IN THE SUPREME COURT OF OHIO

THE WIIITE FAMILY COMPANIES,INC.

Plaintiff/Appellee,

v.

INVESCO, LTD., ET AL.,

DefendantslAppellants.

On Appeal from the MontgorncryCounty Court of Appeals, Second

Appellate District

Court of Appeals Case No. CA 23305

MEMORANDUM IN SUPPORT OF JURISDICTION OF APPELLANTS MICHAEL

KARAMAN AND INVESCO, LTD.

Steven K. Dankof, Sr. (0010428) (Counsel of Record)SKILKEN LOWE & DANKOF, LLC1500 Kettering'1'owerDayton, Ohio 45423Telephone: 937-223-1500Facsimile: 937-224-1402Email: Steve.DankofLaw@gmail.com

John R. Gall (0011813)Philomena M. Dane (0044064)Jolene S. Griffith (0084940)SQUIRE, SANDERS & DEMPSEY, LLP41 South High StreetSuite 2000Columbus, Ohio 43215Telephone: 614-365-2700Facsimile: 614-365-2499Email: jgall@ssd.com

COUNSEL FOR MICHAEL KARAMAN AND INVESCO, LTD.

Paul Shaneyfelt (0065629)Dungan & Lefevre Co., LPA210 West Main StreetTroy, Ohio 45373Telephone: 937-339-0511Facsimile: 937-335-5802Email: pshaneyfelt@dungan-lefevre.com

COUNSEL FOR THE WHITE FAMILY COMPAi1IES, INC.

TABLE OF CONTENTS

EXPLANATION OF WIIY THIS CASE IS ONE OFPUBLIC OR GREAT GENERAL INTEREST ..................................................................1

STATEMENT OF TIIE CASE AND FACTS ...... ............................................................ 4

ARGUMENT IN SUPPORT OF PROPOSITIONS OF LAW

Proposition of Law No. 1 Claims, the substance ofwhich are based on a promissory note due and payable

on a date certain, niust be brought within 6 years of thenote's due date, including claims against a guarantor.R.C. Section 1303.16(A) . .......................................................................................9

Proposition of Law No. 2: When a litigant confronts asituation where future claims would be baiTed byrurming of the applicable statute of limitations, thatlitigant's precise remedy is a declaratory judgmentaction $led before expiration of the limitations periodapplicable to the future clainis .............................................................................. 11

CONCLUSION ............................................................................................................... 13

PROOF OF SERV I CE ..................................................................................................... 14

APPENDIX

Opinion of the Montgomery County Court of Appeals(January 15, 2010) ............................................................................................ A-1

Final Entriy of the Montgomery County Court of Appeals(January 15, 2010) ............................................................................................ A-6

Opinion of the Montgomery County Court of Common Pleas(February 4, 2009) ............................................................................................ A-8

EXPLANATION OF WHY THIS CASE IS ONE OFPUBLIC OR GREAT GENERAL INTEREST

The Court of Appeals' January 15, 2010 Opinion is a nalced advisory opinion, devoid of

sound reasoning and relevant authority, leaving Plaintiff-Appellee White Family Companies,

Inc's ("WFC's") future claims poised as a Sword of Damocles over the head of Deiendant

Michael Karamani ("Michael Karaman"). But of course that does not make this discretionary

appeal one of public or great general interest.

Rather, this case is one of public or great general interest because the Court of Appeals'

advisory opinion, reversing the Trial Court's judgment in Michael Karaman's favor, threatens

the very fabric of Ohio's Uniform Commercial Code 2, undermining the Ohio Legislature's

express purposes in adopting the Code of (1) simplifying, clarifying and modernizing the law

governing commercial transactions, (2) perniitting continued expansion of commercial practices

and (3) making uniform the law among various jurisdictions.3

All of WFC's viable claims for relief were based upon a September 3, 1999 promissory

note due and payable on a date certain, October 3, 1999 ("tlie Note"). The Trial Court correctly

found the Note was a negotiable instrument as defined by R.C. 1303.034. And because Ohio

courts must look to an action's substance to determine its applicable statute of limitationss, the

' Defendant Invesco, Ltd. is defunct and judgment proof.2 Indeed and as we shall see, in fashioning its advisory opinion abandoning the UCC's expresspurposes, the Montgomery County Court of Appeals ignores its own oft cited decision in Palmer

Mfg. & Supply, Inc. v. BancOliio Natl. Bank (1994), 93 Ohio App.3d 17, 637 N.E.2d 386 whichexpressly embraced the UCC's purposes. See also the Court of Appeals' earlier decisionsexpressly embracing the IJCC's purposes: Cyphers v. Balzer, 2d Dist. No. 22182, 2007-Ohio-

6133 and Natl. City Bank v. The Citizens Natl. Bank of Soutlawest Ohio, 2d Dist. No. 20323,

2004-Ohio-6060.3 These statutory purposes are detailed in R.C. 1301.02(B)/UCC 1-102(B).4 Neither WFC nor the Court of Appeals dispute the Trial Court's finding in this respect.' Greenspafa v. Third Fed. Sav. & Loan Assn., 122 Ohio St.3d 455, 2009-Ohio-3508, Palmer

Mfg. & Saipply, Inc., supra.

7'rial Court coirectly reasoned that all of WFC's clainis, stripped of artifice and spin, were for

payinent of the Note and tlius barred by the simple, mechanical application of R.C. 1303.16(A)'s

6 year non-accrual statute of limitations which expired on October 3, 2005, 547 days before

WFC filed suit. Metz v. Unizan Bank (N.D. Ohio 2006), 416 F.Supp.2d 568.

It is axiomatic that appellate review of a claim not raised in the trial court nor supported

by the record amounts to nothing more than an advisory opinion. Egan v. Natl. Distillers &

Chern.Corp: (1986),25OhioSt.3d176. And yet the Court of Appeals' advisory opinion states

that WFC somehow had a claim for "money had and received", a claim WFC never pled nor

supported by !be record. Further, the Court of Appeals opitied that such claim would not accrue

until some future eventb, ignoring unifonn precedent that any claim for "money had and

received" accrued when WFC made its September 3, 1999 loan payment to Invesco. United

States v. Natt. Exchange Bank (1909), 214 U.S. 302, 316 (quoting Leather tLffr.r. Bank v.

Merchants' Bank (1888), 128 U.S. 26, 35); United States v. Firs•t Natl. Bank (C.A.5, 1971), 441

F.2d 906, 908 (quoting Leather 1Llfrs. at 35); Ladd & Tilton Bank v. United States (C.A.9, 1929),

30 F.2d 334, 337 (quoting rYatd. Exchange Bank, at 316 (quoting Leather Mfrs. at 35)); United

States v. Natl. BankofCommerce (C.A.9, 1913), 205 F.433, 436. See also Loyd v. Huntington

Nat1 Bank (June 18, 2009), N.D. Ohio No. 1:08 CV 2301, unreported, 12-13.

The Court of Appeal's advisory opinion is flatly wrong and, if not reversed, would turn

Ohio's Uniform Commercial Code on its head. In its earlier opinion in Cyphers v. Balzer; 2d

Dist. No. 22182, 2007-Ohio-6133, the Court of Appeals coirectly noted that the "t1CC provides

the exclusive remedy where the dispute is governed by its statutory provisions. Common law

causes of action may not be raised to eircurnvent the UCC's rights, claims, and defenses where

6 Possible future disgorgement ordered by the Federal Courts.

2

the statute applies". Later in the same opinion, the Court of Appeals stated, again correctly, "we

do not find R.C. 1303.16 to be ambigious". But now, litigants and their lawyers, faced with the

obvious bar of R.C. 1303.16's unambiguous limitations periods, are emboldened to circumvent

the UCC's clear statutory framework by the chicanery of "creative" pleading, thereby

jeopardizing commercial transactions in Ohio at a time when, honestly, Ohio's commerce needs

a boost, not impediments and hurdles.

Finally, this case is one of public or great general interest because the Court of Appeals'

advisory opinion, if allowed to stand, would eifectively gut Ohio's Declaratory Judgment Act,

thereby stripping litigants of important rights guaranteed by our Legislature. Such an outcome

further threatens Ohio's commerce and endangers the fair administration ofjustice in Ohio and

the well being of her citizens.

3

STATEMENT OF THE CASE AND FACTS

Beginning December 1, 1998 and concluding September 3, 1999, WFC entered into a

series of loan transactions in which it lent significant amounts to Invesco, a now defunct real

estate investnlent company (Stipulations No. 47). Michael Karanian and Krishan Chari were

members of Invesco. Chari was a self-professed real estate "expert" and Invesco's managing

nlember. Unbeknownst to Mr. Karaman, WFC, and many other victiins, Krishan Chari was a

crook and had hatched an elaborate Ponzi scheinethrough fictitious Invesco real estate

transactions to defraud numerous individuals including Mr. Karaman, WFC, Dayton Title

Agency and National City Bank. On March 28, 2001, Mr. Chari pled guilty to 7 felony charges

(including 4 eounts of forgery) brought against him in the Montgomery County Ohio Common

Pleas Court (Exhibit 1) and did 9 years in Chillicothe for these crimes. Michael Karaman has

been personally damaged by Chari's fraud in an amount approaching $2 Million.

In each instance that WFC loaned funds to Invesco, Michael Karaman executed on

Invesco's behalf a single payment note, due on a date certain, and provided on each note his

personal guarantee to satisfy Invesco's obligation to WFC (Stipulations No. 5). The Note was

executed on September 3, 1999 by Michael Karaman, again on behalf of Invesco, and contained

his personal guarantee. The Note was due and payable in a single installment on or before

October 3, 1999 (Stipulations No. 6).

In order to pay the Note, Michael Karanian, on October 20, 1999, presented WFC with a

check drawn by Chari on Dayton Title Agency's ("DTA") IOTA Account8 in the amom7t of

7 All references to Stipulations and Exhibits are to the parties' Agreed Stiptidations of Fact andExhibits thereto jointly filed November 25, 2008.$ As part of his elaborate and fraudulent Ponzi scheme, Chari was using Dayton Title's IOTAaccount as his personal operating account through which he laundered money. His access to this

4

$3,260,000 ("the DTA Check"- Exhibit 5) (Stipulations No. 9).9 Tliereafter, on October 20,

1999, WFC presented the DTA check to National City Bank and exchanged the DTA Check for

an Official Check drawn on National City Bank ("the Offiicial Check" - Exhibit 6) in the amount

of $3,260,000. National City Bank honored the Official Check (Stipulations No. 10).

Because the funds purportedly deposited by Chari to DTA's IOTA Account could not be

collected1D, on November 8, 1999, DTA filed for protection under Chapter 11 of the United

States Bai7kruptcy Code and, on or about IVovember 10,7999, DTA filed aeomplaint a2afnst

WFC ("the DTA Adversary") seeking recovery, as a frandulent trans er o(the funds paid to

WFCfrom DTA's IOTA Account (Stipulations Nos. 11 - 13).

Ultimately, Bankruptcy Judge Clark awarded DTA a May 15, 2001 Summary Judgment

ordering WFC to disgorge and repay to DTA the sum of $3,260,000 plus accrued interest thereon

("Judge Clark's First Decision" - Exhibit 7)(Stipulations No. 14).

Following WFC's appeal of Banla•uptcy Judge Clark's First Decision to the United States

District Court for the Southern District of Ohio, Judge Walter Herbert Rice reversed Bankruptcy

Judge Clark's First Decision (Stipulations No. 17). Thereafter, Bankruptcy Judge Clark issued

his Second Decision ordering WFC to disgorge or payback to DTA the reduced sum of

$2,762,814.97 plus accrued interest thereon. WFC again appealed to the United States District

Court and its appeal remains pending (Stipulations Nos. 18 - 19).

account contributed, in part, to the appearance of legitimacy to his victims including Michael

Karaman and WFC.') Also unbeknownst to Mr. Karainan, DTA, National City and WFC the $5,000,000 check Charideposited into DTA's IOTA account to cover the DTA check was drawn on a bogus, fictitiousaccount created by Chari (Stipulations No. 8 and its related footnote).

10 See Ft. Nt. 11 above.

5

Continuously from December 20, 1999 until filing suit on April 3, 2007 and thereafter,

WFC was represented by competent legal counsel in connection with the D'TA Adversary

(Stipulations Nos, 25 - 26).

The Note is a negotiable instrument as defined by R.C. 1303.03, due and payable on a

date certain, i.e., October 3, 1999 (Stipulations Nos. 27 and 28). The Note was paid in full on

October 20, 1999, and WFC has not repaid or disgorged to DTA, National City Bank or any

otfter party any porti,on of tliat payntent (Stipulations No. 30).

On Apri13, 2007, WFC filed its Complaint for Declaratory Judgment and Other Relief

against Michael Karaman and Invesco, 547 days after expirationii of R.C. 1303.16(A)/UCC 3-

118(A)'s 6 year non-accrual statute of limitations applicable to claims on a promissory note due

and payable on a date certain. WFC did not plead a claim for "nioney had and received".

WFC's failure to earlier tile suit herein against Michael Karaman and Invesco was NOT

the result of Michael Karman's or Invesco's actual or constructive fraud (Stipulations No. 29)

NOR did Michael Karanran or Invesco PREVENT WFC from filing suit12 against them before

Apri13, 2007 (Stipulatioari.s No. 31; WFC's Response to Request for Admissions No. 12 - Exhibit

14).

Indeed, the only communications between WFC and its representative Tim White on the

one hand and Defendants on the other regarding the statute of limitations were Michael

Karaman's statements to Mr. White, after WFC'1ed suit, that WFC's claims were time-barred

by the expiration of the statute of limitations (Stipulations No. 32).

t i"fhe statute of limitations plainly expired on October 3, 2005, 6 years after the Note's October

3, 1999 due date.12 Doe v. Archdiocese ofCincinnati, 116 Ohio St.3d 538, 2008-Ohio-67.

Following WFC's April 3, 2007 Complaint seeking declaratory judgment, Michael

Karanan, on Apri120, 1007, filed his Answer and Counterclaim, specitically asserting that

WFC's Complaint and all its claims for relief were barred by expiration of the applicable statute

of limitations.

Subsequently, the Trial Court in its May 6, 2008 Decision, Order and Entiy denied the

parties' respective motions for summary judgment.

On June 20, 2008, WFC filed its First AmendedComplaintfor Declaratory Judgment and

Other Relief and did NOT plead a claim for "money had and received". On July 2, 2008,

Michael Karaman filed his Answer and First Amended Counterclaim.

In his First Amended Counterclaim, Michael Karanian sought the TriaC Court's

declaration that, among other things, WFC's claims were barred by operation of R.C.

1303.16(A)/UCC 3-118(A)'s 6 year non-accrual statute of limitations.

On November 25, 2008, WFC and Michael Karaman jointly filed their Stipulations and

Exhibits.

Thereafter, WFC and Michael Karaman filed their respective trial and reply briefs and on

February 4, 2009, Judge Froelich filed his Decision Order and Entry Granting Judgment for

Michael Karanian and Invesco, specifically and correctly holding that WFC's Amended

Complaint and its claims for relief were barred by expiration of R.C.1303.16(A)/UCC 3-

118(A)'s 6 year non-accr:ucl statute of limitations.

WFC filed its Notice of Appeal on March 5, 2009. Thereafter, WFC filed its appellate

brief on July 13, 2009, specifically asserting justiciability of WFC's declaratory judgment

claims. Michael Karaman filed his appellate brief on August 21, 2009.

7

Oral arguments were heard on N oveinber 17, 2009 dm'ing which the Court of Appeals

sua sponte and quite inexplicably suggested that WFC's and Michael Karaman's declaratory

judgment claims somehow were not justiciable. Troubled by this bizarre development and

following oral argument, Michael Karaman, pursuant to leave of court, fded a supplemental brief

on August 28, 2009 specifically citing the Court of Appeals to Halley v. Ohio Co. (1995), 107

Ohio App.3d 18, 69 N.E.2d 70 establishing the justiciability of WFC's and Michael Karaman's

declaratory judgmeut claims.

On January 15, 2010, the Court of Appeals issued its advisory opinion ignoring Halley,

supra and other established Ohio precedent regarding declaratory judgnients by holding that

WFC's and Michael Karaman's claims were notjusticiable. Further, the Court of Appeals' held

WFC had an un-pled claim for "money had and received" which would not accrue until WFC

was ordered by the Federal Courts to disgorge the proceeds of the DTA check. Not smprisingly,

the Court of Appeals offered not a shred of case authority for this holding which is contrary to

uniform case law that WFC's uu pled claim for "money had and received" accrued when WFC

paid Defendant Invesco on September 3, 1999 and took the Note. United States v. Ncitl.

Exchange Bank (1909), 214 U.S. 302, 316 (quoting Leather Mfis. Bank v. Merchants' Bank

(1888), 128 U.S. 26, 35); Ilnited States v. First Natl. Bank (C.A.5, 1971), 441 F.2d 906, 908

(quoting Leather Mfi^s. at 35); Ladd & Tilton Bank v. United States (C.A.9, 1929), 30 F.2d 334,

337 (quoting Natl. Exchange Bank, at 316 (quoting Leather Mfrs. at 35)); United States v. Natl.

Bank of Comnierce (C.A.9, 1913), 205 F.433, 436. See also Loyd v. Huntington Natl. Bank (Jtime

18, 2009), N.D. Ohio No. 1:08 CV 2301, unreported, 12-13.

8

ARGUMENT IN SUPPORT OF PROPOSITIONS OF LAW

Proposition of Law No. 1: Claims, the substance of which arebased on a pronvssoiy note due and payable on a date certain, mustbe brought within 6 years of the note's due date, including claimsagainst a guarantor. R.C. Section 1303.16(A).

Each of WFC's three viable declaratory judgment claims in its First Amended Complaint

were for payment of the Note in the event of disgorgeinent. Bankzuptcy Judge Clark's Second

Decision ordering WFC to disgorge $2,762.814.97 plus accrued interest remains on appeal to the

United States District Court (Stipulations Nos. 18 and 19). Should the Federal Courts ultimately

require WFC to disgorge Invesco's October 20, 1999 payment of the Note, WFC fully intends to

present the Note to Michael Karaman on his personal guarantee. And for what? For payment!

Without question, an action's substance determines its applicable statute of Iimitations.

Greenspan v. Third Fed. Sav. & Loan Assn., 122 Ohio St.3d 455, 2009-Ohio-3508; U.S. Bank v.

Graham, lst Dist. No. C-090118, 2009-Ohio-6199. Previousty, the Court ofAPpeals rvould

have agreed. Palrner Mfg & Supply, Inc., supra. And so the Trial Court correctly held that R.C.

1303.16(A)'s 6 year non-accrual statute of limitations applicable to claims for payment of

promissory notes due and payable on a date certain barred WFC's claims wliich were filed on

April 3, 2007, 547 days after the statute expired on October 3, 2005.13

Inexplicably, the Court of Appeals ignored the clear dictates of R.C. 1303.16(A) and the

UCC's express purposes of (1) simplifying, clarifying and modernizing the law of commercial

transactions, (2) permitting continucd expaivsion of commercial practices and (3) making

uniform the law of the various jurisdictions. R.C. 1301.02(B). Instead, the Court of Appeals'

, held that, in the event ofadvisory opinion, completely unsupported by any case authority14

13 The Note was due and payable on October 3, 1999.14 Of course, case law for this utterly false proposition simply could not exist.

9

disgorgement: (1) WFC could pui-sue an un-pled claim for "money had and received" or claims

against Michael Karaman on his guarantee, (2) such claims somehow were not governed by R.C.

1303.16(A)'s 6 year non-accrual statute of limitations but instead R.C. 1303.16(G) (1) and (2)'s

3 year accrual statute and (3) such claims would accrue only upon disgorgement.

The Court of Appeals advisory opinion is flatly wrong. First, the advisory opinion

ignores the Court of Appeals' own precedentrs and the clear dictates of Greenvpan, supra that an

action's substaiice determines the applicable statute of limitations. Second, WFC's un pled claim

for "nioney had and received" accrued when WFC received Invesco's Note and paid the money

on Septeinber 3, 1999. United States v. Natl. Exchange Bank (1909), 214 U.S. 302, 316 (quoting

Leather Mfrs. Bank v. Merchants' Bank (1888), 128 U.S. 26, 35); United Stcrtes v. First Natl.

Bank (C.A.5, 1971), 441 F.2d 906, 908 (quoting Leather Mfrs. at 35); Ladd & Tilton Bank v.

United States (C.A.9, 1929), 30 F.2d 334, 337 (quoting Nall. Exchange Bank, at 316 (quoting

Leather Mfis. at 35)); United States v. Natl. BankofCornmerce (C.A.9, 1913), 205 F.433, 436.

See also Loyd v. Huntington Natl. Bank (June 18, 2009), N.D. Ohio No. 1:08 CV 2301,

unreported, 12-13. Third, Michael Karaman as guarantor is an accommodation party under R.C..

1303.59 16 and, as such, enjoys the satne protection of R.C. 1303.16(A)'s 6 year non-accrual

statute of limitations as Inveseo, the Note's maker. Fiflh Tfaird Bank v. farrell, 10th Dist. No.

04AP-358, 2005-Ohio-1260.

In reasoning that WFC's un-pled claim for "money had and received" would not acerue

until future disgorgement, the Court of Appeals ignored its own and Ohio Supreme Court and

appellate precedent, thereby threatening the essential efficacy and express purposes of Ohio's

Uniform Commercial Code.

rs Palrner Mf'g & Supply, Inc., supra16 UCC 3-419.

10

Nevertheless, the UCC's express purposes including tiniformity, clarity and predictability

must be and are parainount to what might otherwise appear to be the harsh effect of the UCC's

application in any particutar case". Loyd v. Huntington Natl. Bcznk (June 18, 2009), N.D. Ohio

No. 1:08 CV 2301, um•eported; Metz v. Unizan Bank (N.D. Ohio 2006), 416 F.Supp.2d 568.

Previously, the Court of Appeals had embraced this very principle in Cyphers v. Balzer, 2d Dist.

No. 22182, 2007-Ohio-6133; Natl. City Bank v. The Citizens Nall. Bank of Southwest Ohio, 2d

Dist. No. 20323, 2004-Ohio-6060 and Palmer Mfg. & Supply, Inc. v. BancOhio Natl: Bank

(1994), 93 Ohio App.3d 17, 637 N.E.2d 386. 'The Court of Appeals' advisory opinion

abandoning its own precedent is beyond the pale and tramples the Ohio's Legislature's express

purposes in enacting the UCC, thereby imperiling Obio commerce. R.C. 1301.02(B).

Proposition of Law No. 2: When a litigant confronts a situationwhere future claims would be barred by ruiming of the applicablestatute of limitations, that litigant's precise remedy is a dec1aratoryjudgment action filed before expiration of the limitations periodapplicable to the future claims.

During oral argument, and despite WFC's appellate brief establishing that WFC's First

Amended Complaint and Michael Karaman's FirstAmended Counterclaim raised justiciable

claims, the Court of Appeals sua sponte suggested WFC's and Michael Karaman's claims

somehow were not justiciable. Following oral argument and with leave of court, Michael

Karaman supplemented his appellate brief on the subject of justiciability and cited the Court of

Appeals to the Cuyalioga Court of Appeals' decision in Halley v. Ohio Co. (1995), 107 Ohio

App.3d 518, 669 N.E.2d 70, which establishes that, facing a bar to future clainis by expiration of

the applicable statute of limitations, a litigant's precise remedy is a declaratory judgment action

brought before expiration of the statute. The Court of Appeals did not even comment on Halley,

17 Such as the expiration of the applicable statute of limitations.

11

supra. [nstead, the Court fashioned its advisory opinion that WFC, in the event of disgorgement,

could bring an un-pled claini for "inoney had and received" which would accrue only at that

time. Deafening is the palpable irony of the Court of Appeals' holding that WFC's and Michael

Karainan's claims were not justiciable.

Un-reversed, the C.ourt of Appeals' advisory opinion guts Ohio's Declaratory Judgment

Act and a string of Ohio appellate decisions that the bar effected by expiration of a statute of

limitations is quite appropriately the subject of declaratory judgment. Nelson v. State of Ohio,

5th Dist. No. 2006 AP 0061, 2007-Ohio-6274; Bethel Village Condominium Assn. v. Republie-

Franklin Ins. Co. 10th Dist. No. 06AP-691, 2007-Ohio-546; Halley v. Ohio Co. (1995), 107

Ohio App.3d 518, 669 N.E.2d 70.

12

CONCLUSION

The lack of scholarship and depth of error exhibited by the Court of Appeals' January 15,

2010 advisory opinion is stunning. Of course, that does not make this case one of public or great

general interest. No, this case is one of public or great general interest because, if allowed to

stand, the Court of Appeals' advisory opinion will (1) undermine the express purposes of the

UCC, thereby dealing a serious blow to Ohio commerce at a time of great financial distress and

(2) gut Ohio's Declaratory Judgment Act, thereby undermining well-estabGshed jurisprudence

and impairing the sound and effective administration of j ustice in Ohio.

Respectfl^y submitted,

StevekK. Dankof, r. (0010428)SKILKL,̀''N-La. & DANKOF, LLC1500 Kettering TowerDayton, Ohio 45423T'elephone: 937-223-1500Facsimile: 937-224-1402Steve.DankolLaw@gmail.com

ohn R. Gall (0011813)Philome a M. Dane (0044064)Jolene . Griffith (0084940)

RE, SANDERS & DEMPSEY, LLP41 South High StreetSuite 2000Coluinbus, Ohio 43215Telephone: 614-365-2700Facsimile: 614-365-2499Email: jgall@ssd.corn

Counsel for Michael Karanian and Invesco, Ltd.

13

CERTIFICATE OF SERVICE

The undersigned hereby certifies that a true and accurate copy of the foregoing,

Memorandum in Support of Jurisdiction of Appellants Michael Karaman and Invesco, Ltd., was

served via First Class U.S. mail this 26t" day of February 2010 upon the following:

Paul ShaneyfeltDungan & Lefcvre Co., LPA210 West Main StreetTroy, Ohio 45373Counsel for The White Family Companies, lnc.

SteveK. Danko Sr°f0010428)Couns eLfor kliefiael Karaman and Invesco, Ltd

14

I®Oh !'.. . _ ._..

35

fl

3 2THE WHITE FAMILY COMPANIES, INC:

,. N TFicc ,;_; ;

G li { . . 41 E)i

n ;cu^YS„^OHIOC0 E COURT OF APPEALS OF MONTGOMERY COUNTYGI

Plaintiff-Appellant . C.A. CASE NO. 23305

vs.

INVESCO, LTD., et al.

Defendants-Appellees

T.C. CASE NO. 07CV2759

O P I N I O N

Rendered on the 15th day of January 2010.

Paul H. Shaneyfelt, Atty. Reg. No.0065629, 210 W. Main Street,Troy, OH 45373

Attorney for Plaintiff-Appellant

Steven A. Dankof, Sr., Atty. Reg. No. 0010428, 1500 KetteringTower, Dayton, OH 45423

Attorney for Defendants-Appellees

GRADY, J.:

This is an appeal from a judgment of the common pleas court

in an action for declaratory judgment.

Plaintiff, The White Family companies, Inc. ("WFC"), made a

series of loans to Defendant, Invesco, Ltd. ("Invesco") in 1998

and 1999. On October 20, 1999, Invesco tendered repayment to WFC

in the amount of $3,260,000 in a check drawn on the trust account

maintained by Dayton Title Agency ("Dayton Title") at National

City Bank. WFC presented the check to National City Bank, and

THE COURT OF APPEALS OF OHIOSECOND APP6LLAT8 DISTRICT

2

received an Official Check in return, which National City Bank

then honored by paying $3,260,000 to WFC.

It was subsequently determined that the Dayton Title trust

account contained insufficient funds to cover Invesco's check,

due to fraud. Dayton Title filed for bankruptcy protection. In

a series of proceedings, the bankruptcy court found that the

payment by Dayton Title to WFC constituted a fraudulent transfer,

and it ordered WFC to repay Dayton Title $3,260,000, plus accrued

interest. Dayton Title appealed that judgment to the Federal

District court, where it remains pending.

On April 3, 2007, WFC filed the action for declaratory

relief underlying this appeal against Invesco and Michael Raraman

in the common pleas court. WFC asked the court to declare that,

to the extent WFC will be required to repay any amounts it

received in checks drawn on Dayton Title's account in the

bankruptcy proceeding, Invesco is liable to WFC in the same

amount. WFC also asked the court to declare that Raraman is

likewise liable to WFC as a guarantor of Invesco's obligations.

Defendants Invesco and Karaman filed an answer denying WFC's

allegations and a counterclaim pleading a statute of limitations

defense. On February 4, 2009, the common pleas court found that

G7FC's claims against Invesco and ICaraman based on loans WFC made

to Invesco in 1998 and 1999 are governed by the six-year U.C.C.

statute of limitations, R.C. 1303.16(A), which would bar any

action by Invesco on those claims. The court granted Invesco and

Karaman a judgment on the declaratory relief WFC sought as well

THE COURT OP APPEALS OF OHIOSECOND APPELLA7'E DISTRICT A cp

as judgment on their counterclaim. WFC filed a notice of appeal.

FIRST ASSIGNMENT OF ERROR

"THE TRIAL COURT COMMITTED REVERSIBLE ERROR BY FINDING THAT

THE SI%-YEAR STATUTE OF LIMITATIONS SET FORTH IN R.C. 1303.16(A)

WAS A BAR TO APPELLANT'S DECLARATORY JUDGMENT CLAIMS AND BY

GRANTING JUDGMENT TO APPELLEES ON THEIR COUNTERCLAIM."

SECOND ASSIGNMENT OF ERROR

"THE TRIAL COURT COMMITTED REVERSIBLE ERROR BY FINDING THAT

APPELLANT'S ONLY CURRENT OR FUTURE CLAIM FOR RELIEF AGAINST

APPELLEES WAS AN ACTION TO ENFORCE AN OBLIGATION UNDER A NOTE

SUBJECT TO THE SIX-YEAR LIMITATION PERIOD IN R.C. 1303.16(A)."

THIRD ASSIGNMENT OF ERROR

"THE TRIAL COURT COMMITTED REVERSIBLE ERROR BY FINDING THT

THE LIMITATIONS PERIOD IN R.C. 1303.16(A) BEGAN TO RUN IN 1999

AND HAS SINCE EXPIRED."

FOURTH ASSIGNMENT OF ERROR

"THE TRIAL COURT COMMITTED REVERSIBLE ERROR BY FINDING THAT

THE LIMITATION PERIOD IN R.C. 1303.16(A) WAS NOT EQUITABLY TOLLED

BY VIRTUE OF THE PAYMENTS MADE BY KARAMAN TO APPELLANT AND

KARAMAN'S ACKNOWLEDGMENT OF HIS CONTINUED OBLIGATION TO

APPELLANT."

WFC argues that the trial court found that its claims

against Invesco and Raranaan are governed by R.C. 1303.16(A)

because the court mistakenly believed the parties had so

stipulated. WFC contends that its claims may be pled on multiple

theories, including against Invesco for monies had and received

THE COURT OF APPEALS OF OHIO ^SECOND APPELLATE DISTRIC9` 3

4

and against Karaman as a guarantor. Such claims are not subject

to the six-year statute governing actions on an instrument, R.C.

1303.16(A). They are instead governed by R.C. 1303.16(G)(1) and

(2), which imposes a three year statute of limitations period

"after the cause of action accrues." An action as to those

causes would accrue upon WFC's disgorgement of funds, if WFC is

ordered to do so by the Bankruptcy Court.

The errors that WFC assigns relate to the merits of the

trial court's determination that WFC's declaratory judgment is

time-barred. Following oral argument, and based on questions the

court had asked, Invesco requested leave to file a supplemental

brief on the issue of ripeness or justiciability of WFC's claims.

We granted leave, and the parties have since filed supplemental

briefs on the issue.

The jurisdiction of the court of common pleas and its

divisions is determined by statute. Section 4(B), Article IV

Ohio Constitution. R.C. 2721.02(A) authorizes that court "to

declare rights, status, and other legal relations whether or not

further relief is or could be claimed." However, a prerequisite

to any such determination is that an actual controversy exists.

Karches v. City of Cincinnati (1988), 38 Ohio St.3d 12. A court

may, and we believe should, refuse to render a declaratory

judgment or decree when no uncertainty or controversy would be

terminated thereby. Walker v. Walker (1936), 132 Ohio St. 137.

Invesco contends that both the parties and the trial court

agreed that WFC's claim presented an actual controversy.

THE COURT OF APPEALS OF Ot11OSECOND APPELLATE DISTRICT A ®

5-

However, that is an issue of law and not subject to stipulation.

At this time, it is uncertain whether the Federal District

Court will affirm its Bankruptcy Court's order requiring WFC to

repay Dayton Title. That uncertainty could not be terminated by

the declarations WFC asked the common pleas court to make

concerning the liability of Invesco and Karaman to WFC in the

event the Federal District Court affirms the Bankruptcy Court's

order. Indeed, the declarations WFC requests are wholly

contingent on a finding by the Federal District Court sustaining

the order of the Bankruptcy Court. Until that occurs, in due

time, no actual controversy exists which the requested

declarations could determine.

Because no actual controversy exists that the trial court

could resolve or aid in resolving, the court abused its

discretion in granting declaratory relief for Invesco and

Karaman. The assignments of error are sustained. The judgment

from which the appeal is taken will be reversed and vacated.

BROGAN, J. And FAIN, J., concur.

Copies mailed to:

Paul H. Shaneyfelt, Esq.Steven K. Dankof, Sr., Esq.Hon. Connie S. Price

THF. COURT OF APPEALS OF OHIOSECOND APPELLATE D15TRICT AV

FILEacoUftT OF AYr`

20{0

NII Ilrl NfgUJt^ l A. '^G12. 3RUS

TSNr^ ct ^' iIN THE CO^LTR ,OF( 7APPEAL$ OF MONTGOMERY COUNTY, OHIO

39THE WHITE FAMILY COMPANIES, INC:

C.A. CASE NO. 23305

vs. T.C. CASE NO. 07CV2759

INVESCO, LTD., et al. . FINAL ENTRY

Defendants-Appellees

Plaintiff-Appellant

q

Pursuant to the opinion of this court rendered on the

15th day of January , 2010,the judgment of the trial

court is Reversed and Vacated. Costs are to be paid as provided

in App.R. 24.

E A• BROGAN,

MIKE FAIN, JUDGE

THE COIJR'I' OF APPEALS OF OHIOSECOND APPFLLATF, DISTRICT

Copies mailed to:

Paul H. Shaneyfelt, Esq.210 W. Main StreetTroy, OH 45373

Steven K. Dankof, Sr., Esq.1500 Kettering TowerDayton, OH 45423

Hon. Connie S. Price

THE COURT OF APPEALS OF OHIOSECONI) APPELLAT@ DISTRICT

! Ir^.r . (^4 rs7.1

20U9 FEB -t^ ^' I i 8

CJmmLV/E . % GS

THE WHITF' FAMILYCOMPANIES, INC.

I

Case No. 07-2759

(Judge Jeffrey E. Froelich)Plaintiff,

DECISION, ORDER AND ENTRYv. GRANTING JUDGMENT FOR

DEFENDANTS ON PLAINTIFF'SINVESCO, LTD., et al. COMPLAINT AND FOR

DEFENDANTS ON DEFENDAN`TS'Defendants. COUNTERCLAIM AFTER TRIAL TO

TfIE COCIRT

The detailed facts and procedural histoiy liave been set forth in the pleadings and in the

decision of May 6, 2008. In sumrnaty:

Invesco/ Karanian signed a note and borrowed over three million dollars from WFC;

WFC has been fully paid on the note, but has been ordered by the Bankruptcy Court to disgorge

the fi:nds to a third party; that order is under apper.L

WFC does not want to give the money to the third party and retained counsel to advocate

that position in federal court; its attorneys were paid, at least in part, by Ivesco/ Karatnan.

WFC has sued Invesco/ Karaman; the original Complaint soaght declaratoryjudgment

that Invescoi Karaman has to pay the note should WFC have to give the nioney back that

Invesco/ Karaman bon-owed on the note; Invesco's counterclaim likewise sought declaratory

relief. Neither party demanded a jury.

Invesco's Motion to Dismiss or, in the alternative, for summaiy judgment and WFC's

motion for summary judgment were denied on May 6, 2008.

On June 20, WFC filed an Amended Complaitit for Declaratory Judgment and other

Relief and Invesco answered and filed an Amended Counterclaim. The docket does not reflect

that either party obtained leave to file amendnients. However, neither party, in litigation

marked by its professionalism and cooperation, objects to the amended pleadings and the Court

etroactively grant leave for the amendments.

Invesco says the suit was brought too late, i.e. beyond the six year statute of limitations.

WFC responds that Invesco is relying on the wrong statute, and even if the six years were

controlling, that Invesco's actions in paying WFC's attorneys constituted an acknowledgment

and partial payment of the note and that, based on Invesco's actions, WFC waited beyond the

six years to bring suit and therefore the statute is equitably tolled.

The Court previously denied Invesco's Motion to Dismiss holding that although the six

year statute of limitations was exceeded, WFC raised a defense of equitable estoppel in its

pleadings, which must be presumed to be true. The cross-motions for summary judgment were

denied since there were factual questions regarding the equitable estoppel. 'The Decision

2

A s

concluded that there were two issues for trial:

-"the Plaintiff must establish that it is owed a debt that has not been satisfied and that

it filed its complaint within the statute of limitations...

-"the Plaintiff must also establish that the actious of the Defendants caused the delay

and that the statute was equitably tolled."

(Pg. 23 of May 6, 2008, Decision, Order and Entry.)

The parties agreed to proceed to trial by stipulation of facts supplemented by written

argument. Unfortunately, the pressures of time and the probability of an appeal by one or both

parties, has resulted in a less detailed, and ceitainly less scholarly, decision than the parties and

their excellent counsel deserve. The parties have set out four issues for the Court's

determination on the merits.:

1. "Whether the six year statute of limitations set forth in R.C. Section 1303.16(a)/

U.C.C. Section 3-118(a) governs WFC's claims against Defendants?" Yes.

First, this was originally stipulated and was part of the basis of the May 6, 2008, decision

(see, e.g. , pg. 7 of the Decision).

Second, the Complaint seeks, inter alia, a declaration that Invesco "is liable in damages

to WFC for any and all amounts that it ...[WFC] returns from the payment of the Note."

Invesco argues that R.C. 1303.16 only applies in "an action to enforce the obligation of a party

t0 DaV a note..." (Emphasis in WFC's menrorandum), and that since it is stipulated that WFC

has received full payment, this is not an action to force Invesco to a.

The controversy is whether Invesco must pay WFC any amounts due if WFC has to give

I

A ®I

back ntoney and thereby has not had its debt from Inveseo satisfied. This is more than a]

tautology; there would be no suit except for the fact that Tnvesco might have to a WFC and

the parties are each seeking a declaration as to such obligation.

2. "If so, whether the six year statute of limitation on its face would operate to bar

WFC's claims against Defendants?" Yes.

The note was signed September 3, 1999, and was due October 3, 1999. The Conlplaint

was filed Apri13, 2007, more than six years after the due date.

3. "If so, whether WFC has met its burden of establishing that the six year statute of

limitations has been tolled by acknowledgment and partial payment?"

The Decision of May 6, 2008 (pp.8-9) found that since the Complaint was "silent as to

any payments or acknowledgments made by Defendants or on Defendants' behalf...WFC has

not met its burden of pleading partial payment and acknowledgment ... [and] the statute of

limitations cannot be tolled on this basis." To the extent this has been "overruled" by the

Amended Complaint, it is addressed in No. 4 below.

4. "If not, whether WFC has met its burden of establishing that the six year statute of

limitations has been tolled by the doctiine of equitable estoppel." No.

If Invesco's payment of WFC's attorney fees were an acknowledgment of the debt and

a partial payment of the debt owed to WFC, andlor if WFC reasonably relied on a

misrepresentation by Invesco, then Ivesco shoLild not be perniitted to avoid liability based on

WFC's "late" fililng. The following time line is relevant.

4

Aov l l

10-3-1999 Note is due

10-19-1999 Chari's deposit to DTA's IOLTA account

10-20-1999 Chari's check to National City

10-20-1999 National City check to WFC

11-9-1999 D'TA files bankrtupcy

11-10-2000 DTA adversary action filed

5-15-2001 Initial Order for WFC to return funds to DTA

5-25-2001 WFC and Invesco attorneys meet and agree for Invesco to pay up to$120,000 in WFC's attorney fees and bond premiums to appeal

disgorgenlcnt order

9-27-2002 Bankruptcy Order reversed and remanded

7-16-2003 Dice and Collins sue WFC for funds from DTA funds

10-4-2004 Second decision ordering return of funds

10-13-2004 Appeal of second order by WFC

7-26-2006 Last payment of WFC attorney fees by Invesco/ Karaman

2-2-2007 WFC ordered to pay Dice and Collins

3-27-2007 WFC appeals Dice and Collins decision, requiring posting of bond; WFCrequests Karaman to pay premium, and he refiuses.

4-3-2007 WFC sues Invesco and Karaman

10-26-2007 Reversal of order for WFC to pay Dice and Collins

WFC, which has the burden of proving an "exception" to the statute of limitations,

argues that the only reason Invesco/ Karaman paid WFC's attorney fees was so that WFC could

5

r I-L

cverrtually keep the moncy and thus Invesco would not have to pay any more money. That may

be true, but there are no facts to support a conclusion about whether the payment of the fees was

an acknowledgment or partial payment of the debt or that Invesco made any misrepresentations

regarding tllat. For example, if it were payment on the note, would WFC pay it back to Invesco

if WFC prevails on its appeal? Or, was it an "investment" by Invesco which, if successful,

would result in the note's being satisfied without it (Invesco) being out any money'?

Invesco says it never made any misrepresentations to WFC and while it hoped WFC

would eventtrally prevail and keep the money which was received from DTA, at no tiine did it

(Invesco) represent, or did the parties agree, that the attorney fees were payments on the note

oreven an acknowledgmetit of the obligation. Despite very conipetent counsel and extremely

sophisticated clients, there is nothing in writing or otherwise explaining the intent of Invesco's/

Karaman's payment of WFC's attorney fees. The burden is on WFC to demonstrate that the

payment of these fees and their acceptance by WFC were an acknowledgment of the debt and/or

a partial payment of that debt by Invesco or that the actions of Invesco were a misrepresentation

that was reasonably relied on by WFC and caused WFC not to sue on the note within the six

year statute or to seek an extension of the statute.

A trier of fact cannot speculate as to why certain agreements and payments were made.

The Plaintiff has not met its burden and judgment is awarded to the Defendants on their

counterclaim.

SO ORDERED:

6

A43

HO F4EY E. FROELICH

Copies of this Decision, Order and Entiy were forwarded to all parties listed below by

ordinary mail this filing date.

PAUL H. SHANEYFELTATTORNEY A'T LAW210 WEST MAIN STREETTROY, OHIO 45373(937) 339-0511Attorney for Plaintiff

STEVEN K. DANKOF, SR.ATTORNEY AT LAW1500 KETTERING TOWERDAYTON, OH 43423(937) 223-1500Attorney for Defendants

CASE FLOW SERVICES

LOIS TIPTON, Bailiff (937) 225-4440/ E-mail: tiptonl@montcourt.org.

7

APO