COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 70293, 70294, 70572 ATAC CORPORATION : : Plaintiff-appellant : : JOURNAL ENTRY -vs- : AND : OPINION JAMES L. LINDSAY, ET AL. : : Defendants-appellees : : DATE OF ANNOUNCEMENT OF DECISION: JANUARY 16, 1997 CHARACTER OF PROCEEDING: Civil appeal from Court of Common Pleas Case Nos. CV-279827 & CV-279439 JUDGMENT: AFFIRMED. DATE OF JOURNALIZATION: APPEARANCES: For Plaintiff-Appellant: For Defendants-Appellees: WALTER P. BUBNA, ESQ. BRUCE P. BATISTA, ESQ. 5700 Pearl Road, Suite 304 VORYS, SATER, SEYMOUR & PEASE Cleveland, Ohio 44129 2100 One Cleveland Center 1375 East Ninth Street Cleveland, Ohio 44114 -2- DYKE, J.: In these consolidated actions, Plaintiff ATAC Corporation appeals from the trial court's dismissal of its complaints against James L. Lindsay and Bayport Acquisition, Inc. for collection upon a promissory note, and from the trial court's denial of its motion to vacate that judgment. For the reasons set forth below, we affirm as to each appeal. ATAC is the regional representative for Arthur Treacher's, Inc. and is responsible for selling "territories" or regional franchise rights in Texas and Mexico. In April 1993, ATAC entered into a purchase agreement and promissory note with defendant Bayport Acquisition, Inc., by Bayport's president defendant James L. Lindsay for territory franchise rights for the development of Arthur Treacher's restaurants in Houston, Texas. In relevant part, the purchase agreement provided as follows: 9. Governing Law. This agreement shall be governed by and construed in accordance with the laws of the State of Ohio. The record further reflects that on October 25, 1993, Bayport Acquisition (hereinafter referred to as "Bayport") filed suit against ATAC in the 189th Judicial District Court of Harris County, Texas, case no. 93-055395. Within this action, Bayport alleged that ATAC made false representations in connection with various locations in the territory which Bayport purchased. Bayport then set forth causes of action for breach of contract and fraud. In addition, Bayport requested a declaration from the court that it is -3- entitled to set-off its damages against the sums due to ATAC in accordance with the terms of the promissory note. Thereafter, on October 27, 1994, or one year after the Texas action was filed against ATAC, ATAC filed case no. 279439 in the Cuyahoga County Court of Common pleas against Bayport and Lindsay for recovery upon the April 20, 1993 promissory note. On November 3, 1994, ATAC filed case no. 279827 in the Cuyahoga County Court of Common Pleas against Lindsay and Bayport, as well as Arthur Treacher's, Inc. and its president James Cataland. Within this action, ATAC again prayed for recovery against Bayport and Lindsay upon the April 20, 1993 promissory note. In addition, ATAC alleged causes of action for tortious interference with business, conversion, breach of contract, price fixing, tortious interference with business against Arthur Treacher's Inc., and breach of con- tract and tortious interference with business against Cataland upon the April 20, 1993 promissory note. On March 31, 1995, the Cuyahoga County actions were consolidated, over ATAC's objection. Lindsay and Bayport then filed amended answers and counterclaims against ATAC for breach of contract, misrepresentation and fraud, then moved to dismiss ATAC's claims, asserting that the claims must be brought as compulsory counterclaims in the Texas action. Thereafter, on September 15, 1995, the trial court dismissed the consolidated actions. In a subsequent ruling, the court determined that Lindsay's and Bayport's counterclaims were moot, and ATAC ultimately dismissed its claims against Arthur Treacher's, Inc. and Cataland. ATAC -4- appeals from the dismissal of case no. 279439 in appellate no. 70294, and the dismissal of case no. 279827 in appellate case no. 70293. On January 22, 1996, ATAC moved for relief from judgment on the basis of newly discovered evidence, asserting that a release entered in connection with another matter precluded any further claims by Bayport and Lindsay which stem from the purchase at issue. The trial court denied this motion and ATAC appeals that judgment in case no. 70572. We further note that the supplemental record presented in this matter indicates that the Texas action terminated on January 6, 1997 pursuant to a judgment entry which provided in relevant part as follows: On this 6th day of January, 1997, came on to be heard the above-entitled and numbered cause and Bayport Acquisition, Inc., Plaintiff, appeared in person through its authorized agent and by its attorney of record and announced ready for trial. Atac Corp., Defendant, after having previously appearing and announcing ready for trial and having participated in the first portion of the trial but failing to appear at this time and no jury having been demanded, all matters of facts and things in controversy were submitted to the Court. The Court, after having received good and sufficient evidence and argument of counsel, finds that the Defen- dant has damaged the Plaintiff in the total sum of $440,090.04, including reasonable attorney's fees. The Court finds that Defendant's action constituted fraud. I. ATAC's first assignment of error states: THE TRIAL COURT ERRED IN GRANTING DEFENDANTS-APPELLEES' MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION. -5- Within this assignment of error, ATAC maintains that the Cuyahoga County Court of Common Pleas should have retained the consolidated actions since the purchase agreement and promissory note require that this matter be construed in accordance with the laws of Ohio. In this connection, ATAC maintains that the "choice of law" provision is to be construed as a "choice of forum" provision. ATAC further argued, before the Texas action was resolved, that its claims need not be brought as a compulsory counterclaim "as the Texas case of Defendant-Appellee Bayport only has not been adjudicated or been resolved on the merits," involves additional parties, and matured after the Texas action was filed. Lastly, ATAC maintains that the complaint "cannot proceed on the merits because of [a] release" and because ATAC's claims matured 1 over seven months after the Texas action was filed. ATAC acknowledges that on August 3, 1995, it filed a counterclaim in the Texas action, notwithstanding its objection that the matter should proceed within Ohio. With regard to ATAC's argument that the "choice of law" provision in fact establishes a "choice of forum," we must 1 In light of the presence of the "choice of law" provision and the fact that the parties do not dispute its validity, we apply Ohio law herein. Moreover, in Guider v. LCI Communications Holdings Co. (1993), 87 Ohio App.3d 412, 417, the court noted that the law of the jurisdiction in which relief is sought controls as to non-substantive issues. In any event, Rule 97 of the Texas Rules of Civil Procedure, like Ohio Civ. R. 13(A) requires that claims which "[arise] out of the transaction or occurrence that is the subject matter of the opposing party's claim" are to be stated within a party's pleading as "compulsory counterclaims." -6- disagree. In Anilas, Inc. v. Kern (1986), 28 Ohio St.3d 165, 167 the supreme court rejected the contention that a "choice of law" clause could be construed as a forum selection clause. The court explained: Appellant Anilas emphasizes the presence of a provision in the lease agreement, which provided: * * * Any such default in performance shall be deemed to be a breach of this contract, and the breach shall be deemed to be made at Salina, Kansas. Anilas contends essentially that the foregoing provision should be interpreted as a choice of forum provision and that by signing the lease, Elvira Kern expressly consented to the jurisdiction of the Kansas court. We do not find Anilas' argument to be persuasive. * * * the provision alleged by Anilas to be a 'choice of forum' clause cannot clearly be construed as such. The provision does not expressly state that the lessee or the guarantors of the lease agree to be subject to the jurisdiction of the Kansas courts, but it merely provides that any breach will be 'deemed to be made at Salina, Kansas.' While such a provision may, in some cases, be considered a 'choice of law' clause that will often control in a determination regarding the applica- bility of the chosen state's law to a dispute over the agreement, see Schulke Radio Productions, Ltd. v. Midwestern Broadcasting Co. (1983), 6 Ohio St.3d 436, such clauses have only a limited effect as one of many factors that must be weighed in determining whether a defendant has 'purposefully established minimum contacts' within a particular forum. (Emphasis in original.) Id., at 167-176. Indeed, the supreme court has noted that the essential nature of a forum selection clause demands a different legal analysis than that applied for conflict of law issues. Kennecorp Mtg. Brokers, Inc. v. Country Club Convalescent Hospital, Inc. (1993), 66 Ohio St.3d 173, 175. -7- In addition, while ATAC maintains that in Burger King Corp. v. Rudzewicz (1985), 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528, the Supreme Court of the United States "clearly held that choice of law provisions in a contract are to be construed to favor as a forum the choice of law state," (Appellant's Brief at 11) we do not find it to go quite this far. Rather, the Supreme Court simply noted in Burger King that "[n]othing in our cases *** suggests that a choice-of-law provision should be ignored in considering whether a defendant has `purposely invoked the benefits and protections of a State's laws' for jurisdictional purposes." Id., 471 U.S. at 482. With regard to whether ATAC's claims were to be asserted as compulsory counterclaims, we note that Civ. R. 13(A) provides: (A) Compulsory counterclaims. A pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction. But the pleader need not state the claim if (1) at the time the action was commenced the claim was the subject of another pending action, or (2) the opposing party brought suit upon his claim by attachment or other process by which the court did not acquire jurisdiction to render a personal judgment on that claim, and the pleader is not stating any counterclaim under this Rule 13. The purpose of this rule is to settle all related claims in one action and thereby avoid a wasteful multiplicity of litigation on claims which arise from a single transaction or occurrence. State ex rel. Massaro Corp. v. Franklin Cty. Court of Common Pleas (1989), 65 Ohio App.3d 428, 430. The rule also provides for an -8- orderly delineation of res judicata, Cleveland v. A.J. Rose Mfg. Co. (1993), 89 Ohio App.3d 267, 275, as failure to assert a com- pulsory counterclaim will result in its being barred in any subsequent action. Quintus v. McClure (1987), 41 Ohio App.3d 402, 404. A component of the rule is the "first in time" rule. Cleveland v. A.J. Rose Mfg. Co., supra. That is, as the supreme court has recently stated in State ex rel. Sellers v. Gerken (1995), 72 Ohio St.3d 115, 117: 'As between [state] courts of concurrent juris- diction, the tribunal whose power is first invoked by the institution of proper proceedings acquires jurisdiction to the exclusion of all other tribunals, to adjudicate upon the whole issue and to settle the rights of the parties.' State ex rel. Racing Guild of Ohio v. Morgan (1985), 17 Ohio St.3d 54, 56, 17 OBR 45, 46, 476 N.E.2d 1060, 1062, citing State ex rel. Phillips v. Polcar (1977), 50 Ohio St.2d 279, 4 O.O.3d 445, 364 N.E.2d 33, syllabus. 'When a court of competent jurisdiction acquires jurisdiction of the subject matter of an action, its authority continues until the matter is completely and finally disposed of, and no court of co-ordinate jurisdiction is at liberty to interfere with its pro- ceedings.' John Weenink & Sons Co. v. Cuyahoga County Court of Common Pleas (1948), 150 Ohio St. 349, 38 O.O. 189, 82 N.E.2d 730, paragraph three of the syllabus. By its operation, Civ. R. 13(A) compels that a counterclaim be raised when (1) the claim exists at the time of serving the pleading; and (2) the claim arises out of the transaction or occurrence that is the subject matter of the opposing claim. Rettig Enterprises, Inc. v. Koehler (1994), 68 Ohio St.3d 274, 277. With regard to the first of these requirements, the time at which the claim matured, ATAC maintains that the basis of its claim, i.e., that Bayport and Lindsay had defaulted on the -9- promissory note, did not occur until April 1994 or six months after the Texas action was filed. This claim is not clearly supported in the record. Moreover, since Bayport sought a declaration by the Texas state court that it could set-off money due to ATAC in accordance with the promissory note from its damages allegedly caused by ATAC, one could reasonably conclude that as of October 1993, or contemporaneously with the filing of the Texas action, Bayport had manifested an intention not to pay ATAC in accordance with the terms of the promissory note. Thus, there is no evidence that the trial court erred inasmuch as it determined that the basis of ATAC's claim existed at the time it was served with the Texas complaint. With regard to the second requirement of Civ. R. 13(A), whether the claim arises out of the same "transaction or occurrence," it is clear that in the interests of judicial economy, courts have given a broad interpretation to this phrase. Hershman's, Inc. v. Sachs-Dolmar Div. (1993), 89 Ohio App.3d 74, 79. In general, there is a "flexible test of reviewing the transaction to determine whether there is any logical relationship between the claim and the counterclaim." Id., quoting Eastman v. Benchmark Minerals, Inc. (1986), 34 Ohio App.3d 255, 257. As the claims of Lindsay and Bayport and the claims of ATAC relate to the responsibility of Lindsay and Bayport to pay ATAC, they share a logical relationship. Thus both prongs of the test set forth in Rettig Enterprises, supra, have been satisfied. -10- ATAC's additional claim that the "the Texas case of Defendant- Appellee Bayport only has not been adjudicated or been resolved on the merits," is moot, as we note that during the pendency of this matter, the Texas case was in fact resolved. In any event, this factor is relevant only with regard to whether ATAC's claims will be precluded by res judicata. Cf. Sharkin v. Tartaglia (August 4, 1988), Cuyahoga App. No. 55101, unreported. This court explained: The claim of Gwenn Sharkin can be construed as a compulsory counterclaim in the first action. If the previous action had been adjudicated her claim in the second action would be barred by the doctrine of res judicata. See Geauga Truck & Implement Co. v. Juskiewicz (1984), 9 Ohio St.3d 12, 14. However, the doctrine of res judicata operates against the parties to the first action when there is a final judgment. Appellee's action is pending. If leave of court is granted, Gwenn Sharkin could still amend her answer. The logic of Civ.R. 13(A) is the avoidance of separate trials and a duplication of time and effort by the court and the parties. Here, prior to the filing of the motion to dismiss, all claims arising out of the same occurrence, including the com- plaint of the intervenor Blue Cross and Blue Shield, were pending in the one consolidated action and would have been resolved in one trial. Id. As to ATAC's remaining claim that the Texas action involves different parties than named in the Ohio lawsuits, we note that the essential question here is whether the Texas action involves parties opposed to ATAC. See Quintus v. McClure, supra, at 404. Here, there is no doubt that all of the claims set forth in case no. 279439 involve parties opposed to ATAC since Bayport and its president Lindsay are defendants in this action, and Bayport is a plaintiff in the Texas action. Likewise, in case no. 279827, ATAC's pending claims for relief name Bayport and Lindsay as -11- defendants. Accordingly, ATAC's contentions would have been leveled at opposing parties if asserted in the Texas forum. II. Defendant's second assignment of error states: THE TRIAL COURT ERRED IN DENYING PLAINTIFF'S MOTION TO VACATE OR TO RECONSIDER UNDER RULE 60(B) BECAUSE OF THE AFORESAID REASONS AND BECAUSE OF NEWLY DISCOVERED EVIDENCE OF A RELEASE WHICH STATED THAT DEFENDANTS- APPELLEES HAD NO CLAIMS AGAINST PLAINTIFF-APPELLEE. Within this claim, ATAC maintains that its motion to vacate was erroneously denied since it met all requirements for such motion pursuant to GTE Automatic Electric v. ARC Industries Inc. (1976), 47 Ohio St.3d 146. Relief from judgment is governed by Civ. R. 60(B). In order to obtain relief under this rule, a party must demonstrate that: If relief is granted; (2) the party is entitled to relief under one of the grounds stated in Civ.R. 60(B)(1) through (5); and (3) the motion is made within a reasonable time, and, where the grounds of relief are Civ.R. 60(B)(1), (2) or (3), not more than one year after the judgment, order or proceeding was entered or taken. GTE Automatic Electric v. ARC Industries, supra, paragraph two of the syllabus. Here, ATAC alleged as the basis of its motion that it had newly discovered evidence that Lindsay and Bayport, and Arthur Treacher's, Inc. had entered into a "Full and Final Release" in connection with an action which had been pending in the United States District Court. According to ATAC, Bayport and its agents unconditionally released Arthur Treacher's, Inc., its agents and representatives from all claims, thereby precluding the Texas -12- litigation and in turn precluding the assertion that the within matter must be raised as a counterclaim to the Texas action. Although the release may have been relevant to Bayport's claims against ATAC, cf. Huntington National Bank v. Investment Group (1983), 12 Ohio App.3d 113, it arises from the transaction or occurrence which was the subject of the Texas action, and should have been raised in that forum. Moreover, in Urbana College v. Conway (1985), 29 Ohio App.3d 13, this court held that where the allegations set forth in con- nection with a motion for relief from judgment describe a counter- claim, they do not assert a legally cognizable affirmative defense. Accord City Council of Englewood v. Malott (August 30, 1996), Montgomery App. No. 14986, unreported "accepting [plaintiff's] position would be akin to dismissing *** claim on the basis of the allegations in the counterclaim or complaint, which *** is not a favored approach for affirmative defenses"). Thus, from the circumstances of the within matters, the alleged release does not serve as good grounds for relief from the judgments entered by the courts of this state. For the foregoing reasons the second assignment of error is overruled. Judgments affirmed. -13- 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 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. PORTER, P.J., AND NAHRA, J., CONCUR ANN DYKE JUDGE 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 .