Murphy v. Hall

[Cite as Murphy v. Hall, 2020-Ohio-163.]
IN THE COURT OF APPEALS
ELEVENTH APPELLATE DISTRICT
TRUMBULL COUNTY, OHIO
JAMES E. MURPHY, JR., et al., : OPINION
Plaintiffs-Appellants, :
CASE NO. 2019-T-0022
- vs - :
MARGARET A. HALL, :
INDIVIDUALLY AND IN HER
CAPACITY AS EXECUTRIX :
OF THE ESTATE OF
CATHERINE M. MURPHY, et al., :
Defendant-Appellee. :
Civil Appeal from the Trumbull County Court of Common Pleas, Probate Division, Case
No. 2017 CVA 0012.
Judgment: Affirmed.
William M. Flevares, Flevares Law Firm, LLC, 1064 Niles Cortland Road, N.E., Warren,
OH 44484 (For Plaintiffs-Appellants).
Douglas J. Neuman, Neuman Law Office, LLC, 761 North Cedar Avenue, Suite 1, Niles,
OH 44446 (For Defendant-Appellee).
MATT LYNCH, J.
{¶1} Plaintiffs-appellants, James E. Murphy, Jr., Martin W. Murphy, Sr., Jeanne
M. Murphy, Patrick B. Murphy, Donna M. Grombacher, and Sean M. Murphy, appeal the
March 14, 2019 Amended Judgment Entry of the Trumbull County Court of Common
Pleas, Probate Division, ordering the distribution of 403(b) retirement account funds to
them and to appellee, Margaret A. Hall, and the Estate of Catherine M. Murphy. For the
following reasons, we affirm the decision of the court below.
{¶2} On February 24, 2017, the plaintiffs filed a Complaint for Declaratory
Judgment in the Trumbull County Court of Common Pleas, Probate Division, against Hall,
individually and in her capacity as Executrix of the Estate of Murphy, Fidelity Investments
Institutional Operations Company, Inc., and The Mercy Health Partners Retirement Plan
Committee. The plaintiffs and Hall are siblings of the decedent. The plaintiffs sought a
declaration that they are the true owners of the decedent’s Fidelity Investment 403(b) plan
account managed by Mercy Health Partners.
{¶3} On May 24, 2017, Hall filed her Answer which contained the following: “As
an affirmative defense, the Defendant states that she is entitled to a set-off against the
claims of the Plaintiffs from life insurance proceeds that the Defendant has given to the
Plaintiffs.”
{¶4} On October 16-17, 2017, the case was tried before the court. During the
course of the trial, the following relevant testimony was given:
{¶5} Hall testified that the decedent had two Cigna life insurance policies of
which she was the beneficiary: a Basic Benefit policy worth about $94,000 and a
Supplemental Benefit policy worth about $187,000. The decedent indicated to Hall that
the larger policy was for her siblings and that the smaller was to be divided between her
nieces and nephews. During the decedent’s final hospitalization, an attempt was made
by a friend of the decedent, Stella Maiorana, to have the siblings, nieces, and nephews
added to the policies as beneficiaries. However, “the life insurance * * * told her she
[Maiorana] wasn’t allowed to list that many people, because she [the decedent] had so
many nieces and nephews and brothers and sisters to list on the insurance, that they
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didn’t have room for them. * * * So she put just my name on it for both life insurance
policies and then I would divide them.”
{¶6} In October 2015, Hall sent checks to the siblings and the nieces and
nephews dividing the proceeds of the two policies. Although not directed to do so by the
terms of the policies or the decedent’s will, Hall testified: “If it’s somebody’s last wish, you
do it.”
{¶7} The decedent’s attorney, Joshua Garris, testified that the decedent
expressed her wish “to benefit her siblings, nieces, nephews, but primarily her sister
Peggy [Hall].” The decedent also expressed “that there was either a death benefit or a
retirement benefit of which there were two parts. The greater part would be shared
amongst siblings * * * but * * * the smaller part would be shared amongst nieces and
nephews.”
{¶8} Maiorana testified that the decedent “wanted her family to have everything
they possibly could” monetarily and she “wanted to make sure that Peggy [Hall] was going
to be set.”
{¶9} Martin Murphy, one of the decedent’s siblings, testified that, during the final
hospitalization, there was a paper stating that the insurance was to be divided between
the nieces and nephews while the Fidelity 403(b) was to be divided evenly between the
siblings.
{¶10} Sean Murphy, one of the decedent’s siblings, testified that the decedent told
him directly that the “retirement,” i.e., the 403(b), was going to her siblings. He “had
thought Cigna was going to go to the kids [nieces and nephews], but [he] didn’t know that
for sure a hundred percent.”
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{¶11} James Murphy, one of the decedent’s siblings, testified regarding a meeting
with the decedent at Garris’ office at which she stated, “I want the 403 to go to my brothers
and sisters, the insurance policy goes to my nieces and nephews.”
{¶12} On November 21, 2017, the probate court issued a Judgment Entry,
denying the Complaint for Declaratory Judgment. The court’s Entry states, in relevant
part:
The Plaintiffs argue that the change of beneficiary designation
signed by Catherine M. Murphy shortly before her death, which
leaves all seven of her siblings fourteen percent (14%) of the
account, and which was received by Fidelity Investments Institutional
Operations Company, Inc. after her death, should be followed.
Defendant Hall argues that all of the proceeds of the 403(b) account
should be paid to The Estate of Catherine M. Murphy, which had
been the designation of the decedent prior to the execution of the
change of beneficiary designation. The Court finds that the
appropriate test to determine how the proceeds of the 403(b) account
should be transferred is the clearly expressed intent test. * * * The
Court finds that Margaret Hall reliably testified that the decedent
intended the 403(b) account to go to her and that the smaller
insurance policy was to be divided between the siblings and the
nieces and nephews of the decedent. The Court finds that the
change of beneficiary designation form does not accurately reflect
the intent of the decedent.
{¶13} The plaintiffs appealed the denial of the Complaint, arguing that the probate
court’s judgment was against the weight of the evidence.
{¶14} On January 22, 2019, this court reversed the probate court’s decision for
the reason that “the weight of the evidence shows that the change of beneficiary form
was the decedent’s clearly expressed intent,” and remanded for further proceedings.
Murphy v. Hall, 11th Dist. Trumbull No. 2017-T-0114, 2019-Ohio-188, ¶ 17.
{¶15} At a status conference subsequent to the remand, the parties agreed that
no further testimony would be necessary before a final disposition could be made.
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{¶16} On March 12, 2019, the probate court issued its Judgment Entry which it
subsequently modified by an Amended Judgment Entry issued on March 14, 2019. The
court ruled as follows:
Because this Court [previously] ruled that the entirety of the
403(b) account was an asset of the Estate in its November 21, 2017
Judgment Entry, this Court did not address the affirmative defense
of Defendant Margaret Hall that she is entitled to a set-off against the
claims of the Plaintiffs from life insurance proceeds that she gave to
the Plaintiffs. The opinion of the Eleventh District Court of Appeals
similarly did not address the affirmative defense. The Court finds
that it is now appropriate to rule on the affirmative defense of
Defendant Hall.
Pursuant to Civ.R. 8(C), when a party has mistakenly
designated a defense as a counterclaim or a counterclaim as a
defense, the Court, if justice so requires, shall treat the pleading as
if there had been a proper designation. The Court finds that justice
requires it to construe the affirmative defense contained in
Paragraph 21 of Defendant Hall’s Answer as a counterclaim for set-
off.
The Court finds that Defendant Hall believed that the estate
plan of the decedent was for Defendant Murphy to pay equal shares
of the $187,000.00 Cigna life insurance benefit to each of the
decedent’s siblings, to pay equal shares of the $94,000.00 Cigna life
insurance benefit to the decedent’s nieces and nephews, and to
retain the entirety of the 403(b) account for her own use.
The Court finds that, even though Defendant Hall was actually
entitled to the entire value of both Cigna life insurance benefit
payments, Defendant Hall paid the appropriate portions of the money
to her siblings and to the nieces and nephews of the decedent to
comply with the estate plan of the decedent. The Court finds that
Defendant Hall paid to each of the Plaintiffs herein $26,857.14 from
the Cigna life insurance benefit in compliance with what she believed
was the decedent’s estate plan. The Court finds that Defendant Hall
believed that she was required to make the payments to the Plaintiffs
and took care to send each check by certified mail and retain copies
for her records.
The Court finds that, while Defendant Hall also made
payments to the decedent’s nieces and nephews in compliance with
what she believed was the estate plan of the decedent even though
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the policy was made payable to her, those nieces and nephews are
not parties to this action.
Based upon the decision of the Eleventh District Court of
Appeals, Defendant Hall was mistaken as to the estate plan of the
decedent. The Eleventh District Court of Appeals ruled that the
decedent actually intended for 14% of the 403(b) account to be paid
to each of her seven siblings as beneficiaries.
The Court finds that the evidence is clear that Defendant Hall
is the person with whom the decedent had the closest relationship
and that Defendant Hall was the decedent’s primary caregiver during
her illness. The Court finds that the clear intention of the decedent
was that Defendant Hall would receive the bulk of her assets. This
intention that Defendant Hall be the primary beneficiary of the
decedent’s assets is clear from the evidence presented at the
hearing, including the testimony of Joshua Garris, Esq. * * *. If the
Court fails to grant the counterclaim, the Plaintiffs would receive a
windfall, and the inequitable result would be that Defendant Hall
would not receive the bulk of the decedent’s assets as the decedent
intended.
The Court finds that, if the decedent intended for the 403(b)
account to be paid to each of her seven siblings equally, as the
Eleventh District Court of Appeals has ruled, she did not intend for
the $187,000.00 Cigna life insurance benefit to be paid to each of
her seven siblings equally and, instead, intended for the $187,000.00
Cigna life insurance benefit to be retained by Defendant Hall in its
entirety.
The Court finds that Defendant Hall is entitled to a set-off. The
Court finds that it is necessary and appropriate that the money which
was erroneously paid to the Plaintiffs in compliance with the
decedent’s estate plan be returned to Defendant Hall now that the
Eleventh District Court of Appeals has decided that the decedent’s
estate plan was different than what Defendant Hall understood it to
be.
{¶17} Accordingly, the probate court ordered that the Fidelity 403(b) account be
divided amongst the decedent’s seven siblings with each sibling receiving 14%. The
amounts received by the six plaintiffs was reduced by $26,857.14 which was added to
Hall’s amount. The remaining 2% was ordered to be paid to Hall’s estate.
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{¶18} On April 8, 2019, the plaintiffs filed a Notice of Appeal. On appeal, they
raise the following assignments of error:
{¶19} “[1.] The trial court abused its discretion when it sua sponte construed
defendant-appellee Hall’s affirmative defense as a counterclaim.”
{¶20} “[2.] The trial court erred as a matter of law when it sua sponte construed
defendant-appellee Hall’s affirmative defense as a counterclaim.”
{¶21} “[3.] The trial court’s entry treating defendant-appellee Hall’s affirmative
defense of set-off as a counterclaim was against the manifest weight of the evidence.”
{¶22} The plaintiffs’ first two assignments of error challenge the probate court’s
decision to construe Hall’s affirmative defense of setoff as a counterclaim. The arguments
raised under each assignment are similar. The difference lies with the standard of review
to be applied. The first assignment claims the trial court abused its discretion in the
application of Civil Rule 8(C). Under this deferential standard, “[i]t is not sufficient for an
appellate court to determine that a trial court [erred] simply because the appellate court
might not have reached the same conclusion or is, itself, less persuaded by the trial
court’s reasoning process than by countervailing arguments.” State v. Morris, 132 Ohio
St.3d 337, 2012-Ohio-2407, 972 N.E.2d 528, ¶ 14. The second assignment asserts an
error of law which requires this court to consider the decision de novo, i.e., “the appellate
court must * * * independently determine, without deference to the conclusion of the trial
court,” whether its decision satisfied the applicable legal standard. State v. Burnside, 100
Ohio St. 3d 152, 2003-Ohio-5372, 797 N.E.2d 71, ¶ 8.
{¶23} In either case, the plaintiffs argue “the Trial Court overstepped its authority
in general when it sua sponte designated Defendant-Appellee Hall’s affirmative defense
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of set-off as a counterclaim.” Appellants’ brief at 10. They note that the court “should
have followed this Court’s mandate and issued a judgment entry ordering Fidelity to
distribute 14% of [the decedent’s] 403(b) account to each of the six Appellants and
Defendant-Appellee Hall with the remaining 2% to the Estate of Catherine M. Murphy.”
Id. at 7. Instead, they claim, the court acted as an advocate for Hall’s interests. They
note that Hall’s affirmative defense does not contain a “short and plain statement of the
claim” or a “demand for judgment” as required by Civil Rule 8(A) for counterclaims. Id. at
11. Moreover, the court’s action failed to comply with the basic motion requirements of
Civil Rule 7(B) (“a motion * * * shall state with particularity the grounds therefor”) and “its
timing was contrary to Civil Rule 15 given that it did not do this until after this Court
remanded this case to the Trial Court.” Id. at 6 and 10.
{¶24} Civil Rule 8(C) provides: “When a party has mistakenly designated a
defense as a counterclaim or a counterclaim as a defense, the court, if justice so requires,
shall treat the pleading as if there had been a proper designation.” It has been recognized
generally that a claim for setoff should be raised as a counterclaim pursuant to Civil Rule
13(C) (“[a] counterclaim may or may not diminish or defeat the recovery sought by the
opposing party”). Kingston Natl. Bank v. Stulley, 4th Dist. Pike No. 443, 1990 WL 155741,
*5; Indus. Fabricators, Inc. v. Natl. Cash Register Corp., 10th Dist. Franklin No. 83AP-13,
1984 WL 4669, *5 (“[p]ursuant to Civ.R. 13(C), a counterclaim is now any claim, including
setoff or recoupment, which a defendant may have against a plaintiff”); Civ.R. 13, 1970
Staff Notes (“[t]he rule abolishes any distinction between such terms as set off or
recoupment as distinguished from the term counterclaim itself”).
{¶25} We note that several courts have adopted the plaintiffs’ position that, in
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order for an affirmative defense to be construed as a counterclaim, it must be properly
pled and so construed in a timely manner. “This provision was intended to permit trial
courts to forgive clerical errors made in designating defenses and counterclaims; it was
not designed as a means by which a party could correct a substantive error in pleadings
long after the time for amendment to those pleadings had passed.” Am. Outdoor
Advertising Co., L.L.C. v. P & S Hotel Group, Ltd., 10th Dist. Franklin No. 09AP-221,
2009-Ohio-4662, ¶ 26; BAC Home Loans Serv., L.P. v. Hall, 12th Dist. Warren No.
CA2009-10-135, 2010-Ohio-3472, ¶ 19 (the same). This position, however, has not been
universally adopted. See Eaton Corp. v. Taylor-Winfield Corp., 8th Dist. Cuyahoga No.
62361, 1993 WL 267113, *4 (“[a]lthough Civ.R. 8(A) requires a counterclaim to contain a
demand for relief, lack of a demand is of no consequence when an affirmative defense is
to be treated as a counterclaim”).
{¶26} Given the particular circumstances of the present case, we find no
reversible error in the probate court’s decision to construe Hall’s affirmative defense as a
counterclaim. This court reversed the court’s prior judgment as being against the weight
of the evidence, specifically as to the decedent’s intent regarding the distribution of the
Fidelity 403(b) account. When a judgment is reversed as being against the weight of the
evidence, the proper procedure on remand is to hold a new trial. Eastley v. Volkman, 132
Ohio St. 3d 328, 2012-Ohio-2179, 972 N.E.2d 517, ¶ 22. This court is aware of no rule
that prevents the raising of supplemental claims when a case is remanded for a new trial.
See, e.g., Rejas Invests. v. Natl. City Bank, 2d Dist. Montgomery No. 23349, 2010-Ohio-
5163, ¶ 47 (affirming the trial court’s decision to grant a jury demand contained in
supplemental counterclaims raised on remand); Civ.R. 13(F) (“[w]hen a pleader fails to
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set up a counterclaim through oversight, inadvertence, or excusable neglect, or when
justice requires, he may by leave of court set up the counterclaim by amendment”); Civ.R.
15(E) (“[p]ermission [to file supplemental pleadings] may be granted even though the
original pleading is defective in its statement of a claim for relief or defense”).
{¶27} Nor do we find error in the probate court’s decision to construe the
affirmative defense erroneous because it was taken sua sponte. This court’s prior
Opinion established as the law of the case that the decedent’s intent with respect to the
distribution of the 403(b) account was reflected in the change of beneficiary form. Murphy,
2019-Ohio-188, at ¶ 17. Neither this court nor the probate court considered or made any
ruling regarding the distribution of the Cigna policies. Given that the lower court’s prior
judgment denied the plaintiffs’ claim for declaratory judgment, there was no reason for
either court to address what effect payment of the Cigna policies would have had on a
judgment in the plaintiffs’ favor. The issue was raised in Hall’s answer and was litigated
at trial. Virtually every witness testified regarding the policies and documentary evidence
of their value and of the distribution to the siblings, nieces, and nephews was introduced.
Rather than hold a new trial, however, the parties agreed that no further testimony would
be necessary in order for a final disposition to be rendered. The plaintiffs may have
believed that the court’s only option on remand was to enter judgment in their favor, but
that was not the case.
{¶28} The first two assignments of error are without merit.
{¶29} In the third assignment of error, the plaintiffs argue that the probate court’s
decision that Hall was entitled to a setoff in the amount of the insurance distribution to the
siblings was against the manifest weight of the evidence. We disagree.
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{¶30} “Weight of the evidence concerns ‘the inclination of the greater amount of
credible evidence, offered in a trial, to support one side of the issue rather than the other.’”
(Citation omitted.) Eastley, 132 Ohio St. 3d 328, 2012-Ohio-2179, 972 N.E.2d 517, at ¶
12. Being “mindful of the presumption in favor of the finder of fact,” the reviewing court
“‘weighs the evidence and all reasonable inferences, considers the credibility of witnesses
and determines whether in resolving conflicts in the evidence, the [finder of fact] clearly
lost its way and created such a manifest miscarriage of justice that the [judgment] must
be reversed and a new trial ordered.’” (Citations omitted.) Id. at ¶ 21, 20.
{¶31} Hall’s distribution of the proceeds from the Cigna Supplemental Benefit
policy valued at $187,000 to the plaintiffs does not constitute a setoff as understood in
Ohio law. “The right to setoff mutual debts exists as a remedy under Ohio law.” Lewis v.
United Joint Venture, 691 F.3d 835, 839 (6th Cir.2012). It has been defined as “that right
which exists between two parties, each of whom under an independent contract owes a
definite amount to the other, to set off their respective debts by way of mutual deduction.”
Witham v. S. Side Bldg. & Loan Assn. of Lima, Ohio, 133 Ohio St. 560, 562, 15 N.E.2d
149 (1938); In re U.S. Aeroteam, Inc., 327 B.R. 852, 861 (S.D.Ohio 2005), citing Citizens
Bank of Maryland v. Strumpf, 516 U.S. 16, 18, 116 S. Ct. 286, 133 L. Ed. 2d 258 (1995)
(“[s]etoff is a doctrine that allows entities who owe money to each other to cancel out or
apply their mutual debts against each other thereby avoiding the ‘absurdity of making A
pay B when B owes A’”) (citation omitted); King v. King, 11th Dist. Geauga No. 2011-G-
3046, 2013-Ohio-432, ¶ 33-34.
{¶32} Although Hall’s defense was denominated a “set-off” and the probate court
purported to construe it thus as a counterclaim, the court’s Entry demonstrates it was
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contemplating another remedy. The court’s Entry frankly states that, “even though
Defendant Hall was actually entitled to the entire value of both Cigna life insurance benefit
payments, [she] paid the appropriate portions of the money to her siblings * * * in
compliance with what she believed was the decedent’s estate plan.” By estate plan, the
court is apparently referencing the decedent’s desire to make Hall the primary beneficiary
of her estate or, in the court’s words, that Hall should “receive the bulk of her assets.”
This overarching purpose, according to the lower court’s construal of the evidence, was
frustrated by the decedent’s own conduct in executing the change of beneficiary form
shortly before her death. Hall “was mistaken as to the estate plan of the decedent,” not
with respect to her being the primary beneficiary, but with respect to the 403(b) account
comprising the bulk of those assets that she was to receive. Accordingly, the court
concludes, if it failed “to grant the counterclaim, the Plaintiffs would receive a windfall,
and the inequitable result would be that Defendant Hall would not receive the bulk of the
decedent’s assets.”
{¶33} The plaintiffs argue “[t]his court’s decision [in Murphy, 2019-Ohio-188] that
it was [the decedent’s] clearly expressed intent that the 403(b) account be split equally
between Defendant-Appellee Hall and the six Appellants does not alter [the decedent’s]
intent that Defendant-Appellee Hall was to distribute the proceeds of the two Cigna life
insurance policies in the manner that she did: One to Defendant-Appellee Hall and the
six Appellants and the other to the nieces and nephews.” Appellants’ brief at 17.
{¶34} The probates court’s judgment, however, does not rest on the decedent’s
specific intent as to the insurance policies. Per the terms of the policies, they were paid
to Hall. The relevant intent, for the purposes of the court’s judgment, was the decedent’s
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intent as to her estate plan. As determined by the lower court, the estate plan did not
envisage the appellants receiving a share of the 403(b) account as well as the proceeds
of the supplemental benefit policy inasmuch as Hall was intended to receive “the bulk” of
decedent’s assets. This conclusion is supported by the testimony of Garris, Maiorana,
and Hall and is entitled to our deference. Home Builders Assn. of Dayton and the Miami
Valley v. Beavercreek, 89 Ohio St. 3d 121, 129, 729 N.E.2d 349 (2000) (“[w]hen reaching
a factual determination, the trial court is in the best position to evaluate the testimony of
witnesses and the evidence presented”).
{¶35} Furthermore, we note that the probate court’s focus on the decedent’s broad
intent regarding her estate is not inconsistent with the equitable nature of restitution which
may be applied in circumstances where the retention of a benefit by a party would be
unjust and/or where a party is entitled to compensation for a benefit conferred on another.
Johnson v. Microsoft Corp., 106 Ohio St. 3d 278, 2005-Ohio-4985, 834 N.E.2d 791, ¶ 20-
21; Resco Holdings, L.L.C. v. AIU Ins. Co., 2018-Ohio-2844, 112 N.E.3d 503, ¶ 41 (8th
Dist.) (“equity gives the court flexibility to reach a just result depending upon the facts and
circumstances of each case” and a reviewing court “will not disturb a trial court’s exercise
of its equity discretion absent an abuse of discretion”).
{¶36} The third assignment of error is without merit.
{¶37} In their reply brief, the appellants attempt to raise a fourth assignment of
error on the grounds that the probate court could not rely on the doctrine of mistake in
rendering its judgment. We decline to address this argument as it is presented in a
manner contrary to both the appellate rules and precedent. Cleveland v. Dancy, 8th Dist.
Cuyahoga No. 107241, 2019-Ohio-2433, ¶ 36 (“[p]ursuant to App.R. 16(C), reply briefs
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are to be used to rebut arguments raised in the appellee’s brief; an appellant may not use
a reply brief to raise new issues or assignments of error not addressed in the appellant’s
opening brief”) (citation omitted).
{¶38} For the foregoing reasons, the Amended Judgment of the Trumbull County
Probate Court is affirmed. Costs to be taxed against the appellants.
TIMOTHY P. CANNON, P.J.,
THOMAS R. WRIGHT, J.,
concur.
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