Court Opinion

ID: 4149768
Source: CourtListenerOpinion
Date Created: 2017-03-02 17:15:32.205636+00
Date Added: 2024-06-11T09:27:30.885319
License: Public Domain

[Cite as Baker v. Manchi, 2017-Ohio-730.]

                           STATE OF OHIO, MAHONING COUNTY
                                 IN THE COURT OF APPEALS
                                      SEVENTH DISTRICT

PHYLLIS BAKER                                  )
                                               )
        PLAINTIFF-APPELLEE                     )
                                               )            CASE NO. 15 MA 0091
VS.                                            )
                                               )                   OPINION
JAMES MANCHI, et al.                           )
                                               )
        DEFENDANT-APPELLANT                    )

CHARACTER OF PROCEEDINGS:                      Civil Appeal from the Court of Common
                                               Pleas of Mahoning County, Ohio
                                               Case No. 2014 CV 582

JUDGMENT:                                      Affirmed.

APPEARANCES:
For Plaintiff-Appellee                         Attorney Kevin Murphy
                                               108 Main Avenue, S.W.
                                               Suite 500
                                               Warren, Ohio 44481

For Defendant-Appellant                        Attorney Stuart Strasfeld
                                               100 East Federal Street
                                               Suite 600
                                               Youngstown, Ohio 44503

JUDGES:

Hon. Mary DeGenaro
Hon. Gene Donofrio
Hon. Cheryl L. Waite

                                               Dated: February 28, 2017
[Cite as Baker v. Manchi, 2017-Ohio-730.]
DeGENARO, J.

        {¶1}    Defendants-Appellants, James Manchi, et al., appeal the trial court's
judgment awarding Plaintiff-Appellee, Phyllis Baker, half of the proceeds from the
sale of various companies in which she had an interest, and for refusing to consider
his cross motion for summary judgment. As Manchi’s arguments are meritless, the
judgment of the trial court is affirmed.
                                Facts and Procedural History
        {¶2}    Phyllis Baker’s husband, Robert Baker, and Manchi, were lifelong
business partners. Starting in the 1970’s, they formed Federal Management
Company, Inc., B&M Professional Services, Inc., Valley View I, LP, Valley View II,
LP, and Austintown Associates, LLC, with Mr. Baker and Manchi each 50%
shareholders and general partners of the companies.
        {¶3}    In 2007, Mr. Baker and Manchi entered into a Buy-Sell agreement to
establish their respective rights and obligations in the event that one of them died or
became incapacitated. The agreement provided in pertinent part: 1) it became
irrevocably binding "upon the death or disability of any Stockholder;" 2) the surviving
stockholder had thirty days to elect to purchase the surviving spouse's interest. In the
event that the surviving stockholder elected not to purchase the surviving spouse's
interest, he was then required to sell the companies; 3) the surviving spouse was to
receive 40% of the distributions from the companies during the first year of the
election trigger date, 50% during the second year, and 60% during the third year and
thereafter until the companies were sold; and, 4) the surviving stockholder owes a
fiduciary duty to the surviving spouse in the event of a sale of the companies.
        {¶4}    After Mr. Baker died in 2009, Manchi did not purchase Baker's interest,
nor did he sell the companies. For the next three years, Manchi continued to operate
the companies though Mrs. Baker made numerous requests that he sell them.
        {¶5}    In August 2012, Manchi unilaterally reduced Mrs. Baker's 60%
distribution entitlement back to 50% despite the plain language of the Buy-Sell
Agreement. As the companies still had not been sold, the parties agreed to a private
mediation in December of 2012.
                                                                              -2-

       {¶6}   In mediation the parties reached an agreement; in exchange for Baker
reducing her 60% distribution to 50%, Manchi agreed to forgo a monthly
management fee and list the companies for sale at $10 million. A minimum offer of $8
million was required to be accepted if one or more parties agreed. The agreement
created an exception to the requirement that Manchi list the properties allowing him
to purchase Baker's interest.
       {¶7}   In March 2013, Manchi sent Baker a formal purchase option agreement
which permitted Manchi to list the properties for sale, get an offer from a third party
and then exercise the right to buy out Baker's interest, which she refused to sign. On
March 14, 2013, Manchi retained a broker to list the companies for sale. Within a few
months, he received approximately a dozen letters of intent in the $9 to $10 million
range. On May 17, 2013, Manchi received an offer of $10.3 million for the companies
and on June 4, 2013, Manchi notified Baker he wanted to purchase her interest for
$2.5 million and retain the balance of the sales proceeds. When the sale closed,
Manchi and Baker each received $2.5 million as a partial distribution.
       {¶8}   The $1.8 million dollar balance from the sale was placed into an escrow
account pending resolution of this matter. Manchi contended that pursuant to the
mediation agreement Baker had received payment in full and that any remaining
monies are his alone. Baker contended that the language of the Buy-Sell Agreement
entitles her to half of the escrowed funds.
       {¶9}   Baker filed a complaint for declaratory judgment and Manchi filed an
answer and counterclaim. Depositions were taken and Baker filed a motion for partial
summary judgment. Manchi filed his own cross motion for partial summary judgment.
       {¶10} The trial court granted summary judgment in favor of Baker finding that
as a 50% general partner that she was entitled to 50% of the sale proceeds. The trial
court determined that Manchi owed a fiduciary duty to Baker pursuant to the terms of
the Buy-Sell Agreement, and Manchi's interpretation of the mediation agreement
directly contradicted both agreements.
                                 Summary Judgment
                                                                                   -3-

       {¶11} In his first of four assignments of error, Manchi asserts:

       The trial court erred in failing to consider Appellant's Cross Motion for
       Summary Judgment.

       {¶12} The trial court set the dispositive motion deadline for March 1st. Baker
filed a motion for partial summary judgment on February 27th, which was scheduled
for hearing on April 6th. Although Manchi requested a continuance of the hearing and
an extension to respond to Baker's motion—and the trial court granted both—he did
not request leave to file his own motion for summary judgment. However, not only did
Manchi filed his opposition brief, he also filed a cross motion for partial summary
judgment.
       {¶13} Civ.R. 56(A) and (B) provide that if an action has been set for pretrial or
trial, parties may move for summary judgment only with leave of court. Absent an
abuse of discretion, an appellate court will not reverse a trial court's decision to deny
a motion for leave to file summary judgment. Blatnik v. Avery Dennison Corp., 148
Ohio App. 3d 494, 2002-Ohio-1682, 774 N.E.2d 282, ¶ 45 (11th Dist.) An abuse of
discretion means the trial court's decision is unreasonable based upon the record;
that the appellate court may have reached a different result is not enough to warrant
reversal. Downie v. Montgomery, 7th Dist. No. 12 CO 43, 2013–Ohio–5552, ¶ 50;
Blatnik, ¶ 45.
       {¶14} Manchi attempts to confuse the issue by arguing that the trial court
granting him an extension to file an opposition brief to Baker's motion inherently
meant that he could file his own motion for summary judgment and provides no case
law to support this argument. Manchi missed the deadline to file a motion for
summary judgment and did not seek leave to do so. The trial court did not abuse its
discretion in failing to consider a motion that was not properly before it. Accordingly,
Manchi's first assignment of error is meritless.

                                 Buy-Sell Agreement
                                                                              -4-

      {¶15} In his second of four assignments of error, Manchi asserts:

      The trial court erred in failing to hold that the parties' Settlement
      Agreement supersedes the Buy-Sell Agreement.

      {¶16} "[O]nce a trial court determines that a matter is appropriate for
declaratory judgment, its holding regarding questions of law are reviewed on a de
novo basis.” Arnott v. Arnott, 132 Ohio St. 3d 401, 2012-Ohio-3208, 972 N.E.2d 586,
¶ 13. If the terms of the contract are determined to be clear and unambiguous, the
interpretation of the language is a question of law reviewed de novo on appeal.
Nationwide Mutual Fire Insurance Company v. Guman Brothers Farm, 73 Ohio St. 3d
107, 108, 1995-Ohio-214, 652 N.E.2d 684. Only in the event that a term of a contract
is determined to be ambiguous will the matter be labeled as a question of fact. Inland
Refuse Transfer Co. v. Browning-Ferris Industries of Ohio, 15 Ohio St. 3d 321, 322,
474 N.E.2d 271 (1984). “When the language of a written contract is clear, a court
may look no further than the writing itself to find the intent of the parties.” Sunoco,
Inc. (R & M) v. Toledo Edison Co., 129 Ohio St. 3d 397, 2011-Ohio-2720, 953 N.E.2d
285, ¶ 37.
      {¶17} Manchi argues that the parties' mediation agreement supersedes the
Buy-Sell Agreement. Baker argues that the trial court was correct in holding that the
Buy-Sell Agreement became irrevocably binding upon Mr. Baker’s death. The Buy-
Sell Argument contains the following provisions:

      Section 2. Term: This agreement will be effective upon execution, and
      will remain in effect until modified, amended or terminated by mutual
      agreement of the parties in writing, however, that upon the death or
      disability of any Stockholder, this Agreement shall become irrevocably
      binding.

      Section 12. Remedies: The Surviving Stockholder and the Surviving
      Spouse/Trustee/Estate will mediate any disputes that arise under this
                                                                               -5-

      Agreement or in regard to The Companies affairs. If mediation does not
      lead to resolution of the dispute, the parties will submit the dispute to
      arbitration. Such mediation and/or arbitration shall be conducted by and
      under the rules of such organization as the parties shall agree and shall
      be binding upon all involved. If the parties to the mediation and/or
      arbitration are unable to agree on a mediator or arbitrator, each party
      will select one person to act as such and the two mediators or
      arbitrators will then select a third person to act as the third mediator or
      arbitrator. NO PARTY CAN APPEAL THE DECISION OF THE
      ARBITRATOR.

      {¶18} By its plain language the Buy-Sell Agreement became irrevocably
binding when Mr. Baker died. However it also contemplated that there may be conflict
between the surviving spouse and the surviving stockholder; as such, Section 12
provided for mediation.
      {¶19} The parties engaged in mediation and reached an agreement which
both Baker and Manchi signed. Manchi asks us to hold that the mediation agreement
supersedes the Buy-Sell Agreement. However, the plain language of the mediation
agreement does not support this notion; Section 6 states that "the Buy-Sell
Agreement is also amended" which clearly indicates that the Buy-Sell Agreement
remained in effect. More fundamentally, the mediation settlement was just that: a
vehicle for the parties to resolve their dispute regarding the irrevocable terms of the
Buy-Sell Agreement. And as borne out by this litigation, the issues were not resolved
via mediation.
      {¶20} The trial court correctly held that the Buy-Sell Agreement was
irrevocably binding and the mediation agreement was not a superseding document.
Accordingly, Manchi's second assignment of error is meritless.

                               Mediation Agreement
      {¶21} In his third of four assignments of error, Manchi asserts:
                                                                              -6-

      The trial court erred in failing to determine that the parties' Settlement
      Agreement included an unconditional and irrevocable option in favor of
      James P. Manchi.

      {¶22} Within the mediation settlement are two relevant provisions:

             3. The listings shall be for periods not to exceed 1 year and
      relisted consecutively with the same or different realtor upon same
      terms. Listing Agreement shall have exception for Manchi's option set
      forth in #8.

             8. Manchi has option to purchase all of Baker's interests in the
      companies for 2.5M for 1 year from 1/1/13 and for 2.75M from 1/1/14
      through 6/30/14.

      {¶23} Manchi erroneously argues that he exercised his option "months prior
to reaching an agreement to sell the apartment complexes" and that there were no
limits placed on him regarding selling the properties after expressing his intent to
purchase Baker's interest.
      {¶24} The Buy-Sell Agreement not only placed limits on Manchi, it imposed
upon him a fiduciary duty to Baker. Further, the plain language of the mediation
agreement provided that Manchi's option to purchase was an exception; in the event
Manchi exercised his option to purchase Baker's interest, the listing agreement
terminated. As such, the trial court correctly held that Manchi could not
simultaneously sell the companies and buy out Baker's interest.           Accordingly,
Manchi's third assignment of error is meritless.
                                   Fiduciary Duty
      {¶25} In his final of four assignments of error, Manchi asserts:
                                                                               -7-

       The Trial Court erred in holding that Appellant breached fiduciary duties
       when Appellee made no such claim in her Complaint and presented no
       such argument in her Motion for Summary Judgment.

       {¶26} Manchi argues that Baker has waived the fiduciary duty argument
because it was not included in the complaint and motion for summary judgment.
Baker argues that she filed a complaint for declaratory judgment and the duty was
contractual as it was contained in the Buy-Sell Agreement. She further contends that
she included the fiduciary duty argument in the motion for summary judgment.
       {¶27} Baker attached a copy of the Buy-Sell Agreement to her declaratory
judgment complaint in which she requested judgment "pursuant to the terms of the
Buy-Sell Agreement." She specifically pled: "[t]he surviving stockholder shall have the
primary and fiduciary responsibility to sell The Companies." Further, she specifically
argued in her summary judgment motion that the Buy-Sell Agreement contained a
provision that the surviving shareholder owes the surviving spouse a fiduciary duty.
Thus, Baker did not waive this argument, and the trial court correctly held that the
Buy-Sell Agreement imposed a fiduciary duty upon Manchi when he was selling the
companies. Accordingly, Manchi's fourth assignment of error is meritless.
       {¶28} As the trial court did not err in failing to consider Manchi's cross motion
for summary judgment, nor err in awarding Baker half of the proceeds from the sale
of the companies, the judgment of the trial court is affirmed.

Donofrio, J., concurs.

Waite, J., concurs.