Carnahan v. Weeks, Unpublished Decision (5-21-1999)

CourtOhio Court of Appeals
DecidedMay 21, 1999
DocketC.A. Case No. 17302. T.C. Case No. 96-3044.
StatusUnpublished

This text of Carnahan v. Weeks, Unpublished Decision (5-21-1999) (Carnahan v. Weeks, Unpublished Decision (5-21-1999)) is published on Counsel Stack Legal Research, covering Ohio Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Carnahan v. Weeks, Unpublished Decision (5-21-1999), (Ohio Ct. App. 1999).

Opinion

OPINION
Defendant-Appellant David A. Weeks appeals the trial court's affirmance in part and reversal in part of the magistrate's decision in Plaintiff-Appellee Thomas H. Carnahan's action against Weeks for breach of contract, Weeks' counterclaims against Carnahan for breach of contract and fraud, and Weeks' cross-claims against Third-Party Defendant-Appellee Joseph Ressa. For ease of comprehension, we will, in as brief a fashion as possible, recount the basic facts of the transaction giving rise to these causes of action, supplementing them as it becomes necessary in our discussion of the parties' assignments of error.

In the summer of 1995, Weeks and his son contacted William Silver, a mortgage broker, and expressed an interest in acquiring commercial property for the purpose of operating an automotive repair shop. Carnahan and Ressa were, at the time, co-owners of Automotive Management Service, Inc., with each holding fifty percent of the corporation's stock. They operated two businesses under the umbrella of Automotive Management Service, Inc.; a car sales business and an auto repair shop. Carnahan maintained the business records of both companies and ran the car sales business and Ressa worked as a mechanic in the auto repair shop.

In time, Silver became aware that Carnahan was interested in divesting himself of his interest in the auto repair shop and negotiations began between Carnahan and Weeks. Silver acted as Weeks' agent in the negotiations. Although he was half owner of the business, Ressa was, at most, only peripherally involved in the negotiations.

Silver and Weeks were given access to the business and financial records of the auto repair shop, such as they were. No actual accounting books were kept, so Silver and an accountant he hired to assist him in evaluating the business were left to sort through work orders, invoices, tax returns, and bank statements, from which they compiled a profit and loss comparative for the years 1990 through 1994.

In the process of poring over the records provided, Silver and Weeks learned that the business had little or no income value. The records also revealed that the shop had a line of credit account with Wells Fargo Bank with an outstanding balance of approximately $30,000 and that the accounts receivables were valued at approximately $55,500, but many of those accounts were expected to be uncollectible due to poor record keeping.

In November of 1995, Weeks' son Rob began working in the auto repair shop with Ressa as a way of assessing their compatibility. In addition, Weeks began spending time at the shop observing the day-to-day operations including the payment of bills.

By the end of January 1996, the parties had come to a general agreement that Weeks would purchase Carnahan's interest in the shop for $50,000. Silver, acting with the consent of Carnahan and Ressa, drafted the parties' agreement in what he titled a "Letter of Agreement" dated February 1, 1996. The document was signed by all parties in their personal capacities, and Weeks paid Carnahan the purchase price on February 9, 1996. In the contract, Carnahan agreed to, inter alia, convey his stock certificates in the corporation to Weeks and collect $30,000 worth of the accounts receivables within ninety days of the date of the contract. Carnahan also guaranteed that complete and accurate financial records had been provided to Weeks, to the best of his knowledge. Carnahan and Ressa agreed to assume liability for and hold Weeks harmless on any and all federal, state, county, and city taxes due on or before January 31, 1996.

In addition to the payment of $50,000 to Carnahan, Weeks' obligations under the contract included assumption of the Wells Fargo line of credit account and taking necessary steps to remove and hold Carnahan harmless from the company's accounts with Marathon Oil, Wells Fargo (which was secured by receivables), a G.E. Capital lease for an All Data diagnostic system, and Genuine Auto Parts. There was no provision in the contract addressing how the rest of the accounts payable would be treated, although the parties agree it was a matter frequently discussed during the negotiation period.

On July 23, 1996, Carnahan filed his complaint alleging Weeks had breached the contract by failing to remove and hold Carnahan harmless on the Wells Fargo debt. He prayed specific performance or, in the alternative, money damages. On August 9, 1996, Weeks filed an answer and counterclaimed against Carnahan alleging fraud and breach of contract. Carnahan responded to Weeks' counterclaim and asserted a third-party complaint against Ressa claiming entitlement to indemnity and contribution from him. Ressa, in turn, answered Carnahan's third-party complaint and counterclaimed against him; the counterclaim was later voluntarily dismissed, however, and is of no longer of any import.

On May 7, 1997, Carnahan filed an amended complaint in which he claimed Weeks further breached the parties' contract by failing to relieve Carnahan of his liability on the Wells Fargo account, the G.E. Capital lease for the All Data system, an NBD Equipment lease for an alignment rack, and the shop's DP L account. Carnahan also reasserted his third-party complaint against Ressa. The next day, Weeks filed a cross-complaint against Ressa seeking contribution and alleging Ressa breached a fiduciary duty to Weeks by failing to reveal alleged misrepresentations made by Carnahan. Weeks' answer to Carnahan's amended complaint followed about one week later. Finally, Ressa's answer to Weeks' cross-complaint against him was filed on May 14, 1997.

That same day, a three-day trial began before the magistrate after which she concluded that (1) Carnahan presented no evidence of any harm he suffered as a result of Weeks' failure to remove Carnahan's name from the debts of the corporation and could not, therefore, recover on his breach of contract claim; (2) specific performance prayed for by Carnahan was precluded as a remedy because the terms of the contract relating to Carnahan's claims against Weeks lacked the definitiveness and clarity necessary to grant such relief; (3) Weeks was entitled to specific performance on the transfer of the stock certificates since the contract provision requiring Carnahan to do so was unequivocal; (4) Carnahan's obligation to disclose all pending obligations of the corporation were met by permitting Weeks and Silver access to the corporate records; (5) no clause of the contract required Carnahan to pay in full all debts of the corporation incurred before February 1, 1996, as was claimed by Weeks; (6) federal, state, county, and city taxes due in the amount of $3,575.46 were the responsibility of Carnahan and Ressa and, as a result, Ressa was personally liable to the corporation for half that amount; (7) Weeks' allegation of fraud against Carnahan failed because any reliance by Weeks on Carnahan's representations was unjustified, and Weeks had failed to show Carnahan intended to mislead Weeks in providing certain financial information to him. The magistrate found Carnahan and Weeks jointly and severally liable to Weeks for the back taxes, and ordered Carnahan to transfer his stock certificates to Weeks.

Each party filed objections to the magistrate's decision, upon which we see no need to elaborate. Suffice it to say that the trial court reversed the magistrate's decision insofar as it found Carnahan and Ressa liable to the Weeks for the back taxes. The court reasoned that any property right arising out of the provision of the contract wherein Carnahan and Ressa agreed to shoulder the responsibility for all tax liabilities accruing prior to February 1, 1996, would vest in the non-party corporation, not Weeks personally.

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Bluebook (online)
Carnahan v. Weeks, Unpublished Decision (5-21-1999), Counsel Stack Legal Research, https://law.counselstack.com/opinion/carnahan-v-weeks-unpublished-decision-5-21-1999-ohioctapp-1999.