFENDANT'S ACTIONS. The evidence is undisputed that plaintiff, over an 18 year period, received detailed royalty statements from Beechwood Music/EMI which described royalties due on his various compositions. The name of the songs and the dates for which the payments were made were itemized thereon. On none of these statements were payments made respecting the two compositions at issue in this suit. It was on the basis of this knowledge that the trial court found that plaintiff knew or should have known, in the exercise of due diligence, of his claim against the defendants for fraudulently misappropriating his songs long before the four year period prior to this suit started to run. We agree with the trial court's reasoning and disposition. R.C. 2305.09(C) states that an action for relief on the grounds of fraud shall be brought within "four years after the cause thereof accrued *** [if] the action is *** for the wrongful taking of personal property, the causes thereof shall not accrue until the wrongdoer is discovered; nor if it is for fraud, until - 9 - the fraud is discovered." A collateral principle to the discovery of the fraud rule is due diligence. Discovery of the fraud, in regard to the statute of limitations, means where the party defrauded, by the exercise of due diligence, after facts sufficient to put him on inquiry have come to his notice, ought to have discovered the fraud. Such facts are knowledge, and, after four years, the party claiming not to be bound by the lapse of time must show such diligence. * * * The discovery contemplated in the Ohio statutes of limitations is measured by the external standard and not merely a subjective one, so that the term includes not only actual discovery but also a situation where discovery should have been made. Where the circumstances are such as to suggest to a person of ordinary intelligence the probability that he has been defrauded, a duty of inquiry arises, and if he omits that inquiry when it would have developed the truth, knowledge of fraud will be imputed to him, and he will be held to have actually known what he might or ought to have known. 66 Ohio Jur.3d (1988) Limitations and Laches, 98. The time in which an action for fraud must be brought begins to run when the circumstances are such that a reasonable person would be alerted to the possibility of wrongdoing. Copeland v. Delvaux (1993), 89 Ohio App.3d 1, 6; Kettering v. Berger (1982), 4 Ohio App.3d 254, 261. A claimant cannot rely on his ignorance where an elemental inquiry would have led to the discovery of the alleged wrongdoing. Hambleton v. R.G. Barry Corp. (1984), 12 Ohio St.3d 179, 182; see, also, Physicians Ins. Co. of Ohio v. Morehead (1993), 88 Ohio App.3d 103, 107-08. - 10 - Although plaintiff argues that he was misled by the release of the 1967 lawsuit into thinking he was reassigned his two compositions, there is no factual basis for that in the record. The release, prepared by plaintiff King's attorney, addressed itself solely to a pecuniary amount and a time table of payments for settlement of the managerial agreement dispute. The same release was incorporated into a formal Journal Entry by the court. Plaintiff King asserted no affirmative defenses and sought no affirmative relief by counterclaim in the 1967 lawsuit for interests unrelated to the managerial agreements, especially rights in the musical compositions to which he now claims rights. The plaintiff's attorney in the 1967 lawsuit, Timothy R. Sweeney, stated in an affidavit prepared in October 1992: *** that any musical compositions written by Thomas King, in whole or in part, were never a consideration of the lawsuit or settlement; that the settlement of this matter was totally unrelated to any musical composition written, in whole or in part, by Thomas King, relative to the plaintiffss [sic] (defendants Anthony J. Nuccio and Roger Karshner in the instant action); that the settlement consideration was pecuniary in nature; that Thomas King never challenged the ownership of the plaintiffs (same defendants), in this litigation of musical compositions written, in whole or in part, by Thomas King, specifically, but not limited to "Time Won't Let Me", "Girl In Love," *** and all other musical compositions, written in whole or in part, by Thomas King ***. Plaintiff King was 26 years of age at the time of the 1967 lawsuit, experienced in entertainment matters and represented by independent counsel, who was aware of the sale of the musical - 11 - compositions in a letter from defendant Nuccio dated December 7, 1966. Attorney Sweeney had full knowledge of the purchase of "Time Won't Let Me" and "Was It Really Real" by the defendants from the plaintiff, but no mention was made of same in the release or settlement. There is no factual basis for plaintiff's contentions that the release of the 1967 lawsuit operated as a retransfer to him of the musical compositions formally assigned to defendants earlier. Failure to exercise due diligence when documentary evidence is available and known to the plaintiff which should put him on notice of fraud does not prevent the four year statute of limitations from running. As this Court recently stated in Craggett v. Adell Ins. Agency (1993), 92 Ohio App.3d 443, 454: Under R.C. 2305.09, a cause of action for misrepresentation must be brought within four years after the misrepresentation was or should have been discovered. Investors REIT One v. Jacobs (1989), 46 Ohio St.3d 176, 546 N.E.2d 206; Venham v. Astrolite Alloys (1991), 73 Ohio App.3d 90, 596 N.E. 2d 585, motion to certify overruled (1991), 62 Ohio St.3d 1422, 577 N.E.2d 1105. No more than a reasonable opportunity to discover the misrepresentation is required to start the period of limitations. Information sufficient to alert a reasonable person to the possibility of wrongdoing gives rise to a party's duty to inquire into the matter with due diligence. Id; see Flowers v. Walker (1992), 63 Ohio St.3d 546, 589 N.E.2d 1284. Once sufficient indicia of misrepresentation are shown, a party cannot rely on its unawareness or the efforts of the opposition to lull it into a false sense of security to toll the period of limitations. See Kimmelman v. - 12 - Advest, Inc. (Mar. 19, 1993), Lucas App. No. 920177, unreported, 1993 WL 77192. Here, each of the policies issued to Craggett clearly stated on its cover in enlarged, bold print that it was a life insurance policy payable upon due proof of the insured's death, the name of the insured, the face value of the policy, and the policy number. This information was sufficient to require a reasonable person who believed she was simply adding a name to an existing policy to inquire into the possibility of wrongdoing. Insurance customers are not free to ignore warning signals which would cause a reasonable person to ask questions. Inasmuch as Craggett failed to assert her claims of misrepresentation within four years of the various dates she received and reviewed the policies, the dates she should have discovered the alleged misrepresentation, her claims are barred by the applicable statute of limitations. Even giving Craggett the benefit of all reasonable inferences by assuming, arguendo, that the policies themselves were not sufficient indicia of misrepresentation to trigger the period of limitations, the May 26, 1980 Statement of Dividends and Endowments was certainly sufficient information to trigger Craggett's duty to investigate the alleged misrepresentation. Craggett similarly failed to assert her misrepresentation claim within four years of the date she signed the Statement of Dividends and Endowments, the date by which she should have discovered AIA's alleged misrepresentations. Thus, the trial court correctly determined that summary judgment was appropriate under the applicable statute of limitations. In similar vein, plaintiff knew he had formally agreed to assign and did, in fact, formally assign all of his right, title and interest in the two compositions in 1966 to the defendants Nuccio and Karshner. Soon thereafter the song "Time Won't Let Me" - 13 - achieved some popular success. Yet, plaintiff was aware that he received no royalties from Beechwood Music/EMI over 26 years from the assignments and popular success. There are no material issues of disputed facts which prevented plaintiff from knowing that he had been deprived of a valuable asset, or as he claims, defrauded by the defendants. Under the circumstances, summary judgment was properly granted. Assignments of Error I and IV are overruled. The remaining assignments of error are moot and need not be addressed under App. R. 12(A)(1)(c). Judgment affirmed. - 14 - It is ordered that appellees recover of appellant its costs herein taxed. The Court finds there were reasonable grounds for this appeal. It is ordered that a special mandate issue out of this Court directing the Court of Common Pleas 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. KARPINSKI, J., and PRYATEL, J.*, CONCUR. JAMES M. PORTER PRESIDING JUDGE (*August Pryatel, Retired, Eighth District Court of Appeals, Sitting by Assignment) N.B. This entry is made pursuant to the third sentence of Rule 22(D), Ohio Rules of Appellate Procedure. This is an announcement of decision (see Rule 26). Ten (10) days from the date hereof, this document will be stamped to indicate journalization, at which .