2013 Ohio 4966
Ohio Ct. App.2013Background
- Sheridan Rinehart, longtime COO of two nonprofit cemetery corporations (Grandview and Fairview), purportedly sold their stock/assets to Ted and Mindi Martin in February 2008 under a stock-asset purchase ("Agreement 1") for $110,000, with payment secured by a mortgage/security agreement. Agreement 1 described Rinehart as "doing business as" the cemeteries despite their nonprofit status.
- The Martins alleged they later discovered undisclosed liabilities and that the cemetery assets could not be sold because the corporations were nonprofit; they claim a second agreement ("Agreement 2," May 2008) terminated Agreement 1 and assigned all of Rinehart’s rights to the Martins. Rinehart denies knowingly signing Agreement 2 (though his deposition acknowledged the signature appeared to be his).
- Rinehart sued in January 2010 seeking specific performance of Agreement 1 or return of stock/assets. The Martins asserted Agreement 2 superseded Agreement 1 and attached Agreement 2 to their answer.
- After cross-motions for summary judgment and further filings (including handwriting analysis and a second summary-judgment motion by the Martins), the trial court denied the parties’ summary-judgment motions but later granted the Martins’ motion for judgment on the pleadings, holding Agreement 1 void ab initio because it attempted to distribute profits from nonprofit cemetery corporations.
- The Martins’ counterclaim was later voluntarily dismissed; Rinehart appealed the judgment dismissing his complaint and the denial of his summary-judgment motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. Whether Agreement 1 is enforceable despite purporting to sell nonprofit corporate assets for pecuniary gain | Rinehart urged enforcement of Agreement 1 and sought mortgage/security relief under it | Martins argued Agreement 1 was void because it attempted profit distribution from cemetery nonprofits and was superseded/terminated by Agreement 2 | Court held Agreement 1 void ab initio as it attempted an impermissible profit distribution from nonprofit cemetery corporations; dismissal affirmed |
| 2. Whether the trial court erred in granting judgment on the pleadings under Civ.R. 12(C) | Rinehart argued judgment on the pleadings was improper and that rescission or other equitable relief could have been applied | Martins argued the pleadings showed Agreement 1 was void as a matter of law; subsequent posture left no live claim after counterclaim dismissal | Court applied de novo review and found no set of pleaded facts could entitle Rinehart to relief; 12(C) ruling upheld |
| 3. Whether the trial court should have rescinded Agreement 1 and restored corporate control to Rinehart | Rinehart argued rescission was an available equitable remedy if Agreement 1 is void | Martins maintained they assumed liabilities under Agreement 2 and provided consideration; also relied on voidness of Agreement 1 | Court found rescission was not proper to decide at the 12(C) stage and, after the Martins voluntarily dismissed their counterclaim, no further relief remained for the trial court to decide |
| 4. Whether the trial court erred in denying Rinehart’s summary-judgment motion enforcing the mortgage/security interest | Rinehart asserted Agreement 2 was invalid and the mortgage portion of Agreement 1 should be enforced | Martins maintained Agreement 1 was illegal and unenforceable | Court held that because Agreement 1 was illegal and void, its mortgage/security provisions were unenforceable and summary judgment for Rinehart was not appropriate |
Key Cases Cited
- Peterson v. Teodosio, 34 Ohio St.2d 161 (treatment of Civ.R. 12(C) and construing pleadings in favor of nonmovant)
- Newell v. The Cleveland Cemetery Assn., 61 Ohio App. 476 (cemetery corporations may not distribute profits to individuals)
- Langer v. Langer, 123 Ohio App.3d 348 (courts will not enforce contracts if illegal or against public policy)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (summary judgment standard — whether reasonable minds could differ)
- Grafton v. Ohio Edison Co., 77 Ohio St.3d 102 (de novo review of summary judgment)