COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 71350 EMERGENCY PREEMPTION, : JOURNAL ENTRY INC. ET AL. : AND : OPINION Plaintiffs-appellants : : -vs- : : EMERGENCY PREEMPTION : SYSTEMS, INC. : : Defendants-appellees : DATE OF ANNOUNCEMENT OF DECISION: AUGUST 14, 1997 CHARACTER OF PROCEEDING: Civil appeal from the Court of Common Pleas Case No. CV-266929 JUDGMENT: Reversed and Remanded DATE OF JOURNALIZATION: APPEARANCES: For Plaintiff-Appellant: GARY A. EBERT, ESQ. MICHAEL E. STINN, ESQ. SEELEY, SAVIDGE & AUSSEM 800 Bank One Center 600 Superior Avenue, East Cleveland, Ohio 44114-2655 For Defendant-Appellee: DONALD J. KRAL, ESQ. DANA A. GOLDSTEIN, ESQ. GOLDSTEIN & KRAL 29425 Chagrin Blvd., Suite 307 Pepper Pike, Ohio 44122 DYKE, P. J.: Appellants, Emergency Preemption, Inc. (EPI) and Thornton 2 McDonough, appeal the decision of the trial court granting summary judgment in favor of appellees, Emergency Preemption Systems, Inc. (EPSI), James Hill, Douglas Newell and Norbert Lewandowski. For the following reasons, we reverse and remand. Defendant-appellee EPSI is in the business of manufacturing and selling a siren activated emergency vehicle preemption system. This devise causes the lights at an intersection to change in response to a siren of an emergency vehicle, to allow the emergency vehicle to pass through the intersection. Defendant-appellee Jim Hill is president and majority shareholder of EPSI. Defendant- appellee Douglas Newell is treasurer and shareholder of EPSI. In the spring of 1991, Newell asked McDonough and McDonough's friend, Jim Cullen, if they wanted to become involved in the marketing of EPSI's product. McDonough and Cullen agreed as individuals to participate in the marketing efforts. McDonough began contacting city officials concerning the preemption system and arranging demonstrations. In July, 1991, a dinner meeting took place at the Great Lakes Brewery. McDonough deposed that Hill and Newell promised McDonough and Cullen a sales territory of Ohio, Pennsylvania, Western New York, Kentucky, Indiana, Illinois and Michigan. Hill and Newell promised McDonough a 10% commission on units sold. McDonough and Cullen decided to create a corporation through which to conduct the business of marketing the preemption systems. The corporation, plaintiff-appellant, EPI, was incorporated on August 5, 1992. 3 McDonough drafted a document dated November 16, 1992, stating that EPSI agreed to pay EPI a consultation fee of 11.11% on all EPSI products and services sold in the territory of Ohio, Pennsylvania, western New York, Kentucky, Indiana, Illinois and Michigan. This document will be referred to as the first document . Shortly after November 16, 1992, Cullen withdrew his participationin the marketing efforts. Cullen assigned McDonough his interest in EPI, and then EPI was closed. McDonough deposed that he then operated out of his pre-existing corporation, Intrinsic, Inc., which was owned by McDonough and his wife. Intrinsic, Inc. is involved in administration of real estate limited partnerships of which McDonough is the general partner. Intrinsic, Inc. is not a party to this action. According to McDonough, Newell told him that Newell signed the November 16, 1992 document. Hill did not sign the document, and McDonough conceded that Hill had to sign the document to make it binding. A November 17, 1992 memo from Hill to Newell refers to the November 16 letter and states, I was not a party to any agreement where they were to receive anything except 10% of product sales, they were involved in . . . I did not agree to any territory except Ohio, and even then it was to be based on direct involvement, by sites . On January 6, 1993, McDonough met with Newell and Lewandowski. Newell announced that Lewandowski, a shareholder and creditor of EPSI, would take over the marketing of EPSI products on a national 4 level. Lewandowski would be taking over the sales territory allegedly promised to McDonough. Newell said that EPSI would be out of business unless Lewandowski invested in EPSI. McDonough maintains that prior to January 6, he was assured that funding for EPSI was not a problem. Newell told McDonough to get together with Lewandowski and work out an agreement. McDonough met with Lewandowski on January 12, 1993. According to appellant, Lewandowski agreed that McDonough would receive a 3% royalty on all units sold in certain cities to compensate McDonough for the work he did from June, 1991 to January, 1993. McDonough was not required to perform future work, but could opt to do so, and receive the same compensation as other salespeople, in addition to the 3% royalty. Lewandowski was acting on behalf of EPSI when this agreement was made. McDonough agreed to forgo the 10% commission previously agreed to, and agreed to give up the territory allegedly promised him because Lewandowski was putting up the investment to fund the marketing efforts. McDonough drafted a memorandum containing this agreement, dated January 12, 1993. The memorandum is on Intrinsic, Inc. letterhead. This document refers to me and I throughout, and is signed by Thorton D. McDonough, with no indication he was signing for a corporation. The document states, . . . please arrange to have such 3% fee paid to Intrinsic, Inc. (my personal S Corporation). According to McDonough, this agreement superseded the November 16, 1992 5 agreement. This document will be referred to as, the second document. McDonough deposed that Newell said he signed the second document. EPSI denies that Newell signed the agreement. Hill sent a twelve page fax to McDonough setting out what Hill believed the agreement should be. At a meeting in March, 1993, Hill said that Lewandowski was not a spokesperson for Hill. Hill rejected the January 12, 1993 agreement . Hill agreed to pay McDonough's expenses if certain conditions were met. McDonough rejected this deal. McDonough had incurred $4,744.90 of expenses to market the system. Units have been sold in Lyndhurst, Wooster, Willowick, Canton, Orrville and South Euclid. McDonough has not received any payments from EPSI. McDonough's and EPI's second amended complaint states, contrary to the facts stated by McDonough in his deposition, that E.P.I. was still in existence, but Cullen had retired, leaving McDonough as its sole shareholder. The complaint states the following causes of action: 1. EPSI breached a contract with EPI. 2. EPI is entitled to recover for its services on a quantum meruit basis. 3. EPSI was unjustly enriched by the services of EPI. 4. EPSI fraudulently misrepresented material facts, and such misrepresentations were relied upon by plaintiffs, to their detriment. EPSI misrepresented its financial condition, intentions regarding the services to be performed and the territory in which they would be provided. EPSI also falsely misrepresented it would pay 6 commissions. 5. A contract between the plaintiffs and EPSI existed or was being negotiated. Defendants James Hill, Norbert Lewandowski and Douglas Newell intentionally interfered with the contract or negotiations. I. Appellants' first assignment of error states: THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT IN FAVOR OF EPSI. THERE ARE GENUINE ISSUES OF MATERIAL FACT, WHICH COULD, WHEN VIEWED WITH IN A LIGHT MOST FAVORABLE TO PLAINTIFFS-APPELLANTS, LEAD REASONABLE MINDS TO DIFFERING CONCLUSIONS AND EPSI IS NOT ENTITLED TO JUDGMENT AS A MATTER OF LAW. Summary Judgment is proper when: (1) there are no genuine issues of material fact, (2) the moving party is entitled to judgment as a matter of law, and (3) it appears from the evidence that reasonable minds can come to but one conclusion, and viewing such evidence most strongly in favor of the party against whom the motion for summary judgment is made, that conclusion is adverse to that party. Civ. R. 56(C), Temple v. Wean United, Inc. (1977), 50 Ohio St.2d 317. Appellee-EPSI contends that it is entitled to summary judgment against McDonough on the contract claim, because McDonough was not a party to the first written contract of November 16, 1992 or the second written contract of January 12, 1993. Also, the first, second and third counts of the complaint state that EPI asserts claims for breach of contract, quasi-contract and unjust enrichment, but does not state that McDonough asserts these claims individually. 7 The first document purports to be a contract between EPI and EPSI. There are issues of fact as to whether EPSI accepted the first document. If the first document was accepted, EPI was closed shortly thereafter. After EPI was closed, EPSI dealt only with McDonough. Cullen had assigned his interest to McDonough. If the first document was not accepted, there is evidence showing EPSI had an oral contract with McDonough individually. The second document appears to be a contract between McDonough individually and EPSI, with Intrinsic as the third party beneficiary. The second document is signed by McDonough individually and refers to I and me throughout. The document requests that payment be made to my personal S corporation . McDonough deposed that after EPI was closed, he operated out of Intrinsic, Inc.. He kept records of his EPSI marketing expenses in the accounting records of Intrinsic. This fact does not necessarily mean that EPSI contracted with Intrinsic rather than McDonough personally. There was an issue of fact over whether the second agreement was made by McDonough personally or by Intrinsic, Inc. There are issues of fact as to whether this second document is binding upon EPSI. It is unclear whether Lewandowski had actual or apparent authority to bind EPSI to such a contract, and whether EPSI accepted the second document. Even if the second document was not in effect, an oral agreement could have existed. There are issues of fact over whether any oral agreement was with Intrinsic or McDonough personally. 8 Even if the agreement was between Intrinsic, Inc. and EPSI, McDonough can sue on the agreement as a third party beneficiary. When Intrinsic and EPSI made the agreement, they intended McDonough to be a beneficiary of the agreement. See Hill v. Sonitrol of Southwestern Ohio, Inc. (1988), 36 Ohio St.3d 36, Doe v. Adkins (1996), 110 Ohio App.3d 42, cf. Woodhouse & Associates v. Gruber (Oct. 27, 1993), Hamilton App. No. C-920669, unreported. (Corporation was not third party beneficiary of contract made by its shareholders as individuals, because corporation did not exist at time of making contract.) Appellee asserts that the complaint does not allege that McDonough personally had a contract with EPSI. While counts one through three make allegations as to EPI only, count five states that plaintiffs had a contract with EPSI. The statement in count five is sufficient to put EPSI on notice that McDonough is alleging that EPSI had a contract with McDonough individually. See Civ. R. 8(a), Illinois Controls, Inc. v. Langharm (1994), 70 Ohio St.3d 512. A complaint is sufficient to set forth a legal theory of recovery if it sets forth facts showing the plaintiff is entitled to relief, although the particular legal theory is not pled. Illinois Controls, supra. The facts alleged in the complaint are also sufficient to support a claim of quasi-contract or unjust enrichment by McDonough. The complaint alleges that EPI, whose sole principal was McDonough, performed services for EPSI, and McDonough personally has a contract claim for those services. Genuine issues of fact existed as to whether McDonough had a 9 contract, oral or written, with EPSI. Summary judgment should not have been granted as to McDonough's contract claim against EPSI, or on McDonough's quasi-contract or unjust enrichment claims. Genuine issues of fact also exist as to whether EPI had a contract claim, quasi-contract claim or unjust enrichment claim against EPSI. The facts appear to demonstrate that the first document was not a contract, because Mr. Hill did not agree to it. However, there may have been an oral understanding between EPSI and EPI. If any units were sold before EPI was dissolved, EPI may be entitled to commissions. The fact that EPI was later dissolved did not mean the contract was invalid during the time period this corporation existed. Appellee-EPSI asserts that any prior agreements were superseded by the new agreement , ie. the second document dated January 12, 1993. The second document was made by McDonough or Integrity and not EPI. However, there are issues of fact as to whether EPSI agreed to the second document. If the second agreement never went into effect, the old agreement with EPI may still be in effect. Appellee-EPSIalso asserts that the alleged contract with EPI was a contract of indefinite duration that appellee was free to terminate, after a reasonable time and upon reasonable notice. See Miller v. Wikel Manufacturing Company (1989), 46 Ohio St.3d 76, 78. Even if EPSI was free to terminate the agreement, it is still liable for the obligations incurred while the contract was in existence. Assuming a contract existed, the contract with EPI did not terminate until EPI closed in December, 1992 and McDonough's 10 contract was not terminated until January, 1993. Appellants may be entitled to commissions earned before the contracts were terminated. Appellee-EPSI was not entitled to summary judgment on the contract, quasi-contract and unjust enrichment claims. Appellee was entitled to summary judgment on the fraud claim. The elements of fraud are: (a) A representation or, where there is a duty to disclose, concealment of fact, (b) which is material to the transaction at hand, (c) made falsely, with knowledge of its falsity, or with such utter disregard and recklessness as to whether it is true or false that knowledge may be inferred, (d) with the intent of misleading another to rely upon it, (e) justifiable reliance upon the representation or concealment, and (f) a resulting injury proximately caused by the reliance. Burr v. Stark County Board of Commissioners (1986), 23 Ohio St.3d 69. There is no evidence that EPSI did not intend to pay commissions or give appellants a certain territory when the promises were made. See Tibbs v. National Homes Construction Corp. (1977), 52 Ohio App.2d 281, 286, Freeman v. Westland Builders, Inc. (1981), 2 Ohio App.3d 212, Speece v. Universal Pensions, Inc. (May 20, 1993), Cuyahoga App. No. 62444, unreported. There is no evidence that the representations concerning the financial condition of EPSI were false or known to be false when made. Similarly, there is no evidence that the principals of EPSI were aware that more marketing effort was required than what they originally described to appellants. The trial court did not err in granting summary judgment on 11 the fraud count. The trial court erred in granting summary judgment on the breach of contract, quasi-contract and unjust enrichment claims. Accordingly, this assignment of error is sustained. II. Appellants' second assignment of error states: THE TRIAL COURT ERRED IN DISMISSING ALL CLAIMS. THE MOTIONS FILED BY HILL, LEWANDOWSKI AND NEWELL ON COUNT V, TORTIOUS INTERFERENCE WITH CONTRACT COUNT, WERE DENIED AND SAID COUNT SHOULD HAVE REMAINED PENDING. Appellants assert that the trial court never ruled on the motion for summary judgment of Hill, Newell and Lewandowski. The trial court's journal entry granted the defendants' joint motion for summary judgment. The journal entry states that the defendants' motion for summary judgment is granted. Tortious interference with contract is defined as: (O)ne who without privilege to do so, induces or otherwise purposely causes a third party not to enter into, or continue, a business relationship with another, or perform a contract with another is liable to the other for the harm caused thereby. Juhasz v. Quik Shops, Inc. (1977), 55 Ohio App.2d 51, 57, See also A&B - Abell Elevator Co. V. Columbus/Cent. Ohio Bldg. & Constr. Trades Council (1995), 73 Ohio St.3d 1. Tortious interference with contract requires an actor to improperly interfere with the performance of a contract between two other persons. See Miller v. Wikel Mfg. Co., Inc. (1989), 46 Ohio St.3d 76, 79. A corporate officer can not interfere with a corporation's contract in his capacity as corporate officer, but can interfere if his acts were 12 solely in his personal capacity. Id. In this case, Hill and Newell were acting solely as agents of EPSI, and not in their individual capacity. A person is privileged to interfere in a contract, if the person is legitimately asserting a legally protected interest that the person believes will be impaired by the performance of the contract. See Juhasz, supra. Officers, directors, and creditors of a corporation have a privilege to interfere with contracts in furtherance of their legitimate business interests. Canderm Pharmacal, Ltd. v. Elder Pharmaceuticals, Inc., (C.A. 6 1988), 862 F.2d 597, 601, Bell v. Le-Ge, Inc. (1985), 20 Ohio App.3d 127, Pearse v. McDonald's (1975), 47 Ohio App.2d 20. Hill, Lewandowski and Newell were shareholders, and Lewandowski was a creditor of EPSI. There is no evidence showing that Hill and Newell were not acting in furtherance of their legitimate business interests as shareholders. Appellants argued that Lewandowski, acting solely in his individual capacity, induced EPSI to take appellants' sales territory and give it to Lewandowski. However, business competition which causes the termination of an at-will contract does not constitute tortious interference with business. See Hoyt, Inc. v. Gordon & Associates, Inc. (1995), 104 Ohio App.3d 598, See also Timber Ridge Investments Ltd. v. Marcus (1995), 107 Ohio App.3d 174. Appellants' contract did not specify it would be in effect for any length of time, so the contract was at-will. Lewandowski can not be held liable for inducing EPSI to do business with him, and terminating the at-will agreement with appellants. 13 Lewandowski, Hill and Newell were entitled to summary judgment on the tortious interference claim. According, this assignment of error is overruled. The decision of the trial court is reversed and remanded for further proceedings. 14 This cause is reversed and remanded to the lower court for further proceedings consistent with this opinion. It is, therefore, considered that said appellants recover of said appellees their costs herein. It is ordered that a special mandate be sent to said 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. *HOLMES, J., CONCUR O'DONNELL, J., CONCURS IN PART AND DISSENTS IN PART (SEE ATTACHED CONCURRING AND DIS- SENTING OPINION) ANN DYKE PRESIDING JUDGE *Sitting by Assignment: Justice Robert E. Holmes, Retired, of the Supreme Court of Ohio. 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 clerk per App.R. 22(E). See, also S.Ct.Prac.R. II, Section 15 2(A)(1). 16 COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO.71350 EMERGENCY PREEMPTION, INC., : ET AL. : : CONCURRING : Plaintiffs-Appellants : AND : vs. : DISSENTING : EMERGENCY PREEMPTION SYSTEMS, : OPINION INC., ET AL. : : : Defendants-Appellees : DATE: _AUGUST 14, 1997______ O'DONNELL, J., CONCURRING AND DISSENTING: I concur with the disposition of the first assignment of error except for that portion which relates to the claim for breach of contract. As the majority correctly points out, the complaint in this case sets forth five causes of action: 1. Breach of Contract 2. Quantum Meruit 3. Unjust Enrichment 4. Fraudulent Misrepresentation 5. Tortious Interference with Contract While I agree that summary judgment as to counts two through five of the complaint should be reversed, I do not believe that the 17 appellants demonstrated the existence of a contract with EPSI and, therefore, would affirm the trial court regarding the claim for breach of contract. The majority admits that ***the first document was not a contract, because Mr. Hill did not agree to it, (Majority Op. P.7), but concludes that ***there are issues of fact as to whether EPSI agreed to the second document. (Majority Op. P.8) A review of the record here reveals that although Thornton McDonough signed both documents, neither the first document, dated November 16, 1992, styled Defendant's Exhibit 3, nor the second document, dated January 12, 1993, styled Defendant's Exhibit 4, were signed by James Hill or Douglas Newell, EPSI's representatives. Therefore, the documents merely constitute offers and not written contracts with EPSI. The majority also asserts as an alternative justification for reversing summary judgment as to the contraact claim, that ***there may have been an oral understanding between EPSI and EPI. (Majority Op. P.7) However, R.C. 1335.05, Ohio's statute of frauds, states: No action shall be brought whereby to charge the defendant,***upon a contract***or upon an agreement that is not to be performed within one year from the making thereof; unless the agreement upon which such action is brought, or some memorandum or note therof, is in writing and signed by the party to be charged therewith. (Emphasis added.) During oral argument, appellant's counsel, when questioned, admitted that the alleged contract was for a duration of longer than a year. 18 Therefore, since there is no writing signed by either representative of EPSI, the party charged in the complaint, and an oral contract between the parties is not enforceable pursuant to R.C. 1335.05, there is no basis for the reversal of summary judgment on the appellants' breach of contract claim because EPSI could not have committed a breach of contract. Therefore, the trial court properly granted EPSI summary judgment on the appellants' first count alleging breach of contract. Accordingly, I concur that the trial court's grant of summary judgment as to counts two and three of the complaint should be reversed and that the grant of summary judgment as to count four .