Court Opinion

ID: 4226178
Source: CourtListenerOpinion
Date Created: 2017-12-06 14:08:15.455584+00
Date Added: 2024-06-11T07:47:53.937202
License: Public Domain

[Cite as Stanfield v. On Target Consulting, 2017-Ohio-8830.]
                 IN THE COURT OF APPEALS
             FIRST APPELLATE DISTRICT OF OHIO
                  HAMILTON COUNTY, OHIO

THOMAS MARK STANFIELD,                            :            APPEAL NO. C-160890
                                                               TRIAL NO. A-1406435
  and                                             :
                                                                  O P I N I O N.
ANNA MARIA D’AMICO,                               :

        Plaintiffs-Appellees,                     :

  vs.                                             :

ON TARGET CONSULTING, LLC,                        :

  and                                             :

BERNIE KURLEMANN,                                 :

    Defendants,                                   :

  and                                             :

ROBERT A. DAVIS,                                  :

     Defendant-Appellant.                         :

Civil Appeal From: Hamilton County Court of Common Pleas

Judgment Appealed From Is: Reversed and Cause Remanded

Date of Judgment Entry on Appeal: December 6, 2017

Strauss Troy Co., LPA, Theresa L. Nelson and Christopher J. Groeschen, for
Plaintiffs-Appellees,

Dinsmore & Shohl, LLP, Bryan E. Pacheco and Mark G. Arnzen, Jr., for Defendant-
Appellant.
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M OCK , Judge.

       {¶1}    Plaintiffs-appellees Thomas Mark Stanfield and Anna Marie D’Amico

(“appellees”) filed suit against defendant-appellant Robert A. Davis and others for

breach of contract arising from liability in a foreclosure action. Appellees received a

default judgment against Davis and the others in the amount of $74,662.69.

       {¶2}    In August 2016, appellees moved for an order charging Davis’s alleged

interests in Firehouse Grill, LLC, Firehouse Partners, LLC, and Murody Marketing,

LLC.   Appellees presented documents to demonstrate his membership interests,

including Davis’s 2014 income tax return, which showed income from the three

companies, and records from the Ohio Department of Commerce, Division of Liquor

Control for the years 2011 to 2016 in which the companies had renewed their liquor

licenses listing Davis alternately as “owner,” “manager,” and “partner.”

       {¶3}    In response, Davis presented copies of operating agreements from the

three companies. The operating agreement for Firehouse Grill, LLC, amended on

February 2, 2014, listed only Molly Davis and Jeff Saley as members. The operating

agreement for Firehouse Partners, LLC, executed on February 2, 2014, listed only

Molly Davis and Jeff Saley as members. And the operating agreement for Murody

Marketing, LLC, executed on May 19, 2011, listed only Molly Davis as a member.

       {¶4}    The trial court granted appellees’ motion. In two assignments of

error, Davis now appeals.

              Trial Court Lacked Competent Evidence of Membership

       {¶5}    In his first assignment of error, Davis argues that the trial court erred

when it granted appellees’ motion for a charging order on the limited-liability

companies at issue in this case. We agree.

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         {¶6}   Pursuant to R.C. 1705.19, a judgment creditor of a member of a

limited-liability company may apply to a court of common pleas to charge the

membership interest of the member for payment of an unsatisfied judgment. A

charging order is a judgment creditor's sole and exclusive remedy to satisfy a

judgment against the membership interest of a limited-liability-company member.

R.C. 1705.19(B).    R.C. 1705.01(G) defines “member” as “a person whose name

appears on the records of the limited liability company as the owner of a membership

interest in that company.” R.C. 1705.01(H) defines “membership interest” as “a

member's share of the profits and losses of a limited liability company and the right

to receive distributions from that company.”

         {¶7}   Davis argues that the evidence established that he was not a member

of the limited-liability companies, and therefore had no membership interest to be

charged. He claims that the operating agreements conclusively established this fact.

On the other hand, appellees argue that the documents they presented established

that he was a member. They claim that the records from the Division of Liquor

Control were “records of the limited liability company” as that phrase is used in R.C.

1705.01(G). They contend that, since the Revised Code does limit “records of the

limited liability company” to the company’s operating agreement, the phrase should

include any document “that records or documents past events” of the company.

Essentially, appellees propose that “records of the limited liability company” should

include any documents generated by the company in the normal course of business.

         {¶8}   While we agree that the Revised Code does not define “records of the

limited liability company,” we reject appellees’ proposed definition as unworkably

broad.     The Tenth Appellate District addressed the question in Matthews v.

D'Amore, 10th Dist. Franklin No. 05AP-1318, 2006-Ohio-5745. In that case, the

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court was called upon to determine who the members of a limited-liability company

were. After reciting the definitions of “member” and “membership interest” found in

R.C. 1705.01, the court reasoned that

       [i]t is well-settled that “[t]he paramount consideration in determining

       the meaning of a statute is legislative intent.” State v. Jackson, 102

       Ohio St.3d 380, 2004-Ohio-3206, [811 N.E.2d 68,] ¶ 34, citing State

       ex rel. Asberry v. Payne[, 82 Ohio St.3d 44, 47, 693 N.E.2d 794

       (1998)]. To determine such intent, a court must first look at the words

       of the statute itself. “It is a cardinal rule that a court must first look to

       the language of the statute itself to determine the legislative intent. If

       that inquiry reveals that the statute conveys a meaning which is clear,

       unequivocal and definite, at that point the interpretative effort is at an

       end, and the statute must be applied accordingly.” Provident Bank v.

       Wood[, 36 Ohio St.2d 101, 105-106, 304 N.E.2d 378 (1973)], citing

       Sears v. Weimer[, 143 Ohio St. 312, 55 N.E.2d 413 (1944)]. A court

       must also bear in mind that “[s]tatutes concerning the same subject

       matter must be construed in pari materia.” In re C. W., 104 Ohio St.3d

       163, 2004-Ohio-6411, [818 N.E.2d 1176,] ¶ 7, citing In re Hayes[,79

       Ohio St.3d 46, 48, 679 N.E.2d 680 (1997)]. With these principles in

       mind, we conclude, reading R.C. 1705.01(G) and (H) in pari materia,

       that to be a “member” of a limited liability company, a person's name

       must appear on the company records as one who shares in the

       company's profits and losses and has a right to receive distributions

       from the company.

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Id. at ¶ 32. The Matthews court determined that an operating agreement was the

record that sets forth the membership interests of the parties, and was the

appropriate document to consider when determining the identity of the members of

a limited-liability company. The court recognized that, while articles of organization

and agent-appointment forms may qualify as “company records,” they were not

“records of the limited liability company”—documents that listed “a person’s name as

one who shares in the company’s profits and losses and has a right to receive

distributions from the company.”

       {¶9}    While we conclude that the reading of the statute by the Matthews

court may be unduly narrow, we agree that the consideration of other statutes

regulating limited-liability companies may provide guidance to our inquiry. R.C.

1705.28(A) requires the principal office of a limited-liability company to keep certain

records:

       (1) A current list of the full names, in alphabetical order, and last

       known business or residence address of each member;

       (2) A copy of the articles of organization, all amendments to the

       articles, and executed copies of any powers of attorney pursuant to

       which the articles or the amendments have been executed;

       (3) A copy of any written operating agreement, all amendments to that

       operating agreement, and executed copies of any written powers of

       attorney pursuant to which the operating agreement and the

       amendments have been executed;

       (4) Copies of any federal, state, and local income tax returns and

       reports of the company for the three most recent years;

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      (5) Copies of any financial statements of the company for the three

      most recent years;

      (6) Unless contained in a written operating agreement, a writing

      setting forth all of the following:

              (a) The amount of cash, and a description and statement of the

              agreed value of any other property or services, that each

              member has contributed and has agreed to contribute in the

              future;

              (b) Each time at which and each event on the occurrence of

              which any additional contribution agreed to be made by each

              member is to be made;

              (c) Any right of the company to make to a member, or of a

              member to receive, any distribution that includes a return of all

              or any part of his contribution;

              (d) Each event upon the occurrence of which the company is to

              be dissolved and its affairs wound up.

      {¶10}   We find this list of records instructive. All of the records listed are

records maintained by a limited-liability company for the purpose of its corporate

governance. Limiting the class of records to those documents involving corporate

governance that establish a membership interest in a limited-liability company

works in harmony with statutes like R.C. 1705.28(A), provides the most reliable

information regarding the company’s structure and operation, and gives the trial

court guidance as to which records to examine to determine whose name appears as

an owner “entitled to receive distributions and share in the profits and losses.” We

therefore hold that, when determining if an individual is a member of a limited-

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liability company for the purpose of R.C. 1705.19, the trial court must consider

records maintained by the company for the purpose of its corporate governance that

name those owners entitled to receive distributions and share in the profits and

losses of the company.

       {¶11}   Using this definition of “records of the limited liability company,”

appellees failed to produce evidence that Davis was a member of any of the three

limited-liability companies. A company’s filings with the Ohio Liquor Commission

are documents relating to the company’s business operation, not its corporate

governance. And Davis’s personal income tax returns were not documents from any

of the companies. Documents that are not “records of the limited liability company”

are insufficient as a matter of law to provide a basis for the issuance of a charging

order pursuant to R.C. 1705.19.

       {¶12}   On the other hand, Davis presented copies of the operating

agreements for the three companies which demonstrated that Davis was not a

member of any of the three companies at the time appellees filed their motion for a

charging order. Therefore, the only “records of the limited liability [companies]”

before the trial court established that Davis was not a member of Firehouse Grill,

LLC, Firehouse Partners, LLC, or Murody Marketing, LLC. The trial court erred

when it granted appellees’ motion for a charging order. We sustain Davis’s first

assignment of error

                                  No Hearing Required

       {¶13}   In his second assignment of error, Davis claims that the trial court

erred when it failed to conduct a hearing before granting appellees’ motion for a

charging order. Since the trial court should have denied the motion, Davis’s second

assignment of error is moot.

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                                      Conclusion

       {¶14}   Having determined that the trial court lacked competent evidence

upon which to base its decision to grant appellees’ motion for a charging order, we

reverse the judgment of the trial court, and remand the cause to the trial court with

instructions to overrule the appellees’ motion.

                                                Judgment reversed and cause remanded.

ZAYAS and MYERS, JJ., concur.

Please note:
       The court has recorded its own entry on the date of the release of this opinion.

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