COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 70392 HUNTINGTON NATIONAL BANK : : Plaintiff-appellant/ : cross appellee : JOURNAL ENTRY : vs. : and : OPINION LLOYD R. GINN, et al : [Cross appeal by Keith C. Fox] : : Defendants-appellees/ : cross-appellant : : DATE OF ANNOUNCEMENT OF DECISION : DECEMBER 26, 1996 CHARACTER OF PROCEEDING : Civil appeal from : Court of Common Pleas : Case No. 275,149 JUDGMENT : AFFIRMED DATE OF JOURNALIZATION : _______________________ APPEARANCES: For plaintiff-appellant/ DONALD A. MAUSAR cross-appellee : ROBERT B. WELTMAN Attorneys at Law Lakeside Place, Suite 200 323 Lakeside Avenue, West Cleveland, Ohio 44113 For defendant-appellee/ ABRAHAM CANTOR cross-appellant Attorney at Law Keith C. Fox : 35104 Euclid Avenue, Suite 301 Willoughby, Ohio 44094 TIMOTHY E. McMONAGLE, J.: Plaintiff-appellant/cross-appellee Huntington National Bank ("Huntington") appeals the decision of the Cuyahoga County Common Pleas Court that dismissed Huntington's action against defendants- appellees Haase Land Corporation and Leonard J. Haase and defendant-appellee/cross-appellant Keith C. Fox. The facts relevant to this appeal are as follows: Defendants 1 Lloyd R. Ginn ("Ginn") and Leonard J. Haase ("Haase") were each one of four twenty-five-percent shareholders in Haase Land Cor- poration ("HLC"), a Florida corporation that owned a sixty-percent interest in one hundred five acres of land contiguous to Disney World in Orlando, Florida. HLC originally acquired the property in the early 1970's and sold a forty-percent interest in the property to a third party in 1973, leaving HLC with its present sixty- percent interest in the land. The testimony at trial revealed that Ginn had bought out one of the original four shareholders in 1981 for $90,000.00. As a result, at the time of the transactions at 1 The record reflects that Lloyd R. Ginn died of natural causes on January 24, 1996, approximately one month before trial. Ginn had appeared pro se in this action prior to his death and, at the time of trial, there had been no substitution of or representation by his estate. - 3 - issue, Ginn owned a twenty-five percent interest in HLC, which owned a sixty-percent interest in the Florida land. Ginn was also the sole proprietor of a collection agency doing 2 business under the name of Ginn & Haase. The collection agency maintained a commercial checking account, referred to in the parties' briefs as a trust account, wherein it held monies collected for its various clients. Commerce Exchange Bank ("Com- merce") was the holder of two promissory notes executed by Ginn as the "sole owner" of Ginn & Haase. When Ginn failed to make pay- ments due pursuant to the notes' terms, Commerce accelerated the notes and attached the Ginn & Haase commercial account. Fearing that checks written against that account would be returned for insufficient funds, Haase made aggregate past-due payments total- ling $16,311.11 and, according to correspondence with attorneys for Commerce, personally guaranteed repayment of Ginn's notes in order to release the attachment on the account. Desirous of extinguishing his personal liability on these two notes, Haase discussed with Ginn the possibility of Ginn selling his interest in HLC. The record reflects that Haase valued Ginn's interest in HLC at $450,000 based upon current negotiations with 2 Stanley Ginn, Lloyd R. Ginn's late father, was a principal in a law firm by the same name, as was Leonard Haase. The younger Ginn was not an attorney, and although the relationship between the younger Ginn and Haase is not entirely clear from the record, it appears that the collection agency was separate and distinct from that of the law firm. Nonetheless, the two entities had some type of business relationship. - 4 - 3 potential buyers for the most valuable portion of the land. According to Haase's testimony at trial and at deposition, Ginn was more than happy at the thought of being able to sell his interest for this amount but was unsure of how to locate a buyer. Haase approached his son-in-law, defendant-appellee/cross-appellant Keith C. Fox ("Fox"), regarding his interest in buying out Ginn's share in HLC. Fox did agree to buy Ginn's share and forwarded a series of checks and promissory notes during October and November 1991 totalling $450,000 as follows: Fox issued a check in the amount of $84,847.18, payable to Commerce, in satisfaction of the two promissory notes executed by Ginn and owing Commerce. For reasons that are not entirely clear, Commerce, in turn, assigned both notes 4 to Haase. Fox then issued a check made payable to Haase, as attorney for Ginn, in the amount of $100,000.00. This check was believed to be deposited into the Ginn & Haase commercial account in the event any checks were returned for insufficient funds as a 3 Of the one hundred five acres owned by HLC, the thirty-five acres eventually sold to Silver Lake were considered the most valuable. The remaining acreage was considered to be the least valuable and, as testified to in Haase's deposition, would have required a significant monetary investment in order to become profitable. 4 While correspondence from attorneys for Commerce indicates that they would assign Ginn's notes to Haase upon receipt of the unpaid balance, it is presumed that this was to be done in the event Haase would make this payment. It is unclear from the record why Commerce went ahead and assigned both notes when the balance due was paid with proceeds that served as the consideration for the sale of land from Ginn to Fox. - 5 - result of the prior attachment of that account. Fox then issued a check made payable to Haase, as attorney for Ginn, in the amount of $165,152.82, which was ultimately forwarded to Ginn. Being $100,000 short of the $450,000 sale price, Fox then issued two promissory notes. The first was in the amount of $60,811.11 and was payable to Haase. This figure reflected the amount Ginn owed Haase for a series of loans made over a course of years. It appears from the record that Ginn agreed that, as part of the consideration for this land sale, Fox would pay Haase rather than Ginn pay Haase, although no written assignment is evident in the record. The second promissory note was in the amount of 5 $39,188.89 and was payable to Ginn. In April 1992, almost six months after these transactions, Ginn executed a mortgage in favor of Haase for $60,811.11, the same amount Fox promised to pay Haase pursuant to the terms of the promissory note. According to Haase's testimony, Ginn executed this mortgage of his own volition because Ginn was disappointed that Fox had not yet paid Haase and Ginn wanted to make sure that Haase would be paid. Haase further testified that he was not worried that Fox would not pay him and did not request Ginn to execute this mortgage. 5 It appears from the record that Ginn had instituted legal action against Fox to recover the monies due pursuant to this note. As best as can be ascertained, Fox did not want to pay on this note until he received funds from Silver Lake, the eventual buyers of thirty-five of the one hundred five acres co-owned by HLC. Fox eventually paid the promissory note according to its terms. - 6 - Sometime in the spring of 1992, a limited partnership known as 6 Silver Lake purchased, for $3 million, thirty-five of the one hundred five acres in which HLC owned a sixty-percent interest. Of this amount, HLC was to receive sixty percent, or $1.8 million, and each of the four shareholders of HLC was to be entitled to $450,000.00. While Silver Lake purchased this property with the intent to build a time-share resort, the property, at the time of trial, had yet to be developed nor had HLC received any payment pursuant to the sale. On November 30, 1993, Huntington obtained a judgment against Lloyd R. and Clarice R. Ginn (collectively "Ginns") when the Ginns defaulted on credit card and overdraft accounts for which they were jointly and severally liable. Based on the personal financial statements completed by the Ginns at the time credit was originally extended to them in 1983 and 1985, Huntington had reason to believe that the Ginns held an interest in HLC that could satisfy the judgment obtained against them. Once it was learned that this asset had been sold, Huntington instituted the present action, naming as defendants the Ginns, HLC, Haase and Fox. Fox, a South Carolina resident, subsequently moved for summary judgment on the basis that his contacts with the State of Ohio were insufficient to have the court impose personal jurisdiction over him. This motion was denied without opinion. 6 HLC is one of the limited partners of Silver Lake. - 7 - A bench trial commenced on February 21, 1996. Pursuant to Civ.R. 41(B)(2), HLC, Haase and Fox moved for dismissal at the close of Huntington's case, which was granted by the trial court. Huntington timely appeals and assigns the following errors for our review: I. WHETHER OR NOT THE TRIAL COURT ERRED WHEN IT DISMISSED THE PLAINTIFF/APPELLANT HUNTINGTON NATIONAL BANK'S CAUSE OF ACTION PURSUANT TO OHIO CIVIL RULE 41(B). II. WHETHER OR NOT THE TRIAL COURT ERRED AS A MATTER OF LAW WHEN IT GRANTED THE OHIO CIVIL RULE 41(B)(2) MOTION BY THE DEFEN- DANT/APPELLEES LEONARD J. HAASE, KEITH C. FOX AND THE HAASE LAND CORPORATION ON THE PLAINTIFF/APPELLANT HUNTINGTON NATIONAL BANK'S CAUSE OF ACTION GROUNDED IN OHIO REVISED CODE 1336.04(A)(1), WHERE THE PLAINTIFF/APPELLANT HUNTINGTON NATIONAL BANK PUT FORTH A PRIMA FACIE CASE AND A SUFFICIENT NUMBER OF THE BADGES OF FRAUD FOUND IN OHIO REVISED CODE 1336.04(B), WHICH SHIFTED THE BURDEN OF PROOF FROM THE PLAINTIFF/APPELLANT, HUNTINGTON NATIONAL BANK, TO THE DEFENDANT/APPELLEES, LEONARD J. HAASE, KEITH C. FOX AND THE HAASE LAND CORPORATION. Fox cross-appeals and assigns the following error for our review: THE TRIAL COURT ERRED IN DENYING KEITH C. FOX'S MOTION FOR SUMMARY JUDGMENT BECAUSE MR. FOX WAS NOT SUBJECT TO PERSONAL JURISDICTION PURSUANT TO R.C. 2307.382. I. - 8 - Huntington's assignments of error are interrelated and will, therefore, be discussed together for the sake of expediency. Succinctly, Huntington challenges the trial court's dismissal of its cause of action against HLC, Haase and Fox pursuant to Civ.R. 41(B)(2) where, it contends, a prima facie case of fraudulent conveyance was established pursuant to R.C. 1336.04. Civ.R. 41(B)(2) governs the dismissal of a plaintiff's claim at the conclusion of the plaintiff's evidence and states: After the plaintiff, in an action tried by the court without a jury, has completed the presentation of his evidence, the defendant, without waiving his right to offer evidence in the event the motion is not granted, may move for a dismissal on the ground that upon the facts and the law the plaintiff has shown no right to relief. The court as trier of the facts may then determine them and render judgment against the plaintiff or may decline to render any judgment until the close of all the evidence. If the court renders judgment on the merits against the plaintiff, the court shall make findings as provided in Rule 52 if requested to do so by any party. Pursuant to Civ.R. 41(B)(2), if a case is tried to the court rather than to a jury, a defendant may move for dismissal of the plaintiff's action after the plaintiff has presented his evidence and rested. Construing the facts and the law, the trial court may grant the motion if the plaintiff has failed to show a right to 7 relief. The trial court, in determining whether the plaintiff has shown a right to relief, is not required to review the evidence in 7 L.W. Shoemaker, M.D., Inc. v. Connor (1992), 81 Ohio App.3d 748, 752. - 9 - the light most favorable to the plaintiff but is required only to determine whether the plaintiff has made out his case according to 8 the applicable burden of proof. A dismissal pursuant to this rule will not be set aside unless it is incorrect as a matter of law or is against the manifest 9 weight of the evidence. When an appealing party challenges the findings of a trial court on the basis that such findings are not supported by the weight of the evidence and separate findings of fact and conclusions of law were neither requested by the parties pursuant to this rule nor supplied by the trial court, the reviewing court is bound to affirm if, from an examination of the record as a whole, there is some evidence from which the trial court could have reached the ultimate factual conclusions support- 10 ing the judgment. Neither party requested findings of fact or conclusions of law pursuant to Civ.R. 52 as provided for in Civ.R. 41(B)(2). Consequently, this court is unable to ascertain which arguments the trial court found persuasive or why. Nonetheless, because this case alleges violations of the Ohio Uniform Fraudulent Transfer 8 See Jacobs v. Bd. of Cty. Commrs. (1971), 27 Ohio App.2d 63, 65. 9 Johnson v. Tansky Sawmill Toyota, Inc. (1994), 95 Ohio App.3d 164, 167; Bank One, Dayton, N.A. v. Doughman (1988), 59 Ohio App.3d 60, 63; Hirus v. Balraj (Jan. 6, 1994), Cuyahoga App. No. 64488, unreported. 10 Shaker Auto Lease, Inc. v. Javitch & Eisen (July 30, 1992), Cuyahoga App. No. 60934, unreported at 7-8. See, also, Seasons Coal Co. v. Cleveland (1984), 10 Ohio St.3d 77. - 10 - Act, codified at R.C. 1336.01 et seq., Huntington must prove the 11 elements of fraud by clear and convincing evidence. With this standard in mind, we must determine if the trial court had before it competent, credible evidence from which it could find that Huntington failed to show by clear and convincing evidence that the conveyance from Ginn to Fox was fraudulent within the purview of the Ohio Uniform Fraudulent Transfer Act in order to justify dismissal pursuant to Civ.R. 41(B)(2). R.C. 1336.04(A)(1) provides that a transfer is fraudulent as to a creditor if it is made "with actual intent to hinder, delay, or defraud any creditor ***." The ultimate burden of proof rests upon the party seeking to set aside the alleged fraudulent convey- 12 ance. In determining actual intent, R.C. 1336.04(B) lists sever- al statutory factors, termed "badges of fraud," that a court considers in determining whether an inference of fraud exists. If the party alleging fraud is able to demonstrate a sufficient number of badges, the burden of proof then shifts to the defendant to 13 prove that the transfer was not fraudulent; however, if the defendant can put forth evidence that the transfer was for 11 See McKinley Fed. S. & L. v. Pizzuro Enterprises, Inc. (1990), 65 Ohio App.3d 791, 796. 12 Stein v. Brown (1985), 18 Ohio St.3d 305, 308; Baker & Sons Equip. Co. v. GSO Equip. Leasing, Inc. (1993), 87 Ohio App.3d 644, 651. 13 Baker & Sons Equip., supra, at 650; Cardiovascular & Thoracic Surgery of Canton, Inc. v. DiMazzio (1987), 37 Ohio App.3d 162, 166. See, also, Spangler v. Redick (1991), 74 Ohio App.3d 798, 804. - 11 - reasonable equivalent value, then there exists a defense to a prima facie case of actual intent to defraud pursuant to R.C. 14 1336.04(A)(1). Huntington maintains that it presented a prima facie case of fraudulent conveyance by establishing no less than six badges of fraud: (1) Ginn transferred property to an insider [R.C. 1336.04(B)(1)]; (2) before the transfer was made, Ginn was being threatened with suit [R.C. 1336.04(B)(4)]; (3) the transfer was of substantially all of the assets of Ginn [R.C. 1336.04(B)(5)]; (4) the value of the consideration received by Ginn was not reasonably equivalent to the value of the asset transferred [R.C. 1336.04(B)(8)]; (5) Ginn became insolvent shortly after the trans- fer was made [R.C. 1336.04(B)(9)]; and (6) the transfer occurred after Ginn had incurred a substantial debt [R.C. 1336.04(B)(10)]. The record reflects, however, that Huntington's prima facie case was defeated by the unrebutted evidence presented by HLC, Haase and Fox that Ginn's sale to Fox for $450,000 was for fair market value. The record reflects that HLC and the forty-percent co-owner accepted an offer to sell thirty-five of the one hundred five acres for $3 million, of which HLC would recoup $1.8 million based on its sixty-percent interest. Dividing this figure by the four, each shareholder, as a result of this sale, would be entitled to $450,000, which is the precise consideration paid by Fox to Ginn. 14 Baker & Sons Equip., supra, at 651, fn. 4. - 12 - Moreover, the record reflects that, only five months prior to the 15 transaction at issue, one of the forty-percent owners of the one hundred five acres sold a slightly larger interest for $150,000 less than the sale from Ginn to Fox. Huntington appears to argue that because no property apprais- als were completed prior to the sale, nor was the property placed on the open market, there is no evidence that the property sold for reasonable equivalent value; however, as it was Huntington's burden to prove the conveyance was for less than equivalent value, it was incumbent upon Huntington to come forth with evidence of the 16 property's valuation through expert testimony or otherwise. With only the unrebutted evidence of HLC, Haase and Fox as to the property's value, it cannot be said that Ginn did not receive reasonable equivalent value for this property transfer. Having determined that competent, credible evidence was pre- sented demonstrating that Fox paid reasonable equivalent value for the property, Huntington's argument that it presented a prima facie case of fraudulent conveyance sufficient to overcome dismissal to 17 Civ.R. 41(B)(2) is without merit. In the interests of justice, we will, nonetheless, address Huntington's remaining arguments as they relate to the statutory 15 At one point, the forty-percent interest was co-owned by three persons. By the time of the sale to Silver Lake, the forty- percent interest was owned by one person. 16 See Baker & Sons Equip., supra, at 651. 17 Id. at 651, fn. 4. - 13 - factors considered in establishing a fraudulent conveyance pursu- ant to R.C. 1336.04(B). A. Huntington contends that the transfer of property from Ginn to Fox was a transfer to an insider as defined in R.C. 1336.01(G)(1)(a), which defines an insider as a "relative of the debtor or of a general partner of the debtor[.]" Huntington argues that Fox qualifies as an insider because he was the son-in-law of Haase, Ginn's general partner. While the record reflects that Stanley Ginn, Lloyd R. Ginn's late father, and Haase were general partners in the law firm known as Ginn & Haase, there is no evidence in the record to support that the younger Ginn, who was not an attorney, and Haase were general partners. It appears from the record that the younger Ginn independently operated a collection agency under the same name as evidenced by correspondence from attorneys for Commercial that referred to loans extended to the younger Ginn as "sole owner" of Ginn & Haase. Moreover, the younger Ginn eventually sold this collection agency to Automated Merchants Credit Systems for $100,000.00. While it appears that some type of business relationship existed between the younger Ginn and Haase, the evidence does not support that these two parties were general partners. Whether this is an accurate depiction of the relationship between the younger Ginn and Haase is not apparent from the record nor do we make any - 14 - determination of the propriety of such a relationship. As competent, credible evidence existed from which the court could have determined that Ginn and Haase were not general partners, it cannot be said that Huntington established that Ginn's transfer of the property to Fox was to an insider as defined in R.C. 1336.01(G)(1)(a). B. Huntington next contends that Ginn was being pursued and 18 threatened with suit by Commerce prior to the transfer; however, the evidence at trial does not support that Ginn was being threat- ened with legal action for failure to pay his debts to Commerce. While the Ginn & Haase commercial checking account was attached until such a time as the conditions for its release were met, these conditions were ultimately satisfied by Haase prior to the sale of property to Fox. Consequently, at the time of the property transfer, Ginn was not being threatened with suit nor was the commercial account subject to attachment. To the contrary, the threat of further attachment had extinguished. As competent, credible evidence existed from which it could be determined that Ginn, prior to the transfer, was not being threatened with suit, it cannot be said that Huntington established this badge of fraud. C. Huntington further argues that Ginn's sale of his interest in HLC to Fox was of substantially all of Ginn's assets. Without 18 See R.C. 1336.04(B)(4). - 15 - offering any evidence of Ginn's assets, Huntington claims that it is clear that Ginn's interest in HLC represented the bulk of Ginn's assets. To the contrary, the personal financial statements on file with Huntington when the Ginns applied for credit in 1983 and 1985 support that Ginn had significant assets apart from his interest in HLC. There was no evidence offered to negate the existence of these other assets at the time of trial nor was any evidence presented to substantiate Huntington's claim that Ginn's interest in HLC was substantially all of Ginn's assets. Consequently, the trial court had before it competent, credible evidence from which to determine that Huntington failed to establish that Ginn's transfer of his interest in HLC consisted of substantially all of Ginn's assets. D. Huntington further argues that Ginn was insolvent at the time 19 that he transferred his interest in HLC. Huntington relies on R.C. 1336.02(A)(2), which presumes a debtor to be insolvent when the debtor is not paying his debts as they become due. Huntington maintains that Ginn was unable to pay his debt to Commerce and, therefore, was presumptively insolvent pursuant to this statutory provision. While it may be true that Ginn had recent difficulty keeping this account current, at the time of the transfer, this account was current as was his debt owed to Huntington. There was no other evidence offered that Ginn was unable to meet his 19 See R.C. 1336.04(B)(9). - 16 - obligations to any other creditors or even if Ginn were indebted to other creditors. Consequently, competent, credible evidence was before the court from which it could be determined that Ginn did not meet the definition of insolvency as set forth in R.C. 1336.02(A)(2). E. Huntington lastly argues that Ginn's debt to Commerce was a 20 substantial debt incurred shortly before the property transfer. In essence, Huntington claims that Ginn did not have the financial resources to pay this debt in the absence of fraudulently convey- ing his interest in HLC. To the contrary, the record reflects that the larger of the two promissory notes was executed by Ginn in November 1989 for $120,000.00. The second note, in the amount of $45,000, was executed in March 1991. As the transfer at issue occurred in October 1991, it cannot be said that Ginn's debt to Commerce was incurred shortly before the property transfer. Moreover, there was no evidence to suggest that Ginn was unable to pay the promissory notes according to their terms prior to the events leading up to the attachment. Consequently, competent, credible evidence was presented from which the trial court could have determined that Huntington failed to establish that Ginn's debt to Commerce was a debt that incurred shortly before the property transfer pursuant to R.C. 1336.04(B)(10). 20 See R.C. 1336.04(B)(10). - 17 - Because competent, credible evidence was presented from which the trial court could have found that Huntington failed to estab- lish by clear and convincing evidence that the conveyance from Ginn to Fox was fraudulent, it cannot be said that the trial court's judgment was unsupported by the evidence. Consequently, the trial court did not err in dismissing Huntington's action against HLC, Haase and Fox pursuant to Civ.R. 41(B)(2). Accordingly, Huntington's assignments of error are overruled. II. Because of our disposition of Huntington's assignments of error, it is not necessary to address Fox's cross-assignment of 21 error. 21 App.R. 12(1)(c). - 18 - It is ordered that appellees recover of appellant 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 Cuyahoga County 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. PATRICIA BLACKMON, P.J. and JAMES M. PORTER, J. CONCUR JUDGE TIMOTHY E. McMONAGLE N.B. This entry is an announcement of the court's decision. See App.R. 22(B), 22(D) and 26(A); Loc.App.R. 27. This decision will be journalized and will become the judgment and order of the court pursuant to App.R. 22(E), unless a motion for reconsideration with supporting brief, per App.R. 26(A), is filed within ten (10) days of the announcement of the court's decision. The time period for review by the Supreme Court of Ohio shall begin to run upon the journalization of this court's announcement of decision by the .