Baker v. Manchi
2017 Ohio 730
| Ohio Ct. App. | 2017Background
- Robert Baker and James Manchi were 50/50 partners in several closely held entities; a Buy‑Sell Agreement governed rights upon death or disability and became "irrevocably binding" on a stockholder's death. The Buy‑Sell Agreement also required mediation/arbitration for disputes and imposed that the surviving stockholder owed a fiduciary duty to the surviving spouse in the event of a sale.
- After Robert Baker died in 2009, Manchi continued operating the companies, declined to buy out Baker’s interest, and did not sell the companies despite Phyllis Baker’s repeated requests.
- In December 2012 the parties mediated and signed a settlement that amended the Buy‑Sell Agreement (including listing the companies for sale, a pricing range, and an exception allowing Manchi an option to buy Baker’s interest for set prices and periods).
- In 2013 Manchi listed the companies, received third‑party offers, and negotiated a sale for which he paid Baker $2.5 million (partial distribution) and placed the remaining $1.8 million of sale proceeds into escrow pending resolution of the dispute over entitlement to those funds.
- Baker sued for declaratory judgment seeking enforcement of the Buy‑Sell Agreement terms; both parties moved for partial summary judgment. The trial court granted Baker summary judgment, awarded her 50% of the sale proceeds, and refused to consider Manchi’s cross‑motion because it was filed past the dispositive‑motion deadline without leave.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the trial court erred by not considering Manchi’s late cross‑motion for summary judgment | Baker: court properly enforced deadlines and considered only timely motions | Manchi: granting extension to oppose implied permission to file his own motion | Court: no abuse of discretion; motion missed the deadline and leave to file was not sought, so court properly declined to consider it |
| Whether the mediation settlement superseded the Buy‑Sell Agreement | Baker: Buy‑Sell became irrevocable on death and remained controlling; mediation only amended it | Manchi: mediation settlement supersedes Buy‑Sell terms | Court: mediation amended but did not supersede the Buy‑Sell Agreement; Buy‑Sell remained irrevocable |
| Whether Manchi had an unconditional irrevocable option to buy Baker’s interest and could simultaneously market and sell the companies | Baker: option was an exception; listing and sale duties plus fiduciary duty barred self‑dealing sale/option abuse | Manchi: he had an unconditional option and could exercise it independently of sales efforts | Court: option was an exception terminating the listing if exercised; he could not both sell to third parties and simultaneously buy out Baker in a manner that violated the Buy‑Sell fiduciary obligations |
| Whether the trial court erred in finding Manchi breached fiduciary duties when Baker did not explicitly plead that claim | Baker: fiduciary duty arises from the Buy‑Sell Agreement and was pleaded in the declaratory judgment complaint and summary judgment papers | Manchi: duty was waived because not separately pleaded | Court: Baker alleged the Buy‑Sell Agreement and its fiduciary provision; she did not waive the argument and the court properly found a contractual fiduciary duty |
Key Cases Cited
- Arnott v. Arnott, 132 Ohio St.3d 401, 2012-Ohio-3208, 972 N.E.2d 586 (Ohio 2012) (declaratory‑judgment and contract interpretation reviewed de novo)
- Nationwide Mut. Fire Ins. Co. v. Guman Bros. Farm, 73 Ohio St.3d 107, 1995-Ohio-214, 652 N.E.2d 684 (Ohio 1995) (clear contract language is enforced as written)
- Inland Refuse Transfer Co. v. Browning-Ferris Indus. of Ohio, 15 Ohio St.3d 321, 474 N.E.2d 271 (Ohio 1984) (ambiguous contract terms present questions of fact)
- Sunoco, Inc. (R & M) v. Toledo Edison Co., 129 Ohio St.3d 397, 2011-Ohio-2720, 953 N.E.2d 285 (Ohio 2011) (when contract language is clear, courts look no further)
- Blatnik v. Avery Dennison Corp., 148 Ohio App.3d 494, 2002-Ohio-1682, 774 N.E.2d 282 (Ohio Ct. App. 2002) (trial court’s denial of leave to file summary judgment reviewed for abuse of discretion)