Susany v. Susany
2017 Ohio 132
| Ohio Ct. App. | 2017Background
- S.E.T., Inc. is a closely held S-corporation founded by brothers Douglas and David Susany; originally 100 shares (55 Douglas, 45 David). In June 2006 the corporation issued 300 nonvoting Class B shares, resulting in Douglas holding 15% of capital stock while retaining 55% voting (Class A) shares.
- David (45% owner) sued in 2009 in a shareholder derivative action seeking determination of corporate ownership of several properties, including the "shop property" titled in Douglas’ name. Parallel divorce proceedings between Douglas and Theresa were ongoing; domestic court deferred corporate issues to the trial court.
- Evidence showed S.E.T. funds paid for the shop property purchase checks and taxes, and S.E.T. erected a ~7,500 sq. ft. pre‑fabricated building (approx. $200,000) on the site. Corporate minutes (June 12, 2007) authorized constructing the building on land "owned by [Douglas and Theresa]" and authorized a 25‑year land lease at $100/month.
- The magistrate and trial court concluded Douglas owns 15% of S.E.T.’s capital stock (no fraudulent divestiture) and found the shop property titled to Douglas was owned by Douglas and Theresa, with only a month‑to‑month lease to S.E.T. because no written lease met the statute of frauds.
- Appeals: Theresa appealed the stock‑ownership ruling (and sought equitable relief for differing remedy); S.E.T. and David appealed the shop‑property ruling claiming a purchase‑money resulting trust and unjust enrichment for improvements. The appellate court affirmed the trial court; one judge dissented in part, urging remand to address compensation for the buildings/improvements.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Douglas’ June 2006 stock transfers divested him of his capital interest (i.e., whether he retains only 15% capital stock) | Theresa: transfers were an illusory gift intended to hide assets from divorce and should not reduce Douglas’ ownership for marital/equitable purposes | Douglas/Trial Ct.: transfers were legitimate (succession plan, sons employed), no clear evidence of intent to defraud Theresa; transfers valid | Court: affirmed — no abuse of discretion; Douglas owns 15% capital stock |
| Whether S.E.T. holds equitable title to the shop property by purchase‑money resulting trust (because S.E.T. paid purchase and improvements) | David/S.E.T.: S.E.T. paid purchase checks, taxes, and built improvements; a resulting trust or equitable ownership should be imposed in favor of corporation | Douglas/Theresa/Trial Ct.: despite S.E.T. payments, corporate minutes and parties’ conduct show land intended for benefit/ownership of Douglas and Theresa; evidentiary dispute on intent; statute of frauds bars oral long‑term lease | Court: affirmed — trial court did not abuse discretion; shop property owned by Douglas and Theresa and only month‑to‑month tenancy exists with S.E.T. |
| Whether appellate court should fashion a novel equitable remedy (award Theresa half value of Douglas’ pre‑transfer ownership without divesting sons) | Theresa: equity requires correcting perceived injustice; Douglas still controls voting shares and can manipulate ownership; relief should preserve sons’ titles while awarding Theresa marital share | David/S.E.T.: remedy not raised below; cannot raise new equitable theory on appeal; fact finder credited legitimacy of transfers | Court: rejected — appellate court will not consider new theory raised first on appeal and trial record supports trial court; assignment fails |
Key Cases Cited
- Harkai v. Scherba Indus., 136 Ohio App.3d 211 (Ohio Ct. App.) (trial court must separately enter a judgment specifying outcome and remedy rather than merely adopting a magistrate's decision)
- Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240 (1933) (equity decisions are flexible and courts may fashion remedies to prevent injustice)
- N. Royalton City School Dist. Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 129 Ohio St.3d 172 (2011) (definition and treatment of ground lease in Ohio jurisprudence)