Youngstown Daily Legal News

Judges reverse ruling, say man was not shielded by corporate veil for alleged breach of contract

JESSICA SHAMBAUGH
Special to the Legal News
Published: January 24, 2013

A 10th District Court of Appeals panel recently ruled that a man was not protected by a corporate veil because the complaint filed against him claimed a breach of contract involving the man as an individual, not the corporation.

The three-judge appellate panel sustained Gary Galbreath’s claim that a municipal court wrongly dismissed his breach of contract action as failing to include a claim against the defendant.

“Because plaintiff’s complaint states a claim for relief against defendant, we reverse,” 10th District Judge Peggy Bryant wrote for the court.

Case summary states that Galbreath and his company G.G.C. Wholesale Carpets filed an action against Marcus Martin, Galilee Missionary Baptist Church Inc. and Galilee Baptist Church claiming they owed him $9,369.02 for installing flooring in the church.

The defendants failed to file a response to the complaint and the Franklin County Municipal Court filed default judgment against them for the full amount. Proceedings against the church and the corporation were stayed because of a Notice of Chapter 11 bankruptcy but continued against Martin, the church’s owner.

In March 2011, Martin filed for relief, claiming he was not served with the complaint and he was protected from the action by a corporate veil. Martin was granted a hearing and ultimately served with the complaint. The court ruled that no complaint was filed against Martin and granted his motion to dismiss. Galbreath argued that Martin was included in the complaint and appealed to the 10th District.

“Plaintiff’s single assignment of error asserts the trial court erred in granting defendant’s Civ.R.12(B)(6) motion to dismiss, as the allocations of the complaint state a claim against defendant upon which relief may be granted,” Bryant stated.

On review, the appellate judges found Galbreath alleged he entered an oral agreement with Martin, stating he would install flooring in the church in exchange for $9,369.02. The complaint stated Martin breached the contract by failing to pay Galbreath after the flooring was installed.

They held that Martin was not protected by a corporate veil because Galbreath’s complaint alleged Martin breached the contract, not the church.

“Whether plaintiff will be able to prove the allegations is not the issue at this juncture. Rather, because plaintiff alleged defendant individually failed to perform his obligations under his contract with plaintiff, the complaint states a claim against defendant,” Bryant wrote.

Because they found the complaint did include a claim against Martin, the judges ruled the municipal court erred when it granted Martin’s motion to dismiss.

“Having sustained plaintiff’s single assignment of error, we reverse the judgment of the Franklin County Municipal Court and remand for further proceedings consistent with this decision.”

Fellow 10th District judges Gary Tyack and Susan Brown joined Bryant to form the majority.

The case is cited Galbreath v. Martin, case No. 2013-Ohio-80.

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