IN THE COMMON PLEAS COURT OF FAIRFIELD COUNTY, OHIO KARYN NEIHAUS, : Plaintiffs, : Case No. 09 CV 1638 v. : Judge Berens SHIRLEY FINLEY, ET AL., : JUDGMENT ENTRY Overruling motions for summary judgment Defendants. : This matter is before the Court upon Plaintiff s Motion for Summary Judgment, filed February 25, 2011 and upon Defendant Shirley Finley s Motion for Summary Judgment, filed March 15, 2011. For the following reasons, Plaintiff s motion for summary judgment is hereby OVERRULED and Defendant s motion for summary judgment is hereby OVERRULED. STATEMENT OF THE CASE This is an action alleging breach of fiduciary duty. From the submissions of the parties, including the pleadings, affidavits, and written admissions, the Court can discern the following undisputed facts: Defendant served as attorney-in-fact for Warren J. Butte 1 pursuant to a Durable General Power of Attorney ( Power of Attorney ) executed May 3, 2001. Among Mr. Butte s assets at the time of his death was a life insurance policy from Aetna Life Insurance Company ( Aetna ) with a benefit of $25,000. Before Mr. Butte s death, Defendant, acting as Mr. Butte s attorneyin-fact, submitted a designation of beneficiary form to Aetna changing the beneficiary of that life insurance policy from Plaintiff to Reed-Egan Funeral Home of Newark as the primary beneficiary to the extent of funeral arrangements and to Defendant as the contingent beneficiary. Paragraph 12 of the Power of Attorney granted Defendant the following powers 1 Mr. Butte passed from this life in 2009, before the filing of the instant action. 1
concerning insurance policies: To continue in force and pay the premiums on any insurance policies I may own, including life insurance * * *; to sell, assign, and transfer any policies; to cancel, surrender, borrow against them, change the coverage of, make a claim under, or exercise any other right under my policy which the owner or beneficiary may exercise; and to take out any new policies, including policies on my or another s life; excepting, however, that if I own any insurance policy or policies on the life of my attorney-in-fact, my attorney-in-fact shall have no power with respect to any such policy on his or her own life. Under the terms of the Aetna life insurance policy, Mr. Butte was permitted to change the beneficiary designation without the permission of the named beneficiary. LAW & ANALYSIS Civ.R. 56(A) and (B) permit both plaintiffs and defendants to move for summary judgment on all or part of any claim. Summary judgment is appropriate when, looking at the evidence as a whole, (1) no genuine issue of material fact remains to be litigated, (2) the moving party is entitled to judgment as a matter of law, and (3) it appears from the evidence, construed most strongly in favor of the nonmoving party, that reasonable minds could only conclude in favor of the moving party. 2 The party moving for summary judgment must identify the basis of the motion to allow the non-movant a meaningful opportunity to respond. 3 Additionally, the movant must state specifically which areas of the opponent's claim raise no genuine issue of material fact and such 2 Horton v. Harwick Chem. Corp. (1995), 73 Ohio St.3d 679, 653 N.E.2d 1196, at paragraph three of the syllabus. 3 Mitseff v. Wheeler (1988), 38 Ohio St.3d 112, 116, 526 N.E.2d 798. 2
assertion may be supported by affidavits or otherwise as allowed by Civ.R. 56(C). 4 The movant cannot rest on conclusory assertions that the non-movant lacks evidence. Rather, the moving party must be able to specifically point to some evidence of the type listed in Civ.R. 56(C) [.] 5 If the moving party fails to meet its burden, summary judgment is inappropriate; however, if the moving party meets its initial burden, the non-moving party has a reciprocal burden outlined in Civ.R. 56(E) to set forth specific facts showing that there is a genuine issue for trial [.] 6 If the non-movant produces evidence that allows for conflicting inferences, the court may not weigh the evidence. 7 Instead, the trial court must resolve any doubts and construe the evidence in favor of the non-movant. 8 In her motion for summary judgment, Plaintiff argues that the undisputed facts establish that Defendant breached her fiduciary duty as Mr. Butte s attorney-in-fact by making herself a beneficiary of the Aetna life insurance policy. Plaintiff maintains that she was damaged to the value of the policy because she would have received the benefit of the policy but for Defendant s action in designating a new beneficiary. In Defendant s responsive motion for summary judgment, Defendant raises two arguments. First, Defendant asserts that the undisputed facts establish that she did not breach her fiduciary duty because her actions were proper under the terms of the Power of Attorney. Second, Defendant maintains that Plaintiff can prove no harm resulting from the change of beneficiary because Plaintiff had no vested interest in the insurance benefit. 4 Id. at 115, citing Harless v. Willis Day Warehousing Co. (1978), 54 Ohio St.2d 64, 66, 375 N.E.2d 46; Dresher v. Burt (1996), 75 Ohio St.3d 280, 293, 662 N.E.2d 264. 5 Dresher, at 293. 6 Id. at 294. 7 White v. Westfall, 183 Ohio App.3d 807, 2009-Ohio-4490, 919 N.E.2d 227, at 9, citing Hamilton v. Ohio Dept. of Rehab. & Corr., 10th Dist. No. 06AP-916, 2007-Ohio-1173, at 10. 8 Hannah v. Dayton Power & Light Co. (1998), 82 Ohio St.3d 482, 485, 696 N.E.2d 1044. 3
The elements for a breach of fiduciary duty claim are: (1) the existence of a duty arising from a fiduciary relationship; (2) a failure to observe the duty; and (3) an injury resulting proximately therefrom. 9 Here, there is no dispute that a fiduciary relationship existed between Defendant and Mr. Butte as a result of the Power of Attorney. 10 The remaining issues, therefore, are whether Defendant breached her fiduciary duty and whether Plaintiff was injured by that breach. 1. Issues of fact remain as to whether Defendant breached her fiduciary duty. Plaintiff alleges that Defendant s actions in having herself named as a beneficiary of the Aetna life insurance policy and in collecting the benefit of that policy were a breach of fiduciary duty. Plaintiff has reason to be suspicious; self-dealing transactions by a fiduciary are presumptively invalid. 11 That general statement is subject to a caveat when the fiduciary relationship is created by a power of attorney, however. An attorney-in-fact may transfer property to herself when the power of attorney confers that power. 12 Such a grant of authority effectively extinguishes any duty the attorney-in-fact has to avoid self-dealing. 13 The net result is that attorneys-in-fact bear the initial burden of proving the validity of a transfer to themselves under the power of attorney, while the party attacking the transfer retains the ultimate burden of proving undue influence by 9 Grossniklaus v. Waltman, 5th Dist. No. 09 CA 15, 2010-Ohio-2937, at 19, quoting Camp St. Mary's Assn. of W. Ohio Conference of the United Methodist Church, Inc,, 176 Ohio App.3d 54, 889 N.E.2d 1066, 2008-Ohio-1490, 19. 10 In re Scott, 111 Ohio App.3d 273, 276, 675 N.E.2d 1350. 11 Hoopes v. Hoopes, 5th Dist. No. 2006 CA 00220, citing Estate of Cunningham (1989), 5th Dist. No. 89-CA-10. 12 MacEwen v. Jordan, 1st Dist. No. 020431, 2003-Ohio-1547, at 12. 13 Id., at 13. 4
clear and convincing evidence. 14 The Power of Attorney granted Defendant the power to exercise any other right under [one of Mr. Butte s insurance policies] which the owner or beneficiary may exercise. One of those rights under the Aetna life insurance policy was the right to change the beneficiary. Therefore, the Court finds that Defendant s change of beneficiary was a valid act under the Power of Attorney. But validity under that document is not the end of the inquiry. The question remains whether there remain issues of fact as to whether Defendant exercised undue influence over Mr. Butte. Undue influence requires a susceptible [grantor], another's opportunity to exert it, the fact of improper influence exerted or attempted, and the result showing the effect of such influence. 15 Considering the submissions of the parties, the Court finds that issues of fact remain relating to that analysis. According to the Complaint, Mr. Butte was diagnosed with Alzheimer s disease in the year 2000, a condition which very well could have made him susceptible to undue influence. Defendant was a close friend of Mr. Butte, his attorney-in-fact, and had been given substantial portions of Mr. Butte s property, including real property in Lancaster, Ohio. Together, those circumstances strongly indicate that she had the opportunity to exercise undue influence over Mr. Butte. In addition, Plaintiff s sworn statement that Mr. Butte had arranged for separate life insurance policies to benefit Plaintiff and Defendant upon his death and Plaintiff s position as Mr. Butte s only child give rise to the inference that the redesignation of beneficiary was contrary to Mr. Butte s wishes. 14 Id. 15 Krischbaum v. Dillon (1991),58 Ohio St.3d 58, 65, 567 N.E.2d 1291. 5
2. Plaintiff is not barred from claiming the loss of a contingent benefit. Plaintiff maintains that she was injured in the amount of the Aetna life insurance benefit. It is long-standing law in Ohio that a life insurance policy, which reserves to the insured the privilege of changing the beneficiary therein, gives the named beneficiary only an expectancy during the life of the insured, which does not become a vested right until the insured s death. 16 (Internal quotation omitted.) Under such a policy, the beneficiary s interest is contingent upon being the beneficiary at the time of the insured s death. 17 Plaintiff admitted, in response to Defendant s request for admission number one, that the Aetna life insurance policy involved in this action gave Mr. Butte the right to designate a new beneficiary without the permission of the existing beneficiary. As a result, Plaintiff s interest in that policy was contingent upon being the beneficiary at the time of Mr. Butte s demise. It is uncontested in this action that Defendant changed the beneficiary of the policy before that time. Therefore, Plaintiff never had a vested interest in the life insurance benefit. Defendant asserts that a contingent beneficiary to a life insurance policy does not suffer a cognizable injury when she does not receive the benefit. But Defendant s argument does not address the allegation in this action that Plaintiff would have received the benefit of the Aetna life insurance policy if not for Defendant s actions. The Court s research uncovered no legal basis on which the Court can rest the conclusion that the loss of a contingent benefit is not a cognizable harm. In contrast, the Ohio Supreme Court has implicitly rejected Defendant s argument as it 16 Stone v. Stephens (1951), 155 Ohio St. 595, 598 9, 99 N.E.2d 766. 17 Id., at 599 6
relates to a similar tort. In Firestone v. Galbreath, 18 the Ohio Supreme Court recognized the tort of intentional interference with expectancy of inheritance and held that an action on that tort could be sustained by any person who can prove the elements of the tort. 19 The dissenting justices 20 objected to the Court s broad statement on the ground that such an action should not be sustainable by someone with a mere expectancy or contingent interest. 21 That dissenting opinion strongly suggests that the Court did not limit the types of harm that might be alleged for such a tort. In the intervening years, the experience of courts dealing with cases raising the issue of a contingent beneficiary has been that the proximate cause element is sufficient to limit the scope of claims. 22 In light of that, the Court concludes that Plaintiff s status as a contingent beneficiary is not a bar to her claim. Instead, the pertinent question is whether Plaintiff suffered an injury proximately caused by Defendant s actions. At this point, the evidence presented is that Defendant s action in changing the beneficiary designation on the Aetna life insurance policy caused Plaintiff to not receive that benefit in the sense that it was an action without which it appears that Plaintiff would have received the benefit. 23 In addition, Plaintiff s loss of the expected life insurance benefit was a foreseeable, natural, and probable consequence of Defendant s allegedly tortious action. Therefore, Defendant s actions were the proximate cause 18 (1993), 67 Ohio St.3d 87, 616 N.E.2d 202. 19 Id. at 88. 20 Chief Justice Thomas Moyer and Judge John E. Evans of the Third Appellate District, sitting by designation. 21 Id. at 89 (Evans, J., dissenting). 22 See, e.g., Treadway v. Free Pentecostal Pater Ave. Church of God, Inc., 12th Dist. No. CA2007-05- 139, 2008-Ohio-1663, at 24. 23 A but for cause. 7
of Plaintiff s loss 24 For all of the foregoing reasons, the Court finds that neither Plaintiff nor Defendant has demonstrated the absence of a genuine issue of material fact or that she is entitled to judgment as a matter of law. Reasonable minds could reach a variety of conclusions based on the evidence submitted. Accordingly, both motions for summary judgment are OVERRULED. IT IS SO ORDERED. Judge Richard E. Berens Copies to: Lee D. Heckman, 36 N. Second St., P.O. Box 919, Newark, OH 43058 Charles A. Gerken, 59 E. Second St., P.O. Box 565, Logan, OH 43138 24 Strother v. Hutchinson (1981), 67 Ohio St.2d 282, 286-287, 21 O.O.3d 177, 423 N.E.2d 467. 8