KENNETH M. STUMPFF, et al. v. RICHARD L. HARRIS, et al.
C.A. CASE NO. 24562
T.C. CASE NO. 03CV5624
IN THE COURT OF APPEALS OF MONTGOMERY COUNTY, OHIO
March 23, 2012
2012-Ohio-1239
(Civil Appeal from Common Pleas Court)
Rendered on the 23rd day of March, 2012.
Konrad Kuczak, Atty. Reg. No. 0011186, 130 West Second Street, Suite 1010, Dayton, OH 45402-1588 Attorney for Plaintiffs-Appellants
Alfred W. Schneble, III, Atty. Reg. No. 0030741, 11 West Monument, Suite 402, Dayton, OH 45402 Attorney for Defendants-Appellees
GRADY, P.J.:
{¶ 1} This is an appeal from a final order dissolving a corporation entered pursuant to
{¶ 2} In 2003, Kennеth Stumpff and Mahaffey‘s Auto Salvage, Inc. (the “corporation“) commenced an action against Richard Harris. Stumpff and Harris each owned 50% of the shares in the corporation. The Plaintiffs alleged that Harris had used his position as president of the corporation to enrich himself and anothеr business he owned with assets of the corporation and to deny Stumpff opportunities to which he was entitled as a shareholder. Plaintiffs claimed Harris‘s conduct was a breach of his fiduciary duties. Harris denied liability and filed a counterclaim seeking an order of judicial dissolution of the corporatiоn.
{¶ 3} The claims in the action were referred to a magistrate. Following hearings, the magistrate filed a decision (1) dismissing the Plaintiffs’ claims against Harris for breach of fiduciary duty and (2) ordering judicial dissolution of the corporation. Stumpff objected, but the court overruled his objections and adopted the magistrate‘s decision. Stumpff appealed. On review, we affirmed the judgment of the trial court on September 15, 2006. Stumpff v. Harris, 2d Dist. Montgomery No. 21407, 2006-Ohio-4796.
{¶ 4} On November 22, 2006, Stumpff filed a motion asking the court to appoint a receiver for the corporation. The court denied that motion, and instead ordered the parties to file an agreed order dividing the assets and liabilities of the corporation within thirty days. The court further ordered that if the parties could not agree, the court would appoint a liquidator to perform that task.
{¶ 5} Stumpff filed a notice of appeal from the order denying his motion to appoint a receiver. On Mаy 1, 2007, we dismissed that appeal for lack of a final order. Stumpff v. Harris, 2d Dist. Montgomery No. 22050, (May 1, 2007).
{¶ 7} The receiver held hearing to determine the corporate assets and liabilities. On July 2, 2008, based on information discovered in the course of those hearings, the corporation filed a Notice of Claims alleging that it is owed an additional $233,536 for monies belonging to the corporation that Harris appropriated for the use of another business he owns, Valley Auto Parts, L.L.C.
{¶ 8} The receiver filed a report, inventorying the assets of the corporation. The report made no mentiоn of the additional claims totaling $233,536 against Harris made by the corporation. Plaintiffs requested a hearing on their new claims. The court denied that request. The court entered an order identifying the assets of the corporation and ordering the receiver to take possession of those assеts and prepare a plan for liquidation of the corporation. Harris filed a notice of appeal from that order. Harris subsequently dismissed his appeal voluntarily on August 19, 2008. Stumpff v. Harris, 2d Dist. Montgomery No. 22651 (Sept. 29, 2008).
{¶ 9} On March 13, 2008, the receiver filed a liquidation plan that again took no account of the claims against Harris in the corрoration‘s July 2, 2008 Notice of Claims. The
{¶ 10} Stumpff and the corporation took no appeal from the order denying their objections and adopting the liquidation plan of the receiver in the 2003 action. Instead, on October 23, 2008, Stumpff and the corporatiоn commenced a new action against Harris on the claims which were the subject of their July 2, 2008 Notice of Claims.
{¶ 11} Harris moved for summary judgment in the 2008 action. The trial court granted the motion, reasoning that Stumpff and the corporation should have filed a motion in the 2003 action to amend their complaint tо include their new claims against Harris. The court further concluded that because Stumpff and the corporation took no appeal from the court‘s order adopting the report of the receiver in the 2003 action, their claims in the 2008 action are barred by res judicata. Stumpff and the corporation appealed.
{¶ 12} On review, we agreed with the trial court‘s res judicata analysis, to the extent that the claims in the 2008 action involve the same funds that were asserted in the Notice of Claims the corporation filed in the 2003 action. We further held that such claims against a party to a dissоlution proceeding are properly brought as part of that action, and that there was no need for the Plaintiffs to amend their complaint in order to do that because their Notice of Claims had put the matters before the court. When the receiver and the trial court failed to aсt on those claims, Plaintiffs’ proper course of action was an appeal challenging the order overruling their objections and adopting the receiver‘s report and liquidation plan, which they
{¶ 13} Nevertheless, we further held that the res judicata bar could not apply to the claims in the 2008 аction for lack of an
{¶ 14} Following our decision in Casе No. 23354, Stumpff and the corporation requested a hearing in the 2003 action to prove the corporation‘s claims against Harris. Plaintiffs argued that the court could not enter the final order of dissolution that
{¶ 15} Prior to entering the order of March 8, 2011, from which this appeal was taken, the trial court on February 24, 2011, entered a Decision, Order and Entry Granting Defendant‘s Motion For Judicial Dissolution. [Dkt. 2]. After discussing the history of the
{¶ 16} On March 8, 2011, the court entered an order of dissolution pursuant to
ASSIGNMENT OF ERROR
{¶ 17} “THE TRIAL COURT COMMITTED PREJUDICIAL ERROR BY DISSOLVING MAHAFFEY‘S AUTO SALVAGE, INC. WITHOUT ADDRESSING PROVED BREACH OF FIDUCIARY DUTY CLAIMS AGAINST APPELLEE HARRIS AND SETTING THE VALUE OF THE SHARES OF THE SHAREHOLDERS.”
{¶ 18} The history and present posture of this litigation bring to mind the Latin term deus ex machina, literally, “a god out of a machine.” “The expression has its origin in ancient Greek theatre, especially in certain plays of Euripides. When the complexities of plot and character appeared incapable of resolution, a god was set down on stage by a mechanical crane to sort out things and make them right. Greek gods could do anything.”1
{¶ 19} We have no illusion that our talents and capacities allow us to act as the Greek gods were once portrayed, but merely observe that the record of this proceeding and the arguments of the parties would benefit from their assistance.
{¶ 21} The Notice of Claims that Plaintiffs filed on July 2, 2008 allege the following claims on behalf of the corporation against Harris and the other business entity he owns:
| Attorney fees in the amount of | $ 22,170.00 |
| Employee Health Premiums | 33,468.13 |
| Employee Wages | 152,050.00 |
| Employee Payroll Taxes | 28,848.50 |
[Dkt 11, Case No. 23354.]
{¶ 22} Plaintiffs argued that they learned of these new matters on January 23, 2008, during a hearing to determine the assets of the corporation, and that the new matters concern transactions that occurred between June 1, 2005 and January 15, 2008. In that event, Plaintiffs’ new claims are not a part of the acts or transactions on which the claims for unjust enrichment in their 2003 claim were founded, and the new claims are not barred from subsequent judicial determination by res judicata.
{¶ 23} In Case No. 23354, we held that Plaintiffs’ Notice of Claims properly put the matter of their new claims before the court, and that when the court failed to act on them the
{¶ 24} The assignment of error is sustained. The March 8, 2011 order of dissolution will be reversed and vacated. The case will be remanded to the trial court to conduct a hearing pursuant to
DONOVAN, J., concurs.
HALL, J., concurring:
{_ 25} I agree with the opinion of thе majority but write separately to detail why I believe the prior litigation does not have a res judicata effect on the discreet claims raised in the appellant‘s “Objection, etc.* * * to Report of Receiver and Request for Hearing” filed July 21, 2008.
{_ 27} Appellant‘s appeal from the trial court‘s December 6, 2005, decision wаs docketed as this court‘s case number CA 21407. The trial court‘s decision was affirmed by Opinion and Final Judgment Entry both filed September 15, 2006.
{_ 28} After this court‘s affirmance, the case was ripe for the trial court to proceed with the winding up of affairs for the judicial dissolution. A receiver was appointed. Assets of the сorporation were determined and the “Receiver‘s plan for liquidation” was filed March 13, 2008. It ended: “Following liquidation * * * Receiver would file a report after reviewing each claim. Thereafter, any objecting party to the Receiver‘s Report may request an oral hearing on the same.” Id at 2. On July 2, 2008, Mahaffey‘s filed a notice of claims asserting that Harris, who had been operating the company in the interim, and Valley Auto parts, LLC, Harris’ new salvage operation, owed the corporation for attorney fees, and for employee
{_ 29} On July 9, 2008, the Report of the Receiver was filed. On July 21, 2008, appellant filed objections to the receiver‘s report and requested a hearing. The principle thrust of the objections was the failure of the receiver to recognize the claims filed July 2, 2008, for reimbursement of attorney fees, employee wages, benefits, and payroll taxes. Appellant‘s claims related to the compensation of employees beginning on June 1, 2005. Those claims are different in kind, nature, and time than the breach of fiduciary duty claims for exclusion of Stumpff from the business, which were the subject of the trial on April 26 and May 26, 2004. Most importantly, the claim that Harris dissipated several hundred thousand dollars belonging to Mahaffey‘s from June 1, 2005, to January 23, 2008, did not exist at the time of the original 2004 trial. To the discrete extent that appellant‘s claims arose aftеr the original trial, I would determine that res judicata emanating from the 2004 trial decisions and their affirmance on appeal, did not bar the presentation of those claims in July 2008. Accordingly, I agree that the matter should be remanded for a hearing on those claims.
{_ 30} Needless to say, granting a hearing doеs not grant the claims alleged. The record reveals that when appellant Stumpff took $16,000.00 out of the corporate accounts, there was little if any money left. Therefore, the after-trial payroll expenses about which appellant complains were likely paid with after-acquired income, which Stumpff, who was excluded from the premises, did not assist to produce. But, the viability of appellant‘s claims is best left for the trial court to determine.
. . . . . . . . .
Konrad Kuczak, Esq.
Alfred W. Schneble, III, Esq.
Hon. Mary Lynn Wiseman