Keybank Narl. Assn. v. Thalman
2016 Ohio 2832
Ohio Ct. App.2016Background
- Howard A. Couse created a trust for his descendants; KeyBank became successor trustee after his death. Beneficiaries included Jeanne Schlitt Clough (Clough line) and Howard H. Schlitt (Schlitt line).
- In 2008 KeyBank divided administration into two labeled accounts: FBO JSC (for Jeanne/Clough line) and FBO HHS (for Dr. Schlitt). Each account had separate account numbers and statements; beneficiaries received only their respective statements.
- After Dr. Schlitt complained about income and later died (2011), KeyBank initially planned to distribute each FBO account to its respective heirs, but after threats by the Schlitt heirs to report KeyBank to regulators, KeyBank combined the two accounts and reallocated balances, taking ~$237,000 from the FBO JSC account for the Schlitt heirs.
- The Clough heirs filed counterclaims alleging breach of trust and breach of fiduciary duty; KeyBank sought declaratory relief. The probate court ordered equal distribution between Clough and Schlitt heirs; later the trial court granted summary judgment to KeyBank on all Clough-heirs’ claims and awarded KeyBank fees.
- On appeal the Eighth District reversed and remanded, finding genuine issues of material fact regarding (1) whether KeyBank improperly represented and operated the trust as split, (2) whether combining the accounts prejudiced the Clough heirs’ interests, and (3) whether the Clough heirs suffered damages from KeyBank’s conduct.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether summary judgment was proper on claims of breach of trust under R.C. Chapter 5810 | Clough heirs: KeyBank misled beneficiaries, treated trust as split, then combined accounts — breach of trust and damages exist | KeyBank: Trust language did not permit splitting; actions were lawful and no damages proven | Court: Reversed — genuine issues of material fact exist on breach of trust and damages; summary judgment improper |
| Whether KeyBank could combine previously administered separate FBO accounts and equally distribute between Clough and Schlitt heirs | Clough heirs: Splitting was agreed and communicated; combining substantially impaired Clough heirs’ interests and frustrated Jeanne Clough’s purposes | KeyBank: R.C. 5804.17 permits combining/dividing trusts so long as beneficiaries’ rights aren't substantially impaired | Court: Reversed — factual dispute whether combining prejudiced Clough heirs; cannot decide as matter of law |
| Whether KeyBank breached fiduciary duties (accounting, loyalty, communication) | Clough heirs: KeyBank failed to render clear accurate accounts, treated accounts inconsistently, and caused loss (~$237,000) | KeyBank: Denies breach; contends administration and distributions were proper | Court: Reversed — material factual disputes exist on breach and proximate injury |
| Whether Clough heirs suffered recoverable damages from KeyBank’s actions | Clough heirs: Combining accounts resulted in significant loss to FBO JSC beneficiaries (approx. $237,000) | KeyBank: No cognizable injury shown; distribution was lawful | Court: Reversed — factual dispute over causation and quantum of damages requires trial |
Key Cases Cited
- Baiko v. Mays, 140 Ohio App.3d 1 (Ohio App. 1999) (standard of appellate de novo review of summary judgment)
- Smiddy v. The Wedding Party, Inc., 30 Ohio St.3d 35 (Ohio 1987) (no deference on appellate review of summary judgment)
- Dresher v. Burt, 75 Ohio St.3d 280 (Ohio 1996) (party moving for summary judgment must identify record evidence showing absence of genuine issue)
- Wing v. Anchor Media, Ltd. of Texas, 59 Ohio St.3d 108 (Ohio 1991) (summary judgment standard discussed in Ohio precedent)
- Shuster v. N. American Mortgage Loan Co., 139 Ohio St. 315 (Ohio 1942) (definition of breach of trust including negligence or oversight)