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Stacy v. Gibson

Court of Appeals of Ohio, Second District, Montgomery

July 5, 2019

ROBERT STACY Plaintiff-Appellee
PAUL J. GIBSON, et al. Defendant-Appellant

          Trial Court Case No. 2016-CV-5126 (Civil Appeal from Common Pleas Court)

          RICHARD L. CARR, JR., Atty. Reg. Attorney for Plaintiff-Appellee

          SCOTT G. OXLEY, Atty. Reg. Attorney for Defendant-Appellant


          DONOVAN, J.

         {¶ 1} Gibson appeals from the trial court's October 17, 2018 order that $10, 000 disbursed from Gibson's 401(k) plan and held in trust by attorney Scott Oxley be paid to Chris Cowan, the receiver for Ace Sprinkler, Inc. ("Ace"), for distribution as follows: $3, 622.20 to Ace employee David Arvin, and the remainder to Gibson's former partner at Ace, Robert Stacy. We hereby affirm the judgment of the trial court.

         {¶ 2} On October 5, 2016, Stacy filed a complaint against Paul Gibson and Ace. Stacy and Gibson were 50% shareholders of Ace. According to the complaint, Stacy, Gibson and Ace entered into a Close Corporation and Shareholders Agreement on May 11, 2006; the agreement contained "a deadlock provision" in Section 14, which Gibson invoked. Stacy alleged that, pursuant to the deadlock provision, Gibson offered to purchase Stacy's interest in Ace. The complaint alleged that "Gibson was to pay the entire debt of [Ace] with funds that he would be providing to [Ace]." Stacy alleged that, on March 31, 2016, "Gibson represented that his offer to purchase had become final." According to the complaint, Stacy, Gibson and Ace eventually entered into a more detailed agreement, effective July 15, 2016, to redeem Stacy's stock ("the redemption agreement"). Stacy alleged that, pursuant to the terms of the redemption agreement, "Gibson was to provide funding to pay off certain debts * * * and the purchase was to close on or before the 30th day after the date of the agreement"; the debts to be paid "included debts to be paid directly to Stacy and Stacy was to be paid his salary through the closing date." Stacy alleged that, although he had attempted to work with Gibson and Gibson's counsel, no closing had occurred and Gibson had not provided any "proof of funding." Stacy asserted a claim for breach of contract, arguing that Gibson had breached his contract to redeem Stacy's shares pursuant to the redemption agreement. He also requested the appointment of a receiver for Ace.

         {¶ 3} The shareholders agreement was attached to the complaint as Exhibit A. Section 14 provides:

Deadlock (a) In the event the Shareholders are unable to agree on a Major Decision * * * or become deadlocked on any other issue material to the business of the Corporation (a "Deadlock") which, in any Shareholder's opinion, is essential for the successful operation or prudent conduct of the Corporation's business, then the provisions of Section 14. (b) [sic] shall apply and any of the Shareholders ("the Electing Shareholder") shall be permitted to pursue the rights provided in Section 14(b). (b) In the event of a Deadlock, including the failure to agree on a Major Decision, the Electing Shareholder shall have the right to deliver to the other Shareholders a written demand that the requested action be taken or transaction approved. If such other Shareholders do not, within 15 days following the delivery of such demand, respond affirmatively to the demand, then the electing Shareholder shall have the right to pursue the compulsory buy-sell provisions contained in Section 14(c).

         {¶ 4} Stacy attached to his complaint a December 7, 2015 correspondence from Gibson to Stacy invoking the deadlock provision and identifying "[i]ssues needing to be recognized and corrected by Robert Stacy" (Exhibit B), and a January 29, 2016 correspondence from Gibson to Stacy (Exhibit C). Exhibit C was captioned "Second notice as per Section 14" of the shareholders agreement. It stated:

As per our agreement this written offer is to both sell my shares or to purchase your shares.
At this juncture you chose [sic] which position you choose - Buyer or Seller.
You have a total of 45 days from date of second notice presented to you to choose.
If at the end of the 45 days you have not made a decision then it is deemed that you are to sell.
Currently the long term debt, accounts payable and monthly revolving payments such as vehicles total $805, 657.00.
Buyer assumes all debts.
Buyer offers the following:
• Within 45 days of acceptance of this offer, the entire debt of Ace Sprinkler will be paid in full.
• Funds necessary to remove all debt from Ace Sprinkler Inc. will be afforded by buyer.
• The payment made by buyer will be in the form of a cashier's check to
Ace Sprinkler Inc., and Ace Sprinkler Inc. will disperse said funds to satisfy all debt holders.
• Upon acceptance of this offer, seller will assign his 50% ownership of Ace Sprinkler Inc. over to buyer.

         {¶ 5} Two additional items were attached to the complaint as Exhibits D and E. Exhibit D was a March 31, 2016 "Finalization of Buy-Sell Agreement" signed by Gibson. Exhibit E was the July 15, 2016 redemption agreement signed by Gibson and Stacy; it provided in part that, pursuant to the notices sent by Gibson, Stacy had "elected to accept the offer to sell all of his shares in the Corporation," and that "the purchase price for such shares is that Mr. Gibson shall pay or shall cause the Corporation to pay all existing debts of the Corporation."

         {¶ 6} On October 12, 2016, Stacy filed an amended complaint which asserted claims for breach of contract, breach of fiduciary duties, bank fraud, and "fraud after signing redemption agreement" and requested appointment of a corporate receiver. In addition to the exhibits described above, which were attached to the first complaint, Stacy attached Exhibits F and G. Exhibit F was an October 6, 2016 correspondence to Gibson from "John Callahan" requesting "return of monetary funds of $625, 000.00 to Settlor." Exhibit G was a redacted PNC Bank statement in Gibson's name for the period of September 5, 2016 to October 6, 2016, reflecting a beginning balance of $150.05 and an ending balance of $625, 150.05.

         {¶ 7} On October 12, 2016, Stacy also filed a motion for a hearing regarding the appointment of a receiver. The motion sought "an expedited hearing" and asserted that Gibson had "engaged in an ongoing scheme of fraud," had "mismanaged" Ace, "making it insolvent," and had "failed to pay federal, state, and local taxes which are grossly past due." It further asserted that Gibson had improperly "taken over total control of Ace's financial assets, cutting of [Stacy's] ability to review any financial transactions."

         {¶ 8} On October 19, 2016, the court issued a "scheduling order" which stated: "The hearing on the motion to appoint a receiver recessed. The hearing will resume on Friday, October 21, 2016 at 3:00 p.m. in the event that the agreement read into the record is not fulfilled." The record does not include any information about any agreement that was read into the record or the circumstances under which this occurred.

         {¶ 9} On October 27, 2016, Stacy filed a motion to show cause, which stated that the parties had executed a settlement agreement on October 21, 2016, and Gibson had failed to comply with that agreement. Stacy asserted that, pursuant to that settlement agreement, Gibson was to provide proof that he had opened a new bank account for the purpose of receiving funds to fund the settlement, that Gibson had failed to provide such proof, and that no closing had been scheduled.

         {¶ 10} On October 31, 2016, Stacy filed an agreed settlement entry, which stated that the parties had reached a settlement of their dispute and that all claims would be dismissed with prejudice. The agreed settlement entry provided that the court would retain jurisdiction for the purpose of enforcing the terms of the parties' agreement, that the agreed settlement entry would be treated as a court order, and that any violation of the agreed settlement entry would be "subject to contempt." The agreed settlement entry was signed by the judge.

         {¶ 11} On November 21, 2016, Stacy filed a motion for a temporary restraining order, asking that Paul Gibson be "restrained from performing any financial transactions on behalf of Ace and be restrain[ed] from disposing of any of his personal assets or any of Ace's assets * * *." Stacy attached a subpoena issued by his counsel to Huntington National Bank in Brookville requesting balance and transaction information for an account number ending in 692, a check dated October 24, 2016 made out to Gibson for $625, 000.00, and a Huntington Bank deposit slip for an account ending in 692, showing a beginning balance of zero and a deposit of $625, 000. The court granted the motion.

         {¶ 12} After a hearing on November 14 and 18, 2016, the court appointed John Paul Rieser as the receiver for Ace.

         {¶ 13} On December 15, 2016, the trial court found Gibson in contempt of court. The court's entry stated:

This matter came on for a hearing on Plaintiff Robert Stacy's Motion to Show Cause as to Contempt on November 14, November 18, and December 9, 2016. On the basis of the earlier two hearings, this Court entered an Order Appointing Receiver for Ace Sprinkler, Inc. on November 21, 2016. Defendant, Paul J. Gibson, was not present at that hearing and as a result, this court continued the hearing until December 9, 2016 in order to give Paul J. Gibson an additional attempt to appear and show cause as to why he should not be held in contempt.
On December 9, 2016, Paul J. Gibson did appear in court, fired his attorney, David Duwel, and those [sic] chose not to participate in the hearing. As explained to Mr. Gibson in court, the hearing would go forward without his participation.
On the basis of the hearings held on November 14, November 18, and December 9, 2016, this Court finds that Paul J. Gibson has acted in contempt of this court through fraudulent testimony and the offering of fraudulent documents as part of the settlement agreement ordered by this Court. As sanctions against Paul J. Gibson for his fraud, this Court awards a judgment in favor of Plaintiff, Robert Stacy, and against Defendant, Paul J. Gibson, in the amount of $13, 396.69. This amount was determined by the attorneys' fees and costs incurred by Plaintiff, Robert Stacy, in bringing this contempt to the Court once Robert Stacy's Amended Complaint was filed on October 12, 2016. This judgment is not in lieu of whatever other civil remedies Plaintiff, Robert Stacy, may have for breach of contract and is not in lieu of any other and further sanctions which this Court may award due to Gibson's contempt of this court as an institution. This Court has not yet decided if additional fines or sanctions will be imposed upon Paul J. Gibson.

         {¶ 14} On April 21, 2017, the receiver filed a motion to resign and to freeze the receivership escrow bank account at Huntington Bank pending further order of the court. On April 27, 2017, the trial court, with the agreement of the parties, granted the motion to terminate Rieser's role as receiver effective May 2, 2017. On May 3, 2017, the court appointed Chris Cowan as receiver.

         {¶ 15} On June 21, 2018, Stacy filed a "motion to detain funds." The motion provided:

Pursuant to the attached documentation, the Receiver appointed by this Court, John Rieser, consented to the release of 401(k) funds to Paul Gibson on the condition that $10, 000 be maintained in Scott Oxley's trust account pending resolution of claims regarding Gibson's misappropriation of money that should have gone into persons' 401(k) accounts. * * *
Scott Oxley has now threatened to release the $10, 000 set aside for these claims. Robert Stacy and David Arvin are entitled to those funds on the basis that Paul Gibson defrauded them by not depositing the 401 (k) and Gibson taking funds for himself, while not paying 401(k) funds for Stacy and Arvin, creating a misappropriation of corporate funds which were held in trust for 401(k) purposes.
The undersigned respectfully requests that a hearing be set regarding the disposition of the $10, 000 held by Scott Oxley and that the funds be retained by Oxley in his trust account pending that hearing.

         {¶ 16} Exhibit A was attached to the motion, and the first page of the exhibit was a March 22, 2017 email from Rieser to several others, including Oxley. The email stated in part:

2. [Gibson] has not agreed to fund the other two participants['] pre Receivership deficiencies, but he has agreed to receive out of his distribution a separate check in the amount of $10k to be signed over to me and to be held in a separate escrow account by me as Receiver that is sufficient to fund these amounts, but preserving his right to research the issue and possibly agree or submit the question to the court handling the Ace case.
5. I am holding in escrow all amounts due for [Gibson] and the other participants post 12/1/16 to the present and will get a list to Terri so these can be remitted and credited separately.

         {¶ 17} Also attached to the motion was an April 17, 2017 email to Stacy from Carol M. Bigornia at "," which provided in part:

I'm hoping you would reply to this email to approve the withdrawal of Paul Gibson's 401k account, following the payment instructions as stated in the receiver, John Rieser's attached letter. ...

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