Holloway v. Holloway Sportswear, Inc., Unpublished Decision (6-7-2001)

CourtOhio Court of Appeals
DecidedJune 7, 2001
DocketCase Nos. 17-98-20, 17-2000-18.
StatusUnpublished

This text of Holloway v. Holloway Sportswear, Inc., Unpublished Decision (6-7-2001) (Holloway v. Holloway Sportswear, Inc., Unpublished Decision (6-7-2001)) is published on Counsel Stack Legal Research, covering Ohio Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Holloway v. Holloway Sportswear, Inc., Unpublished Decision (6-7-2001), (Ohio Ct. App. 2001).

Opinion

OPINION
Plaintiffs-appellants, D'Lorah Holloway ("Dolly"), Lorinda Jill ("Jill") Holloway, Johanna Heggblom, Katherine Holloway Heggblom, Erin Holloway, and the estate of Merry Holloway (collectively, "appellants") appeal the grant of partial summary judgment by the Shelby County Court of Common Pleas to defendants-appellees, Holloway Sportswear, Inc. ("HSI") and William Randall Holloway ("Randy"). Appellants also appeal the court's decision denying their Civ.R. 60(B) motion for relief from judgment.

In 1951, J.H. "Bus" Holloway began HSI, serving as President and Chairman of the Board. Bus and his wife, Merry, had four children: Dolly, Jill, Randy, and Jack.1 Bus gifted all four children shares in HSI so that they each became minority shareholders of the closely-held corporation. Bus ran HSI until he turned over the company's leadership to Randy in late 1978. Before tapping Randy as HSI's leader, Bus developed a stock-purchase plan that would ensure the company's continuing survival while providing retirement income to himself and Merry and providing his children with income.

On October 16, 1978, Bus held a meeting at his home to institute the plan. The immediate family was present, along with HSI's attorney, Carroll Lewis, and the corporation's treasurer, Roy Leasure. There, Bus instituted the plan, which involved two transactions. Jill, Dolly, and Merry each owned 22,500 shares of HSI, while each of Jill's two children owned 2,200 shares that were held in trust for them. In the first transaction, HSI's Employee Stock Option Plan ("ESOP") purchased all of the shares owned by Merry, Dolly, and Jill, as well as those owned by Jill's children.

The closely-held corporation's shares, which Bus had valued using an Internal Revenue Service formula, were purchased for $7.89 per share. The purchase price would be paid with a promissory note from ESOP guaranteed by HSI. ESOP would pay $10,000 at closing, with the balance paid in ninety-six equal monthly installments at six percent interest. The transaction would provide an annual income of $18,000 each to Dolly and Jill for twenty-four years. Dolly and Jill executed a sales agreement, while HSI executed a promissory note.

In the second transaction executed that day, Randy purchased Bus's own majority interest, which consisted of 128,700 shares of HSI stock, at the same price per share — $7.89 — that ESOP had paid Dolly and Jill. Randy purchased Bus's shares by executing a promissory note to his father in the amount of $1,015,443, with six percent interest. Jill, Dolly, and Merry all signed a waiver of their right to purchase Bus's stock. Randy was to pay the purchase price for Bus's shares in one hundred quarterly installments of $19,679.28. The note's payments would provide Bus and Merry with retirement income of $78,717.12 a year for twenty-five years. After Randy purchased the shares, he assumed leadership of HSI.

Bus died on December 30, 1986. Bus's will appointed Randy executor and trustee of a family trust he had established in May 1986. Under Bus's will, his real and tangible personal property would be given to Merry. The residuary estate, which was comprised mainly of Randy's note to Bus for the stock purchase, would pour over into the trust. The trust, which was nominally funded with $10 at the time it was created, had been established as a scholarship fund to provide $50,000 for each of Bus's four grandchildren. The trust agreement required that the scholarships be funded first. Any money remaining in the trust after funding the grandchildren's scholarships was to be distributed equally to Merry, Dolly, Jill, and Randy.

On October 16, 1986, approximately two and one-half months before Bus died, Randy owed $834,476.35 in principle on the stock-purchase note. After Bus's death, the estate owed over $220,000 in debts and expenses. Randy continued to make the scheduled payments on the note so that the estate could pay its debts and fund the trusts before being closed. On March 13, 1991, the estate distributed $243,500 to the trust. The Probate Division of the Circuit Court for Palm County, Florida, discharged the estate on March 15, 1991. The estate's lawyer, Jack Martyn, sent copies of the estate's accounting and tax return to Jill and Dolly.

In his capacity as trustee, Randy established four money market accounts of $50,000 each for Bus's grandchildren. He then divided the trust's remaining $43,500 among himself, Dolly, and Jill.2 Randy continued to make payments to the trust on the note after the estate was closed. On April 15, 1994, Randy calculated the remaining balance he owed on the stock-purchase note to Bus, including principle and interest, at $585,298.50. Randy paid off the note, which the trust held, by tendering checks for one-third of the note's balance, $195,099.50 each, to Jill and to Dolly.

On April 12, 1996, appellants filed a three-count complaint against Randy and HSI. The complaint alleged that Randy had committed fraud by misrepresenting the fair market value of appellants' stock in HSI during the October 1978 transaction. The complaint also alleged that Randy, as trustee of the family trust, had failed to properly account for trust funds, thus breaching his fiduciary relationship with appellants.

Appellants later amended their complaint to include eight counts. Counts I through IV alleged that Randy committed fraud during the October 1978 transaction by misrepresenting and by failing to disclose material information about the value and future value of HSI's stock. Counts V through VIII alleged that Randy had breached his fiduciary duty as trustee of the family trust by failing to render a truthful and accurate accounting of money he paid to the trust, by failing to properly collect trust assets, and by misrepresenting the amount of money he had paid into the trust on the note.

Randy and HSI moved for summary judgment. After reviewing numerous affidavits and exhibits submitted by both parties, the trial court granted partial summary judgment for Randy and HSI. The court granted summary judgment on the entirety of Counts I through IV, which involved allegations of fraud in the October 1978 transaction, after finding the claims barred by the applicable statute of limitations. On Counts V through VII, in which appellants claimed fraud and breach of fiduciary duty in the administration of the family trust, the court granted summary judgment "as to all matters occurring before termination of the probate estate and the concurrent funding of the trust estate which occurred on March 13, 1991," and denied summary judgment "as to any matters alleged to have occurred during the administration of the trust estate." The trial court determined that its ruling on the summary judgment motion was a final appealable order in accordance with Civ.R. 54(B) and held the remaining issues in abeyance.

Appellants appealed the trial court's ruling granting partial summary judgment. While the appeal was pending, however, appellants filed a motion in the trial court requesting assignment of a new judge and a motion for relief from judgment pursuant to Civ.R. 60(B). Appellants' Civ.R. 60(B) motion attacked the impartiality of trial judge Sumner Walters, who was sitting by assignment, and it asserted that the trial court relied upon legally insufficient evidence in granting summary judgment and failed to give the proper weight to the evidence they introduced opposing summary judgment. We remanded the cause to the trial court for consideration of appellants' Civ.R. 60(B) motion. Judge Patrick Foley was then appointed to hear the Civ.R. 60(B) motion in the trial court.

After considering appellants' Civ.R. 60(B) motion, the trial court denied it.

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Bluebook (online)
Holloway v. Holloway Sportswear, Inc., Unpublished Decision (6-7-2001), Counsel Stack Legal Research, https://law.counselstack.com/opinion/holloway-v-holloway-sportswear-inc-unpublished-decision-6-7-2001-ohioctapp-2001.