Hutchings v. Hutchings , 2019 Ohio 5362 ( 2019 )

[Cite as Hutchings v. Hutchings, 2019-Ohio-5362.]
IN THE COURT OF APPEALS OF OHIO
SIXTH APPELLATE DISTRICT
SANDUSKY COUNTY
Charles R. Hutchings Court of Appeals No. S-19-008
Appellee Trial Court No. 20169001
v.
John Hutchings, Individually and as
Trustee of the Hutchings Family Trust DECISION AND JUDGMENT
Appellant Decided: December 27, 2019
*****
Emmett E. Robinson, for appellant.
Jennifer J. Antonini, for appellee.
*****
ZMUDA, J.
{¶ 1} This matter is before the court on appeal from the judgment of the Sandusky
County Court of Common Pleas, Probate Division, following a jury trial. Because we
find the verdict contrary to law and unsupported by the evidence, we reverse.
I. Facts and Procedural Background
{¶ 2} The parties in this dispute are brothers, appellant John Hutchings and
appellee Charles (Chip) Hutchings. Chip filed suit to challenge the distribution of trust
assets, placed in an irrevocable trust by their father Charles Hutchings. Both Charles and
his wife Elise Hutchings passed away in 2014, shortly after creation of the irrevocable
trust.
{¶ 3} During Charles’ and Elise’s lives, John managed their finances. His parents
chose him because he worked as a financial advisor and had the training, education, and
experience to manage their affairs. Chip never objected to this arrangement, and even
approved of John’s efforts on their parents’ behalf.
{¶ 4} In 2012, Elise exhibited signs of dementia, and Charles soon became her
full-time caregiver. While Elise was still competent to do so, she and Charles executed
durable power of attorney documents, granting John broad authority over his parents’
affairs. The durable power of attorney revoked all prior financial powers of attorney, and
granted John the authority to act in each parent’s name and on their behalf in matters
including real property transactions, banking, retirement transactions, fiduciary
transactions, and estate, trust, and other beneficiary transactions.
{¶ 5} Relevant to this appeal, the durable power of attorney specifically provided
John with authority with respect to amending or creating trusts, permitting John to “create
a new revocable or irrevocable inter vivos trust, under whatever terms my attorney-in-
fact deems advisable[.]” The durable power of attorney expressly permitted self-dealing,
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providing, “My Agent can enter into transactions with me or in my behalf in which my
Agent is personally interested, notwithstanding any law prohibiting acts of self-dealing.”
{¶ 6} Charles’ attorney, Louis Borowicz, drafted the power of attorney documents
after consulting with Charles by phone. Chip never challenged the validity of the power
of attorney, or disputed the broad authority granted to John. Instead, Chip argued that
John exceeded this broad authority by having a gift-balancing clause included in the
otherwise proper irrevocable trust.
{¶ 7} Both sons received gifts and money from their parents throughout their adult
lives, and Elise was a meticulous record-keeper. She tracked funds given to John and
Chip, as well as any money received back as repayment on loans. Elise preserved her
ledgers in a lock box, and John indicated she called the ledgers her “bread crumbs,”
intended for John’s use in sorting out the estate when she and Charles were gone. By
2013, Elise’s health and mental state had deteriorated, and she moved into a nursing
home. At this point, Elise required more care than Charles was able to provide, and
Charles became concerned about the cost of long-term nursing home care. Charles’
health also began to fail at this time, and eventually he, too, required nursing home care.
{¶ 8} After speaking with his father, John consulted with Borowicz, who
recommended an irrevocable trust. Borowicz did not speak with Charles regarding the
trust, but John indicated he shared all details with his father. As part of preparations for
the trust, John ran a credit report for his parents and discovered several student loans
taken out by Chip’s daughter, totaling around $100,000. All but one of these loans listed
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Charles as cosigner without Charles’ knowledge or consent, and all were in default.
Fearing Sallie Mae would attach assets of the estate, Borowicz recommended quick
execution of the trust.1 On August 12, 2013, John executed the irrevocable trust, drafted
by Borowicz, on behalf of Charles as expressly authorized by the power of attorney.
Borowicz directed John to execute the trust on his father’s behalf to avoid delay, because
Charles lived a distance from Borowicz’s office.
{¶ 9} The new trust identified John and Chip as beneficiaries, but unlike prior
estate plans, included a gift-balancing clause, requiring offset of any distribution after the
death of both parents, according to amounts already given to John or Chip during their
parents’ lifetimes. Both John and Chip were aware of gifts and money received by the
other, but there was no evidence that either knew the exact amounts each had received,
prior to execution of the trust. Borowicz indicated this clause was standard where there
have been lifetime gifts given to the beneficiaries. Chip argued this new provision did
not reflect his parents’ intent, but did not otherwise seek to void the trust. Chip also
never claimed that John exerted undue influence over their father.
{¶ 10} The terms of the irrevocable trust designated John as trustee, and granted
him the authority to make distributions of principal and interest, during the lifetimes of
Charles and Elise, with “absolute discretion.” As trustee, John could make these
1
The forged student loans are not at issue in this appeal.
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discretionary distributions to himself, to Chip, and to his father’s financial advisor.2 At
trial, John testified that the goal of the irrevocable trust was, first, to take care of his
parents, who were expending large sums each month for nursing home care. As
structured, John indicated the trust assets would have depleted over time had his parents
lived longer, taking them through the Medicaid look-back period. A second goal of the
trust was creditor protection, and John testified that the surprise of the student loan debt
acted as an impetus for quick execution of the documents. Based on the evidence and
testimony, John authorized distributions of both income and principal, as expressly
permitted, to care for his parents until they passed away.
{¶ 11} Chip asserted no claim based on distributions, during his parents’ lifetime.
Chip, furthermore, did not dispute the authority granted to John as trustee, to make
distributions while their parents lived, solely at John’s discretion. Chip also cited no
provision within the trust language that granted him ownership or a right to possession of
trust assets, prior to the deaths of both parents. Instead, the trust provided for distribution
after death, as follows:
3.1. Distributions following the Death of the Survivor.
Upon the death of the second to die of my spouse and me, all of the
remaining principal and accumulated income, if any, of this Trust shall be
2
At the time John executed the trust, he had retired from the financial advising business,
and his stepson, Mark Lieser, also a financial advisor, had succeeded him in his business
and in his duties in managing his parents’ investments.
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divided into as many shares, allocated as hereinafter provided, as are
necessary to provide one such share for each then living child of mine.
3.1.1. Funding Each Child’s Trust Share. The Trustee shall fund
such separate shares so as to provide as nearly equal shares as practicable
after crediting to the value of such separate shares the amount of all gifts
made by the Grantor to, or for the benefit of, the beneficiaries of each such
separate share, or to, or the benefit of, the spouse or descendant of any such
beneficiary. It is the Grantor’s intention that the family units represented
by such separate shares be treated equally by aggregating all such gifts to
the members of such family units as provided above and allocating the
amounts used to fund the separate shares hereunder, so that the total
amount of funds benefiting each family unit will be as nearly equal as is
reasonably practicable. In making such allocations, the Grantor expressly
realizes that a share or shares may not be funded to any extent hereunder.
{¶ 12} On August 22, 2013, days after execution of the irrevocable trust, Charles
personally conveyed his assets into the trust by executing and recording a deed and
memorandum and affidavit of trust to convey his home from the prior revocable trust to
the newly created irrevocable trust.
{¶ 13} Within a year of executing the irrevocable trust, Charles and Elise passed
away, Charles on May 18, 2014, and Elise on July 27, 2014. John, as trustee, sold the
home and personal property, and used Elise’s ledgers to conduct the gift balancing. John
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sent a detailed spreadsheet to Chip containing the results of his calculations. Based on
Elise’s records, both brothers received substantial lifetime gifts, but Chip and his family
received the larger share. John calculated lifetime gifts to Chip and his family totaling
over $400,000, and lifetime gifts to himself and his family totaling nearly $120,000. The
proceeds from the trust, however, only totaled around $300,000. After gift balancing,
Chip received no funds in distribution from the trust.
{¶ 14} Chip filed suit, seeking to void only the gift-balancing provision of the
trust, and alleged claims for an accounting, conversion, and unjust enrichment. Chip also
sought declaratory judgment regarding proper division of the trust proceeds.
Additionally, Chip requested punitive damages for John’s alleged malice in denying him
his inheritance. The matter proceeded to trial, with Chip prosecuting only his claim for
conversion, seeking compensatory and punitive damages.
{¶ 15} Chip’s complaint for conversion alleged as follows:
Upon information and belief, the original estate plan of Charles and
Elise Hutchings provided for equal distribution of the residuary of their
assets;
By inserting a “gifting clause” into the irrevocable trust, John
purposely intended to and in fact did, utilize such “gifting clause” to make
the claim that Chip was not entitled to his share of trust assets;
The gifting clause was invalid as it was not within the 1999 trust,
and as such, was not the intention of Charles and Elise Hutchings;
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John’s wrongful action has resulted in his conversion of Chip’s share
of the inheritance to himself;
As a result of John’s conversion of Chip’s inheritance, Chip has
been damaged in an amount in excess of twenty five thousand dollars
($25,000.00).
{¶ 16} A jury heard the conversion claim. In support of his claim, Chip provided
his own testimony. John and attorney Borowicz testified for the defense. The parties
largely stipulated as to the exhibits, which included the durable power of attorney, prior
wills, the earlier revocable trust, the irrevocable trust agreement, and John’s gift-
balancing spreadsheet.
{¶ 17} After a three-day trial, the jury returned a verdict in favor of Chip, and
awarded him half of the remaining trust assets as compensatory damages for conversion.
The jury also found John was liable for punitive damages and attorney fees. The trial
court denied John’s motion for judgment notwithstanding the verdict, and this appeal
followed, with John asserting the following assignments of error:
1. The trial court’s judgment in plaintiff’s favor on the conversion
claim was contrary to law and against the manifest weight of the evidence
because plaintiff did not own or have a possessory interest in tangible
personal property at the time of the alleged conversion.
2. The trial court reversibly erred by applying the wrong burden and
standard of proof to plaintiff’s conversion claim.
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3. The trial court reversibly erred by applying a great-weight-of-the-
evidence standard to plaintiff’s claim for punitive damages.
4. Even discounting all of the aforementioned errors, the trial
court’s judgment was contrary to the manifest weight of the evidence.
II. Standard of Review
{¶ 18} John challenges the verdict as contrary to law and against the manifest
weight of the evidence, while also challenging the trial court’s application of the law
regarding the standard of proof for conversion and evidence of punitive damages.
{¶ 19} To prevail on a claim of conversion, the plaintiff bears the burden of
proving all the elements necessary to sustain that claim by a preponderance of the
evidence. J.B. Walter Const. Inc. v. Futronics, Inc., 6th Dist. Lucas No. L-99-1080,
2000 WL 5911, *2 (Jan. 7, 2000), citing Joyce v. General Motors Corp., 49 Ohio St. 3d
93, 96, 551 N.E.2d 172 (1990); Zacchini v. Scripps-Howard Broadcasting Co., 47 Ohio
St.2d 224, 226, 351 N.E.2d 454 (1976). An award of punitive damages, however,
requires proof by the plaintiff of entitlement to punitive damages by clear and convincing
evidence. Whetstone v. Binner, 146 Ohio St. 3d 395, 2016-Ohio-1006, 57 N.E.3d 1111,
¶ 20, citing R.C. 2315.21(D)(4).
{¶ 20} A judgment is insufficient and contrary to law where the evidence is not
legally sufficient to sustain the verdict. Eastley v. Volkman, 132 Ohio St. 3d 328, 2012-
Ohio-2179, 972 N.E.2d 517, ¶ 11, citing State v. Thompkins, 78 Ohio St. 3d 380, 386, 678
N.E.2d 541 (1997), quoting Black’s Law Dictionary 1433 (6th Ed.1990). Even if there is
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sufficient evidence to sustain a judgment, we may still find that the judgment is against
the manifest weight of the evidence. Eastley at ¶ 12. In reviewing a challenge to the
manifest weight of the evidence, we must determine “whether the greater amount of
credible evidence was admitted to support the judgment than not.” Quest Workforce
Solutions, LLC v. Johb1USA, Inc., 75 N.E.3d 1020, 2016-Ohio-8380, ¶ 41 (6th Dist.),
citing Eastley at ¶ 17; Thompkins at 386-390.
III. Analysis
{¶ 21} In his first assignment of error, John argues that the judgment was contrary
to law and against the manifest weight of the evidence because Chip did not own or have
possession of any trust assets at the time of the alleged conversion. In his second
assignment of error, John argues the trial court erred by applying the wrong burden and
standard of proof to plaintiff’s conversion claim. Because these assignments of error
both concern the requirements for sustaining a claim of conversion, we address them
together.
{¶ 22} The parties disputed when the conversion occurred, with John
characterizing Chip’s theory as conversion by execution of the trust, and Chip arguing
conversion beginning with execution of the trust and continuing through the time of
distribution, according to the gift-balancing provision included in the trust.
{¶ 23} Chip abandoned all but his conversion claim at trial, and sought to prove
the “gift-balancing” provision invalid through conversion. The essential elements of a
conversion claim are (1) ownership or right to possession of the property at the time of
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conversion, (2) a wrongful act or disposition of that property right by the defendant, and
(3) damages. (Citations omitted.) Peirce v. Szymanski, 6th Dist. Lucas No. L-11-1298,
2013-Ohio-205, ¶ 19.
{¶ 24} After considering the evidence, the jury answered interrogatories, finding
John did not act appropriately in executing the trust, and that this conduct resulted in
conversion of Chip’s property. Specifically, the jury answered the following question in
the negative: “Do you find * * * that [John] appropriately acted within his fiduciary duty
in executing the August 12, 2013 Hutchings Family Irrevocable Trust, on behalf of his
father, using the power of attorney?” The jury then awarded Chip half of the trust assets,
or distribution without application of the gift-balancing provision.
{¶ 25} In order to demonstrate conversion, however, Chip needed to demonstrate
possession or ownership of trust assets. Peirce at ¶ 19. The terms of the trust, and
specifically, the gift-balancing provision, prevented Chip from attaining ownership of
assets. Therefore, Chip sought to invalidate only the gift-balancing provision by arguing
John breached a fiduciary duty in executing the irrevocable trust.3 Significantly, Chip
3
While neither party raises the issue of “partial invalidity” of the trust, courts will strike a
provision, while preserving the trust, where that provision could not have legal effect as a
matter of law. See, e.g., Gwinner v. Schoeny, 111 Ohio App. 177, 185, 171 N.E.2d 728
(1st Dist.1960) (finding the Rule against Perpetuities invalidated some aspects of the
trust, but did not otherwise require setting the entire trust aside); Sawyer v. Lebanon
Citizens Natl. Bank, 105 Ohio App. 3d 464, 468, 665 N.E.2d 571 (12th Dist.1995) (“court
did not have authority pursuant to R.C. 2125.03(A)(2) to order the children’s trust funds
conveyed to Favaron’s next of kin if both children died without issue before reaching age
twenty-five, and we find that provision in the trust agreement invalid.”).
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challenged John’s conduct while also accepting the durable power of attorney, in its
entirety, as valid and proper.
{¶ 26} “A power of attorney is a written instrument authorizing an agent to
perform specific acts on behalf of his principal.” (Citation omitted.) Testa v. Roberts, 44
Ohio App. 3d 161, 164, 542 N.E.2d 654 (6th Dist.1988). The unchallenged durable
power of attorney specifically authorized John to “create a new revocable or irrevocable
inter vivos trust, under whatever terms my attorney-in-fact deems advisable[.]” The
durable power of attorney expressly granted authority for this specific action, pursuant to
R.C. 1337.42(A).
{¶ 27} Despite this explicitly granted authority, Chip argued that John’s conduct in
executing the trust with a gift-balancing provision exceeded this authority. At the same
time, in the factual allegations of his pleading, Chip acknowledged John’s authority, as
authorized by the durable power of attorney, stating:
On or around August 12, 2013, John executed the Hutchings Family
Irrevocable Trust Agreement, u/a/d August 12, 2013, on behalf of
Charles F. Hutchings, alleged Grantor, by way of John’s power of attorney.
(See attached Exhibit A) Said power of attorney authorized John to
initiate and execute an irrevocable trust. (Emphasis added.)
There is no dispute, therefore, that the durable power of attorney expressly granted John
the authority to execute an irrevocable trust. To challenge only the gift-balancing
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provision, Chip maintained that John wrongfully exceeded the powers granted, ignoring
the comprehensive scope of authority actually given to John.
{¶ 28} Clearly, without the express authority to self-deal, any transfer of assets
using a power of attorney would be presumptively invalid. MacEwen v. Jordan, 1st Dist.
Hamilton No. C-020431, 2003-Ohio-1547, ¶ 13 -14. With the comprehensive and
express grant of authority to John, however, the presumption of invalidity, based on self-
dealing, did not arise in this case. In re Buckner, 12th Dist. Clermont No. CA2008-07-
074, 2009-Ohio-2447, ¶ 26, citing MacEwen at ¶ 11, 14. Furthermore, Chip’s argument
of wrongful conduct—the use of authority specifically granted within the durable power
of attorney—is irreconcilable with Chip’s acknowledgment that the durable power of
attorney was proper and authorized that same exercise of authority.
{¶ 29} Because John had express authority to execute the irrevocable trust,
including any terms he deemed appropriate, and no evidence demonstrated wrongful
conduct in execution of the irrevocable trust, John’s exercise of authority was facially
valid. Thus, Chip bore the burden of demonstrating undue influence, by clear and
convincing evidence, in order to demonstrate an invalid exercise of authority as to the
gift-balancing provision. (Citation omitted.) MacEwen at ¶ 13. Instead, the evidence
adduced at trial demonstrated (1) an unchallenged durable power of attorney, (2) used to
execute the irrevocable trust containing terms that were consistent with prior estate plans
but for the gift-balancing clause, (3) that provided John with absolute discretion over
distributions while Charles and Elise lived, and (4) required gift-balancing prior to
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distribution after they died. Chip presented no evidence of undue influence, and on
appeal, maintained that the issue of undue influence was irrelevant and unnecessary.
{¶ 30} Chip’s theory of conversion depended on the contradictory position that
John’s authorized use of proper authority was presumptively improper, with no further
facts necessary regarding John’s conduct. Instead, Chip relied on John’s distribution
after gift-balancing as the wrongdoing, which John performed in conformity with the
terms of the trust. With no evidence, however, of undue influence or other wrongful
conduct, John’s inclusion of the gift-balancing provision was expressly authorized, and
the distribution not wrongful.
{¶ 31} Because Chip failed to demonstrate invalidity in a properly executed trust,
and application of the gift-balancing provision resulted in Chip receiving no funds from
the estate,4 we find no evidence that Chip owned or possessed trust assets. As this was a
necessary element for a conversion claim, we find the first and second assignments of
error well-taken. Resolution of these assignments of error render John’s fourth
assignment of error moot.
{¶ 32} In his third assignment of error, John argues that the trial court applied an
incorrect standard to Chip’s claim for punitive damages. However, based on our finding
as to the lack of evidence on an essential element of the conversion claim, this
4
The trust contemplated this potential result, with language regarding distribution, after
second death, providing, “the Grantor expressly realizes that a share or shares may not be
funded to any extent hereunder.”
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assignment of error is also moot. It is well-settled law that punitive damages “arise
incident to compensable harm” and are recoverable only when compensatory damages
are awarded. Whetstone, 146 Ohio St. 3d 395, 2016-Ohio-1006, 57 N.E.3d 1111 at ¶ 20,
citing Niskanen v. Giant Eagle, Inc., 122 Ohio St. 3d 486, 2009-Ohio-3626, 912 N.E.2d
595, ¶ 12-13; R.C. 2315.21(C)(1). Finding no basis for judgment on the claim or for
compensable damages, therefore, there could be no punitive damages awarded in this
matter.
IV. Conclusion
{¶ 33} For the forgoing reasons, we reverse the judgment of the Sandusky County
Court of Common Pleas, Probate Division, and enter judgment in favor of appellant as to
the claim for conversion. Appellee is ordered to pay the costs of this appeal pursuant to
App.R. 24.
Judgment reversed.
A certified copy of this entry shall constitute the mandate pursuant to App.R. 27.
See also 6th Dist.Loc.App.R. 4.
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Hutchings v. Hutchings
C.A. No. S-19-008
Mark L. Pietrykowski, J. _______________________________
JUDGE
Thomas J. Osowik, J.
_______________________________
Gene A. Zmuda, J. JUDGE
CONCUR.
_______________________________
JUDGE
This decision is subject to further editing by the Supreme Court of
Ohio’s Reporter of Decisions. Parties interested in viewing the final reported
version are advised to visit the Ohio Supreme Court’s web site at:
http://www.supremecourt.ohio.gov/ROD/docs/.
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