Maiben v. Waver
| Decision Date | 07 February 2013 |
| Docket Number | A1105192 |
| Parties | JAMES MAIBEN, Plaintiff, v. KELVIN WAVER, et al., Defendants |
| Court | Ohio Court of Common Pleas |
Filed February 8, 2013
DECISION
This case is before the Court on Defendants' Motion for Summary Judgment. For the reasons discussed below, that motion is granted in part and denied in part. This case is also before the Court on Plaintiffs Motion to Compel. For the reasons discussed below, that motion is denied.
Summary judgment is appropriate when there are no genuine issues of material fact that remain to be litigated and the moving party is entitled to judgment as a matter of law. Civ. R. 56(C); Celotex Corp. v. Catrett , 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Summary judgment should be granted if the pleadings, depositions, answers to interrogatories, written admissions, affidavits, transcripts of evidence in the pending case, if any, timely filed in the action and construed most strongly in favor of the non-moving party, show that there is no genuine issue as to any material fact. Civ. R. 56(C). The burden of establishing that the material facts are not in dispute, and that no genuine issue of fact exists, is on the party moving for summary judgment. Vahila v. Hall , 77 Ohio St.3d 421, 1997 Ohio 259, 674 N.E.2d 1164 (1997). If the moving party asserts that there is an absence of evidence to establish an essential element of the non-moving party's claim, the moving party cannot discharge this burden with a conclusory allegation, but must specifically point to some part of the record which affirmatively demonstrates this absence of evidence. Dresher v. Burt , 75 Ohio St.3d 280, 1996 Ohio 107, 662 N.E.2d 264 (1996).
The Ohio Supreme Court has established three factors to be considered upon a motion for summary judgment. These three factors are:
(1) That there is no genuine issue as to any material fact; (2) that the moving party is entitled to judgment as a matter of law; and (3) that reasonable minds can come to but one conclusion, and that the conclusion is adverse to the party against whom the motion for summary judgment is made, who is entitled to have the evidence construed most strongly in his favor.
Bostic v. Connor , 37 Ohio St.3d 144, 524 N.E.2d 881 (1988) (quoting Harless v. Willis Day Warehousing Co ., 54 Ohio St.2d 64, 375 N.E.2d 46 (1978)).
Once a motion for summary judgment has been made and supported as provided in Civ, R. 56(C), the nonmoving party then has a reciprocal burden to set forth specific evidentiary facts showing the existence of a genuine issue for trial and cannot rest on the allegations or denials in the pleadings. Wing v. Anchor Media, Ltd. Of Texas , 59 Ohio St.3d 108, 111, 570 N.E.2d 1095 (1991).
In 2007, Plaintiff and Defendant Kelvin Waver began discussing forming a business together in order to buy property to renovate and later rent. Plaintiff alleges that he and Defendant Waver agreed to form an LLC in order to carry out these plans. Plaintiff alleges there was an agreement that each would own 50% of the LLC and both Plaintiff and Defendant Waver would provide labor on the homes. Defendants and Plaintiff began purchasing homes and performing work renovating the homes.
Plaintiff alleges that he signed Articles of Organization for the LLC, but that this document has not been located. The Articles of Organization on file with the Secretary of State and produced in this case has only the signatures of Defendant Kelvin Waver and Gloria Waver affixed to it. Plaintiff alleges that Defendants have failed to execute an Operating Agreement in order to form the LLC as agreed.
Defendants argue that the agreement between the parties was merely an agreement to agree. Further, Defendants argue that a condition to Plaintiffs involvement in Defendant MKG Investments was that Plaintiff resolve certain monetary liabilities. Defendants contend that this condition was never met, and therefore Defendants had no liability.
Defendants move for summary judgment on Plaintiffs claims for breach of contract, breach of implied in fact contract, breach of good faith and fair dealing, promissory estoppel and accounting, as well as certain damage claims.
Plaintiff argues that Defendants have breached the contract to form an LLC by failing to execute an Operating Agreement. Defendants argue that Plaintiff cannot enforce an agreement to agree.
A party who signs Articles of Organization as a member of an LLC but does not sign the operating agreement does not have a membership interest in that LLC. Matthews v. D'Amore , 2006 Ohio 5745 (10th Dist. 2006). In Matthews , the defendants were in discussions to become part of an LLC and signed the Articles of Organization on a form that identified the defendants as members. Id. at ¶ 4 . However, the defendants did not execute the Operating Agreement. Id. at ¶ 6. The plaintiffs were the only signatories to the Operating Agreement and the only named members. Id. The Court found that a member of an LLC must appear on company records as a member who shares in profits and losses and receives distribution. Id. at ¶ 33. The Court also found that the Operating Agreement, not the Articles of Organization, determines the membership and rights of the parties. Id. at 36.
Plaintiff did not sign an Operating Agreement for the LLC. Therefore, he is not a member of the LLC. Plaintiff alleges he signed an Articles of Organization, but has not produced this signed document.
Plaintiff, however, is not claiming to actually be a member of the LLC. Rather, Plaintiff claims Defendant Kelvin Waver agreed to form an LLC with him, and subsequently breached that agreement.
Plaintiff alleges he and Defendant Waver agreed to form an LLC with each owning a 50% interest for the purpose of renovating rental properties, and that Defendants breached that agreement by refusing to enter into an Operating Agreement with him. Defendants argue there were conditions precedent to Plaintiffs membership in the LLC, and that further formalization in the form of an operating agreement was required.
The enforceability of an agreement to agree depends on whether the parties have manifested an intention to be bound by its terms and whether these intentions are sufficiently definite to be specifically enforced. Westwinds Development Corp. v. Outcalt , 2009 Ohio 2948 at ¶ 32 (11th Dist. 2009) (citing Normandy Place Associates v. Beyer , 2 Ohio St.3d 102, 2 Ohio B. 653, 443 N.E.2d 161 (1982)). The Westwinds Court stated:
Where an agreement contemplates further action towards formalization or if an obligation to become binding rests on a future agreement to be reached by the parties, so that either party may refuse to agree, there is no contract. In other words, as long as both parties contemplate that something remains to be done to establish a contractual relationship, there is no binding contract.
Id. at ¶ 37 (citations omitted).
In this case, Plaintiff argues that there was no future agreement to be reached. Plaintiff alleges that the terms of the agreement were defined: Plaintiff and Defendant Kelvin Waver were to own a 50% share in an LLC created for the purpose of purchasing houses in order to renovate and rent those houses. Defendants argue that there was a condition precedent to this agreement, and that Plaintiff did not fulfill that condition. Additionally, Defendants argue that any agreement between the parties cannot be enforced, because an operating agreement still needed to be formalized and that operating agreement would require additional terms that the Court cannot define for the parties.
There is a factual dispute in the case as to the existence of a condition precedent. Defendant Kelvin Waver testified in his deposition that the parties agreed Plaintiff could not become a member of the business and enter into any agreement regarding the business until his tax liabilities were resolved. Plaintiff, on the other hand, stated in his affidavit that his tax issues were not even discussed until 2010, long after the parties agreed to form the LLC.
However, regardless of the factual dispute over Defendants' condition precedent argument, the Court finds that any agreement to agree between the parties cannot be enforced. To do so would require the Court to enforce an operating agreement with terms not agreed to by the parties.
While R.C. 1705 fills in some provisions an operating agreement may cover, courts have found operating agreements to be essential to determining the rights and obligations of members of an LLC. The Court in Matthews, supra (quoting McConnel v. Hunt Sports Enterprises , 132 Ohio App.3d 657, 725 N.E.2d 1193 (10th Dist. 1999) stated:
" Operating agreement" is defined in R.C. 1701.01(J) as all of the valid written or oral agreements of the members as to the affairs of a limited liability company and the conduct of its business. R.C. 1705.03 sets forth the various activities limited liability companies may engage in and indicates that such are subject to the company's articles of organization and operating agreement. Indeed, many of the statutory provisions in R.C. Chapter 1705 governing limited liability companies indicate they are, in various ways, subject to and/or dependent upon related provisions in the operating agreement.
For example, R.C. 1705.10 states that the allocation of profits and losses shall be allocated in the manner provided in writing in the operating agreement. Likewise, R.C. 1705.12 gives a member the right upon withdrawal to receive any distribution the member is entitled to under the operating agreement. Voting rights are also determined under the operating agreement, as stated in R.C. 1705.26.
The agreement between the parties was to form an LLC, An LLC is governed by an operating agreement, and, as stated above, certain provisions of R.C. 1705 are dependent on provisions of the...
To continue reading
Request your trial