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North Kenova Development Co., Inc. v. Wilson

November 21, 2008

NORTH KENOVA DEVELOPMENT CO., INC., ET AL., PLAINTIFFS-APPELLANTS,
v.
WILLIAM F. WILSON, ET AL., DEFENDANTS-APPELLEES.



The opinion of the court was delivered by: McFarland, J.

DECISION AND JUDGMENT ENTRY

{¶1} Appellants, North Kenova Development Co., Inc., et al. appeal from the Lawrence County Court of Common Pleas grant of summary judgment in favor of Appellees, William Wilson, C. Richard Wilson, George Wilson and Helen Wilson. Appellants raise a single assignment of error for our review, contending that the trial court erred in granting Appellees' motion for summary judgment based on its finding that a corporation whose charter has been cancelled for over seventeen years remained a de facto corporation. Because we find that Appellants lack standing to challenge the actions of Appellees' corporation and have failed to demonstrate the existence of a genuine issue of material fact precluding a grant of summary judgment in Appellees' favor, we conclude that Appellees were entitled to judgment as a matter of law and affirm the decision of the trial court.

FACTS

{¶2} Based upon an affidavit filed by Appellee, C. Richard Wilson, North Kenova Development Co., Inc., hereinafter "original corporation," was originally formed on February 7, 1930, by George and Helen Wilson. George and Helen Wilson had six children, William F. Wilson, C. Richard Wilson, George Phillip Wilson, Kathleen Wilson, Timothy Wilson and Thomas Wilson, who eventually took over ownership of the business, some time prior to 1990. Unbeknownst to the owners, the original corporation's articles of incorporation were cancelled by the Secretary of State of Ohio in 1990, apparently for failure to either pay franchise taxes or file corporate franchise tax returns.*fn1 Thus, the original corporation was operated through the time of the filing of the present lawsuit, which brought to the owners attention the fact that the articles of incorporation had been cancelled. The operations of the original corporation have, over the years, consisted of holding real estate, operating a mobile home park and operating a driving range.

{¶3} At some point in 1996, a disagreement developed among the sibling owners of the original corporation, which resulted in the filing of two lawsuits against Timothy and Thomas Wilson. One of the lawsuits was filed by C. Richard Wilson, George Wilson and William Wilson, siblings of Timothy and Thomas Wilson. The other lawsuit was filed by Helen Wilson, mother of Timothy and Thomas Wilson. The original corporation, North Kenova Development Co., Inc., was joined as an additional party. The lawsuits apparently alleged that Timothy and Thomas had improperly operated the corporation and had taken funds from the corporation.*fn2 In a Magistrate's Decision entered on October 21, 1998, in case number 96-871*fn3, the Lawrence County Court of Common Pleas removed Timothy and Thomas Wilson from their positions as officers, directors and shareholders of the original corporation and transferred the common stock owned by them back to the corporation. As a result of this action by the court, the sole owners, shareholders, officers and directors of the original corporation, North Kenova Development Co., Inc., became William F. Wilson, C. Richard Wilson, George Phillip Wilson and Kathleen Wilson. An amended judgment entry was issued by the trial court on December 15, 1998, adopting the decision of the magistrate and constituted a final and appealable order. Neither Timothy nor Thomas Wilson appealed the decision.*fn4

{¶4} Because the articles of organization of the original corporation were cancelled in 1990, the original corporation's name, North Kenova Development Co., Inc., became available for use. Appellants herein, on October 12, 2005, registered as a corporation in the state of Ohio under the name North Kenova Development, Co., Inc., hereinafter "new corporation," the exact same name that was held by the original corporation since 1930 and the same name under which the original corporation continued to operate until the filing of this lawsuit. Appellants also registered a new corporation by this name in West Virginia as well. Other than having the same name as the original corporation, there is no evidence in the record to suggest that Appellants, new corporations, have any connection with or ownership interest in the original corporation that was operated by Appellees.

{¶5} Nevertheless, on May 4, 2007, the new corporations, Appellants herein, filed a complaint against William F. Wilson, C. Richard Wilson, George Wilson and Helen Wilson seeking ejectment and an accounting. Appellants alleged, in their complaint, that Appellees, owners of the original corporation, had taken possession of real property owned by Appellants to which Appellants were entitled to immediate possession. It appears that the real property claimed to be owned by Appellants, the new corporation, was actually property owned by the original corporation. Appellants seem to claim that because they have the same name as the original corporation, they are the original corporation, and, as a result, own the original corporation's property. In addition to the claim for ejectment, Appellants also sought an accounting from Appellees, owners of the original corporation, for any and all funds received as a result of operating under the name of North Kenova Development Co., Inc.

{¶6} Appellees denied the allegations in the complaint and requested dismissal of the action. In their motion to dismiss, Appellees argued that Appellants, newly formed corporations not even coming into existence until after deeds conveying certain real property to the original corporation were executed and having no connection with the original corporation, lacked standing to seek ejectment and an accounting.

{¶7} During oral argument at the trial court level on the motion to dismiss, Appellees argued that while R.C. 1701.88 governs dissolution of a corporation and requires that after cancellation of its articles of organization a corporation either wind-up its affairs or seek reinstatement, the revised code also provides that only an officer, director, shareholder or creditor of a corporation has standing to force a dissolution. Appellees further argued that because Appellants herein held none of those positions in relation to the original corporation, that they lacked standing to complain of the original corporation's continued operations and did not have a right to ownership of its property or to demand an accounting.

{¶8} Appellants, in their memorandum contra Appellees' motion to dismiss, simply stated that it, "however is "North Kenova Development Company, Inc., which is the only corporation by that name in Ohio and West Virginia. Clearly, it has standing to assert claims on its own behalf." Curiously, Appellants seemed to claim that their newly formed 2005 corporations were, in actuality, the original corporation that was formed in 1930. Although the trial court overruled Appellees' motion to dismiss, it noted that "there are no sworn affidavits or depositions that address the salient issues. Plaintiff's original Complaint alleges that it is a part owner of real estate, but makes no allegation that it is a Director, Shareholder, or creditor of the Defendant corporation, as required by R.C. 1701.89."

{¶9} Subsequently, both parties moved the court for summary judgment. Appellants' motion for summary judgment was denied and the denial of that motion has not been appealed by Appellants. Appellees' also moved for summary judgment, arguing that despite the cancellation of the original corporation's articles of incorporation, the corporation continued to exist as either a de jure or de facto corporation. They argued the corporation continued to own real property until it became aware, after the filing of the lawsuit, of its duty to dissolve in accordance with R.C. 1701.88, at which point it did proceed to dissolve. Appellees further argued that Appellants, "a new corporation that has nothing to do with the operation other than picking up the name and [sic] has no rights to demanding [sic] an accounting . . ." Appellees supported their motion with the affidavit of C. Richard Wilson, copies of the magistrate's decision and final, appealable order from the 1998 lawsuits and copies of corporate resolutions of the original corporation dissolving the corporation effective December 31, 2007.

{¶10} In their memorandum contra motion for summary judgment, Appellants disputed Appellees' interpretation of R.C. 1701.88, arguing that the original corporation could have only continued to exist for purposes of winding-up its affairs, which Appellants claimed could not have taken seventeen years. Appellants, however, did not dispute Appellees' argument that it lacked any sort of connection with the original corporation providing it standing to seek ejectment, an accounting or ownership of its property. Further, Appellants failed to provide any evidence demonstrating that it was an owner, director, shareholder or creditor of the original corporation.

{¶11} By judgment entry dated December 20, 2007, the trial court granted Appellees' motion for summary judgment, reasoning as follows: "The Plaintiff, North Kenova Development, Co., Inc., is not the same corporation as North Kenova Development Co., which was incorporated on February 7, 1930, and had it's Charter terminated by the Ohio Secretary of State in the year 1990. As such, the current Plaintiff corporation has no rights in the assets of the 1930 corporation, which happens to bear the same name; the 1930 corporation continued to act in a defacto capacity after the Ohio Secretary of State terminated it's Charter in 1990; Plaintiffs, having no interest in the 1930 corporation or it's defacto operation after 1990, have no shareholder interest or ownership interest in any of the 1930 corporation's assets; having no interest in the assets of the 1930 corporation, Plaintiff is not entitled to an accounting as to that corporation's assets. Defendants are, therefore, granted judgment as a matter of law as prayed for in their motion for summary judgment."

{ΒΆ12} Subsequently, on January 10, 2008, the trial court issued a Judgment Entry Final Appealable Order and it is from that final order that Appellants bring their current appeal, ...


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