Court Opinion

ID: 3738634
Source: CourtListenerOpinion
Date Created: 2016-07-06 07:03:22.670303+00
Date Added: 2024-06-11T18:03:01.977649
License: Public Domain

Plaintiffs could have appealed on questions of law and fact and could have had a trial de novo in this court. However, they have elected to appeal on questions of law from the judgment below dismissing their third amended petition "for the reason that the proof adduced by the plaintiffs is insufficient to support the claim for relief asserted by the plaintiffs against the defendant and is insufficient as a matter of law."
The power and duty of a court in the trial of a chancery case upon the filing of a motion for judgment by the defendant at the close of plaintiff's case is different *Page 221 
from that of a judge in determining a motion for a directed verdict in an action at law. In an action at law tried with a jury, upon a motion for a directed verdict, the court is limited to determining the sufficiency of the evidence as a matter of law and may not determine any question of fact upon which the evidence may be in conflict.
But in the trial of an action at law without a jury, upon a motion by defendant for judgment at the close of plaintiff's case, the court may determine issues of fact as well as of law. If the plaintiff has presented a prima facie case without conflict, the motion should be overruled and defendant put upon his proof. If the plaintiff, at the close of his case, has offered no evidence upon a material fact required to be proved, the court determines as a matter of law that the plaintiff has failed to establish his case, and the petition is dismissed.1 But if the plaintiff, at the close of his case, has offered evidence of such a character as to overcome any prima facie case made by him, the court determines questions of fact as well as law upon the defendant's motion for judgment, and common sense would require that at the instance of the defendant the litigation should then be terminated. Euclid Arcade Bldg.Co. v. H. A. Stahl Co., 99 Ohio St. 47, 49, 121 N.E. 820.
In Matthews v. State Mortgage  Investment Co., 119 Ohio St. 419,164 N.E. 418, the Supreme Court applied the rule of theEuclid case to a chancery case, and in the course of its opinion, at page 421, said:
"An inspection of the record in the instant case discloses that, while plaintiffs adduced some evidence tending to prove the charges of misrepresentation alleged, there is a sharp conflict in the evidence presented *Page 222 
relating to the only claimed misrepresentations of material and existing facts, thereby requiring the weighing of the evidence by the Court of Appeals, which resulted in the conclusion that the evidence was insufficient to show any right to the relief prayed for."
At the trial in the instant case, defendant was permitted to examine plaintiffs' witnesses at great length either upon cross or redirect examination by way of rebuttal, explanation and clarification of defendant's conduct, the difficult, if not delicate, problems encountered by the defendant, and even to the extent of supporting defensive allegations. On one occasion defendant was permitted to examine out of order one of its own witnesses, without waiving its right to move for judgment at the close of plaintiffs' case. Although such procedure is irregular, the order of proof and extent of re-examination of witnesses is within the sound discretion of the trial judge. This is particularly true in a case such as this, wherein the plaintiffs were allowed an unusually wide scope of inquiry relating to the history and world-wide ramifications of the business of The Austin Company, the numerous details incident to the settlement and administration of the trusts, and the alleged conflicts between the management of The Austin Company, and between the heirs of Samuel and Sarah Austin. The wide scope of this inquiry is reflected by a record of 2,690 pages with several hundred voluminous exhibits (including defendant's 45 exhibits).
It thus appears clear that upon the making of the motion in the instant case, it was the duty of the trial court as the trier of the facts and the law to weight the evidence.
In the instant case, after 38 days of trial, common sense would require that, if the evidence be insufficient, the litigation be then terminated (Euclid Arcade Bldg. Co. v.Stahl, supra), and that defendant should not be *Page 223 
required to reintroduce the evidence theretofore already admitted. Nor should a court suffer the imposition of being required to rehear evidence already introduced and such additional evidence as zealous counsel might conceive to be necessary to support his defense, and with the strong probability of extensive rebuttal on the part of the plaintiffs.
In my opinion but three questions are presented on this appeal:
1. If a trustee is confronted with a conflict of interest, in the absence of evidence that as a result of such conflict such trustee has been influenced thereby toward acts inimical to the best interests of the trust, should such trustee ipso facto be removed?
2. If a trustee is confronted with a conflict of interest, in the absence of evidence that such conflict has influenced the conduct of such trustee to the detriment of the cestui que trust, in lieu of removal of such trustee, should a court of equity grant other and further relief under a general prayer therefor?
3. Is the judgment of the court manifestly against the weight of the evidence?
4. Are the findings prejudicially erroneous?
With regard to the removal of the trustee, as well as refusal to grant alternative relief, it may suffice to say that the writer concurs generally in the conclusions reached by the trial court in his opinion rendered some seven months after the submission of the motion of the defendant, but possible effrontery on the part of the dissenting member of this court provokes further conment. This controversy has its inception in the sagacious recognition by the settlor of the trust and founder of The Austin Company that his four daughters were not capable of participating in any degree in the management of the affairs of that company. To that end, he wisely provided that not even the trustee should vote the shares of The Austin Company held *Page 224 
by the trustee, but that they should be voted by his son and son-in-law, who were familiar with the business of the company. In the interest of maintaining the company as a close family corporation, he also gave to his son, W. J. Austin, the option to first purchase shares held by the trustee in the event of the sale thereof. Notwithstanding the extraordinarily large dividends received by his daughters as a result of the continued successful operation of The Austin Company under the policies of the settlor, his son, W. J. Austin, and later by George A. Bryant as president (augmented by the opportunities realized by World War II), jealousy has arisen between the daughters and their children on the one hand and the children of W. J. Austin on account of the latter's preferred position in the company and under the trusts. After all the prosperous dividends resulting from the holocaust of World War II, the daughters have a fear that the ambition of George A. Bryant, president of the company, to make the company an executive and employee-owned concern will ultimately deprive them and their children of the fortuitous bounty of their father and mother.
The officers of the trust company are confronted with a delicate, difficult, if not embarrassing, situation. The trust was accepted by the trustee with full power and authority to sell the stock, but subject to the option of W. J. Austin and his heirs, and without voting rights, except in the case of disagreement between the two persons appointed to exercise such rights.2 Under the trust agreements, the trustee is bound to comply with the provisions thereof as directed by the settlors.
On the one hand is George A. Bryant, the aggressive, dominant president of The Austin Company, imbued *Page 225 
with the ambition to carry on successfully the policy of his predecessors, the founder Samuel Austin and W. J. Austin, including the admitted policy contributing substantially to the success of the company of executive and key employee ownership of its common stock. In 1947, Mr. Bryant became a director of The Cleveland Trust Company. The writer of this opinion is not so naive as to believe that Mr. Bryant, as a director of The Cleveland Trust Company, in his firm belief that the future success of The Austin Company is dependent upon employee stock ownership, would lean backward and fail to exert his influence with the officers of the bank to acquire the Austin stock for the benefit of The Austin Company as well as for himself and other executives and employees at the best price obtainable.
On the other hand, the trustee is confronted with the jealousy of the daughters toward the W. J. Austin family, the obvious co-operation between the members of the W. J. Austin family with Mr. Bryant in controlling the policy and affairs of The Austin Company, the alleged loss of confidence in the trustee and apprehension that the trustee will be influenced by Mr. Bryant to sell the Austin stock at a figure less than its true value.
Nevertheless, the paramount duty of the trustee is to serve the best interests of the beneficiaries of the trust. But the trustee is bound also to carry out the duties imposed upon it by the settlors of that trust. Subject to the option to W. J. Austin and his heirs, it has the sole duty of determining when and at what price the Austin stock shall be sold. From a practical standpoint, the market for the sale of the trust-held stock is severely limited to sale to the Austin family, The Austin Company or its officers and employees. Upon the record in this case, if any criticism is to be directed toward the trustee, it is its policy (admittedly *Page 226 
that of all trust companies) of at least in part shifting its responsibility in determining the sale of securities to the beneficiaries rather than exercising the independent judgment that the settlor intended it should exercise when the trusts were established. The beneficiaries are entitled to be fully informed, but the ultimate decision whether to sell securities and at what price is the responsibility of the trustee. It must be recognized that practicality requires a trustee to consult with the beneficiaries in order to keep peace. But let it be observed what happened in 1937 when it was necesary for the trustee to provide for the payment of charitable legacies and inheritance taxes. The bank could have loaned the money to itself as trustee to pay such amounts, and thus have been charged with self-dealing. But there was no ready market for the stock, and when W. J. Austin offered to buy 400 shares at $100 per share and waived his right to purchase, it was offered to the daughters at $100 per share. Although the daughters were strongly influenced by their brother, W. J. Austin, and their brother-in-law, William Stewart, not to buy the stock, the decision was theirs to make, and the trustee can not now be criticized because of its failure to oppose the advice of Austin and Stewart. W. J. Austin, instead of buying the 400 shares of stock himself, caused The Austin Company to buy it, and now, counsel for the plaintiffs contend that the trust officer did not advise the daughters that the shares were worth more than $100. Surely the trustee can not be criticized for its failure to anticipate the substantial future earnings of the company resulting from World War II. Although the book value of the stock was $188 per share, the trial court very properly found, in view of the limited market, that there is no evidence in the record that the reasonable market value in August 1937 was more than $100. The attitude of the daughters and their able *Page 227 
counsel evidences wisdom of the settlor of the trust not to permit them to engage in the business of The Austin Company, and also to impose upon a trustee the responsibility of selling the stock.
On September 2, 1947, George A. Bryant, president of The Austin Company, became one of 18 directors of The Cleveland Trust Company. Mr. Bryant was imbued with the conviction that the future of The Austin Company depended upon the incentive program of sale of common stock to officers and employees and that the company should be owned by officers and employees. In March 1944 with the approval of the four daughters, he had been appointed proxy to vote the trust-held common stock of The Austin Company. On November 10, 1947, Mr. Bryant caused The Austin Company to seek an option on the trust-held shares. The trust officer promptly notified counsel for the plaintiffs of the option and later advised Mr. Bryant that the trustee had no power to grant such an option. Further negotiations transpired relating to the purchase by The Austin Company of the trust-held stock. On February 26, 1948, The Austin Company, through Mr. Bryant, made a formal offer to purchase the preferred and common stock. Before any action was taken by the trustee upon this offer, the instant action was instituted and on April 21, 1948, an injunction was issued herein and The Austin Company withdrew its offer.
As heretofore indicated, Bryant as president of The Austin Company and as a director since 1947 of the defendant company, desires to obtain the trustee-held stock for The Austin Company and its employees. The trustee is bound to consider any proposal to purchase the stock. Such consideration and negotiation for its sale does not evidence bad faith or divided loyalty. But the evidence fails to disclose that Bryant's influence as a member of the board has had any effect upon the trustee's judgment regarding the sale of the stock. *Page 228 
The president of the bank vehemently and resentfully denied that Mr. Bryant would or could influence his judgment with respect to the sale of the stock to The Austin Company. Whether or not this was window-dressing, was a question of credibility for the trial court — not this court — to determine.
By reason of Mr. Bryant's presence on the board of directors of the defendant trust company, the imminence of possible influence on the part of the trustee disadvantageous to the beneficiaries appears. But the mere possibility of influence, conflict of interest or divided loyalty is not sufficient to support either removal of a trustee or other relief. In every trust there is the possibility of a conflict of interest. A trusteeship offers an opportunity, if not a temptation, to disloyalty and self-aggrandizement. In re Estate of Binder,137 Ohio St. 26, 27 N.E.2d 939, 129 A. L. R., 130. Therefore, a trustee must act with the utmost care, perspicacity and fair judgment.
Plaintiffs' counsel assert that by reason of Mr. Bryant's position as a member of the trustee's board of directors and the evidence of his ambition to acquire the trust-held stock of the corporation, a conflict of interest and divided loyalty to the trust is revealed, such as to warrant the removal of the trustee or at least other relief "without further inquiry." He thus seeks to apply the salutary principle "of no further inquiry" applicable to self-dealing, to abstract or potential conflict of interest or divided loyalty. This is not the law. Potential adverse influence or possibility of conflict of interest or divided loyalty is not the criterion, nor does the mere existence of such a conflict afford a basis for removal of the trustee.3 To so *Page 229 
hold would be to defeat the will of the settlor, because the settlor had the power to appoint the trustee and to specify the terms upon which it should act. It is not the abstract conflict or potentiality of divided loyalty that defeats the trust, but it is the administration that is decisive. And if conflict of interest or divided loyalty is revealed in the administration of the trust, a court of equity will intervene and grant relief.4
In other words, negligent conduct or overt acts inimical to the trust are requisite to support relief. Except in the apprehension and imagination of the beneficiaries of the trust fostered by their counsel, no harm has resulted to the corpus of the trust by any action of the trustee. Whether such stock should be sold to members of the Austin family, The Austin Company or on the open market and at what price, is a matter for the trustee to determine. But it is inconceivable that the trustee, in the light of the lack of confidence by the beneficiaries and the presence of Mr. Bryant on its board of directors, would undertake now to sell the stock without prior approval of a court of competent jurisdiction.
The judgment of the trial court upon the evidence *Page 230 
adduced prior to the close of plaintiffs' case that the trustee should not be removed was, therefore, an appropriate exercise of sound discretion.
In lieu of removal of the trustee, should the court have granted other and further relief under the general prayer therefor? It is difficult to understand plaintiffs' contention that the court failed to exercise discretion in refusing alternative relief. Plaintiffs assert that "if the plaintiffs below adduced proof sufficient to call for an exercise of discretion, the lower court will be reversed without regard to whether or not judgment for the defendant would have been an abuse of discretion." They further assert that the court below considered only that proof was insufficient to support removal, and that if plaintiffs below adduced proof sufficient to support other relief, the lower court should be reversed.
Plaintiffs recognize the general rule that in a case involving the exercise of discretion, a reviewing court will not disturb the action below unless the record discloses an abuse of discretion. In their principal brief, in discussing possible alternative relief, counsel state that these points were repeatedly developed in conference with the court, from which it appears that the subject of alternative relief was before the court for determination and presumably was not ignored by the court in reaching its decision. Essentially, failure on the part of a court to exercise discretion is equivalent to an abuse of discretion. Cf. Cincinnati, Sandusky  Cleveland Rd. Co. v.Sloan, 31 Ohio St. 1, 13, 14. As is stated in 2 Ohio Jurisprudence, 1063, Section 589, before judicial action can be justified on the ground of discretion, the case must, of course, be one calling for the exercise of discretion. In the instant case, the granting or refusing of alternative relief called upon the trial court to exercise its discretion upon the evidence adduced. The Supreme Court has defined *Page 231 
"abuse of discretion" in relation to the granting of a motion for new trial as connoting more than error of law or judgment and as implying an unreasonable, arbitrary or unconscionable attitude upon the part of the court. Steiner v. Custer, 137 Ohio St. 448,  31 N.E.2d 855; Klever v. Reed Bros. Express, Inc.,154 Ohio St. 491, 496, 96 N.E.2d 781. The rule generally applicable is that an order or ruling made, or act done, by a court in a matter within its discretion will not be disturbed by a reviewing court unless it plainly and manifestly appears that there has been an abuse of discretion, and that thereby the rights of the party complaining have probably been prejudiced.
In 21 Ohio Jurisprudence, 1006, Section 17, it is stated:
"As a rule an application for an injunction is addressed to the sound discretion of the court, its allowance being a matter of grace rather than of strict right, and determined by the nature of the case, the peculiar facts presented therein, the law governing the same."
As said by this court in VanFleet, Inc., v. Bayer MedicineCo., 61 Ohio App. 14, 21, 22 N.E.2d 298:
"The right to invoke the extraordinary remedy of injunction is not an arbitrary and vested right. Its allowance is rather a matter of grace and good conscience. A court of equity has a large discretion in granting and refusing the writ in a particular case."
The above principles are particularly applicable to this appeal on questions of law in a chancery case. "Sitting as a court of error to review the action of the chancellor in this case, we are not at liberty to disturb his findings and decree, unless it shall appear from the record that he has disregarded and violated these principles — that he has abused this discretion. We have not the same freedom and authority in the premises as if the case were here on appeal." Eleventh St. *Page 232 Church of Christ v. Pennington, 18 Cow. C., 408, 413, 10 Cow. D., 74.
As in the case of the trial court's refusal to remove the trustee, its refusal upon consideration of the evidence to grant other and further relief, such as continuing the injunction, was not such an error of discretion, judgment, or of law, as to warrant a reversal.
Nor is the judgment in my opinion manifestly against the weight of the evidence. As in the case of Krell v. Krell PianoCo., 14 Ohio App. 74, 78, we must approach consideration of the evidence upon this appeal on questions of law under the rule that the judgment will not be disturbed unless the record shows clearly and satisfactorily that it is manifestly against the weight of the evidence. The credibility of the witnesses can not be considered, and where the evidence is merely conflicting, the determination of the trial court as to such evidence will not be disturbed. Were we trying this case de novo, we might well have reached different conclusions, but as a reviewing court on error, we can not substitute our judgment for that of the trial court, particularly in a case involving exercise of equitable discretion. As heretofore stated, the granting of affirmative equitable relief such as is sought in the instant case is a matter within the sound discretion of the court, and to support a reversal the evidence supporting relief should be so clear and indisputable that denial of relief would constitute an abuse of discretion. No such abuse of discretion is revealed in the record upon this appeal.
With respect to the findings, Section 11421-2, General Code, requires that upon request of a party with a view of excepting to the court's decision upon questions of law involved in the trial, the court shall state in writing the conclusions of fact found separately from the conclusions of law. The findings of the court do not comply with the mandate of the statute. The *Page 233 
facts are not found separately from the conclusions of law. Instead of ultimate facts, evidentiary as well as immaterial facts argumentative in nature are included. Conclusions of law are intermingled with conclusions of fact. It is true that in the light of the decision finding that the plaintiffs were not entitled to any relief, the request for separate conclusions called for more or less negative findings. The writer has concurred with the majority in sustaining the assignments of error directed to conclusions of fact Nos. 10 to 14, 19, 20, 22, 23, 25, 50, 51, 53, 54, 65, 70, 71, 73 to 80. But the failure to enter proper conclusions is not prejudicial to the plaintiffs, inasmuch as a complete bill of exceptions has been reviewed by this court in determining the assignment of error that the judgment is against the weight of the evidence. Oxford Township
v. Columbia, 38 Ohio St. 87, 94; In re Guardianship ofZimmerman, 78 Ohio App. 297, 70 N.E.2d 153. Cf. Shunk v.Shunk Mfg. Co., 86 Ohio App. 467, 473, 93 N.E.2d 321.
A majority of this court has also sustained assignments of error directed to conclusions of law Nos. 5, 6, 7, 10 and 12. But prejudicial error is to be predicated upon the judgment and not upon the conclusions of law. Conclusions of fact separately from those of law enable a party to determine whether the findings of fact warrant the legal conclusions reached by the court in rendering its judgment. A finding of facts as distinguished from conclusions of law alone is important, because separate conclusions of law have no place or function in a record for the purpose of review. The reviewing court determines only whether the judgment properly follows the finding of facts. The legal reasons stated by the court for its judgment are only advisory, and may be erroneous as propositions of law, although the judgment may be correct. The important right of the litigant is to have a statement of facts in a *Page 234 
proper case as the basis of the court's judgment, whereas the legal conclusions, aside from the judgment, are unimportant.Bauer v. Cleveland Ry. Co., 141 Ohio St. 197, 203,47 N.E.2d 225 (obiter dictum).
In the case of a decision in favor of a plaintiff, the making of findings upon request of the defendant enables the defendant to attack the conclusions of fact as not supported by the evidence and also to attack the judgment as not supported by the conclusions of fact. But the entering of findings upon request of a plaintiff in the face of a decision in favor of a defendant is of doubtful efficacy to such plaintiff. The decision in itself calls for negative findings. In the instant case, after the elimination of the conclusions of fact enumerated above, it can not be found that the judgment is erroneous or prejudicial. In such a predicament, the plaintiff is relegated to assigning as error the failure or refusal of the court to make findings in accordance with plaintiff's requests therefor.
The record in the instant case indicates that the court rendered its decision in a written opinion in September 1952. On October 27, 1952, plaintiffs, in writing, requested generally conclusions of fact and of law. On November 19, 1952, plaintiffs filed a supplemental request for findings of fact in which they assert that plaintiffs have proposed a short entry, finding no facts and making no conclusions except that as a matter of law the case must be dismissed on the proof submitted. Plaintiffs further asserted in the application that the defendant has included in its proposed journal entry a long and complicated finding covering many facts both directly and by implication, for the most part consisting of a paraphrase of the opinion of the court. Plaintiffs objected generally to the inclusion of findings in the journal entry and particularly to variations from the findings in the *Page 235 
opinion and to certain specific proposed findings. The grounds for the objection are (1) the findings were proposed and will be used for ulterior purposes (in other litigation) not connected with the instant case, and (2) the conduct of the trustee in submitting the proposed entry was an imposition upon the court, on plaintiffs' counsel and upon the beneficiaries of the trust whom the defendant professes to protect. Thereafter the application requests the court to make extensive findings. These requested findings are subject to the same criticism as directed to the formal findings of the court. Except by way of historical background, many of them are immaterial, others present mixed conclusions of law and fact, others are highly argumentative, and some are predicated upon conflicting testimony. It is significant, however, that a review of plaintiffs' requests as a whole would not result in a conclusion that the judgment was contrary to law on the facts. The writer, therefore, concludes that no error prejudicial to the plaintiffs can be predicated either upon the making or the refusal to enter conclusions of fact separate from the conclusions of law.
The inclusion of some 27 conclusions of fact and law in the journal entry was erroneous. Long ago, the Supreme Court said that a judgment is not properly part of the trial, but forms the subject of a distinct title in the Code; that a finding by the court precedes the formal decree. Commercial Bank of Cincinnati
v. Buckingham, 12 Ohio St. 402, 406. Neither conclusions of fact nor conclusions of law, except the finding and judgment, have any place in a journal entry. Nor can it be said that the inclusion of such findings is not prejudicial to the plaintiffs. But, although the judgment may not be affirmed, such error of commission does not require a reversal, but rather it requires the exercise by this court of its power of modification. In the opinion of the writer, the judgment should be modified *Page 236 
by striking therefrom all of such conclusions erroneously included therein, leaving as the judgment of the court the first sentence incorporating the general finding and the last four paragraphs comprising the judgment. As so modified, the judgment should be affirmed.
FESS, CONN and DEEDS, JJ., of the Sixth Appellate District, sitting by designation in the Eighth Appellate District.
1 Parenthetically, in such event neither party is entitled to separate conclusions of fact and law. Bauer v. Cleveland Ry.Co., 141 Ohio St. 197, 203, 47 N.E.2d 225.
2 No doubt the trustee could resign or be removed, but no provision for resignation or appointment of a successor trustee was made in the trust agreements.
3 In re Trusteeship of Stone, 138 Ohio St. 293,34 N.E.2d 755, 134 A. L. R., 1306, upon which plaintiffs rely, involved retention by the trustee of its own stock. Such retention presented the opportunity to the bank to manipulate the shares to its own interest with results which could prove detrimental to the trust, i. e., potential divided loyalty and conflict of interest and possibility of self-dealing. But the decision turned on the impropriety of the trustee retaining its own shares without express authorization therefor in the trust instrument. The syllabus of the case deals with divided loyalty evidenced by actual self-dealing and is silent with respect to the contention of the plaintiffs that potential adverse influence or possibility of conflict of interest or divided loyalty affords a basis upon which to grant relief.
4 However, in Union Savings Bank  Trust Co. v. Alter,103 Ohio St. 188, 132 N.E. 834, the Supreme Court held, in paragraph three of the syllabus: "Where a will by broad and comprehensive language empowers a trustee `to sell and convey any of the property, real, personal or mixed, which may be the subject of this trust within said period of ten years from the date of my death, and to reinvest the proceeds of such sale,' a court, in the absence of a showing of fraud, collusion or bad faith, will not interfere with the discretion thus vested in such trustee with reference to a sale, by such trustee, of any of the property, the subject of the trust, and will not substitute its judgment for the judgment of such trustee."