Court Opinion

ID: 2703014
Source: CourtListenerOpinion
Date Created: 2014-08-04 20:02:43.091506+00
Date Added: 2024-06-11T12:51:40.017203
License: Public Domain

[Cite as Sobin v. Lim, 2012-Ohio-5544.]

                     [Please see vacated opinion at 2012-Ohio-4060.]

                 Court of Appeals of Ohio
                               EIGHTH APPELLATE DISTRICT
                                  COUNTY OF CUYAHOGA

                              JOURNAL ENTRY AND OPINION
                                       No. 97952

                                      ROBERT SOBIN

                                                   PLAINTIFF-APPELLEE

                                             vs.

                                CHUN BIN LIM, ET AL.
                                                   DEFENDANTS-APPELLANTS

                                          JUDGMENT:
                                           AFFIRMED

                                      Civil Appeal from the
                             Cuyahoga County Court of Common Pleas
                                      Case No. CV-727635

        BEFORE: Stewart, P.J., Boyle, J., and Kilbane, J.

        RELEASED AND JOURNALIZED:                  November 29, 2012
ATTORNEYS FOR APPELLANTS

H. Alan Rothenbuecher
Jay E. Krasovec
Ice Miller, LLP
Fifth Third Center
600 Superior Avenue, East
Suite 1701
Cleveland, OH 44115

ATTORNEY FOR APPELLEE

Alan J. Rapoport
55 Public Square
Suite 1717
Cleveland, OH 44113

ON RECONSIDERATION1

         The original announcement of decision, Sobin v. Lim, 8th Dist. No. 97952, 2012-Ohio-4060,
       1

released September 6, 2012, is hereby vacated. This opinion, issued upon reconsideration, is the
court’s journalized decision in this appeal. See App.R. 22(C); see also S.Ct.Prac.R. 2.2(A)(1).
MELODY J. STEWART, P.J.:

      {¶1} Plaintiff-appellee Robert Sobin, a former employee of defendant-appellant

Trionix Research Laboratory and its majority shareholder, defendant-appellant Chun Bin

Lim, filed this declaratory judgment seeking a declaration that he was a shareholder of

Trionix. Sobin alleged that he purchased 655 shares of Trionix stock in 1987 and 1988,

but Trionix and Lim argued that Sobin sold his shares back to the corporation in 1991 and

1992 and that Sobin should in any event be estopped from making claims based on his

ownership rights because he had ceased exercising any rights as a shareholder after 1992.

The court denied cross-motions for summary judgment and conducted a trial. It held

that Sobin is a Trionix shareholder and payments Trionix made to Sobin were not to buy

back the stock, but were instead treated by both parties as “back-pay” and a “loan

reimbursement.”

                                            I

      {¶2} We originally dismissed this appeal as non-final because the court’s

declaration that Sobin owned 655 shares contained a further order setting a date for a

hearing “to address the value of Plaintiff’s 655 shares of Trionix.” We found the court’s

decision to hold a hearing to value Sobin’s shares invoked well-established precedent that

the resolution of a party’s liability without a determination of damages is non-final

because it does not affect a substantial right as required by R.C. 2505.02. State ex rel.

White v. Cuyahoga Metro. Hous. Auth., 79 Ohio St.3d 543, 546, 684 N.E.2d 72 (1997),
citing State ex rel. A & D Ltd. Partnership v. Keefe, 77 Ohio St.3d 50, 53, 671 N.E.2d 13

(1996).

       {¶3} On reconsideration, we now conclude that the court’s order is final despite

the court setting the matter of valuation for a later hearing. There is no question that the

court’s declaration of ownership affected a substantial right under R.C. 2505.02(A)(1).

Indeed, absent any language on valuation, the court’s order would have clearly been final.

 Sobin’s complaint did not seek a valuation of the shares nor was there any argument at

trial concerning the valuation of the shares. The parties both agree that the trial court

acted on its own in deciding to value the shares, an action that was extraneous and wholly

unnecessary to the question of whether Sobin was a shareholder in Trionix. For purposes

of the declaratory judgment part of the litigation, the case terminated with the finding that

Sobin owned the shares, coupled with the court’s later Civ.R. 54(B) certification of no

just reason for delay separating the declaratory action from the remaining counts. We

thus have a final, appealable order.

                                             II

       {¶4} We begin with Lim’s second assignment of error — a number of complaints

that essentially raise the issue of whether the court’s judgment that Sobin was a

shareholder of Trionix was against the manifest weight of the evidence.

       {¶5} The weight of the evidence concerns “‘the inclination of the greater amount

of credible evidence, offered in a trial, to support one side of the issue rather than the

other.’” (Emphasis sic.) Eastley v. Volkman, 132 Ohio St.3d 328, 2012-Ohio-2179, 972
N.E.2d 517, ¶ 12, quoting State v. Thompkins, 78 Ohio St.3d 380, 387, 1997-Ohio-52,

678 N.E.2d 541. When reviewing an argument that a judgment is against the manifest

weight of the evidence, the reviewing court must engage in every reasonable presumption

in favor of the judgment and the finding of facts. Id. at ¶ 21. “If the evidence is

susceptible of more than one construction, the reviewing court is bound to give it that

interpretation which is consistent with the verdict and judgment * * *.” Id.

      {¶6} The parties agree that Sobin, a former Trionix employee, was a founding

shareholder in the corporation and was named a director. At the time of incorporation in

1987, Sobin received 277 shares of “founders stock.”        Later that same year, Sobin

acquired 80 shares of stock. In 1988, Sobin acquired another 298 shares of stock, for a

total holding of 655 shares. The parties also agree that in 1991 and 1992, Sobin received

two payments from Trionix in the amount of $71,875 and $16,000. As noted by the

court, the dispute is whether these payments to Sobin were to buy back his shares or were

for some other purpose.

      {¶7} To prove his contention that Trionix repurchased Sobin’s shares, Lim claimed

that Trionix’s by-laws precluded anyone but current employees of the corporation from

holding Trionix shares. Although the corporate by-laws did not actually contain any

such restriction, Lim claimed that the board adopted the restriction on stock ownership

and cited a financial statement prepared in 1988 that memorialized this policy. What is

more, Lim offered evidence showing that Sobin knew that Trionix demanded and

received the shares held by four employees who left the corporation.
       {¶8} Sobin offered evidence showing that not only did Trionix never adopt a

formal policy requiring a departing employee/shareholder to sell back shares,

minutes from a March 1988 Trionix shareholder meeting showed that Lim (as chairman

of the board) “[r]eaffirmed that 20% of the corporate stock is available to outside

investors.”

       {¶9} Sobin also offered evidence showing that Trionix continued to consider Sobin

a shareholder long after he terminated his employment. For example, in January 1997,

Trionix sent Sobin a letter giving him notice of a special meeting of shareholders. While

it is true that Sobin’s presence at the meeting might have been required because he was

still a member of the board of directors, other evidence confirmed his status as a

shareholder. A mortgage deed recorded just days after the January 1997 shareholder

meeting listed Sobin as a “current shareholder” in the corporation.       Other evidence

showed that the four former shareholders who sold their shares back to Trionix were

removed from the corporate shareholder’s roll, but that Sobin’s name remained on the

shareholder’s roll years past the point when Lim claimed that Sobin sold back his shares.

       {¶10} Lim’s primary evidence that Sobin sold his shares back to the corporation

consisted mainly of the $71,875 payments made in 1991 and 1992, which he maintained

were for 575 shares of Sobin’s stock that were given to him through the Trionix employee

investment plan. Under that plan, Sobin agreed to work for a lower salary in exchange

for shares in the corporation. Lim argued that these were in essence cash loans to the

corporation and the shares of stock issued in return were the equivalent of promissory
notes valued at $125 per share. He pointed out that the $71,875 in payments made to

Sobin in 1991 and 1992 represented the exact value of the 575 shares that Sobin received

at $125 per share.

       {¶11} Sobin characterized this receipt of shares under the employee investment

plan as compensation for agreeing to work for a lower salary at a point when Trionix was

having cash flow problems. Indeed, Trionix’s check register called its payments to

Sobin “back-pay” and “loan reimbursement.” Additionally, both Sobin and Lim, who

received similar payments, treated those payments as income for tax purposes rather than

proceeds from the sale of stock.        And at no point did Sobin surrender his stock

certificates nor did Trionix demand their return in a manner consistent with the claim that

the payments were intended to repurchase the shares. The court held as much when

deciding the action in Sobin’s favor.

       {¶12} Competent, credible evidence supports the court’s verdict and, in fact,

contradicted even the most basic assertions made by Trionix. For example, Trionix

offered no documentation to show that stock ownership was restricted to current

employees, relying instead on the testimony of Lim.         His recollections were flatly

contradicted by evidence showing that Trionix actually contemplated that 20 percent of

shares could be held by persons outside the corporation.

       {¶13} While it is true that Trionix could document that some former Trionix

employees were told they had to sell their shares back to Trionix when they left, no such

documentation existed to show that Trionix made the same demand on Sobin. In fact,
Trionix not only failed to make any written demand that Sobin return his shares, its claim

that Sobin took payment in exchange for returning his shares was contradicted by

corporate documents that continued to list Sobin as a shareholder long after he left

employment with the corporation.

       {¶14} Finally, Trionix’s claim that payments to Sobin were reimbursements for

loans were contradicted by its own treatment of those payments, characterizing them as

“back pay.” Tellingly, even Lim failed to treat similar payments as the sale of stock on

his federal income tax return.

       {¶15} Trionix did offer evidence showing that Sobin was aware that other

departing employees were required to sell their stock back to the corporation. And the

total amount it paid Sobin — consistent with the stock being valued at $125 per share —

made Trionix’s theory of the case plausible. Certainly, many years passed from the time

Sobin left the corporation until the time he asserted his ownership rights.          Better

documentation may well have turned the case in Trionix’s favor. But the court found the

inconsistencies in Trionix’s case that we have detailed did not tip the balance of evidence.

 As a reviewing court, we are obligated to give the evidence the construction most

consistent with upholding the verdict. We conclude that the court’s verdict was not

against the manifest weight of the evidence.

                                            III

       {¶16} Trionix next argues that the court erred as a matter of law by failing to grant

summary judgment on its affirmative defense of laches. It argues that Sobin is equitably
barred from asserting his ownership of the Trionix shares when he waited 18 years from

receiving payment from Trionix to demanding redress for violations of his shareholder

rights. It also argues that the court erred by refusing to grant judgment because the

statute of limitations for Sobin’s claims had expired.

                                             A

       {¶17} Laches is an equitable doctrine that bars the delayed assertion of claims

when the delay has caused circumstances to change so much that it is no longer just to

grant the plaintiff’s claim. “The elements of a laches defense are ‘(1) unreasonable delay

or lapse of time in asserting a right, (2) absence of an excuse for the delay, (3) knowledge,

actual or constructive, of the injury or wrong, and (4) prejudice to the other party.’”

Portage Cty. Bd. of Comm. v. Akron, 109 Ohio St.3d 106, 2006-Ohio-954, 846 N.E.2d

478, ¶ 81, quoting State ex rel. Polo v. Cuyahoga Cty. Bd. of Elections, 74 Ohio St.3d

143, 145, 1995-Ohio-269, 656 N.E.2d 1277. Because laches is a component of equity,

we review claimed error in the application of the doctrine for an abuse of discretion.

Payne v. Cartee, 111 Ohio App.3d 580, 590, 676 N.E.2d 946 (4th Dist.1996).

       {¶18} When denying Trionix’s partial motion for summary judgment on the

defense of laches, the court found there were questions of fact because Sobin maintained

he was the owner of the 655 shares and had no reason to know that there was a question

regarding his ownership status until 2009, when he requested that Trionix supply him

with documentation that would enable him to value his shares.
       {¶19} We find no error in the court’s refusal to grant summary judgment on the

affirmative defense of laches. As the court noted, Sobin had no reason to question his

status as a shareholder until 2009 — when Trionix refused to grant him access to

corporate records. While Sobin had not made any demands on the corporation for many

years, that fact says nothing about his ownership of the stock. Many shareholders like

Sobin quietly retain their stock for investment purposes, content to let their investment

mature.   That investors of this type do not assert claims on corporate directors is

therefore unremarkable.

       {¶20} Trionix also argues that Sobin failed to assert ownership “rights” like

calling meetings of the board of directors or attending shareholder meetings. We are

aware of no general rule that stock ownership can grow stale, much less a rule that

requires shareholders to actively participate in the running of a corporation as a means of

preventing their stock ownership from going stale. Sobin was a member of the Trionix

board of directors until he was removed from the board in a 1997 shareholder meeting

where Lim, acting as majority shareholder, named a new board of directors of his own

choosing. Trionix offered no evidence to show that any other shareholder meetings were

called after 1997. It is disingenuous for it to argue that Sobin had the responsibility to

call for a shareholder meeting post-1997 when no other shareholder of the corporation,

including Lim, was so required.

                                            B
       {¶21} We need not dwell on Trionix’s claim that the 15-year statute of limitations

for written contracts expired, arguing that Sobin’s claims accrued in 1992 when Trionix

failed to hold the annual shareholder meeting but that he did not file suit until 2010. We

agree with the court that Sobin had no reason to doubt his ownership of the shares until

December 2009, when Trionix refused to provide the information he requested. Indeed,

it was not until December 2009 that Trionix, inconsistent with its own records,

manifested any indication that Sobin did not own the shares. On this basis, the court did

not err by refusing to grant judgment on the statute of limitations.

       {¶22} Judgment affirmed.

       It is ordered that appellee recover of appellants his costs herein taxed.

       The court finds there were reasonable grounds for this appeal.

       It is ordered that a special mandate issue out of this court directing the   Cuyahoga

County Court of Common Pleas to carry this judgment into execution.

       A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of

the Rules of Appellate Procedure.

MELODY J. STEWART, PRESIDING JUDGE

MARY J. BOYLE, J., and
MARY EILEEN KILBANE, J., CONCUR