Kenneth R. Matheny v. Ohio Bancorp
| Decision Date | 30 December 1994 |
| Docket Number | 94-T-5022,94-LW-0802 |
| Parties | KENNETH R. MATHENY, et al., Plaintiffs-Appellants, v. OHIO BANCORP, et al., Defendants-Appellees. CASE |
| Court | Ohio Court of Appeals |
HON DONALD R. FORD, P.J., HON. JUDITH A. CHRISTLEY, J., HON ROBERT A. NADER, J.
ATTY CHARLES L. RICHARDS, 159 E. Market, #300, Warren, OH 44481 (For Plaintiffs-Appellants)
ATTY. PAUL P. EYRE, ATTY. RONALD S. OKADA, ATTY. DANIEL P. MASCARO, 3200 National City Center, 1900 East 9th Street, Cleveland, OH 44114 (For Defendants-Appellees)
This appeal arises from a judgment of the Trumbull County Court of Common Pleas, wherein the court dismissed the action for lack of standing to bring suit.
Appellants, Kenneth R. and Joan Matheny, on behalf of themselves and all other similarly situated shareholders of the McKinley Bank ("McKinley"), filed a complaint on August 2, 1993 against appellees, Ohio Bancorp ("Bancorp") and Dollar Savings and Trust Co. ("Dollar"). Under their first claim for relief, appellants alleged that appellees breached a reorganization and merger agreement with McKinley, under which McKinley would merge with and into Dollar. Appellants sought money damages claiming that appellees' alleged breach adversely affected the value of their McKinley stock.
On September 1, 1993, appellees filed a motion to dismiss the complaint on the basis that appellants lacked standing to file a class action on the merger agreement entered into by appellees and McKinley and which was allegedly breached by appellees. At the hearing on appellee's motion, the trial court granted appellants leave to file an amended complaint while reserving its ruling on the motion.
On October 8, 1993, appellants filed their amended complaint, and on October 22, 1993, appellees filed their motion to dismiss the amended complaint. On December 13, 1993, appellants filed their memorandum in opposition to this motion, and a hearing was held on this motion on December 15, 1993. At this time, appellants dismissed without prejudice their second claim for relief directed against McKinley's directors. On December 27, 1993, the trial court dismissed the remaining count at appellants' costs, holding that appellants lacked standing to maintain their direct action against appellees for the alleged breach of the Plan of Reorganization and/or the Merger Agreement. The court further concluded that appellants' complaint must also be dismissed on the alternative ground that appellants could not, as a matter of law, be considered third-party beneficiaries of the agreement. This appeal timely followed.
Before this court, appellants argue that the trial court erred in dismissing their amended complaint for lack of standing because the alleged injury was sustained by the McKinley shareholders personally, and because their complaint raised the factual issue of whether appellants were intended to benefit personally as third-party beneficiaries of the merger agreement entered into by McKinley and appellees.
In ruling upon a motion to dismiss for failure to state a claim upon which relief can be granted, a court must presume that all factual allegations set forth in the complaint are true, and must make all reasonable inferences in favor of the non-moving party. Mitchell v. Lawson Milk Co. (1988), 40 Ohio St.3d 190, 192. Such a motion should be granted only if it appears beyond doubt from the complaint that the plaintiff can prove no set of facts entitling him to recovery. Greeley v. Miami Valley Maintenance Contrs. Inc. (1990), 49 Ohio St.3d 228.
The trial court based its holding of no standing on the decision of the Supreme Court of Ohio in Adair v. Wozniak (1986), 23 Ohio St.3d 174, wherein the court held:
"A plaintiff-shareholder does not have an independent cause of action where there is no showing that he has been injured in any capacity other than in common with all other shareholders as a consequence of the wrongful actions of a third party directed towards the corporation." Id. syllabus.
In Adair, shareholders brought suit individually against a bank and certain individuals who had agreed to secure a loan for the corporation. The shareholders alleged that those defendants had conspired to deprive the corporation of its property in connection with a sale and leaseback agreement.
The Supreme Court of Ohio, in upholding summary judgment granted in favor of defendants, concluded that:
"*** a court must preliminarily determine if the pleadings state injury to the plaintiff upon an individual claim as distinguished from an injury which indirectly affects the shareholders or affects them as a whole." Id. at 176. (Emphasis added.)
Although the plaintiff-shareholders in Adair had personally guaranteed loans made to the corporation and had alleged injuries including reduction in income, diminution in the value of their stock, and the accumulation of personal debt and liability from the corporation's decline, the court found that the loans guaranteed by the plaintiff-shareholders were unrelated to the sale and leaseback transaction at issue, and the shareholders' alleged injuries were "not based upon any independent contractual relationship plaintiffs had with defendants." Id. at 177.
The Supreme Court of Ohio concluded:
"Where the defendant's wrongdoing has caused direct damage to corporate worth, the cause of action accrues to the corporation, not to the shareholders, even though in an economic sense real harm may well be sustained by the shareholders as a result of *** diminution in the value of ownership, ***." Id. at 178. (Footnote omitted.)
Although appellants maintain that the instant action is distinguishable from Adair, courts in this state have consistently applied Adair for the proposition that only a corporation can complain of an injury sustained by its shareholders as a whole. See Godale v. Chester Twp. Bd. of Trustees (June 26, 1992), Geauga App. No. 91-G-1673, unreported, at 4 () (Emphasis added.); Grand Council of Ohio v. Owens (1993), 86 Ohio App.3d 215, 221 (); Cousins v. Brownfield (1992), 83 Ohio App.3d 782, 791 ()(Emphasis added.); Weston v. Weston Paper & Mfg. Co., (May 11, 1994), Montgomery App. No. 13815, unreported, at 15 ("*** claims for the diminution of the value of *** stock *** are typically derivative in nature.")
In Hershman's, Inc. v. Sachs-Dolmar Div. (1993), 89 Ohio App.3d 74, 77, the court noted:
Appellants submitted Weston as additional authority in support of their position that this action was not derivative in nature. While appellants find the reasoning put forth in the dissent in Weston to be supportive, we find the majority opinion to be even more persuasive in support of the appellees' position. Upon review of appellants' amended complaint, we conclude that the trial court did not err in finding that "appellants are alleging injuries that they have in common with all other McKinley shareholders and not any type of independent or separate injury."
In their reply brief, appellants argue that Adair does not control the instant action because their complaint alleged "a direct and independent contractual relationship" between each appellant and the appellees, and that each appellant suffered a "direct and independent injury" to the value of their shares of stock.
The trial court specifically found, however, that appellants' amended complaint did not allege that their injuries were based upon any independent contractual relationship with appellees. Our review of the amended complaint supports the trial court's finding on this issue.
We conclude that the trial court properly applied the law as set forth in Adair in finding that appellants could prove no set of facts in support of their claim which would entitle them to relief.
Appellants also argue that the trial court erred when it concluded that appellants were not intended third-party beneficiaries of the merger agreements. Specifically, appellants contend that the language contained in the merger agreements was, at a minimum, ambiguous as to this issue, and thus it was improper for the trial court to grant appellees' Civ.R. 12(B)(6) motion.
The trial court without objection(fn1) relied on the following provision of the reorganization agreement to conclude that appellants were not intended third-party beneficiaries of the agreements signed by appellees and McKinley:
"7.2 *** Nothing in this Agreement or the Merger Agreement, expressed or implied, is intended to confer upon any party, other than the parties hereto and thereto, and their respective successors, any rights, remedies, obligations or liabilities."
The court concluded that there was no ambiguity in the language of the reorganization or merger agreements, and that appellants could not, as a matter of law, be considered third-party beneficiaries of the...
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