Estate of Cowling v. Estate of Cowling

• Decision Date: 31 May 2006
• Docket Number: No. 2004-1101.,2004-1101.
• Parties: ESTATE OF COWLING, Appellant, v. ESTATE OF COWLING et al., Appellees.
• Court: Ohio Supreme Court

847 N.E.2d 405

109 Ohio St.3d 276

2006-Ohio-2418

ESTATE OF COWLING, Appellant, v. ESTATE OF COWLING et al., Appellees.

No. 2004-1101.

Supreme Court of Ohio.

Submitted March 30, 2006.

Decided May 31, 2006.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

John L. Keyse-Walker, Elyria, for appellees.

Richard D. Panza, Avon, for appellant.

PFEIFER, J.

{¶ 1} The issue in this case is whether the court of appeals properly reversed the trial court's decisions to deny motions for directed verdict and judgment notwithstanding the verdict. We reverse, reinstate the trial court's order for the establishment of a constructive trust, and modify the order to place the constructive trust over the assets in their present form as cash deposits held by the Lorain County Clerk of Courts.

I

{¶ 2} Grace and Garnard Cowling married in 1967. It was a second marriage for both of them, and each of them had children from a previous marriage. Sandra Reddington and appellees Gary Cowling and Richard Cowling are Garnard's children from his previous marriage. Appellee Deanna Cowling is Gary's wife; appellee Dianne Cowling is Richard's wife. The appellees will be referred to collectively as the Cowlings. Grace and Garnard had no children together.

{¶ 3} Grace and Garnard owned various brokerage accounts and stock investments jointly with rights of survivorship. On July 16, 1996, Grace signed irrevocable documents that transferred stocks to Garnard. This transaction gave Garnard exclusive possession and control over these stocks, which previously had been owned and controlled by both Grace and Garnard. Garnard placed the stocks in an account that he designated in December 1996 as a transfer-on-death ("TOD") account, with his children named as the beneficiaries. Garnard gave some of these stocks to Gary, Richard, and Sandra between December 1996 and February 1997. Garnard transferred additional assets from joint brokerage accounts into his own name sometime in 1996 or 1997. He then placed those assets in the TOD accounts. The assets in the TOD accounts passed to Gary, Richard, and Sandra upon Garnard's death on February 8, 1998. The total amount received by Garnard's children as a result of the gifts of stock ($142,363.00) and the proceeds of the TOD accounts ($182,995.69) was $325,358.69.

{¶ 4} Grace filed an equitable claim against the Cowlings for a declaratory judgment to establish a constructive trust over the assets transferred by Garnard to the Cowlings. Grace's complaint also made claims against Garnard's estate for breach of contract, conversion, breach of fiduciary duty, negligent misrepresentation, and fraud.

{¶ 5} The record contains much evidence of Grace's and Garnard's respective contributions to their joint assets, including the testimony of Grace's expert witness Mark Bober, a certified public accountant, testimony of various nonexpert witnesses, and a variety of income tax returns, stock certificates, and gift and estate tax returns. Bober estimated that 74 percent of the assets were attributable to contributions made by Grace. Although Bober's analysis did not directly track Grace's personal assets into the joint accounts with rights of survivorship, it was based upon increases in investment income after Grace and Garnard sold stocks and their residence. He also considered the proportion of the stocks and the residence that had been owned by Grace. The Cowlings attempted to refute Grace's proof of her contributions and offered tax returns and stock certificates as evidence.

{¶ 6} The court instructed the jury (1) to determine whether Garnard had withdrawn funds from the joint and survivorship accounts in excess of the contributions attributable to him and (2) to assess damages in the amount of assets that had been wrongfully transferred by Garnard. The court also instructed the jury to award only damages that were proven by Grace by a preponderance of the evidence. The jury found that Garnard had withdrawn funds from the accounts in excess of the contributions attributable to him and that the damages suffered by Grace were $255,354. The court rendered a default judgment in that amount against Garnard's estate, which had not answered or participated in the trial. Garnard's estate did not appeal.

{¶ 7} In its judgment, the trial court also declared a constructive trust in the total amount of $255,354, imposed on each of the Cowlings in proportion to the amount that each had individually received from Garnard. The trial court did not designate the specific property or assets over which the constructive trust was to be imposed. The Cowlings moved for a new trial and for judgment notwithstanding the verdict; the motion was denied.

{¶ 8} On January 27, 2003, after trial but before the decision of the court of appeals, the parties stipulated that the assets had been retained by the Cowlings during the trial. After the trial, the assets were sold to post cash deposits for the appeal. These cash deposits are being held by the Lorain County Clerk of Courts. Sandra Reddington satisfied the portion of the judgment against her and was not a party to the appeal.

{¶ 9} While the appeal was pending, Grace Cowling died, on July 8, 2002. Appellant estate of Grace Cowling was substituted as plaintiff by the court of appeals pursuant to App.R. 29(A).

{¶ 10} The court of appeals reversed the trial court's denial of the Cowlings' motions for directed verdict and judgment notwithstanding the verdict regarding the claim for the establishment of a constructive trust. The court of appeals thereby reversed the trial court's equitable order for the imposition of a constructive trust. Grace's estate appealed.

{¶ 11} The cause is before this court upon the acceptance of a discretionary appeal.

II

{¶ 12} "The existence of a joint and survivorship bank account raises a rebuttable presumption that co-owners of the account share equally in the ownership of the funds on deposit." Vetter v. Hampton (1978), 54 Ohio St.2d 227, 8 O.O.3d 198, 375 N.E.2d 804, paragraph three of the syllabus. This presumption applies in the absence of evidence to the contrary. Id. at paragraph four of the syllabus; see Wright v. Bloom (1994), 69 Ohio St.3d 596, 602-603, 635 N.E.2d 31. "A joint and survivorship account belongs, during the lifetime of all parties, to the parties in proportion to the net contributions by each to the sums on deposit, unless there is clear and convincing evidence of a different intent." In re Estate of Thompson (1981), 66 Ohio St.2d 433, 20 O.O.3d 371, 423 N.E.2d 90, paragraph one of the syllabus; see Uniform Probate Code 6-103. We expressly stated that Thompson did not "significantly alter our earlier case law" but merely amended our analytic framework to better effectuate "the intent of the parties to create joint and survivorship accounts." Thompson, 66 Ohio St.2d at 439, 20 O.O.3d 371, 423 N.E.2d 90. This language indicates that, although we adopted a new presumption for determining ownership of joint and survivorship accounts, the presumption of equal ownership continues to exist when net contributions are not proven. See Uniform Probate Code 6-103, Official Comment (courts should "divide the account equally among the parties to the extent that net contributions cannot be proven").

{¶ 13} "Net contributions" is not defined in the Revised Code and has not been defined by this court. The Uniform Probate Code defines "net contributions" of a party as "the sum of all deposits to an account made by or for the party, less all payments from the account made to or for the party which have not been paid to or applied to the use of another party and a proportionate share of any charges deducted from the account, plus a proportionate share of any interest or dividends earned." Uniform Probate Code 6-211. As we concluded in Thompson concerning another section of the Uniform Probate Code, we conclude that this definition from the Uniform Probate Code (the "net contributions presumption") "accurately reflect[s] the common experiences of mankind in regard to joint and survivorship accounts," and we adopt this definition as the law of Ohio. See Thompson, 66 Ohio St.2d at 439, 20 O.O.3d 371, 423 N.E.2d 90.

{¶ 14} We also conclude that the determination of net contributions is a factual determination for the trier of fact. Parties may produce evidence of their own net contributions, the net contributions of another account holder, or the net contributions of all account holders. Evidence of net contributions presented by one party will often necessarily rebut the evidence offered by an opposing party. Ultimately, the finder of fact must determine net contributions based on the evidence presented.

{¶ 15} Next we must determine the evidentiary burden necessary to prove net contributions to a joint and survivorship account. In Union Properties, Inc. v. Cleveland Trust Co. (1949), 152 Ohio St. 430, 435, 40 O.O. 425, 89 N.E.2d 638, this court held that a husband's creditor could not appropriate money from a joint account, of which the husband was a joint account holder, because there was evidence of "sufficient probative force [that] the money on deposit was in reality the sole property" of his wife. The evidence consisted of testimony by the husband and wife that the funds on deposit belonged exclusively to the wife. Id. at 432, 40 O.O. 425, 89 N.E.2d 638. Although the court did not discuss the evidentiary burden, we conclude that the court applied a preponderance-of-the-evidence standard. See Drosos v. Drosos (Nov. 17, 1988), Cuyahoga App. No. 54138, 1988 WL 122961, at *5 (burden of proving contributions by a preponderance of the evidence was not met). We hold that evidence of net contributions must be proven by a preponderance of the evidence.

III

{¶ 16} The trial court instructed the jury to determine damages suffered by Grace as a result of Garnard's withdrawals in excess of the contributions attributable to him. Garnard withdrew...