State, Dept. of Taxation v. Cemetery Management Service Co. of Pennsylvania

• Decision Date: 18 June 1981
• Parties: , 2 O.B.R. 128 The STATE of Ohio, DEPT. OF TAXATION, Appellee, v. CEMETERY MANAGEMENT SERVICE CO. OF PENNSYLVANIA et al., Appellees; Wilson et al., Appellants.
• Court: Ohio Court of Appeals

Page 115

2 Ohio App.3d 115

440 N.E.2d 1222, 2 O.B.R. 128

The STATE of Ohio, DEPT. OF TAXATION, Appellee, v. CEMETERY MANAGEMENT SERVICE CO. OF PENNSYLVANIA et al., Appellees Wilson et al., Appellants.

Court of Appeals of Ohio, Tenth District, Franklin County.

June 18, 1981.

Syllabus by the Court

1. It is error for the trial court to grant a motion for summary judgment on the theory of res judicata where dismissal of the prior action was based on a settlement agreement which it is claimed was fraudulently induced and when disputed material facts could lead reasonable minds to different conclusions.

2. Leave to amend is a matter for the discretion of the trial court and there is no abuse of discretion in the failure to grant a party's motion for leave to amend before granting the opposing party's motion for summary judgment.

Dale R. England, Jr., Columbus, for Dept. of Taxation.

Graham, Dutro & Nemeth and H. C. Dutro, Jr., Columbus, for Cemetery Mgmt. Service of Pa. et al.

Rockford H. Richardson, Columbus, for Wilson et al.

MOYER, Judge.

This matter is before us on appeal from a judgment of the Court of Common Pleas of Franklin County, granting summary judgment in favor of third-party plaintiffs/third-party defendants.

This action is the third suit involving the parties herein. On May 30, 1974 third-party defendants/third-party plaintiffs A. B. Wilson, Ruth Wilson and Ruth Ann Wilson (Wilsons), brought suit in Perry County, Ohio against defendant/third-party plaintiff/third-party defendant Cemetery Management Service Company of Pennsylvania (CMS, predecessor in interest of appellee CMS East, Inc.). Wilsons claim that, under the terms of a 1973 sales agreement, CMS was obligated to pay certain liabilities, including a tax assessment of the Ohio Department of Taxation in an amount in excess of $16,000, in return for the transfer of certain property. That suit ended in a settlement agreement on March 14, 1975, under which CMS was to pay Wilsons the sum of $25,000 and to assume the tax liability of $18,000.

On March 1, 1976, Wilsons again sued CMS, claiming that CMS had breached the settlement agreement. After six days of trial, this suit was settled. CMS agreed to pay Wilsons the sum of $35,000. Wilsons were to pay the tax liability from the sum they received.

When the tax liability remained unpaid, the Ohio Department of Taxation brought suit against CMS. CMS impleaded Wilsons, claiming that Wilsons were obligated to pay the tax liability under the April 29, 1977 settlement agreement. Wilsons denied liability under the agreement, raising defenses of fraud in the inducement and conspiracy, and counterclaimed against CMS.

On the day before trial, CMS paid the entire tax liability of $18,456.80. The state of Ohio was then dismissed from the case. In place of trial, the court held a short hearing, at which time Wilsons informed CMS that they were expected to mitigate damages by filing for a refund of excess taxes assessed. Wilsons then filed an amended counterclaim, naming as additional defendants appellees George Stoecklein, Bernard Stoecklein, David Strobel, Joseph Huber, Hubert Dutro and special counsel Dale England. On March 18, 1980, the trial court sustained a motion for summary judgment dismissing Wilsons' third-party complaints and counterclaims. Wilsons appeal from that judgment, raising the following two assignments of error in support of their appeal:

"I. The trial court erred in failing to rule on the pending motion for leave to amend before granting appellees' motion for summary judgment.

"II. The trial court erred in granting appellees' motion for summary judgment on the theory of res judicata where dismissal of the prior action was based on an executory agreement which the appellants claim was fraudulently induced and when disputed material facts could lead reasonable minds to different conclusions."

We consider the second assignment of error first. In support thereof, the Wilsons argue that the court erred in granting summary judgment on the theory of res judicata where the basis for the prior resolution of the matter was a settlement agreement, which Wilsons claim was fraudulently induced.

Specifically, the Wilsons allege that CMS and Dale England led Wilsons to believe that the amount of the tax liability could be compromised and reduced from the figure of $18,456.80. According to Wilsons, they would not have agreed to the settlement, had they not believed that they were not incurring the full $18,000 tax...