Court of Appeals of Ohio, Fifth District, Guernsey
from the Court of Common Pleas, Case No. 17PV053117
Plaintiff-Appellee BRENT STUBBINS GRANT J. STUBBINS, For
Appellee Emily Ann McCoy BRYAN CONAWAY
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.
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.
AND PROCEDURAL HISTORY
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
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
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
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
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
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 ...