Ronald G. Joseph v. Michael L. Dever
| Decision Date | 20 August 1986 |
| Docket Number | 86-LW-2334,C840628 |
| Parties | Ronald G. JOSEPH, et al., Plaintiffs-Appellants v. Michael L. DEVER, et al., Defendants-Appellees |
| Court | Ohio Court of Appeals |
This is an appeal from a series of four judgments entered by the Court of Common Pleas of Hamilton County in favor of Michael L. Dever (Dever), Marilyn M. Cones, executrix of the estate of Thomas E. Cones (Cones), and Toyota of Cincinnati (T of C), defendants-appellees (Appellees) and against Ronald G Joseph (Joseph) and Pond Realty Co. (Pond), plaintiffs-appellants (Appellants). The four judgments appealed are: 1) a judgment entry granting Appellees' motion for partial summary judgment dated February 10, 1983; 2) a judgment entry denying Appellants' motion for preliminary injunction dated March 1, 1983; 3) a judgment entry granting Appellees' motion for directed verdict dismissing Appellants' claim for damages and specific performance dated March 26, 1984; and 4) a judgment entry granting Appellees' counterclaim for reformation dated July 17, 1984.
This action arises from a dispute as to the meaning of certain sections of an agreement dated February 27, 1973 (1973 Agreement) pursuant to which Joseph, and his brother, Robert Joseph (Robert), sold their shares of T of C stock to Dever and Cones. Joseph's brother, Robert, assigned his interest to Joseph in 1980 and is not a party to this action. Cones died in 1979 and the estate was made a party by Appellants "to assure that full relief could be granted in connection with the transfer of Cones' stock in 1976 and after his death in 1979" (Appellants' brief, page 1, fn. 1).
On September 1, 1981, Joseph filed a complaint, which was subsequently twice amended, alleging that Appellees had breached two provisions of the 1973 Agreement, namely, section 7(d) Right of First Refusal; and section 7(e) Franchise Not To Be Moved. Appellees answered and counterclaimed seeking reformation of section 7(d) and 7(e) of the 1973 Agreement. On July 18, 1982, Appellees filed a motion for partial summary judgment arguing "that the three transfers of stock alleged to have taken place did not trigger a right of first refusal of" Joseph.
On February 7, 1983, Joseph moved for a preliminary injunction to enjoin the threatened movement of the franchise by Dever and T of C in violation of section 7(e) of the 1973 Agreement and Pond was made a party plaintiff.
On February 10, 1983, the trial court granted Appellees' motion for partial summary judgment.
On March 1, 1983, the trial court denied Joseph's motion for preliminary injunction.
On March 26, 1984, the trial court, at the conclusion of Appellants' case, pursuant to Civ.R. 50(A), directed a verdict in favor of Appellees and against Appellants as to the remaining non-movement franchise claims of the Appellants based on section 7(e) and damages resulting therefrom.
On July 17, 1984, Appellees' counterclaim for reformation of section 7(d), Right of First Refusal, of the 1973 Agreement was granted.
Appellants timely appeal and argue the following assignments of error:
ASSIGNMENT OF ERROR NO. I
THE TRIAL COURT ERRED TO THE PREJUDICE OF PLAINTIFF JOSEPH BY GRANTING PARTIAL SUMMARY JUDGMENT DISMISSING THE CLAIMS FOR BREACH OF SECTION 7(d) OF THE 1973 AGREEMENT.
THE TRIAL COURT ERRED TO THE PREJUDICE OF PLAINTIFFS JOSEPH AND POND BY GRANTING DEFENDANTS' MOTION FOR A DIRECTED VERDICT AND TO DISMISS AT THE CLOSE OF THE PLAINTIFFS' EVIDENCE AT TRIAL.
Prior to 1973, Joseph and Robert founded and owned all of the stock of T of C. Joseph also owned, through Pond Realty Co., the building and real estate where T of C was located. On February 27, 1973, Joseph and Robert entered into an agreement (the 1973 Agreement) to sell all of their T of C shares of stock to Cones and Dever.
For the purposes of this action, the salient language of the agreement is:
7.Cones and Dever represent, warrant and covenant, which representations, warranties and covenants shall survive this agreement and the transfer of shares, that
Lease To Be Executed:
(b) Cones and Dever on behalf of T of C shall execute a lease of the premises at 8940 Colerain Avenue on the date of closing. The terms of the lease shall be Six Thousand Dollars ($6,000.00) per month rent with all taxes, insurance and maintenance to be paid by lessee for a period of ten (10) years with an increase in rent after five (5) years to Six Thousand Eight Hundred Dollars ($6,800.00) per month and with a termination clause in favor of the lessor after five (5) years provided one-year notice is given to lessee. (Emphasis added)
(d) Cones and Dever hereby grant to Joseph the right of first refusal of all the stock of T of C at such time as it is to be offered for sale. The consideration to be paid for said stock at such time is to be the net worth of the company less all used car inventory. Joseph shall have sixty (60) days after notice within which to exercise their right of first refusal on all of said stock. (Emphasis added)
Franchise Not To Be Moved:
(e) This entire Agreement is contingent upon securing approval from Mid-Eastern Toyota Distributors, Inc. Joseph and Cones and Dever agree to use their best efforts in securing said approval. Cones and Dever shall operate a Toyota franchise at the present location of T of C and shall not move the franchise without the prior permission of Joseph. No other franchise shall be operated at 8940 Colerain Avenue without the prior permission of Joseph. (Emphasis added)
8. The rights created by this Agreement shall inure to the benefit of, and the obligations created hereby shall be binding upon the heirs, administrators, executors, successors, and assigns of Joseph and of Cones and Dever. (Emphasis added)
Following the execution of the 1973 Agreement, Cones paid for and received 51% of the shares of T of C stock, and Dever paid for and received 49% of those shares. On March 1, 1973, T of C entered into a written lease with Pond. The terms of the 1973 lease were ten years with an increase in rent after five years and with a termination clause exercisable in favor of Pond after five years. On April 28, 1978, Pond and T of C entered into a second lease covering the second five-year term. Cones died in 1979, and Joseph attempted to exercise his right to buy Cones' 51% of T of C stock, and when Appellees rejected Joseph's claim, he filed his complaint. During discovery, Joseph learned that 1) five shares (1%) of T of C stock had been transferred by Cones to Dever in 1976; 2) that the balance of Cones' shares of T of C stock had been redeemed by the corporation pursuant to a "stock purchase agreement" entered into by Cones and Dever in 1978, under the terms of which Cones' estate sold all of his shares of T of C stock to T of C for a sum in excess of Two Hundred Seventy-Five Thousand Dollars ($275,000); 3) Dever in 1980 transferred all of the outstanding shares of T of C stock, which he now owned, to Automanage, Inc. (Automanage), a Dever wholly owned holding company, not a party to the 1973 Agreement. On March 1, 1983, T of C moved its operation and the franchise from the location set out in section 7(e) without the prior permission of Joseph.
Appellant Joseph contends that: 1) each of the three transactions resulting in a transfer of shares of T of C stock either from Cones or Dever required, under section 7(d) of the 1973 Agreement, prior notice to Joseph so as to enable him to exercise or not exercise his first refusal right in connection therewith; 2) T of C was not permitted, pursuant to section 7(e), to move its franchise from the Pond property without Joseph's consent.
Appellees contend 1) that even if the parties intended section 7(d) to be a right of first refusal, none of the transfers which took place triggered its operation; 2) that section 7(d) did not "express the parties true intention and really was a result of mutual mistake of fact"; and 3) that section 7(e) was proscribed by section 7(b).
The trial court resolved every motion and every issue in favor of the Appellees starting with the entry of February 10, 1973, wherein the trial court found:
none of the transfers of stock were either sales or offers for sale within the meaning of the right of first refusal clause. (Emphasis added)
The trial court concluded with its entry of July 17, 1984, wherein it reformed section 7(d) by changing the "Right of First Refusal" to a "Repurchase Obligation." (Known as a "put" in the industry).
We now consider the assignments of error in turn.
We start our consideration of the first assignment of error by stating that we agree with ...
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