COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 68833 : LENEL & WANDA GOLDEN : : : JOURNAL ENTRY Plaintiffs-Appellees : : and v. : : OPINION MICHAEL F. WAIWOOD, ET AL. : : : Defendants-Appellants : : : DATE OF ANNOUNCEMENT OF DECISION: JUNE 6, 1996 CHARACTER OF PROCEEDING: Civil appeal from Common Pleas Court Case No. CV-259981 JUDGMENT: Affirmed. DATE OF JOURNALIZATION: __________________________ APPEARANCES: For Plaintiffs-Appellees: For Defendants-Appellants: FORD L. NOBLE, ESQ. BRADLEY P. TOMON, ESQ. 950 Standard Building McFADDEN & ASSOCIATES CO. 1370 Ontario Street 1700 Standard Building Cleveland, Ohio 44113 1370 Ontario Street Cleveland, Ohio 44113 - 2 - KARPINSKI, J.: Defendants-appellants, Robert Neroni, American Homes Realty Corporation, and Patricia Homes, Inc., appeal from the judgment of the trial court awarding $5,000 plus interest and attorney's fees to plaintiffs, Lenel and Wanda Golden. On appeal, Robert Neroni and American Homes argue they should not be liable for this judgment. For the following reasons, we affirm the judgment of the court below. Plaintiffs were interested in purchasing a home. Helen Frank-Wilson, their realtor, took the plaintiffs to see a home located at 10514 Belleau Street, Twinsburg, Ohio. An American Homes Realty sign was in the yard. Wilson testified that Patricia Homes was the seller, but American Homes Realty was the realtor. This property was built by Patricia Homes and marketed by American Homes Realty. American Homes Realty has been incorporated since 1973. Phyllis Neroni, Robert's wife, is the sole officer and shareholder of that corporation. Robert Neroni testified that American Homes Realty was his wife's brokerage firm. (Tr. 151.) On the other hand, when questioned by the court, Phyllis Neroni testified as follows: Q. I think you said that you were not the broker for American Homes? A. That's right. Q. Who had the listing for this house? - 3 - A. American Homes was the lister, [sic] Robert Neroni. Q. Who was it then that was a broker? A. Bob Neroni. Q. Bob Neroni was broker? A. Yes. He is a broker. (Tr. 184.) Patricia Homes, a construction company, was incorporated on May 12, 1989. The two shareholders of Patricia Homes are Robert Neroni and his attorney, Michael Waiwood. Patricia Homes was named after Phyllis and Robert Neroni's daughter, Patricia. In September, 1993, a certificate of good standing was issued by the Ohio Secretary of State. Patricia Homes is now defunct with no assets. Robert Neroni testified that he has formed seven to nine corporations. On February 27, 1992, plaintiffs signed a purchase agreement for the home. On this contract Patricia Homes is listed as the seller, and Robert Neroni signed the contract on behalf of Patricia Homes. The agreement required an earnest money deposit of $5,000. This earnest money was refundable if plaintiff failed to obtain financing after making a good faith effort to obtain the required financing. Plaintiffs made the check out to Patricia Homes. The money was not placed in a trust account, but rather was deposited in the Patricia Homes account. The money was used to complete construction of the house. There is a glaring dispute as to when and where the purchase agreement was signed. Robert and Phyllis Neroni testified that they signed the agreement when it was sent to them in Arizona. - 4 - Wilson testified that the contract was signed by the Neronis in the home in Lyndhurst, Ohio. Plaintiffs were unable to obtain financing. Their first attempt was with Union National Mortgage, which turned them down because of bad credit. Plaintiffs, along with Wanda Golden's brother, reapplied for financing at Union National Mortgage and again were turned down. Thereafter, Robert Neroni called plaintiffs and told them that he was the builder. He suggested that they try to obtain financing through his bank, Security Federal. After discussions with Security Federal, it became apparent to plaintiffs that this second bank would not extend financing, so they did not file a formal application. On November 7, 1992, after failing to obtain financing, plaintiffs requested the return of their earnest money. Robert Neroni testified that he consulted Waiwood and they declined to return plaintiffs' earnest money, because, in their opinion, plaintiffs had not made a good faith effort to obtain financing. Plaintiffs filed a complaint against Michael Waiwood, Robert Neroni, American Homes Realty Corp., and Patricia Homes, Inc. The case was referred to arbitration. The arbitration panel awarded as follows: Finding for Plaintiffs against Patricia Homes, Inc. in the amount of $5,000.00 plus interest from November 7, 1992 and court costs. Finding for Defendants Michael F. Waiwood, Robert J. Neroni and American Homes Realty Corp on Plaintiffs [sic] Complaint. Plaintiffs appealed this decision and a bench trial was held on March 13, 1995. At the close of plaintiffs' case, the trial - 5 - court dismissed Michael Waiwood as a party because his name was never brought up by any of plaintiffs' witnesses. Plaintiffs have not appealed the dismissal of Waiwood. Additionally, the trial court denied defendants' motion to dismiss Robert Neroni and American Homes Realty. After defendants presented their case, the trial court, in its findings of fact and conclusions of law, found that plaintiffs made a good faith effort to obtain financing and were entitled to a return of their $5,000 earnest money. Defendants have not appealed this portion of the trial court's judgment. They take issue only with the following portion of the trial court judgment: The Court further finds that Patricia Homes and American Homes Realty, are alter-egos of Robert Neroni. And by and through him, Phyllis Neroni, who has worked with and for the [sic] him. And in particular, that Robert Neroni's activity, as the broker, as testified to by Ms. Neroni, while at the same time an undisclosed principal of Patricia Homes, is a violation of Title 47 of the revised code. As well as the deposit of the check in Patricia Homes' account, and not an escrow account, of which is again, a violation of Title 47 of the Ohio Revised Code. All of this, leads this Court to believe that the 5,000 dollar deposit has been wrongfully withheld by Robert Neroni, American Home [sic] Realty and Patricia Homes. And as a consequence of that, the Court finds for the plaintiffs in the amount of 5,000 dollars, with interest. From the 27th of February, 1992, against Patricia Homes, against American Home [sic] Realty, and against Robert Neroni. Defendants timely appeal raising four assignments of error. The first three assignments state as follows: I. THE TRIAL COURT ABUSED ITS DISCRETION BY REFUSING TO GRANT THE DEFENDANTS/APPELLANTS ROBERT NERONI'S AND AMERICAN HOMES REALTY CORPORATION'S MOTION TO DISMISS AFTER THE PLAINTIFF RESTED AT TRIAL. - 6 - II. THE TRIAL COURT ERRED IN HOLDING ROBERT NERONI PERSONALLY LIABLE FOR THE DEBT OF PATRICIA HOMES, INC. III. THE TRIAL COURT ERRED IN FINDING AMERICAN HOMES REALTY CORPORATION LIABLE FOR THE DEBT OF PATRICIA HOMES, INC. In these assignments, defendants argue that the trial court erred by not granting the motions to dismiss defendants, Robert Neroni and American Homes Realty. The substance of defendants' arguments is that Robert Neroni and American Homes Realty cannot be liable for the wrongful withholding of the earnest money when the check for $5,000 was made out to Patricia Homes. At the close of plaintiffs' case in chief, defendants orally moved to dismiss Robert Neroni and American Homes Realty. In a civil trial to a judge without a jury, as in the case at bar, a motion for a defense judgment at the close of plaintiff's case is treated as a motion for dismissal under Civ.R. 41(B)(2), not a motion for directed verdict under Civ.R. 50. Bank One v. Doughman (1988), 59 Ohio App.3d 60, 62. A trial court's ruling on a Civ.R. 41(B)(2) motion will be set aside only if erroneous as a matter of law or against the manifest weight of the evidence. Id. at 62. In the case at bar, this condition was not met. In a civil case, judgments supported by some competent, credible evidence going to all the essential elements of the case will not be reversed by a reviewing court as being against the manifest weight of the evidence. C.E.Morris Co. v. Foley Construction Co. (1978), 54 Ohio St.2d 279. Moreover, in either a civil or criminal case, "the weight to be given the evidence - 7 - and the credibility of the witnesses are primarily for the trier of facts." State v. DeHass (1967), 10 Ohio St.2d 230, syllabus paragraph one. As to the law regarding the merits of the case, particularly the identity of the parties of those liable, in Belvedere Condominium Unit Owners' Assn. v. R.E. Roark Cos., Inc. (1993), 67 Ohio St.3d 274, the Ohio Supreme Court noted that under certain circumstances individual shareholders may be held liable for the debts of the corporation: Under this exception, the "veil" of the corporation can be "pierced" and individual shareholders held liable for corporate misdeeds when it would be unjust to allow the shareholders to hide behind the fiction of the corporate entity. Courts will permit individual shareholder liability only if the shareholder is indistinguishable from or the "alter ego" of the corporation itself." Belvedere at 287. The Court went on to delineate the elements necessary to pierce the corporate veil as follows: Thus, the corporate form may be disregarded and indi- vidual shareholders held liable for corporate misdeeds when (1) control over the corporation by those to be held liable was so complete that the corporation has no separate mind, will, or existence of its own, (2) control over the corporation by those to be held liable was exercised in such a manner as to commit fraud or an illegal act against the person seeking to disregard the corporate entity; and (3) injury or unjust loss resulted to the plaintiff from such control or wrong. Id. at 289. This court has consistently followed Belvedere and has imposed liability on individual shareholders when it is established that the shareholder and the corporation are fundamentally indistinguishable. Belvedere at 278; University - 8 - Circle Research Ctr. Corp. v. Galbraith (Oct. 5, 1995), Cuyahoga App. No. 68038, unreported, at 3. In the case at bar, competent, credible evidence supported the trial court's finding that Robert Neroni, American Homes Realty, and Patricia Homes were fundamentally indistinguishable. In attempting to purchase the home, plaintiffs made out the first earnest money check for $1,000 to American Homes Realty. After being informed that this amount was insufficient, plaintiffs sent the second earnest money check for $5,000 made out to Patricia Homes. Wanda Golden testified that the broker she was dealing with was Phyllis Neroni, who represented American Homes Realty and Patricia Homes. After being denied financing at the first bank, plaintiffs were contacted, however, by Robert Neroni, who personally recommended that they try a second bank. On re-cross examination, Wanda Golden's testimony shows her confusion over the parties. Q. Who did you enter into the purchase agreement with? A. American Homes Patricia Homes. * * * As far as I know, American Homes and Patricia Homes were * * * one in the same. (Tr.45.) The testimony from Helen Frank-Wilson, plaintiffs' realtor, also establishes that the lines between the different defendants are blurred. Initially, she testified that, "[t]he seller was Patricia Homes." (Tr. 50.) Later, she testified that the seller was American Homes. (Tr. 61.) She cleared up this contradiction - 9 - by stating that American Homes was the realtor and the Patricia Homes was the seller. (Tr. 67-68.) Most importantly for purposes of piercing the corporate veil, Wilson testified that, although working for American Homes Realty, Phyllis Neroni signed the contract on behalf of Patricia Homes. Wilson stated as follows: THE COURT: Thank you. Who does Phyllis Neroni work for? * * * THE WITNESS: She was working for American Homes. This is what she told me. THE COURT: Who signed for Patricia Homes on the contract? THE WITNESS: Your Honor, Phyllis Neroni. (Tr. 75.) Finally, when Wilson prepared the release for the return of the earnest money, she used the names American Homes Realty and Patricia Homes interchangeably. The confusion regarding who Phyllis Neroni worked for was further demonstrated by the testimony of Ron Szuch, who is an Assistant Vice President of Union National Mortgage Company. Q. When you spoke to, you say, Mrs. Neroni, who was she representing? A. She was representing the seller who per the contract was American Homes or Patricia Homes. (Tr. 88.) The testimony of the defendants also supported the finding that the defendants were interchangeable. The defendants contra- - 10 - dicted each other on who the broker was for this transaction. Robert Neroni testified that American Homes Realty is his wife's brokerage firm. Phyllis Neroni testified, however, that her husband is the broker for American Homes Realty. It is apparent that the two corporate defendants are acting as the alter egos of Phyllis and Robert Neroni. They effectively 1 are American Homes Realty and Patricia Homes. In trying to complete this deal, plaintiffs and their broker dealt at times with Robert Neroni and at times with Phyllis Neroni. At trial, Wilson, an experienced broker who participated in this transaction from the beginning, was not clear who the broker or seller was. Finally, even the Neronis themselves gave conflicting testimony as to who was the broker for American Homes Realty. Accordingly, sufficient evidence has been presented to support the trial court's finding that the defendants are alter egos of one another, thus satisfying the first element necessary for piercing the corporate veil. The second element under Belvedere is whether control over the corporation was exercised in such a manner as to commit fraud or an illegal act against the person seeking to disregard the corporate entity. The defendants violated Ohio law by not segregating the earnest money in a separate account as required by R.C. 4735.18(A)(26). This statute sets forth one of the 1 The only other owner of either of these two companies is Michael Waiwood, Robert's attorney. - 11 - instances whereby real estate brokers can have their license suspended or revoked as follows: Failure to maintain at all times a special or trust bank account, noninterest-bearing, separate and distinct from any personal or other account of the broker, to which account shall be deposited, and in which account shall be maintained, all escrow funds, security deposits, and other moneys received by the broker in a fiduciary capacity. The name, account number, if any, and location of the depository wherein such special or trust account is maintained shall be submitted in writing to the superintendent, which depository shall be located in this state. Instead of segregating this money, the Neronis used it to complete construction of the home. This is another example of the way in which the defendants played fast and loose in the pursuit of this sale. Finally, plaintiffs have satisfied the third element under Belvedere by suffering a loss because of defendants' actions. Substantial evidence supported the trial court's finding that plaintiffs made a good faith effort to obtain financing as required by the purchase agreement. The actions of defendants have caused plaintiffs to spend a significant amount of time and money trying to retrieve money rightfully owed to them. Accordingly, competent credible evidence supports the trial court's decision to disregard the corporate structure of the defendants and hold them individually liable. Defendants' first three assignments are overruled. Defendants' fourth assignment states as follows: IV. THE TRIAL COURT ERRED IN GRANTING ATTORNEY FEES IN FAVOR OF PLAINTIFFS/APPELLEES. - 12 - A prevailing party is generally not entitled to an award of attorney's fees absent statutory authorization or a showing of bad faith. State ex rel. Durkin v. Ungaro (1988), 39 Ohio St.3d 191; State ex rel. Kabatek v. Stackhouse (1983), 6 Ohio St.3d 55. It is not necessary for the trial court to use the magic words "bad faith" when it awards attorney's fees. Taylor v. Johnson (May 25, 1995), Cuyahoga App. No. 67585, unreported, at 7. A breach of a fiduciary duty constitutes an act of bad faith and supports an award of attorney's fees. Id. In the case at bar, the trial court found that defendants wrongfully withheld plaintiffs' escrow money. Defendants made no effort whatsoever to segregate the earnest money as required by Ohio law. The money was used to complete the home. Defendants' actions were a breach of their fiduciary duty sufficient to be deemed "bad faith" and to support an award of attorney's fees. Accordingly, the trial court's finding that plaintiffs are entitled to attorney's fees is affirmed. Judgment affirmed. - 13 - It is ordered that appellees recover of appellants their 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 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. O'DONNELL, P.J., and PATTON, J., CONCUR. DIANE KARPINSKI JUDGE 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 time it will become the judgment and .