Lakeview Holding (OH), L.L.C. v. Haddad , 2013 Ohio 1796 ( 2013 )

[Cite as Lakeview Holding (OH), L.L.C. v. Haddad, 2013-Ohio-1796.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 98744
LAKEVIEW HOLDING (OH), L.L.C.
PLAINTIFF-APPELLEE
vs.
TINA R. HADDAD, ET AL.
DEFENDANTS-APPELLANTS
JUDGMENT:
REVERSED AND REMANDED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-763892
BEFORE: S. Gallagher, J., Boyle, P.J., and Keough, J.
RELEASED AND JOURNALIZED: May 2, 2013
ATTORNEYS FOR APPELLANTS
Tina R. Haddad
3155 West 33rd Street
Suite 1128
Cleveland, OH 44109
Harlan D. Karp
850 Euclid Avenue
Suite 1330
Cleveland, OH 44114
ATTORNEYS FOR APPELLEES
Kirk W. Liederbach
Matthew A. Marsalka
Law Office of Schwartz & Associates
P.O. Box 14250
Cleveland, OH 44114
Maureen C. Zink
Law Office of Schwartz & Associates
27 N. Wacker Drive, #503
Chicago, IL 60606
For David T. Brady
David T. Brady
Law Office of Schwartz & Associates
27 N. Wacker Drive, #503
Chicago, IL 60606
SEAN C. GALLAGHER, J.:
{¶1} Defendant-appellant Tina R. Haddad appeals the trial court’s decision that
denied her motions for sanctions against Nicholas Cardinal, David T. Brady, Kirk
Liederbach, the “attorneys for ‘Tax Lien Law Group, L.L.P.,’” and Lakeview Holding
(Ohio) L.L.C.1
{¶2} Lakeview filed a foreclosure action against Haddad and others based upon
two tax certificates relating to the property identified as 1763 E. 27 St., Cleveland, OH.
The complaint identified two addresses for Haddad: 1763 E. 77th Street, Cleveland, OH
44114, and 1768 E. 27th Street, Cleveland, OH 44114. The record reflects that the
summons and complaint were sent to those addresses. Haddad maintains that Lakeview
never served her with the complaint or other filings in the underlying case. The initial
failure of service on Haddad is documented in the record, with notice being issued to
plaintiff that it was not deliverable as addressed and “no such number.” Lakeview later
attempted to serve Haddad at 3155 W. 33rd Street, Cleveland, OH 44109. The return
receipt indicates service at that address; however, it was filed ten days after Lakeview had
voluntarily dismissed the case.2
1
The parties will be referred to as Haddad, Cardinal, Brady, Liederbach, and Lakeview in
this opinion, or appellees or appellee attorneys where relevant.
2
We note that Lakeview, through its attorneys, maintains that Haddad had notice of the
pending action prior to the dismissal and had contacted counsel’s office about it. In fact, the action
was dismissed because Haddad had redeemed the tax certificates and paid the attorney fees assessed
by appellee attorneys.
{¶3} Lakeview filed a preliminary judicial report on September 16, 2011, that was
issued by Title Resources Guaranty Company with an effective date of August 30, 2011,
and was executed by Rebecca Hill as a “licensed agent.” On October 13, 2011,
Lakeview filed a motion for appointment of receiver and a motion to transfer the case to
the commercial docket. Haddad maintains that Lakeview failed to serve her with these
motions. The certificates of service on these motions bear the same incorrect addresses
for Haddad as are reflected in the complaint. Both motions were denied on October 25,
2011.
{¶4} Haddad indicates that she learned of the action on September 22, 2011. The
Tax Lien Law Group sent Haddad the payoff for the tax certificates the next day.
Haddad also received a payoff for legal fees and expenses, totaling $2,540. The legal
fees were discounted by 10 percent, reducing the payoff figure for legal fees and expenses
to $2,465. Haddad paid the discounted amount of legal fees and expenses and redeemed
the tax lien certificates in October 2011.
{¶5} Haddad filed a motion for sanctions and requested a hearing on November 3,
2011. She “renewed” the motion following Lakeview’s voluntary dismissal of the
action. After multiple continuances, a hearing on Haddad’s motion for sanctions took
place before a magistrate on March 27, 2012. However, a recess was called at the
request of Lakeview and its attorneys. The motion hearing was set to resume on April
24, 2012. Instead, Lakeview moved to vacate the referral to the magistrate and/or for
disqualification of the magistrate. The trial court partially granted the motion by
vacating the referral to the magistrate. The trial court’s order provided that the court
would address all post-dismissal issues that remained.
{¶6} Lakeview filed a motion in limine, a motion to continue the hearing, and a
motion for submission of evidence under seal. The court granted the motion to continue
the hearing. Haddad opposed the remaining motions. The court ordered Lakeview to
either submit the affidavits offered under seal into evidence, with copies to Haddad, or it
would go forward with the sanctions hearing on July 13, 2012. The court further ordered
that if Lakeview submitted the affidavits into evidence, it would consider them as support
for the motion in limine and Haddad’s response thereto and may cancel the hearing if it
determined one was not required.
{¶7} In June 2012, Lakeview filed a motion in limine for an order limiting the
scope of the motion for sanctions and for a ruling that a hearing was unnecessary.
Lakeview also opted to unseal and submit evidence in support of its motion in limine. In
response to the newly submitted evidence, Haddad filed a supplemental motion for
sanctions, as well as an opposition to Lakeview’s motion in limine.
{¶8} On June 29, 2012, Lakeview moved to strike Haddad’s supplemental motion
for sanctions. The trial court granted Lakeview’s motion to strike the supplemental
motion for sanctions on July 3, 2012. The supplemental motion included issues
surrounding the preliminary judicial report and “post-dismissal” conduct, such as the
motion appellees filed to vacate the referral to the magistrate, alleged ex parte
conversations with court personnel, coaching witnesses at the initial hearing, and
impugning the integrity of the magistrate by seeking her disqualification. Additionally,
the supplemental motion for sanctions reiterated issues regarding the attorney fees
assessed against her.
{¶9} The court indicated it had considered all pending post-dismissal motions and
granted Lakeview’s motion in limine, denied Haddad’s motion for sanctions, and found
that a hearing on the issue was not required. The court’s order further found that Haddad
failed to prove that Lakeview’s attorneys acted willfully and/or in bad faith to cause a
violation of Civ.R. 11. Haddad’s motion was denied in all respects. In a separate order,
the court found it unnecessary to rule on Lakeview’s motion to limit the scope of the
motion for sanctions. Haddad pursued this appeal.
{¶10} Additional facts will be addressed in resolution of the assigned errors.
{¶11} Haddad assigns three errors for review that she has styled as follows:
Assignment of Error No. 1
Where the record contains substantial evidence that frivolous conduct may
have occurred, a trial court errs when it does not hold an evidentiary hearing
under R.C. 2323.51 and afford the parties a fair opportunity to present
evidence that frivolous conduct occurred. Whether conduct is frivolous is
a mixed standard of review and entails inquiring into questions of law
(reviewed de novo) and fact[.]
Assignment of Error No. 2
The court erred in denying the motion for sanctions and not employing its
inherent authority under Chambers v. NASCO, 111 S.Ct. 2123 (1991).
Assignment of Error No. 3
The trial court erred to the prejudice of defendant Haddad in striking the
June 21, 2012 supplement to motion for sanctions without affording
defendant Haddad an opportunity to respond. The response summarized
developments during the sanctions proceeding and attached additional
evidence.
{¶12} Haddad’s assigned errors all relate to her motion for sanctions and the trial
court’s orders regarding it. They will be addressed together for ease of discussion.
{¶13} Haddad filed a motion for sanctions before Lakeview voluntarily dismissed
the foreclosure action and then “renewed” it (and sought to supplement it) at times after
the dismissal. Trial courts retain jurisdiction to resolve collateral matters, such as a
motion for sanctions, pursuant to Civ.R. 11 or R.C. 2323.51. ABN AMRO Mtge. Group,
Inc. v. Evans, 8th Dist. No. 96120, 2011-Ohio-5654. The decision to grant sanctions
under R.C. 2323.51 and Civ.R. 11 rests with the sound discretion of the trial court.
Taylor v. Franklin Blvd. Nursing Home, Inc., 112 Ohio App.3d 27, 677 N.E.2d 1212 (8th
Dist.1996).
{¶14} As a general rule, the trial court is not required to hold a hearing before
denying a motion for sanctions “when the court determines, upon consideration of the
motion and in its discretion, that [the motion] lacks merit.” Pisani v. Pisani, 101 Ohio
App.3d 83, 88, 654 N.E.2d 1355 (8th Dist.1995). However, courts have found that a trial
court abuses its discretion when it arbitrarily denies a motion for sanctions. Bikkani v.
Lee, 8th Dist. No. 89312, 2008-Ohio-3130, ¶ 31. This court has held that a trial court
abuses its discretion by denying a motion for sanctions without a hearing if either the
“record clearly evidences frivolous conduct” or “an arguable basis exists for an award of
sanctions.” Id.{¶15} Pursuant to R.C. 2323.51(A),
(2) “Frivolous conduct” means either of the following:
(a) Conduct of an inmate or other party to a civil action, of an inmate
who has filed an appeal of the type described in division (A)(1)(b) of this
section, or of the inmate’s or other party’s counsel of record that satisfies
any of the following:
(i) It obviously serves merely to harass or maliciously injure another
party to the civil action or appeal or is for another improper purpose,
including, but not limited to, causing unnecessary delay or a needless
increase in the cost of litigation.
(ii) It is not warranted under existing law, cannot be supported by a
good faith argument for an extension, modification, or reversal of existing
law, or cannot be supported by a good faith argument for the establishment
of new law.
(iii) The conduct consists of allegations or other factual contentions
that have no evidentiary support or, if specifically so identified, are not
likely to have evidentiary support after a reasonable opportunity for further
investigation or discovery.
(iv) The conduct consists of denials or factual contentions that are
not warranted by the evidence or, if specifically so identified, are not
reasonably based on a lack of information or belief.
{¶16} A determination of frivolous conduct applies an objective standard and is
ascertained “without reference to what the individual knew or believed.” Bikkani at ¶ 22.
{¶17} Conversely, determining whether an attorney is subject to sanctions for a
willful violation of Civ.R. 11 requires application of a subjective standard. Id. at ¶ 21.
The violation(s) must be willful and not merely negligent to warrant sanctions under
Civ.R. 11. Id.
{¶18} Civ.R. 11 provides:
Every pleading, motion, or other document of a party represented by an
attorney shall be signed by at least one attorney of record in the attorney’s
individual name, whose address, attorney registration number, telephone
number, facsimile number, if any, and business e-mail address, if any, shall
be stated. A party who is not represented by an attorney shall sign the
pleading, motion, or other document and state the party’s address. A party
who is not represented by an attorney may further state a facsimile number
or e-mail address for service by electronic means under Civ.R. 5(B)(2)(f).
Except when otherwise specifically provided by these rules, pleadings, as
defined by Civ.R. 7(A), need not be verified or accompanied by affidavit.
The signature of an attorney or pro se party constitutes a certificate by the
attorney or party that the attorney or party has read the document; that to the
best of the attorney’s or party’s knowledge, information, and belief there is
good ground to support it; and that it is not interposed for delay. If a
document is not signed or is signed with intent to defeat the purpose of this
rule, it may be stricken as sham and false and the action may proceed as
though the document had not been served. For a willful violation of this
rule, an attorney or pro se party, upon motion of a party or upon the court’s
own motion, may be subjected to appropriate action, including an award to
the opposing party of expenses and reasonable attorney fees incurred in
bringing any motion under this rule. Similar action may be taken if
scandalous or indecent matter is inserted.
{¶19} Haddad’s motion alleged, among other issues, that appellees repeatedly
failed to serve her with court filings, appellees filed frivolous motions, appellees
submitted an invalid preliminary judicial report, and appellee attorneys charged her
excessive fees. The hearing that commenced with respect to Haddad’s motion provided
some evidence that supported her claims. The hearing was recessed, and appellees
attempted to submit affidavits under seal in arguing that Haddad’s motion for sanctions
should be limited in scope to her initial allegations. The court instructed appellees to
submit the affidavits into evidence or a hearing would reconvene. Appellees submitted
the affidavit evidence and then the court granted their motion in limine and denied
Haddad’s motion for sanctions without a hearing.
{¶20} During the course of the hearing on the motion, it was learned that the agent
who executed the preliminary judicial report did not have a valid license, and that
appellees essentially filed standardized motions to transfer a foreclosure matter involving
tax certificates to the commercial docket, as well as a motion to appoint a receiver (these
motions were also filed in approximately 40 other pending cases as well). At the initial
hearing, Haddad elicited testimony that the motion to appoint the receiver was based
solely on her alleged statement to Cardinal that she had not been paying the property taxes
because business had been bad, which led Cardinal to assume she “may not have been
paying other bills” and caused him to file for the appointment of a receiver. The record
indicates that this conversation occurred during Haddad’s attempt to settle the foreclosure
case. The motions were denied for having no basis in law and for insufficiency of a
factual basis. In addition, there was testimony concerning the amount of legal fees
assessed against Haddad.
{¶21} As stated, the hearing was recessed and rescheduled but never resumed.
{¶22} In addition to the rulings previously detailed above, Haddad’s motion to
supplement was stricken from the record and appellees’ motion in limine was granted.
{¶23} Haddad asserts that trial court erred by striking her supplemental motion for
sanctions. Appellees argue that this ruling was proper because they contend the
supplemental motion was untimely. Appellees’ reliance upon Edwards v. Lopez, 8th
Dist. Nos. 97917 and 98510, 2013-Ohio-571, is misplaced. In Lopez, this court reversed
the trial court’s order that granted a motion for sanctions and the appellate decision was
not appealed to the Ohio Supreme Court. Thus, the denial of sanctions became the law
of the case. Here, there had been no ruling on Haddad’s motion for sanctions when she
sought to supplement it. There is no prohibition to supplementing pending motions for
sanctions. See generally Bikkani, 8th Dist. No. 89312, 2008-Ohio-3130, at ¶ 16
(involving a motion for sanctions and a supplemental motion for sanctions). While
appellees complain that Haddad supplemented her motion with information she learned
during the initial sanctions hearing, it was appellees who wanted the continuance. The
ruling on Haddad’s motion was delayed at appellees’ request. Under these
circumstances, Haddad’s supplemental motion should not have been stricken.
{¶24} One of appellees’ contentions in opposing Haddad’s motion for sanctions
was that she allegedly incurred no recoverable damages. Appellees appear to concede
that the preliminary judicial report filed in her case was invalid, but insist that Haddad
was not damaged by it. Haddad asserts that she incurred damage in having to defend the
motion to transfer to the commercial docket and the motion to appoint a receiver.
Appellees are correct that Haddad cannot obtain attorney fees as sanctions in this case
because she has represented herself pro se throughout the lower court proceedings and
thus did not incur any attorney fees. See Mikhael v. Gallup, 9th Dist. No. 22992,
2006-Ohio-3917. Notwithstanding the foregoing points, the law still allows for Haddad to
recover costs incurred as a result of sanctionable conduct. She maintains that she was
assessed unreasonable attorney fees related to the foreclosure action. Appellee attorneys
did not keep itemized time records, choosing instead to charge a flat rate. They claim
Haddad was not charged for either the motion to transfer to the commercial docket or the
motion to appoint a receiver, which cannot be objectively deciphered from this record.
Haddad has produced evidence regarding the reasonableness of the fee as compared to
fees charged in other similar matters.
{¶25} We find the fact that Haddad paid the attorney fee bill associated with the
foreclosure action does not preclude her from challenging the reasonableness of the fees
assessed against her. To provide otherwise would place parties in an untenable position
of facing mounting attorney fees if they wanted to challenge the reasonableness of the
attorney fees assessed in the foreclosure action. Stated differently, the attorney fees for
pending actions logically increase as the litigation continues.
{¶26} Having reviewed the record, we find that Haddad has presented enough
evidence to establish an arguable basis for awarding sanctions in this case under
R.C. 2323.51 and Civ.R. 11. Nevertheless, the evidence, when fully developed, may
support a finding that the appellee attorneys did not engage in a willful violation of the
rule and that sanctions may not be warranted against any party. However, we find that
Haddad is entitled to a complete hearing on her motion and supplemental motion for
sanctions before that determination is made. In remanding this case to finish the hearing
on Haddad’s motion for sanctions, we take no position on whether the trial court should
grant or deny it.
{¶27} Assignments of error Nos. 1 and 3 are sustained; assignment of error No. 2
is overruled as moot.
{¶28} Judgment reversed; case remanded.
It is ordered that appellant recover of appellees 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 common
pleas 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.
SEAN C. GALLAGHER, JUDGE
MARY J. BOYLE, P.J., and
KATHLEEN ANN KEOUGH, J., CONCUR