Molly Hosford v. Harry W. Hosford
| Decision Date | 30 September 1982 |
| Docket Number | 44403,82-LW-3170 |
| Parties | Molly Hosford PLAINTIFF-APPELLEE, v. Harry W. Hosford DEFENDANT-APPELLANT. |
| Court | Ohio Court of Appeals |
For plaintiff-appellee: Russell S. Bensing.
For defendant-appellant: Allan Hull.
JOURNAL ENTRY AND OPINION
This cause came on to be heard upon the pleadings and the transcript of the evidence and the record in the Common Pleas Court, and was argued by counsel for the parties; and upon consideration, the court finds no error prejudicial to the appellant and therefore the judgment of the Common Pleas Court is affirmed. Each assignment of error was reviewed and upon review the following disposition made:
This appeal is taken from a judgment in favor of plaintiff-appellee Molly Hosford,®1¯ awarding her $30,000 plus interest, in a suit brought against her father defendant-appellant Harry W. Hosford, for breach of fiduciary duty in his capacity as trustee.
Footnote 1 Plaintiff is incorrectly referred to as "Holly" throughout the transcript of the trial below.
Plaintiff's grandfather Harry W. Hosford, Sr., created an inter vivos trust for the health, education and welfare of plaintiff in 1954, naming his son, the defendant Harry W. Hosford, Jr., as trustee. The trust was to terminate on August 23, 1972, when plaintiff attained the age of twenty-one. In the first count of her complaint, plaintiff alleged that she had received neither income nor principal from this trust, and that she believed defendant had "invaded the corpus, and . . . used the income from (this trust) for his own purposes and ends," thereby violating his fiduciary duty to her. Plaintiff further alleged that defendant refused to render any accounting to her as to this trust although she had requested such, and that as a consequence she was unable to determine "the exact amount due" to her. The prayer of the complaint asked that defendant be compelled to render an accounting, and "to pay to plaintiff such sums as shall be found due upon the accounting."®2¯
Footnote 2 The second count of the complaint, which concerned defendant's failure to turn over to plaintiff shares of certain securities, was settled before trial and is not germane to the appeal.
Defendant answered, admitting the creation of the trust by the grandfather (his father), but averring that he (defendant) had used all the income for trust purposes, or delivered it to plaintiff, and that he had also delivered to her the "remaining principal."
Following a trial to the court on the issue of defendant's breach of fiduciary duty as to the investment of the trust funds in Gilmore Industries (which company subsequently went bankrupt)®3¯ the court entered a "finding for plaintiff" on May 13, 1981. Defendant moved for a new trial or for judgment notwithstanding the verdict, which motion was overruled on July 1, 1981. On August 14, 1981, defendant filed a document with the court entitled "Accounting by Trustee as Ordered by Court" listing "disbursements" to plaintiff in the years 1973 through 1979 from unspecified source(s) totalling over $30,000.®4¯ Thereafter, plaintiff filed a "Motion to Correct Judgment Entry" under Civ. R. 60(A), requesting that the judgment be amended to reflect an award to her of $30,000, plus interest.®5¯ On September 2, 1981, from which this appeal is taken, the court granted plaintiff's Civ. R. 60(A) motion, and entered a judgment awarding her $30,000, plus interest.
Footnote 3 The parties stipulated at the outset of trial that this was the sole issue before the court (Tr. 4).
Footnote 4 These "disbursements" appear to have been payments from defendant's personal funds to his daughter after she reached the age of twenty-one.
Footnote 5 The initial judgment entry of May 13, 1981, made a general "finding for plaintiff" without specifying what relief the court was awarding.
The evidence at trial consisted of the testimony of defendant Harry W. Hosford who acknowledged that plaintiff's grandfather established an inter vivos trust in 1954 with stock certificates in Exxon (Standard Oil of New Jersey) and $6,000 cash, for a total of about $12,000. Defendant was to serve as trustee with plaintiff as beneficiary until she received the principal at the age of twenty-one (21). Defendant was unable to produce the written trust agreement, which he said was destroyed as a result of an "oil spill" in his home. Initially, defendant invested part of the corpus of the trust in Harco Corporation, a company of which he was president, with the grandfather's permission. In 1971, defendant sold the shares in Harco for $30,000 (Tr. 12-13), and invested this sum (just over half of the corpus) in Gilmore Industries, purchasing 15,000 shares in plaintiff's name at $2.00 a share. At that time, defendant was on Gilmore's Board of Directors, and he later became the President and Chief Executive Officer of the company, prior to its bankruptcy in 1977. In 1971-72, defendant sought to control 45 to 50 percent of Gilmore's stock, and to that end purchased some 500,000 shares for himself and some 75,000 shares with trust assets in his role as trustee for Molly and other family members. A stock certificate in plaintiff's name for 15,000 shares of Gilmore was issued in December, 1972 (Defendant's Exhibit 1), which defendant said he offered to convey to plaintiff (who had attained the age of twenty-one the previous August), along with other certificates in her name, but that she declined, asking her father to continue to hold the certificates on her behalf.
Defendant admitted that the investment in Gilmore was"speculative," and that Gilmore paid neither dividends nor earnings per share (Tr. 18). Regarding the value realized on this investment, defendant was asked:
Plaintiff's expert witness Howard Baer, a stockbroker, testified as to his opinion that an investment in Gilmore in 1971-72 would be classified as "speculative," or "highly speculative" (Tr. 49), that such was "not a prudent investment," and that he would not have recommended Gilmore stock to a trustee seeking to invest trust assets.
In his defense, defendant Harry W. Hosford testified that it was while the grandfather was alive he told defendant orally that he (defendant) should "put it [the trust assets] where I was working . . ." (Tr. 52), and that essentially the elder Hosford approved of his son as trustee investing trust assets in his own businesses.
On rebuttal, plaintiff Molly Hosford stated that her father had never offered to turn over any trust assets to her when she attained the age of twenty-one. The first time she learned that she owned any stock in Gilmore Industries was when bankruptcy proceedings ensued, although she had known since childhood that her grandfather had set up a trust for her benefit. She further testified that when she reached the age of twenty-one, her father "came to Maryland [where she was then living] and informed me that I had approximately $500.00" although she had previously "been led to believe" that the trust consisted of "thousands and thousands of dollars." (Tr. 91).
In bringing this appeal from the judgment of September 2, 1981, defendant-appellant Harry W. Hosford cites two assignments of error.
Assignment of Error No. I:
I. THE COURT BELOW ERRED BY FINDING THAT A SPECULATIVE INVESTMENT BY A TRUSTEE, WHICH WAS AUTHORIZED BY THE CREATOR OF THE TRUST, CONSTITUTED A BREACH OF FIDUCIARY DUTY ON THE PART OF THE TRUSTEE.
In this assignment, appellant argues that he breached no fiduciary duty to his daughter by investing trust assets in Gilmore (admittedly a "speculative" investment) since such investment was consistent with the settlor's (grandfather's) granting appellant permission to invest money in the "business in which you work."
Appellee has moved to dismiss this assignment of error on the ground that no appeal was taken from the court's overruling of appellant's motion for a new trial, filed in response to the judgment entry of May 13, 1981, in which the court found that appellant had breached his fiduciary duty.
The appeal in the instant case was taken from the court's entry of judgment on September 2, 1981, awarding $30,000 plus interest. In that entry, the court stated in part:
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