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McCoy v. McCoy

Court of Appeals of Ohio, Fifth District, Guernsey

December 12, 2019


          Appeal from the Court of Common Pleas, Case No. 17PV053117

         JUDGMENT: Affirmed

          For Plaintiff-Appellee BRENT STUBBINS GRANT J. STUBBINS, For Appellee Emily Ann McCoy BRYAN CONAWAY

          For Defendant-Appellant C. JOSEPH MCCOY, WILLIAM S. MCCOY

          JUDGES: Hon. John W. Wise, P.J. Hon. Craig R. Baldwin, J. Hon. Earle E. Wise, Jr., J.


          Wise, Earle, J.

         {¶ 1} Defendant-appellants Brandon McCoy and Cameron McCoy appeal the February 1, 2019 judgment of the Guernsey County Probate Court which found plaintiff-appellee Karen Sue McCoy properly revoked and terminated a 1997 trust created by herself and her deceased husband Dick McCoy, and properly withdrew the assets of the trust.


         {¶ 2} This dispute involves the interpretation of an A-B-C trust (the trust) created by appellee and her husband Dick McCoy on October 8, 1997. Dick and appellee are both grantors and trustees of the trust. Appellants Brandon and Cameron are Dick's sons from a previous marriage. Appellant and Dick had one child in common, Emily McCoy who is not a party to this appeal.


         {¶ 3} Appellee and Dick married in 1989. During their marriage, Dick grew a hardware business - Orme Hardware -- with the assistance of his father and the financial assistance of appellee and appellee's father.

         {¶ 4} In 1997, when the trust agreement was created, Dick co-owned one Orme Hardware store location along with his two brothers. Also at that time, the federal estate tax exclusion was $600, 000, resulting in a taxable event only for estate assets exceeding that amount. The main purpose of the trust was to minimize tax liability of the couple's estate upon their deaths.

         {¶ 5} On March 11, 2016 Dick McCoy died leaving appellee as executrix of his estate. By that time, Dick had bought out his brothers and expanded Orme Hardware to seven locations which he and appellee managed and operated together. The inventory filed in Dick's estate listed all shares of Orme Hardware Company as intangible property valued at $1, 792, 898.00. Appellee transferred those shares into the trust as directed by Dick's last will and testament. As of the date of Dick's death, the estate tax credit had been increased from $600, 000 to $5, 450, 000.


         {¶ 6} Six months after Dick's death, on September 8, 2016, appellee revoked the trust, and transferred all shares of Orme Hardware to herself. Upon learning of this transfer, appellants sent appellee a letter challenging her authority to do so. In response, on October 26, 2017, appellee filed a declaratory judgment complaint. On November 28, 2017, she filed an amended complaint. Appellee set forth four alternative claims. In her first claim, appellee argued she was entitled to an order declaring she validly terminated the trust pursuant to Article One of the trust, and validly transferred all of the Orme Hardware to herself, free from any claims of the trust.

         {¶ 7} Appellee next alternatively argued she was entitled to an order declaring she validly received one half of the Orme stock outright from Trust A, pursuant to Article II (A)(2) of the trust, which addresses the death of either grantor, and the remaining half was validly distributed to her from Trust C, pursuant to Article II (E), as Trust C is for the benefit of the surviving grantor, free of any claims of the trust.

         {¶ 8} In her third alternative claim, appellee argued she was entitled to an order declaring pursuant to Article II(C) of the trust, that she validly reallocated the shares of Orme Hardware stock into Trust C. As a sub-alternative argument in this vein, appellee argued because no federal or state estate tax liability existed due to changes in IRS rules, the trial court should reform the trust to provide for the placement of Orme Hardware stock into Trust C, without reduction of its assets to Trust B, permitting appellee to distribute the assets to herself, free of any claims of the trust.

         {¶ 9} Finally, in her fourth alternative claim, appellant argued the shares of Orme Hardware stock should have been categorized are tangible, as opposed to intangible property in the estate inventory. Then, since Dick's will bequeathed to appellee all tangible personal property of the estate, appellant would become the sole owner of Orme Hardware.

         {¶ 10} On December 11, 2017, appellants filed an answer to appellant's complaint for declaratory judgment as well as counterclaims for tortious interference in the expectancy of an inheritance, breach of trust and declaratory judgment. In their request for declaratory judgment, appellants asked the trial court to issue an order declaring that the trust agreement requires up to $5, 450, 000 in assets be transferred to Trust B, and held in Trust B pursuant to the terms of the trust agreement for appellee's lifetime, and then distributed to appellants and Emily McCoy upon appellee's death.

         {¶ 11} On April 9, 2018, appellants filed a motion for summary judgment in their favor as to one of appellee's claims. On October 18, 2018, appellee filed a motion for partial summary judgment in her favor as to appellant's claims of tortious interference in the expectancy of inheritance and breach of trust. On December 12, 2018, the trial court denied appellant's motion and granted appellee's motion for partial summary judgment. The declaratory judgment matter was set for a bench trial.


         {¶ 12} The trial was held on December 18, 2018. Brandon and Cameron both testified. Cameron indicated he was never involved in the hardware business. He stated he and his father had one conversation in 2012 regarding whether Cameron desired to work at Orme Hardware. Cameron declined, stating he was happy with his career trajectory in teaching. According to Cameron, his father told him the door would always be open should he change his mind, and that he, Brandon, and Emily were set to "inherit these."

         {¶ 13} Brandon testified he began working for his father in 2012. Dick sent Brandon to a 4-month program through the National Hardware Retail Association so Brandon could gain a better understanding of office skills, human resources, and customer service. In an e-mail to the Association as Brandon's sponsor for the program, Dick stated the course could be used by Brandon on the job "and ultimately will be of great benefit to our company and his future." Brandon took this to mean he would be "part of that succession plan, part of the next in line." He further testified that in April 2014, Orme obtained a key man life insurance policy for him. Brandon believed this signified that he held an important role within the company.

         {¶ 14} In July 2014, Dick purchased the Arcanum store. At trial, Brandon introduced a local newspaper article about the purchase which included a photo of Dick and Brandon titled "New Owners Dick and Brandon McCoy." Brandon explained this was because he was "heavily involved with the company and involved in discussions with my father to acquire this location." He admitted however, that he never personally put any money into the endeavor.

         {¶ 15} Before Dick's death, Brandon was managing the stores located in Newark and Arcanum, making $25 an hour, driving a company vehicle, and using a company gas card. Immediately following Dick's death, Brandon and appellee had a conversation in front of Cameron and his wife regarding closing the stores for Dick's funeral, at which time appellee stated "The stores are yours, you figure it out." Brandon took this to mean all the stores had passed to him upon his father's death. His belief stemmed in part from the fact that in 2014, Dick consulted with a strategic tax planning firm to look into a succession plan and had discussed the matter with Brandon. Dick told Brandon he was looking into the matter so that Brandon "may have the business one day." Brandon admitted, however, that his father never went through with the succession plan, and admitted on cross-examination that appellee did not gift the stores to him after his father's death. Brandon further testified that he had an agreement with his father to buy Orme Hardware, but admitted they never discussed price, nor were there any contracts or promises. According to Brandon, these conversations took place in 2014, and no further conversations on the subject ever took place.

         {¶ 16} Sometime after Dick's funeral, appellee asked Brandon to develop a business plan for the Newark and Arcanum stores. She advised that if it was good enough, he could keep his job. Instead of working on a business plan, however, Brandon testified he went home and worked on his resume and an exit plan. A month later, Brandon had a meeting with appellee and two other Orme Hardware board members who advised Brandon his business plan was inadequate. He was given the option to quit, be fired, or to work under a manager at a store 70 miles away from his home at minimum wage and without a gas card. Brandon stated he worked at that store for 3 days before asking appellee if he could be laid off so that he could collect unemployment, Appellee granted his request.

         {¶ 17} Appellee testified that she met Dick in 1988 and they married in 1989. When the trust was executed, they did not yet own anything. Dick acquired the Cambridge Orme Hardware store in 2007, which was the only store at the time. Dick's father had previously divided all the shares of Orme Hardware between Dick and his two brothers. In 2007, Dick and appellee used appellee's inheritance from her grandfather to buy out Dick's brothers. Before the buyout, Dick's parents had deeded the property upon which the Cambridge store is situated to appellee. She remains the owner of that property.

         {¶ 18} As for the trust, appellee stated its sole purpose was to avoid paying estate taxes, and that upon advice from an attorney, she believed the trust was revocable, and believed she acted within her authority when she revoked the trust and withdrew its assets. Appellee's understanding of the trust was that the surviving spouse would take all, and upon the surviving spouse's death, the children would then be the beneficiaries of any remaining assets. She additionally testified the trust contains a second-to-die insurance policy that was valued at $500, 000 at the time of the hearing. This policy is for the benefit of the 3 children, but appellee testified she was considering allowing the policy to lapse. Its purpose in 1997, she said, was for the children to have something should she and Dick meet a common untimely death while the children were still minors, as they had few assets at the time.

         {¶ 19} Appellee additionally testified as to her conversations with Dick just before his demise. Asked what she should do with the stores, Dick told her that was for her to decide. In discussing Brandon's role, Dick advised appellee "You know, he doesn't know a damn thing. I can't teach him anything. But you can give him a chance if you want."

         {¶ 20} Appellee explained that Brandon had been working mostly at the Arcanum and Newark stores which were to be his focus. After Dick's death the board of directors had questions for Brandon that Brandon could not answer. Her father-in-law, who sits on the board, advised she needed to fire Brandon. She asked the board if she could send Brandon to another store to work under her best manager in hopes he would learn how to run a store. This, according to appellee is why Brandon was transferred and his pay cut. She wanted to keep him and the board wanted to fire him. She did, however, permit him to keep a company truck and ...

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