Kodu v. Medarametla: “Don’t Give $43,500.00 to a Woman You Just Met on the Internet!” and Other Valuable Lessons
The First District Court of Appeals just released its (well-written, as usual) opinion today in the case of Kodu v. Medarametla. To say the least, it was a crazy case.
It all began when a Virginia man (Umesh) and a Cincinnati-area woman (Kalarani) met on “a dating site.” Neither the opinion nor the Plaintiff’s Complaint specify which one. They met in August of 2014 and broke up around the end of November of 2014 – a grand total of about three months of dating. They only saw each other in person twice. Still, the woman was able to convince the man to send her a bunch of money. A total of $43,500, to be exact.
First, she told him she needed money for an attorney and to avoid being held in contempt in a post-Decree Domestic Relations (divorce) case. You would think this would be a red flag. From what I can tell, it appears she may have been looting a “custodial account” set up for her and her ex-husband’s daughter. She supposedly had to replenish that account so the DR Court wouldn’t come down hard on her.But she didn’t stop there. She told the man she needed a $15,000 loan for a down payment on a condo she wanted to buy. He gave her the money, but she never bought the condo.
She also got him to pay $5,000 in order to retain a family law attorney and $1,000 directly to the DR Court to cover GAL fees. He claimed it was all a loan, the whole $43,500, whereas she claimed everything other than the $15,000 was a gift. This was dubious, in part because the man produced an email at trial from the woman to the family law attorney (who knows how he got it or why it was not excluded as privileged) stating that she had borrowed the $5,000 from a friend. It appears the man and woman intended to get married, and the Trial Court characterized some of the money as being a gift in anticipation of marriage, but the Court of Appeals did not go into detail about that.
Then they broke up. Not surprisingly, all hell broke loose. The man asked the woman to pay him back the $15,000 and make arrangements to repay the rest. She just told him to stop contacting her. Then, the man drove from Virginia to Cincinnati to try to reason with her and her parents, whom she lived with. The woman’s mother let him in, but the woman called the police. So the man got an attorney and filed a lawsuit against the woman in Hamilton County. He even sued her mother because some of the payments were funneled through the mother’s account.
Apparently the parties were unable to settle. The case was tried to a Judge, who found the woman and her mother liable for fraud, conversion, and unjust enrichment. The Court also found the woman liable for breach of contract for failing to repay the $43,500 in loans to the man. In the alternative, the court found that even if the $43,500 at issue had been a gift, it had been a gift given in contemplation of a marriage that never occurred. The Court awarded the man $43,500 in compensatory damages and $70,000 in punitive damages. Based on the fact that it had awarded punitive damages, the Court also awarded the man $43,341.45 in attorney fees – a true “home run” for the man, to be sure. He and his attorney must have been celebrating.
But then the woman and her mother appealed. On appeal, the woman and her mother pulled off quite a victory by getting some of the damages reduced. The First District found several issues with the Trial Court’s judgment, much to the man’s chagrin.
First, the Court of Appeals laid out the standard for proving breach of an oral contract, just like the Twelfth District did in Frisby v. Solberg (see prior blog post, entitled How Do You Prove Breach of an Oral Contract Under Ohio Law?). There was no written contract, only emails and text messages, so the man is lucky he was able to prevail at all. Here is how the Court of Appeals laid out the standard:
{¶9} Essential elements of a contract include an offer, acceptance, contractual capacity, consideration, a manifestation of mutual assent, and legality of object and of consideration. Kostelnik v. Helper, 96 Ohio St.3d 1, 2002-Ohio-2985, 770 N.E.2d 58, ¶ 16, citing Perlmuter Printing Co. v. Strome, Inc., 436 F.Supp. 409, 414 (N.D.Ohio 1976). An oral contract must be proven by clear and convincing evidence. Clements v. Ohio State Life Ins. Co., 33 Ohio App.3d 80, 85, 514 N.E.2d 876 (1st Dist.1986). An oral agreement may be enforceable provided there “is sufficient particularity to form a binding contract.” Kostelnik at ¶ 15. Proof of the terms of an oral contract rarely exists with the level of formality found in written contracts. Hence, the terms of an oral contract may be shown from the parties’ words, deeds, acts, and silence. Id.
The Court then concluded that there was sufficient evidence for the Trial Court to find that there was an oral contract (and not a gift). Of note, the Court added to this standard by stating the principle that “where terms of repayment concerning an oral contract are not sufficiently clear, payment becomes due upon demand.” The woman had argued that even if there was a contract there was no breach since there was no deadline for repayment, but since the man had demanded repayment of the money it became due immediately and she was in breach at that point. So the man still gets his $43,500. However, the Court then went on to knock out the punitive damages and attorney fees, explaining as follows:
{¶16} In their second assignment of error, Kalarani and Jhansirani argue that there was insufficient evidence to prove fraud against either one of them. They are correct.
{¶17} The elements of fraud are 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 on it, (e) justifiable reliance upon the representation or concealment, and (f) a resulting injury proximately caused by the reliance. Wiley v. Good Samaritan Hosp., 1st Dist. Hamilton Nos. C-030131 and C-030181, 2004-Ohio-763, ¶ 9, quoting Burr v. Stark Cty. Bd. of Commrs., 23 Ohio St.3d 69, 491 N.E. 2d 1101 (1986), paragraph two of the syllabus.
{¶18} The trial court found that Kalarani had misrepresented her financial situation and had also misrepresented why she needed the money. The trial court determined that Kodu relied on these representations to his detriment by agreeing to loan her money. The trial court’s judgment fails for two main reasons. First, Kalarani did not misrepresent her income. The bank records admitted at trial showed that Kalarani’s pay was what she had told Kudo it was—approximately $75,000 a year. While the trial court found that Kalarani had had money available to her in her parents’ account, there is nothing in the record to support a finding that Kalarani had permission to use her parents’ money as she saw fit. Kalarani testified that she did not, and neither of her parents were called as witnesses. Second, Kodu admits on appeal that Kalarani was “undoubtedly * * * truthful when she told Kodu she needed the money for replenishing the custodial accounts, to retain an attorney, and to purchase a condo.” The fact that Kalarani may not have ultimately used some of the money that Kodu had loaned her as intended was irrelevant, because Kodu’s “resulting injury” occurred when Kalarani refused to repay him, and not because Kalarani did not use some of the money as she had allegedly said that she would. Because Kodu could not prove a materially false representation leading to his injury, Kodu failed to prove the elements of fraud as to Kalarani.
{¶19} As to Jhansirani, there was absolutely no evidence submitted to the trial court to support the elements of fraud. There is nothing in the record demonstrating that Jhansirani was involved in any of the discussions concerning the loans at issue, let alone that she made a false, material representation to Kodu that he reasonably relied upon to his detriment. Nevertheless, the trial court determined that Jhansirani was an “accomplice” to Kalarani’s fraud and found her liable on that basis. We find no authority allowing for “accomplice” liability in a civil fraud action. And even if there was, because we have determined that Kalarani was not liable for fraud, the basis for the trial court’s holding fails.
{¶20} We therefore hold that there was insufficient evidence of fraud. See Eastley, 123 Ohio St.3d 328, 2012-Ohio-2179, 972 N.E.2d 517, at ¶ 11. We sustain the
second assignment of error.
The Court also threw out the finding of conversion:
{¶21} In their third assignment of error, Kalarani and Jhansirani contend that there was insufficient evidence presented to the trial court to prove conversion. They are correct.
{¶22} Conversion is the wrongful exercise of dominion over property to the exclusion of the rights of the owner, or withholding it from his possession under a claim inconsistent with his rights. Joyce v. Gen. Motors Corp., 49 Ohio St.3d 93, 96, 551 N.E.2d 172 (1990). “It is fundamental that a plaintiff in a conversion action must show title or rightful ownership of the chattel, including money, at the time of the alleged conversion.” Levens Corp. v. Aberth, 9th Dist. No. 15661, 1993 Ohio App. LEXIS 727, *7, (Feb. 10, 1993). In keeping with this requirement, a claim for conversion of money will lie only when the money at issue is earmarked or is capable of identification, such as money in a specific bag or certain coins or notes that have been entrusted to a defendant’s care. Smith v. Boston Mut. Life Ins. Co, 1st Dist. Hamilton No. C-120668, 2013-Ohio-2510, ¶ 11. Further, the plaintiff must prove that there was an obligation to keep intact and deliver the specific, earmarked money rather than merely deliver a certain sum. Id.
{¶23} Here, Kodu proved only that a certain sum was due. The trial court therefore erred in holding Kalarani and Jhansirani liable for conversion, as its judgment was not supported by sufficient evidence. See Eastley, 123 Ohio St.3d 328, 2012-Ohio-2179, 972 N.E.2d 517, at ¶ 11. The third assignment of error is sustained.
Ouch – no liability for fraud or conversion means no punitive damages and no attorney fees:
{¶27} In their sixth and seventh assignments of error, Kalarani and Jhansirani contend that the trial court erred in imposing punitive damages and attorney fees. We address these assignments of error, together.
{¶28} Punitive damages may be awarded in tort cases involving fraud, insult or malice. Columbus Fin., Inc. v. Howard, 42 Ohio St.2d 178, 183, 327 N.E.2d 654 (1975). “If punitive damages are proper, the aggrieved party may also recover reasonable attorney fees.” Id; see Fulwiler v. Schneider, 104 Ohio App.3d 398, 411, 662 N.E.2d 82 (1st Dist.1995). Here, the trial court awarded punitive damages on the basis that Kalarani and Jhansirani were liable for fraud and conversion and found an award of attorney fees to be proper based on its award of punitive damages. We have determined that the trial court improperly held Kalarani and Jhansirani liable for fraud and conversion. The trial court’s award of punitive damages was therefore improper, as was its award of attorney fees. We sustain Kalarani and Jhansirani’s sixth and seventh assignments of error.
Now the verdict has been reduced to $43,500, a big appellate win for the woman. Furthermore, the man can only try to collect from the woman (at least she has a job, apparently), because the verdict against her mother was thrown out entirely. It sucks for him, especially since we know he already spent at least $43,341.45 in attorney fees at trial alone. The appeal probably cost him another $15,000-25,000, at least. He undoubtedly learned a costly lesson: don’t give tens of thousands of dollars to a woman in another state whom you met online only a few months ago.
Side note: the man had to travel here from Virginia to attend the trial (and possibly to be deposed, prepare for trial, etc.). This must have resulted in additional expense. I believe he might have been able to sue the woman in Virginia. I don’t know what Virginia’s law is on this point, but in Ohio the non-breaching party to a contract can sue in the county where the money was due to be paid, and if there is no provision in the contract stating where payment is to occur, the default rule is that payment is due in the county where the non-breaching party’s place of business is located. See Civ.R. 3(B)(6); Lorenz Equip. Co. v. Ultra Builders, Inc. (Feb. 23, 1993), Franklin App. No. 92AP–1445, unreported (citations omitted).
It would be interesting to know if, under Virginia law and civil procedure rules, the man could have sued in Virginia and if it would have been more favorable to him to do so. Additional side note: the Court of Appeals also threw out the “unjust enrichment” verdict because a claim for unjust enrichment generally will not lie where there is a valid claim for breach of contract.
