Cintas Corp. v. Great Lakes Best One Tire & Serice, L.L.C., d.b.a. Terrys Tire Town , 2018 Ohio 2456 ( 2018 )

[Cite as Cintas Corp. v. Great Lakes Best One Tire & Serice, L.L.C., d.b.a. Terrys Tire Town, 2018-Ohio-2456.]
IN THE COURT OF APPEALS
ELEVENTH APPELLATE DISTRICT
TRUMBULL COUNTY, OHIO
CINTAS CORPORATION, : OPINION
Plaintiff-Appellee, :
CASE NO. 2017-T-0080
- vs - :
GREAT LAKES BEST ONE TIRE & :
SERVICE, LLC, d.b.a. TERRY’S
TIRE TOWN,
Defendant-Appellant. :
Civil Appeal from the Girard Municipal Court, Case No. 2016 CVF 00153.
Judgment: Affirmed.
Patrick Milligan and Monique Boyd, 18615 Detroit Avenue, Suite 201, Lakewood, OH
44107 (For Plaintiff-Appellee).
Darren DeHaven, 3500 Massillon Road, Suite 410, Uniontown, OH 44685 (For
Defendant-Appellant).
COLLEEN MARY O’TOOLE, J.
{¶1} Appellant, Great Lakes Best One Tire & Service, LLC, d.b.a. Terry’s Tire
Town, appeals from the July 17, 2017 judgment of the Girard Municipal Court, granting
judgment in favor of appellee, Cintas Corporation, and against appellant in the amount
of $5,450.44 plus interest following a bench trial. On appeal, Great Lakes asserts the
trial court erred in finding it liable under a contract entered into between Terry’s Tire
Town and Cintas. Great Lakes contends that Cintas did not establish any of the four
recognized exceptions to the general rule for successor liability under Flaugher v. Cone
Automatic Machine Co., 30 Ohio St. 3d 60, 62 (1987). Because the first exception
applies in this case since Great Lakes, the buyer corporation, expressly or impliedly
agreed to assume Terry’s Tire Town’s prior liability through the plain language of the
Purchase Agreement, we find no reversible error and affirm.
{¶2} Cintas, an Ohio corporation, is a uniform and facility services provider.
Terry’s Tire Town was in the business of selling and servicing commercial tires. On
September 19, 2012, Terry’s Tire Town entered into a five-year “Standard Rental
Service Agreement” with Cintas for uniforms and other facility products/services. The
Cintas Service Agreement was executed by James Brott, Terry’s Tire Town’s
Commercial Division Manager, and Barry Long, a Cintas Service Sales Representative.
The Cintas Service Agreement was terminated prior to completion of the five-year term.
Eighty-four weeks remained on the term of the Cintas Service Agreement at the time of
Terry’s Tire Town’s breach with an early cancellation sum due to Cintas in the amount
of $5,450.44.
{¶3} In March 2014, American Tire Distributors (“ATD”) purchased Terry’s Tire
Town. The following month, ATD approached Mr. Brott indicating it would be selling off
the commercial tire division. Mr. Brott asked if he could bid through Great Lakes, a
limited liability company he had formed.
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{¶4} On July 31, 2014, a “Purchase Agreement” was entered into by and
among Terry’s Tire Town Holdings, Inc., Terry’s Tire Town, Inc., and Great Lakes. Mr.
Brott signed the Purchase Agreement as President of Great Lakes.
{¶5} Great Lakes continued to use the services of Cintas for a period of time.
In early 2016, Great Lakes notified Cintas that it was switching to a more cost-effective
option.
{¶6} On February 22, 2016, Cintas filed a complaint for breach of contract
against Great Lakes, d.b.a Terry’s Tire Town. On March 16, 2016, Great Lakes filed an
answer.
{¶7} A bench trial was held on June 30, 2017.
{¶8} On cross-examination, Mr. Brott acknowledged his signature on the 2012
Cintas Service Agreement. (Exhibit A). Mr. Brott also acknowledged his signature on
the 2014 Great Lakes Purchase Agreement. (Exhibit H). Mr. Brott testified that the
Cintas Service Agreement was not specifically excluded from Section 2.4(a) of the
Great Lakes Purchase Agreement. Mr. Brott had knowledge that Terry’s Tire Town had
a continuous contract with Cintas. He indicated that the Cintas Service Agreement is
not on the excluded part of Section 2.3 of the Great Lakes Purchase Agreement. Mr.
Brott said he informed Cintas of the sale, i.e., that it was no longer Terry’s Tire Town but
rather a new entity, Great Lakes. Mr. Brott acknowledged that he never changed the
logos on company shirts. (Exhibit F). A photograph taken around June 29, 2016
revealed that the Girard store still had a Terry’s Tire Town sign. (Exhibit G). Mr. Brott
indicated he could not afford to change the sign at that time.
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{¶9} On direct examination, Mr. Brott testified he “purchased the store assets”
for Terry’s Tire Town in April 2014. From Mr. Brott’s understanding of the Great Lakes
Purchase Agreement, he was not assuming any of Terry’s Tire Town’s contracts or
liabilities. Mr. Brott indicated that he cannot point to anything that states that he has
assumed any of the liabilities of Terry’s Tire Town, specifically the Cintas Service
Agreement. He said the invoicing, checks, and business cards all included the name,
Great Lakes. However, Mr. Brott stated again that the front signage remained as
Terry’s Tire Town due to expense.
{¶10} Cintas Service Sales Representative Mr. Long testified he was told in
2015 that Terry’s Tire Town was going to be sold. Don Jones, Operations Manager for
Cintas, referenced the Cintas Service Agreement. Mr. Jones also referenced a
document regarding liquidated damages in the event of an account being stopped.
(Exhibit B). Terry’s Tire Town’s termination of the contract, which had 84 weeks
remaining, was coded as a “price lack of relationship,” i.e., switched for a lower price.
(T.p. 44). Mr. Jones said there was never a formal notification of the sale of Terry’s Tire
Town.
{¶11} On July 17, 2017, the trial court determined that the original contract was
entered into between Terry’s Tire Town and Cintas in 2012. The court found that Great
Lakes “purchased the assets” and liabilities of Terry’s Tire Town in 2014. The court
granted judgment in favor of Cintas and against Great Lakes in the amount of $5,450.44
plus interest at the rate of four percent per annum from the date of judgment plus costs.
Great Lakes filed a timely appeal and raises the following assignment of error:
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{¶12} “The Trial Court committed reversible error finding Great Lakes Best One
Tire & Services LLC is liable under the contract between Cintas Corporation and Terry’s
Tire Town, Inc., as said finding is contrary to law.”
{¶13} In its sole assignment of error, Great Lakes argues the trial court erred in
finding it liable under the 2012 Cintas Service Agreement between Terry’s Tire Town
and Cintas. Great Lakes asserts Cintas did not establish any of the four recognized
exceptions to the general rule for successor liability.
{¶14} “‘(T)he appropriate standard of review in contract cases is whether the trial
court erred as a matter of law. (* * *) Accordingly, we “must determine whether the trial
court’s order is based on an erroneous standard or a misconstruction of the law.”
Continental W. Condo. Unit Owners Assn. v. Howard E. Ferguson, Inc. (1996), 74 Ohio
St.3d 501, 502 * * *. In so doing, we must keep in mind that “an appellate court gives
due deference to the trial court’s findings of fact, so long as they are supported by
competent, credible evidence.”’ (Citations omitted.) Fine v. U.S. Erie Islands Co., 6th
Dist. Ottawa No. OT-07-048, 2009-Ohio-1531, * * * ¶25.” (Parallel citations omitted.)
Meeker R & D, Inc. v. Evenflo Co., Inc., 11th Dist. Portage Nos. 2014-P-0060 and 2015-
P-0017, 2016-Ohio-2688, ¶52.
{¶15} The well-recognized general rule of successor liability provides that an
“asset purchaser” will not be liable for the debts and obligations of the selling company.
Flaugher, supra, at 62. However, four exceptions apply to this general rule: “(1) the
buyer expressly or impliedly agrees to assume such liability; (2) the transaction amounts
to a de facto consolidation or merger; (3) the buyer corporation is merely a continuation
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of the seller corporation; or (4) the transaction is entered into fraudulently for the
purpose of escaping liability.” Id.
{¶16} Both parties agree that the last three exceptions do not apply in this case.
The parties, however, disagree on the applicability of the first recognized exception.
Based on the record and facts before us, we find the first exception does apply.
{¶17} Great Lakes, the buyer corporation, expressly or impliedly agreed to
assume Terry’s Tire Town’s prior liability through the plain language of the 2014 Great
Lakes Purchase Agreement. The Great Lakes Purchase Agreement did not exclude the
2012 Cintas Service Agreement as an assumed liability. Rather, the Cintas Service
Agreement entered into between Terry’s Tire Town and Cintas was covered under the
Great Lakes Purchase Agreement, which provides in part under Article II, “Sale and
Purchase[:]”
{¶18} “2.2 Purchase of Purchased Assets. Subject to the terms and conditions
of this Agreement, * * * Asset Buyer shall purchase and accept from TTT, and TTT shall
sell, assign, transfer and convey to the Asset Buyer, all of TTT’s right, title and interest
in and to the assets (other than the Excluded Assets) listed below (the ‘Purchased
Assets’):
{¶19} “* * *
{¶20} “2.3 Excluded Assets. Other than the Purchased Assets subject to
Section 2.2, Asset Buyer expressly understands and agrees that this is not purchasing
or acquiring, and TTT is not selling or assigning, any other assets or properties of TTT,
and all such other assets and properties shall be excluded from the Purchased Assets
(the ‘Excluded Assets’). * * *
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{¶21} “* * *
{¶22} “2.4 Assumed Liabilities. At Closing, the Asset Buyer will assume and
agree to pay, perform and discharge the following Liabilities of Sellers (collectively, the
‘Assumed Liabilities’):
{¶23} “(a) All Liabilities to suppliers for materials and services related to the
Business ordered in the ordinary course of business consistent with past practices prior
to the Closing Date that are scheduled to be delivered or provided thereafter, including,
without limitation, those that are set forth on Schedule 2.4(a)[.] * * *
{¶24} “2.5 Excluded Liabilities. The Excluded Liabilities will remain the sole
responsibility of and will be retained, paid, performed and discharged as and when due
solely by Sellers. ‘Excluded Liabilities’ means every Liability of Sellers, other than the
Assumed Liabilities[.]”
{¶25} As stated, the record establishes that the 2012 Cintas Service Agreement
was entered into between Terry’s Tire Town and Cintas. The Cintas Service Agreement
was executed by Mr. Brott, Terry’s Tire Town’s Commercial Division Manager, and Mr.
Long, a Cintas Service Sales Representative. The Cintas Service Agreement was later
terminated by Terry’s Tire Town prior to completion of the agreed upon five-year term.
{¶26} In 2014, a Purchase Agreement was entered into between Terry’s Tire
Town and Great Lakes. Mr. Brott signed the Purchase Agreement as President of
Great Lakes. According to Mr. Jones, Operations Manager for Cintas, Cintas was never
formally informed regarding any change of ownership and, thus, continued to provide
uniform rental services to Great Lakes until February 2016. The location serviced by
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Cintas continued to use Terry’s Tire Town signage on the front of its building during that
time period.
{¶27} Under the 2014 Great Lakes Purchase Agreement, Great Lakes assumed
the 2012 Cintas Service Agreement. The plain and unambiguous language of Sections
2.4 and 2.5 of the Great Lakes Purchase Agreement reveals that the Cintas Service
Agreement was an assumed liability. Mr. Brott indicated that uniforms and facility
services were used in the ordinary course of business and this was consistent with past
practices of Terry’s Tire Town. See Section 2.4(a). The trial court properly found that
uniforms and facility services were related to the ordinary course of business.
{¶28} In addition, Mr. Brott signed both the Cintas Service Agreement and the
Great Lakes Purchase Agreement. Mr. Brott did not specifically exclude the Cintas
Service Agreement in Section 2.3 and the contract was assumed under the plain
language of Section 2.4(a). Thus, the Cintas Service Agreement was not excluded by
the Great Lakes Purchase Agreement. See Section 2.5. The trial court correctly
applied the plain language of the contract to the facts presented and found in favor of
Cintas.
{¶29} The record further establishes that Great Lakes did not merely “purchase
only the assets” of Terry’s Tire Town. Rather, Great Lakes assumed a number of
liabilities through the Purchase Agreement. See Sections 2.3; 2.4; 2.5. The trial court
properly determined that Great Lakes “purchased the assets” and liabilities of Terry’s
Tire Town. Due to the plain and unambiguous language in the Great Lakes Purchase
Agreement, the trial court committed no error in finding Great Lakes liable for the
assumed debts and obligations of Terry’s Tire Town, specifically the sum of $5,450.44
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due to Cintas. The trial court’s findings of fact are supported by competent, credible
evidence.
{¶30} For the foregoing reasons, appellant’s sole assignment of error is not well-
taken. The judgment of the Girard Municipal Court is affirmed.
THOMAS R. WRIGHT, P.J.,
TIMOTHY P. CANNON, J.,
concur.
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