HARRY E. FIGGIE IV, ET AL., v. BETSY FIGGIE, ET AL.
No. 109829
COURT OF APPEALS OF OHIO EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA
April 8, 2021
2021-Ohio-1195
JUDGMENT: AFFIRMED
RELEASED AND JOURNALIZED: April 8, 2021
Civil Appeal from the Cuyahoga County Court of Common Pleas Probate Division Case No. 2018ADV239801
Appearances:
Baker & Hostetler L.L.P., Michael K. Farrell, Robert R. Galloway and Corey N. Barnes, for appellee Betsy Figgie, as Co-Trustee of the Harry E. Figgie II Trust Agreement dated July 15, 1976, as amended.
Calfee Halter & Griswold L.L.P., Mitchell G. Blair, Colleen M. O’Neil, Kelly A. Callam and Alexandra Forkosh; Ulmer & Berne L.L.P., Steven S. Kaufman, Robin M. Wilson and Ashtyn N. Saltz, for appellee Brent Ballard, as Co-Trustee of the Harry E. Figgie, Jr. Trust Agreement dated July 15, 1976, as amended, Trustee of the Nancy F. Figgie Trust Agreement dated September 7, 1976, as amended, and Trustee of the Matthew P. Figgie Trust Agreement dated October 20, 1985, as amended.
EILEEN A. GALLAGHER, J.:
{¶ 1} Plaintiffs-appellants Harry E. Figgie, IV (“Harry IV”) and Catherine Figgie (“Katie”) (collectively, “plaintiffs” or “appellants”) appeal from the probate court’s decision granting the
{¶ 2} For the reasons that follow, we affirm.
Procedural and Factual Background1
{¶ 3} Nancy Figgie (“Nancy”) and Harry E. Figgie, Jr. (“Harry II”) had three children — Harry E. Figgie, III (“Harry III), Mark P. Figgie (“Mark”) and Matthew P. Figgie (“Matthew”). On August 23, 1983, Harry III executed a trust agreement
{¶ 4} Harry III died on December 21, 1999. Among the assets of the Harry III Trust at the time of Harry III’s death were classes of voting and nonvoting shares of Clark Reliance Corporation (“CRC”), a closely held corporation built by the Figgie family. Harry II had conveyed the CRC stock to the Harry III Trust while Harry III was alive.
{¶ 5} Prior to his death, Harry III had a “bitter falling out” with his parents (Harry II and Nancy) and brother Matthew. This estrangement continued until Harry III died. Pursuant to the terms of the trust agreement, after Harry III died, Harry II served as the trust advisor for the Harry III Trust, charged with decisions relating to the investment, sale and purchase of stock for the trust. Wilmington Trust Co. was the trustee of the Harry III Trust.
{¶ 6} Following Harry III’s death, the Harry III Trust owned 4,000 shares of Class A CRC stock and 76,000 shares of Class B CRC stock (collectively, the “CRC stock”). On October 21, 2001, CRC redeemed the CRC stock from the Harry III Trust for a purchase price of $1,909,007 “through a transaction that was initiated and directed by [Harry II]” (the “2001 CRC stock redemption”). At the time of the 2001 CRC stock redemption, Harry II, Nancy, Mark and Matthew were all shareholders of CRC. Harry II was also an officer of CRC and/or a member of its board of
{¶ 7} Harry II died on July 14, 2009. Prior to their deaths, Harry II, Nancy and Matthew each executed trust agreements establishing separate trusts — the Harry E. Figgie Jr. Trust Agreement dated July 15, 1976, as amended (the “Harry II Trust”), the Nancy Figgie Trust Agreement dated September 7, 1976, as amended (the “Nancy Trust”) and the Matthew P. Figgie Trust Agreement dated October 20, 1985, as amended (the “Matthew Trust”).
{¶ 8} On December 20, 2018, Harry IV, individually and as conservator of Susie, and Katie filed suit in the Cuyahoga County Court of Common Pleas, Probate Division, against (1) defendant-appellee Betsy Figgie (“Betsy”), as co-trustee of the Harry E. Figgie II Trust Agreement dated July 15, 1976, as amended, (2) Ballard, as co-Trustee of the Harry E. Figgie II Trust Agreement dated July 15, 1976, as amended, Trustee of the Nancy F. Figgie Trust Agreement dated September 7, 1976, as amended, and Trustee of the Matthew P. Figgie Trust Agreement dated October 20, 1985, as amended3 and (3) CRC related to the 2001 CRC stock redemption (Case No. 2018ADV239801).
{¶ 10} In their first amended complaint, appellants alleged that as trust advisor of the Harry III trust, Harry II owed fiduciary duties, including an “undivided duty of good faith and loyalty,” to the Harry III Trust and to appellants as beneficiaries of the trust, and that, at the time of the 2001 CRC stock redemption, Harry II “was operating under several serious and insurmountable conflicts of interest.” Appellants further alleged that CRC and Harry II’s conduct in connection with the 2001 CRC stock redemption was “misleading, in bad faith and/or fraudulent in nature” and that the purchase price the Harry III Trust received for its CRC stock during the 2001 CRC stock redemption was “well below market value,” resulting in losses to the Harry III Trust and to appellants as beneficiaries of the trust. Specifically, appellants alleged that Harry II and CRC (1) “did not properly, fairly or adequately secure or evaluate a valuation of the CRC [s]tock,” (2) relied on a valuation of CRC prepared by a non-independent person/company, (3) did not secure an independent valuation of the CRC stock, (4) manipulated or relied on known and unreasonably manipulated data to reduce the valuation of the CRC stock
{¶ 11} Appellants claimed that as a result of the 2001 CRC stock redemption, CRC and its remaining shareholders recognized “a significant increase” in the value of their shares and that this appreciated value could be traced to assets currently held by CRC, the Harry II Trust, the Nancy Trust and the Matthew Trust. Appellants alleged that they had been deprived of the CRC stock (or its fair value in assets) as part of their inheritance, that the defendants had been unjustly enriched by the “wrongful, fraudulent conduct” that led to the 2001 CRC stock redemption and that appellants were, therefore, entitled to the imposition of a constructive trust over “the improper benefits, gains, appreciation, profits and unjust enrichment derived from the 2001 redemption of the CRC [s]tock.”
{¶ 12} Appellants claimed that they did not discover, and had no way of discovering, “the false, flawed and concealed data and valuation process” that was used in the 2001 CRC stock redemption until November 25, 2018.5 Appellants requested an order declaring (1) that the 2001 redemption of the CRC stock was “below value,” (2) that “improper benefits and proceeds” from the 2001 CRC stock
{¶ 13} On May 24, 2019, CRC and the Trust Defendants filed separate motions to dismiss the first amended complaint pursuant to
{¶ 14} Appellants filed an opposition in which they maintained that the allegations of the first amended complaint — describing how the 2001 CRC stock redemption was fraudulent, “detail[ing] the concealment of material facts relating to the value of the stock transaction, ‘with the knowledge, acquiescence and/or assistance of all Defendants (or their predecessors)’” and asserting that the Trust Defendants “knew about the fraud,” “participated in it” and “retained the benefit of misrepresentations” that caused appellants “substantial damages” — were sufficient to state a claim for which relief could be granted under
{¶ 15} On June 18, 2020, the probate court granted the Trust Defendants’ motion to dismiss, dismissing all six counts against the Trust Defendants. With respect to appellants’ fraud claim, the probate court held that although appellants had sufficiently pled a fraud claim against CRC — based on CRC’s alleged concealment of information material to the 2001 CRC stock redemption — appellants had not sufficiently pled a fraud claim against the Trust Defendants. The probate court explained:
The Court finds that the essence of Plaintiffs’ fraud claim alleges that [CRC] and [Harry II] had a duty to disclose information which was concealed from the Plaintiffs regarding the 2001 redemption of CRC stock. Specifically, Plaintiffs assert that CRC, [Harry II], and, upon information and belief, all other Defendants (or their predecessors in interest), knew the 2001 redemption of CRC stock was fraudulent, deflated, and manipulated, and that such information was concealed from Plaintiffs. Upon review of the allegations in the First Amended Complaint, Plaintiffs have sufficiently alleged with particularity that CRC had a duty to disclose, but instead concealed information, which was material to the transaction of the redemption of CRC stock, and that Plaintiffs justifiably relied upon the false and misleading information provided by CRC which resulted in an alleged monetary injury to the Plaintiffs. This Court cannot find, however, that Plaintiffs have sufficiently plead the allegations of fraudulent conduct against [the Trust Defendants], as Plaintiffs have not [pled] with particularity any alleged fraudulent conduct by the Trust Defendants in the redemption of CRC stock.
Plaintiffs allege that the Trust Defendants, or their predecessors in interest, knew of the allegedly fraudulent and/or manipulative redemption of CRC stock in 2001. As such, Plaintiffs assert that upon their information and belief, the Defendants, or their predecessors in interest, knew the 2001 redemption of CRC stock was fraudulent. Plaintiffs have failed to identify any specific representations or concealment of facts made by the Trust Defendants upon which Plaintiffs relied. Plaintiffs further request that this Court hold the Trust Defendants liable for alleged fraudulent conduct and actions, not of the named Trust Defendants, but of their predecessors in interest. The allegations asserted against the Trust Defendants, or their predecessors in interest, do not rise to the level of particularity as required by
Civ.R. 9 . Consequently, upon review of the First Amended Complaint, the Court finds that Plaintiffs have failed to plead the claim of fraud with particularity as to the Trust Defendants[.]
{¶ 16} With respect to appellants’ claim for declaratory judgment, the probate court held that appellants’ request for an order declaring that “improper benefits and proceeds” from the 2001 CRC stock redemption are in the Harry II Trust, the Nancy Trust and the Matthew Trust and that defendants are “equitably
{¶ 17} The probate court determined that appellants’ claims of tortious interference with expectancy of inheritance, unjust enrichment, constructive trust and civil conspiracy against the Trust Defendants failed as well. The probate court held that appellants could not establish the expectancy-of-inheritance or causation elements for its tortious interference claim because appellants’ expectancy of inheritance “occurred in 1999 when they inherited the trust assets upon Harry III’s death.” The probate court held that appellants’ unjust enrichment claim was barred by the statute of limitations and that any alleged benefit conferred upon the Trust Defendants as a result of the 2001 CRC stock redemption was an indirect benefit, which could not support a claim for unjust enrichment against them. The probate court further held that constructive trust is “a form of equitable relief” in cases of fraud and unjust enrichment, not an independent claim, and that appellants could not prevail on their civil conspiracy claim against the Trust Defendants because the Trust Defendants had not been named in the civil conspiracy count and the underlying fraud claim against the Trust Defendants had been dismissed. The probate court also determined that there was no just reason for delay pursuant to
Assignment of Error No. 1: The probate court improperly dismissed Plaintiffs’ constructive trust claim against the Trust Defendants.
Assignment of Error No. 2: The probate court incorrectly dismissed Plaintiffs’ claim for unjust enrichment against the Trust Defendants.
Assignment of Error No. 3: The probate court incorrectly determined that Plaintiffs failed to state a claim of fraud against the Trust Defendants.
Assignment of Error No. 4: The probate court incorrectly dismissed Plaintiffs’ claim for tortious interference with expectancy of inheritance against all Defendants.7
Law and Analysis
Standard of Review
{¶ 19} A
{¶ 20} However, a complaint must consist of more than “‘bare assertions of legal conclusions.’” Fisher v. Ahmed, 2020-Ohio-1196, 153 N.E.3d 612, ¶ 8 (9th Dist.), quoting Copeland v. Summit Cty. Probate Court, 9th Dist. Summit No. 24648, 2009-Ohio-4860, ¶ 10. Allegations in a complaint must be supported by facts. Minaya v. NVR, Inc., 2017-Ohio-9019, 103 N.E.3d 160, ¶ 15, 17 (8th Dist.). “Conclusions not supported by factual allegations in the complaint cannot be deemed admitted and are insufficient to withstand a motion to dismiss.” Krohn v. Ostafi, 6th Dist. Lucas No. L-19-1002, 2020-Ohio-1536, ¶ 10, citing State ex rel. Hickman v. Capots, 45 Ohio St.3d 324, 544 N.E.2d 639 (1989); Mitchell v. Lawson Milk Co., 40 Ohio St.3d 190, 193, 532 N.E.2d 753 (1988) (“Unsupported conclusions that appellant committed an intentional tort are not taken as admitted by a motion to dismiss and are not sufficient to withstand such a motion.”) (emphasis deleted); Godwin v. Facebook, Inc., 2020-Ohio-4834, 160 N.E.3d 372, ¶ 14 (8th Dist.) (‘“[E]ven under Ohio’s notice-pleading standard, a cause of action must be factually supported and courts need not accept bare assertions of legal conclusions.’ * * * [U]nsupported legal conclusions are not accepted as true for purposes of a motion to dismiss.”), quoting Enduring Wellness, L.L.C. v. Roizen, 8th Dist. Cuyahoga No.
{¶ 21} To prevail on a
{¶ 22} A trial court’s decision to grant a
Constructive Trust
{¶ 23} In their first assignment of error, appellants contend that the probate court improperly dismissed their constructive trust claim against the Trust Defendants because it believed, incorrectly, that a constructive trust is an equitable remedy that could not survive independently of their fraud or unjust enrichment claims against the Trust Defendants. Appellants assert that a constructive trust claim is “an independent claim for relief” that “remedies ill-gotten gains when equity dictates the recipient should not hold and enjoy certain benefits” regardless of whether the property holder committed any wrongdoing or was otherwise unjustly enriched. Appellants further contend that they sufficiently pled a claim for constructive trust against the Trust Defendants based on their allegations that the Trust Defendants “held the property that had been improperly taken from Plaintiffs,” i.e., that the Trust Defendants had benefited from the 2001 CRC stock redemption through the appreciation of their CRC shares and that that benefit was traceable to assets currently held by the Trust Defendants. We disagree.
{¶ 24} A constructive trust is
“a trust by operation of law which arises contrary to intention and in invitum, against one who, by fraud, actual or constructive, by duress or abuse of confidence, by commission of wrong, or by any form of unconscionable conduct, artifice, concealment, or questionable means, or who in any way against equity and good conscience, either has obtained or holds the legal right to property which he ought not, in equity and good conscience, hold and enjoy.”
{¶ 25} In support of their contention that constructive trust is an independent, stand-alone cause of action, appellants focus, in their appellate briefs, on Ferguson v. Owens, 9 Ohio St.3d 223, 459 N.E.2d 1293 (1984). In Ferguson, a husband and wife with five children divorced. As part of the divorce decree, entered in August 1978, the husband agreed to purchase “through his company” a $100,000 “life insurance policy” for the benefit of his children. The policy was to be owned by, and the premiums paid by, the wife. Id. at 223. In 1979, the husband obtained a
{¶ 26} Shortly after he acquired the accidental death policy, the husband’s employment terminated. The husband obtained a new position, which included as a fringe benefit, a $40,000 life insurance policy (the “life insurance policy”). The husband named Ferguson, a woman with whom he was then living, as the beneficiary of the $40,000 life insurance policy. Id. The husband died, but not from an accidental death, so it was not covered under the accidental death policy. Ferguson and the wife and children filed separate suits to recover the proceeds of the $40,000 life insurance policy. Id. Ferguson claimed that as the named beneficiary of the life insurance policy, she had an absolute right to the proceeds. The wife and children claimed that they possessed an equitable right to those proceeds, which was superior to Ferguson’s contractual right. Id. Both parties filed motions for summary judgment. Id. at 224-225.
{¶ 27} The trial court granted summary judgment in favor of Ferguson and the wife and children appealed. Id. at 225. The First District affirmed the trial court, concluding that there was no genuine issue of material fact that Ferguson had not “acquired a right to those proceeds by any means contradictory to the fundamental principles of equity.” Id. The wife and children appealed to the Ohio Supreme Court. The court identified the issue on appeal as “whether a constructive trust may
{¶ 28} With respect to the first issue, the court defined a constructive trust and further explained:
A constructive trust is, in the main, an appropriate remedy against unjust enrichment. This type of trust is usually invoked when property has been acquired by fraud. However, a constructive trust may also be imposed where it is against the principles of equity that the property be retained by a certain person even though the property was acquired without fraud.
Id. at 226, citing 53 Ohio Jurisprudence 2d, Trusts, Section 88, at 578-579 (1962); V Scott on Trusts, Section 462, at 3412 (3d Ed.1967). The court noted that other jurisdictions “have applied the doctrine of constructive trust in situations involving after-acquired life insurance policies in determining the equities as between the title owner of such policies and those who were to be named beneficiaries by the terms of a separation agreement embodied within a divorce decree.” Id.
{¶ 29} With respect to the second issue, the court found that, based on the record before the trial court, there were genuine issues of material fact regarding what the divorce decree required and whether the husband had complied with the
{¶ 30} Contrary to appellants’ assertion, there is no indication in Ferguson that the court sought to analyze whether a constructive trust was an independent cause of action, much less that it concluded that a constructive trust was an independent, stand-alone cause of action. As noted above, the court explicitly stated that imposition of a constructive trust is a “remedy,” “usually invoked” in cases where fraud is established, but that it could also be “an appropriate remedy against unjust enrichment,” “where it is against the principles of equity that the property be retained by a certain person even though the property was acquired without fraud.” Id. at 226.
{¶ 31} At oral argument, appellants shifted their focus from Ferguson to Estate of Cowling, 109 Ohio St.3d 276, 2006-Ohio-2418, 847 N.E.2d 405, in arguing that the Ohio Supreme Court had recognized an independent claim for constructive trust.
{¶ 32} In Estate of Cowling, a husband and wife owned various brokerage accounts and stock investments jointly with rights of survivorship. Id. at ¶ 3. Each had children from a prior marriage, but no children together. Id. at ¶ 2. During their marriage, the husband transferred the couple’s stocks from their joint account into a transfer-on-death (“TOD”) account, with his children named as the beneficiaries. Id. at ¶ 3. He later gifted some of the stocks to his children and
{¶ 33} The wife filed suit, asserting “an equitable claim” against the children “for a declaratory judgment to establish a constructive trust over the assets transferred” by the husband to his children. Id. at ¶ 4. The wife also asserted claims against the husband’s estate for breach of contract, conversion, breach of fiduciary duty, negligent misrepresentation and fraud. Id.
{¶ 34} The case proceeded to trial. A jury found that the husband had withdrawn funds from the couple’s joint accounts in excess of the contributions attributable to him and that the wife had sustained $255,354 in resulting damages. Id. at ¶ 6. The trial court entered a default judgment in that amount against the husband’s estate, which had not answered or participated in the trial, and “declared a constructive trust” in the amount of $ 255,354, which it imposed on each of the children in proportion to the amount he or she had received from their father. Id. at ¶ 6-7. The trial court did not designate the specific property or assets over which the constructive trust was to be imposed. Id. at ¶ 7. The children filed motions for a new trial and for judgment notwithstanding the verdict. Id. The trial court denied the motions, and the children appealed. Id. at ¶ 7-8.
{¶ 35} The Ninth District reversed the trial court’s denial of the children’s motions for directed verdict and judgment notwithstanding the verdict and the trial court’s order imposing a constructive trust. Id. at ¶ 10. The wife’s estate then
{¶ 36} After discussing the ownership of assets in a joint and survivorship account and the evidentiary burden necessary to prove net contributions to a joint and survivorship account, the court turned to the constructive trust issue. Id. at ¶ 12-15. As in Ferguson, there is no indication in Estate of Cowling that the court sought to analyze whether a constructive trust was an independent cause of action — much less that it concluded that a constructive trust was an independent, stand-alone cause of action that could be imposed on a party without proof of unjust enrichment or proof of wrongdoing, such as fraud. The court began by defining a constructive trust. Citing Ferguson, 9 Ohio St.3d at 226, 459 N.E.2d 1293, and Aetna Life Ins. Co. v. Hussey, 63 Ohio St.3d 640, 642, 590 N.E.2d 724 (1992), the court explained that “[a] constructive trust is an equitable remedy that protects against unjust enrichment and is usually invoked when property has been obtained by fraud” but that “[s]uch a trust ‘may also be imposed where it is against the principles of equity that the property be retained by a certain person even though the property was acquired without fraud.’” Estate of Cowling at ¶ 19, quoting Ferguson at 226.
When they have addressed tracing, courts in Ohio have required the claimant to offer sufficient proof of tracing the property through any changes in form or possessor to the possessor of the property over whom the constructive trust should be placed. * * * We are in accord with these decisions and hold that before a constructive trust can be imposed, there must be adequate tracing from the time of the wrongful deprivation of the relevant assets to the specific property over which the constructive trust should be placed.
We have previously held that a party seeking the judicial imposition of a constructive trust “bears the burden of producing clear and convincing evidence justifying it.” [Univ. Hosps. of Cleveland, Inc. v.] Lynch, 96 Ohio St.3d 118, 2002-Ohio-3748, 772 N.E.2d 105, paragraph three of the syllabus. Lynch specifically referred to the claimant‘s burden of proof and the evidentiary standard for proving the unjust-enrichment aspect of a constructive trust. Id. at 130, 772 N.E.2d 105. We conclude that the same evidentiary burden should apply to tracing and that the burden of proof is on the claimant.
A claimant seeking the imposition of a constructive trust must specify the particular property over which the constructive trust is to be placed. * * * A constructive trust is an equitable remedy that must be imposed on particular assets, not on a value. For example, if a party is inequitably deprived of 100 shares of stock that are valued at $ 10,000, a constructive trust should be imposed over 100 shares of stock, not $10,000. * * * Constructive trusts should be placed over the property of the party who wrongfully obtained the property. When, as in this case, the property was subsequently transferred to third parties, a constructive trust can be imposed.
(Emphasis added.) Id. at ¶ 22-26.
{¶ 38} Thus, in Estate of Cowling, as in Ferguson, the Ohio Supreme Court expressly recognized that constructive trust is “an equitable remedy.” The court further acknowledged, citing Lynch, that there is an “unjust-enrichment aspect of a
{¶ 39} Applying these principles, the court then considered whether the trial court had properly denied the children‘s motions for a new trial or judgment notwithstanding the verdict. Specifically, the court considered whether the wife‘s estate (1) “presented clear and convincing evidence of the inequitable situation or unjust enrichment that would result if the [children] retained the assets” and (2) “provided clear and convincing evidence tracing the assets from the joint and survivorship accounts * * * to property held by the [children].” Id. at ¶ 32.
{¶ 40} The court held that because the husband withdrew all of the assets he subsequently transferred to his children from joint and survivorship accounts that were in his and his wife‘s names and because evidence was presented that the husband‘s withdrawals had exceeded his contributions to those accounts, “reasonable minds could only conclude that inequity had been proven by clear and convincing evidence” and that the wife‘s estate had “presented sufficient evidence with respect to this element of a constructive-trust claim to survive motions for a directed verdict and judgment notwithstanding the verdict.” Id. at ¶ 33. The court noted that “[d]espite the imprecision of some of the standards we apply in equity,
{¶ 41} As to the tracing requirement, the parties stipulated that, at the time of the trial, the assets the husband had transferred to his children were in the same form in which the husband had received them, that the children had retained the assets throughout the trial and that the children (with the exception of one child, who had turned over her share of the assets to the wife‘s estate) had then sold the assets to post cash deposits for the appeal and had deposited the proceeds with the Lorain County Clerk of Courts. The court held that the evidence presented at trial and the parties’ stipulations were “sufficient to satisfy the tracing requirement” but that the trial court‘s order for a constructive trust could not “stand unmodified.” Id. at ¶ 34-35. The court found that the trial court had erred because it did not specify the particular assets over which the constructive trust was imposed and that the constructive trust “should have been placed over the proportion of the specific assets held by the [children] that equaled Father‘s net contributions, as determined by the jury.” Id. at ¶ 36. Accordingly, the court reversed the decision of the Ninth District, reinstated the trial court‘s order imposing a constructive trust and ordered that the constructive trust be imposed over the proportionate share of the assets then held by the Lorain County Clerk of Courts. Id. at ¶ 37-38.
{¶ 42} Accordingly, we do not read Ferguson or Estate of Cowling as recognizing a constructive trust as an independent claim that may be maintained
{¶ 43} Furthermore, this court (and others) have explicitly held that a constructive trust is not an independent cause of action. See, e.g., Graham v. Lakewood, 2018-Ohio-1850, 113 N.E.3d 44, ¶ 58 (8th Dist.) (“constructive trust is a remedy, not a cause of action“); Widok, 2020-Ohio-5178, at ¶ 85-86 (“constructive trust is not an independent cause of action“); see also Krohn, 2020-Ohio-1536, at ¶ 37 (“An accounting, like a constructive trust, is an equitable remedy, not a cause of action.“); Lapoint v. Templeton, 6th Dist. Fulton No. F-07-014, 2008-Ohio-1792, ¶ 42 (“Since appellants have not demonstrated fraud or unjust enrichment, a constructive trust cannot be created.“); Kostyo v. Kaminski, 9th Dist. Lorain No. 12CA010266, 2013-Ohio-3188, ¶ 17 (“Generally speaking, * * * there is no such thing as a cause of action for constructive trust.“).
{¶ 44} Appellants argue that this court‘s decisions in Graham and Widok conflict with its prior decision in Cooper v. Cooper, 8th Dist. Cuyahoga No. 76899, 2000 Ohio App. LEXIS 3955 (Aug. 31, 2000), and that Cooper recognizes that “a constructive trust claim is an independent claim separate and apart from a claim for fraud or unjust enrichment.” Once again, we disagree.
{¶ 45} In Cooper, several siblings appealed the trial court‘s decision dismissing a declaratory judgment action they had filed against their stepmother, individually and as administratrix of their father‘s estate. Id. at 1. The stepmother had been named the primary beneficiary of several of their father‘s investment
{¶ 46} The stepmother filed a motion to dismiss the complaint for failure to state a claim upon which relief could be granted pursuant to
{¶ 47} On appeal, this court affirmed the trial court‘s dismissal of the action. This court found that there was “no evidence beyond the [children‘s] bare allegations” that their stepmother had “improperly obtained title” to their father‘s retirement assets, that even if the father had verbally expressed his intent to leave
{¶ 48} There is nothing in Cooper that recognizes a constructive trust claim as an independent claim. The court stated:
While a constructive trust may arise when the property is acquired through fraud, duress, undue influence or mistake, or breach of fiduciary duty, it may also arise where the property holder has not committed any wrongdoing but is not equitably entitled to retain the property.
Id. at 9-10, citing In re The Estate of Cole, 12th Dist. Butler No. CA99-03-059, 2000 Ohio App. LEXIS 1869 (May 1, 2000) (“A constructive trust is a remedial device utilized to prevent fraud and unjust enrichment.“), Ferguson, 9 Ohio St.3d at 226, 459 N.E.2d 1293, and Union S. & L. Assn. v. McDonough, 101 Ohio App.3d 273, 276, 655 N.E.2d 426 (12th Dist.1995) (“A constructive trust is a trust created by operation of law against the holder of a legal right to property which that person should not, in equity and good conscience, hold or enjoy; it is a relationship associated with property subjecting the title holder to an equitable duty to convey it to another because otherwise the title holder would be unjustly enriched. * * * A constructive trust will not attach to property acquired by a bona fide purchaser — one who
{¶ 49} This statement by the court is not, as appellants contend, a recognition that “a claim of constructive trust can exist without being tied to another stand-alone claim.” This is simply an acknowledgement that a constructive trust may be an appropriate remedy even in the absence of wrongdoing where a party is “not equitably entitled to retain the property” at issue, i.e., where one party has been unjustly enriched.
{¶ 50} As the court further explained: “A constructive trust is imposed ‘where a person holding title to property is subject to an equitable duty to convey it to another on the ground that he would be unjustly enriched if he were permitted to retain it.‘” (Emphasis added.) Id. at 9, quoting Estate of Cole at 4. General unfairness or “a showing that there has been a ‘moral wrong’ is not sufficient to warrant imposition of a constructive trust.” Id. at 11.
{¶ 51} That a constructive trust is not an independent cause of action is further supported by the Ohio Supreme Court‘s application of statutes of limitation in cases seeking the imposition of a constructive trust. As the court stated in Peterson v. Teodosio, 34 Ohio St.2d 161, 297 N.E.2d 113 (1973), a constructive trust cannot be imposed where the underlying “cause of action in which imposition of a constructive trust is sought as a remedy” is time-barred:
In Ohio, statutes of limitation attach to causes of action and not to the remedial form in which the action is brought. * * * If the cause of action in which imposition of a constructive trust is sought as a remedy is
barred by a statute of limitation, the imposition of a constructive trust is likewise barred. It is a rule of universal application that limitation statutes will run with respect to actions seeking imposition of constructive trusts.
Id. at 172; see also Cundall, 122 Ohio St.3d 188, 2009-Ohio-2523, 909 N.E.2d 1244, at ¶ 39-41 (constructive trust could not be imposed where the underlying causes of action were time-barred); Krohn at ¶ 34-35 (after determining that appellant‘s claims for fraud and breach of fiduciary duty were time-barred by the four-year statute of limitations in
{¶ 52} “Dismissal under
Unjust Enrichment
{¶ 53} In their second assignment of error, appellants challenge the probate court‘s determinations that their unjust enrichment claim was time-barred under
{¶ 54} Unjust enrichment occurs when a person ‘“has and retains money or benefits which in justice and equity belong to another.‘” Johnson v. Microsoft Corp., 106 Ohio St.3d 278, 2005-Ohio-4985, 834 N.E.2d 791, ¶ 20, quoting Hummel v. Hummel, 133 Ohio St. 520, 528, 14 N.E.2d 923 (1938); see also Jamison v. Jamison, 8th Dist. Cuyahoga No. 106185, 2018-Ohio-1626, ¶ 16. The purpose of an unjust enrichment claim is not to compensate the plaintiff for loss or damage suffered by the plaintiff, but to enable the plaintiff to recover the benefit he or she conferred on the defendant under circumstances in which it would be unjust to allow the defendant to retain it. Johnson at ¶ 21, citing Hughes v. Oberholtzer, 162 Ohio St. 330, 335, 123 N.E.2d 393 (1954); Cleveland Cent. Catholic High School v. Mills, 2018-Ohio-4873, 125 N.E.3d 328, ¶ 41 (8th Dist.).
{¶ 55} To prevail on a claim for unjust enrichment, a plaintiff must prove by a preponderance of the evidence that (1) the plaintiff conferred a benefit upon the defendant, (2) the defendant had knowledge of such benefit and (3) the defendant retained that benefit under circumstances in which it would be unjust for him or her to retain that benefit. Johnson at ¶ 21; Hambleton v. R.G. Barry Corp., 12 Ohio St.3d 179, 183, 465 N.E.2d 1298 (1984); see also Cleveland Cent. Catholic at ¶ 42; Pomeroy v. Schwartz, 8th Dist. Cuyahoga No. 99638, 2013-Ohio-4920, ¶ 41.
{¶ 56} A showing of ‘“[e]nrichment alone‘” is insufficient for a plaintiff to prevail on a claim for unjust enrichment. Chesnut v. Progressive Cas. Ins. Co., 166 Ohio App.3d 299, 2006-Ohio-2080, 830 N.E.2d 751, ¶ 30 (8th Dist.), quoting Directory Servs. Group v. Staff Builders Internatl., 8th Dist. Cuyahoga No. 78611, 2001 Ohio App. LEXIS 3108 (July 12, 2001). To prove a cause of action for unjust enrichment, the plaintiff ‘“must go further and show that under the circumstances [the plaintiff] has a superior equity so that, as against [the plaintiff], it would be
{¶ 57} A six-year statute of limitations applies to claims for unjust enrichment.
{¶ 58} The discovery rule has not been extended to unjust enrichment claims. Jones Lang at ¶ 118; Drozeck v. Lawyers Title Ins. Corp., 140 Ohio App.3d 816, 749 N.E.2d 775 (8th Dist.2001); Darkadakis at ¶ 42; Marok v. Ohio State Univ., 10th Dist. Franklin No. 13AP-12, 2014-Ohio-1184, ¶ 25; Binsack v. Hipp, 6th Dist. Huron No. H-97-029, 1998 Ohio App. LEXIS 2370, 17-18 (June 5, 1998); see also Patel v. Krisjal, L.L.C., 10th Dist. Franklin No. 12AP-16, 2013-Ohio-1202, ¶ 30 (“The statute of limitations for an unjust enrichment claim is not subject to equitable tolling or a discovery rule.“).
{¶ 59} Citing Cleveland v. Ohio Bur. Workers’ Comp., 2018-Ohio-846, 109 N.E.3d 84, and KeyBank Natl. Assn. v. Correct Custom Drywall, Inc., Franklin C.P. 09-CV-0164008, 2014 Ohio Misc. LEXIS 5567 (Apr. 25, 2014), appellants argue that the statute of limitations does not bar their unjust enrichment claim against the Trust Defendants because appellants pled that “the benefits continue to accrue to this day,” that the unjust enrichment and resulting harm to appellants was “ongoing” and that “the full potential benefit had not yet been determined.” Appellants contend that because they claim the Trust Defendants continue to “possess the benefit” they received from the 2001 CRC stock redemption, the last date a benefit was conferred by appellants requires a factual analysis and cannot be
{¶ 60} KeyBank involved a bank‘s efforts to collect a commercial debt from an individual, Wilkie, who, in 1997, had executed a guaranty promising to repay the debt. Id. at 1-2. Wilkie filed a third-party complaint against Wade that included an unjust enrichment claim. Wilkie alleged that KeyBank and Wade conspired to induce Wilkie to sign the guaranty by misrepresenting to Wilkie that Wade would also be a guarantor and that Wade had been unjustly enriched as a result. Id. at 1-3. The Franklin County Court of Common Pleas denied Wade‘s motion to dismiss Wilkie‘s unjust enrichment claim against him on statute-of-limitations grounds, concluding that the claim had “not yet fully accrued” because neither Wilkie nor Wade had yet been “adjudged liable for the debt at issue” and, therefore, the “full potential benefit has not yet been determined/conferred.” Id. at 11. That is not the situation here.
{¶ 61} In Cleveland v. Ohio Bur. of Workers’ Comp., 2018-Ohio-846, 109 N.E.3d 84, the city of Cleveland asserted a claim for unjust enrichment against the Ohio Bureau of Workers’ Compensation (“BWC“), alleging that the BWC had unlawfully charged the city excessive workers’ compensation insurance premiums from 1997-2009 in order to subsidize overly generous premium discounts given to public employers who participated in the BWC‘s group-rating program. In that case, this court held that the city‘s cause of action for unjust enrichment did not accrue until 2009, when the city made its last premium “overpayment,” i.e., the last point
{¶ 62} Once again, that is not the situation here. This is not a case in which appellants were engaged in series of continuing transactions with the defendants. Here, there was only a single transaction — a transaction in which the Trust Defendants were not direct participants — that occurred in 2001.
{¶ 63} This case is similar to Binsack v. Hipp, 6th Dist. Huron No. H-97-029, 1998 Ohio App. LEXIS 2370 (June 5, 1998). In Binsack, the plaintiff, a minority shareholder, sold her shares of a closely held corporation back to the defendants, majority shareholders, in 1979. Id. at 2-4. Ten years later, when the value of the company and the shares held by the defendants and their children had greatly increased, the plaintiff learned that her shares had been redeemed for much less than they were worth. Id. at 4, 17. The plaintiff filed suit against the defendants for fraud, breach of fiduciary duty and unjust enrichment. Id. at 4-5. The trial court granted summary judgment on the plaintiff‘s unjust enrichment claim on the ground that it was barred by the statute of limitations. Id. at 6. The Sixth District affirmed, concluding that her cause of action for unjust enrichment accrued in 1979
{¶ 64} At issue in this case is a single transaction — a transaction that occurred in 2001. Any benefit that may have been conferred upon the Trust Defendants as a result of the 2001 stock redemption was conferred upon them in 2001, when the stock that had been owned by the Harry III Trust was redeemed by CRC. If the stock redemption was “unjust,” as appellants allege, it was “unjust” from the beginning. See Pomeroy, 2013-Ohio-4920, at ¶ 46; cf. Patel, 2013-Ohio-1202, at ¶ 1-5, 28-30 (unjust enrichment claim against an Ohio limited liability company to recover funds diverted from a British company accrued at the time of the transfer of the funds in 1999, not when the transfer was allegedly discovered in 2007, because “[t]he statute of limitations for an unjust enrichment claim is not subject to equitable tolling or a discovery rule“).
{¶ 65} Given that appellants’ original complaint was not filed until 2018 — more than 17 years after the 2001 CRC stock redemption — appellants’ unjust enrichment claim is time-barred, and the probate court did not err in dismissing appellants’ unjust enrichment claim against the Trust Defendants.9 We overrule appellants’ second assignment of error.
{¶ 66} In their third assignment of error, appellants contend that they “met the pleading standard for fraud set forth by
{¶ 67} The elements of fraud are: (1) a representation of fact (or where there is a duty to disclose, concealment of a fact); (2) that is material to the transaction at issue; (3) made falsely, with knowledge of its falsity or with utter disregard and recklessness as to whether it is true or false; (4) with the intent of misleading another into relying upon it; (5) justifiable reliance upon the misrepresentation (or concealment) and (6) resulting injury proximately caused by the reliance. Cohen v. Lamko, Inc., 10 Ohio St.3d 167, 169, 462 N.E.2d 407 (1984).
{¶ 68}
{¶ 69} Appellants argue that they pled their fraud claim against the Trust Defendants with sufficient particularity, as required under
{¶ 70} We disagree. The only fraudulent conduct alleged in the first amended complaint is conduct by CRC and Harry II. The first amended complaint alleges that “CRC and Harry [II] had a duty to disclose” information related to the
{¶ 71} Because the first amended complaint does not contain facts that, if true, would establish all elements of a fraud claim against the Trust Defendants, the probate court did not err in dismissing appellants’ fraud claim against the Trust Defendants pursuant to
Tortious Interference with Expectancy of Inheritance
{¶ 72} In their fourth and final assignment of error, appellants contend that the probate court erred in dismissing their claim for tortious interference with expectancy of inheritance against the Trust Defendants based on its “misguided belief” that “a beneficiary who has a certain expectancy prior to vesting and who fails to discover the interference until after his or her interest vests is barred from bringing such a claim.”
{¶ 73} The elements of a claim for tortious interference with expectancy of inheritance are (1) an existence of an expectancy of inheritance in the plaintiff, (2) an intentional interference by a defendant with the expectancy of inheritance, (3) tortious conduct constituting such interference, such as fraud, duress or undue influence, (4) a reasonable certainty the expectancy of inheritance would have been
{¶ 74} The first amended complaint alleges that, during Harry III‘s lifetime, Harry III established the Harry III Trust for the benefit of his children and that Harry II conveyed the CRC stock to the Harry III Trust. Accordingly, during Harry III‘s lifetime, appellants may have had an “expectancy of inheritance” of a share of the assets of the Harry III Trust, including the CRC stock. However, that “expectancy” was extinguished upon Harry III‘s death, when appellants realized their inheritance and became beneficiaries of the Harry III Trust. See, e.g., Brown v. Ralston, 2016-Ohio-4916, 67 N.E.3d 15, ¶ 20 (8th Dist.) (“an inheritance means that the property passes after the owner‘s death“); Restatement of the Law 2d, Torts, Section 774B, Comment b (1979) (“inheritance * * * includes any devise or bequest that would otherwise have been made under a testamentary instrument or any property that would have passed to the plaintiff by intestate succession“).
{¶ 75} In 2001, when the CRC stock redemption occurred, appellants no longer had an “expectancy” of “inheritance” with respect to the CRC stock; they had a present interest in the Harry III Trust and/or the assets of the trust as beneficiaries
{¶ 76} Furthermore, appellants’ first amended complaint contains no allegations of any actionable conduct by the Trust Defendants related to appellants’ tortious interference claim, i.e., the complaint contains no reference to any facts from which it could be reasonably inferred that Trust Defendants intentionally and tortiously interfered with any expectancy of inheritance on the part of appellants. The first amended complaint alleges only that Harry II and CRC‘s conduct was
{¶ 77} Because appellants failed to plead sufficient facts that, if true, would establish that they had a reasonable expectancy of inheritance at the time of the 2001 CRC stock transaction and that that expectancy of inheritance would have been realized, but for the interference of the Trust Defendants, the probate court did not err in dismissing appellants’ claim for tortious inference with expectancy of inheritance against the Trust Defendants. Appellants’ fourth assignment of error is overruled.
{¶ 78} Judgment affirmed.
It is ordered that appellees recover from appellants costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to the Cuyahoga County Common Pleas Court, Probate Division, to carry this judgment into execution.
EILEEN A. GALLAGHER, JUDGE
KATHLEEN ANN KEOUGH, P.J., and
EMANUELLA D. GROVES, J., CONCUR