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Strahm v. Kagy

Court of Appeals of Ohio, Third District, Allen

June 12, 2017

LINDA J. STRAHM, ET AL., PLAINTIFFS-APPELLANTS,
v.
LEE ANN KAGY, ET AL., DEFENDANTS-APPELLEES.

         Appeal from Allen County Common Pleas Court Trial Court No. CV 2016 0694

          Thomas P. Kemp and James F. Blair for Appellants

          Ryan W. Goellner for Appellees, Lee Ann Kagy and Leslie M. Barnes

          Matthew C. Huffman for Appellee, A to Z Control Meats, Inc.

          OPINION

          WILLAMOWKSI, J.

         {¶1} Although originally placed on our accelerated calendar, we have elected pursuant to Loc.R. 12(5) to issue a full opinion in lieu of a summary judgment entry. Plaintiffs-appellants Linda J. Strahm ("Strahm") and Lois J. Bender ("Bender") appeal the judgment of the Allen County Court of Common Pleas for granting the motion to dismiss of the defendants-appellees, Lee Ann Kagy ("Kagy") and Leslie M. Barnes ("Barnes"). For the reasons set forth below, the judgment of the lower court is affirmed.

         Facts and Procedural History

         {¶2} Ownership of A to Z Portion Control Meats, Inc. ("A to Z") is equally divided among four shareholders: Strahm, Bender, Kagy, and Barnes. Doc. 1, 12. Thus, each of these shareholders owns one-fourth of A to Z's stock. Id. The board of directors of this corporation is composed of three people who are elected to serve one-year terms. Doc. 1. The officers of A to Z are presently Kagy, who serves as president and treasurer, and Barnes, who serves as secretary. Id. Currently, three people-Kagy, Barnes, and Terry Strahm, who is Strahm's husband-serve on the board of directors. These board members were elected by the shareholders on January 8, 2015, to commence their one-year terms. Id. Bender and Strahm received their ownership interest in A to Z on May 26, 2015, and were, thus, not shareholders at the time that the current board of directors was elected. Id.

         {¶3} On July 21, 2015, the shareholders held a special meeting during which Strahm and Bender moved to expand the positions on the board of directors from three to five. Id. Bender and Strahm voted in favor of this motion while Kagy and Barnes voted against this motion. Id. Thus, this motion failed to receive a majority vote of the shareholders and was defeated. Id. On January 4, 2016, the shareholders convened for their annual meeting during which elections were held for the board of directors. Id. At this meeting, the names of Strahm, Terry Strahm, Bender, Barnes, and Kagy were placed into nomination for positions on the board of directors. Id. When the time came to vote, Terry Strahm, Bender, Barnes, and Kagy each received one vote. Id. Kagy, as president of the company, announced that the vote was deadlocked and that the current board of directors, which had been elected the previous January, would remain in office pursuant to the company's code of regulations. Id.

         {¶4} Since that time, the shareholders have remained deadlocked on the issue of who should be on the board of directors and have not been able to come to an agreement, leaving the board of directors elected on January 8, 2015 in their positions after their one-year term expired. Id. On December 15, 2016, appellants Strahm and Bender filed a verified complaint for judicial dissolution of A to Z pursuant to R.C. 1701.91. Id. In the complaint, appellants allege that

various controversies and differences have existed, and still exist, among them, which are of such a dramatic and competing nature, kind, and character, as to impede the efficient and effective business plan, management of A to Z, and the relationship between the shareholders has been irretrievably broken.

Id. On December 20, 2016, the appellees submitted a Civ.R. 12(B)(6) motion to dismiss. Id. In this motion, appellees argued that the trial court should dismiss this action because the appellants did not represent the required level of shareholder ownership to bring an action for judicial dissolution under R.C. 1701.91 and, therefore, lacked standing to bring this claim. Id.

         {¶5} On January 27, 2017, the trial court held a hearing on appellees' motion and dismissed this action. Doc. 26 at 40. On February 27, 2017, appellants filed a joint notice of appeal. In this appeal, appellants raise the following assignment of error:

The trial court erred in granting appellee's motion to dismiss based on a flawed interpretation of Ohio ...

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