2025 Ohio 2247
Ohio Ct. App.2025Background
- Defendants Michael Kinne and Perla Medina-Kinne were founders and directors of Angel’s Rest Animal Sanctuary (ARAS), a nonprofit corporation.
- ARAS contracted with Mills Fence Co., LLC, to build a fence but later refused to pay the roughly $24,000 contract amount, leading Mills to file a mechanic’s lien.
- ARAS experienced financial difficulties and was voluntarily dissolved by the Kinnes, who sold the property and initially held funds in escrow corresponding to Mills's lien (which Mills failed to collect before its expiration).
- After the lien expired, the Kinnes paid themselves "Founders’ Loans" from the sale proceeds and dissolved ARAS.
- Mills sued ARAS (winning a default judgment), then sued the Kinnes directly for breach of fiduciary duty and sought to pierce the corporate veil.
- The trial court found the Kinnes breached their fiduciary duty to Mills (a creditor) but declined to pierce the corporate veil; the Kinnes appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did directors of a defunct nonprofit owe creditors fiduciary duties? | Kinnes, as directors, owed fiduciary duties to Mills under the trust fund doctrine and Ohio law during dissolution. | Directors did not owe fiduciary duties to creditors; duty runs to corporation, not third parties. | Directors do not owe creditors a fiduciary duty; duty is to the corporation, not creditors. |
| Should trial court have denied dismissal (12(B)(6)) on breach of fiduciary duty? | Sufficient claim stated: Kinnes owed, and breached, fiduciary duties to Mills as a creditor. | No fiduciary duty owed by law; Mills’s claim fails as a matter of law. | Reversed: Mills’s claim should have been dismissed. |
| Is piercing the corporate veil a standalone claim? | Mills claimed for piercing the veil as an independent cause of action. | Piercing the veil is a remedy, not an independent claim. | Veil-piercing is not a standalone cause of action; must attach to a viable claim. |
| Necessity to address summary judgment denial? | N/A | N/A | Moot, given resolution of the other issues. |
Key Cases Cited
- Thomas v. Matthews, 94 Ohio St. 32 (Ohio 1916) (established doctrine that directors act as trustees for creditors during insolvency, but limited to specific contexts)
- Cay Machine Co. v. Firestone Tire & Rubber Co., 175 Ohio St. 295 (Ohio 1963) (discussed the trust fund doctrine but did not expressly create fiduciary duty to creditors)