[Cite as Hostetler v. Cent. Farm and Garden, Inc.,

.]

COURT OF APPEALS TUSCARAWAS COUNTY, OHIO FIFTH APPELLATE DISTRICT

WILLIAM HOSTETLER JUDGES: Hon. W. Scott Gwin, P. J. Plaintiff-Appellant/Cross-Appellee Hon. John W. Wise, J. Hon. Julie A. Edwards, J. -vs- Case No. 2010 AP 12 0046 CENTRAL FARM AND GARDEN, INC.

Defendant-Appellee/Cross-Appellant OPINION

CHARACTER OF PROCEEDING: Civil Appeal from the Court of Common Pleas, Case No. 2009 CV 07 0629

JUDGMENT: Affirmed

DATE OF JUDGMENT ENTRY: February 9, 2012

APPEARANCES:

For Plaintiff-Appellant For Defendant-Appellee

DAVID P. BERTSCH DAVID J. WIGHAM BUCKINGHAM, DOOLITTLE ANDREW P. LYCANS & BURROUGHS CRITCHFIELD, CRITCHFIELD & 3800 Embasy Parkway JOHNSON Suite 300 225 North Market Street, P. O. Box 599 Akron, Ohio 44333 Wooster, Ohio 44691 Tuscarawas County, Case No. 2010 AP 12 0046 2

Wise, J.

{¶1} Appellant/Cross-Appellee William Hostetler appeals the decision of the

Court of Common Pleas, Tuscarawas County, which denied his motion for directed

verdict and subsequently denied his motion for judgment notwithstanding the verdict

(“JNOV”) or a new trial following a jury trial in a suit against Appellee/Cross-Appellant

Central Farm and Garden, Inc., claiming breach of a business agreement. The relevant

facts leading to this appeal are as follows.

{¶2} Plaintiff-Appellant William Hostetler is a farmer who formerly operated an

additional business known as Hostetler Farm Supply, a d/b/a started by his late father.

Defendant-Appellee Central Farm and Garden, Inc. is a wholesale distributor of farm

and garden supplies, including twine and fodder preservation products. Appellant

Hostetler’s business competed in part with Appellee Central Farm in selling twine to

dealers and other commercial customers. Appellant Hostetler's business also sold

twine, in lesser amounts, to some of his neighbors and other retail customers.

Appellant at one time had an account with Appellee Central Farm to purchase twine at

dealer prices for resale to said neighbors and other retail customers.

{¶3} In the summer of 2004, appellee asked appellant, who generally was able

to sell his product at a lower price, whether he would be willing to sell appellee some

twine after appellee’s supply ran low. Appellant agreed to sell the twine to appellee at

his cost.

{¶4} In September 2004, appellee’s then co-owners, Joe Franks and Dick

Olson, approached appellant about purchasing his business.1 Accordingly, in

1 Olson later became the sole owner of Appellee Central Farm. Tuscarawas County, Case No. 2010 AP 12 0046 3

December 2004, the parties executed a purchase agreement prepared by appellee’s

legal counsel. In the agreement, appellee agreed to acquire appellant’s “customer list

and price list” for a price of $275,000. This amount was to be paid in installments of

$10,000 on December 31, 2004, $17,500 on September 1, 2005, and nine additional

payments of $27,500 payable annually on September 1, 2006 through September 1,

2014. See Articles I and II of the agreement.

{¶5} Article V of the agreement provided for appellee to employ appellant as a

commissioned sales representative on an annual renewable basis. The agreement

does not clearly tie appellee’s installment payment obligations to appellant’s continued

service as a sales representative. However, Section 5.1 states that “[d]uring the term of

employment, [appellant] shall not engage in any activity which conflicts or interferes

with the performance of duties hereunder or usurps the business interests, existing or

potential, of [appellee].” Section 5.3(c) states that appellee would set the price at which

appellant was to sell appellee’s products, and that appellant could purchase twine at

dealer cost.

{¶6} Section 7.3 of the agreement contained a noncompetition provision which

prohibited appellant from competing against appellee for the following five years (i.e.,

until the end of 2009), as well as a provision entitling appellee to injunctive relief upon

violation. Section 7.4 provided that appellee could set off its claimed damages under

the noncompetition provision against the outstanding balance owed on the purchase

price by giving notice to appellant, specifying in reasonable detail the basis for the set-

off and depositing the amount of the claimed set-off in an escrow account at its law

firm. Tuscarawas County, Case No. 2010 AP 12 0046 4

{¶7} After the agreement was executed, appellant delivered a list of the names

and addresses for his commercial twine accounts to appellee, although it is presently

undisputed that any copies thereof have been lost or destroyed by both parties.

Appellant also provided appellee the names of his twine suppliers. Appellee in turn

paid appellant the first $17,500 installment under the purchase agreement.

{¶8} Appellant continued to purchase twine from appellee at dealer cost under

Section 5.3(c) of the agreement, which he resold to some of his neighbors and other

retail customers. Appellant maintained at trial that he purchased approximately

$175,000 of twine from Central Farm for resale to his neighbors and retail customers at

a 5% profit for the three years from 2005 through 2007. See Tr. at 166-167.

{¶9} In July 2005, Appellee Central Farm made appellant a salaried employee

at a rate of $40,000 per year plus the commission payments under the 2004

agreement, plus benefits. This additional agreement was for a term of one year

automatically renewable in July of each successive year unless either party gave

notice of discontinuation at least sixty days prior to the annual anniversary date.

{¶10} Appellant received the $17,500 purchase price installment payment in the

autumn of 2005 and the $27,500 purchase price installment payment in the autumn of

2006.

{¶11} In September 2007, a dispute arose between Central Farm's co-owners

Franks and Olson over a bank audit and inventory issues. Olson decided to remove

Franks as president and appoint Corey Sheely, the company’s marketing manager, as

the new president. Sheely thereupon conducted a review of Central Farm's finances

and the 2004 purchase agreement. Despite the terms of the additional 2005 Tuscarawas County, Case No. 2010 AP 12 0046 5

agreement, on October 24, 2007, Sheely met with appellant and told him he was being

taken off salary and returned to his original position as a commissioned salesman

effective November 1, 2007. Sheely also told appellant in the meeting that Appellee

Central Farm was discontinuing twine sales until at least the following spring. This was

problematic for appellant, because most of his twine sales for appellee were made in

the autumn and winter. Sheely allegedly did not give appellant any sales territory of his

own when he put him back on commission.

{¶12} In the late autumn of 2007, Sheely told his sales staff that appellant would

no longer be working for Central Farm. Sheely also instructed the sales representatives

to see if appellant had been contacting any Central Farm customers.

{¶13} Appellee Central Farm did pay Hostetler the September 1, 2007

installment of $27,500 at the end of October. However, appellee’s vice-president,

David Guster, told appellant not to attend any further sales meetings since there was

no twine to sell. Appellant subsequently told Guster he had taken a job as a long-

distance truck driver and asked Guster to notify him upon appellee’s resumption of

twine sales.

{¶14} In December 2007, Appellee Central Farm's former president Franks,

along with his wife, went into the twine business, operating under the name JBF.

Sheely suspected appellant had gone into this business with Franks and personally

began asking some of appellee’s customers if appellant was selling them twine.

{¶15} Appellee Central Farm ultimately resumed twine sales the following

spring, but Guster never contacted appellant to let him know or invite him to any

subsequent sales meetings. Tuscarawas County, Case No. 2010 AP 12 0046 6

{¶16} Appellant has maintained that he never went into the twine business with

Franks, never provided any services to Franks, and never solicited any customer on

behalf of Franks or JBF.

{¶17} Appellant has also maintained that after he began work as a long-distance

trucker in late October 2007, he also discontinued selling twine to his neighbors and

other retail customers. In February 2008, Hostetler received his last monthly account

statement from Central Farm, which showed he was still owed $16,739.23 in credits. In

April 2008, Hostetler sent a letter to Central Farm requesting that it close his account

and send him a check for the $16,739.23 account balance. Appellant’s attorney sent a

follow-up letter in May 2008 again requesting that appellee send the outstanding

balance of credits claimed on the account. Appellee never responded to either letter.

{¶18} Appellee Central Farm then failed to make the $27,500 payment on the

purchase price that was due and payable on September 1, 2008. Appellant asserts that

appellee never gave the requisite notice to him under Section 7.4 of the agreement that

it was withholding this payment as a set-off for claimed damages attributable to any

alleged breach of the agreement by appellant.

{¶19} On July 9, 2009, Appellant Hostetler filed a civil complaint for breach of

the purchase agreement, breach of contract, breach of account, and a demand for

account stated. On September 8, 2009, appellee filed an answer and counterclaim.

{¶20} The matter proceeded to a jury trial for nearly four days in late October

2010. Appellant moved for a directed verdict at the close of evidence on appellee’s

counterclaim, asserting there was no competent evidence that appellant had Tuscarawas County, Case No. 2010 AP 12 0046 7

committed any material breach of the agreement and no evidence that appellee had

sustained any damages. The motion for directed verdict was denied.

{¶21} Appellant submitted a proposed set of interrogatories asking the jury to

make a finding as to whether and in what manner appellant had breached the

agreement and the amount of any resulting damages. The trial court declined to submit

the proposed jury interrogatories. See Tr. at 491.

{¶22} After hearing the evidence, the jury returned a verdict awarding appellant

$25,240 on his account claim, which was subsequently reduced by way of a stipulated

remittitur to the $16,739.23 outstanding account balance. The jury also returned a

verdict in favor of appellant on appellee’s counterclaim for breach of agreement, but did

not render a verdict for appellant on his claim for the $192,500 remaining balance

appellant claimed was owed on the purchase price. The trial court thereafter issued a

final entry on the verdicts which included a declaratory judgment relieving appellee

from any further payment obligation under the agreement.

{¶23} The trial court subsequently denied appellant’s motion for judgment

notwithstanding the verdict (“JNOV”) or a new trial.

{¶24} On December 10, 2010, appellant filed a notice of appeal. He herein

raises the following four Assignments of Error:

{¶25} “I. THE TRIAL COURT COMMITTED PREJUDICIAL ERROR IN

ENTERING A DECLARATORY JUDGMENT THAT DEFENDANT BE RELIEVED

FROM HAVING TO PAY THE $192,500 BALANCE OWED FOR THE PURCHASE OF

PLAINTIFF'S WHOLESALE BUSINESS AND IN DENYING PLAINTIFF'S MOTIONS

FOR DIRECTED VERDICT AND JUDGMENT NOTWITHSTANDING THE VERDICT Tuscarawas County, Case No. 2010 AP 12 0046 8

GIVEN THE ABSENCE OF ANY COMPETENT EVIDENCE THAT PLAINTIFF

BREACHED THE AGREEMENT, THE ABSENCE OF ANY COMPETENT EVIDENCE

THAT DEFENDANT SUSTAINED ANY DAMAGES AS A RESULT OF ANY ALLEGED

BREACH AND THE JURY VERDICT IN FAVOR OF PLAINTIFF ON DEFENDANT'S

CLAIM THAT PLAINTIFF BREACHED THE AGREEMENT.

{¶26} “II. THE TRIAL COURT COMMITTED PREJUDICIAL ERROR IN

REPEATEDLY ALLOWING DEFENDANT OVER PLAINTIFF'S ONGOING

OBJECTIONS TO PRESENT INCOMPETENT HEARSAY EVIDENCE IN SUPPORT

OF ITS CLAIM THAT PLAINTIFF VIOLATED THE NON-COMPETITION PROVISION

OF THE PURCHASE AGREEMENT.

{¶27} “III. THE TRIAL COURT COMMITTED PREJUDICIAL ERROR IN

REFUSING TO SUBMIT PLAINTIFF'S PROPOSED JURY INTERROGATORIES ON

WHETHER AND IN WHAT RESPECT PLAINTIFF BREACHED THE AGREEMENT

AND THE DAMAGES ATTRIBUTABLE TO ANY SUCH BREACH.

{¶28} “IV. THE TRIAL COURT COMMITTED PREJUDICIAL ERROR IN

DENYING PLAINTIFF'S MOTION FOR NEW TRIAL ON ITS [SIC] CLAIM FOR THE

REMAINING BALANCE DEFENDANT OWES ON THE PRICE FOR THE PURCHASE

OF PLAINTIFF'S ASSETS BASED UPON THE MANIFEST WEIGHT OF THE

EVIDENCE.”

{¶29} Appellee Central Farm has filed a cross-appeal herein. It herein raises the

following two Assignments of Error on cross-appeal: Tuscarawas County, Case No. 2010 AP 12 0046 9

{¶30} “I. THE JURY’S VERDICT IN FAVOR OF HOSTETLER AND AGAINST

CENTRAL FARM ON THE ACCOUNT CAUSE OF ACTION WAS AGAINST THE

MANIFEST WEIGHT OF THE EVIDENCE.

{¶31} “II. THE JURY’S VERDICT IN FAVOR OF HOSTETLER AND AGAINST

CENTRAL FARM ON THE ACCOUNT STATED CAUSE OF ACTION WAS AGAINST

THE MANIFEST WEIGHT OF THE EVIDENCE.”

Hostetler Appeal

I.

{¶32} In his First Assignment of Error, appellant contends the trial court erred in

relieving appellee, via declaratory judgment after the jury’s verdict, of responsibility for

paying the remaining $192,500 under the 2004 purchase agreement and in his denying

motion for JNOV and/or for a directed verdict. We disagree.

{¶33} As an appellate court, we are not fact finders. We neither weigh the

evidence nor judge the credibility of witnesses. Our role is to determine whether there

is relevant, competent and credible evidence upon which the jurors could base their

judgment. Accordingly, judgments supported by some competent, credible evidence

going to all the essential elements of the case will not be reversed as being against the

manifest weight of the evidence. The triers of fact have the duty to decide what weight

is to be given to the evidence and to assess the credibility of the witnesses. See Cox v.

Storsin, Stark App.No. 2003CA00263,

(additional citations

omitted).

{¶34} In regard to motions for judgment notwithstanding the verdict (JNOV),

Civ.R. 50(B) states as follows: Tuscarawas County, Case No. 2010 AP 12 0046 10

{¶35} “Whether or not a motion to direct a verdict has been made or overruled

and not later than fourteen days after entry of judgment, a party may move to have the

verdict and any judgment entered thereon set aside and to have judgment entered in

accordance with his motion; or if a verdict was not returned such party, within fourteen

days after the jury has been discharged, may move for judgment in accordance with

his motion. A motion for a new trial may be joined with this motion, or a new trial may

be prayed for in the alternative. * * *.”

{¶36} The standard for granting a motion for judgment notwithstanding the

verdict or in the alternative for a new trial pursuant to Civ.R. 50(B) is the same as that

for granting a motion for a directed verdict pursuant to Civ.R. 50(A). Texler v. D.O.

Summers Cleaners & Shirt Laundry Co.,

,

,

1998–Ohio–602. Thus, JNOV is proper if upon viewing the evidence in a light most

favorable to the nonmoving party and presuming any doubt to favor the nonmoving

party, reasonable minds could come to but one conclusion, that being in favor of the

moving party. Wagoner v. Obert,

, 401–402,

,

2008–Ohio–7041, citing Goodyear Tire & Rubber Co. v. Aetna Cas. & Sur. Co.,

, 2002–Ohio–2842, ¶ 3. “Neither the weight of the evidence nor the

credibility of the witnesses is for the [trial] court's determination in ruling upon [a

JNOV].” Osler v. Lorain (1986),

,

, quoting Posin

v. A.B.C. Motor Court Hotel (1976),

,

,

.

{¶37} The decision to grant or deny a Civ.R. 50(B) motion for JNOV is reviewed

de novo by an appellate court.

, citing

. Tuscarawas County, Case No. 2010 AP 12 0046 11

{¶38} In regard to appellant’s argument regarding a directed verdict, our

standard of review for the grant or denial of a motion for a directed verdict is whether

there is probative evidence which, if believed, would permit reasonable minds to come

to different conclusions as to the essential elements of the case, construing the

evidence most strongly in favor of the non-movant. Brown v. Guarantee Title &

Trust/Arta (Aug. 28, 1996), Fairfield App.No. 94–41, citing Sanek v. Duracote Corp.

(1989),

,

. A motion for a directed verdict

therefore presents a question of law, and an appellate court conducts a de novo review

of the lower court's judgment. Howell v. Dayton Power & Light Co. (1995),

,

.

{¶39} In the case sub judice, appellant essentially argues that the trial court

should have set aside the jury’s decision to relieve appellee of any further obligation to

pay the remaining $192,500.00 balance on the original $275,000.00 purchase price of

Hostetler Farm Supply pursuant to the 2004 purchase agreement, which he claims

allowed appellee to enjoy an improper windfall. Appellant maintains that the evidence

does not support the conclusion that he materially breached his end of said agreement,

such that appellee would be legally entitled to relief from further payment.

{¶40} We have recognized that the mere breach of a term of a contract

committed by a party who has substantially performed its obligations under the contract

does not relieve the other party from performance. See Oakes v. P.J. Bordner & Co.

(April 18, 1994), Stark App.No. CA 9488,

, citing Software

Clearinghouse, Inc. v. Intrak, Inc. (1990),

and Kersh v.

Montgomery Developmental Ctr. (1987),

. Thus, “[a] party is Tuscarawas County, Case No. 2010 AP 12 0046 12

relieved of performing its obligations only if the breach of contract committed by

another is a ‘material’ breach.” Id, citing Software Clearinghouse, supra. Once there

has been a material breach of the contract, the nonbreaching party is not required to

fulfill the remaining terms of the contract, and the breaching party is not entitled to

collect damages from the nonbreaching party. See Sites v. Moore (1992),

.

{¶41} In

, the court relied on the Restatement of the Law

2d, Contracts (1981) 237, Section 241, which sets forth five factors to be used to

determine the materiality of a breach, including the extent to which the injured party will

be deprived of the expected benefit, the extent to which the injured party can be

adequately compensated for the lost benefit, the extent to which the breaching party

will suffer a forfeiture, the likelihood that the breaching party will cure its breach under

the circumstances, and the extent to which the breaching party has acted with good

faith and dealt fairly.

Appellant’s Covenant Not to Compete

{¶42} In the case sub judice, the 2004 agreement provided that Appellant

Hostetler would not "[p]romote or assist, financially or otherwise, any person ... or

corporation engaged in any business which directly or indirectly competes with the

farm and garden supply business carried on by [Appellee Central Farm]." Furthermore,

Appellant Hostetler agreed not to "enter into or engage in any business, including but

not limited to operating a packaging supplies distribution business which directly or

indirectly competes with [Appellee Central Farm]." One of appellee’s main defensive

arguments throughout the trial was that Appellant Hostetler had breached said Tuscarawas County, Case No. 2010 AP 12 0046 13

agreement by soliciting twine sales from Central Farm's own customers, acting on

behalf of Joe Franks, who had been removed from his position as appellee’s president

and had started a competitive firm. Appellant charges that this argument was

unsupported by the witnesses and evidentiary documentation, and, as further analyzed

in our discussion of the Second Assignment of Error, was allegedly based on improper

hearsay.

{¶43} However, the record reveals that Franks, who admittedly had become a

close friend of appellant, testified that when he was thinking of starting up a competing

twine business, he had sometimes “bounced ideas” off appellant and asked him what

products would interest twine consumers. See Tr. at 288. Phone records were

produced at trial demonstrating that after the new business, JBF, Inc. was commenced,

Franks spent more than 10,000 minutes conversing on the phone with appellant.

Although they testified that the majority of this time was spent talking about personal

and religious matters, their testimony indicates that Franks was using appellant and his

experience as a resource to answer questions about twine and solve his customers'

problems. These are the types of services that Franks had earlier determined were

valuable to Central Farm and warranted a salary. See, e.g., Tr. at 266. These phone

records thus provided circumstantial evidence that appellant had done more than just

indirectly assist Franks and JBF.

{¶44} Appellant nonetheless adds that even if we conclude Appellee Central

Farm had presented competent evidence to support its allegation that appellant had

breached the Purchase Agreement, appellee failed to present evidence of monetary

damages resulting from the conversations with Franks. However, as appellee aptly Tuscarawas County, Case No. 2010 AP 12 0046 14

responds, the jury could properly conclude that the harm to Central Farm was the

same whether appellant was doing it for friendship or for financial gain. Appellant

assisted his good friend Franks in growing JBF, which now has most of appellee’s

former customers and 75% of the twine market formerly served by Central Farm, after

just three years of operation. See Tr. at 325.

{¶45} Furthermore, although appellant has challenged it on hearsay grounds,

additional testimony was adduced that appellant continued to carry on phone

conversations with representatives of his former accounts at Central Farm. Many of

these phone calls with these former customers were then followed up with calls to

Franks. While appellant asserted that the customer conversations were informal and

non-business related, we find it was within the province of the jury to determine that

such explanation was implausible.

Appellant’s Provision of Customer and Price Lists

{¶46} It is undisputed that appellant continued to operate Hostetler Farm Supply

for three years after purportedly selling the assets (i.e., his customer and price lists)

from Hostetler Farm Supply to Appellee Central Farm. The jurors could have

concluded that appellant, by continuing to maintain Hostetler Farm Supply and selling

to his own loyal customers, assured that those customers would continue to identify

him personally as their source of twine, and would not begin to buy twine from Central

Farm's network of wholesale dealers. Furthermore, while appellant was serving as the

sales representative to Hostetler Farm Supply, he was selling Central Farm's twine to

his d/b/a at a loss, although some of this may have resulted from appellant’s sale of Tuscarawas County, Case No. 2010 AP 12 0046 15

damaged product for Central Farm. Again, it was the jury's prerogative to weigh the

import of such evidence.

{¶47} Appellant seeks to justify his practice of maintaining his own retail

customers by reading the purchase agreement as pertaining to selling his “commercial”

customer list only. He maintains Central Farm instructed him to concentrate exclusively

on sales to its commercial twine accounts. He claims that Central Farm benefited in

selling twine at dealer prices to appellant for resale to his neighbors and other “retail”

customers who could not purchase directly from Central Farm at wholesale prices and

would not likely purchase twine from Central Farm's other dealers. Appellant also

asserts that Franks and Olson originally had no interest in having Central Farm acquire

the portion of the business involving Hostetler's sales to neighbors and other “retail”

customers, on the basis that Central Farm was chiefly a wholesale distributor. While

certainly appellant was allowed to purchase twine from appellee at dealer cost under

Section 5.3(c) of the agreement, we find the jury could have properly determined that

this retention of personal customers by appellant was a material breach.

{¶48} Ultimately, the evidence is consistent that appellant never actually

provided Central Farm with either of the two documents that it was entitled to under the

Agreement. Appellant admittedly never provided a price list, and he also decided not to

provide a complete and accurate customer list as required. Instead, he provided only

the names of his wholesale or commercial customers, despite the language of the

agreement, simply determining on his own that Central Farm did not really want or

need the complete list. Tuscarawas County, Case No. 2010 AP 12 0046 16

{¶49} Thus, appellant fails to demonstrate reversal would be warranted as to the

jury’s conclusion that the breaches to the agreement were material. See

As appellee aptly responds, the evidence indicates that Central Farm was deprived of

the expected benefit of the contract. Over the course of three years, he sold $175,000

worth of wrapping products to his own customers for his own profit, after buying the

twine from Central Farm below its out-of-pocket cost. Central Farm was likely unable to

retain many of appellant’s customers because of appellant’s incomplete lists and his

assistance to competitor Franks and JBF, Inc. Finally, the jury could have properly

determined that appellant, despite his contentions to the contrary, will not suffer

forfeiture. Appellant testified he merely faxed the customer list to Central Farm,

although he later lost or misplaced the original. Tr. at 159. The jurors could have

determined that appellant kept his retail customers, and assisted a competing company

going after his wholesale customers. The jurors could have further determined that

appellant cannot now cure his breach, and that he has failed to deal with Central Farm

in good faith.

Appellant’s Claim of Rescission by Appellee

{¶50} Appellant finally advances the theory that appellee’s counterclaim in the

suit below was “essentially” a claim for rescission. He proceeds to argue that

rescission is unwarranted as appellee has suffered no damages and has defaulted on

the remainder of the purchase price. In support, he cites Simes v. Beaver Valley

Resort, Clark App.No. CA 2925,

; Holt v. Ohio Machinery, Franklin

App.No. 06AP-911,

. Tuscarawas County, Case No. 2010 AP 12 0046 17

{¶51} It is well-established that “[w]here there has been a breach of a material

and vital provision of a contract by one party, the other party thereto may either treat

the contract as terminated and rescind it and pursue the remedy that such rescission

entitles him to, or he may sue for damages for a breach of the contract.” See Wilson v.

Kreusch (1996),

,

, citing 18 Ohio

Jurisprudence 3d (1980) 230, Contracts, Section 309. Furthermore, the remedy of

restitution may be appropriate, even though a case is not specifically pleaded in

rescission, when the evidence is uncontestable that rescission was intended and

actually did occur. See Cincinnati Bible Seminary v. Griffiths (Oct. 10, 1984), Hamilton

App.No. C-830867, citing See Purvis v. Davish (June 21, 1986), Hamilton App.No. CA

75-07-0058.

{¶52} Thus, appellant appears to be initially correct that rescission may be

determined even if not specifically pled. Nonetheless, upon review, we do not conclude

that appellee was seeking rescission as part of its counterclaim. Indeed, appellee

sought and obtained relief from further payments to appellant under the purchase

agreement, and it will not get back the $82,500 it paid to appellant under the

agreement. As appellee aptly notes, it is proper for a jury, where counterclaims have

been presented, to determine that neither side has met its respective burden. See

Lazzaro v. Picardini, (January 24, 1992), Lake App.Nos. 91-L-023, 91-L-024.

{¶53} We thus find no reversible error on the issue of claimed rescission, as

urged by appellant. Tuscarawas County, Case No. 2010 AP 12 0046 18

Conclusion

{¶54} Based on the evidence presented of appellant’s communication with

Franks after the formation of JBF, appellant’s communications with other buyers

despite the covenant not to compete, and his failure to provide the full customer list to

appellee, we hold the trial court’s denial of appellant’s motions for JNOV, new trial, and

directed verdict did not constitute reversible error or an abuse of discretion.

{¶55} Appellant's First Assignment of Error is overruled.

II.

{¶56} In his Second Assignment of Error, appellant contends the trial court erred

in permitting appellee’s current president, Corey Sheely, to testify as to information

about appellant’s customers, claiming impermissible hearsay. We disagree.

{¶57} As a general rule, all relevant evidence is admissible. Evid.R. 402.

However, “[h]earsay is not admissible except as otherwise provided by the Constitution

of the United States, by the Constitution of the State of Ohio, by statute enacted by the

General Assembly not in conflict with a rule of the Supreme Court of Ohio, by these

rules, or by other rules prescribed by the Supreme Court of Ohio.” Evid.R. 802.

Hearsay is “a statement, other than one made by the declarant while testifying at the

trial or hearing, offered in evidence to prove the truth of the matter asserted.” Evid.R.

801(C).

{¶58} In the case sub judice, appellee’s counsel questioned Sheely about, inter

alia, communications he had conducted with two customers, Gerber Feed and United

Rope (via owner Gary Zwack). The pertinent portions of Sheely’s testimony are as

follows: Tuscarawas County, Case No. 2010 AP 12 0046 19

{¶59} “Q. Okay, but what about other examples? Tell me about the things you

did to investigate whether [Appellant Hostetler] was living up to these obligations or

complying with this contract?

{¶60} “Well I decided that, again with everything else that was going on within

the company, I decided that I was going to get out and try to investigate to find out for

myself, which you know, we're a pretty small company, and so I, I hooked up with the

sales, the salesmen that sells general merchandise to, to customers in certain areas

and I went out with them, and in particular a customer down in Baltic, Ohio, by

accompanying the sales rep into that facility just to kind of see what I could find out

about what was going on.

{¶61} “Q. Okay, what was the name of that customer?

{¶62} “Gerber Feed.

{¶63} “Q. And when did this occur?

{¶64} “Oh, this was late 2008, winter of 2008, might have been first of the year.

{¶65} “Q. Okay, and what did you do once you got there?

{¶66} “Well I just went in and, and, there was a young lady, who was Launa,

behind the desk and --

{¶67} “THE COURT: What?

{¶68} “[APPELLANT’S TRIAL COUNSEL] MR. BERTSCH: Objection.

{¶69} “THE COURT: Are you objecting to the answer? I'm --

{¶70} “MR. BERTSCH: I, yes, your Honor, because I –

{¶71} “THE COURT: -- just trying to figure out what you were -- Tuscarawas County, Case No. 2010 AP 12 0046 20

{¶72} “MR. BERTSCH: Yes, your Honor, I mean I think to the extent that he's

going to start recounting conversations with a customers, that's hearsay so the

question, I didn't object to the question in general, but I believe the answer, I don't

know if it's already been cautioned or not, but I'm just doing it on, on a preventative

basis.

{¶73} “[APPELLEE’S TRIAL COUNSEL] MR. PETTORINI: So this is a

preventative objection? I, I’m not sure I follow the – the question was what did he do

when he got to the customer’s place of business.

{¶74} “THE COURT: Okay, all right. I'm - the question is not objectionable, so

you need to sit down.

{¶75} “* * *

{¶76} “Q. Well let me, -- I, I know you lost your train of thought, Corey. First

off, were they still selling twine?

{¶77} “Yes.

{¶78} “Q. And did you ask about twine sales?

{¶79} “Yes.

{¶80} “MR. BERTSCH: Objection, objection, your Honor.

{¶81} “THE COURT: Did he ask about twine sales, is overruled. You may

answer.

{¶82} “Yes.

{¶83} “Q. And did you specifically ask about Bill Hostetler selling twine?

{¶84} “Yes.

{¶85} “Q. What'd you find out? Tuscarawas County, Case No. 2010 AP 12 0046 21

{¶86} “MR. BERTSCH: Objection.

{¶87} “Where, you know --

{¶88} “THE COURT: Well just a minute, Mr. Sheely. Let's just have a sidebar

{¶89} “(Whereupon, the following was held at sidebar:)

{¶90} “THE COURT: The question is what did you find out.

{¶91} “MR. BERTSCH: I'm objecting on hearsay. Basis, your Honor, this, this

case has been pending for a year and a half, you know, they could have brought any of

these customers in, instead of trying to get in the back door by hearsay statements as

to what was said to Mr. Sheely by some customer. He used it for the truth of the matter

asserted that Mr. Hostetler was selling to that customer and that's the whole point of

this, and if they're going to have that evidence come in, it behooves them to have the

actual customer come in and say yes, Mr. Hostetler sold to them.

{¶92} “THE COURT: Do you know the answer?

{¶93} “MR. PETTORINI: Do I know the answer?

{¶94} “THE COURT: To the question you just asked.

{¶95} “MR. PETTORINI: What he found? He found out that Bill Hostetler was

selling to them.

{¶96} “THE COURT: Okay.

{¶97} “MR. PETTORINI: That's the conclusion he, he reached. He's not going to

make any statements --

{¶98} “THE COURT: Relay any conversation.

{¶99} “MR. PETTORINI: These questions are carefully crafted to --

{¶100} “THE COURT: Avoid hearsay. Tuscarawas County, Case No. 2010 AP 12 0046 22

{¶101} “MR. PETTORINI: -- avoid hearsay.

{¶102} “MR. BERTSCH: Your Honor, at this --

{¶103} “MR. PETTORINI: And what he finds out in his investigation is relevant,

and he's not going to say what someone else told him. He's going to say what, based

on this investigation, based on going to his customers, what he concluded, and that is

perfectly acceptable testimony and does not run afoul of the hearsay.

{¶104} “THE COURT: Thank you.

{¶105} “MR. BERTSCH: Your Honor, basically what he's going to testify, if he

says I concluded he was selling this to Hostetler, he has no information to conclude

that other than the hearsay statement of a customer telling that to him. So to the extent

that his opinion testimony, his conclusion is based upon hearsay statements by a third

party, what they're essentially trying to do is back door in the same stuff that they can't

do by having him say what did he tell you? Okay, don't tell us what he told you, but tell

us what you concluded after your discussion with that customer.

{¶106} “THE COURT: Okay, and I think that's a proper question. So I'm going to

overrule it.

{¶107} “(Whereupon, the following was held in open court:)

{¶108} “THE COURT: Okay, Mr. Sheely, the question is what did you conclude,

and again, would just caution you not to relay specific conversations you had with

others. Okay, so the pending question is what did you conclude from that:

{¶109} “Well yeah, because I really didn't get an answer, so there was no

conversation other than I concluded that there was obviously a relationship there that

didn't, that they didn't want to breach. Tuscarawas County, Case No. 2010 AP 12 0046 23

{¶110} “Q. A relationship with Mr. Hostetler?

{¶111} “MR. BERTSCH: Move to strike, your Honor.

{¶112} “THE COURT: Overruled. Go ahead.

{¶113} “Yes.

{¶114} “* * *

{¶115} “Q. After this visit was there any doubt in your mind that Mr. Hostetler was

out there competing?

{¶116} “MR. BERTSCH: Objection to the form of the question.

{¶117} “THE COURT: Overruled. He may answer.

{¶118} “Ask me again please.

{¶119} “Q. Sure. After this visit to Gerber Feed was there any doubt in your mind

that Mr. Hostetler was competing?

{¶120} “No.” Tr. at 385-390.

{¶121} “****

{¶122} “Q. And you would receive communications or, well communications from

them [buyers] via e-mail?

{¶123} “Yes.

{¶124} “Q. And did you ever receive communication, via e-mail, regarding what

Mr. Hostetler was doing?

{¶125} “MR. BERTSCH: Objection, your Honor.

{¶126} “I did.

{¶127} “THE COURT: Oh, just a minute, Did you receive the communication via

e-mail? That, that is overruled, and he answered I did. I think that's fine. Tuscarawas County, Case No. 2010 AP 12 0046 24

{¶128} “Q. And who was this communication from?

{¶129} “Commiss-communication was from a fellow at United Rope, Gary Zwack,

the owner, the president, whatever, he was the decision maker at United Rope.

{¶130} “Q. And do you know what happened with Mr. Zwack?

{¶131} “I mean with his passing?

{¶132} “Q. Yeah.

{¶133} “Yeah, he has since passed away.

{¶134} “Q. After you received this communication, did it help you make any

decisions with respect to Mr. Hostetler and his contract?

{¶135} “Well with yeah, with the nature of it I, I felt, you know, that, you know, that

we had, we had a problem.

{¶136} “MR. PETTORINI: Your Honor, at this time I'd like to proffer exhibit BB.

{¶137} “THE COURT: Okay, it would be proffered. Thank you.

{¶138} “Q. At this point did you believe that Mr. Hostetler was helping Mr. Franks

in his twine business?

{¶139} “MR. BERTSCH: Objection, your Honor.

{¶140} “THE COURT: Overruled. You may answer.

{¶141} “I did.” (Tr. at 392-393).

{¶142} We herein review the trial court's decision regarding the admission of

hearsay in light of Evid.R. 103(A) and the standard established in Civ.R. 61.

{¶143} Evid.R. 103, provides in relevant part:

{¶144} “(A) Effect of erroneous ruling Tuscarawas County, Case No. 2010 AP 12 0046 25

{¶145} “Error may not be predicated upon a ruling which admits or excludes

evidence unless a substantial right of the party is affected….”

{¶146} Civ.R. 61 sets forth the harmless error rule in civil cases, providing in

pertinent part that no error or defect in any ruling is “ground for granting a new trial or

for setting aside a verdict or for vacating, modifying or otherwise disturbing a judgment

or order, unless refusal to take such action appears to the court inconsistent with

substantial justice.”

{¶147} “Generally, in order to find that substantial justice has been done to an

appellant so as to prevent reversal of a judgment for errors occurring at the trial, the

reviewing court must not only weigh the prejudicial effect of those errors but also

determine that, if those errors had not occurred, the jury or other trier of the facts would

probably have made the same decision.” Hallworth v. Republic Steel Corp. (1950),

,

, paragraph three of the syllabus. If hearsay evidence

is objected to and permitted to go to the jury, the judgment must be reversed unless it

affirmatively appears in the record that the party is not prejudiced. Westinghouse Elect.

Corp. v. Dolly Madison Leasing & Furniture Corp.(1975),

,

; Wilson v. Barkalow,

,

; Lowe v. Lehman,

,

.

{¶148} Appellee responds that Sheely’s testimony was in the form of

“conclusions” Sheely reached after communicating with Gerber and United Rope, and

it maintains such conclusions do not constitute impermissible hearsay. We do not

agree with appellee’s responsive legal argument, and because the objected-to

evidence was hearsay which did not fall into one of the recognized exceptions which Tuscarawas County, Case No. 2010 AP 12 0046 26

would permit it to be admitted, the trial court did not have discretion to allow the

statements into evidence. However, after weighing the prejudicial effect of the evidence

we find that if the statements had not been admitted, the jury would probably have

made the same decision.

{¶149} Appellant's Second Assignment of Error is therefore overruled.

III.

{¶150} In his Third Assignment of Error, appellant contends the trial court erred in

declining to allow the submission of certain jury interrogatories. We disagree.

{¶151} Jury interrogatories are addressed in Civ.R. 49(B), which states:

{¶152} “The court shall submit written interrogatories to the jury, together with

appropriate forms for a general verdict, upon request of any party prior to the

commencement of argument. Counsel shall submit the proposed interrogatories to the

court and to opposing counsel at such time. The court shall inform counsel of its

proposed action upon the requests prior to their arguments to the jury, but the

interrogatories shall be submitted to the jury in the form that the court approves. The

interrogatories may be directed to one or more determinative issues whether issues of

fact or mixed issues of fact and law.

{¶153} “The court shall give such explanation or instruction as may be necessary

to enable the jury both to make answers to the interrogatories and to render a general

verdict, and the court shall direct the jury both to make written answers and to render a

general verdict.

{¶154} “When the general verdict and the answers are consistent, the appropriate

judgment upon the verdict and answers shall be entered pursuant to Rule 58. When Tuscarawas County, Case No. 2010 AP 12 0046 27

one or more of the answers is inconsistent with the general verdict, judgment may be

entered pursuant to Rule 58 in accordance with the answers, notwithstanding the

general verdict, or the court may return the jury for further consideration of its answers

and verdict or may order a new trial.”

{¶155} In Cincinnati Riverfront Coliseum, Inc. v. McNulty Company (1986),

, the Ohio Supreme Court held Civ.R. 49 places a mandatory duty upon

the trial court to submit timely interrogatories to the jury, provided the interrogatories

are in a form the court approves. An interrogatory must be drafted to test a finding on a

determinative issue, and a trial court is not required to reformulate a defective

interrogatory. Instead, the court has discretion to reject an improper interrogatory. See

Freeman v. Norfolk & Western Railway Co. (1994),

.

{¶156} Appellant requested the submission of the following three interrogatories

to the jury:

{¶157} “Did William Hostetler breach the Purchase Agreement? *** If your answer

is no, then do not answer Interrogatory 2 or 3.”

{¶158} “If your answer to the prior question is yes, please state in what respect

William Hostetler breached the Purchase Agreement.”

{¶159} “Please state the amount of damages, if any, that Central Farms [sic]

sustained as a direct result of any breach of the Purchase Agreement identified in your

prior answer.” Appellant’s Appendix at A-10.

{¶160} In the case sub judice, the trial court had issued a scheduling order

requiring jury interrogatories to be filed one week before trial. Appellant actually

untimely submitted his proposed interrogatories several days after the commencement Tuscarawas County, Case No. 2010 AP 12 0046 28

of trial. Nonetheless, having reviewed three aforecited proposed interrogatories, we

agree with appellee’s responsive argument that they may likely have confused the jury

as to the burden of proof required of appellant, as they go beyond simply asking if

appellant had demonstrated he had performed under the 2004 agreement. As such, we

find the trial court did not abuse its discretion in refusing to submit the interrogatories to

the jury.

{¶161} Appellant's Third Assignment of Error is therefore overruled.

IV.

{¶162} In his Fourth Assignment of Error, appellant contends the trial court erred

in denying his motion for a new trial based on the manifest weight of the evidence. We

disagree.

{¶163} Civ.R. 59(A) allows a trial court to grant a new trial upon motion, including

one asserting that the judgment is not sustained by the weight of the evidence. Our

standard of appellate review on a motion for new trial is abuse of discretion. Anthony v.

Hunt (Feb. 9, 1998), Stark App.No.1997CA00170. In order to find an abuse of

discretion, we must find the trial court's decision was unreasonable, arbitrary or

unconscionable and not merely an error of law or judgment. Blakemore v. Blakemore

(1983),

,

. In reviewing a decision on a motion

for new trial, an appellate court must view the evidence in a light most favorable to the

trial court's decision, rather than in favor of the nonmoving party. See Jenkins v.

Krieger (1981),

,

. Furthermore, “[a] civil

judgment which is supported by competent and credible evidence may not be reversed Tuscarawas County, Case No. 2010 AP 12 0046 29

as against the manifest weight of the evidence.” State v. McGill, Fairfield App.No.

2004–CA–72, 2005–Ohio–2278, ¶ 18.

{¶164} Appellant’s essential argument again is that the evidence does not

demonstrate that he materially breached his end of the 2004 agreement. Based on our

previous analysis herein, and in viewing the evidence in a light most favorable to the

trial court's decision, we are unpersuaded that the court’s refusal to grant a new trial on

the basis of the manifest weight of the evidence was unreasonable, arbitrary or

unconscionable.

{¶165} Accordingly, appellant’s Fourth Assignment of Error is overruled.

Central Farm Cross-Appeal

I.

{¶166} In its First Assignment of Error on cross-appeal, Appellee Central Farm

contends the jury’s verdict in favor of Appellant Hostetler on his breach of account

cause of action was against the manifest weight of the evidence. We disagree.

{¶167} “A civil judgment which is supported by competent and credible evidence

may not be reversed as against the manifest weight of the evidence.” McGill, supra, at

¶ 18. In order to find an abuse of discretion, we must find the trial court's decision was

unreasonable, arbitrary or unconscionable and not merely an error of law or judgment.

{¶168} “An action on an account, although founded on contract, ‘exists only as to

the balance that may be due one of the parties as a result of [a] series of transactions.’”

Worldwide Asset Purchasing LLC v. Sandoval, Stark App.No. 2007CA00159, 2008-

Ohio-6343, f.n. 5, quoting Am. Sec. Serv., Inc. v. Baumann (1972), 32 Ohio App.2d Tuscarawas County, Case No. 2010 AP 12 0046 30

237, 242,

. “The purpose of an action on an account is ‘to avoid the

multiplicity of suits necessary if each transaction between the parties (or item on the

account) would be construed as constituting a separate cause of action.’”

quoting

.

{¶169} As indicated previously herein, Hostetler Farm Supply was established by

appellant’s father. For years, Hostetler Farm supply had maintained a customer

account at Appellee Central Farm. Even after execution of the 2004 purchase

agreement, appellant continued to use the Hostetler Farm Supply account to purchase

products from appellee. Trial testimony also indicated that appellee would periodically

ask appellant to deliver to area customers some of the wholesale twine appellant had

purchased from appellee and stored on his farm. Rather than engage in additional

billing, appellee would simply credit the Hostetler Farm Account for the twine deliveries.

{¶170} At trial, appellant produced a credit statement produced by appellee on

February 29, 2008, indicating a credit owed to appellant of $16,739.23. See Exhibit 10;

Tr. at 139-141. Appellee did not respond to two letters sent by appellant and/or his

attorney in April 2008 and May 2008 requesting a check for the $16,739.23 account

balance. The jury ultimately awarded appellant $25,240.00 on his breach of account

claim; however, this was later reduced by agreed remittitur to the amount of

$16,739.23.

{¶171} In Refrigeration & Air Conditioning Institute v. Rine (1946),

,

, the court recognized: "It is generally accepted that he who seeks

damages for a breach of contract bears the burden of proof, unless the statute Tuscarawas County, Case No. 2010 AP 12 0046 31

otherwise dictates or knowledge is peculiarly within the possession of the other

contracting party who must, in such case, bear the burden of producing it.”

{¶172} In the case sub judice, appellee’s account manager, Betsy Dusenberry,

effectively admitted that Central Farm owed the credit balance to Hostetler. Tr. at 337-

345. Additional testimony further indicated that Central Farm had backup records

regarding the credit balance at the time appellant requested payment in the spring of

2008; however, Central Farm lost or destroyed these records after Dusenberry left the

company in June 2009. Id.; Tr. at 398, 411-412. Joe Franks, the former Central Farm

president, tried to call into question the figure of $16,739.23 being rendered on credit

invoices, or what the company coded as “999999999” invoices, rather than on a credit

memo. See Tr. at 273-276. Such evidence of appellee’s erratic management and

bookkeeping practices during the time frame in question was a repeated theme

throughout the trial. Indeed, Corey Sheely recalled what he encountered following

when taking over as appellee’s president:

{¶173} “Well it, it, it was a process that occurred over many years from what I,

from what I gathered when I got in there. There was some things that I saw initially

that concerned me, the lack of inventory control, the no -- doing no physical

inventories, just kind of the controls that were in place. The, the emphasis on sales

versus profitability, in other words, we were, it was we were trying like heck under Joe’s

leadership to get to 50, 60, 70 million in sales, with absolutely no regard for the

expense it took to do that, and the profitability of the company was why, I think I stated

the other day, that we were 50 million in sales with no profit, and our books were in

such disarray that there was absolutely no way to even know if the company was Tuscarawas County, Case No. 2010 AP 12 0046 32

making a profit. And so when I was asked to step in, the litigation began to take place.

I just tried to begin to firm things up as quickly as I possibly could, in an effort to, you

know, hopefully save at that time 90, 80 to 90 jobs, keep the company -- when I was

asked if I even wanted to even do this, when everything came to light, we were -- the

inventory was in total disarray, we were under collateralized, banks were calling,

vendors weren’t paid, and Dick said can you step in and do something about this and I

was like, well you know, I might as well because I don’t have anything better to do, at

that time, and I, I believed in and the employees believed in what the company had

there. I mean the infrastructure of the company, the nitch the company provided, the

customer base we had, the trucks and all the equipment we had, we had the makings

of a, of a successful company. It just had been terribly, terribly mismanaged, in my

mind.” Tr. at 353-354.

{¶174} Upon review, we hold that the jury was entitled to rely on Central Farm’s

own business record, i.e., the credit statement of February 29, 2008, as an admission

and prima facie evidence of the account balance owed appellant, and the jury’s

rejection of appellee’s response thereto in regard to the breach of account claim was

not against the manifest weight of the evidence.

{¶175} Cross-Appellant's First Assignment of Error is overruled.

II.

{¶176} In its Second Assignment of Error on cross-appeal, appellee contends the

jury’s verdict in favor of appellant on the “account stated” cause of action was against

the manifest weight of the evidence. We disagree. Tuscarawas County, Case No. 2010 AP 12 0046 33

{¶177} In Gunton Building Specialties v. G.H.& M. Development and

Construction, Stark App.No 5381,

, this Court stated: “An ‘account

stated’ is defined as the settlement of an account between the parties, with a balance

struck in favor of one of them. Put another way, an ‘account stated’ is rendered by the

creditor and by the debtor assented to as correct, either expressly, or by implication of

law from the failure to object. *** Once an ‘account stated’ is established, it is prima

facie evidence of its correctness and a party seeking to set it aside must do so on

grounds of mistake or fraud and the party so doing has the burden of proving mistake

or fraud by clear and convincing evidence.”

{¶178} However, in order to secure reversal of a judgment, a party on appeal

must generally show that a recited error was prejudicial. See Tate v. Tate, Richland

App.No. 02-CA-86,

(additional citations omitted). In the case sub

judice, the verdict form for the “account stated” cause of action (cause of action

number 3), which in this instance is rendered for appellant, directed the jury not to

insert a damage amount if damages had already been awarded for the breach of

account cause of action (cause of action number 2). Accordingly, the jury duly left the

damages line blank in the account stated verdict form. Under these circumstances, we

find further analysis of the issue of the account stated claim to be unnecessary. Tuscarawas County, Case No. 2010 AP 12 0046 34

{¶179} Cross-Appellant's Second Assignment of Error is overruled as moot.

{¶180} For the reasons stated in the foregoing opinion, the judgment of the Court

of Common Pleas, Tuscarawas County, Ohio, is hereby affirmed.

By: Wise, J.

Gwin, P. J., and

Edwards, J., concur.

.

___________________________________

___________________________________

___________________________________

JUDGES JWW/d 0106 Tuscarawas County, Case No. 2010 AP 12 0046 35

IN THE COURT OF APPEALS FOR TUSCARAWAS COUNTY, OHIO FIFTH APPELLATE DISTRICT

WILLIAM HOSTETLER : : Plaintiff-Appellant/Cross-Appellee : : -vs- : JUDGMENT ENTRY : CENTRAL FARM AND GARDEN, INC. : : Defendant-Appellee/Cross-Appellant : Case No. 2010 AP 12 0046

For the reasons stated in our accompanying Memorandum-Opinion, the

judgment of the Court of Common Pleas of Tuscarawas County, Ohio, is affirmed.

Costs to be split evenly between Appellant and Appellee.

___________________________________

___________________________________

___________________________________

JUDGES