Ernest L. Kiraly v. Francis A. Bonanno, Inc., 97-LW-4412

• Decision Date: 29 October 1997
• Docket Number: 18250,97-LW-4412
• Parties: ERNEST L. KIRALY, et al., Appellants v. FRANCIS A. BONANNO, INC., Appellee C.A.
• Court: Ohio Court of Appeals

ERNEST L. KIRALY, et al., Appellants v. FRANCIS A. BONANNO, INC., Appellee

No. 18250

97-LW-4412 (9th)

Court of Appeals of Ohio, Ninth District Summit

October 29, 1997

APPEAL FROM JUDGMENT ENTERED IN THE COMMON PLEAS COURT COUNTY OF SUMMIT, OHIO, CASE NO. CV 95-03-0799

This cause was heard upon the record in the trial court. Each error assigned has been reviewed and the following disposition is made:

OPINION

SLABY Judge.

Appellants, Ernest Kiraly, d/b/a Kiraly Wine Company ("Kiraly") and Kiraly Wine Company, Inc. appeal from the Summit County Court of Common Pleas' dismissal of the termination of franchise agreement action against Bonanno, Inc., d/b/a Allied Wines ("Bonanno"). We affirm.

Kiraly Wine Company, Inc. was incorporated on January 11, 1988, with Ernest Kiraly as its sole shareholder, officer and director. In 1989, the corporation started distributing wine for Bonanno. On January 18, 1993, Bonanno gave notice to the corporation that it no longer wanted the corporation to distribute its products as of March 22, 1993.

Kiraly Wine Company, Inc. voluntarily applied for dissolution on September 30, 1993. The corporation was granted dissolution in December of 1993. Ernest Kiraly filed the corporation's final tax return in March of 1994.

On March 1, 1995, Kiraly filed a complaint against Bonanno for terminating a franchise agreement without just cause. Bonanno filed an answer and asserted as one of its defenses that Kiraly failed to state a claim upon which relief could be granted. Thereafter, Bonanno moved for, and Kiraly opposed summary judgment based on substantive franchise law. In June 1996, Bonanno moved to dismiss the case and argued that Kiraly lacked the capacity to sue. Kiraly submitted a memorandum in opposition to this motion.

On June 25, 1996, Kiraly filed an amended complaint which included Kiraly Wine Company, Inc. as a party. Thereafter Bonanno moved for dismissal of the case based on a lack of capacity to sue. Bonanno answered the amended complaint and averred that Kiraly failed to state a claim upon which relief could be granted and that Ernest Kiraly, d/b/a Kiraly Wine Company, and Kiraly Wine Company, Inc. lacked standing to sue. Appellants responded to Bonanno's motion to dismiss. On November 11, 1996, the trial court granted Bonanno's motion to dismiss and found that Kiraly, d/b/a Kiraly Wine Co., and the Kiraly Wine Company, Inc. lacked the capacity to sue

Appellants timely appeal the trial court's Civ.R. 12(B)(6) dismissal and raise three assignments of error.

ASSIGNMENT OF ERROR I

The trial court erred in granting defendant's motion to dismiss as to plaintiff, Kiraly Wine Company, Inc.

ASSIGNMENT OF ERROR II

The trial court erred in finding plaintiff-appellant, Ernest L. Kiraly d/b/a Kiraly Wine Company, did not have the capacity to bring an action against defendant-appellee.

ASSIGNMENT OF ERROR III

The trial court erred in finding plaintiffs, Kiraly Wine Company, Inc. and Ernest L. Kiraly d/b/a Kiraly Wine Company, lacked the capacity to bring an action pursuant to ORC 1701.88(B) or as successor in interest of Kiraly Wine Company, Inc.

In order for a court to dismiss a complaint for failure to state a claim upon which relief can be granted it must appear beyond doubt from the complaint that the plaintiff can prove no set of facts entitling him to recovery. O'Brien v. Univ. Community Tenants Union (1975), 42 Ohio St.2d 242, syllabus. See Civ.R. 12(B)(6). See, also, Greeley v. Miami Valley Maintenance Contrs., Inc. (1990), 49 Ohio St.3d 228, 230. In construing a complaint upon a motion to dismiss for failure to state a claim, a court must presume that all factual allegations of the complaint are true and make all reasonable inferences in favor of the non-moving party. Mitchell v. Lawson Milk Co. (1988), 40 Ohio St.3d 190, 192. Because only legal issues are presented, we review an entry of a dismissal on the pleadings de novo. Plazzo v. Nationwide Mut. Ins. Co. (June 24, 1992), Summit App. No. 15370, unreported, at 3.

All three assignments of error refer to the interpretation of R.C. 1701.88. The trial court found in dismissing the action that both Ernest Kiraly d/b/a Kiraly Wine Company and Kiraly Wine Company, Inc. lacked the capacity to sue. In its response to Bonanno's motion to dismiss, Appellants argued that both entities possessed the capacity to sue pursuant to R.C. 1701.88. R.C. 1701.88(D) allows for successors in interest to a corporation to sue. R.C. 1701.88(B) allows a dissolved corporation to sue. Assuming arguendo that Ernest Kiraly d/b/a Kiraly Wine Company was a successor in interest under R.C. 1701.88(D), his claim fails for the same reason the corporation's claim under R.C. 1701.88(B) fails. Both of these statutory provisions require that the action be maintained for the sole purpose of winding up the corporation.

R.C. 1701.88 provides:

(A) When a corporation is dissolved voluntarily, when the articles of a corporation have been canceled, or when the period of existence of the corporation specified in its articles has expired, the corporation shall cease to carry on business and shall do only such acts as are required to wind up its affairs, *** and for such purposes it shall continue as a corporation.

(B) Any claim existing or action or proceeding pending by or against the corporation or which would have accrued against it may be prosecuted to judgment, with right of appeal as in other cases, but any proceeding, execution, or process, or the satisfaction or performance of any order, judgment, or decree, may be stayed as provided in section 1701.89 of the Revised Code.

***

(D) The directors of the corporation and their survivors or successors shall act as a board of directors in accordance with the regulations and bylaws until the affairs of the corporation are completely wound up. Subject to the orders of courts of this state having jurisdiction over the corporation, the directors shall proceed as speedily as is practicable to complete winding up of the affairs of the corporation and, to the extent necessary or expedient to that end, shall exercise all the authority of the corporation. ***

Kiraly claims that under R.C. 1701.88(B), the corporation possesses the capacity to sue. Kiraly further argues that under R.C. 1701.88(D), Ernest Kiraly d/b/a Kiraly Wine Co. maintains the authority to sue as a successor in interest.

The Ohio Supreme Court has held that "a corporation continues to exist for the purpose of winding up its affairs even after it has filed a certificate of dissolution. (Section 1701.88(A), Revised Code, applied.)" Commonwealth Telephone Co. v. Bowers (1962), 174 Ohio St. 141, syllabus. See Diversified Property Corp. v Winters Natl. Bank & Trust Co. (1967), 13 Ohio App.2d 190, 193. The continued existence of a corporation is limited to the purpose of winding up of its affairs. See Mack Constr. Dev. Corp. v. Austin Smith Constr. Co. (1989), 65 Ohio App.3d 402, 405; Columbia Real Estate Title Ins. Co. v. Columbia Title Agency, Inc. (1983), 11 Ohio App.3d 284, 286; Diversified Property Corp. v. Winters Natl. Bank & Trust Co., 13...