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Dueck v. Kerrigan

Court of Appeals of Ohio, Eighth District, Cuyahoga

November 21, 2019

ARTHUR P. DUECK, ET AL., Plaintiffs-Appellants,
v.
JOSEPH KERRIGAN, TRUSTEE, CLIFTON PARK TRUST, ET AL. Defendants-Appellees.

          Civil Appeal from the Cuyahoga County Court of Common Pleas, Probate Division Case No. 2018 ADV 234080

          Hahn, Loeser & Parks, L.L.P., Dennis R. Rose, and Casey J. McElfresh, for appellant.

          Krugliak, Wilkins, Griffiths & Dougherty Co., L.P.A., Terry J. Evans, and Karen Soehnlen McQueen, for appellees.

          JOURNAL ENTRY AND OPINION

          ANITA LASTER MAYS, JUDGE

         I. Introduction and Background

         A. The 2012 action

         {¶ 1} We recite excerpts of our opinion in Dueck v. Clifton Club Co., 2017- Ohio-7161, 95 N.E.3d 1032 (8th Dist.) ("Dueck I "), arising from a declaratory judgment action initiated in 2012, [1] as background for this case and hereby incorporate the defined terms therein for the current opinion:

Plaintiffs-appellants Arthur P. Dueck ("Dueck"), Todd Gilmore ("Gilmore"), Nancy Binder ("Binder"), and William R. Keller ("Keller," collectively "appellants") appeal the trial court's grant of summary judgment in a declaratory judgment action, interpreting a trust agreement in favor of defendants-appellees Clifton Park Trust Trustees ("Trustees") and The Clifton Club Company ("Clifton Club"). * * * After a thorough review of the record, we find that the nonresident members of the Clifton Club are not beneficiaries of the Trust and, as a result, have no legal rights. The matter is reversed and remanded as instructed herein for a hearing on the amount of sanctions.

Dueck I at ¶ 1.

         {¶ 2} The case involved a dispute regarding use of the Clifton Park Beach:

Appellants are lot owners in the Clifton Park Allotment in Lakewood, Ohio ("Clifton Park"), a residential area owned and developed in the 1800s by the Clifton Park Association ("Clifton Park Association"), predecessors in interest to the Clifton Park Land & Improvement Company ("Land Company"). In 1912, the Land Company placed the Clifton Park private park and beach area (collectively the "Beach") into a trust ("Trust") for the use and enjoyment of all Clifton Park lot owners, vesting lot owners with the legal status of Trust beneficiaries ("Beneficiaries"). The Clifton Club, a social club operating in Clifton Park since 1902, is a members-only establishment. Membership is open to the lot owner Beneficiaries, as well as nonresidents of Clifton Park ("Club Members"). While the Clifton Club's membership is comprised of both resident lot owners and nonresidents, the focus of this case is whether Club Members, due to their status as Club Members, are Beneficiaries under the Trust and entitled to Beach access.

Dueck I at ¶ 2.

         {¶ 3} After an in-depth analysis of the trust documents and history, we decided that there is

a historical understanding by the Trustees and Clifton Club that the Club Members' right to access the Beach is permissive, and that the Trustees have full authority to regulate Beach access. The Club Lease, capping the membership number subject to the settlors' consent, confirms that the Clifton Club's use, even as a direct Beneficiary, is not unfettered, particularly since the purpose of the Trust is to allow the lot owners to enjoy the Beach.
We conclude that the trial court correctly determined that the Club Members have a "right" to use the Beach. However, in response to the declaration explicitly requested by appellants, we find that the Club Members have no legal right of access as Beneficiaries. Access by the Club Members is by permission and regulation of the Trustees.

Dueck I at ¶ 66-67.

         B. The 2018 action

         {¶ 4} In the instant case, the parties continue to debate entitlement to Beach access and Trustee regulation. Plaintiffs-appellants Arthur P. Dueck, Paul A. Bjorn, Nancy Binder, and William R. Keller appeal the November 20, 2018 judgment of the Cuyahoga County Court of Common Pleas, Probate Division. Appellants challenge the trial court's dismissal with prejudice of Count 1 of the Second Amended Complaint seeking to enjoin the current Clifton Park Trust Trustees; Joseph Kerrigan, Mary Ellen Fraser, Robert Frost, Warren Coleman, and Ryan Meany ("Trustees"); from granting members of the Clifton Club "a permissive right to use the Beach that is equal to the rights of the Beneficiaries without the unanimous consent of the Beneficiaries." Brief of appellants, p. 5.

         {¶ 5} Appellants argue that the rules issued by the Trustees for 2018 granted the Club Members the same rights as the Beneficiaries and, to some extent, greater rights. Appellants filed the instant action in May 2018. Via the second amended complaint filed on May 2, 2018, appellants filed an action pursuant to R.C. 2101.24 and 2721.05 and allege:

the Trustees have issued rules related to the use of Trust Property -held in the form of the Clifton Park Beach and related Beach Property -that (a) grants each individual Club Member a right to use the Trust Property that is equal to the rights of an individual Resident Beneficiary to the use the Trust Property and (b) grants the Club rights to use the Trust Property that are far greater than any individual Resident Beneficiary in Clifton Park - in fact 224 times greater.

Second amended complaint, ¶ 76.

         {¶ 6} Count 1 requests an injunction under RC. 5810.01(B) to prevent the Trustees from granting the permissive rights to the Club Members contained in the rules without the unanimous consent of the Beneficiaries because the conduct is a breach of the Trust and the Trustees' fiduciary duties. Appellants also pray for costs, expenses, and attorney fees pursuant to RC. 5810.04.

         {¶ 7} Count 2 of the second amended complaint asserts that the Trustees breached their fiduciary duties by implementing rules that provide the Club Members with greater access and rights to use the Beach than the Beneficiaries. Appellants seek an injunction under R.C. 5810.01(B) and costs, expenses, and attorney fees under R.C. 5810.04.

         {¶ 8} Count 3 alleges that the Trustees breached their fiduciary duties by creating rules that reduced the common use of the Beneficiaries to 60 percent of portions of the Beach. Appellants seek an injunction under R.C. 5810.01(B) and costs, expenses and attorney fees under R.C. 5810.04.

         {¶ 9} Appellants charge that the Trustees breached their fiduciary duty to: (1) keep current Beneficiaries reasonably informed of Beach administration and material facts to allow the Beneficiaries to protect their interests; and (2) promptly respond to requests by Beneficiaries for Trust administration information. Appellants seek an injunction under R.C. 5810.01(B) and costs, expenses, and attorney fees under R.C. 5810.04.

         {¶ 10} It is the position of the Trustees that they have acted properly and within the scope of their authority pursuant to this court's ruling in Dueck I. The Trustees respond that the instant action is simply a collateral attack because the issues involved are res judicata.

         {¶ 11} On May 15, 2018, appellants filed a motion for temporary restraining order and preliminary injunction under Civ.R 65 ("TRO") to enjoin the Trustees from implementing the rules for the 2018 season. Attached to the motion was 79 pages of exhibits including the Trust Deed, historical information about Clifton Park and the Beach, correspondence between the parties prior to institution of this case, and a legal update document issued by the Trustees ("Legal Update") that provides a summary of the outcome of Dueck I and focuses on this court's determination that the Trustees have the right to regulate use of the Beach.

         {¶ 12} The Legal Update provides that while the Dueck I appeal in the Ohio Supreme Court[2] was pending in December 2017, the Trustees "increased the Clifton Club's assessment to 45 percent of the annual budget and maintained the same number of Club Members to access the Beach as in the previous five years, for the calendar year 2018." Access to the Beach was granted to 224 Clifton Club families, the same number with access over the prior five years.

         {¶ 13} The Legal Update also provides:

2018 Assessment & Club Member Access Review - 2018 assessments will remain the same * * *. Any significant changes to assessments after the calendar year has begun to present administrative challenges and potential financial burden to Beneficiaries. For example, if $127, 000 (the Clifton Club's assessment) was to be re-assigned to Lot Owner Beneficiaries other than the Clifton Club for only a portion of 2018, administrative and substantive challenges occur for the following reasons:
1) Trust Beneficiaries are preparing and transmitting payments.
2) Clifton Park Trustees have received and processed payments.
3) Assessment amounts to Lot Owner Beneficiaries would increase significantly and may represent an unanticipated financial burden to Lot Owner Beneficiaries.

         {¶ 14} The Legal Update states that, in recognition of the difference between the rights of Beneficiaries and Club Member, the car stickers issued for each group would be distinguishable to allow the Trustees to monitor the traffic in consideration of future adjustments. The Trustees also modified the table and occupancy rules to "better reflect the intention of the rules and the assignment of rights in light of the Court's decision."

         {¶ 15} The Legal Update also shares the result of the Trustees' 2018 operating expense review:

We expect legal expenses to triple from the original budget of $20, 000. This is a direct result of (i) the Clifton Park Trustees seeking legal counsel to interpret and administer the Trust following the Court's decision, and (ii) inquiries from Beneficiaries and Plaintiff Appellants that carry legal ramifications to the Trust and all Beneficiaries (primarily regarding the interpretation of the Court's decisions). As a result of the past litigation, the current Trustees felt it prudent to use legal counsel on matters in order to appropriately carry out our duties, as well as hopefully avoid future litigation involving the Trust. It is our duty to protect the interests of all Trust Beneficiaries impartially and with due regard to the interest of each Beneficiary.
It is our responsibility to continuously report the financial condition of the Trust. We are delaying certain projects originally planned for the [sic] 2018 to accommodate the increased legal expenses. These projects include the replacement of the boardwalk and associated lighting. We are still planning to repair the Beach House Chimney.

         The 2018 rules are attached to the Legal Update.

         {¶ 16} On May 15, 2018, the Trustees filed a responsive motion accompanied by 82 pages of exhibits that includes appellants' opposition to summary judgment in Dueck I, appellants' October 19, 2015 trial brief, witness list and stipulations submitted in Dueck I, and appellants' August 16, 2017 press release regarding the court victory in Dueck I.

         {¶ 17} The Trustees also filed a motion to dismiss the complaint on May 15, 2018. The motion is based on appellants' failure to state a claim upon which relief can be granted under Civ.R. 12(B)(6) as to Count 1 of the second amended complaint based on res judicata. The Trustees also asserted a claim under Civ.R. 12(B)(7) due to the failure to join Clifton Club and the other lot owner Beneficiaries as indispensable and necessary parties as to all counts.

         {¶ 18} The trial court responded:

[T]he doctrine of res judicata encompasses the two concepts of claim preclusion, also known as res judicata or estoppel by judgment, and issue preclusion, also known as collateral estoppel. O'Nesti v. DeBartolo Realty Corp., 113 Ohio St.3d 59, 2007-Ohio- 1102, 862 N.E.2d 803, ¶ 6. Claim preclusion prevents subsequent actions, by the same parties or their privies, based upon any claim arising out of a transaction that was the subject matter of a previous action. Id. Further, the doctrine of issue preclusion precludes the relitigation of an issue that had been actually and necessarily litigated and determined in a prior action that was based on a different cause of action. Ft. Frye Teachers Assn., OEA/NEA v. State Emp. Relations Bd., 81 Ohio St.3d 392, 395, 692 N.E.2d 140, (1998). Issue preclusion holds that a fact or a point that was actually and directly at issue in a previous action, and was passed upon and determined by a court of competent jurisdiction, may not be drawn into question in a subsequent action between the same parties or their privies, whether the cause of action in the two actions be identical or different. Stacy v. Batavia Local School Dist. Bd. of Edn., 97 Ohio St.3d 269, 2002-Ohio-6322, 779 N.E.2d 216, ¶ 16 (2002).
As a result of Plaintiffs' formerly litigated Complaint filed with this Court in June 2012, the Eighth District Court of Appeals held that Plaintiffs sought a declaration seeking that the Club Members are not lot owners; Plaintiffs requested that the Court hold Club Members are not Beneficiaries of the Trust and do not have the same legal rights as the lot owner Beneficiaries to access the Beach. Dueck v. Clifton Club Co., 8th Dist. Cuyahoga No[s]. 103868 [and 103888], 2017-Ohio-7161, 95 N.E.3d 1032, ΒΆ 3, appeal not allowed. Further, the Eighth District Court of Appeals found, "while the Clifton Club's membership is comprised of both resident lot owners and nonresidents, the ...

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