[Cite as Auer v. Paliath,

.]

IN THE COURT OF APPEALS OF OHIO SECOND APPELLATE DISTRICT MONTGOMERY COUNTY

TORRI AUER, et al. : : Plaintiffs-Appellants : Appellate Case No. 27004 : v. : Trial Court Case No. 2008-CV-9673 : JAMIE PALIATH, et al. : (Civil Appeal from : Common Pleas Court) Defendants-Appellees : :

...........

OPINION

Rendered on the 12th day of August, 2016.

...........

THOMAS W. KENDO, JR., Atty. Reg. No. 0058548, ANDREW M. ENGEL, Atty. Reg. No. 0047371, 7925 Paragon Road, Centerville, Ohio 45459 Attorneys for Plaintiffs-Appellants

GARY J. LEPPLA, Atty. Reg. No. 0017172, PHILIP J. LEPPLA, Atty. Reg. No. 0089075, 2100 South Patterson Boulevard, P.O. Box 612, Dayton, Ohio 45409 Attorneys for Defendants-Appellees

.............

WELBAUM, J. -2-

{¶ 1} In this case, Plaintiffs-Appellants, Torri Auer, Thomas Auer, and Rapid Realty

Solutions, Inc. (collectively, “the Auers”) appeal from a summary judgment granted to

Defendant-Appellee, Hari Paliath. In support of their appeal, the Auers contend that the

trial court erred when it refused to strike paragraph six of the affidavit that Hari Paliath

filed in support of summary judgment. The Auers also contend that the trial court erred

in granting summary judgment to Hari Paliath.

{¶ 2} We conclude that the trial court erred in failing to strike certain conclusory

parts of Appellee’s summary judgment affidavit, but did not err in failing to strike certain

other parts, which were marginally non-conclusory. Nonetheless, the trial court erred in

rendering summary judgment in favor of Appellee, because said movant failed to satisfy

his initial burden to demonstrate that an absence of genuine issues of material fact existed

concerning his liability for fraud. Accordingly, the judgment of the trial court will be

reversed, and this cause will be remanded for further proceedings.

I. Facts and Course of Proceedings

{¶ 3} This is the third time this case has been before us. In October 2008, the

Auers filed an action in the trial court against Jamie Paliath (“Jamie”), Hari Paliath (“Hari”),

and Keller Williams dba Hometown Realty (“Hometown”), based on certain real estate

transactions that took place in 2007. At the time of the transactions, Jamie worked for

Hometown as a licensed real estate person. Pursuant to a contract between Hometown

and Jamie, Hometown was to receive 30% of the commissions Jamie earned on real-

estate transactions. See Auer v. Paliath,

,

, ¶ 4 (2d Dist.) -3-

(Auer I), reversed in part and affirmed in part,

,

,

.

{¶ 4} Torri Auer and her ex-husband, Thomas Auer, lived in California. Torri met

Jamie over a website called Bid4Assets, and came to Dayton, Ohio, in September 2007,

to view a property she had found on the website. Id. at ¶ 5. Ultimately, Torri purchased

several properties using some funds of her own as well as funds borrowed from Thomas.

Torri and Jamie also created a company called Gem City Investment Group (“Gem City”),

for the purpose of purchasing and rehabilitating a 12-unit property located on Emerson

Avenue, in Dayton. Additional funds were spent by the Auers to rehabilitate two

properties located on Richmond Avenue in Dayton. Sales of all the properties had

closed by mid-December 2007, and the rehab projects, which were to be done by Miami

Valley Home Improvements, LLC (“MVHI”) were supposed to be finished in early 2008.

Id. at ¶ 6-10. The objective was to rent the 27 total units that had been purchased, and

to provide rental income to Torri.

{¶ 5} In December 2007, Jamie left Hometown and formed a company called The

Investment Genie Realty Group, aka TIG Realty (“TIG”), which handled property

management. TIG was supposed to handle Torri’s rental properties. However, Torri

never realized any income from the apartments, and by August 2008, only one of the 27

units was being rented. Id. at ¶ 9-12. In October 2008, Torri visited the properties and

learned that they were all in disrepair and needed substantial work. Id. at ¶ 13.

{¶ 6} Shortly thereafter, the Auers filed suit against Jamie, Hari, and Hometown.

The complaint asked for dissolution of Gem City pursuant to R.C. 1701.01; for damages

in excess of $400,000 against Jamie and Hometown for breach of fiduciary duty; for an -4-

accounting by Jamie, Hari, MVHI, and TIG for all money received during the pendency of

their business relationships; for recovery under the Ohio Real Estate Recovery Fund; and

for damages in excess of $400,000 against Jamie, Hari, MVHI, and TIG, for fraud. In

November 2008, an answer was jointly filed on behalf of Jamie and Hari. However, in

June 2009, counsel for Jamie and Hari was granted permission to withdraw as counsel,

based on his representation that he had not been paid attorney fees, and that a potential

conflict of interest existed, because Jamie and Hari had filed for divorce in February 2009.

{¶ 7} In July 2009, an attorney entered an appearance for Jamie, but no attorney

entered an appearance for Hari. Subsequently, the action was dismissed other than on

the merits and without prejudice, based on the fact that Jamie had declared bankruptcy.

The action was then reactivated and reinstated in November 2010, due to an agreed order

of relief that had been filed with the bankruptcy court.

{¶ 8} Jamie then filed a motion for summary judgment in January 2012, and filed

the following depositions with the court: the depositions of Jamie, Torri Auer, and

Thomas Auer. After the court overruled the motion for summary judgment, the matter

was tried before a jury in March 2012. The jury found in favor of the Auers, and a

judgment was filed assessing the following damages: $135,000 in favor of Torri and

against Hometown; $255,200 in favor of Torri and against Jamie; $103,000 in favor of

Thomas against Jamie, with a remittitur to $24,250; and $427,000 in favor of the Auers

against Hari, based on a directed verdict that the court had granted against Hari.

{¶ 9} Neither Jamie nor Hari appealed the judgment, but Hometown appealed.

On appeal, we affirmed the judgment in all respects other than a $15,000 judgment

concerning one property. We concluded that Torri failed to prove the actual value of that -5-

property at the time of purchase. Auer I,

,

, at ¶ 66-68.

On further appeal, the Supreme Court of Ohio vacated the jury verdict against Hometown

and remanded the case to the trial court for further proceedings on the issue of

Hometown’s liability. Auer v. Paliath,

,

,

(Auer II). The court’s decision was based on error in the jury instructions that

precluded the jury from making a decision on whether Jamie’s actions were within the

scope of her agency from Hometown.

The decision of the Supreme Court of Ohio

was issued on August 28, 2014.

{¶ 10} In the meantime, Hari had filed a motion for relief from judgment in the trial

court on June 30, 2012. His motion was supported by an affidavit in which he asserted

that he was unaware that he was unrepresented after his attorney withdrew, and had

received no notices from the court or his attorney after the attorney withdrew. He further

stated that he had a valid defense because he had no personal responsibility for any

activities associated with the claims in the case. The trial court granted the motion for

relief from judgment following an evidentiary hearing held on June 11, 2013. Torri

appealed from the decision, but we affirmed the decision on July 3, 2014, after finding no

abuse of discretion by the trial court. See Auer v. Paliath, 2d Dist. Montgomery No.

25888,

(Auer III). Our decision was issued on July 3, 2014.

{¶ 11} In April 2015, the trial court set a trial date for September 2015, with all

discovery to be concluded by August 15, 2015. On June 30, 2015, Hari filed a motion

for summary judgment, in which he contended that he was not liable for any actions

asserted in the complaint. He also contended that he was entitled to indemnification by

Jamie, pursuant to their divorce decree. The Auers filed a response to the motion and -6-

also asked the court to strike paragraphs six and seven of the affidavit, contending these

paragraphs were conclusory. On December 18, 2015, the court issued a decision

striking paragraph seven of the affidavit, but refusing to strike paragraph six. The court

then granted summary judgment to Hari, concluding that he had presented unrefuted

proof of lack of personal liability. In view of this holding, the court did not rule on the

indemnification issue. The Auers now appeal from the summary judgment decision.

II. Did the Court Err in Failing to Strike Paragraph Six of the Affidavit?

{¶ 12} The Auers’ First Assignment of Error states that:

The Trial Court Erred in Failing to Strike All of Paragraph 6 of

Paliath’s Affidavit.

{¶ 13} Under this assignment of error, the Auers contend that the trial court erred

in failing to strike paragraph six of Hari’s affidavit, because that paragraph consisted of

legal conclusions, not operative facts from which the trial court could properly find lack of

genuine issues of material fact.

{¶ 14} Civ.R. 56(C) provides that:

Summary judgment shall be rendered forthwith if the pleadings,

depositions, answers to interrogatories, written admissions, affidavits,

transcripts of evidence, and written stipulations of fact, if any, timely filed in

the action, show that there is no genuine issue as to any material fact and

that the moving party is entitled to judgment as a matter of law. No

evidence or stipulation may be considered except as stated in this rule. A

summary judgment shall not be rendered unless it appears from the -7-

evidence or stipulation, and only from the evidence or stipulation, that

reasonable minds can come to but one conclusion and that conclusion is

adverse to the party against whom the motion for summary judgment is

made, that party being entitled to have the evidence or stipulation construed

most strongly in the party’s favor.

{¶ 15} “We review summary judgment decisions de novo, which means that we

apply the same standards as the trial court.” (Citations omitted.) GNFH, Inc. v. W. Am.

Ins. Co.,

,

,

. “We stand in

the shoes of the trial court and conduct an independent review of the record.” Deutsche

Bank Nat. Trust Co. v. Doucet, 10th Dist. Franklin No. 07AP-453,

.

{¶ 16} Regarding affidavits, Civ.R. 56(E) states that “[s]upporting and opposing

affidavits shall be made on personal knowledge, shall set forth such facts as would be

admissible in evidence, and shall show affirmatively that the affiant is competent to testify

to the matters stated in the affidavit.”

{¶ 17} Hari’s affidavit in support of summary judgment is very cursory, and, with

respect to paragraph six, is virtually identical to paragraph six of the affidavit that was filed

in support of his motion for relief from judgment. Paragraph six of the summary judgment

affidavit states that:

I never had personal responsibility for any activities associated with

the subject claims herein, I did not have a “dba” for any LLC, I have a

complete and total personal defense to any claims set forth against me

individually and as a “dba” insofar as I never acted as an individual in any

business matters, at most I was simply a “member” of an undesignated LLC, -8-

and I simply did some estimates as an employee for Miami Valley Home

Improvement, LLC having no role with “Investment Genie” or any “dba” or

otherwise * * *.

Affidavit of Hari Paliath, filed on June 30, 2015, p. 1, ¶ 6.

{¶ 18} In its decision, the trial court concluded that the phrase “I have a complete

and total personal defense to any claims set forth against me individually and as a ‘dba’

insofar as” was a legal conclusion. Accordingly, the trial court struck that sentence in

paragraph six. The court refused to strike the remainder of the paragraph, based on its

belief that the rest of the statements in paragraph six were factual statements relating to

Hari’s dealings with the subject LLCs and businesses.

{¶ 19} “The decision to admit or exclude evidence, including affidavit testimony, is

subject to review under an abuse of discretion standard, and absent a clear showing that

the court abused its discretion in a manner that materially prejudices a party, we will not

disturb the trial court's ruling.” (Citations omitted.) Carter v. U-Haul Internatl., 10th Dist.

Franklin No. 09AP-310,

, ¶ 9.

{¶ 20} “A trial court abuses its discretion when it makes a decision that is

unreasonable, unconscionable, or arbitrary.” (Citation omitted.) State v. Darmond,

,

,

. “ ‘Abuse of discretion’ has been

described as including a ruling that lacks a ‘sound reasoning process.’ ” State v. Morris,

,

,

, ¶ 14, quoting AAAA Ents., Inc. v.

River Place Community Urban Redevelopment Corp.,

,

(1990).

{¶ 21} After the trial court’s ruling, the remaining content of paragraph six is as -9-

follows: (1) Hari never had personal responsibility for any activities associated with the

claims in the case; (2) Hari never had a “dba” for any LLC; (3) Hari never acted as an

individual in any business matters; (4) Hari was a member of an undesignated LLC; (5)

Hari only did a few estimates as an employee of MVHI; and (6) Hari had no role with

Investment Genie (TIG) or any dba.

{¶ 22} As to statement (1), it is primarily a legal conclusion. Hari contends,

however, that the trial court was permitted to decide if it would be aided by “lay opinion”

testimony, and that opinion testimony is appropriately admitted even if it embraces

ultimate issues that the trier of fact is to decide. As support for his position, Hari cites

Graham v. Szuch, 8th Dist. Cuyahoga No. 100228,

. Graham, in

turn, cites State v. Hand,

,

,

, ¶ 125, for

the proposition that lay opinion testimony may be admitted in the trial court’s discretion.

, citing Hand at ¶ 125.

{¶ 23} However, Hand involved a different situation than the case before us.

Specifically, in Hand, a witness testified about the defendant’s lack of reaction to the

deaths of two wives that the defendant had arranged to have murdered. Id. at ¶ 118-

123. The Supreme Court of Ohio concluded that the trial court did not abuse its

discretion in admitting this evidence because the witness had personally observed the

defendant’s demeanor, and the defendant’s lack of grief was relevant. Id. at ¶ 125. This

is different from a defendant (Hari) giving his own opinion about whether his actions were

relevant to a particular claim. As an example, the Supreme Court of Ohio held that an

affidavit was conclusory and did not set forth facts to support summary judgment where

the affiant stated that “ ‘At no time relevant to this case did either affiant * * * have any -10-

authority or power or ability to take any action set forth in Paragraph 5 of the Complaint.’ ”

Fryberger v. Lake Cable Recreation Assn., Inc.,

,

(1988). The court held that, instead, the affidavit recited legal conclusions.

.

{¶ 24} Furthermore, the statement about Hari’s lack of personal responsibility is so

conclusory that it is essentially meaningless. It could be construed, at most, as a

statement by a defendant that “I did nothing.” Such a statement is akin to a general

denial in an answer and lacks any factual foundation.

{¶ 25} In addition, the meaning of statement (2), i.e., that Hari did not have a “dba,”

is unclear. “ ‘The designation “d/b/a” means “doing business as” but is merely descriptive

of the person or corporation who does business under some other name. Doing

business under another name does not create an entity distinct from the person operating

the business. The individual who does business as a sole proprietor under one or

several names remains one person, personally liable for all his obligations.’ ” Poss v.

Morris, 11th Dist. Ashtabula No. 94-A-0042,

, *3 (Mar. 29, 1996), quoting

Duval v. Midwest Auto City, Inc.,

(D. Neb. 1977). As a result,

even if the trial court did not specifically err in admitting statement (2), the statement is

unclear or basically irrelevant.

{¶ 26} The remaining statements, however, do involve “facts,” although marginally.

In these statements, Hari indicates that he never acted as an individual in any business

matters and that he only conducted a few estimates as an MVHI employee. He also

admits that he was a member of an LLC, but does not specify which LLC. Because these

parts of paragraph six do involve facts, the trial court did not err in refusing to strike them,

even though they are minimally informative. Whether these facts entitle Hari to summary -11-

judgment is a different issue, and will be addressed in our discussion of the second

assignment of error.

{¶ 27} Based on the preceding discussion, the First Assignment of Error is

overruled in part and sustained in part.

III. Did the Trial Court Err in Granting Summary Judgment to Hari?

{¶ 28} The Auers’ Second Assignment of Error states that:

The Trial Court Improperly Found that Paliath Was Entitled to

Judgment as a Matter of Law.

{¶ 29} Under this assignment of error, the Auers argue that even if the trial court

could consider Hari’s affidavit, summary judgment was not appropriate because the

claims against Hari were based on fraud and Hari’s participation in a general scheme to

defraud them through an LLC, MVHI. The Auers further argue that members of an LLC

can be held liable individually for the tortious acts of the LLC.

{¶ 30} In response, Hari contends that the Auers failed to submit any affidavits or

factual materials in response to the motion. He further contends that he satisfied his

burden on summary judgment and that the Auers failed to carry their burden in responding

to summary judgment.

{¶ 31} As was noted, our review of summary judgment decisions is de novo, and

we independently review the record. GNFH, Inc.,

, 2007-Ohio-

2722,

; Doucet, 10th Dist. Franklin No. 07AP-453, 2008-Ohio-

589, at ¶ 8.

{¶ 32} In Dresher v. Burt,

,

(1996), the Supreme -12-

Court of Ohio stressed that “a party seeking summary judgment, on the ground that the

nonmoving party cannot prove its case, bears the initial burden of informing the trial court

of the basis for the motion, and identifying those portions of the record that demonstrate

the absence of a genuine issue of material fact on the essential element(s) of the

nonmoving party's claims.”

. The court additionally stressed that “[the moving

party cannot discharge its initial burden under Civ.R. 56 simply by making a conclusory

assertion that the nonmoving party has no evidence to prove its case. Rather, the

moving party must be able to specifically point to some evidence of the type listed in

Civ.R. 56(C) which affirmatively demonstrates that the nonmoving party has no evidence

to support the nonmoving party's claims. If the moving party fails to satisfy its initial

burden, the motion for summary judgment must be denied.” (Emphasis sic.)

{¶ 33} The court also indicated in Dresher that “if the moving party has satisfied its

initial burden, the nonmoving party then has a reciprocal burden outlined in Civ.R. 56(E)

to set forth specific facts showing that there is a genuine issue for trial and, if the

nonmovant does not so respond, summary judgment, if appropriate, shall be entered

against the nonmoving party.”

However, “[b]ecause summary judgment is a

procedural device to terminate litigation, courts should award it cautiously after resolving

all doubts in favor of the non-moving party.” Coles v. I-Force, 2d Dist. Montgomery No.

26385,

, ¶ 10, citing Murphy v. Reynoldsburg,

, 358–

59,

(1992).

{¶ 34} The parties litigated the motion before the trial court on narrow grounds and

we will limit our review to their arguments. Hari is correct that the Auers failed to point

to specific facts indicating that genuine issues of fact exist. Instead they relied primarily -13-

on the inadequacy of Hari’s affidavit.

{¶ 35} The remaining content of the affidavit is very marginal, and does not satisfy

Hari’s “initial burden of informing the trial court of the basis of the motion and identifying

those portions of the record that demonstrate the absence of a genuine issue of material

fact on the essential elements(s) of the nonmoving party’s claims.” Dresher,

,

. Since Hari failed to satisfy his initial burden under

Dresher, the Auers had no duty to respond.

{¶ 36} We note that neither party directed the trial court to pertinent evidence: (1)

the depositions of Thomas Auer and Jamie Paliath, which were filed with the trial court

on January 17, 2012; (2) the deposition of Torri Auer, filed with the trial court on February

28, 2012; (3) Six volumes of transcripts from the trial that the court presided over for a

week during March 2013; and (4) the transcript of the hearing the court held on June 11,

2013, regarding Hari’s motion for relief from judgment.

{¶ 37} The complaint that was filed in this case alleged that Torri Auer was induced

to purchase 2259 Emerson Avenue, based on representations from Jamie that Jamie had

a company that was capable of making repairs. As a result, Torri purchased the property

for $73,000 with funds obtained from Thomas. Torri also signed a promissory note to

Thomas in the amount of $176,000, which included the purchase price and repairs that

were to be made. Paragraph 14 and 15 of the complaint specifically implicate Hari in the

alleged fraud, by indicating that Hari and Jamie represented that “their” company, MVHI

could make the necessary repairs and improvements. The same type of allegations are

made with regard to the purchase and repair by MVHI of properties located at 1111-1115

and 1119 Richmond Avenue. See Complaint, paragraphs 16-21. However, according -14-

to the complaint, the properties were not rehabilitated and were not rented, causing

damages to the Auers in excess of $400,000. The complaint contains further specific

allegations of fraud, and includes Hari and MVHI in those allegations.

{¶ 38} The elements of fraud are: “(a) a representation or, where there is a duty to

disclose, concealment of a fact, (b) which is material to the transaction at hand, (c) made

falsely, with knowledge of its falsity, or with such utter disregard and recklessness as to

whether it is true or false that knowledge may be inferred, (d) with the intent of misleading

another into relying upon it, (e) justifiable reliance upon the representation or

concealment, and (f) a resulting injury proximately caused by the reliance.” Burr v. Bd.

of Cty. Commrs. of Stark Cty.,

,

(1986), paragraph two

of the syllabus, following Cohen v. Lamko, Inc.,

,

(1984).

{¶ 39} “A fundamental rule of corporate law is that, normally, shareholders,

officers, and directors are not liable for the debts of the corporation.” (Citation omitted.)

Belvedere Condominium Unit Owners' Assn. v. R.E. Roark Cos., Inc.,

,

(1993). “An exception to this rule was developed in equity to

protect creditors of a corporation from shareholders who use the corporate entity for

criminal or fraudulent purposes.”

“Under this exception, the ‘veil’ of the corporation

can be ‘pierced’ and individual shareholders held liable for corporate misdeeds when it

would be unjust to allow the shareholders to hide behind the fiction of the corporate entity.”

{¶ 40} The test outlined in Belvedere is that “the corporate form may be

disregarded and individual shareholders held liable for corporate misdeeds when (1) -15-

control over the corporation by those to be held liable was so complete that the

corporation has no separate mind, will, or existence of its own, (2) control over the

corporation by those to be held liable was exercised in such a manner as to commit fraud

or an illegal act against the person seeking to disregard the corporate entity, and (3) injury

or unjust loss resulted to the plaintiff from such control and wrong.”

.

{¶ 41} Subsequently, the Supreme Court of Ohio stated that “[i]n view of the reality

that shareholders could seriously misuse the corporate form and evade personal liability

under the second prong as presently worded, we find it necessary to modify the second

prong of the Belvedere test to allow for piercing in the event that egregious wrongs are

committed by shareholders.” Dombroski v. WellPoint, Inc.,

, 2008-

Ohio-4827,

. As a result, the court held that “to fulfill the second

prong of the Belvedere test for piercing the corporate veil, the plaintiff must demonstrate

that the defendant shareholder exercised control over the corporation in such a manner

as to commit fraud, an illegal act, or a similarly unlawful act.” Id. at ¶ 29.

{¶ 42} Under these standards, there are genuine issues of material fact regarding

whether Hari is personally liable for fraud committed by MVHI. Furthermore, as argued

by the Auers, Hari is also subject to liability individually for his alleged fraudulent actions,

based on the claims asserted against him in the complaint. See Reply Brief of

Appellants, p. 6, citing Rismiller v. Wagner, 2d Dist. Darke No. 1053,

(Nov.

10, 1982).

{¶ 43} Hari was cited in the caption of the complaint as a “dba,” but we have

already noted that a person operating as a dba may be held individually liable. Poss,

11th Dist. Ashtabula No. 94-A-0042,

, at *3. Moreover, we noted in -16-

Rismiller that “the names appearing in the caption of a case do not determine who the

parties are to the suit; rather, whether or not a defendant is properly in the case hinges

upon the allegations in the body of the complaint, and not upon his inclusion in the

caption.” (Citations omitted.)

. Accord Newark Orthopedics, Inc. v.

Brock, 10th Dist. Franklin No. 95APE03-246,

, *3 (Oct. 5, 1995), and

Briggs v. Wilcox,

,

, ¶ 37 (8th Dist.) (noting that a “fair

reading of the complaint” indicated that the plaintiff had sued the defendant individually).

In the case before us, a fair reading of the complaint indicates that Hari was being sued

individually.1

{¶ 44} In responding to the Auers’ arguments, Hari also contends that even if the

trial court erred in failing to strike paragraph six of his affidavit, he was still entitled to

summary judgment based on the indemnification agreement in his divorce decree.

Because the trial court did not address this matter, we will not consider it. However, we

did observe in Childrens Med. Ctr. v. Campbell, 2d Dist. Montgomery No. 11709,

(Mar. 2, 1990), that if a wife believed her former husband was responsible for

all or part of the medical bills for their daughter, “her remedy was to file a cross-claim

against her former husband for indemnification.” Id. at *3. We see no evidence of a

cross-claim in the record. See Answer of Defendants, Jamie Paliath, dba The

Investment Genie Realty Group and Hari Paliath, dba Miami Valley Home Improvement,

LLC (“Collectively, Paliath”) to Plaintiff’s Complaint, filed on November 26, 2008, and

1 Hari also answered the complaint as “Hari Paliath, dba Miami Valley Home Improvement, LLC.” See Answer of Defendants, Jamie Paliath, dba The Investment Genie Realty Group and Hari Paliath, dba Miami Valley Home Improvement, LLC (“Collectively, Paliath”) to Plaintiff’s Complaint, filed on November 26, 2008, p. 1. -17-

Amended Answer of Hari Paliath, filed on May 6, 2015.

{¶ 45} As a further matter, the indemnification agreement in the divorce decree

was filed in October 2009, well after the fraud action had been initiated against Jamie and

Hari Paliath.2 The divorce decree attached to Hari’s affidavit in support of his summary

judgment motion also indicates that Hari gave up all interest in the marital residence, any

interest in all the companies, including MVHI, TIG, A-1 Property, and Miami Valley

Custom Homes, and any claim to the assets of these companies. Hari appears to have

received no property under the divorce decree.

{¶ 46} Badges of fraud attending fraudulent transfers and leading to an inference

of fraud include “inadequate consideration; transfer of the debtor's entire estate; the

debtor's insolvency as a result of the transfer; the relationship of the parties to the transfer;

the reservation of an interest in the transferred property; and a threat or pendency of

litigation.” (Citations omitted). Cardiovascular & Thoracic Surgery of Canton, Inc. v.

DiMazzio,

,

(5th Dist. 1987). See also Individual

Business Servs. v. Carmack, 2d Dist. Montgomery No. 25286,

(discussing fraudulent transfers and 11 statutory badges of fraud in a case involving

transfers while litigation was pending); and R.C. 1336.04 (relating to transfers made with

intent to defraud or hinder creditors).

{¶ 47} Again, the indemnification issue was not considered by the trial court, and

2A memorandum filed by Hari and Jamie Paliath’s former counsel in support of his motion to withdraw as counsel also indicates that the Paliaths’ divorce action was filed on February 26, 2009. See Reply in Support of Motion to Withdraw as Counsel of Record, p. 2, filed on June 11, 2009. Whether or not this was true, the filing, again, would have been after the fraud action was filed. And, certainly, the parties were aware of the pending fraud action when they filed their divorce decree. -18-

issues pertaining to enforceability of the indemnification clause are for the trial court to

decide in the first instance.

{¶ 48} Based on the preceding discussion, the Second Assignment of Error is

sustained.

IV. Conclusion

{¶ 49} The Auers’ First Assignment of Error having been sustained in part and

overruled in part, and the Auers’ Second Assignment of Error having been sustained, the

judgment of the trial court is reversed, and this cause will be remanded for further

proceedings.

.............

FAIN, J. and FROELICH, J., concur.

Copies mailed to:

Thomas W. Kendo, Jr. Andrew M. Engel Gary J. Leppla Philip J. Leppla Thomas Pyper Rapid Realty Solutions Michael McNamee Hon. Barbara P. Gorman