COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 73089 AMADA, INC., ET AL : : Plaintiffs-Appellees : JOURNAL ENTRY : -vs- : AND : RICHARD ZAGGARIO : OPINION : Defendant-Appellant : Date of Announcement of Decision: JULY 30, 1998 Character of Proceeding: Civil appeal from Court of Common Pleas Case No. 302634 Judgment: Affirmed Date of Journalization: Appearances: For Plaintiffs-Appellees: PAUL R. HOFFER, ESQ. Evans Building, 7th Floor 333 South Main Street Akron, Ohio 44308 For Defendant-Appellant: JOHN W. HICKEY, ESQ. 3794 Pearl Road Cleveland, Ohio 44109 -2- JAMES M. PORTER, P.J.: Defendant-appellant Richard Zaggario appeals from the judgment for compensatory damages and attorney fees following a bench trial in favor of plaintiffs-appellees Amada, Inc. and Richard Brewton on plaintiffs' claims that the defendant trespassed and breached a lease agreement preventing defendant from reopening and operating a restaurant in South Euclid, Ohio. For the reasons hereinafter stated, we affirm the judgment below. This case arises out of the original lease of restaurant premises at 3040 Mayfield Rd. in South Euclid, Ohio. A written lease of the property dated November 6, 1987 was entered into between Richard Zaggario, Lessor and Robares, Inc., Paul Robares and Margaret Robares, Lessees, to be used as a restaurant and lounge known as Zaggario's for a five-year term from November 15, 1987 to November 14, 1992. (Lease q5). Lessees had an option to renew for an additional five-year term. (Lease q23). In late 1990, plaintiff Brewton acquired the assets of Zaggario's Restaurant from the Robares, who are his in-laws. As a part of the transaction, he personally assumed the liabilities of the Lease of the restaurant premises. A written assignment of the Lease to Amada, Inc. and Brewton, as Lessees, was entered into on November 14, 1990, evidencing the assumption of the leasehold by plaintiffs. (Tr. 57, 172; Px 2, 3). Thereafter, plaintiffs operated the restaurant for the remainder of the original term. On December 14, 1992, the Lease was amended in writing for another five-year term ending November 15, 1997. -3- In August 1994, plaintiffs sold the assets of the restaurant to Do Min, Inc. for the sum of $100,000, a portion of which was paid as a down payment, the balance with a promissory note. The assets of Do Min were pledged 100% as security for said promissory note. (Tr. 129, 174). No written assignment of the Lease was ever entered into between plaintiffs and Do Min, nor consented to by defendant. Plaintiffs retained their leasehold interest in the property (Tr. 173) and treated Do Min as their sub-tenant. (Tr. 173, 176, 258). Do Min, however, directly paid the rent to defendant Zaggario. Mrs. Sanzo, one of the owners of Do Min, had severe health problems in late 1995. As a result of those health problems, she caused the restaurant to close. She and her husband subsequently filed personal bankruptcy. However, Do Min never filed bankruptcy itself. (Tr. 255-256). On or about November 28, 1995, plaintiff Brewton learned that the restaurant was closed. Several days later, he advised defendant Zaggario of his intention to reopen the restaurant. (Tr. 185). Brewton made preparations to reopen the restaurant including taking steps to execute on his security interest in the assets in the Sanzos' bankruptcy. (Tr. 182). Brewton purchased all outstanding shares of Do Min from the Sanzos' bankruptcy trustee and relinquished his claim on the promissory note by not filing for same in the bankruptcy. Plaintiff contended that as of December 1, 1995, the restaurant was in a turn key condition. (Tr. 179, 393). -4- Although plaintiffs made defendant aware of their intentions and efforts to reopen the restaurant, defendant did not respond, but instead referred Brewton to his attorney, who gave Brewton the run-around. On January 12, 1996, plaintiff forwarded a rent check for three months rent. Zaggario never cashed this check. Although defendant had several occasions to talk with Brewton, he never informed Brewton that he had directed several restaurant suppliers to remove their machines and property from the premises and advised them that he was not going to permit the restaurant to be reopened. (Tr. 49, 110, 120). Within a day after plaintiffs applied for an occupancy inspection so the restaurant could be reopened, defendant entered the premises, demolished the interior of the restaurant and started to erect a wall through the middle of it, all without obtaining a South Euclid building permit. He also removed a number of items of personal property as well, which were never returned. (Tr. 195, 196, 263-264). As of the date defendant reentered, none of the equipment, furniture or restaurant supplies had been removed. (Tr. 129, 391). Defendant never gave any notice of default or of his intentions to re-enter as was required under Paragraph 15 of the Lease. (Tr. 60, 64, 191). Although he was aware of plaintiffs' intentions to reopen the restaurant, defendant never took any steps to ascertain the rights of plaintiffs under the Lease. (Tr. 73, 83). On January 31, 1996, defendant's counsel sent plaintiffs a letter advising them that unless they met with defendant on -5- February 5, 1996, they would relinquish their tenancy. (Tr. 191- 92). Brewton did attend the meeting, got the keys back and was promised by defendant that the premises would be restored. Despite those promises, defendant did not make any effort to restore the premises until after the trial court ordered it done, over fourteen months later. Plaintiffs were not able to resume their tenancy and reopen their restaurant until August 1997. (Order of Aug. 4, 1997). On January 31, 1996, plaintiffs filed a complaint against defendant alleging that defendant had trespassed, improperly damaged the premises and breached the Lease. Plaintiffs sought monetary damages and specific performance requiring defendant to restore the premises. Defendant's answer asserted a general denial and affirmative defenses. Defendant also counterclaimed against plaintiffs claiming that Do Min had damaged the premises thereby diminishing the premises' value. Trial to the court commenced on February 4, 1997. The trial court ruled that defendant had prevented plaintiff from re-entry to his property under the Lease and has altered the interior by trespass and breach of the Lease so as to prevent its restart as a restaurant since December 1, 1995, (Order of Feb. 10, 1997). To prevent further injury, the trial court ordered specific performance requiring defendant to restore the premises to the condition that they were in as of December 1, 1995. The issue of monetary damages was deferred to a future date. -6- On March 21, 1997, the trial court held additional proceedings and adduced testimony pertaining to damages. On May 1, 1997, the trial court issued a partial judgment granting plaintiffs money damages in the amount of $52,377 for the diminution in value of the assets of Do Min and damages for the liquor license renewal and advertising expenses totaling $7,820. Final hearing was continued until completion of the restoration. (Judgment, May 1, 1997). On August 1, 1997 final hearing was held. At the hearing, the court learned that defendant, although having been given almost three additional months to complete restoration of the premises, still did not have the premises fully restored. As a result, the court awarded plaintiffs additional damages totaling $4,100 and punitive damages of $16,343.40 in attorney fees based on the defendant's trespass. (Supp. Order, Aug. 4, 1997). Defendant has filed a notice of appeal only from the May 1, 1997 and August 4, 1997 judgments. We will address defendant's assignments of error out of order to facilitate a logical discussion and clarification of the issues. VIII. THE TRIAL COURT HAD NO JURISDICTION OVER THE SUBJECT MATTER OF THIS CASE AND ITS JUDGMENTS ARE VOID. The basis for this claim is that a portion of the damages was premised on the diminution of value of the assets of Do Min, which was not a party, and the court did not have subject matter jurisdiction to award plaintiffs any damages. Although the defendant argues that the trial court lacked subject matter jurisdiction, the trial court clearly has the -7- authority to preside over landlord/tenant disputes. See Morrison v. Steiner (1972), 32 Ohio St.2d 86, paragraph one of syllabus ( Subject-matter jurisdiction of a court connotes the power to hear and decide a case upon its merits ***. ). Defendant seems to actually be arguing the trial court lacked personal jurisdiction over Do Min. However, the record reflects that defendant never raised the issue of personal jurisdiction in the trial court, therefore, the defendant waived it. Detroit, Toledo & Ironton Ry. Co. v. Maxine's Potato Serv. (1983), 13 Ohio App.3d 157, 160; Security Ins. Co. v. Regional Transit Auth. (1982), 4 Ohio App.3d 24, 28; Home Bank, F.S.B. v. Pauer (Feb. 19, 1998), Cuyahoga App. No. 72242, unreported at 12. Furthermore, although it is clear from the record that the plaintiffs never filed a motion to amend the complaint to include Do Min, Inc., the record also indicates that evidence concerning the damages to Do Min was included without objection from the defendant. Therefore, Do Min was included by implication pursuant to Civ.R. 15(B), which states in pertinent part: (B) Amendments to conform to the evidence. When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. ***. The Ohio Supreme Court in State ex rel. Evans v. Bainbridge Twp. Trustees (1983), 5 Ohio St.3d 41, paragraphs one and two of the syllabus held: 1. An implied amendment of the pleadings under Civ.R. 15(B) will not be permitted where it results in substantial prejudice to a party. -8- Various factors to be considered in determining whether the parties impliedly consented to litigate an issue include: whether they recognized that an unpleaded issue entered the case; whether the opposing party had a fair opportunity to address the tendered issue or would offer additional evidence if the case were to be tried on a different theory; and, whether the witnesses were subjected to extensive cross-examination on the issue. 2. Under Civ. R. 15(B), implied consent is not established merely because evidence bearing directly on an unpleaded issue was introduced without objection; it must appear that the parties understood the evidence was aimed at the unpleaded issue. In the case herein, no substantial prejudice was suffered by the defendant as the defendant had the opportunity to cross-examine on the issue of Do Min's damages. In fact, it appeared defense counsel was prepared to address these damages. Noticeably absent from the record is a motion for new trial or j.n.o.v. which would indicate that the defendant did not knowingly consent to the inclusion of Do Min as a party. It is only on appeal that the issue is first raised. A reviewing court will not consider issues which the appellant failed to raise in the trial court. Cleveland v. Assn. of Fire Fighters, Local 93 (1991), 73 Ohio App.3d 220, 225. Defendant's Assignment of Error VIII is overruled. VII. THE COURT ERRED IN ITS FINDING OF TRESPASS AGAINST DEFENDANT. Defendant claims that the trial court erred in finding that defendant had trespassed and breached the Lease because: (1) only Do Min could assert this claim and (2) defendant was only -9- exercising self-help in obtaining his right of possession. We find these arguments without merit. Defendant contends in essence that plaintiffs assigned the Lease to Do Min thereby removing any rights or interest of plaintiffs in the premises. Plaintiffs contend, to the contrary, that they merely sub-leased the premises to Do Min, thereby retaining their position as lessee to defendant and becoming sub- lessor to sub-lessee Do Min. These issues were in large part the basis for the disagreement at trial. Defendant's arguments are directly challenging the findings of the trial court based on the weight of the evidence presented since the trial court's findings found in favor of the plaintiffs' evidence. It is well-settled law in Ohio that 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 Constr. Co. (1978), 54 Ohio St.2d 279, syllabus. The trial court has broad discretion to determine the credibility of witnesses and the weight to be given the evidence. Ostendorf- Morris Co. v. Slyman (1982), 6 Ohio App.3d 46, 47. A reviewing court must defer to the findings of a trial court where the decision turns upon the credibility of witnesses. Myers v. Garson (1993), 66 Ohio St.3d 610, 615. The key issue the trial court had to resolve was whether the Lease was assigned or not. Under the statute of frauds, leases and -10- lease assignments must be in writing unless an exception applies which would remove the matter from the Statute of Frauds. R.C. 1335.04; McCarthy, Lebit, Crystal & Haiman Co. v. First Union Mgmt., Inc. (1993), 87 Ohio App.3d 613, 623. This Court in North Coast Cookies v. Sweet Temptations (1984), 16 Ohio App.3d 342, 348, held that a writing satisfies the Statute of Frauds if it: (1) identifies the subject matter, (2) establishes that a contract has been made, and (3) states the essential terms with reasonable certainty. In the case herein, the defendant claims the form that was filled out for the Board of Liquor Control in which the box for assignment was checked off, satisfies this requirement. However, this form hardly evidences the essential terms of any agreement to assign the lease. It was also never signed by anyone at Do Min. Plaintiff Brewton also testified that the Lease was not part of the sale of the restaurant business to the Sanzos; that the Sanzos were merely sub-tenants or sub-lessees and that if the Sanzos did not make the rent payments, Brewton would be required to do so. (Tr. 173, 176). Based on this testimony and the absence of a written assignment, the trial court was entitled to conclude that Sanzos and Do Min were merely sub-tenants (or sublessees) and plaintiffs had a present right to possession upon the default of the Sanzos/Do Min in closing the business. Defendant also claims that he had the right to self-help repossession.Ohio law has held that a landlord may avail himself of self-help repossession where the parties have incorporated -11- that right into the Lease and the landlord has complied with the notice provisions for default. Craig Wrecking Co. v. S.G. Loewendick & Sons, Inc. (1987), 38 Ohio App.3d 79, 83. However, defendant never gave any notice of its exercise of such rights as required by Paragraph 15 of the Lease. The trial court correctly found that defendant was not entitled to use self-help, especially where defendant himself acknowledged that he never bothered to read the Lease prior to his re-entry. (Tr. 73, 83). Assignment of Error VII is overruled. I. THE COURT ERRED IN ASSESSING $52,377.00 FOR DIMINUTION IN VALUE OF ASSETS OF DO MIN, INC. II. THE COURT ERRED IN ASSESSING $1,820.00 FOR DO MIN, INC. LIQUOR LICENSE RENEWAL FOR 1997. III. THE COURT ERRED IN GIVING DAMAGES OF $6,000.00 FOR DO MIN, INC. ADVERTISING EXPENSES. V. THE COURT ERRED IN ITS SUPPLEMENTAL ORDER AWARDING AN ADDITIONAL $1,700.00 FOR LIQUOR PERMIT AND FOOD LICENSE FOR DO MIN, INC. VI. THE COURT ERRED IN ITS SUPPLEMENTAL ORDER AWARDING AN ADDITIONAL ($2,400.00) IN COMPENSATORY DAMAGES. Defendant's principal contention is that the trial court erred in awarding plaintiffs damages as they are actually damages owed to Do Min. Defendant does not contest the amount of the damages, only that plaintiffs were not a correct party to recover same. As stated above, Do Min was included as a party pursuant to Civ.R. 15(B); the case was tried as though it were a party. Therefore, the $52,377 in damages awarded for the diminished value of the corporation due to the restaurant remaining closed was properly awarded. -12- Defendant also claims that various out-of-pocket expenses, such as liquor license renewals, food permits, and the cost to install a drain which defendant failed to install despite the trial court's order directing specific performance were not compensable as they were also owed to Do Min. However, plaintiff Brewton testified that he paid those expenses personally. (Tr. 209, 214, 215). The expense he incurred for the liquor license renewal and food permits was a loss to him as he was unable to operate the restaurant due to defendant's taking over the property and renovating it. The trial court had sufficient evidence to award plaintiffs for their out-of-pocket expenses. Finally, defendant claims that the trial court erred in awarding plaintiffs monetary damages for prospective advertising expenses as those were damages which accrued to Do Min only. Given that plaintiff Brewton testified as to those expenses which he incurred personally as start-up advertising expenses, the trial court had sufficient, competent, credible evidence from which to reimburse plaintiffs for same. (Mar. 21, 1997 Tr. at 12-13). Defendant also argues that the trial court erred by using the wrong measure of damages. In support of his argument, defendant cites Cr anfield v. Lauderdale (1994), 94 Ohio App.3d 426. In Cranfield, this Court held that a landlord could only seek damages if he presented evidence pertaining to diminution of the leasehold premises as a result of the tenant's wrongful conduct. There is nothing in that case which suggests that a tenant, whose turn key business is significantly damaged by the landlord's trespass -13- (breach of the Lease) is limited to an award for the diminution of the rental premises. Defendant does not explain how this case applies to his circumstances. Defendant also contends that the trial court should have credited against plaintiffs' award certain alleged damages caused by Do Min. However, defendant's own testimony admitted that the sole reason the restaurant could not open was due to his own conduct in demolishing the property and not the conduct of any other parties. (Tr. 393). Weighing the inherent conflict of defendant's own testimony, the trial court was entitled to determine defendant's credibility and apparently found it wanting. Myers v. Garson, supra, at 615. Furthermore, regarding the changes made by defendant to bring the premises within the building code, there was testimony that since the premises had been closed for over a year, it was no longer grandfathered in under the old code. Therefore, if defendant had not trespassed, the business would have been ongoing and grandfathered in. Defendant is also not entitled to any damages he incurred as a result of his trespass. Therefore, no offset was required in this case. Assignments of Error I, II, III, V and VI are overruled. IV. THE COURT ERRED IN AWARDING ATTORNEY FEES OF $16,363.40 AS PUNITIVE DAMAGES IN ITS SUPPLEMENTAL ORDER. IX. THE COURT ERRED IN ASSESSING PUNITIVE DAMAGES AGAINST THE DEFENDANT. Defendant claims that the trial court erred in awarding plaintiffs punitive damages in the form of attorney fees as plaintiffs failed to prove malice. However, we believe the -14- record is sufficient to show defendant's conduct showed conscious disregard of the rights of others that had a great probability of causing substantial harm. It is well-settled law that the same standard of review is employed to assess the weight of the evidence whether the findings are for compensatory damages or the elements necessary to justify an award of punitive damages. So long as there is competent credible evidence going to each essential element, the decision of the trier of fact may not be overturned on appeal. Hofner v. Davis (1996), 111 Ohio App.3d 255, 259. In the case of Malone v. Courtyard By Marriott L.P. (1996), 74 Ohio St.3d 440, the Ohio Supreme Court reiterated the definition of malice sufficient to sustain an award of punitive damages. The Court states that malice is: 1. that state of mind under which a person's conduct is characterized by hatred, ill will or spirit of revenge, or 2. a conscious disregard for the rights and safety of other persons that has a great probability of causing substantial harm. Id.,at 445-446, citing Preston v. Murty (1987), 32 Ohio St.3d 334, syllabus. In the case at bar, significant evidence pertaining to the second definition of malice was introduced from which the trial court could have found that defendant acted with conscious disregard of plaintiffs' rights from which they were substantially harmed. -15- On November 28, 1995, plaintiff Brewton learned that the Sanzos had closed the restaurant. He took steps to secure the premises by advising the police and defendant. Brewton advised defendant of his intention to reopen the restaurant. (Tr. 185). Brewton took steps to perfect his security interests in the restaurant and expended considerable funds and time to get the restaurant open, including making arrangements to have the premises reinspected for an occupancy permit by South Euclid and tendering rent to defendant. (Tr. 182, 195, 196). While plaintiff was making his arrangements, defendant acted secretly to make sure that the restaurant would not reopen. He told plaintiffs' equipment suppliers to remove their equipment from the premises because he was not going to allow the restaurant to reopen even bragging that Richard Brewton had been outfoxed. (Tr. 49, 110, 120). Defendant made arrangements to give the restaurant equipment (without ascertaining who actually owned it) to his nephew so he could open a pizza delivery business. (Tr. 69, 394). Although he talked with Brewton on several occasions both in person and over the phone, he never told Brewton that he was not going to allow the restaurant to reopen. Instead, he allowed Brewton to go on thinking that he could reopen the restaurant and referred him to his attorney for any further discussion who in turn gave plaintiff the run-around. (Tr. 65, 80). Defendant made no effort to ascertain his rights and obligations under the Lease. Although defendant suggested that plaintiffs had defaulted under the Lease, the record is clear that he did not give any notice of a default as -16- required by Paragraph 15 of the Lease. He testified that he did not bother to read the Lease prior to his self-help entry. (Tr. 73, 83). Despite defendant's claims concerning the rights of Do Min, the record reveals that defendant made no attempt to ascertain whether Do Min or plaintiffs had an interest in the premises. (Tr. 71). Defendant exercised his right of self-help without regard to the covenants in the Lease. Defendant entered the lease premises, demolished the interior (Tr. 400, 401) and started constructing a wall through the middle of the premises to subdivide it as it was prior to the restaurant being there. The foregoing facts, most of which were admitted by defendant on cross-examination, are adequate to sufficiently demonstrate a conscious disregard of the rights of others to constitute malice. Defendant's intentional destruction of the premises and reconstruction efforts to convert the premise into office space substantially harmed and prejudiced plaintiffs' rights. Assignments of error IV and IX are overruled. Judgment affirmed. -17- 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 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. ROCCO, J., and JAMES D. SWEENEY, J., CONCUR. JAMES M. PORTER PRESIDING 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 .