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Baker v. Manchi

Court of Appeals of Ohio, Seventh District, Mahoning

February 28, 2017

PHYLLIS BAKER PLAINTIFF-APPELLEE
v.
JAMES MANCHI, et al. DEFENDANT-APPELLANT

         Civil Appeal from the Court of Common Pleas of Mahoning County, Ohio Case No. 2014 CV 582

          For Plaintiff-Appellee Attorney Kevin Murphy

          For Defendant-Appellant Attorney Stuart Strasfeld

          Hon. Mary DeGenaro Hon. Gene Donofrio Hon. Cheryl L. Waite

          OPINION

          DeGENARO, J.

         {¶1} Defendants-Appellants, James Manchi, et al., appeal the trial court's judgment awarding Plaintiff-Appellee, Phyllis Baker, half of the proceeds from the sale of various companies in which she had an interest, and for refusing to consider his cross motion for summary judgment. As Manchi's arguments are meritless, the judgment of the trial court is affirmed.

         Facts and Procedural History

         {¶2} Phyllis Baker's husband, Robert Baker, and Manchi, were lifelong business partners. Starting in the 1970's, they formed Federal Management Company, Inc., B&M Professional Services, Inc., Valley View I, LP, Valley View II, LP, and Austintown Associates, LLC, with Mr. Baker and Manchi each 50% shareholders and general partners of the companies.

         {¶3} In 2007, Mr. Baker and Manchi entered into a Buy-Sell agreement to establish their respective rights and obligations in the event that one of them died or became incapacitated. The agreement provided in pertinent part: 1) it became irrevocably binding "upon the death or disability of any Stockholder;" 2) the surviving stockholder had thirty days to elect to purchase the surviving spouse's interest. In the event that the surviving stockholder elected not to purchase the surviving spouse's interest, he was then required to sell the companies; 3) the surviving spouse was to receive 40% of the distributions from the companies during the first year of the election trigger date, 50% during the second year, and 60% during the third year and thereafter until the companies were sold; and, 4) the surviving stockholder owes a fiduciary duty to the surviving spouse in the event of a sale of the companies.

         {¶4} After Mr. Baker died in 2009, Manchi did not purchase Baker's interest, nor did he sell the companies. For the next three years, Manchi continued to operate the companies though Mrs. Baker made numerous requests that he sell them.

         {¶5} In August 2012, Manchi unilaterally reduced Mrs. Baker's 60% distribution entitlement back to 50% despite the plain language of the Buy-Sell Agreement. As the companies still had not been sold, the parties agreed to a private mediation in December of 2012.

          {¶6} In mediation the parties reached an agreement; in exchange for Baker reducing her 60% distribution to 50%, Manchi agreed to forgo a monthly management fee and list the companies for sale at $10 million. A minimum offer of $8 million was required to be accepted if one or more parties agreed. The agreement created an exception to the requirement that Manchi list the properties allowing him to purchase Baker's interest.

         {¶7} In March 2013, Manchi sent Baker a formal purchase option agreement which permitted Manchi to list the properties for sale, get an offer from a third party and then exercise the right to buy out Baker's interest, which she refused to sign. On March 14, 2013, Manchi retained a broker to list the companies for sale. Within a few months, he received approximately a dozen letters of intent in the $9 to $10 million range. On May 17, 2013, Manchi received an offer of $10.3 million for the companies and on June 4, 2013, Manchi notified Baker he wanted to purchase her interest for $2.5 million and retain the balance of the sales proceeds. When the sale closed, Manchi and Baker each received $2.5 million as a partial distribution.

         {¶8} The $1.8 million dollar balance from the sale was placed into an escrow account pending resolution of this matter. Manchi contended that pursuant to the mediation agreement Baker had received payment in full and that any remaining monies are his alone. Baker contended that ...


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