Garver Road Invest., L.L.C. v. Diversapack of Monroe, L.L.C. ( 2014 )


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  • [Cite as Garver Road Invest., L.L.C. v. Diversapack of Monroe, L.L.C., 
    2014-Ohio-3551
    .]
    IN THE COURT OF APPEALS
    TWELFTH APPELLATE DISTRICT OF OHIO
    BUTLER COUNTY
    GARVER ROAD INVESTMENT, LLC,                            :
    CASE NOS. CA2013-10-181
    Plaintiff-Appellee,                             :                    CA2013-10-183
    :                   OPINION
    - vs -                                                                    8/18/2014
    :
    DIVERSAPACK OF MONROE, LLC, et al., :
    Defendants-Appellants.                          :
    CIVIL APPEAL FROM BUTLER COUNTY COURT OF COMMON PLEAS
    Case No. CV2012-03-1075
    Millikin & Fitton, Steven A. Tooman, Heather Sanderson Lewis, Salvatore A. Gilene, 9032
    Union Centre Blvd., Suite 200, West Chester, Ohio 45069, for plaintiff-appellee
    Myron A. Wolf, Dennis L. Adams, 120 North Second Street, P.O. Box 741, Hamilton, Ohio
    45012, for defendants-appellants, Diversapack of Monroe, LLC and Alan Kristel
    Wachtel Masyr & Missry LLP, Julian D. Schreibman, One Dag Hammarskjold Plaza, 885
    Second Avenue, 47th Floor, New York, New York 10017 and Fred S. Miller, Baden & Jones
    Bldg., 246 High Street, Hamilton, Ohio 45011, for defendant-appellant, Euroamerican
    Investment Corp.
    Jeffrey J. Harmon, 537 East Pete Rose Way, Cincinnati, Ohio 45202, for defendant, First
    Capital
    RINGLAND, P.J.
    {¶ 1} Defendants-appellants, Alan Kristel and EuroAmerican Investment Corp.
    (Appellants), appeal a decision of the Butler County Court of Common Pleas granting a
    Butler CA2013-10-181
    CA2013-10-183
    motion to compel production of tax returns.
    {¶ 2} Diversapack of Monroe, LLC ("DPK Monroe") entered into a commercial lease
    with Garver Road Investment LLC ("GRI") for a manufacturing facility.           DPK Monroe
    subsequently defaulted on the lease and filed for bankruptcy. Prior to the bankruptcy filing,
    GRI filed suit against DPK Monroe, EuroAmerican Investment Corp. ("EuroAmerican"),
    Diversapack LLC ("Diversapack"), who is DPK Monroe's parent company, and Kristel, one of
    its principals, among others.
    {¶ 3} The lease was secured by a "Parent Guaranty," executed by Diversapack, and
    by a conditional guaranty executed by Kristel (the "Kristel Guaranty") that could only be
    triggered by the occurrence of a "Parent Capital Default." The Parent Capital Default was
    defined in the Parent Guaranty as the withdraw of a capital contribution made by
    EuroAmerican DP Holdings, LLC ("EADP"), before DPK Monroe had been profitable for at
    least two consecutive full fiscal years.
    {¶ 4} In its complaint, GRI alleges that Kristel is liable under the Kristel Guaranty.
    GRI sought to compel production of tax returns from Diversapack and Kristel to determine
    whether a Parent Capital Default occurred. Appellants argue that the information necessary
    to determine whether the Kristel Guaranty was triggered is available from the Diversapack tax
    returns, and thus Kristel's returns are unnecessary.
    {¶ 5} In turn, GRI argues that Kristel put his tax returns at issue by asserting that
    Kristel's contributions to Diversapack should be imputed to EADP in satisfaction of the
    requirements of the Parent Guaranty. GRI also argues that Kristel's tax returns are relevant
    to Kristel's credibility based on potential inconsistencies with Diversapack's returns.
    {¶ 6} GRI also sought to compel production of EuroAmerican's tax returns. GRI
    asserts that it had a first priority security interest in DPK Monroe's equipment, and that DPK
    Monroe improperly granted a security interest in its equipment to EuroAmerican.
    -2-
    Butler CA2013-10-181
    CA2013-10-183
    Accordingly, GRI argues that EuroAmerican's tax returns are at issue because EuroAmerican
    has alleged that it "recovered nothing by way of its security interest." Thus, GRI argues that
    EuroAmerican's tax returns are at issue because they would contain information as to
    whether EuroAmerican truly recovered nothing by way of its security interest. In addition,
    GRI argues the tax returns are relevant to issues of credibility because they may reveal
    inconsistencies with Diversapack's returns.
    {¶ 7} After considering the parties arguments, the trial court ordered that
    EuroAmerican, Kristel and Diversapack produce their tax returns. Appellants now appeal,
    separately but similarly raising a single assignment of error for our review.
    {¶ 8} Kristel's Assignment of Error No. 1:
    {¶ 9} THE TRIAL COURT ERRED TO THE PREJUDICE OF APPELLANT WHEN IT
    GRANTED APPELLEE'S MOTION TO COMPEL PRODUCTION OF PERSONAL TAX
    RETURNS,      WHERE       APPELLANT'S        TAX     RETURNS      WERE      DEMONSTRABLY
    IRRELEVANT AND WHERE THE INFORMATION PURPORTEDLY SOUGHT WAS
    READILY AVAILABLE FROM ANOTHER SOURCE.
    {¶ 10} EuroAmerican Investment Corp.'s Assignment of Error No. 1:
    {¶ 11} THE TRIAL COURT ERRED TO THE PREJUDICE OF APPELLANT WHEN IT
    GRANTED APPELLEE'S MOTION TO COMPEL PRODUCTION OF TAX RETURNS
    WHERE APPELLEE MADE NO SHOWING OF NEED AND WHERE THE INFORMATION
    SOUGHT WAS READILY AVAILABLE FROM ANOTHER SOURCE.
    {¶ 12} GRI notes that Appellants did not provide the transcript of the hearing on the
    motion to compel. Accordingly, our review is limited to the record before us. However, the
    record before us provided sufficient information to allow us to rule on the merits of Appellants'
    assignments of error.
    {¶ 13} A trial court maintains discretion to manage the discovery process. Bank of
    -3-
    Butler CA2013-10-181
    CA2013-10-183
    Am., N.A. v. Singh, 12th Dist. Butler No. CA2012-07-146, 
    2013-Ohio-1305
    , ¶ 17. This court
    reviews a trial court's decision to impose discovery sanctions for an abuse of discretion.
    Lucchesi v. Fischer, 12th Dist. Clermont No. CA2008-03-023, 
    2008-Ohio-5935
    , ¶ 6, citing
    Nakoff v. Fairview Gen. Hosp., 
    75 Ohio St.3d 254
     (1996), syllabus. A decision constitutes an
    abuse of discretion only when it is found to be unreasonable, arbitrary, or unconscionable.
    State ex rel. Ebbing v. Ricketts, 
    133 Ohio St.3d 339
    , 
    2012-Ohio-4699
    , ¶ 13; Blakemore v.
    Blakemore, 
    5 Ohio St.3d 217
    , 219 (1983).
    {¶ 14} Tax returns, while subject to heightened protection from disclosure, are not
    privileged. Civ.R. 26(B)(1) provides that "[p]arties may obtain discovery regarding any
    matter, not privileged, which is relevant to the subject matter involved in the pending action."
    This standard is much broader than the test for relevancy used at trial. Covington v. The
    MetroHealth Sys., 
    150 Ohio App.3d 558
    , 
    2002-Ohio-6629
    , ¶ 20 (10th Dist.). "Matters are
    only irrelevant at the discovery stage when the information sought will not reasonably lead to
    the discovery of admissible evidence." 
    Id.
    {¶ 15} Appellants cite a two-step analysis utilized by various federal and state courts
    when determining whether to order the production of personal tax returns. We note that no
    such test has been adopted in Ohio, and the scope of discovery is instead governed by
    Civ.R. 26(B)(1), as described above.
    {¶ 16} Applying Civ.R. 26(B)(1), we do not find that the trial court abused its discretion
    in ordering the production of Kristel and EuroAmerican's tax returns. Given the broad scope
    of discovery, and the reasonable likelihood that those tax returns could lead to the discovery
    of admissible evidence, we find no error in the trial court's decision. The information or lack
    thereof contained in those returns goes to the heart of this case. Accordingly, they should be
    deemed discoverable even if they are found only to corroborate the information in
    Diversapack's returns.
    -4-
    Butler CA2013-10-181
    CA2013-10-183
    {¶ 17} In light of the foregoing, having found that the trial court did not abuse its
    discretion in ordering the production of Appellants' tax returns where they could reasonably
    lead to the discovery of admissible evidence, Appellants' assignments of error are overruled.
    {¶ 18} Judgment affirmed.
    S. POWELL and PIPER, JJ., concur.
    -5-
    

Document Info

Docket Number: CA2013-10-181, CA2013-10-183

Judges: Ringland

Filed Date: 8/18/2014

Precedential Status: Precedential

Modified Date: 10/30/2014