deborah-k-wagner-as-guardian-of-the-person-and-estate-of-harry-l-tillman ( 2013 )

Pursuant to Ind.Appellate Rule 65(D),
this Memorandum Decision shall not be Jun 13 2013, 6:19 am
regarded as precedent or cited before
any court except for the purpose of
establishing the defense of res judicata,
collateral estoppel, or the law of the case.
ATTORNEYS FOR APPELLANT: ATTORNEY FOR APPELLEE:
F. STEPHEN SHEETS CRYSTAL SPIVEY WILDEMAN
STEVEN T. CHARLES Kahn, Dees, Donovan & Kahn, LLP
F. Stephen Sheets & Associates Evansville, Indiana
Evansville, Indiana
IN THE
COURT OF APPEALS OF INDIANA
DEBORAH K. WAGNER AS GUARDIAN )
OF THE PERSON AND ESTATE OF )
HARRY L. TILLMAN, )
Appellant-Respondent, )
)
vs. ) No. 82A05-1207-GU-375
)
JEFFREY L. FINNEY AS GUARDIAN )
OF THE PERSON AND ESTATE OF )
R. VIRGINIA TILLMAN )
)
Appellee-Petitioner. )
APPEAL FROM THE VANDERBURGH SUPERIOR COURT
The Honorable Renee Allen Ferguson, Magistrate
Cause No. 82D07-0806-GU-76
June 13, 2013
MEMORANDUM DECISION - NOT FOR PUBLICATION
BAILEY, Judge
Case Summary
Deborah Wagner (“Wagner”), as Guardian of the person and estate of Harry Tillman
(“Harry”) appeals an order enforcing a prenuptial provision for spousal support upon petition
by Jeffrey Finney (“Finney”), as Guardian of the person and estate of R. Virginia Tillman
(“Virginia”). We affirm, but remand for clarification of the payee of attorney’s fees.
Issues
Wagner presents six issues for review:
I. Whether the trial court erroneously concluded that the prenuptial
agreement between Harry and Virginia included an enforceable spousal
support provision;
II. Whether the order for payment of nursing facility expenses as they
become due is excessive;
III. Whether the enforcement order properly included reimbursement to
Virginia’s daughter for payment of Virginia’s nursing facility charges;
IV. Whether the issuance of the interim order preceding an evidentiary
hearing denied Harry’s estate procedural due process;
V. Whether the trial court abused its discretion by finding Wagner in
contempt of court; and
VI. Whether Virginia’s estate was entitled to attorney’s fees.
Facts and Procedural History
On June 3, 1998, Harry and Virginia – each over eighty years old – married. In
contemplation of the marriage, they executed a prenuptial agreement to be governed by the
laws of Illinois.1 At that time, Harry had assets in excess of $900,000 and Virginia had assets
1
Their prenuptial agreement included the clause:
The terms and provisions of this agreement shall be construed and interpreted in accordance
with the laws of the jurisdiction of the State of Illinois in such case made and provided,
whether or not the parties continue to reside in the State of Illinois subsequent to their
marriage.
(App. 32.)
2
of approximately $87,600. The couple resided together for a decade in the residence Virginia
had previously acquired in the State of Illinois.
In 2008, Harry suffered a debilitating stroke. Wagner, who is Harry’s daughter and a
registered nurse, believed that Virginia was unable to provide the degree of care that Harry
needed. Wagner brought Harry into the State of Indiana, admitted him into a nursing facility
in Warrick County, and obtained guardianship over his person and estate. She and her
husband moved into the Indiana residence that Harry owned.
Virginia moved into an assisted living facility, but was later admitted into a nursing
facility in Henry County, Illinois. After Virginia suffered a stroke and was diagnosed with
dementia, her son, Finney, obtained guardianship of her person and estate. He sold
Virginia’s residence and applied the proceeds to her nursing facility bills.
Wagner paid the bills for Harry’s nursing facility and all household expenses for his
Indiana house from the funds of Harry’s estate.2 She also provided some funds for Virginia’s
benefit.3 In October of 2011, Virginia’s separate assets were depleted. She continued to
receive Social Security benefits in the amount of $1,445 monthly, significantly less than
2
Harry receives Social Security payments and some investment income, amounting to $2,119 monthly income.
However, according to her testimony, Wagner has not attempted to generate income from the Evansville
residence, valued at $125,000 in 1998. She and her husband have resided at the property without payment of
rent to the estate, while substantial home maintenance/improvements and utilities, including internet, phone,
and cable bills, have been charged to the estate. As of the time of the hearing, Wagner had not listed the
residence for sale or advertised it for rent.
3
The 2011 biennial guardianship accounting (covering the period from July 2, 2008 to December 31, 2010)
stated that “total spousal support” had amounted to $12,400, including $1,200 to “Jeff Finney.” (Appellee’s
App. at 67.) The biennial accounting period predated Finney obtaining guardianship of Virginia in 2012.
Finney testified that he had personal knowledge that two checks had been received, one in the amount of $400,
dated May 6, 2010, and one in the amount of $800, dated April 5, 2010. Virginia’s estate produced copies of
those checks.
3
required to maintain her residence in the nursing facility.
Over time, Harry’s medical needs and other expenditures from his estate caused a
dramatic decrease from the former value. Wagner stopped making payments for Virginia’s
benefit and her husband contacted Finney with the proposal that the elderly spouses should
divorce.
On May 3, 2012, Finney filed a petition to enforce the prenuptial agreement.4 A
hearing was conducted on May 23, 2012, at which the trial court ordered the parties to submit
briefs on applicable Illinois law. Finney, on behalf of Virginia, moved the court for an
interim support order. He advised the court that his sister, Jeralyn Bye (“Bye”) had paid
significant sums for Virginia’s care but the bills had become delinquent, and Virginia was in
imminent danger of eviction from her nursing facility. Wagner filed a petition for dissolution
of her father’s marriage to Virginia.5
On July 3, 2012, the trial court ordered Wagner, as guardian, to “immediately and
without delay” pay $7,690.76 past due to Virginia’s nursing facility in Kewanee, Illinois.
(App. 13.) She was further ordered to make payments of $2,755 per month to Virginia’s
attorney to pay for her expenses. Wagner attempted an interlocutory appeal, which was
ultimately held in abeyance, and filed a motion for stay in the trial court without securing an
order thereon, but did not make any payments pursuant to the interim order.
4
It appears that an action for a declaratory judgment with regard to the prenuptial agreement was subsequently
filed in an Illinois court. At a hearing in this case, the trial court was advised that the Illinois action was being
dismissed.
5
The petition was dismissed and the trial court’s dismissal order is the subject of a separate appeal in this
Court.
4
On September 25, 2012, Finney filed a petition for contempt. An evidentiary hearing
was conducted on October 8, 2012, at which Bye, Finney, and Wagner testified regarding the
financial circumstances of the spouses. The parties also offered differing interpretations of
the prenuptial agreement. Finney contended that Harry had, pursuant to the express terms of
the prenuptial agreement, agreed to provide for Virginia so long as they were married.
Wagner argued that Virginia had waived any and all claims to spousal support of any kind
whatsoever and suggested that her guardian should have more promptly pursued Medicaid
coverage.6
On November 1, 2012, the trial court issued an order granting the petition to enforce
the spousal support provision of the prenuptial agreement. Wagner was found to be in
contempt of court and was ordered to pay from estate funds attorney’s fees Bye had incurred
in the aggregate amount of $41,197.21 ($26,351.65 to Kahn, Dees, Donovan & Kahn and
$14,845.56 to Hasselberg, Williams, Grebe & Birdsall).
This appeal ensued.
Discussion and Decision
Prenuptial Agreement Spousal Support Provision
In the prenuptial agreement, the spouses had agreed that the laws of Illinois were
applicable, regardless of where the parties might become domiciled in the future.
In Illinois, a prenuptial agreement is considered to be a contract and the rules
6
As of the hearing date, Virginia was not receiving public assistance and, according to Finney’s investigation,
she was ineligible for assistance as a surviving widow of Finney’s father, a World War II veteran, because she
had remarried. Wagner’s attorney advised the trial court that an individual, although legally married, could
potentially obtain Medicaid coverage for health care if she demonstrated both that she was personally indigent
and that the spouse with assets refused to make a contribution to her expenses.
5
governing the interpretation of contracts apply. In re Marriage of Rosenbaum-Golden and
Golden, 884 N.E.2d 1272, 1280 (Ill. App. Ct. 2008), appeal denied. The primary goal of the
court in the construction of a contract is to decide and give effect to the intent of the parties
as it is expressed through the words of the contract. Id. If the terms are not ambiguous, the
intent of the parties must be decided solely from the contract’s plain language. Id.The prenuptial agreement between Harry and Virginia includes the following
provision:
Tillman agrees to provide, as long as he remains married to Finney, for the
reasonable support, care and maintenance of Finney.
(App. 31.) Wagner claims that this provision should be of no effect because Virginia waived
her right to receive spousal support of any kind pursuant to paragraphs 1 through 3, as
follows:
Each party does hereby release and waive all common-law and statutory rights
of every kind and nature now existing or which hereafter may exist, which may
be created in the separate property of the other party, which either party, as
husband or as wife, may have or could have arising during the marriage of the
parties, as a result of the marriage of the parties, upon the termination of the
marriage of the parties prior to death or upon the death of either of the parties.
This agreement includes any and all similar or dissimilar common-law or
statutory rights, including spouses awards, and allowances of any state of the
United States or any country that may have jurisdiction over the parties or the
property of the parties hereto.
Each of the parties agrees that any and all statutory or common-law right in or
to any personal or real property owned separately or by the other party now or
in the future, and any and all other rights, claims or interests which either party
may have claim or assert in or to the separate estate of the other, whether
during the marriage of the parties or subsequent to the termination thereof by
reason of separation, divorce, annulment, or death shall be and are hereby
waived and barred; and that this agreement shall be a legal and equitable bar to
any and all claims which either party may make to the property of the other,
6
except as to such devise or bequest, if any, as may be provided for either party
in the Last Will and Testament of the other, and except as to such contractual
rights or survivorship provisions as may be created in real or personal property
after the marriage of the parties as created by written instrument by the parties’
voluntary acts. Each of the parties hereby acknowledges waiver of any
statutory claim against the estate of the other upon the death of the other.
Except for the provisions of paragraph number 7 of this agreement, which
paragraph shall take precedence over any other apparently conflicting
provision of this agreement, each of the parties agrees that neither party shall
make any claim for or be entitled to receive any money or property, both real
or personal, from the other party in the way of alimony, maintenance or
spousal support in the event of separation, annulment, dissolution or any other
domestic relations proceeding of any kind or nature. Each of the parties
especially waives and relinquishes any claim for alimony, maintenance or
spousal support, including, but not limited to, any claims for services rendered,
work performed, and labors expended by either of the parties during the entire
length of the marriage.
(App. 28-29.) These provisions may be read in harmony. Paragraphs one through three
contemplate an end of the harmonious marital relationship by death, dissolution, or domestic
proceeding. Virginia agreed to forgo any common law or statutory right to support in such
circumstances.
Notwithstanding this language, paragraph eight is directed to Harry’s obligation while
the marriage continues. He unambiguously contracted to provide for Virginia’s “reasonable
support, care and maintenance” so long as he remains married to her. (App. 31.) The trial
court properly looked to this plain language to determine the intent of the parties.
Harry intended to assume a duty for Virginia’s support while the marriage was in-tact.
Virginia and Harry remain married. While competent, neither initiated dissolution
proceedings, a legal separation, or an independent and adversarial action for support. Finney
seeks not to establish a common law or statutory right to monetary support on Virginia’s
7
behalf; rather, he seeks to enforce a contractual duty. The construction urged by Wagner is
that Harry assumed a contractual duty to support Virginia – during an ongoing marriage – but
Virginia waived her right to enforce this contractual duty, all within the four corners of the
same instrument. We, like the trial court, find this to be a tortured construction.
The trial court found that Harry’s intent, as expressed in the prenuptial agreement, was
to be responsible for Virginia during the marriage but be able to protect assets in the event of
divorce or death. This is consistent with the language of the contract as a whole. The
marriage of Harry and Virginia has not been dissolved; her contractual right of spousal
support has not been forfeited.
Reasonable Expenses
Wagner next contends that, in ordering the estate to fully pay for Virginia’s nursing
facility expenses, the trial court ordered payment beyond that which is reasonable, given the
estate value. She claims that Harry is required “to impoverish himself and jeopardize his
own care – something no reasonable person would do.” (Appellant’s Br. at 13.) She also
cites Cress v. Recreation Servs., Inc., 795 N.E.2d 817, 850 (Ill. App. Ct. 2003), appeal
denied, for the proposition that the proper measure of damages in a breach of contract action
is the amount of money that would place the injured party in as satisfactory a position as he
would have been had the contract been performed. However, as best we can discern
Wagner’s argument, she asserts that the trial court should have fashioned a prospective order
for an amount less than the deficit between Virginia’s nursing facility expenses and her
income to achieve an equitable outcome.
8
According to Wagner’s accounting, at the time of the last hearing, Harry’s estate
consisted of cash in the amount of $189,541.86 and a residence with an assessed valuation of
$129,500. She lists Harry’s expenses as $93,000 annually, including nursing facility charges
of $75,300, taxes of $6,000, clothing and sundries of $6,000, insurance and guardianship
bond of $1,500, fiduciary fees to bank of $1,200, medication of $1,200, and miscellaneous
expenses of $1,800.
Virginia’s nursing facility charges $48,545 annually. She has an annual income of
$17,340, from which she must purchase medication. As such, there is a monthly shortfall of
nearly $3,000. Finney’s attorney advised the trial court that the life expectancy for ninety-
three-year-old Virginia was between three and four years.
Harry agreed to provide, during the marriage, for “the reasonable support, care and
maintenance” of Virginia. (App. 31.) It has not been contended that Virginia’s residence in
a skilled nursing facility is an unreasonable choice, given her advanced age and need for
intensive monitoring. Nor has it been suggested that the charges of the particular facility are
unreasonable in comparison to the prevailing market. The trial court did not order excessive
payments in the sense that the charges for Virginia’s care are anything other than ordinary,
necessary, and reasonable. Rather, the reality is that Harry may not be able to fulfill his
contractual duty to his wife at some point even if her expenses are reasonable.
The trial court was asked to allocate limited resources to provide for the care of
protected individuals in their nineties, each gravely debilitated and requiring around-the-
clock care. It is readily apparent that there are not sufficient estate resources to fully provide
9
for nursing facility care for both spouses for an extended period of time. Wagner has taken
the position that all liquid assets of Harry’s estate are allocable to his nursing care and the
maintenance of his former residence (which she and her spouse occupy rent-free) and that
Virginia should become dependent upon public assistance. To this end, she filed a
dissolution petition, and she acknowledged having no authorization from Harry. Such
apparently represents a reasonable allocation of limited resources in Wagner’s view. We
disagree.
The trial court’s order will result in provision for the needs of both spouses, albeit for
a limited time. Even if the non-performing asset, the residence, is sold and the proceeds
added to the existing $189,541.86 in cash, the liquid assets would cover the shortfall between
Social Security payments and nursing facility charges for only a few years.7 However, given
the circumstances before the trial court, we cannot conclude that the order for payment of
Virginia’s nursing facility charges constitutes an unreasonable award outside the parameters
of the prenuptial contract.
Reimbursement to Jeralyn Bye
Wagner next claims that the trial court erred in ordering that Bye be reimbursed for
sums paid for Virginia’s nursing facility care. Wagner contends that Bye was not liable for
her mother’s support and so any such payments were a gift from Bye to her mother.
The language of the trial court’s order is somewhat confusing, ordering
7
Harry’s nursing facility charges $75,300 per year, while his income is $25,428 per year, leaving a shortfall of
$49,872 before personal expenses. Virginia’s nursing facility charges $48,545 per year, while her income is
$17,340 per year, leaving a shortfall of $31,205 before personal expenses.
10
reimbursement to Bye but also ordering direct payment of attorney’s fees to law firms:
It is ordered that Jeralyn A Bye be reimbursed for expending her personal
funds for attornys [sic] fees to bring this action and to care for her mother
when that should have been paid by the guardianship estate. Jeralyn Bye is
ordered to be paid $41,197.21 from the guardianship, payable immediately. …
The guardian, from the guardianship estate, is order[ed] to pay attorney fees to
Kahn, Dees, Donovan & Kahn in the amount of $26,351.65. The guardianship
estate is ordered to pay attorney fees to the firm of Hasselberg, Williams,
Grebe & Birdsall in the amount of $14,845.56.
(App. 15.) Exhibit H indicates that Bye had expended $12,150 to pay Virginia’s nursing
facility and $41,197.21 in attorney’s fees. As the trial court ordered the payment of
$41,197.21 to Bye, it appears that the trial court intended that Bye be reimbursed for
attorney’s fees but not nursing facility charges. Wagner has demonstrated no error in this
regard. However, to avoid duplication and depletion of limited estate assets, we remand for
clarification of whether the attorney’s fees are to be paid directly to the law firms involved or
to Bye.
Due Process
Wagner claims that the trial court acted in “disregard for the basic requirements of
constitutional due process” by issuing an interim support order without first conducting an
evidentiary hearing. Appellant’s Br. at 15.
“Procedural due process imposes constraints on governmental decisions which deprive
individuals of ‘liberty’ or ‘property’ interests within the meaning of the Due Process Clause
of the Fifth or Fourteenth Amendment.” Mathews v. Eldridge, 424 U.S. 319, 333 (1976).
Some form of hearing is required before an individual is finally deprived of a property
interest. Id.11
Here, the attorneys for both estates appeared at a hearing on May 23, 2012. No
evidence was heard at that time. Both attorneys agreed to a briefing schedule and a future
hearing date at which evidence would be presented. Indeed, the attorney for Harry’s estate
advised the trial court: “the issue of reasonableness is going to have to be litigated, and we
just simply don’t have enough information about what’s reasonable now for her to come to
some sort of a conclusion to the case.” (Tr. 9.)
Additionally, the interim order specifically provided:
This Order shall not affect either party’s ability to challenge the amount or
appropriateness of the support, since both issues will be fully litigated at the
hearing on October 8, 2012.
(App. 13.) The interim order’s language did not purport to permanently dispose of the matter
of support, and therefore, Harry’s estate was not finally deprived of a property interest
without a hearing.
Contempt of Court Finding
Wagner contends that the trial court abused its discretion by finding her in contempt
of court for her failure to make interim support payments as ordered. Wagner concedes,
citing In re Marriage of Betts, 558 N.E.2d 404 (Ill. App. Ct. 1990), appeal denied, that failure
to comply with support and maintenance orders can constitute indirect civil contempt.
However, she argues that she was “entitled to wait” because this Court reinstated her
interlocutory appeal of the interim order only days before the October 8, 2012 hearing, the
issues were to be fully litigated at that hearing, and “the money would have been gone” had
she paid and the trial court then ruled in favor of Harry’s estate. Appellant’s Br. at 19-20.
12
At the October 8, 2012 hearing, the following testimony was elicited:
Question: Miss Wagner, were you aware that this Court entered an interim
order on July 3rd, of this year?
Wagner: Yes.
Question: Let me show you a copy of that. It’s in the Court’s record dated
July 3rd, 2012. Did you become aware of that order immediately after it was
entered? Or when did – when did you first learn of it?
Wagner: I believe Mr. Sheets let us know pretty much immediately.
Question: And did you make any payments pursuant to that order when you
found out about it?
Wagner: No, we did not.
***
Question: Do you see the words immediately and without delay anywhere in
that order?
Wagner: Yes, right here.
***
Question: And you didn’t pay – make any payments when you first learned of
that order, right?
Wagner: No I did not.
Question: And you have not made any payments pursuant to that order as of
today?
Wagner: No I have not.
(Tr. 142-43.) Accordingly, the evidence is that Wagner, with full knowledge of the interim
order and its directive, had made no payment as of the hearing date. There was
uncontroverted evidence that Harry’s estate had sufficient funds to comply with the interim
13
order. As such, the evidence leads solely to the conclusion that Wagner willfully failed to
comply with a court order.
She suggests that her behavior may be excused because she pursued an interlocutory
appeal, although she did not secure a stay of the trial court’s order. See Appellate Rule 39(A)
(providing that an appeal does not stay the effect or enforceability of a judgment or order of a
trial court unless the trial court orders otherwise). She cites no authority for the proposition
that she was entitled to disregard an existing court order because a final hearing was soon
scheduled and she did not want to risk losing estate money if she obtained a favorable
decision. She has not persuaded this Court that the trial court abused its discretion by finding
her to be in contempt of court.
Attorney’s Fees
Finally, Wagner argues that Virginia’s estate is not entitled to attorney’s fees because
the prenuptial agreement includes no such provision, Illinois follows the “American Rule”8
and “there is no basis in the record for the trial court to have ordered Harry to pay any of
Virginia’s attorney’s fees.” Appellant’s Br. at 17. She makes no claim that the particular
charges are unreasonable.
It was in an Indiana action that Wagner was appointed the guardian of Harry’s person
and estate. As guardian, Wagner was charged with, inter alia, a duty to observe and honor
the protected person’s contractual obligations. See Ind. Code § 29-3-8-7. Instead, she
8
Under the “American Rule,” parties pay their own attorney’s fees unless an agreement between the parties, a
statute, or other rule provides otherwise. Smyth v. Hester, 901 N.E.2d 25, 32 (Ind. Ct. App. 2009), trans.
denied.
14
refused to do so, defied a court order, filed an unsolicited dissolution petition, and continued
to live rent-free as she claimed Harry’s assets were inadequate for his and his spouse’s direly
needed nursing care. The trial court found Wagner in contempt of court, in essence finding
that she had breached her fiduciary duty, and ordered the payment of attorney’s fees.
A guardian may be personally liable for damages for breach of fiduciary duty. See In
re Guardianship of Stalker, 953 N.E.2d 1094, 1107 (Ind. Ct. App. 2011) (finding damages to
be appropriate for guardian’s breach of fiduciary duty). Here, however, the trial court
ordered payment of attorney’s fees from the assets of Harry’s estate. Indiana Code section
29-3-9-9 provides:
(a) Whenever a guardian is appointed for an incapacitated person or minor,
the guardian shall pay all expenses of the proceeding, including reasonable
medical, professional, and attorney’s fees, out of the property of the
protected person.
(b) The expenses of any other proceeding under this article that results in
benefit to the protected person or the protected person’s property shall be
paid from the protected person’s property as approved by the court.
Pursuant to Indiana Code section 29-3-2-4, we review an award of attorney’s fees in a
guardianship proceeding for an abuse of discretion.9
Here, the benefit conferred upon Harry from the legal proceedings was that his
express wishes were honored as his spouse was provided comfort and care in her elder years.
This happened only after protracted legal proceedings. Wagner refused to honor Harry’s
contractual obligation, even when ordered to do so immediately by the trial court. She filed a
9
Indiana Code section 29-3-2-4(a) provides: “All findings, orders, or other proceedings under this article
[Guardianships and Protective Proceedings] shall be in the discretion of the court unless otherwise provided in
this article.”
15
dissolution petition without Harry’s authorization, by all appearances for the sole purpose of
evading any obligation to provide for Virginia’s nursing facility care. She suggested that
Virginia should become dependent upon public assistance as soon as possible even if she
remained Harry’s spouse (requiring a move to a publicly-funded nursing facility). All legal
proceedings, even the declaratory judgment action filed and dismissed in another state, were
occasioned by Wagner’s attempted evasion of her ward’s contractual duty. Moreover, it is
uncontroverted that Virginia’s estate lacked any assets with which to pay attorney’s fees,
while Harry’s estate had cash and an asset – the house – with potential to become income-
producing. We find no abuse of discretion in the trial court’s award of attorney’s fees.
Conclusion
The trial court properly found the spousal support provision of the prenuptial
agreement to be enforceable. Harry’s estate was not subjected to an unreasonable order or
denied due process of law. The trial court did not abuse its discretion when it found Wagner
in contempt of court. Virginia’s estate is entitled to attorney’s fees.
Affirmed; remanded for clarification of attorney’s fees payee.
NAJAM, J., and BARNES, J., concur.
16