Galavich v. Hales , 2022 Ohio 1121 ( 2022 )

[Cite as Galavich v. Hales, 2022-Ohio-1121.]
IN THE COURT OF APPEALS OF OHIO
SEVENTH APPELLATE DISTRICT
BELMONT COUNTY
DENNIS N. GALAVICH,
Plaintiff-Appellant,
v.
CAROL HALES et al.,
Defendants-Appellees.
OPINION AND JUDGMENT ENTRY
Case No. 21 BE 0033
Civil Appeal from the
Court of Common Pleas of Belmont County, Ohio
Case No. 2020 CV 230
BEFORE:
Carol Ann Robb, Gene Donofrio, Cheryl L. Waite, Judges.
JUDGMENT:
Affirmed.
Atty. Kristopher O. Justice, Atty. Adam Schwendeman, Atty. Caroline A. Eversman,
Theisen Brock, 424 Second Street, Marietta, Ohio 45750, for Plaintiff-Appellant and
Atty. Lee M. Grosscup, Miller & Grosscup Law Firm, LLC, 3465 South Arlington Road,
Ste. D, Akron, Ohio 44312, for Defendants-Appellees Carol Hales and
–2–
Atty. Nicholas Schneckenburger, Maguire Legal Group, LLC, 190 East Avenue,
Tallmadge, Ohio 44278 for Estate of Bonnie G. Stetson.
Dated: March 31, 2022
Robb, J.
{¶1} Plaintiff-Appellant Dennis Galavich appeals the decision of the Belmont
County Common Pleas Court granting summary judgment for Defendants-Appellees
Carol Hales and the Estate of Bonnie Stetson. Two issues are raised in this appeal. First,
is whether a trust for the Appellant’s benefit was created. The second issue is whether
any of the defenses raised prevented him from collecting as beneficiary of the trust.
{¶2} For the reasons expressed below, we affirm the decision of the trial court.
The evidence indicates an express trust was created. However, Appellant failed to
disclose to the Bankruptcy Court that the property was being held for him. Accordingly,
the doctrine of judicial estoppel is applicable and prevents Appellant from now claiming
the property was being held for him.
Statement of the Facts and Case
{¶3} Carol Galavich owned 172.713 acres in Belmont County, Ohio (Galavich
Farm). This farm had been in the family for approximately 150 years. In March 2011,
Carol Galavich was diagnosed with pancreatic cancer. At that time her son, Appellant
Dennis Galavich was living with her; he was having some financial problems and was
contemplating filing for bankruptcy.
{¶4} Carol Galavich contacted Attorney Richard Yoss while she was in the
hospital to discuss end of life decisions for her estate. Attorney Yoss visited Carol in the
hospital and they discussed the option of creating a trust. Attorney Yoss’s deposition
testimony indicated Carol wanted Dennis to have the farm, but due to his financial
problems she wanted to protect the farm from his creditors. He described the
conversation as he remembered it, stating that Carol wanted Bonnie Stetson to hold the
property for Dennis and then give it to him when his financial issues were resolved. Yoss
Depo. 31-33. However, she did not want to execute a complicated 10-15 page trust
document. Yoss Depo. 31-33. He indicated Carol kept saying she trusted Bonnie. He
told her they should at the least make it clear to the world that she was not gifting the
Case No. 21 BE 0033
–3–
property to Bonnie and to add the word trustee behind Bonnie’s name. Yoss Depo. 31-
33. Carol then agreed indicating she was not gifting it to Bonnie, she just wanted her to
hold it until Dennis resolved his financial troubles. Yoss Depo. 31-33. This meeting
resulted in a letter drafted by Attorney Yoss and signed by Bonnie. The letter stated:
As you know, Carol Galavich is in the hospital and remains concerned about her
son Dennis and his finances. Because of this, I believe she has talked with you
about signing an Affidavit which would transfer certain property to you upon her
death. This transfer would be to you as Trustee with the understanding that should
Carol die you would ultimately transfer this property to Dennis once his financial
problems were taken care of.
This is an unusual situation, but Carol trusts you and tells me that you understand
and are agreeable to this. If that is the case, I would ask that you sign the original
of this letter at the space below and return the same to me in the enclosed self-
addressed envelope.
5/3/11 Document.
{¶5} This document was signed by Bonnie Stetson and was in Attorney Yoss’
file. In addition to the letter, a Transfer on Death Designation Affidavit was executed by
Carol regarding the Galavich farm. The name of the beneficiary on this document was
Bonnie Stetson, Trustee. It was signed by Carol Galavich. 5/25/11 Transfer on Death
Designation Affidavit.
{¶6} Carol Galavich died on July 7, 2011. An Affidavit for Transfer on Death
signed by Bonnie as trustee was recorded September 19, 2011. Also recorded on that
same date was a Transfer on Death Designation Affidavit by “Bonnie Stetson, Trustee,”
for the Galavich Farm and named Dennis Galavich as the beneficiary. 9/19/11 Transfer
on Death Designation Affidavit.
{¶7} Less than a week prior to Carol’s death, Dennis filed for bankruptcy. 7/1/11
Bankruptcy Petition.
{¶8} Dennis proceeded through bankruptcy. At no point during the bankruptcy
proceedings did Dennis indicate to the bankruptcy court that he was the beneficiary of a
Case No. 21 BE 0033
–4–
trust or that property was being held for his benefit. His bankruptcy proceedings indicated
he was disinherited by his mother, Carol.
{¶9} At the end of 2012, Dennis’ bankruptcy was completed. In 2013, Dennis
asked for Bonnie to transfer the house he lived in and had lived in with his mother. Dennis’
deposition testimony indicated that he knew Bonnie and kept in touch with her for years
following the death of his mother. Bonnie, as trustee, conveyed the house and
approximately 1 acre to Dennis. This property was a part of the Galavich farm. Bonnie
signed the warranty deed as trustee. 9/26/13 Warranty Deed.
{¶10} Bonnie signed other documents as trustee. She conveyed land to Mountain
Gathering, LLC for a pipeline on the Galavich Farm. That document indicated the transfer
was done in her individual and trustee capacity. 4/24/14 Special Warranty Deed.
However, she signed the Special Warranty Deed as trustee. 4/24/14 Special Warranty
Deed. In 2019, Bonnie executed a new Transfer on Death Designation Affidavit naming
Carol Hales as the beneficiary of the Galavich Farm. This document indicated Bonnie
was trustee. 5/2/19 Transfer on Death Designation Affidavit.
{¶11} Bonnie entered into contracts for the minerals to the Galavich Farm, some
as trustee. In many of those leases, she signed solely in her individual capacity and
nowhere in the lease did it indicate she was trustee.
{¶12} Bonnie died April 5, 2020. At the time of her death, the Transfer on Death
Designation Affidavit naming Carol Hales as the beneficiary of the Galavich Farm was
still in effect. Carol Hales had taken care of Bonnie in the years leading up to Bonnie’s
death. An Affidavit of Confirmation of Transfer on Death was filed May 1, 2020.
{¶13} Dennis became aware of the transfer to Carol Hales after Bonnie’s death
and filed an action in September 2021. This complaint named Carol Hales, the Estate of
Bonnie Stetson, and numerous oil and gas companies as defendants. He asserted claims
sounding in breach of trust, quiet title, breach of fiduciary relationship, trespass and
conversion. 9/30/21 Complaint; 11/9/20 First Amended Complaint. Hales and the Estate
of Bonnie Stetson filed answers asserting defenses of laches, estoppel, unclean hands,
and waiver. 10/29/20 Carol Hales Answer; 10/29/20 Answer of Estate of Bonnie Stetson;
11/20/20 Answer of Estate of Bonnie Stetson to First Amended Complaint; 11/20/20
Answer of Carol Hales to First Amended Complaint. The oil and gas companies also filed
Case No. 21 BE 0033
–5–
answers, counterclaims, and/or motions to dismiss. 12/8/20 Answer of Defense Strike
Force East, LCC; 12/8/20 Answer of South Central Power Company; 12/9/20 Answer of
Summit Midstream Utica, LLC; 12/10/20 Answer of Mountain Gathering; 12/14/20
Defendant Ascent Resources Answer to First Amended Complaint; 12/15/20 Defendant
Monbel Motion to Dismiss; 12/30/20 Answer of Defendant CNX Gas Co.
{¶14} In response to the counterclaims and Motion to Dismiss, Appellant filed
answers and opposition motions. 1/8/21 Answer to Strike Force Counterclaim and
Summit Midstream Counterclaim; 1/14/21 Plaintiff Motion in Opposition to Motion to
Dismiss.
{¶15} Thereafter, Motions for Summary Judgment by the oil and gas companies
were filed. 2/18/21 XTO Motion for Summary Judgment; 2/25/21 CNX Gas Joinder to
Motion for Summary Judgment; 2/25/21 Utica Motion for Summary Judgment; 2/25/21
Strike Force Motion for Summary Judgment; 3/3/21 Ascent Motion for Partial Summary
Judgment.
{¶16} Appellant then filed a Motion in Opposition to the above summary judgment
motions. 3/5/21 Galavich Motion in Opposition to Summary Judgment Motions.
{¶17} The trial court granted summary judgment for Strike Force East, LLC,
Summit Midstream Utica, LLC, CNX Gas Co., XTO Energy and Mountain Gathering. It
also granted Strike Force’s Motion for Judgment on pleadings and Ascent Resources –
Utica, LLC’s Motion for Partial Summary Judgment. 3/1/21 J.E.
{¶18} Hales filed a Motion for Summary Judgment arguing there was no trust and
even if there was, judicial estoppel and/or laches prevented the trust from being effective.
5/25/21 Hales Motion for Summary Judgment. Specifically, as to judicial estoppel, Hales
asserted Appellant could not take a contrary position in bankruptcy proceedings and also
claim in the trial court that a trust exists where he is the beneficiary.
{¶19} Attached to the Motion for Summary Judgment was an affidavit from Heidi
Kemp, Attorney for Bonnie Stetson. In this affidavit Attorney Kemp indicated that Bonnie
contacted her to execute an affidavit of transfer on death. Given the recorded documents,
Attorney Kemp contacted Ms. Stetson to inquire as to the existence of a trust. Bonnie
informed Attorney Kemp no trust was in existence and never was. Bonnie said she
intended to create one but never did. Based on the conversation Attorney Kemp was
Case No. 21 BE 0033
–6–
under the belief and impression that any potential trust Bonnie and she discussed was a
trust created by Bonnie for her own benefit. 5/25/21 Heidi Kemp Affidavit.
{¶20} The Estate of Bonnie Stetson also filed a motion for summary judgment
arguing there is no evidence of trust, no express oral trust, no implied trust, no resulting
trust, and no constructive trust. The estate asserted defenses of judicial estoppel, laches,
statute of limitations, and unclean hands. 5/27/21 Estate of Bonnie Stetson Motion for
Summary Judgment.
{¶21} Appellant then filed a Motion for Partial Summary Judgment asserting an
express trust was created and if it was not, a constructive trust was created. He also
argued Bonnie breached the duties of the trust. 6/7/21 Plaintiff Motion for Partial
Summary Judgment.
{¶22} The parties filed responses to each other’s Motions for Summary Judgment.
6/9/21 Response of Estate to Plaintiff’s Motion for Summary Judgment; 6/11/21 Hales
response to Plaintiff’s Motion for Summary Judgment; 6/16/21 Plaintiff’s Response to
Estate’s Summary Judgment Motion; 6/18/21 Plaintiff’s Response to Hales’ Summary
Judgment Motion; 6/18/21 Plaintiff’s Combined response to Hales and Estate Motions for
Summary Judgment; 6/22/21 Hales’ Memo in support of her Reply to Plaintiff’s response;
6/22/21 Estate’s Reply to Combined Answer.
{¶23} A hearing was held on the motions. 6/23/21 Tr. The trial court granted
summary judgment for Hales and the Estate of Bonnie Stetson. 6/24/21 J.E. Appellant
filed a timely appeal arguing summary judgment should not have been granted for Carol
Hales and the Estate. 7/20/21 Notice of Appeal. Appellant did not appeal the grant of
summary judgment for the oil and gas companies.
First and Second Assignments of Error
“The trial court erred in granting summary judgment in favor of Carol Hales and the
Estate of Bonnie G. Stetson, aka Bonnie Stetson, aka Bonita Stetson, deceased.”
“The trial court erred in denying summary judgment in favor of Dennis N. Galavich.”
{¶24} The two assignments of error are related and will be addressed together.
{¶25} The trial court granted summary judgment for Appellees. We review an
award of summary judgment de novo. Grafton v. Ohio Edison Co., 77 Ohio St.3d 102,
105; 671 N.E.2d 241 (1996). Pursuant to Civil Rule 56(C), summary judgment is proper
Case No. 21 BE 0033
–7–
if: (1) there is no genuine issue as to any material fact; (2) the moving party is entitled to
judgment as a matter of law; and (3) reasonable minds can come to but one conclusion,
and that conclusion is adverse to the party against whom the motion for summary
judgment is made, who is entitled to have the evidence construed most strongly in his
favor. State ex rel. Whittaker v. Lucas County Prosecutor's Office, 164 Ohio St.3d 151,
2021-Ohio-1241, 172 N.E.3d 143, ¶ 8; Harless v. Willis Day Warehousing Co., 54 Ohio
St.2d 64, 66, 375 N.E.2d 46, 47 (1978).
{¶26} The party moving for summary judgment bears the initial burden of
demonstrating the absence of a genuine issue of material fact concerning the essential
elements of the non-moving party's case. Dresher v. Burt, 75 Ohio St.3d 280, 292 (1996).
Specifically, the moving party must support the motion by pointing to some evidence in
the record of the type listed in Civil Rule 56(C). Id. at 292-293. If the moving party
satisfies this burden, then the non-moving party has the reciprocal burden to demonstrate
a genuine issue for trial remains. Id. at 293.
{¶27} Appellant asserts it is difficult to pinpoint error in the trial court’s reasoning
because it did not provide any written explanation. However, he contends Appellees’
summary judgment motions should have been denied because in simple terms an
express trust, resulting trust, or constructive trust was created and there is no defense
that negates his ability to collect under the trust. Appellees’ counter, arguing no trust was
created because the evidence indicates there was no intent to create a trust and even if
there is a genuine issue of material fact as to whether a trust was created judicial estoppel
and/or the statute of limitations prevent Appellant from claiming the alleged trust exists.
{¶28} Given the arguments, our analysis will address them separately. The issue
of whether a trust was created will be addressed first and the defenses will be addressed
second.
A. Trust
{¶29} Appellant asserts the evidence indicates Carol Galavich created an express
trust to hold the Galavich Farm for his benefit. He argues even if an express trust was
not created, at a minimum, a constructive or resulting trust was created. Appellees
contend the evidence indicates there was no intention to create a trust and thus, a trust
was not created. They further claim neither a constructive or resulting trust was created.
Case No. 21 BE 0033
–8–
{¶30} In general, a “trust” is defined as “the right, enforceable in equity, to the
beneficial enjoyment of property, the legal title to which is in another.” KeyBank N.A. v.
Firestone, 2019-Ohio-2910, 140 N.E.3d 1019, ¶ 15 (8th Dist.), citing In re Guardianship
of Lombardo, 86 Ohio St.3d 600, 603, 716 N.E.2d 189 (1999), quoting Ulmer v. Fulton,
129 Ohio St. 323, 339, 195 N.E. 557 (1935). There are two types of trusts, express and
implied. Brate v. Hurt, 174 Ohio App.3d 101, 2007-Ohio-6571, 880 N.E.2d 980, ¶ 25
(12th Dist.); Lawrence v. Bailey, 3d Dist. Marion No. 9-99-37, 2000 WL 51803 (Jan 25,
2000).
1. Express Trust
{¶31} “An express trust arises by reason of a manifested intention to create it.
Constructive trusts are imposed irrespective of intention.” Peterson v. Teodosio, 34 Ohio
St.2d 161, 172, 297 N.E.2d 113 (1973). See also 91 Ohio Jurisprudence 3d, Trusts,
Section 5 (“Express trusts are those intentionally created by the direct and positive act of
the settlor by some writing, deed, will, or oral declaration, and are distinguishable from
the implied trusts or trusts by operation of law, resulting and constructive, in that resulting
trusts are founded upon the intention, implied in law, of the parties to the transaction, and
constructive trusts are founded upon fraud or wrongdoing irrespective of the intention of
the parties concerned.”). The manifested intent can be either written or oral. Hudson
Presbyterian Church v. Eastminster Presbytery, 9th Dist. Summit No. 24279, 2009–Ohio–
446, ¶ 24. For an express trust to exist “there must be an explicit declaration of trust, or
circumstances which show beyond a reasonable doubt that a trust was intended to be
created, accompanied with an intention to create a trust, followed by an actual
conveyance or transfer of lawful, definite property or estate or interest, made by a person
capable of making a transfer thereof, for a definite term, vesting the legal title presently in
a person capable of holding it, to hold as trustee for the benefit of a cestui que trust or
purpose to which the trust fund is to be applied; or a retention of title by the owner under
circumstances which clearly and unequivocally disclose an intent to hold for the use of
another.” Ulmer v. Fulton, 129 Ohio St. 323, 339-340, 195 N.E. 557 (1935), quoting 65
Corpus Juris, 231, § 21. See also 91 Ohio Jurisprudence 3d, Trusts, Section 49 (“Under
Ohio law, four requirements are necessary to establish existence of an express or
technical trust: (1) an intent to create trust; (2) a trustee; (3) a trust res; and (4) a definite
Case No. 21 BE 0033
–9–
beneficiary. An express trust is created by the act, consent, and mutual understanding of
the parties. To constitute an express trust, there must be an explicit declaration of trust
or circumstances which show beyond reasonable doubt that a trust was intended to be
created and that it was made by a person capable of making a transfer.”).
{¶32} The court's primary duty in construing the provisions of a trust is to
ascertain, within the bounds of the law, the intent of the settlor. In re Trust U/W of Brooke,
82 Ohio St.3d 553, 557, 697 N.E.2d 191 (1998). The parameters of a trustee's authority
are controlled by the specific terms of the trust. In re Trust U/W of Brooke, 82 Ohio St.3d
553, 557, 697 N.E.2d 191 (1998). Interpreting a trust is akin to interpreting a contract.
Millstein v. Millstein, 2018-Ohio-1204, 110 N.E.3d 674, ¶ 14 (8th Dist.). If the language
of the trust agreement is unambiguous, the settlor's intent can be determined from the
trust's express language. Pack v. Osborn, 117 Ohio St.3d 14, 2008-Ohio-90, 881 N.E.2d
237, ¶ 8. “The words in the trust are presumed to be used according to their common,
ordinary meaning.” Id. In interpreting the terms of a trust, a settlor's intent is determined
by considering the language used in the trust, reading all the provisions of the trust
together and “in light of the applicable law, and circumstances surrounding the [trust's]
execution.” Cent. Trust Co. of N. Ohio, N.A. v. Smith, 50 Ohio St.3d 133, 553 N.E.2d 265(1990); Mumma v. Huntington Natl. Bank of Columbus, 9 Ohio App.2d 166, 223 N.E.2d
621 (10th Dist.1967). If the terms of a trust are found to be ambiguous, extrinsic evidence
can be admitted to interpret the trust provisions. Robinson v. Beck, 9th Dist. Summit No.
21094, 2003-Ohio-1286, ¶ 10.
{¶33} The existence of a trust must be shown by clear and convincing evidence.
Gertz v. Dorley, 63 Ohio App.3d 235, 237, 578 N.E.2d 534 (9th Dist.1989). The burden
is on the proponent of the trust to prove the existence, terms, and conditions of the trust.
Thomas v. Thomas, 108 Ohio App. 193, 198, 161 N.E.2d 416 (3d Dist.1958), citing
Harvey v. Gardner, 41 Ohio St. 642, 646 (1885).
{¶34} The first question to answer is whether there was an intent by Carol
Galavich to create a trust. Attorney Yoss, her attorney, was deposed. As to Carol
Galavich’s intent for the Galavich Farm, he avowed:
So we talked about that. This is – this is when she started to talk to me about
Bonnie Stetson, because you can see from her note here she talked about
Case No. 21 BE 0033
– 10 –
making it a TOD to her. Now this is the best I can remember. I said, “Carol,
look, I’m not going to live forever. You’re not going to live forever. Bonnie
may not live forever. You’re telling me you just want to transfer to her with
the understanding she will do what she promised you she will do?” She
said, “I think that.” She said, “What else can I do?”
I said, “Well, let me do at least something so there’s some record to show
that you didn’t just give this farm to Bonnie, period.” She said, “How can I
do that?” I said, “Well, we can draw up at 10- or 12- page trust agreement
or something.” She said, “I trust her.” I said, “I know you do.” She told me
that probably 10 times, “I trust Bonnie.” I said, “I don’t know Bonnie.”
So being the untrusting person that I am, “If you want to TOD this to her,
then I want it to be done with something that gives the world notice that it’s
not really hers.” “Absolutely.” We discussed – I said, “Let me at least put
the word ‘trustee’ after her name because otherwise she could argue, or her
heirs if she dies, that’s hers.”
Yoss Depo. 31-32.
{¶35} During his testimony he acknowledged that Carol Galavich indicated she
did not want to do a 10-to-12-page trust document. Yoss Depo. 32. She indicated she
trusted Bonnie. Yoss Depo 32. Attorney Yoss suggested that at the very least let him do
something to make it clear to the world that she was not gifting the property to Bonnie.
Yoss Depo 32. He indicated that Carol’s response was, “Well, that’s right, because that’s
not why I’m doing it. I’m letting her hold it until Dennis gets out of his difficulties, okay?”
Yoss Depo 33. He told her that the very least he could do was to add the term trustee to
Bonnie’s name and draft a letter for her to sign, which was what he did. Yoss Depo. 33.
{¶36} The letter he drafted to Bonnie Stetson states:
Dear Ms. Stetson:
As you know, Carol Galavich is in the hospital and remains concerned about
her son Dennis and his finances. Because of this, I believe she has talked
to you about signing an Affidavit which would transfer certain property to
you upon her death. This transfer would be to you as Trustee with the
Case No. 21 BE 0033
– 11 –
understanding that should Carol die you would ultimately transfer this
property to Dennis once his financial problems were taken care of.
This is an unusual situation, but Carol trusts you and tells me that you
understand and are agreeable to this. If that is the case, I would ask that
you sign the original of this letter at the space below and return the same to
me in the enclosed self-addressed envelope.
5/3/11 Letter.
{¶37} Bonnie signed this letter and it was delivered to Attorney Yoss.
{¶38} On May 20, 2011, within two weeks of the date of this letter, Carol’s Transfer
on Death Designation of the Galavich Farm to Bonnie was notarized. It was recorded on
May 25, 2011. The Transfer on Death Designation named Bonnie as the trustee.
{¶39} Carol Galavich died on July 7, 2011. The Affidavit for Transfer on Death
was recorded on September 19, 2011. This affidavit lists Bonnie as trustee in separate
places and she signed the document on the line stating, “Bonnie Stetson, Trustee.”
Bonnie also executed a Transfer on Death Designation naming Dennis as beneficiary to
the Galavich Farm on September 12, 2011. That document was recorded September 19,
2011.
{¶40} In addition to the above documents, Bonnie signed a Special Warranty
Deed as well as leases and contracts with oil and gas companies in her capacity as
trustee. Furthermore, after Dennis’ bankruptcy concluded and he wanted the farmhouse
and approximately one acre of land to sell so he could move from the area, he asked
Bonnie to transfer that land to him. She transferred that land to him by warranty deed in
her capacity as trustee.
{¶41} All of these actions show there was an intent for the creation of a trust and
an express trust was created. The letter drafted by Attorney Yoss, signed by Bonnie, and
naming Bonnie as trustee for the beneficiary in a Transfer on Death Designation,
demonstrates a clear intent on Carol’s part to create a trust. The letter, while not lengthy,
contains the basics for a trust and contains an intent to create a trust. Her clear
statements to Attorney Yoss and the statements in the letter signed by Bonnie make it
clear Carol did not want to gift the property to Bonnie. Rather, she wanted Bonnie to hold
the property for Dennis’ benefit until his financial problems were resolved and then she
Case No. 21 BE 0033
– 12 –
was to transfer the property to Dennis. Furthermore, Bonnie’s actions clearly indicate she
was under the belief there was an intent on Carol’s part to create a trust. Bonnie’s actions
following Carol’s death were those of a trustee. Bonnie immediately executed a Transfer
on Death Designation naming Dennis the beneficiary. She signed that document in her
capacity as trustee. Furthermore, Bonnie gave the farmhouse and one acre of land to
Dennis when he asked. Had there been no trust she could have said no. But she did
not. Instead, she gave the property to him in her capacity as trustee. Likewise, she
signed legal documents such as a Special Warranty Deed and various oil and gas leases,
in her capacity as trustee. Admittedly, she did not sign all documents in that capacity.
However, the overwhelming evidence, especially in the years immediately following
Carol’s death, show Bonnie acting in conformity to what the letter asked her to do – be
trustee of the Galavich farm and hold it for Dennis’ benefit until his financial issue were
resolved.
{¶42} Next, the trust must also indicate the beneficiary. “[T]he one for whose
benefit the trust is created is called the cestui que trust, or beneficiary.” Ulmer at 339. A
trust fails where the beneficiaries are not ascertainable. Moskowitz v. Federman, 72 Ohio
App. 149, 156, 51 N.E.2d 48 (9th Dist.1943). Here, it is ascertainable that Dennis is the
intended beneficiary. The letter specifically indicates Bonnie is to hold the property for
Dennis and that once his financial problems are taken care of, the property is to be
transferred to Dennis. That statement is clear.
{¶43} Lastly, the trust must have a trust res; there must be a conveyance or
transfer to the trust. The letter drafted by Attorney Yoss for Carol and signed by Bonnie
states “certain property” would be in the trust. Attorney Yoss testified this certain property
was the Galavich Farm. He testified that “Bonnie and Carol, according to Carol, had
already discussed this and it was all about the farm, period.” Yoss Depo 51.
Furthermore, the TOD executed by Carol for the benefit of Bonnie as trustee within weeks
after this letter was signed by Bonnie was for the Galavich Farm. Bonnie also, following
Carol’s death, executed a TOD naming Dennis as beneficiary for the Galavich Farm,
carrying out the beneficiary designation of Carol. Despite Appellees’ contention that the
letter does not indicate to what property this letter applies, the evidence clearly indicated
the Galavich Farm was the trust res.
Case No. 21 BE 0033
– 13 –
{¶44} Consequently, considering all the above, we conclude an express trust was
created. Finding there was an express trust, we will not address any arguments
concerning the creation of an implied trust.
B. Affirmative Defenses
{¶45} Holding that a trust was created, we now must address the defenses.
Appellees argue even if a trust was established, the trust cannot stand for a number of
reasons. They argued judicial estoppel prevented the trust from standing because in the
bankruptcy proceedings, Appellant indicated he was disinherited and was not receiving
anything from Carol Galavich. He did not disclose the property was being held for his
benefit. They also assert the trust was created for an illegal purpose, which was to
defraud Appellant’s creditors in the bankruptcy. Appellee Carol Hales additionally argues
the doctrine of laches applies.
1. Judicial Estoppel
{¶46} The doctrine of judicial estoppel “precludes a party from assuming a position
in a legal proceeding inconsistent with a position taken in a prior action.” Advanced
Analytics Laboratories, Inc. v. Kegler, Brown, Hill & Ritter, L.P.A., 148 Ohio App.3d 440,
2002-Ohio-3328, 773 N.E.2d 1081, ¶ 37 (10th Dist.), citing Bruck Mfg. Co. v. Mason, 84
Ohio App.3d 398, 616 N.E.2d 1168 (8th Dist.1992). In order to apply the doctrine of
judicial estoppel, the proponent must show that his opponent “(1) took a contrary position;
(2) under oath in a prior proceeding; and (3) the prior position was accepted by the court.”
Greer-Burger v. Temesi, 116 Ohio St.3d 324, 2007-Ohio-6442, 879 N.E.2d 174, ¶ 25.
The purpose of judicial estoppel is to preserve the integrity of the courts by preventing a
party from abusing the judicial process. Id.{¶47} Appellant contends this doctrine is inapplicable to the case at hand because
he was under no duty to disclose that he was a beneficiary of a trust. Appellees primarily
contend judicial estoppel applies because of Appellant’s statement that he was
disinherited and was not receiving anything from Carol Galavich, contrary to the position
he is now taking that he is the beneficiary of a valid trust for the Galavich Farm. Secondly,
they assert he was required to disclose that the property was being held for him and he
did not disclose that information.
Case No. 21 BE 0033
– 14 –
{¶48} Admittedly, when the bankruptcy petition was filed Carol Galavich was still
alive and he had no interest in the property; Bonnie was designated as the transfer on
death beneficiary at that time. However, after she died, he did not update the petition to
indicate the property was being held for his benefit.
{¶49} A motion was filed in bankruptcy court for turnover of inheritance. Appellant
opposed the motion. 9/20/12 Motion in Opposition of Trustee’s Motion for Turnover of
Inheritance. He claimed he was disinherited before her death. 9/20/12 Motion in
Opposition of Trustee’s Motion for Turnover of Inheritance. During his deposition he
explained that he meant this in layman’s terms – he was claiming he did not receive
anything from Carol Galavich’s estate, not that he was legally disinherited. Dennis
Galavich Depo. 68.
{¶50} In bankruptcy proceedings, “[a] debtor seeking shelter under the bankruptcy
laws must disclose all assets, or potential assets, to the bankruptcy court.” Chrysler
Group, L.L.C. v. Dixon, 8th Dist. Cuyahoga No. 104628, 2017-Ohio-1161, ¶ 17, 18, citing
11 U.S.C. 521, 541(A)(7). “[T]he duty to disclose is a continuing one that does not end
once the forms are submitted to the bankruptcy court.” Id. at ¶ 26, quoting Tennyson v.
Challenge Realty (In re Tennyson), 313 B.R. 402 (Bankr.W.D.Ky.2004).
{¶51} That continuing duty is often discussed in cases involving the failing to
disclose a cause of action as an asset on the bankruptcy petition. Moore v. Hodge, 1st
Dist. Hamilton No. C-180633, 2019-Ohio-4752, ¶ 9-10 (“A cause of action is an asset that
must be scheduled” under federal bankruptcy law. Chrysler Group at ¶ 17.). In that
context it has been explained:
The rationale for * * * decisions [invoking judicial estoppel to prevent a party who
failed to disclose a claim in bankruptcy proceedings from asserting that claim after
emerging from bankruptcy] is that the integrity of the bankruptcy system depends
on full and honest disclosure by debtors of all of their assets. The courts will not
permit a debtor to obtain relief from the bankruptcy court by representing that no
claims exist and then subsequently to assert those claims for his own benefit in a
separate proceeding. The interests of both the creditors, who plan their actions in
the bankruptcy proceeding on the basis of information supplied in the disclosure
statements, and the bankruptcy court, which must decide whether to approve the
Case No. 21 BE 0033
– 15 –
plan of reorganization on the same basis, are impaired when the disclosure
provided by the debtor is incomplete.
Rosenheim v. Kleban, 918 F.Supp. 98, 104 (S.D.N.Y.1996).
{¶52} The First Appellate District has explained, “judicial estoppel is not
appropriate when a debtor's failure to disclose a claim in a prior bankruptcy proceeding
is inadvertent” or due to a “mistake.” Moore v. Hodge, 1st Dist. Hamilton No. C-180633,
2019-Ohio-4752, ¶ 12, quoting Saha v. Research Inst. At Nationwide Children's Hosp.,
10th Dist. Franklin No. 12AP-590, 2013-Ohio-4203, ¶ 16. “A motive to conceal claims
from the bankruptcy court always exists as a matter of law, since ‘it is always in a Chapter
13 petitioner's interest to minimize income and assets.’” Id. at ¶ 14 quoting Saha at ¶ 19.
However, an omission may be deemed inadvertent where the debtor lacked knowledge
of the factual basis of the undisclosed claims, had no motive for concealment, and the
evidence supports an absence of bad faith. Id. at ¶ 12, citing White v. Wyndham Vacation
Ownership, Inc., 617 F.3d 472, 478 (6th Cir.2010). The “absence of bad faith” inquiry
focuses on affirmative actions taken by the debtor to notify the bankruptcy court of the
claims. Id. at ¶ 15, citing Stephenson v. Malloy, 700 F.3d 265, 274 (6th Cir.2012)
(declining to apply judicial estoppel where trustee's affidavits acknowledging awareness
of suit presented a factual dispute regarding whether the debtor's omission was in bad
faith); Eubanks v. CBSK Fin. Group., Inc., 385 F.3d 894, 895-897 (6th Cir.2004) (declining
to apply judicial estoppel where evidence showed that debtor notified trustee of claim,
asked trustee to pursue the claim on behalf of the estate, moved for a status conference
on the claim, and moved to substitute the trustee as plaintiff in the suit).
{¶53} Thus, we must determine whether the statement about being disinherited is
contrary to his claim that he is the beneficiary of a valid trust.
{¶54} Appellees cite to the two provisions in the schedules attached to the
bankruptcy petition to indicate Appellant was required to disclose them and by indicating
he was disinherited, when asked about Carol Galavich’s estate, was a contrary position.
{¶55} The provisions in the bankruptcy petition relied on by Appellees state:
Schedule A – Real Property
Case No. 21 BE 0033
– 16 –
Except as directed below, list all real property in which the debtor has any
legal, equitable, or future interest, including all property owned as a
cotenant, community property, or in which the debtor has a life estate.
Include any property in which the debtor holds rights and powers
exercisable for the debtor’s own benefit.
Bankruptcy Petition.
{¶56} Appellant is correct he did not have a contingent or noncontingent interest
in the trust at the commencement of the bankruptcy because his mother was still alive
and there was no property in the trust. Rather, she executed a TOD designation to Bonnie
Stetson, trustee, and asked Bonnie to hold the property as a trustee for Appellant’s
benefit. Pursuant to R.C. 5302.23(B)(4), “[t]he designation of a transfer on death
beneficiary has no effect on the present ownership of real property, and a person
designated as a transfer on death beneficiary has no interest in the real property until the
death of the owner of the interest.” Therefore, he had no interest at the time the
bankruptcy was filed. However, after her death, he had a contingent or noncontingent
interest in the property.
{¶57} Furthermore, as Appellees suggest, 11 U.S. Code 541(a)(1)(5) required
Appellant to inform the bankruptcy court of the trust. That provision indicates if property
is acquired by bequest, devise or inheritance within 180 days of the filing of the bankruptcy
petition, the property is considered part of the bankruptcy estate. This property was
transferred on death to Bonnie within 180 days of the filing of the bankruptcy, as was
Bonnie’s TOD naming Appellant beneficiary. They then assert Federal Bankruptcy Rule
1007(h) requires disclosure of the trust. That provision states:
(h) Interests acquired or arising after petition
If, as provided by § 541(a)(5) of the Code, the debtor acquires or becomes
entitled to acquire any interest in property, the debtor shall within 14 days
after the information comes to the debtor's knowledge or within such further
time the court may allow, file a supplemental schedule in the chapter 7
liquidation case, chapter 11 reorganization case, chapter 12 family farmer's
debt adjustment case, or chapter 13 individual debt adjustment case. If any
Case No. 21 BE 0033
– 17 –
of the property required to be reported under this subdivision is claimed by
the debtor as exempt, the debtor shall claim the exemptions in the
supplemental schedule. The duty to file a supplemental schedule in
accordance with this subdivision continues notwithstanding the closing of
the case, except that the schedule need not be filed in a chapter 11, chapter
12, or chapter 13 case with respect to property acquired after entry of the
order confirming a chapter 11 plan or discharging the debtor in a chapter 12
or chapter 13 case.
Fed.R.Bankr.P. 1007(h).
{¶58} The evidence indicates Appellant knew of the letter claiming to create the
trust about two months after Carol Galavich passed away. Dennis Galavich Depo. 32.
Appellant testified Attorney Yoss explained the trust had been set up. Dennis Galavich
Depo 32. Thus, there was knowledge of the trust.
{¶59} As the Seventh Circuit has noted, “every conceivable interest of the debtor,
future, nonpossessory, contingent, speculative, and derivative, is within the reach of
[section] 541.” In re Carousel Int'l Corp., 89 F.3d 359, 362 (7th Cir. 1996) (internal
quotation and citation omitted). “Section 541 wields a broad scope and includes ‘every
conceivable interest of the debtor’ as property of the estate.” In re GYPC, INC., Bankr.
S.D. Ohio No. 17-31030, 2021 WL 5561016, citing Church Joint Venture, L.P. v.
Blasingame, 986 F.3d 633, 638 (6th Cir. 2021), quoting Tyler v. DH Capital Mgmt., Inc.,
736 F.3d 455, 461 (6th Cir. 2013). Courts recognize that even though “federal law
determines whether a debtor's interest in property is property of the bankruptcy estate,
rights and property interests are created and defined by state law.” In re Gonzalez, 559
B.R. at 330, citing Butner v. United States, 440 U.S. 48, 55, 99 S.Ct. 914, 59 L.Ed.2d 136(1979). Whether it is bankruptcy property is a decision for the bankruptcy court to decide.
However, it did not get to make that decision in this case because the interest was not
disclosed to the bankruptcy court.
{¶60} Regardless, the fact remains the property was being held for his benefit.
Given the above provisions and the purposes of bankruptcy court updates, he was
required to disclose this but did not. He stated to the bankruptcy court that he was
disinherited. Regardless of how he meant the word disinherit, the fact remains he claimed
Case No. 21 BE 0033
– 18 –
to the bankruptcy court he was going to get nothing, but failed to indicate property was
being held for his benefit.
{¶61} Thus, judicial estoppel is applicable, unless it was a mistake or inadvertence
to update. As stated above, “[a] motive to conceal claims from the bankruptcy court
always exists as a matter of law.” Moore v. Hodge, 1st Dist. Hamilton No. C-180633,
2019-Ohio-4752, ¶ 14. However, an omission may be deemed inadvertent where the
debtor lacked knowledge of the factual basis of the undisclosed claims, had no motive for
concealment, and the evidence supports an absence of bad faith. Id. at ¶ 12.
{¶62} Here, the evidence indicates the failure to disclose was not inadvertence
and he had knowledge of the property being held for his benefit. Defenses of mistake or
inadvertence are inapplicable given the evidence.
{¶63} Consequently, judicial estoppel applies as a matter of law and estops him
from collecting under the trust. The trial court’s grant of summary judgment was proper.
2. Illegal Purpose/Spendthrift Trust
And Laches
{¶64} Given our resolution that judicial estoppel is applicable, we do not need to
address illegal purpose/spendthrift trust or laches arguments. Those arguments are
moot.
Conclusion
{¶65} The trial court’s grant of summary judgment is affirmed. An express trust
was created; however, the doctrine of judicial estoppel forecloses Appellant’s ability to
benefit from the trust. Both assignments of error lack merit.
Donofrio, P J., concurs.
Waite, J., concurs.
Case No. 21 BE 0033
[Cite as Galavich v. Hales, 2022-Ohio-1121.]
For the reasons stated in the Opinion rendered herein, the assignments of error
are overruled and it is the final judgment and order of this Court that the judgment of the
Court of Common Pleas of Belmont County, Ohio, is affirmed. Costs to be taxed against
the Appellant.
A certified copy of this opinion and judgment entry shall constitute the mandate in
this case pursuant to Rule 27 of the Rules of Appellate Procedure. It is ordered that a
certified copy be sent by the clerk to the trial court to carry this judgment into execution.
NOTICE TO COUNSEL
This document constitutes a final judgment entry.