COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA Nos. 73116 and 73168 AMERICAN DIVERSIFIED DEVELOP- : MENTS, INC. : : JOURNAL ENTRY Plaintiff-appellant : : AND vs. : : OPINION HILTI CONSTRUCTION CHEM., INC.: ET AL. : : Defendant-appellees : : : DATE OF ANNOUNCEMENT : OCTOBER 29, 1998 OF DECISION : : CHARACTER OF PROCEEDINGS : Civil appeal from : Court of Common Pleas : Case No. CV-294437 : JUDGMENT : REVERSED AND REMANDED DATE OF JOURNALIZATION : APPEARANCES: For plaintiff-appellant, : JEFFERY R. APPELBAUM, ESQ. American Diversified : DONALD P. SCREEN, ESQ. Developments, Inc. : Thompson, Hine & Flory : 3900 Key Center : 127 Public Square : Cleveland, OH 44114-1216 For defendant-appellee, : SAMUEL R. MARTILLOTA, ESQ. Hilti Construction Chemi- : Mansour, Gavin, Gerlack & cals, Inc. : Manos Co., L.P.A. : 55 Public Square, Suite 2150 : Cleveland, OH 44113-1994 -i- For defendant-appellant, : DAVID P. PAVLIK, ESQ. Steingass Mechanical Con- : ROSS, BRITTAIN & SCHONBERG tracting, Inc. : CO., L.P.A. : 6000 Freedom Square : Independance, OH 44131 -2- JOHN T. PATTON, J.: Plaintiff American Diversified Developments, Inc. ( ADD ) filed this action against defendants Steingass Mechanical Contracting, Inc. and Hilti Construction Chemicals, Inc. ( HCCI ) seeking damages resulting from required replacement of a fire-stop material marketed by HCCI and installed by Steingass in an ADD property. Steingass and HCCI filed cross-claims against the other. After eighteen months of discovery, HCCI filed a motion for summary judgment in which it argued the court lacked personal jurisdiction over it, claiming the real party at interest was actually Hilti, Inc., HCCI's parent company. Both ADD and Steingass filed motions to amend their respective complaints to make Hilti, Inc. defendant, but the court denied the motions to amend and granted HCCI's motion for summary judgment. The issues on appeal contest the court's rulings. The underlying facts are largely undisputed. ADD owns an apartment building. It hired Steingass to install in the building a fire-stop material known as CS 2420 Fire Intumescent Wrap. Dow Chemical sold the wrap under private label to either HCCI or Hilti, Inc., meaning that HCCI or Hilti, Inc. marketed the product under the Hilti name. In August 1993, HCCI advised ADD by letter that Dow Chemical learned aged wrap contained potential performance limitations that might render it defective. The letter acknowledged that Steingass may have installed as much as two hundred forty-one rolls of the wrap at ADD's building. In August 1995, ADD filed this suit -3- against both Steingass and HCCI asserting contract, strict liability and negligence claims relating to the manufacture and installation of the wrap. Steingass cross-claimed against HCCI for indemnity; HCCI cross-claimed against Steingass for contribution. The parties engaged in discovery for over one year. In October 1996, HCCI filed a motion for summary judgment in which it claimed the court lacked personal jurisdiction over it because HCCI had no contacts with the state of Ohio. HCCI claimed that it existed for the sole purpose of procuring and qualifying various goods for resale to Hilti, Inc. transactions that occurred in the state of Oklahoma without any contact with Ohio. Absent any contact with Ohio, HCCI argued that it could not be amenable to suit in this state. Both ADD and Steingass opposed the motion for summary judgment claiming that (1) HCCI waived any defects with personal jurisdiction by appearing in the action and conducting discovery and (2) that Ohio's long-arm statute would permit the court to exercise personal jurisdiction over HCCI since HCCI intentionally fostered some confusion by sending correspondence on a letterhead that contained the Hilti Construction Chemicals, Inc. name along with the Hilti corporate logo. At the same time, both ADD and Steingass asked the court for permission to amend their complaints to add Hilti, Inc. as either a defendant or cross-claimant. HCCI opposed the motions to amend on by arguing they lacked timeliness it told the court that ADD knew Hilti, Inc. was the proper party since at least January 1996. It appended to its brief -4- in opposition to the motion to amend a letter from its counsel to ADD's counsel in which the parties appeared to be negotiating the impact of substituting Hilti, Inc. for HCCI. HCCI argued that ADD should not be able to amend its complaint months after learning that another party should be the real defendant, and on the eve of a pending summary judgment. The court agreed without opinion. Both ADD and Steingass appealed, and the appeals have been consolidated. I The first issue is whether the court erred by granting summary judgment to HCCI when HCCI waived the right to challenge personal jurisdiction. In its answer to ADD's complaint, HCCI raised lack of personal jurisdiction as a defense. ADD claims that despite raising the affirmative defense of lack of personal jurisdiction in its answer, HCCI waived that defense by participating in the merits of the action. As this issue relates to Steingass, the record shows HCCI failed to include the defense of lack of personal jurisdiction in its answer to Steingass' cross-claim. The issue for Steingass is whether HCCI's failure to include the defense in the answer to the cross-claim prevents HCCI from raising that defense at all against Steingass. A Personal jurisdiction is the authority of a particular forum to enter a judgment constitutionally binding on the defendant in a case. McBride v. Coble Express, Inc. (1993), 92 Ohio App.3d 505, 509, citing Friedenthal, Kane & Miller (1985), 10-11, Civil Procedure, Section 2.2. Civ.R. 12(H)(1) provides that [a] -5- defense of lack of jurisdiction over the person *** is waived *** if it is neither made by motion under this rule nor included in a responsive pleading or an amendment thereof permitted by Rule 15(A) to be made as a matter of course. HCCI did not plead the defense of personal jurisdiction in response to Steingass' cross-claim so, absent other circumstances, it ordinarily cannot be said to have asserted the defense in a way that would preserve it for purposes of the court's summary judgment. Nehls v. Quad-K. Advertising, Inc. (1995), 106 Ohio App.3d 489, 494-495; State ex rel. Lawrence Dev. Co. v. Weir (1983), 11 Ohio App.3d 96, 97. However, HCCI claims it had no need to assert the defense of lack of personal jurisdiction in an answer to Steingass' cross-claim since it properly asserted that defense in response to ADD's complaint, and Steingass's indemnity cross-claim was merely derivative of ADD's complaint, so no further assertion of the defense would have been required. Civ.R. 12(B) states that every defense shall be asserted in the responsive pleading thereto if one is required, except that a defense of lack of jurisdiction over the person is waived if it is neither made by motion under the rule nor included in a responsive pleading or an amendment thereof. Civ.R. 12(H)(1), however, contains language stating that an affirmative defense is waived if not raised in a responsive pleading. HCCI argues that subsection (H) applies in this case since it deals with waiver of defenses and HCCI filed a responsive pleading to ADD's complaint in which it asserted the defense of lack of jurisdiction. -6- Steingass, on the other hand, argues the difference in the language used under subsections (B) and (H) is merely an oversight with no intended consequences, and that subsection (B) should control the matter to preclude HCCI from raising lack of personal jurisdiction against Steingass when it merely asserted the defense as against ADD. We believe the express meaning of Civ.R. 12(B) requires the assertion of the defense in response to the responsive pleading and find that HCCI did not properly plead lack of personal jurisdiction as a defense against Steingass.1 In reaching this holding, we reject HCCI's position that the personal jurisdiction defense is derivative from the ADD complaint and can be applied by implication to Steingass. If, as argued by HCCI, the purpose of the rules of civil procedure is to eliminate multiple preliminary motions, we do not see how its failure to preserve the defense in its responsive pleading to Steingass' cross-claim promoted this purpose. As we will see shortly, lack of jurisdiction is a defense that can be waived either expressly or impliedly. It may be (however unlikely) that HCCI had no intention of asserting the jurisdictional defense against Steingass. Our point is that when 1 The Supreme Court recently touched on this issue in Jim's Steakhouse v. Cleveland (1998), 81 Ohio St.3d 18; however, that case cannot be considered binding precedent for any legal proposition. Four of the seven justices concurred in judgment only, so only the judgment itself received the requisite number of votes. Any statements contained in the body of the opinion do not even rise to the level of dicta. Cf. Hedrick v. Motorists Mut. Ins. Co. (1986), 22 Ohio St.3d 42, 44 (in plurality opinion in which only syllabus received requisite four votes, the only law emanating from the case is that contained in the syllabus, not in the body of the opinion). -7- multiple parties are involved in litigation, it should not be the court's duty to determine which of those parties a defendant may or may not be asserting the defense against. Had HCCI wished to assert the defense of lack of personal jurisdiction against Steingass, it should have done so in its answer to the cross-claim. We note that HCCI did have an out under the rules it could have asked the court for permission to amend its complaint under Civ.R. 15(A). See Civ.R. 12(H); Hoover v. Sumlin (1984), 12 Ohio St.3d 1, 3; Mossa v. W. Credit Union, Inc. (1992), 84 Ohio App.3d 177, 181. Because it failed to do so, HCCI has no real argument. Accordingly, we find the court erred by granting HCCI's motion for summary judgment on grounds that it lacked personal jurisdiction over HCCI. B HCCI did raise the defense in its answer to ADD's complaint, and therefore the express waiver provided for by Civ.R. 12(H) did not occur. See Civ.R. 12(H)(1). However, a defendant may waive the defense of lack of personal jurisdiction by actively litigating the suit, even where the defenses are properly included in the defendant's answer. McBride v. Coble Express, Inc., 92 Ohio App.3d at 510; Yeldell v. Tutt (C.A.8, 1990), 913 F.2d 533, 539; Continental Bank N.A. v. Meyer (C.A.7, 1993), 10 F.3d 1293, 1296-97; see also 5A Wright & Miller (1996 Supp.), 250, Section 1391 ( [A] party can be held to have waived a Rule 12(h)(1) defense through conduct, such as extensive participation in the litigation -8- of the merits, even if the literal requirements of Rule 12(h)(1) have been met. ). The record shows HCCI actively participated in the litigation. ADD filed its complaint in August 1995. HCCI responded and filed its own cross-claim against Steingass. Counsel for HCCI received permission to appear pro hac vice, and discovery began in earnest. HCCI attended five status conferences, served and answered interrogatories, and actively engaged in motion practice relating to ADD's motion to compel discovery. This activity can rightfully be described as invoking the judicial power of the court for affirmative relief, particularly when HCCI asserted its own request for contribution by way of cross-claim against Steingass. Detroit, Toledo & Ironton Ry. Co. V. Maxine's Potato Service, Inc. (1983), 11 Ohio App.3d 157, 160. Against this backdrop of activity, HCCI points to a January 1996 letter it sent to ADD confirming the substance of a conversation in which HCCI told ADD that Hilti, Inc. should be substituted for HCCI. ADD sought assurance from HCCI that it would not be prejudiced if Hilti, Inc. were substituted and, to that end, asked HCCI to make certain representations. We will address the facts of this point later, but for our purposes here, we cannot construe this letter as an indication that HCCI had no intention of waiving personal jurisdiction. If HCCI truly believed the court lacked personal jurisdiction over it, it should have immediately filed a motion to dismiss. Instead, it continued to engage in discovery for another three months before it filed its motion for -9- summary judgment and, at no time, did it drop its cross-claim against Steingass. While HCCI might have played within the rules for purposes of preserving the defense of lack of personal jurisdiction, it did not comply with the spirit of the rule, which is `to expedite and simplify proceedings in the Federal Courts.' Yeldell, 913 F.2d at 539, quoting C. Wright & A. Miller, 5A Federal Practice and Procedure (2d ed. 1990) 162, Section 1342. On these facts, we find HCCI waived personal jurisdiction against ADD.2 Accordingly, we sustain ADD's assignment of error relating to personal jurisdiction. II The second issue is whether the court abused its discretion by refusing to permit ADD's motion to amend its complaint and Steingass' motion to amend its cross-claim. Both ADD and Steingass sought to name Hilti, Inc. as a defendant. ADD and Steingass collectively argue that the court abused its discretion by denying their motions to amend since no prejudice would result to HCCI were Hilti, Inc. to be added to the action. Civ.R. 15(A) states that a party may amend a pleading only by leave of the court or by written consent of the adverse party any time after a responsive pleading is served. The Rule further states that [l]eave of court shall be freely given when justice so requires. The court's decision to deny a party leave to amend a 2 Having found HCCI waived the right to challenge personal jurisdiction, we have no occasion to consider whether the court's exercise of jurisdiction under Ohio's long-arm statute would offend due process. See Burger King Corp. v. Rudzewicz (1985), 471 U.S. 462, 472, fn. 14. -10- pleading will not be disturbed absent an abuse of discretion. Wilmington Steel Products, Inc. v. Cleveland Elec. Illum. Co. (1991), 60 Ohio St.3d 120, 122. A reviewing court may find an abuse of discretion when the court denies a motion, timely filed, seeking leave to file an amended complaint, where it is possible that plaintiff may state a claim upon which relief may be granted and no reason otherwise justifying denial of the motion is disclosed. Peterson v. Teodosio (1973), 34 Ohio St.2d 161, paragraph six of the syllabus. However, a party seeking to amend a pleading cannot rely on Peterson where the motion is not timely filed or where the trial court gave other reasons for justifying denial of the motion. Wilmington Steel Products, Inc., 60 Ohio St.3d at 122. We conclude the court abused its discretion by denying the motions to amend. The court did not state any reasons for denying the motions, and we find nothing in the record that would justify the court's refusal to grant the motions. Peterson, supra, at paragraph six of the syllabus. Until the time HCCI filed its motions for summary judgment, neither ADD nor Steingass had affirmative proof that Hilti, Inc. should have been joined as a defendant. The circumstances gave both ADD and Steingass every reason to think that HCCI was the real party in interest. HCCI's name and address appeared on all correspondence alerting ADD to the potential performance limitations of the fire-stop wrap. The Hilti corporate logo also appeared on the letterhead, but that logo did not identify Hilti as Hilti, Inc. Both ADD and -11- Steingass rightfully assumed that HCCI was the proper party to the suit. We earlier mentioned that HCCI specifically asked ADD to substitute Hilti, Inc. in the place of HCCI more than one year before ADD asked the court for leave to amend its complaint, and for that reason HCCI argues the court could find ADD did not timely file its motion to amend the complaint. In its letter to ADD, HCCI knew that ADD had some reservations about substituting Hilti, Inc. and asked counsel for ADD to suggest an area where ADD might be prejudiced by a substitution. In a return letter, ADD outlined several conditions it needed fulfilled in order to effect the substitution of Hilti, Inc. Among those were that HCCI could accept service of process for Hilti, Inc. and would agree to waive any defenses based on personal jurisdiction or the expiration of any statute of limitations during the period between the filing of the original complaint and an anticipated amended complaint. The record does not indicate whether HCCI accepted these conditions, although the substance of this appeal certainly suggests that ADD and HCCI failed to reach any kind of agreement. Civ.R. 15(A) favors a liberal amendment policy and absent evidence of bad faith, undue delay or undue prejudice, a party's motion for leave to amend should be granted. Williams v. Harsco Corp. (1994), 94 Ohio App.3d 441, 446; Schweizer v. Riverside Methodist Hospitals (1996), 108 Ohio App.3d 539, 546. Assuming for purposes of this argument that Hilti, Inc. is the correct party, HCCI cannot show any prejudice from permitting ADD and Steingass to -12- amend their complaints. If, as suggested by HCCI, it is a completely separate company unaware of the details regarding Hilti, Inc's transactions, and with no control over Hilti, Inc., see Schofield Aff. at paragraph 7, there can be no prejudice to HCCI from an amendment. If HCCI is truly a separate entity from Hilti, Inc., the court's decision to add Hilti, Inc. as another party should be of no great moment to HCCI. We also believe that under the circumstances, the motions to amend the pleadings were timely filed. Even if HCCI is correct in arguing that it should not have been named in the suit, the motions to amend would not have been untimely against HCCI. Even with HCCI's representations about Hilti, Inc, ADD and Steingass could, with abundance of caution, refuse to make any substitution of parties absent assurances that Hilti, Inc. would agree to waive the right to contest personal jurisdiction and the statute of limitations. We note that during the time the parties appeared to be negotiating Hilti, Inc's substitution, discovery continued unabated and the evidence submitted in support of both ADD's and Steingass' opposition to summary judgment tended to show that HCCI should have been named in the suit HCCI's name appeared on some pieces of advertising that entered the jurisdiction and all correspondence relating to the failure of the fire-stop wrap came from HCCI. So despite HCCI's representations, it appeared to be at least a nominal party in the action and any decision by ADD or Steingass to substitute without assurances that Hilti, Inc. would not oppose the substitution might have been imprudent. -13- In the context of a decision to grant or deny a motion to amend a pleading, the aggrieved party must demonstrate more than an error of law and that the trial court's denial of the motion was unreasonable, arbitrary or unconscionable. See Wilmington Steel Products, Inc., 60 Ohio St.3d at 122; Csejpes v. Cleveland Catholic Diocese (1996), 109 Ohio App.3d 533, 541-542. Here, the court failed to state any reasons for denying the motions to dismiss, despite the motions being timely and non-prejudicial to HCCI. Accordingly, we find the court abused its discretion by denying the motions to amend the pleadings. The assigned errors are sustained. Judgment reversed and remanded. -14- This cause is reversed and remanded to the lower court for further proceedings consistent with this opinion. It is, therefore, considered that said appellant recover of said appellees its 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. TIMOTHY E. MCMONAGLE, P.J. LEO M. SPELLACY, J., CONCUR. JUDGE JOHN T. PATTON 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 .