Opinion
No. 83-64
Decided January 11, 1984.
Probate — Trusts — Probate court unable to impress constructive trust upon savings bonds in hearing on exceptions, when — R.C. 2101.24 and 2115.16, construed.
APPEAL from the Court of Appeals for Ottawa County.
Appellant, Charles W. Etzensperger, is the Executor of the Estate of Ruth M. Etzensperger, whom he married in 1953. Mr. and Mrs. Etzensperger owned a carry-out grocery business in Wooster from the time of their marriage until 1972, when their business was sold to make way for an urban redevelopment project. The Etzenspergers both worked at the carry-out, and the business was operated as a partnership prior to their retirement after the cessation of business in 1972. Mrs. Etzensperger had kept the books for the partnership during the years the carry-out was in operation.
Mrs. Etzensperger died on August 23, 1981. The probate court appointed appellant as the executor of her estate on September 30, 1981. He filed the estate inventory in December 1981. In January 1982 the decedent's niece and nephew, appellees herein, filed exceptions to the inventory, objecting to the exclusion of certain items of personal property from the inventory. The appellees amended their exceptions in February 1982. The basis for the amended exceptions was the inclusion by appellant of certain Series E United States Savings Bonds in the estate inventory. The bonds had been purchased by the decedent. Each bond was issued in the names of Mrs. Etzensperger and one of her relatives as co-owners. The face value of the bonds was $25,775 but their value has now increased to more than $40,600.
Appellant was unaware that his wife had purchased these savings bonds and did not learn of their existence until after her death. The decedent had informed her relatives about the bonds and expressed her intention to prevent appellant from ever finding out about them. Appellee Sandra K. Hurst, niece of the decedent, testified that shortly before her aunt's death, Mrs. Etzensperger divulged the location of the bonds and told Mrs. Hurst to "[g]et them and get them out before Uncle Bud [appellant] sees them." Mrs. Hurst did not, however, remove the bonds from their dresser drawer hiding place. Instead, Joe Fritz, nephew of the decedent and also an appellee herein, directed appellant to the dresser containing the bonds.
In March 1982, the probate court, pursuant to R.C. 2115.16, held a hearing on the exceptions to the inventory. The parties to the hearing were appellant, as executor, the exceptors, and the decedent's sister. The probate court entered the following relevant findings:
"3. The Court further finds that there was existing at the time of the marriage of decedent and the surviving spouse and during that marriage up until the time of death a bonafide partnership between decedent and the surviving spouse, Charles W. Etzensperger.
"* * *
"5. The Court further finds that the United States Savings Bonds which are the subject of this matter were purchased by decedent from assets of said partnership and that the purchase of said bonds was made during the marriage to Charles W. Etzensperger and all said purchases were made without the knowledge of and in concealment of the nature of from Charles W. Etzensperger.
"6. The Court further finds that one-half of the money used to purchase said bonds belonged to Charles W. Etzensperger by virtue of the existing partnership and that said purchases were fraudulently made in violation of the partnership agreement and in violation of the confidential relationship which existed between husband and wife.
"7. The Court finds that a resulting or constructive trust shall be impressed on the bonds for the benefit of Charles W. Etzensperger, surviving spouse, in the amount of one-half of the current value of the bonds.
"8. The Court further finds that the remaining one-half value of the bonds shall inure to the benefit of the survivor listed on each of the bonds involved herein.
"9. The Court further finds that Charles W. Etzensperger as executor shall cash said bonds as attorney in fact for all of the survivors listed thereon and distribute one-half of the current value of said bonds to each of the survivors listed thereon. The Court further finds that any financial institution accepting said bonds shall accept said executor's endorsement as endorsement of the survivor and that said financial institution shall be released from any liability to any of the survivors in cashing said bonds."
Appellees assigned two errors in the court of appeals, contending that the probate court lacked authority to impress a constructive trust on the bonds for appellant's benefit and that fraud had not been proved. The court of appeals sustained the first assignment of error, holding that the trial court erred in impressing a constructive trust upon the bonds. The court stated that "whenever exceptions to the inventory are filed, the sole issue before the probate court becomes whether or not the particular asset that is challenged as not being part of the estate should remain in the inventory and be part of that estate. * * * The probate court should have ruled solely on the issue of whether or not the Series E Bonds were properly included in the estate inventory." (Emphasis sic.) The court of appeals effectively overruled the second assignment of error, concluding that the fraud issue was "moot" as not properly before the probate court.
The cause is now before this court pursuant to the allowance of a motion to certify the record.
Mr. Stephen E. Cottrell, for appellant.
Messrs. Tone, Maddrell, Eastman Grubbe and Mr. Barry W. Vermeeren, for appellees.
The question presented is whether the probate court was empowered to impress a constructive trust upon the savings bonds in a hearing on exceptions.
"The hearing of exceptions to an inventory under Section 2115.16, Revised Code, is a summary proceeding conducted by the Probate Court to determine whether those charged with the responsibility therefor have included in a decedent's estate more or less than such decedent owned at the time of his death." In re Estate of Gottwald (1956), 164 Ohio St. 405 [58 O.O. 235], paragraph one of the syllabus.
Appellant would rely on R.C. 2101.24 and paragraph two of the syllabus in Gottwald to support his contention that the probate court had authority in the hearing on exceptions to impress a constructive trust upon the bonds purchased by the decedent. R.C. 2101.24 states in relevant part as follows:
"The probate court shall have plenary power at law and in equity fully to dispose of any matter properly before the court, unless the power is expressly otherwise limited or denied by statute."
Appellant argues that R.C. 2101.24 is a broad grant, and consistent therewith the probate court could exercise its discretion and impress a constructive trust for his benefit. This argument assumes that appellant's claim to the bonds was a "matter properly before the court." This assumption is unwarranted.
As appellees note, "[t]he sole matter before the trial court at the hearing on the exceptions was whether the bonds belonged in the estate. * * * The issue of the fraudulent appropriation of the purchase money for the bonds * * * was an improper presentment of a claim against the estate * * *." The basis for appellant's assertion of an equitable interest in the bonds was his late wife's allegedly fraudulent use of his funds to purchase the bonds. Appellant's claim is not directed at the bonds themselves, but is focused on one half of the funds and the increment thereon, of which he was allegedly defrauded. For this reason appellees' characterization of appellant's interest as an "unliquidated tort claim" is correct, as is their contention that an unliquidated tort claim against the estate by an executor or administrator should be presented pursuant to R.C. 2117.02. Presentation of a claim in a hearing on exceptions under R.C. 2115.16 may not be substituted for the timely presentation of a claim against the estate consistent with the procedures set forth in R.C. Chapter 2117. Accordingly, appellant's fraud claim was not properly before the court for purposes of R.C. 2101.24 in the hearing on exceptions.
"An executor or administrator within three months after the date of his appointment shall present any claim he has against the estate to the probate court for allowance. The claim shall not be paid unless allowed by the court. When an executor or administrator presents a claim amounting to five hundred dollars or more, the court shall fix a day not less than four nor more than six weeks from its presentation, when the testimony touching it shall be heard * * *."
Appellant would also rely on paragraph two of the syllabus in Gottwald, supra, which states that, "[i]ncidental to such hearing, the Probate Court can determine title to personal property included in such inventory, but it is a matter of discretion whether such summary proceeding shall be employed or the exceptor ordered to pursue other remedies." It is appellant's position that the court of appeals' ruling narrows Gottwald to the extent that it divests the probate court of the discretion afforded by paragraph two of the syllabus in Gottwald. This contention is without merit.
In the instant case, the probate court made two implicit preliminary findings before ordering the impressment of the constructive trust. The court necessarily determined (1) that the bonds were not estate assets, and (2) that the exceptors had title to the bonds prior to its consideration of appellant's asserted equitable interest. The first two steps of the probate court's analysis correspond to the first two paragraphs of the syllabus in Gottwald. The final step taken by the probate court, impressment of constructive trust on the bonds, transcends Gottwald. This court stated in Gottwald, at page 411, that R.C. 2115.16 "does not expressly provide for the impressing of a resulting or implied trust * * * [and] [s]uch jurisdiction ought not to be implied * * *." Thus, the probate court was without authority under R.C. 2115.16 to impress a constructive trust on the bonds and, as we previously noted, the matter was not properly before the court under R.C. 2101.24.
For the reasons hereinbefore stated the judgment of the court of appeals is affirmed.
Judgment affirmed.
CELEBREZZE, C.J., W. BROWN, SWEENEY, LOCHER, HOLMES, C. BROWN and J.P. CELEBREZZE, JJ., concur.