Figgie v. Figgie
| Decision Date | 08 April 2021 |
| Docket Number | No. 109829,109829 |
| Citation | 2021 Ohio 1195 |
| Parties | HARRY E. FIGGIE IV, ET AL., Plaintiffs-Appellants, v. BETSY FIGGIE, ET AL., Defendants-Appellees. |
| Court | Ohio Court of Appeals |
Civil Appeal from the Cuyahoga County Court of Common Pleas Probate Division
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.
Reminger Co., L.P.A., Brian D. Sullivan, Franklin C. Malemud, Joseph S. Simms and Timothy J. Gallagher, for appellants.
{¶ 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 Civ.R. 12(B)(6) motion to dismiss filed by defendant-appellee Brent Ballard ("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 (collectively, the "Trust Defendants"). Appellants contend that they sufficiently pled claims for fraud, tortious interference with expectancy of inheritance, unjust enrichment, and constructive trust arising out of a 2001 stock redemption against the Trust Defendants and that the probate court, therefore, erred in granting the Trust Defendants' motion to dismiss.
{¶ 2} For the reasons that follow, we affirm.
{¶ 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 agreementthat established the Figgie Family Trust (the "Harry III Trust"), of which his three children, Harry IV, Katie and Susie, were beneficiaries.2
{¶ 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 ofdirectors. At the time of the 2001 CRC stock redemption, Harry IV was 18, Katie was a minor and Susie was "cognitively and/or medically disabled."
{¶ 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).
{¶ 9} On April 20, 2019, appellants filed a first amended complaint in Case No. 2018ADV239801, asserting claims for declaratory judgment, fraud, tortious interference with expectancy of inheritance, unjust enrichment, constructive trust and civil conspiracy against CRC and the Trust Defendants (collectively, "defendants").4
{¶ 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 stockand (5) "maliciously combined" to secure the redemption of CRC stock at a substantial savings to CRC in order to benefit CRC and other Figgie family shareholders at the expense of the Henry III Trust and its beneficiaries.
{¶ 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 stockredemption exist in the Harry II Trust, the Nancy Trust, the Matthew Trust and CRC, (3) the amount of the lost value and (4) that defendants are "equitably estopped from denying liability" or denying the "claims stemming from the fraudulent conduct" alleged in the first amended complaint. Appellants also sought compensatory and punitive damages, attorney fees, costs and expenses and an order imposing a constructive trust over the defendants' assets "derived or traced from the improper benefits, gains, appreciation [or] profits" from the 2001 CRC stock redemption.6
{¶ 13} On May 24, 2019, CRC and the Trust Defendants filed separate motions to dismiss the first amended complaint pursuant to Civ.R. 12(B)(6). The Trust Defendants argued that the first amended complaint failed to state a claim for which relief could be granted against the Trust Defendants because: (1) it contained no allegations of actionable conduct by the Trust Defendants; (2) any liability on the part of Harry II could not be imputed to the Trust Defendants; (3) appellants' claims were barred by the applicable statute of limitations, including R.C. 2117.06, 2305.09(C), (D) and 2305.14; (4) appellants failed to plead their fraud claim against the Trust Defendants with particularity as required under Civ.R. 9(B); (5) appellantscould not establish essential elements of their unjust enrichment claim against the Trust Defendants and (6) the imposition of a constructive trust is a remedy, not an independent cause of action.
{¶ 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...
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