Connelly v. Balkwill, 33473

Citation160 Ohio St. 430,116 N.E.2d 701
Decision Date13 January 1954
Docket NumberNo. 33473,33473
Parties, 52 O.O. 329 CONNELLY et al. v. BALKWILL et al.
CourtUnited States State Supreme Court of Ohio

Syllabus by the Court.

1. Whether an action is legal and, therefore, appealable on questions of law only or equitable and, therefore, appealable on questions of law and fact is determined from the pleadings and the issues made thereby.

2. Where a petition alleges the designation of an agent in whom trust and confidence was reposed, that such agent made false representations to and deceived his principal, that such agent defrauded his principal by becoming a secret purchaser of the principal's property with the sale of which he was entrusted, that such agent then secretly disposed of the property so purchased and from such sale realized large profits, the amount of which is unknown to plaintiff, that an accounting is required with respect to all such transactions of such agent, and that the principal desires such accounting to be had and a judgment against such agent for all such secret and unlawful profits, and where all such allegations are denied by answer, the primary orparamount issues raised are equitable and any money judgment which may result from such accounting is merely incidental to the equitable relief sought.

This cause originated in the Court of Common Pleas of Lake County. It was tried on the amended petition (hereinafter referred to as petition) of the plaintiffs, the answer of the defendants to the petition, and plaintiff's reply.

The petition alleges that the plaintiffs individually were shareholders in Cleveland Frog & Crossing Company, an Ohio corporation; that the capitalization of said corporation consisted of 5,000 shares, all of which were issued and outstanding; and that the plaintiffs either individually or in representative capacity were the owners of 4,450 shares of the said stock.

The petition states that the defendant George W. Balkwill was the owner of 550 shares and was, at all times since its incorporation, a director of the company and that the defendant Gen Corporation is the former Cleveland Frog & Crossing Company, the defendant Balkwill having caused the name thereof to be changed to Gen Corporation.

The petition alleges that 'in the latter part of 1949 defendant George W. Balkwill suggested to all the shareholders that it would be for their best interests to all join together in jointly disposing of their holdings in said Cleveland Frog & Crossing Co. and said defendant, on or about that time and subsequently, proposed that he, as agent for all of the shareholders and on their behalf, would attempt to obtain a purchaser for the business of said company'; that with their consent defendant Balkwill endeavored to promote the sale of the business for the benefit of all the shareholders and urged the plaintiffs to dispose of their stock jointly, stating 'it to be his belief that a fair offer could be best obtained' by sale of the interests jointly; and that defendant Balkwill at meetings with the shareholders thereafter held 'outlined suggested plans of sale and offers he had obtained on behalf of all the shareholders, including said defendant, from certain charitable organizations located in or about Chicago, Illinois.'

The petition alleges that plaintiffs 'confided unto defendant George W. Balkwill the procuring of a purchaser for the business of said Cleveland Frog & Crossing Co. and relied upon his integrity to do nothing to impair the interests confided to him in securing such a purchaser upon a joint and equal basis.'

The petition alleges that on or about July 18, 1950 a written proposal to purchase all the shares of the company at $232.14 per share was submitted to all the shareholders by the defendant Balkwill and an agent named Brooks who was allegedly acting on behalf of a charitable organization; that a meeting of all the shareholders was thereafter held to consider the offer, where defendant Balkwill urged that the offer was a fair one and should be accepted, and offered to accept deferred payments for his, the defendant Balkwill's, shares, if necessary, in order to complete the sale; that 'then and there defendant George W. Balkwill assured all the shareholders that his sole interest was to dispose of his shares in said corporation on the same basis as the other shareholders, and that his interest and the interests of all shareholders were identical and would be identical with respect to such sale'; and that as a result of such representations and assurances the plaintiffs, acting in concert, executed a formal escrow agreement to sell all the shares of the corporation, depositing all shares in escrow, including those owned by the defendant Balkwill.

The petition then alleges that the plaintiff shareholders did receive $232.14 for each of their 4,450 shares from the escrow agent.

The petition alleges that the defendant Balkwill instead of selling his shares as part of the joint enterprise had, prior to the execution of the escrow agreement, entered into a fraudulent understanding with Pettibone Mulliken Corporation of Chicago, whereby he retained his 550 shares and purchased the 4,450 shares owned by plaintiffs, saving a secret and undisclosed profit for himself. Details of the alleged transactions carried on by Balkwill are alleged at length. Included are allegations that Balkwill caused the Cleveland Frog & Crossing Company to open a bank account in Chicago to which he caused the funds of the company to be transferred from the Cleveland bank where the accounts had been maintained, the amounts so transferred being unknown to the plaintiffs but alleged to be in excess of $225,000; that the defendant Balkwill caused the Cleveland Frog & Crossing Company to sell to Pettibone Mulliken Corporation its entire inventory for approximately $450,000 in cash and to sell to that corporation all the company's machinery and fixtures for $400,000, for which latter amount the Cleveland Frog & Crossing Company holds an obligation of Pettibone Mulliken Corporation; that Balkwill further caused the company to lease its land and buildings to Pettibone Mulliken Corporation for a period of 20 years at a total rental of $1,100,000 payable in annual installments of $55,000; that Balkwill further caused the company to mortgage its land and buildings to an insurance company in the amount of $400,000; that 'as a result of defendant's machinations he has received sums of money in an amount not ascertainable by the plaintiffs, but which they believe, and therefore aver, to be more than sufficient to pay to himself the sum of $232.14 per share for his 550 shares as provided for in said escrow agreement; and that in addition said defendant, through his sole ownership and control of said corporation, holds title to said land and buildings and also said $400,000 obligation of said Pettibone Mulliken Corporation.'

Plaintiffs aver that said Balkwill has caused the name of the company to be changed to Gen Corporation and has in some manner caused 4,450 shares of said corporate stock heretofore owned by the plaintiffs to be retired with the result that there are now issued and outstanding only 550 shares of the common capital stock of Gen Corporation and all that stock is owned and held by Balkwill.

The petition then alleges that plaintiffs, 'because of their long association with and/or their relationship to defendant George W. Balkwill, reposed faith and trust in him; that said defendant, in utter disregard of the trust confided in him, exercised every effort to keep from plaintiffs the fact that he was dealing with said Pettibone Mulliken Corporation and was making a secret profit; but that, on the contrary, he always advised plaintiffs that his interest coincided with their interest and that, in the sale of the shares of said Cleveland Frog & Crossing Co., all the plaintiffs and defendant George W. Balkwill were on an equal basis.'

The petition then alleges that an accounting will be necessary to determine the exact nature and extent of the financial transactions among Balkwill, Cleveland Frog & Crossing Company, Gen Corporation and Pettibone Mulliken Corporation to determine the exact amount of the secret and fraudulent profit obtained by defendant Balkwill through his alleged fraudulent scheme.

The prayer of the petition is as follows:

'Wherefore, plaintiffs pray: (1) that an accounting be taken of all improper, unlawful and secret profits made by defendant George W. Balkwill; that said defendant be required to account to plaintiffs for their lawful share of such profits; that the amount thereof be determined and that judgment be entered for the amount found to be due the plaintiffs; (2) that an accounting be taken of the assets of defendant Gen Corporation which represent secret profits procured by defendant George W. Balkwill; that a trust be impressed upon such assets in favor of the plaintiffs to the amount that may be found to be due them; (3) that pending final hearing hereof defendant George W. Balkwill and defendant Gen Corporation be enjoined from disposing of or otherwise alienating the assets of Gen Corporation; that they be enjoined from transferring any of its shares of stock or from issuing certificates for further shares of stock, and from changing in any way its capital structure; and (4) that the plaintiffs have such other and further relief in the premises as the court may deem meet and just.'

The answer of the defendants, after admitting that the plaintiffs owned the stocks as claimed, and that the written proposal to purchase all shares of stock in the Cleveland Frog & Crossing Company at $232.14 per share was submitted, alleges 'that said offer was presented by one William V. Brooks acting independently of defendant George W. Balkwill.'

Defendants allege further 'that said written proposal also gave to the purchaser, William V. Brooks the right, at his election, to purchase only 4,450 shares of said...

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    ...owes his or her employer a duty to act "in the utmost good faith and loyalty toward his * * * employer." Connelly v. Balkwill (1954), 160 Ohio St. 430, 440, 116 N.E.2d 701, 706-707. CCCA presented no evidence to show a breach of that duty. For example, ordinarily employees are considered to......
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