Hackenburg v. Zeller

[Cite as Hackenburg v. Zeller, 2015-Ohio-3813.]
IN THE COURT OF APPEALS OF OHIO
THIRD APPELLATE DISTRICT
LOGAN COUNTY
CANDACE HACKENBURG,
EXECUTRIX, ET AL.,
PLAINTIFFS-APPELLANTS, CASE NO. 8-15-02
v.
WILLIAM ZELLER, OPINION
DEFENDANT-APPELLEE.
Appeal from Logan County Common Pleas Court
Trial Court No. CV 14 06 0199
Judgment Affirmed in Part, Reversed in Part and Cause Remanded
Date of Decision: September 21, 2015
APPEARANCES:
Terrence G. Stolly and Melissa A. Marino for Appellants
Steven R. Fansler for Appellee
Case No. 8-15-02
ROGERS, P.J.
{¶1} Plaintiffs-Appellants, Candace Hackenburg, in her personal capacity
and as Executrix of the Estate of Deanna Zeller, f.k.a. Deanna Durnell (“Deanna”),
David Durnell, and Michael Durnell (“the Appellants”), appeal the judgment of
the Court of Common Pleas of Logan County denying their motion for summary
judgment and granting the Defendant-Appellee’s, William Zeller, motion for
summary judgment. For the following reasons, we affirm in part, reverse in part,
and remand for further proceedings consistent with this opinion.
{¶2} This case stems from a matter originating in probate court after the
death of Deanna. The following facts are undisputed. Before her death, Deanna
owned and operated a campground located in Logan County comprised of several
different tracks of land. On January 16, 2004, Deanna created Deanna’s
Properties LLC (“the Company”) by filing articles of organization with the proper
office. At that time, she also executed an operating agreement, which detailed,
among other things, membership in the Company. Deanna was listed as the sole
member of the Company at the time of filing.
{¶3} Deanna and Zeller were married two days later, on January 18, 2004.
Up until the date of their marriage, they lived in separate residences. After they
were married, Zeller moved into Deanna’s residence, which was located on the
campground. On January 21, 2004, Deanna and Zeller, as husband and wife,
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transferred real property via quitclaim deed to the Company. The deeded premises
consisted of the campground, common areas, a duplex, and the cabin which served
as their marital residence (collectively, “the Premises”). The couple lived at the
cabin until the spring of 2009, when the two moved to a house located at 1716
Whispering Pines, Bellefontaine, Ohio (“Whispering Pines”). This property was
not included in the quitclaim deed. Zeller has continued to live at this residence
even after Deanna’s death on April 10, 2013.
{¶4} The operating agreement provided for how the Company would be
affected by Deanna’s death. Paragraph 1.9 of the operating agreement states,
Use of Assets upon Death of Deanna. William M. Zeller, if
married to Deanna at the time of her death, shall have the right to
occupy the real estate identified in Exhibit ‘A,’ notwithstanding this
Operating Agreement, for his natural life. He will also have the
right to enjoy the income from the Company. This provision will
either not apply or terminate as the case may be;
1.9.1 If prior to the death of Deanna there has been filed an initial
pleading to commence an action for divorce, dissolution, annulment
or for alimony only, and such proceeding was still pending;
1.9.2 If William ever cease to be married to Deanna for any reason
other than the death of Deanna; or
1.9.3 If William should ever vacate the premises or should cohabit
with, marry, or unite in any other union recognized by law with
another person. Temporary absence such as extended vacation, or
an illness in which return to the home likely will occur is not a
vacation.
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(Emphasis sic.) (Docket No. 1, Exhibit 1, p. 2). Additionally, membership rights
were controlled by paragraph 2.2 of the agreement, which provided,
Contingent Members. Upon the death of Deanna and so long as
none of the provisions of Paragraph 1.9.1-1.9.3 occur, William
Zeller, Michael Durnell, David Durnell and Candace Smith shall be
Members holding for purposes of income Zeller 100 percent interest,
and for purposes of voting Zeller 66 2/3 percent, and Michael, David
and Candace 1/9 each. Upon an event named in Paragraph 1.9.1-
1.9.3 the entire interests will go to Michael, David and Candace
equally. All such interests are contingent upon the rest of this
operating agreement.
(Id. at p. 3).
{¶5} On June 20, 2014, the Appellants filed a complaint for declaratory
judgment in the Court of Common Pleas of Logan County against Zeller. In the
complaint, the Appellants alleged that Zeller had no interest in the Company
because he vacated the Premises as described in the Company’s operating
agreement. Zeller filed a motion to dismiss on July 23, 2014. On October 14,
2014, the Appellants filed an amended complaint for declaratory judgment. Zeller
filed an answer to the amended complaint on November 17, 2014.
{¶6} On November 21, 2014, the Appellants filed a motion for summary
judgment. Zeller filed a competing motion for summary judgment on December
15, 2014. On December 29, 2014, the Appellants filed a memorandum in
opposition of Zeller’s motion and in support of their motion. On January 7, 2015,
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the trial court denied the Appellants’ motion and granted Zeller’s motion. The
court explained,
The central issue is what is this agreement as it relates to the
ownership of the corporation. The Court finds that it is a unilateral
document that was not signed or consented to by [Zeller.] While
courts recognize a trust as a vehicle to put assets beyond the claims
of a spouse, Dumas v. Estate of Dumas[,] 68 Ohio St.3d 405 (1994),
this Court finds no authority to accord this operating agreement with
the same status as a trust. The Court finds that the Plaintiffs’ motion
is not well taken. The Court finds that the Defendant’s motion is
well taken.
(Docket No. 40, p. 2).
{¶7} The Appellants filed this timely appeal, presenting the following
assignments of error for our review.
Assignment of Error No. I
THE TRIAL COURT ERRED IN GRANTING DEFENDANT’S
MOTION FOR SUMMARY JUDGMENT; THEREFORE, THE
TRIAL COURT’S DECISION SHOULD BE REVERSED.
Assignment of Error No. II
THE TRIAL COURT ERRED IN DENYING PLAINTIFFS’
MOTION FOR SUMMARY JUDGMENT; THEREFORE, THE
TRIAL COURT’S DECISION SHOULD BE REVERSED.
Assignment of Error No. I
{¶8} In their first assignment of error, the Appellants argue that the trial
court erred by granting Zeller’s motion for summary judgment. We agree.
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{¶9} An appellate court reviews a summary judgment order de novo.
Hillyer v. State Farm Mut. Auto. Ins. Co., 131 Ohio App.3d 172, 175 (8th
Dist.1999). Accordingly, a reviewing court will not reverse an otherwise correct
judgment merely because the lower court utilized different or erroneous reasons as
the basis for its determination. Diamond Wine & Spirits, Inc. v. Dayton
Heidelberg Distrib. Co., Inc., 148 Ohio App.3d 596, 2002-Ohio-3932, ¶ 25 (3d
Dist.), citing State ex rel. Cassels v. Dayton City School Dist. Bd. of Edn., 69 Ohio
St.3d 217, 222 (1994). Summary judgment is appropriate when, looking at the
evidence as a whole: (1) there is no genuine issue as to any material fact, and (2)
the moving party is entitled to judgment as a matter of law. Civ.R. 56(C). In
conducting this analysis the court must determine “that reasonable minds can
come to but one conclusion and that conclusion is adverse to the party against
whom the motion for summary judgment is made, [the nonmoving] party being
entitled to have the evidence or stipulation construed most strongly in the
[nonmoving] party’s favor.” Id. If any doubts exist, the issue must be resolved in
favor of the nonmoving party. Murphy v. Reynoldsburg, 65 Ohio St.3d 356, 358-
359 (1992).
{¶10} The party moving for summary judgment has the initial burden of
producing some evidence which demonstrates the lack of a genuine issue of
material fact. Dresher v. Burt, 75 Ohio St.3d 280, 292 (1996). In doing so, the
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moving party is not required to produce any affirmative evidence, but must
identify those portions of the record which affirmatively support his argument. Id.
at 292. The nonmoving party must then rebut with specific facts showing the
existence of a genuine triable issue; he may not rest on the mere allegations or
denials of his pleadings. Id.; Civ.R. 56(E).
{¶11} Here, both motions for summary judgment involved the
interpretation of a document, the operating agreement, and how it affects the
membership of the Company. Interestingly, although the document has the words
“OPERATING AGREEMENT” on the top of the document and otherwise
provides all the information a traditional operating agreement would provide, the
trial court did not find the document to be an operating agreement. Rather, the
trial court determined that it was some sort of testamentary document that
attempted to place assets beyond the claims of the spouse. The trial court failed to
provide its reasoning for this determination, and this court cannot find any
authority to support this conclusion.
{¶12} On the contrary, it is very clear from the face of the document that it
is, in fact, an operating agreement. An operating agreement is defined as “all the
valid written or oral agreements of the members or, in the case of a limited
liability company [“LLC”] consisting of one member, a written declaration of that
member, as to the affairs of a [LLC] and the conduct of its business.” R.C.
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1705.01(J). The document in question here was filed along with the articles of
organization for the Company and squarely addressed Deanna’s declarations as to
the affairs of the Company and the conduct of its business. Therefore, we will
treat it as such.
{¶13} Initial membership in a LLC is controlled by either the articles of
organization or the operating agreement. See R.C. 1705.14(A). After the articles
of organization are filed, a person can become a member of a LLC in one of two
ways:
1. If he acquires an interest directly from the [LLC], upon
compliance with the operating agreement or, if the operating
agreement does not so provide, upon the written consent of all of the
members;
2. If he is an assignee of the interest of a member who has the
power as provided in writing in the operating agreement to grant the
assignee the right to become a member, upon the exercise of that
power and compliance with any conditions limiting the grant or
exercise of the power.
R.C. 1705.14(B)(1)-(2). Membership into a LLC can also be made conditional
upon the happening of an event. See Reif v. Wagenbrenner, 10th Dist. Franklin
No. 10AP-948, 2011-Ohio-3597, ¶ 27.
{¶14} “With regard to reviewing the language of [an] Operating Agreement
and any addendums incorporated into the existing agreement, ‘[t]he cardinal
purpose for judicial examination of any written instrument is to ascertain and give
effect to the intent of the parties.’ ” Great Invest. Properties, L.L.C. v. Bentley, 3d
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Dist. Marion No. 9-09-36, 2010-Ohio-981, ¶ 14, quoting Foster Wheeler
Enviresponse, Inc. v. Franklin Cty. Convention Facilities Auth., 78 Ohio St. 3d
353, 361 (1997), citing Aultman Hosp. Assn. v. Community Mut. Ins. Co., 46 Ohio
St.3d 51, 53 (1989). “The intent of the parties to a contract is presumed to reside
in the language they chose to employ in the agreement.” Kelly v. Med. Life Ins.
Co., 31 Ohio St.3d 130 (1987), paragraph one of the syllabus. Moreover,
“Common words appearing in a written instrument will be given their ordinary
meaning unless manifest absurdity results, or unless some other meaning is clearly
evidenced from the face or overall contents of the instrument.” Alexander v.
Buckeye Pipe Line Co., 53 Ohio St.2d 241 (1978), paragraph two of the syllabus,
superseded by statute on other grounds as stated in Bentley at ¶ 14.
{¶15} In addition to the provisions of the operating agreement quoted
supra, there are several other provisions that help determine Deanna’s intent when
she executed the operating agreement. In Recital B., it provides, “[Deanna]
wishes to form a [LLC] * * * to accept a conveyance of [Deanna’s] interest in the
Property and other real property and to own, manage, improve, lease and sell such
property.” (Docket No. 1, Exhibit 1, p. 1). Next, in Recital C., “The purposes of
the Company include * * * providing [Deanna’s] spouse a residence and income
upon [Deanna’s] death during the marriage, and protecting the property against
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claims of future creditors of family members, including claims of spouses in
connection with marital dissolution proceedings.” (Id.).
{¶16} After reviewing the operating agreement, we find that genuine issues
of material fact exist as to whether Zeller’s membership vested. There is at least
one possible reading of the operating agreement that suggests Zeller’s membership
interest never vested. Paragraph 1.9.3 of the operating agreement provided:
If [Zeller] should ever vacate the premises or should cohabit with,
marry, or unite in any other union recognized by law with another
person. Temporary absence such as extended vacation, or an illness
in which return to the home likely will occur is not a vacation.
(Emphasis added.) Appellants argue that Zeller vacated the premises when he and
Deanna moved to Whispering Pines. Thus, read alone, paragraph 1.9.3 would be
satisfied and Zeller’s interest would have never vested pursuant to paragraph 2.2.
{¶17} This, however, does not end the analysis. As with any written
document, we must read the contract in a way that is consistent with the intent of
the drafter. Bentley, 2010-Ohio-981 at ¶ 14. Although the language in paragraph
1.9.3 suggests that Zeller’s membership interest would not have vested after the
move to Whispering Pines, there is other language in the contract that suggests this
interpretation could be inconsistent with Deanna’s intent. For example,
paragraphs 1.9.1 and 1.9.2 both contemplate situations where Deanna and Zeller
were either divorced or were in the process of getting divorced on the date of
Deanna’s death. Further, one of the purposes of the Company was to provide not
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only a house for Zeller upon Deanna’s death, but also a source of income for
Zeller. Also, reading paragraph 1.9.3 as a whole, instead of focusing solely on the
vacate language, could lead a fact finder to conclude that Deanna’s intent was for
Zeller’s interest to not vest only in the event of a separation. These are but a few
examples that lead to a conclusion that a seemingly mutual marital decision to
move to a different residence was not the type of event that was intended to trigger
the provision in paragraph 1.9.3.
{¶18} That being the case, this is still not sufficient to warrant summary
judgment in favor of Zeller. Since we are reviewing Zeller’s grant of summary
judgment in this assignment, all doubts must be resolved in favor of the
Appellants, as the nonmoving party. Adams v. Gables at Green Pastures Nursing
Home, 3d Dist. Van Wert No. 14-06-33, 2006-Ohio-6856, ¶ 12, citing Murphy, 65
Ohio St.3d at 358-359. It is also quite possible that Deanna’s intent in drafting the
operating agreement was primarily to provide Zeller a place to live upon her death
since he moved out of his home and moved into her house on the premises. The
act of purchasing and moving into Whispering Pines would, therefore, negate the
need for future housing since Zeller would inherit Whispering Pines upon
Deanna’s death. Thus, we are not convinced one way or the other as to Deanna’s
intent. Therefore, a genuine issue of material fact exists, and Zeller was not
entitled to judgment as a matter of law.
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{¶19} Accordingly, the Appellants’ first assignment of error is sustained.
Assignment of Error No. II
{¶20} In their second assignment of error, the Appellants argue that the trial
court erred by denying their motion for summary judgment. Specifically, the
Appellants argue that they were entitled to judgment as a matter of law because
Zeller vacated the premises and, therefore, his membership interest never vested.
We disagree.
{¶21} As stated supra, a genuine issue of material fact exists as to what
Deanna’s intent was in drafting the operating agreement. The same exists in
regard to the Appellants’ motion for summary judgment given that any doubt must
be viewed in favor of Zeller. Therefore, they were not entitled to judgment as a
matter of law, and the trial court did not err by denying their motion albeit for the
wrong reasons.
{¶22} Accordingly, the Appellants’ second assignment of error is
overruled.
{¶23} Having found error prejudicial to the Appellants in the one of the
particulars assigned and argued, we affirm in part, reverse in part, and remand the
matter for further proceedings consistent with this opinion.
Judgment Affirmed in Part,
Reversed in Part and
Cause Remanded
SHAW and WILLAMOWSKI, J.J., concur.
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