COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 73439 NATIONAL CITY BANK : JOURNAL ENTRY : AND Plaintiff-appellee : OPINION : -vs- : : SOL WISE, ET AL. : : Defendants-appellants: DATE OF ANNOUNCEMENT OF DECISION: OCTOBER 8, 1998 CHARACTER OF PROCEEDING: Civil appeal from the Court of Common Pleas Case No. CP-CV-317026 JUDGMENT: Reversed and Remanded DATE OF JOURNALIZATION: APPEARANCES: For Plaintiff-Appellee: JAMES P. VALECKO, ESQ. Lakeside Place 323 Lakeside Avenue, West Cleveland, Ohio 44113 For Defendants-Appellants: RICHARD A. WISE, ESQ. 8508 16TH Street, Apt. 107 Silver Spring, Maryland 20910 -2- DYKE, P.J.: Defendant Richard Wise (hereafter referred to as appellant ) appeals from the judgment of the trial court which effected a settlement of assets of a corporation in which appellant had an interest without affording appellant prior notice. For the reasons set forth below, we reverse and remand for further proceedings. On September 14, 1995, Sol Wise executed an equity reserve agreement with National City Bank through which Wise obtained a line of credit. Thereafter, on October 16, 1996, National City Bank filed a complaint against Sol Wise to collect $21,392.91. On January 21, 1997, Sol Wise filed an answer and third-party complaint against Shirley Long, alleging essentially that he had reason to believe that Long fraudulently obtained the line of credit and its proceeds. On August 22, 1997, Sol Wise individually and Wise Fashion Shop, Inc. ("Wise Fashion Shop") filed a new third-party complaint and motion for a temporary restraining order against Donald Powers alleging that Powers was retained to serve as attorney for third- party plaintiffs and that he had received $104,569.77, the proceeds from the sale of a building owned by third-party plaintiffs. Third-party plaintiffs further alleged that Powers failed to distribute the proceeds of the sale in accordance with corporate agreements and his fiduciary duties. Third-party plaintiffs demanded that Powers disgorge sums of $18,716.36 and $15,000, allegedly in his possession. -3- These sums were subsequently deposited with the clerk o Thereafter, Sol Wise and Wise Fashion Shop filed fcourts. complaint for interpleader which named appellant and other share- holders and creditors as interpleader defendants and asked the court to make a correct disbursement of these sums. With regard to appellant Richard Wise, Sol Wise alleged in documents filed with the trial court that appellant had an interest in funds subsequent to debt disbursement[.] The record further demonstrates that appellant never received service of the third-party complaint filed by Sol Wise and Wise Fashion Shop. On September 4, 1997, Donald Powers filed an answer and third- party complaint for interpleader in the within action in which he named Sol Wise, Wise Fashion Shop, National City Bank, appellant and numerous others as third-party defendants. Powers alleged that he performed legal services for Wise Fashion Shop, and that Sol Wise, appellant, Sylvia Wise and Mildred Wise are the shareholders of this corporation. Real property belonging to the Fashion Shop was sold and Powers obtained net proceeds of $104,569.77. In September 1996, Powers made a partial distribution to the share- holders and reserved money to pay certain known creditors. Powers asserted that he was in possession of $32,642.71 which may be subject to the claims of appellant and other claimants.1 1Corporate records from 1994 indicate that Sol Wise was to obtain 25% of the net proceeds of the sale, and that the remainder would be distributed as follows: Nancy Schuster (representing Micki Wise) 33.3% -4- On September 5, 1997, the trial court issued an order of disbursement of the funds held by Powers. Pursuant to this order, National City Bank accepted $15,000 in settlement of its claims, Powers received $10,000, Joseph Carbone received $1,635 and Nancy Schuster received the rest and residue of the sums held by the clerk of courts which was approximated as $1,864.92. No funds were disbursed to appellant, and indeed, appellant was not served with Powers' complaint for interpleader until September 22, 1997. On October 1, 1997, the trial court held a hearing. The newly served parties were present, but the previous order distributing the funds held by Powers was not modified in any way. Thereafter, the trial court issued an order which stated that the case was dismissed with prejudice. Appellant challenges the settlement herein and raises three errors for our review. Appellant's first assignment of error states: THE TRIAL COURT LACKED JURISDICTION OVER THE ASSETS OF THE CORPORATION AND THE CLAIMS OF SOL WISE AGAINST THE THIRD-PARTY DEFENDANTS. Within this assignment of error, appellant complains that the trial court lacked jurisdiction over corporate assets. Appellant maintains that the third-party complaints impermissibly raised new Appellant (together with Robert Wise) 33.3% Sol Wise 16.5% Sylvia Wise 16.5% Records from 1997 indicate that appellant was to receive 36.22% of the remainder, following a 25% distribution to Sol Wise. -5- causes of action unrelated to the original collection complaint filed by National City Bank. Civ.R. 22 authorizes the filing of a complaint for inter- pleader where, inter alia, a defendant may be exposed to multiple liability. That rule further provides that [i]t is not ground for objection to the joinder that the claims of the several claimants or the titles on which their claims depend do not have a common origin ***. In this instance, the interpleader action filed by Sol Wise and Wise Fashion Shop was entirely proper as the record demonstrates that Wise was exposed to multiple liability in connection with Powers' retention of funds for the payment of corporate debts. Powers' interpleader was likewise proper so that a correct disbursement of those funds could be made. Accordingly, appellant's first assignment of error is without merit. For his third assignment of error, appellant states: THE TRIAL COURT COMMITTED PREJUDICIAL ERROR BY HOLDING THAT THE SUBJECT CASE WAS SETTLED AND DISMISSED WHEN ALL THE PARTIES DID NOT AGREE TO THE SETTLEMENT; THE DEFENDANT-APPELLANT'S TIME FOR ANSWERING THE THIRD-PARTY COMPLAINT HAD NOT EXPIRED AND WHEN THE PARTIES GRANTED JUDGMENT BY THE TRIAL COURT DID NOT PRESENT EVIDENCE AT THE HEARING THAT THEY WERE ENTITLED TO THE CORPORATION'S ASSETS. In this assignment of error, appellant complains that the trial court erroneously settled the within matter and distributed corporate assets before he was served with process, and as a shareholder of Wise Fashion Shop, he had an interest in the distribution of the assets of that corporation. -6- In Bland v. Graves (1994), 99 Ohio App.3d 123, 136-137, the court considered a trial court's authority to fashion a settlement and stated as follows: It is well settled that the law favors the prevention of litigation through compromise and settle- ment. Ziegler v. Wen del Poultry Serv., Inc. (1993), 67 Ohio St.3d 10, 17, 615 N.E.2d 1022, 1029-1030. To this end, a trial judge is given considerable discretion to promote settlement among the parties. Ohio Med. Professional Liability Underwriting Assn. v. Physicians Ins. Co. of Ohio (1985), 27 Ohio App.3d 23, 24, 27 OBR 24, 25-26, 499 N.E.2d 347, 348. Thus, it is not an abuse of discretion for a trial judge to suggest a procedure or provide a process which facilitates settle- ment of all or part of the litigation. Id. As stated by the Supreme Court, "[s]o long as there is no evidence of collusion, in bad faith, to the detriment of other, non-settling parties, the settlement of litigation will be encouraged and upheld." Krischbaum v. Dillon (1991), 58 Ohio St.3d 58, 69-70, 567 N.E.2d 1291, 1302. We find the Supreme Court's decision in Krischbaum to be particularly illuminating in respect to the appellants' attack on the validity of the settlement agreements. In Krischbaum, the plaintiffs, heirs at law, brought a will contest action alleging lack of testa- mentary capacity and undue influence. The defendants to this will contest action were the two named beneficiaries in the decedent's will. Prior to trial, one of the defendants, Riker, settled with the will contestants. On appeal, the other defendant, Dillon, contended that it was contrary to public policy to permit the will con- testants to settle the action with one beneficiary to the detriment of the remaining beneficiary. The Supreme Court rejected Dillon's argument, finding that "[a]lthough, as a result of settling with the con- testants, Riker abandoned his position in the litigation, he had no obligation to maintain his position notwith- standing that he had reached a satisfactory settlement with the contestants." Id. at 69, 567 N.E.2d at 1302. Thus, the court concluded that in the absence of evidence that the settlement agreement was the product of collu- sion, made in bad faith, or otherwise detrimental to a non-settling party, the settlement was valid and enforc- eable. (Emphasis added). In this instance, there is specific evidence in the record which demonstrates that appellant was entitled to a share in the -7- distribution of corporate assets, along with Schuster and certain members h ompletely disposed of corporate assets, made before appellant was even served with process in this matter, was detrimental to appel- lant and therefore will not be enforced by this court. For the fundamental requirement of due process is the opportunity to be heard 'at a meaningful time and in a meaningful manner.'" In re (1996of the Wise family. The trial court's settlement whicc v. Eldridge (1976), 424 U.S. 319, 333, 96 S.Ct. 893, 902, 47 L.Ed.2d 18, 32, and internal quote taken from Armstrong v. Manzo (1965), 380 U.S. 545, 552, 85 S.Ct. 1187, 1191, 14 L.Ed.2d 62, 66. In accordance with the foregoing, appellant's third assignment of error is well-taken. The order of distribution of corporate assets rendered by the trial court is hereby reversed and the matter is remanded for further proceedings consistent with this opinion. Further, in light of our disposition of appellant's third assignment of error, his second assignment of error2 (in which he claims that he was given insufficient time to respond to 2 The second assignment of error states: THE TRIAL COURT DEPRIVED THE DEFENDANT-APPELLANT OF DUE PROCESS OF LAW IN CONTRAVENTION OF THE FOURTEENTH AMEND- MENT TO THE UNITED STATES CONSTITUTION AND SECTION 16, ARTICLE I OF THE OHIO CONSTITUTION WHEN IT HELD A HEARING ONLY EIGHT DAYS AFTER DEFENDANT-APPELLANT, AN OUT OF STATE DEFENDANT, WAS SERVED WITH THE THIRD-PARTY COM- PLAINT. FURTHERMORE, THE TRIAL COURT BY DISPOSING OF THE SUBJECT CASE FIFTEEN [DAYS] AFTER THE THIRD PARTY COMPLAINT WAS SERVED VIOLATED THE DOCTRINE OF SEPARATIONS OF POWERS BECAUSE ITS JUDGEMENT ABROGATED THE LEGISLA- TURES'S AUTHORITY TO DETERMINE THE TIME A PARTY HAS TO RESPOND TO A THIRD-PARTY COMPLAINT. -8- the third party complaint which was eventually served upon him) is moot and will not be addressed herein. App.R. 12(A)(1)(c). Reversed and remanded. -9- 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 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. NAHRA, J., AND KARPINSKI, J., CONCUR. ANN DYKE 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 .