Opinion
Case No. 18-COA-032
05-20-2019
CONERY MANUFACTURING, INC., Plaintiff - Appellee v. JOSHUA R. CAMPBELL, ET AL., Defendant - Appellant
APPEARANCES: For Plaintiff-Appellee PATRICK E. NOSER ANDREW P. LYCANS L.P.A. Critchfield, Critchfield & Johnston, Ltd. 225 North Market Street P.O. Box 599 Wooster, Ohio 44691 For Defendant-Appellant FRANK H. SCIALDONE Mazanec, Raskin & Ryder Co., 100 Franklin's Row 34305 Solon Rd Cleveland, Ohio 44139
JUDGES: Hon. W. Scott Gwin, P.J. Hon. John W. Wise, J. Hon. Craig R.
OPINION
CHARACTER OF PROCEEDING: Appeal from the Ashland County Court of Common Pleas, Case No. 17-CIV-177 JUDGMENT: Affirmed APPEARANCES: For Plaintiff-Appellee PATRICK E. NOSER
ANDREW P. LYCANS
L.P.A.
Critchfield, Critchfield & Johnston, Ltd.
225 North Market Street
P.O. Box 599
Wooster, Ohio 44691 For Defendant-Appellant FRANK H. SCIALDONE
Mazanec, Raskin & Ryder Co., 100 Franklin's Row
34305 Solon Rd
Cleveland, Ohio 44139 Baldwin, J.
{¶1} The Board of County Commissioners of Ashland County and the Ashland County Solid Waste Management District appeal the decision of the Ashland County Court of Common Pleas denying their motion for summary judgment. Appellee is Conery Manufacturing, Inc.
{¶2} The record and briefs contain few direct references to appellant Board of County Commissioners of Ashland County, presumably because the Board's participation in the events described in the briefs was limited and did not impact the analysis. Because the Board was not an active participant in the events relevant to the resolution of the appeal, when we refer to "appellant", we are describing the Ashland County Solid Waste Management District unless we state otherwise.
STATEMENT OF FACTS AND THE CASE
{¶3} Appellant, Ashland County Solid Waste Management District, purchased tons of metal from Joshua Campbell, an employee of appellee, Conery Manufacturing, Inc. Over a period of two years, appellant paid Mr. Campbell over $90,000.00 for metal products with a value of over $800,000.00, trusting that Mr. Campbell had the authority to sell the products. Appellee did not authorize the sale of its property and, upon discovery of the transactions, Campbell was terminated and subsequently convicted of theft. Appellee filed a claim against appellants, seeking to recover its financial losses. Appellants claimed sovereign immunity in the operation of a recycling center, but the trial court denied the appellants' motion for summary judgment.
{¶4} The appellant Ashland Board of County Commissioners formed the Ashland County Solid Waste Management District to satisfy the mandate of R.C. 3734.52, requiring all counties to form a Solid Waste Management District or become part of a Multi-County District. The District was obligated to prepare "a solid waste management plan that provides for, demonstrates, and certifies the availability of and access to, sufficient solid waste management facility capacity to meet the solid waste management needs of the district" Ohio Adm.Code 3745-27-90(B). Appellant was required to include in the plan "[s]trategies for providing informational assistance on reuse, recycling, and composting opportunities to the solid waste generators within the solid waste management district" Ohio Adm.Code 3745-27-90(D)(3) but the regulation also provides that "Solid waste management districts are not required to directly provide services in order to comply ***." Ohio Adm.Code 3745-27-90(E).
{¶5} Appellant established a recycling center where citizens could bring recyclable materials. In the case of metals, the appellant provided compensation for metal of acceptable types and quality. The appellants claimed that this prevented recyclable metals from entering a landfill, but the record does not contain clear evidence in support of that conclusion, particularly with regard to metal. Cynthia Brady, Director of the Ashland County Solid Waste Management District, disclosed that the purchase and resale of scrap metal was a profitable business that financed the operation of the recycling center and that there were competing scrap metal dealers in Ashland County and the surrounding counties. The availability of competing dealers and the apparent financial benefit from selling scrap metal belies any assertion that appellant's recycling center impacted the amount of scrap metal that was placed in the landfill.
{¶6} Appellee is a manufacturer of float switches that control the flow of water in tanks. Appellee also assembles pre-manufactured parts to make products for use primarily in the waste water removal industry and resells unaltered products it buys from third parties, such as stainless steel chain. Joshua Campbell was an employee of appellee, and had been employed for eighteen years prior to his termination. He maintained appellee's inventory and arranged for appellant to pick up cardboard from appellee's site.
{¶7} In 2015 Mr. Campbell began selling metal materials from appellee's business to appellant without his employer's authorization. Much of the metal was in its original packaging and, on one occasion, it appeared that metal items were concealed within a stack of scrap cardboard. Some items were too heavy for Mr. Campbell to transport, so he requested that appellant send a vehicle to pick up materials that he was unable to deliver with his personal vehicle.
{¶8} Mr. Campbell's sales included one transaction comprised of over five thousand pounds of metal, but appellant's employees did not aggressively question Mr. Campbell or contact appellee to confirm his authority to sell the metal. When an employee of appellant questioned his supervisor about the amount of material that Mr. Campbell delivered, the current recycling center supervisor responded "Nobody has filed a police report. Nobody has questioned us." Mr. Campbell did respond to questions regarding some products, claiming that wire he brought to the recycling center was bad or that he was clearing the warehouse, and appellant accepted his explanation.
{¶9} After Mr. Campbell delivered the metal to appellant, it was evaluated, weighed, and appellant issued payment. Appellant drafted a check for the materials payable to Mr. Campbell and not appellee pursuant to Mr. Campbell's instructions. Over a period of two years, Mr. Campbell received over two hundred checks totaling more than $92,000.00 for the unauthorized sale of Conery metal products that were later determined to have a value of over $800,000.00.
{¶10} The metal appellant purchased from Mr. Campbell was sold to other parties, without any modification and at a profit. Appellant's Director noted that the profit from the purchase and sale of metal was sufficient to support the operation of the recycling center.
{¶11} Mr. Campbell continued to sell appellee's metal products to appellant until another Conery employee visited the recycling center for an unrelated reason and saw Conery products. She reported the discovery to company representatives and Mr. Campbell's thefts were discovered. Mr. Campbell was immediately terminated.
{¶12} Mr. Campbell was convicted of theft and ordered to pay restitution in excess of $800,000.00, but appellee is unlikely to recover its losses from Mr. Campbell. Appellee filed claims against appellants for its losses, but only the negligence claim remained pending when appellants filed a motion for summary judgment. Appellants claimed they were immune pursuant to the terms of R.C. Chapter 2744 and that appellee could not prove duty, negligence or proximate cause. Appellant also argued that a portion of the claim arose more than two years prior to the filing of the complaint and was therefore barred by the statute of limitations. Appellee responded citing an exception to sovereign immunity, specifically that appellant was responsible for the negligence committed while it completed a proprietary function. R.C. 2744.02(B)(2). Appellee claimed that appellant's negligence was supported by its failure to fulfill a duty to insure that Mr. Campbell had authority to sell appellee's property and that the statute of limitations was inapplicable because appellee had not discovered the thefts until shortly before the filing of this complaint.
{¶13} The trial court denied the motion for summary judgment finding that "as a matter of law that the operation of a recycling center as in this case does not qualify as a governmental function." (Judgment Entry, Aug. 6, 2018, Docket # 52, page 2.). The trial court further found that questions of fact remained regarding the statute of limitations and the claims of negligence, barring the issuance of summary judgment. The trial court endorsed the entry with the conclusion that the order was a final appealable order and that there was no just cause for delay.
{¶14} Appellant filed a timely notice of appeal and submitted a single assignment of error:
{¶15} "I. THE TRIAL COURT ERRED WHEN IT DENIED THE DEFENDANTS/APPELLANTS THE BENEFIT OF IMMUNITY UNDER CHAPTER 2744 OF THE REVISED CODE."s
STANDARD OF REVIEW
{¶16} We review trial court decisions under Civ.R. 56 de novo. Under the rule, "[s]ummary judgment may not be granted unless the entire record demonstrates that there is no genuine issue of material fact and that the moving party is, on that record, entitled to judgment as a matter of law." Hubbell v. Xenia, 175 Ohio App.3d 99, 2008-Ohio-490, 885 N.E.2d 290, ¶ 15 (2d Dist.). "The burden of showing that no genuine issue of material fact exists is on the moving party." Id., quoting Harless v. Willis Day Warehousing Co., 54 Ohio St.2d 64, 375 N.E.2d 46 (1978). Summary judgment may not be granted unless, construing the evidence most strongly in the nonmoving party's favor, reasonable minds must conclude adverse to the nonmoving party. Civ.R. 56(C).
{¶17} "[T]he moving party bears the initial responsibility of informing the trial court of the basis for the motion, and identifying those portions of the record which demonstrate the absence of a genuine issue of fact on a material element of the nonmoving party's claim." Dresher v. Burt, 75 Ohio St.3d 280, 296, 662 N.E.2d 264 (1996). The trial court's decision must be based upon "the pleadings, depositions, answers to interrogatories, written admissions, affidavits, transcripts of evidence, and written stipulations of fact, if any, timely filed in the action." Civ. R. 56(C). The nonmoving party has the reciprocal burden of specificity and cannot rest on the mere allegations or denials in the pleadings. Id. at 293.
{¶18} A dispute of fact is "material" if it affects the outcome of the litigation. The dispute is "genuine" if manifested by substantial evidence going beyond the mere allegations of the complaint. Black v. McLaughlin, 5th Dist. Richland No. CA-2338, 1985 WL 4718, (Dec. 19, 1985) *2. A material fact is an essential element of the claim or defense, as defined by the substantive law.
ANALYSIS
{¶19} Because an appellate court's jurisdiction is limited to review of judgments or final orders, it must determine its own jurisdiction to proceed before reaching the merits of any appeal. See State ex rel. White v. Cuyahoga Metro. Hous. Auth., 79 Ohio St.3d 543, 544, 684 N.E.2d 72 (1997). Thus, while the denial of a motion for summary judgment is generally not a final, appealable order, "[w]hen a trial court denies a motion in which a political subdivision * * * seeks immunity under R.C. Chapter 2744, that order denies the benefit of an alleged immunity and is therefore a final, appealable order pursuant to R.C. 2744.02(C)." Hubbell v. Xenia, 115 Ohio St.3d 77, 2007-Ohio-4839, 873 N.E.2d 878, syllabus and ¶ 9; see Sullivan v. Anderson Twp., 122 Ohio St.3d 83, 2009-Ohio-1971, 909 N.E.2d 88, syllabus (the statute permits an immediate appeal, in a multiple-claim action, of an order denying alleged immunity, even when the order makes no determination pursuant to Civ.R. 54(B) ). Since Appellant is appealing from an order which denies it the benefit of an alleged immunity, we have jurisdiction to resolve that issue. See Jones v. Norwood, 1st Dist. Hamilton No. C-120237, 2013-Ohio-350, ¶ 31, as quoted in Cincinnati v. Harrison, 1st Dist. Hamilton No. C-130195, 2014-Ohio-2844, ¶¶ 18-19.
{¶20} The appellants have asked us to review, in addition to the trial court's denial of immunity, the issue of whether appellants are entitled to summary judgment on the issues of duty, negligence, and proximate cause as well as the statute of limitations. Appellants propose that these issues are part of the analysis regarding sovereign immunity, but we disagree. As noted below, the three stage analysis of a claim for the protection of sovereign immunity does not include consideration of the underlying merits of the claim. Our review is restricted to the consideration of the application of sovereign immunity as described by Chapter 2744 of the Ohio Revised Code.
{¶21} The parameters of our review are limited because the order denying summary judgment on the issues of duty, negligence, proximate cause and the statute of limitations is not a final appealable order. R.C. 2744.02(C); Leasure v. Adena Local School Dist., 4th Dist. Ross No. 11CA3249, 2012-Ohio-3071. (Holding that when appealing a denial of immunity under R.C. 2744.02(C), and the order is not otherwise final and appealable, a party may not raise other alleged errors concerning the denial of summary judgment) as quoted in Jones v. Norwood, 1st Dist. Hamilton No. C-120237, 2013-Ohio-350, ¶ 32. This court's jurisdiction is limited to a review of the trial court's denial of immunity and we are without jurisdiction to review any other order that is not otherwise a final appealable order. Thomas v. Lorain Metropolitan Hous. Auth., 9th Dist. Lorain No. 17CA011177, 2018-Ohio-2997, ¶ 12.
{¶22} For those reasons, we cannot give any consideration to appellant's arguments regarding the elements of negligence or the statute of limitations because the trial court did not issue a final appealable order on those issues. We will restrict our review to the application of R.C. Chapter 2744.
{¶23} Revised Code Chapter 2744 establishes a three-step analysis to determine whether a political subdivision is immune from liability. Cramer v. Auglaize Acres, 113 Ohio St.3d 266, 270, 2007-Ohio-1946, 865 N.E.2d 9, ¶ 14. First, R.C. 2744.02(A)(1) sets forth the general rule that a political subdivision is immune from tort liability for acts or omissions connected with governmental or proprietary functions. "Except as provided in division (B) of this section, a political subdivision is not liable in damages in a civil action for injury, death, or loss to person or property allegedly caused by any act or omission of the political subdivision or an employee of the political subdivision in connection with a governmental or proprietary function."
{¶24} Second, R.C. 2744.02(B) lists five exceptions to the general immunity granted to political subdivisions under R.C. 2744.02(A)(1). Pertinent to the instant case, R.C. 2744.02(B)(2) states: "*** political subdivisions are liable for injury, death, or loss to person or property caused by the negligent performance of acts by their employees with respect to proprietary functions of the political subdivisions."
{¶25} If R.C. 2744.02(B)(2) applies, the reviewing court must determine whether any of the defenses in R.C. 2744.03 apply, reinstating sovereign immunity, as the third step in the process. In the case at bar, this step is unnecessary because appellants do not argue that any provision within R.C. 2744.03 applies, but rests its argument on the contention that the exception described in R.C. 2744.02(B)(2) does not apply. An analysis of the first step is also not needed as the parties do not dispute that the appellants are entitled to the general grant of immunity under R.C. 2744.02(A)(1). Instead, the dispute focuses on whether the R.C. 2744.02(B)(2) exception to immunity applies, specifically, whether the relevant actions of the appellants were governmental or proprietary.
{¶26} Appellants argue this court must evaluate their claim of immunity in the context of the operation of a recycling center. Appellee responds that appellants were running a scrap metal business, and that immunity does not apply as a result. Neither activity is described by statute as governmental or proprietary, so it is incumbent upon this court to define "what it is that the political subdivision is actually doing when performing the function." Kenko Corp. v. Cincinnati, 183 Ohio App.3d 583, 2009-Ohio-4189, 917 N.E.2d 888, ¶¶ 27-28 (1st Dist.). "When deciding whether a political subdivision is engaged in a governmental or proprietary function pursuant to R.C. 2744.01(G)(1)(b), a court should look to the particular activity the subdivision is engaged in and decide whether that particular activity is of the type customarily engaged in by nongovernmental persons." The key in determining whether a political subdivision is acting in a governmental or proprietary manner is in defining what it is that the political subdivision is actually doing when performing the function." Allied Erecting & Dismantling Co. v. Youngstown, 151 Ohio App.3d 16, 2002-Ohio-5179, 783 N.E.2d 523, (7th Dist.) ¶ 52.
{¶27} Appellant argues it operated a solid waste disposal facility and collected and disposed of scrap metal and that therefore, it was engaged in a governmental function. (Appellant's Brief, p.8). This statement is an overly broad description of what appellant was "actually doing when performing the function" that is the focus of this case. The pleadings, depositions and affidavits support the conclusion that Joshua Campbell approached appellant to sell metal owned by his employer, appellee. Appellant purchased thousands of pounds of metal from Campbell and resold it at a profit. The appellant did not dispose of these materials: ""Disposal" means the discharge, deposit, injection, dumping, spilling, leaking, emitting, or placing of any solid wastes or hazardous waste into or on any land or ground or surface water or into the air, except if the disposition or placement constitutes storage or treatment ***" R.C. 3734.01(F). The record does not support a conclusion that appellant recycled the metal as that would require evidence that it engaged in "the process of collecting, sorting, cleansing, treating, and reconstituting waste or other discarded materials for the purpose of recovering and reusing the materials." R.C. 3736.01(B). Appellant implies that it is operating a recycling center, but there is not sufficient evidence in the record to conclude, as a matter of law, that it is a "engineered facility or site where recycling of material other than scrap tires is the primary objective of the facility." Ohio Adm.Code 3745-27-01.
{¶28} The function appellant performed in this case is more accurately described as purchasing metal for resale, at a profit, to a third party for melting into new products. We find that appellant's actions could be reasonably interpreted to describe a "scrap metal dealer": "the owner or operator of a business that purchases or receives scrap metal for the purpose of sorting, grading, and shipping metals to third parties for direct or indirect melting into new products." R.C. 4737.04. Scrap metal dealers/brokers buy and sell scrap metals in a profit making venture. Indus. Recycling Serv., Inc. v. Rudner, 5th Dist. Stark No. 2001CA00329, 2002-Ohio-4068, ¶ 3. Cynthia Brady, director of Appellant Ashland County Solid Waste Management District and former director of the Ashland County Recycling Center, obtained a scrap metal license for appellant's operation and acknowledged the appellant's obligation to comply with requirements imposed upon the appellant by that license.
{¶29} The record provides sufficient evidence to support a conclusion that appellant was engaged in the business of buying and selling scrap metal. Having more accurately described the function, we must now decide whether that it is of the type customarily engaged in by nongovernmental persons.
{¶30} The Director of the Solid Waste Management dealer testified in her deposition regarding other businesses that bought scrap metal within and outside Richland County. She acknowledged that appellant's activities regarding metals was subject to the same licensing requirements that would be applicable to any dealer in scrap metal. The Ohio Revised Code and the Ohio Administrative Code provide a regulatory structure for persons who operate scrap metal businesses. The Revised Code obligates any person engaging in the business of scrap metal dealing to register with the director of public safety in accordance with section 4737.045 of the Revised Code. R.C. 4737.04; Ohio Adm.Code 4501:5-3-02 (A). This comprehensive statutory scheme, applicable to any person who owns or operates a business that purchases or receives scrap metal for the purpose of sorting, grading, and shipping metals to third parties for direct or indirect melting into new products, supports the conclusion that dealing in scrap metal is an activity customarily engaged in by nongovernmental persons. Ohio Adm.Code 4501:5-3-02; R.C. 4737.04 (A)(1).
{¶31} The propriety nature of these transactions is further disclosed by the Director's response to questions regarding the consequence of not engaging in this type of business. Rather than expressing a concern regarding the impact on the environment, her first concern was the financial impact of the termination of the practice. While profit alone is not conclusive evidence of a proprietary act, taken in context with the balance of the facts and circumstances, it is sufficient to support the trial court's conclusion that summary judgment regarding the issue of immunity was not appropriate. The appellant, acting as a scrap metal dealer, is engaging in an activity that can be described as customarily performed by nongovernmental persons and, "[h]aving entered into activities ordinarily reserved to the field of private enterprise, a [political subdivision] should be held to the same responsibilities and liabilities as are private citizens." Schenkolewski v. Cleveland Metroparks Sys., 67 Ohio St.2d 31, 37, 426 N.E.2d 784 (1981), as quoted in Greene Cty. Agricultural Soc. v. Liming, 89 Ohio St.3d 551, 2000-Ohio-486, 733 N.E.2d 1141 (2000).
{¶32} Appellant asserts that its scrap metal business is a governmental function because it qualifies as "a function that is for the common good of all citizens of the state." R.C. 2744.01(C)(1)(b). Appellant relies upon the argument that a recycling center prevents solid waste reaching the public landfill, but the particular activity involved in this case does not conclusively provide such a benefit.
{¶33} Joshua Campbell possessed a valuable commodity that he planned to sell. The record does not support any contention that the metal sold by Campbell and purchased by appellant was destined for a landfill. As noted by the Director of the Solid Waste Management District, if they had not purchased the metal other buyers were available. Mr. Campbell was aware of other scrap metal dealers, but explained that he did not want to drive to Milliron, a competing dealer, to sell metal. Regardless of whether Mr. Campbell had the authority to sell the metal, it is evident from the record that he would not have simply dumped the metal into a landfill rather than collect a percentage of the value of the metal by selling it to a local dealer. The appellant was under no obligation to purchase scrap metal from Joshua Campbell or Conery and it is evident that, had it chosen not to do so, Mr. Campbell had a ready market available for his contraband.
{¶34} Appellant benefited by these financial transactions and it had the option to not participate. For those reasons, we conclude the facts do not support a conclusion that the activities of the appellant served the common good of all citizens of the state. Instead, we conclude the record has sufficient evidence to permit a reasonable fact-finder to determine that the benefit was limited to the appellants and the citizens of Richland County, both benefitting from the income derived from the scrap metal business which, according to the Director, was a critical part of the recycling center's budget. Bundy v. Five Rivers Metroparks, 152 Ohio App.3d 426, 2003-Ohio-1766, 787 N.E.2d 1279, ¶ 41 (2nd Dist.); Doe v. Cleveland Metro. School Dist., 8th Dist. Cuyahoga No. 97177, 2012-Ohio-2497.
{¶35} Appellant also contends that the operation of a recycling center is a governmental "function that is imposed upon the state as an obligation of sovereignty and that is performed by a political subdivision voluntarily or pursuant to legislative requirement." R.C. 2744.01(C)(1)(a). First, we note that the activity that is the focus of this analysis is the appellant's dealing in scrap metal, and not the production of a solid waste plan or the operation of a recycling center, and appellant has not demonstrated any obligation to engage in a scrap metal business. Further, appellant has conceded it is not obligated to operate a recycling center and that not all solid Waste Management Districts operate a recycling center. Appellant has no obligation to directly provide services to comply with its obligation to complete a solid waste management plan. Ohio Adm.Code 3745-27-9(E), Comment. Even if operating a recycling center was activity subject to our focus, we could not conclude on this record that it was a function imposed upon the state as an obligation of sovereignty.
{¶36} We hold that the appellant's act of purchasing and selling metal as described in the record of this case supports a conclusion that the action was not governmental, but instead was proprietary and therefore, summary judgment was not appropriate. Appellants' assignment of error is denied.
{¶37} The decision of the Ashland County Court of Common Pleas is affirmed. By: Baldwin, J. Gwin, P.J. and Wise, John, J. concur.