Court Opinion

ID: 4176842
Source: CourtListenerOpinion
Date Created: 2017-06-12 20:17:08.324754+00
Date Added: 2024-06-11T13:24:55.254787
License: Public Domain

[Cite as Strahm v. Kagy, 2017-Ohio-4220.]

                      IN THE COURT OF APPEALS OF OHIO
                          THIRD APPELLATE DISTRICT
                               ALLEN COUNTY

LINDA J. STRAHM, ET AL.,
                                                         CASE NO. 1-17-08
       PLAINTIFFS-APPELLANTS,

      v.

LEE ANN KAGY, ET AL.,                                    OPINION

       DEFENDANTS-APPELLEES.

                  Appeal from Allen County Common Pleas Court
                           Trial Court No. CV 2016 0694

                                     Judgment Affirmed

                             Date of Decision: June 12, 2017

APPEARANCES:

        Thomas P. Kemp and James F. Blair for Appellants

        Ryan W. Goellner for Appellees, Lee Ann Kagy and Leslie M. Barnes

        Matthew C. Huffman for Appellee, A to Z Control Meats, Inc.
Case No. 1-17-08

WILLAMOWKSI, J.

       {¶1} Although originally placed on our accelerated calendar, we have

elected pursuant to Loc.R. 12(5) to issue a full opinion in lieu of a summary

judgment entry. Plaintiffs-appellants Linda J. Strahm (“Strahm”) and Lois J.

Bender (“Bender”) appeal the judgment of the Allen County Court of Common

Pleas for granting the motion to dismiss of the defendants-appellees, Lee Ann Kagy

(“Kagy”) and Leslie M. Barnes (“Barnes”). For the reasons set forth below, the

judgment of the lower court is affirmed.

                           Facts and Procedural History

       {¶2} Ownership of A to Z Portion Control Meats, Inc. (“A to Z”) is equally

divided among four shareholders: Strahm, Bender, Kagy, and Barnes. Doc. 1, 12.

Thus, each of these shareholders owns one-fourth of A to Z’s stock. Id. The board

of directors of this corporation is composed of three people who are elected to serve

one-year terms. Doc. 1. The officers of A to Z are presently Kagy, who serves as

president and treasurer, and Barnes, who serves as secretary. Id. Currently, three

people—Kagy, Barnes, and Terry Strahm, who is Strahm’s husband—serve on the

board of directors. These board members were elected by the shareholders on

January 8, 2015, to commence their one-year terms. Id. Bender and Strahm

received their ownership interest in A to Z on May 26, 2015, and were, thus, not

shareholders at the time that the current board of directors was elected. Id.

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Case No. 1-17-08

       {¶3} On July 21, 2015, the shareholders held a special meeting during

which Strahm and Bender moved to expand the positions on the board of directors

from three to five. Id. Bender and Strahm voted in favor of this motion while Kagy

and Barnes voted against this motion. Id. Thus, this motion failed to receive a

majority vote of the shareholders and was defeated. Id. On January 4, 2016, the

shareholders convened for their annual meeting during which elections were held

for the board of directors. Id. At this meeting, the names of Strahm, Terry Strahm,

Bender, Barnes, and Kagy were placed into nomination for positions on the board

of directors. Id. When the time came to vote, Terry Strahm, Bender, Barnes, and

Kagy each received one vote. Id. Kagy, as president of the company, announced

that the vote was deadlocked and that the current board of directors, which had been

elected the previous January, would remain in office pursuant to the company’s code

of regulations. Id.

       {¶4} Since that time, the shareholders have remained deadlocked on the

issue of who should be on the board of directors and have not been able to come to

an agreement, leaving the board of directors elected on January 8, 2015 in their

positions after their one-year term expired. Id. On December 15, 2016, appellants

Strahm and Bender filed a verified complaint for judicial dissolution of A to Z

pursuant to R.C. 1701.91. Id. In the complaint, appellants allege that

       various controversies and differences have existed, and still exist,
       among them, which are of such a dramatic and competing nature,
       kind, and character, as to impede the efficient and effective

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Case No. 1-17-08

       business plan, management of A to Z, and the relationship
       between the shareholders has been irretrievably broken.

Id. On December 20, 2016, the appellees submitted a Civ.R. 12(B)(6) motion to

dismiss. Id. In this motion, appellees argued that the trial court should dismiss this

action because the appellants did not represent the required level of shareholder

ownership to bring an action for judicial dissolution under R.C. 1701.91 and,

therefore, lacked standing to bring this claim. Id.

       {¶5} On January 27, 2017, the trial court held a hearing on appellees’

motion and dismissed this action. Doc. 26 at 40. On February 27, 2017, appellants

filed a joint notice of appeal.     In this appeal, appellants raise the following

assignment of error:

       The trial court erred in granting appellee’s motion to dismiss
       based on a flawed interpretation of Ohio Revised Code
       1701.91(A)(4).

On the basis of their arguments, appellants request that we reverse the decision of

the trial court that granted appellees’ 12(B)(6) motion.

                                   Legal Standard

       {¶6} “A [Civ.R. 12(B)(6)] motion to dismiss for failure to state a claim

upon which relief can be granted is procedural and tests whether the complaint is

sufficient.” Pearsall v. Guernsey, 3d Dist. Hancock No. 5-16-25, 2017-Ohio-681,

¶ 8, quoting Bd. of Health of Defiance Cty. v. McCalla, 3d Dist. Defiance No. 4–

12–07, 2012–Ohio–4107, ¶ 33. Civ.R. 12(B)(6) reads, in relevant part, as follows:

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Case No. 1-17-08

       Every defense, in law or fact, to a claim for relief in any pleading,
       * * * shall be asserted in the responsive pleading thereto if one is
       required, except that the following defenses may at the option of
       the pleader be made by motion: * * * (6) failure to state a claim
       upon which relief can be granted * * *.

Civ.R. 12(B)(6). For a Civ.R. 12(B)(6) dismissal to be proper, “it must appear

beyond doubt that the plaintiff can prove no set of facts in support of the claim that

would entitle the plaintiff to relief.” Arnett v. Precision Strip, Inc., 2012-Ohio-2693,

972 N.E.2d 168, ¶ 5, quoting LeRoy v. Allen, Yurasek, & Merklin, 114 Ohio St. 3d
323, 2007-Ohio-3608, 872 N.E.2d 254, ¶ 14.

       {¶7} “A complaint may be dismissed under Civ.R. 12(B)(6) for failing to

comply with the applicable statute of limitations when the complaint on its face

conclusively indicates that the action is time-barred.” Ohio Bur. of Workers’ Comp.

v. McKinley, 130 Ohio St. 3d 156, 2011–Ohio–4432, ¶ 13; Doe v. Archdiocese of

Cincinnati, 109 Ohio St. 3d 491, 2006-Ohio-2625, 849 N.E.2d 268, ¶ 11; Dibert v.

Watson, 3d Dist. Logan No. 8-09-02, 2009-Ohio-2098, ¶ 10. On review, “[t]he

allegations of the complaint must be taken as true, and those allegations and any

reasonable inferences drawn from them must be construed in the nonmoving party’s

favor.” McKinley at ¶ 12. An appellate court reviews a trial court’s decision to

grant a Civ.R. 12(B)(6) motion de novo. Ballreich Bros., Inc. v. Criblez, 3d Dist.

Hancock No. 5-09-36, 2010-Ohio-3263, ¶ 9.

       {¶8} R.C. 1701.91(A)(4) governs the judicial dissolution process and

reads, in relevant part, as follows:

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Case No. 1-17-08

         (A) A corporation may be dissolved judicially and its affairs
         wound up:

         ***

         (4) By an order of the court of common pleas of the county in this
         state in which the corporation has its principal office, in an action
         brought by one-half of the directors when there is an even number
         of directors or by the holders of shares entitling them to exercise at
         least two-thirds of the voting power, when it is established that the
         corporation has an even number of directors who are deadlocked
         in the management of the corporate affairs and the shareholders
         are unable to break the deadlock, or when it is established that
         the corporation has an uneven number of directors and that the
         shareholders are deadlocked in voting power and unable to agree
         upon or vote for the election of directors as successors to directors
         whose terms normally would expire upon the election of their
         successors.

(Emphasis added.) R.C. 1701.91(A)(4).1

                                             Legal Analysis

         {¶9} In this case, the primary dispute is over whether R.C. 1701.91(A)(4)

confers standing on the appellants. Under our plain reading of this statute, it is clear

that the appellants do not have standing to bring this action. R.C. 1701.91(A)(4)

first identifies the parties who are able to bring an action for judicial dissolution and

then identifies the circumstances in which these specified parties have standing to

bring an action for judicial dissolution. This statute confers standing on two classes

1
  Prior to revision in 2012, R.C. 1701.94(A)(4) permitted judicial dissolution, subject to other specified
circumstances, “in an action brought by one-half of the directors when there is an even number of directors
or by the holders of shares entitling them to exercise one-half of the voting power* * *.” R.C. 1701.91(A)(4).
Thus, before the amendments, shareholders exercising one-half of the voting power could have standing
under the right circumstances to bring a judicial dissolution action. With the 2012 amendments, however,
the General Assembly raised the required level of shareholder voting power necessary to bring a judicial
dissolution action from one-half to two-thirds.

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Case No. 1-17-08

of people: either one-half of the board of directors or shareholders with two-thirds

of voting power can bring an action for judicial dissolution. We need not consider

the circumstances under which these specified parties can bring an action for

judicial dissolution because it is apparent, from the face of the complaint, that the

appellants represent neither one-half of the board of directors nor two-thirds of

shareholder voting power. Thus, the appellants do not have standing to bring this

claim, and the question of whether the shareholders are deadlocked in a dispute over

the election of a new board of directors need not be considered. For these reasons,

Appellants’ sole assignment of error is overruled.

                                    Conclusion

       {¶10} Having found no error prejudicial to the appellants in the particulars

assigned and argued, the judgment of the Allen County Court of Common Pleas is

affirmed.

                                                                Judgment Affirmed

PRESTON, P.J. and ZIMMERMAN, J., concur.

/hls

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