JOHN C. COLLINS, Executor of the ESTATE OF HUGH HEARTY, Deceased, et al. Appellees
HEARTY INVESTMENT TRUST, et al. Appellants
FROM JUDGMENT ENTERED IN THE COURT OF COMMON PLEAS COUNTY OF
SUMMIT, OHIO CASE No. CV 2010 05 3319
L. TUCKER, JOHN R. CHLYSTA, and FRANK G. MAZGAJ, Attorneys at
Law, for Appellants.
MICHAEL J. ELLIOT and LAWRENCE J. SCANLON, Attorneys at Law,
for Appellees. THOMAS F. HASKINS, JR., Attorney at Law, for
DECISION AND JOURNAL ENTRY
JENNIFER HENSAL J.
The Hearty Investment Trust, its trustee, the Hearty
Investment Trust's beneficiaries, and the Hearty Credit
Bypass Trust appeal from a judgment of the Summit County
Court of Common Pleas, granting judgment in favor of the
executor of the estate of Hugh Hearty and his widow. We
reverse in part, vacate in part, and remand the matter for
further proceedings consistent with this opinion.
This case is again before this Court following our reversal
and remand of the trial court's decision. Although the
details of this case are fully set forth in Collins v.
Hearty Investment Trust, we will summarize the
procedural posture and underlying issues. 9th Dist. Summit
No. 27173, 2015-Ohio-400.
In 1996, five of the Hearty siblings pooled certain assets
and created the Hearty Investment Trust (the
"Trust"), of which they were the grantors and
beneficiaries. The Trust was designed to provide quarterly
income distributions to the beneficiaries. Two provisions of
the Trust are relevant to this appeal. First, the Trust
contains a power-of-appointment provision governing the
manner in which the beneficiaries can transfer their interest
in the Trust. The beneficiaries amended that provision in
2007, which - as amended - provides:
[E]ach of the Grantors may appoint his or her trust share by
Last Will and Testament made before or after the effective
date of the Trust Agreement in the manner provided below. * *
* The Grantor's Will must make specific reference to this
limited power of appointment. * * *. If the exercise of the
limited power of appointment is in the form of a trust, the
trustee of this instrument shall also serve as trustee under
the trust created in accordance with the power of
appointment. In default of the exercise of this limited power
of appointment, the Grantor's trust share at death shall
pass in accordance with the terms and provisions of Section 3
[i.e., to the Hearty Credit Bypass Trust].
The second relevant provision of the Trust allows the trustee
to distribute funds from the deceased beneficiary's share
of the Trust to his or her estate if the beneficiary's
estate lacks sufficient non-Trust assets to pay certain
debts. Specifically, that provision provides:
Upon the Grantor's death, there shall be distributed to
the Grantor's estate (to the extent the Trustee
determines that non-trust assets are not available for such
purpose) from his or her Trust Share such an amount as the
Grantor's executor or administrator certifies is not
greater than [the amount of death taxes, and normal and usual
costs of administering the estate and debts of the grantor or
In 2007, Mr. Hearty contacted the executor of his
estate and asked him to prepare a codicil to his
will because he wanted to transfer his interest in the Trust
to his wife pursuant to the amended power-of-appointment
provision. Mr. Hearty provided the executor with the language
he wanted the codicil to include, and the executor prepared
same, titling it "Codicil to the Last Will and Testament
of Hugh G. Hearty." Although Mr. Hearty signed the
purported codicil, there is no dispute that it was not signed
by two witnesses as required under Revised Code Section
Mr. Hearty passed in 2008. Following his death, Mr.
Hearty's interest in the Trust transferred to the Hearty
Credit Bypass Trust, not to his widow. Additionally, pursuant
to the Trust provision allowing the use of Trust assets to
pay certain debts of a beneficiary's estate, the attorney
for Mr. Hearty's estate submitted a notice of unpaid
debts to the trustee of the Trust. The trustee did not
evaluate the estate's claim for monies and Trust assets
were not used to pay those debts.
As a result of these events, the executor of Mr. Hearty's
estate and Mr. Hearty's widow (collectively,
"Plaintiffs") filed a declaratory judgment action
against the Hearty Investment Trust, its trustee, and the
grantors/beneficiaries of the Trust (Mr. Hearty's
siblings) (collectively, "Defendants"). Plaintiffs
later amended their complaint to include the Hearty Credit
Bypass Trust as a defendant. In summary, Plaintiffs'
amended complaint asked the trial court to declare that Mr.
Hearty effectively exercised the power of appointment in
favor of his widow, and to declare that the estate was
entitled to payment of certain debts from Mr. Hearty's
share of the Trust. Plaintiffs also claimed that the trustee
breached his fiduciary duties by not accepting the purported
codicil as an effective means of exercising the power of
appointment, and by failing to provide Trust monies to cover
the unpaid debts of Mr. Hearty's estate.
The case proceeded to a bench trial. Plaintiffs presented
evidence indicating that, despite the fact that his purported
codicil was not signed by two witnesses, Mr. Hearty intended
to execute the power of appointment in favor of his widow.
Plaintiffs also presented evidence indicating that, at the
time the estate demanded funds from the trustee, Mr.
Hearty's estate lacked sufficient non-Trust assets to
cover the debts of the estate.
The trial court entered judgment in favor of Plaintiffs,
concluding, in part, that principles of equity mandated a
determination that Mr. Hearty effectively exercised the power
of appointment in favor of his widow by way of the purported
codicil. In doing so, the trial court noted that the language
of the Trust "does not specify a single manner or way a
beneficiary must appoint his or her trust share[, ]" and
that the evidence indicated that Mr. Hearty intended to
transfer his interest in the Trust to his widow. Accordingly,
the trial court declared Mr. Hearty's widow as a
beneficiary of the Trust and concluded that she was entitled
to distributions thereunder.
The trial court also concluded that Mr. Hearty's estate
submitted a timely notice of unpaid debts to the trustee and
that the trustee "improperly denied and otherwise
refused" to pay those debts through Mr. Hearty's
share of the Trust. The trial court, therefore, ordered $164,
513.51 (the amount of unpaid debts at the time of presentment
minus the ...