Burns v. Daily

Decision Date28 October 1996
Docket NumberNo. 95-T-5259,95-T-5259
PartiesBURNS, Trustee, et al., Appellees, v. DAILY, Appellant. * Eleventh District, Trumbull County
CourtOhio Court of Appeals

Mark S. Colucci, Youngstown, for appellees Peter E. Burns and Delbert E. Strawder.

Douglas J. Neuman, Niles, for appellees Margaret S. Rudy, Douglas J. Neuman, and George Valtas.

Sidney N. Freeman, Uniontown, for appellant.

NADER, Judge.

This is an appeal from the judgment of the Probate Division of the Trumbull County Court of Common Pleas, finding defendant-appellant, John A. Daily, a licensed attorney, guilty of wrongfully concealing assets from a probate estate under R.C. 2109.50.

The litigation giving rise to the present action began roughly seven and one-half years ago. On February 14, 1989, a petition was filed in the Trumbull County Probate Court requesting the appointment of a guardian to oversee the financial affairs of Margaret S. Rudy ("Mrs. Rudy"). On April 20, 1989, the probate court entered an order appointing attorney Robert Vesmas as guardian ad litem. On June 19, 1989, the probate court entered another order prohibiting the transfer of Mrs. Rudy's assets during the pendency of the guardianship until final determination on her competency. After hearing, the probate court found that Mrs. Rudy had made certain financial transactions that were "against her best interests." It imposed a limited guardianship over her by order dated May 8, 1990. On June 13, 1990, the probate court reappointed attorney Vesmas as guardian. 1 This order described Mrs. Rudy as "incapacitated." Mrs. Rudy appealed this determination, and hired Daily to represent her in this court.

It appears that sometime in July 1989, Mrs. Rudy sold over $300,000 worth of stocks without the approval of either the guardian or the probate court. The proceeds were deposited into various bank accounts in Pennsylvania and West Virginia. During the time when Daily would have been prosecuting Mrs. Rudy's appeal before this court, there were incremental cash withdrawals of about $9,000 each. The withdrawals continued until the bank accounts were depleted in November 1990.

On August 26, 1991, we affirmed the probate court's determination that Mrs. Rudy was incompetent. In re Guardianship of Rudy (Aug. 23, 1991), Trumbull App. Nos. 90-T-4398 and 90-T-4416, unreported, 1991 WL 163443. We held that, although the probate court never actually described Mrs. Rudy as "incompetent" in its orders establishing the guardianship and appointing the guardian, its finding that Mrs. Rudy was "incapacitated" substantially complied with the requirement that it find an alleged incompetent to be "so mentally impaired * * * that he is incapable of taking care of himself or his property" under R.C. 2111.01(D).

Mrs. Rudy switched attorneys and appealed again, but died shortly before her case was argued in the Supreme Court of Ohio. Upon her death, plaintiff-appellee, Peter E. Burns, was appointed trustee of a testamentary trust created by Mrs. Rudy in a living will dated January 2, 1992. Burns and plaintiff-appellee, Delbert E. Strawder, are the sole beneficiaries of this trust.

On December 11, 1992, the Supreme Court of Ohio issued its opinion reversing the judgment of this court. In re Guardianship of Rudy (1992), 65 Ohio St.3d 394, 604 N.E.2d 736. The Supreme Court of Ohio invalidated the letters of appointment on the ground that, while the probate court found Mrs. Rudy to be "incapacitated," there technically was no formal finding of incompetency. Because Mrs. Rudy had died, the Supreme Court of Ohio ordered her assets turned over to her estate.

On January 31, 1995, Burns and Strawder filed this action in the Trumbull County Probate Court under the authority of R.C. 2109.50 to recover certain "probate assets" in which they were allegedly interested. The complaint claimed that Daily took excessive legal fees in an unspecified amount during his representation of Mrs. Rudy before this court during her first appeal. On March 7, 1995, Daily filed a motion for judgment on the pleadings pursuant to Civ.R. 12(C), arguing in an attached memorandum that the probate court lacked subject-matter jurisdiction. Burns and Strawder did not reply. On March 17, 1995, the probate court denied Daily's motion.

The probate court held a bench trial on this matter on March 21, 1995 through April 7, 1995. At trial, both Burns and Strawder testified that Mrs. Rudy instructed them to withdraw the cash from the Pennsylvania and West Virginia banks, and that they personally paid these withdrawals directly to Daily as compensation for his legal services in bringing Mrs. Rudy's appeal and for other legal services. 2 Burns and Strawder alleged that, in all, Daily took over $300,000 for these services.

At the close of Burns and Strawder's case-in-chief, Daily moved for dismissal under Civ.R. 41 for failure to establish all the elements of a prima facie case and for failure to establish facts necessary to prove subject-matter jurisdiction. The probate court denied the motion. It subsequently found Daily guilty of withholding probate assets, and ordered him to pay (1) $324,967.97 to Mrs. Rudy's estate, (2) a statutory ten-percent penalty thereon amounting to $32,496.80, (3) prejudgment interest in the amount of $165,788.11, (4) postjudgment interest, (5) costs, and (6) attorney fees.

Daily prematurely filed a notice of appeal before the probate court entered its findings of fact and conclusions of law. By order of this court dated August 30, 1995, this notice of appeal was treated as filed immediately after the probate court entered those findings pursuant to App.R. 4(C).

Daily submits six assignments of error for our review:

"1. The trial court erred, as a matter of law and to the prejudice of the defendant by ruling it had subject-matter jurisdiction over the proceedings below.

"2. The trial court erred, as a matter of law and to the prejudice of appellant when it [failed] to dismiss the plaintiffs' claims for insufficiency to state a cause of action under Ohio Rev.Code Sec. 2109.50.

"3. The trial court erred, as a matter of law and to the prejudice of appellant by allowing the proceedings to continue under deficient notice and other circumstances that prevented appellant from obtaining a fair trial under the Fifth, Sixth and Fourteenth Amendments of the United States Constitution, and comparable provisions of the Ohio Constitution.

"4. The trial court erred as a matter of law and to the prejudice of appellant, by not taking judicial notice of the fact that it already had released appellant from the claims alleged against him below.

"5. The trial court erred, as a matter of law and to the prejudice of the appellant, by refusing to permit the testimony of his polygraph expert.

"6. The trial court erred, as a matter or law and to the prejudice of appellant, when it failed to rule there was not a scintilla of evidence to prove there had been a concealment of assets from a trust estate."

Because "[i]t is axiomatic that courts will resolve questions of subject matter jurisdiction prior to determining the merits of a controversy," Hitt v. Tressler (1983), 4 Ohio St.3d 174, 175, 4 OBR 453, 454, 447 N.E.2d 1299, 1300, we turn first to Daily's arguments that the probate court lacked subject-matter jurisdiction.

The probate court determined that it had subject-matter jurisdiction on two separate occasions. First, it overruled Daily's motion for judgment on the pleadings. Second, it overruled Daily's motion for dismissal on the ground that Burns and Strawder had failed to establish subject-matter jurisdiction at the close of their evidence. It is not clear from Daily's brief from which of these decisions he now appeals. Although this ambiguity would ordinarily preclude our consideration of the assignment of error, see App.R. 12(A)(2) (failure to clearly identify errors in the record), the issue of a possible lack of subject-matter jurisdiction presents a special question. It may be raised for the first time on appeal. Jenkins v. Keller (1966), 6 Ohio St.2d 122, 35 O.O.2d 147, 216 N.E.2d 379, paragraph five of the syllabus. Further, an appellate court may sua sponte consider whether the trial court possessed the power to entertain an action, even where the litigants themselves fail to raise the issue. See Fox v. Eaton Corp. (1976), 48 Ohio St.2d 236, 2 O.O.3d 408, 358 N.E.2d 536, overruled on other grounds Manning v. Ohio State Library Bd. (1991), 62 Ohio St.3d 24, 577 N.E.2d 650. Under these principles, we think it appropriate to proceed despite the uncertainty in Daily's brief.

We first examine the probate court's denial of Daily's motion for judgment on the pleadings, as this motion forced it to determine its power to hear this case early in the litigation and before substantive evidence was introduced. We read the complaint, the only pleading filed in the case, to allege that Daily performed legal services, that Mrs. Rudy paid an amount of money for those services, that Burns and Strawder believed this amount to be excessive, that these monies still belonged to the estate, and that Daily was in possession of them. 3 The second cause of action alleges that Daily violated previous orders of the probate court. Based on these allegations, the probate court determined that it had subject-matter jurisdiction and, accordingly, denied Daily's motion for judgment on the pleadings.

"The existence of the court's own subject-matter jurisdiction in a particular case poses a question of law which the court has the authority and the responsibility to determine." Internatl. Lottery, Inc. v. Kerouac (1995), 102 Ohio App.3d 660, 670, 657 N.E.2d 820, 826, citing State ex rel. Connor v. McGough (1989), 46 Ohio St.3d 188, 189-190, 546 N.E.2d 407, 408-410. We review that determination de novo, without any deference to the conclusion reached below. In so doing, we are to keep in mind that the...

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