In Re: The Matter of the Supervised Administration of the Estate of Wayne Lewis Stayback, Joseph Stayback v. Jeffrey Stayback and Julie Warnke , 2015 Ind. App. LEXIS 506 ( 2015 )

Jul 08 2015, 8:42 am
ATTORNEY FOR APPELLANT ATTORNEY FOR APPELLEES
Morris A. Sunkel Elizabeth A. Flynn
Harris Welsh & Lukmann Michigan City, Indiana
Chesterton, Indiana
IN THE
COURT OF APPEALS OF INDIANA
In Re: The Matter of the July 8, 2015
Supervised Administration of the Court of Appeals Case No.
Estate of Wayne Lewis Stayback, 46A03-1410-ES-378
Deceased,
Appeal from the LaPorte Superior
Court
Joseph Stayback,
Appellant-Respondent, The Honorable Kathleen B. Lang,
Judge
v.
Cause No. 46D01-1110-ES-35
Jeffrey Stayback and Julie
Warnke,
Appellees-Petitioners.
Najam, Judge.
Statement of the Case
[1] Wayne Lewis Stayback, deceased, was the father of three children: Joseph
Stayback, Jeffrey Stayback, and Julie Warnke. In 2010, Wayne created the
Court of Appeals of Indiana | Opinion 46A03-1410-ES-378| July 8, 2015 Page 1 of 23
Wayne Lewis Stayback Irrevocable Living Trust (“the Trust”), the corpus of
which consisted of approximately seventy-five acres of real property in LaPorte
County (“the property”) and some personal property. After Wayne died in
2011, Jeffrey and Julie filed a joint petition to remove Joseph as trustee of the
Trust. Joseph filed a motion to dismiss that petition, and he requested fees and
expenses. Jeffrey and Julie subsequently filed a motion to dissolve and
terminate the Trust. Following a hearing on all pending motions, the trial court
denied Joseph’s motion to dismiss and motion for fees and expenses, and the
court denied Jeffrey and Julie’s motion to dissolve and terminate the Trust.
Joseph appeals and presents two issues for our review:
1. Whether the trial court erred when it concluded that the
Trust shall distribute to Joseph, Jeffrey, and Julie income
generated by billboards located on the property.
2. Whether the trial court abused its discretion when it
denied Joseph’s motion for fees and expenses.
[2] Jeffrey and Julie cross-appeal and present two issues for our review, which we
consolidate and restate as whether the trial court erred when it denied their
petition to dissolve and terminate the Trust.
[3] We affirm in part and reverse in part.
Facts and Procedural History
[4] In approximately 1990, Wayne and Joseph started a business together operating
a paintball course on the seventy-five acre property Wayne owned in LaPorte
Court of Appeals of Indiana | Opinion 46A03-1410-ES-378| July 8, 2015 Page 2 of 23
County. The business was very successful and, over the years, Wayne and
Joseph expanded the operation from three playing fields to eleven playing
fields. At some point, Joseph took over sole ownership of the paintball
business, which became known as Sherwood Forest Adventure Games. But
Wayne continued his daily involvement in running the business. Wayne also
leased a portion of the property to Burkhart Advertising Corporation
(“Burkhart”), which erected billboards on the leased property. 1
[5] On May 3, 2010, Wayne executed the Trust, which provided in relevant part as
follows:
ARTICLE 3
DISTRIBUTION OF INCOME AND PRINCIPAL
3.01 Use of Trust Income During the Lifetime of Wayne Lewis
Stayback
During the lifetime of Wayne Lewis Stayback of LaPorte
County, Indiana, the Trustee, [Joseph,] in his . . . sole discretion,
as defined hereafter, may use any portion or all of the income
and/or principal of the Trust for the use or benefit of any purpose
the Trustee deems necessary or advisable. Under no
circumstances may Trustee use any of the assets of Trustee to
benefit Grantor, Wayne Lewis Stayback.
3.02 Use of Trust Real Estate:
1
Wayne had entered into four contracts with Burkhart to lease four spaces on the property. Appellant’s
App. at 51.
Court of Appeals of Indiana | Opinion 46A03-1410-ES-378| July 8, 2015 Page 3 of 23
During the lifetime of Joseph Stayback, so long as he wishes, he
shall have the right to operate his business known as Sherwood
Forest Adventure Games, or other business name as Joe
Stayback desires, on any trust[-]owned real estate and to retain
all profits and/or losses of said businesses so as [sic] long as he
desires. The Trust shall be responsible to pay yearly taxes
regarding said property.
3.03 Distribution of Undistributed Income and/or Principal after the
Death of Wayne Lewis Stayback
Upon the death of Wayne Lewis Stayback, the TRUSTEE shall
divide the property of the Trust (including the proceeds of any
insurance policy payable on the death of Wayne Lewis
Stayback), into as many equally [sic] shares as shall be required
to provide and make distribution as follows:
1. Joseph Stayback, for as long as he desires, shall be able [to]
operate his business on any real estate owned by the Trust and
retain all income and losses therefrom.
2. The rest, residue and remainder of my Trust, including real
estate subject to paragraph 1 herein above shall be divided
equally among Joseph Stayback, Jeffrey Stayback and Julie
Warnke, who survive me.
Joint Ex. 1.
[6] By 2011, Joseph had incurred “substantial obligations for sales tax to the
Indiana Department of Revenue” related to the paintball business. Appellant’s
Br. at 5. Accordingly, Wayne started a new business known as Sherwood
Rentals, and Wayne “ran the paintball business through [that company] prior to
his death[.]” Tr. at 63. In turn, Joseph “formed another entity [called
Court of Appeals of Indiana | Opinion 46A03-1410-ES-378| July 8, 2015 Page 4 of 23
Sherwood Paintball Maintenance] to continue doing exactly the same thing as
[he] had done[ prior to Wayne’s death in September 2011.]” Id. After Wayne’s
death in September 2011, Joseph’s fiancée, Kathy Love, created a business
called Sherwood Paintball, Inc. Kathy took over responsibility for running the
same aspects of the paintball business that Wayne had run during his lifetime,
such as admissions and concessions. Joseph continued his work building and
maintaining the courses.
[7] Wayne’s will included a pour-over provision, whereby any undistributed assets
of his estate were to be placed in the Trust for distribution. One such asset
included the lease agreements with Burkhart. After Wayne’s death, Joseph
“requested that the lease payments from Burkhart [for the billboards] be made
to him as Trustee of the [Trust].” Appellant’s App. at 55. Joseph used some of
that income, which totaled approximately $12,000 annually, to pay the real
estate taxes on the property.
[8] On October 12, 2011, Joseph was appointed Personal Representative of the
Supervised Estate of Wayne Lewis Stayback. On May 4, 2012, Jeffrey, as
“remainderman beneficiary,” filed a Verified Petition for Accounting, Report,
and Docketing of the Trust. Id. at 20. On August 7, Jeffrey filed a Verified
Petition for Estoppel of Burkhart Advertising Corporation’s Payments to
Joseph Stayback. And on September 26, Jeffrey and Julie filed a Joint Verified
Petition to Remove Joseph Stayback as Trustee and Personal Representative.
On November 7, Joseph filed a motion to dismiss Jeffrey and Julie’s petition to
Court of Appeals of Indiana | Opinion 46A03-1410-ES-378| July 8, 2015 Page 5 of 23
remove him as trustee. On November 30, Jeffrey and Julie filed a Motion to
Dissolve and Terminate Trust.
[9] Following a hearing on all pending motions on July 21, 2014, the trial court
entered the following order:
1. This case involves the interpretation of the language in the
Irrevocable Living Trust executed by Wayne Lewis Stayback on
May 3, 2010.
2. There are three heirs, [Joseph, Jeffrey, and Julie]. Joseph was
appointed Personal Representative and Trustee.
3. Section 3.02 Use of Trust Real Estate states that during the
lifetime of Joseph Stayback, so long as he wishes, he shall have
the right to operate his business known as Sherwood Forest
Adventure Games, or other business name as Joseph Stayback
desires, on any trust-owned real estate, and to retain all profits
and/or losses of said business so long as he desires. The Trust
shall be responsible to pay yearly taxes regarding said property.
This section clearly expresses the trustor’s intention that Joseph Stayback
operate a paintball business on the property for as long as he desires.
4. Section 3.03 Distribution of Undistributed Income and/or Principal
after the Death of Wayne Lewis Stayback—This section is the center
of the conflict between the parties. Upon the death of Wayne
Lewis Stayback, the Trustee shall divide the property of the Trust
(including the proceeds of any insurance policy payable on the
death of Wayne Lewis Stayback), into as many equally [sic]
shares as shall be required to provide and make distribution as
follows:
A. Joseph Stayback, for as long as he desires, shall
be able [to] operate his business on any real estate
Court of Appeals of Indiana | Opinion 46A03-1410-ES-378| July 8, 2015 Page 6 of 23
owned by the Trust and retain all income and losses
therefrom.
B. The rest, residue and remainder of my Trust,
including real estate subject to paragraph 1 herein
above shall be divided equally among Joseph
Stayback, Jeffrey Stayback and Julie Warnke, who
survive me.
4. [sic] The language in sections 3.02 and 3.03 is confusing and
somewhat contradictory. Just as it is clear in section 3.02 that
the Trustor intended Joseph to have the ability to run the
paintball business for as long as he desired, section 3.03 (1)
clearly states that Joseph has the right to operate his business on
any real estate owned by the trust. Section 3.03 (2) indicates that
the rest, residue and remainder of the trust, including real estate
subject to 3.03 (1) be divided equally between Joseph, Jeffrey,
and Julie. The intention of the Trustor in both section 3.02 and 3.03 is
to allow Joseph to use the real property now within the Trust for the
paintball business. Although there is some question about the
structure of the current business organization, the evidence
supports that there is an ongoing paintball business on the
property. The real property will continue to be held in the Trust
until Joseph no longer operates a paintball business. Joseph will
be considered operating a paintball business as long as he is a
named owner of a corporate entity involved with the operation of
a paintball business on the property.
5. [sic] Income is generated from . . . lease[s] with Burkhart
Signs. These contracts are not within the Trust. Any income as a
result of this contractual relationship should be distributed
equally between Joseph, Jeffrey, and Julie.
The Court orders as follows:
Court of Appeals of Indiana | Opinion 46A03-1410-ES-378| July 8, 2015 Page 7 of 23
1. Motion to Dismiss proceedings filed by Joseph Stayback as
Trustee and Personal Representative of the Estate of Wayne
Lewis Stayback.
Motion to Dismiss is denied.
2. Motion for Fees and Expenses filed by Joseph Stayback as
Trustee and Personal Representative of the Estate of Wayne
Lewis Stayback.
Motion for Fees and Expenses is denied.
3. Motion to Dismiss and Motion to Dissolve and Terminate
Trust filed by Jeffrey Stayback and Julie Warnke.
Motion to Dissolve and Terminate Trust is denied.
Id. at 7-8 (some emphases added). This appeal and cross-appeal ensued.
Discussion and Decision
Issue One: Income from Billboard Leases
[10] Joseph first contends that the trial court erred when it concluded that the
billboard contract is not part of the Trust and ordered that the income from that
contract be distributed equally among Joseph, Jeffrey, and Julie. The trial court
entered findings of fact and conclusions thereon sua sponte. Our standard of
review under this circumstance is well settled: specific findings control only as
to issues they cover, and a general judgment standard applies to any issues upon
which the trial court has not made findings. Jewell v. City of Indianapolis, 950
N.E.2d 773 (Ind. Ct. App. 2011). We review such findings by determining
whether the evidence supports the findings and whether the findings support the
Court of Appeals of Indiana | Opinion 46A03-1410-ES-378| July 8, 2015 Page 8 of 23
judgment. Id. We will reverse only when the judgment is shown to be clearly
erroneous, i.e., when it is unsupported by the findings of fact and conclusions
entered thereon, or when the trial court applies an incorrect legal standard. Id.;
Fraley v. Minger, 829 N.E.2d 476, 482 (Ind. 2005). We defer substantially to the
trial court’s findings of fact, but we evaluate conclusions of law de novo. Jewell,
950 N.E.2d at 777.
[11] The interpretation of a will or trust is a question of law for the court. Univ. of S.
Ind. Found. v. Baker, 843 N.E.2d 528, 531 (Ind. 2006). We apply the same rules
of construction of a contract to determine whether the language in a trust is
ambiguous. The primary purpose of the court in construing a trust instrument
is to ascertain and give effect to the settlor’s intention. Id. Indiana follows the
four corners rule that extrinsic evidence is not admissible to add to, vary, or
explain the terms of a written instrument if the terms of the instrument are clear
and unambiguous. Id. Accordingly, where a trust is clear and unambiguous,
the court must give effect to the trust’s clear meaning without resort to extrinsic
evidence. Id.
[12] If, on the other hand, the language is ambiguous, then we must determine its
meaning by extrinsic evidence. Roy A. Miller & Sons, Inc. v. Indus. Hardwoods
Corp., 775 N.E.2d 1168, 1173 (Ind. Ct. App. 2002). An ambiguity exists only
where reasonable people could come to different conclusions about the
contract’s meaning. Id. A contract term is not ambiguous merely because the
parties disagree about the term’s meaning. Id. When the construction of a
Court of Appeals of Indiana | Opinion 46A03-1410-ES-378| July 8, 2015 Page 9 of 23
contract is based upon extrinsic evidence, the construction is a matter for the
factfinder. Fresh Cut, Inc. v. Fazli, 650 N.E.2d 1126, 1133 (Ind. 1995).
[13] The parties do not dispute that, because Wayne had executed a pourover will, 2
the billboard leases became Trust assets upon Wayne’s death. We agree and
hold that the trial court erred when it concluded that the billboard leases were
“not within the Trust.” Appellant’s App. at 8. However, the parties dispute
whether, under the terms of the Trust, that asset should have been distributed to
Joseph, Jeffrey, and Julie or whether it should have been kept in the Trust for
Joseph’s benefit. Because the trial court erred when it concluded that the leases
were not a part of the Trust, we review this issue de novo.
[14] It is well settled that the use of the term “life estate” is not necessary to create a
life estate where, as here, the intention of the grantor to create a life estate is
expressed by equivalent and appropriate language. Long v. Horton, 126 Ind.
App. 651, 133 N.E.2d 568, 572 (1956). Section 3.02 of the Trust provides that,
“[d]uring the lifetime of Joseph Stayback, so long as he wishes, he shall have
the right to operate his business known as Sherwood Forest Adventure Games,
or other business name as Joe Stayback desires,” on Trust-owned property.
Joint Ex. 1. And Section 3.03 of the Trust provides that, upon Wayne’s death,
Joseph shall divide the property of the Trust as follows: first, “for as long as he
desires,” Joseph is able to operate his business on real estate owned by the Trust
2
A pourover will is a “will giving money or property to an existing trust.” Black’s Law Dictionary 1834
(10th ed. 2014).
Court of Appeals of Indiana | Opinion 46A03-1410-ES-378| July 8, 2015 Page 10 of 23
“and retain all income and losses therefrom”; second, the rest, residue, and
remainder of the Trust, including the real estate subject to the first paragraph,
shall be divided equally among Joseph, Jeffrey, and Julie. Id. We hold that
Section 3.02 and the first numbered paragraph of Section 3.03 conveyed a life
estate in the property to Joseph, subject to the condition that he continue to
operate a paintball business there. See, e.g., Gladden v. Jolly, 655 N.E.2d 590,
592 (Ind. Ct. App. 1995) (holding will provision granting Gladden right to live
in decedent’s house during Gladden’s life subject to conditions created life
estate in the residence).
[15] As we explain below, we agree with the trial court that Joseph is operating a
paintball business on the property. Accordingly, Joseph is fulfilling the
condition required to maintain a life estate in the property, subject to his
continued operation of a paintball business. A life estate entitles the holder to
the possession of real property. See, e.g., Krieg v. Hieber, 802 N.E.2d 938, 946
(Ind. Ct. App. 2004). And the right to the rents and profits of the real estate
follows the right to possession. Lockridge v. Citizens Trust Co. of Greencastle, 110
Ind. App. 253, 37 N.E.2d 728, 731 (1941). We hold that Joseph is entitled to
the income generated by the billboard leases for the duration of his life estate.
Thus, the trial court erred when it ordered that the income from the billboard
leases be distributed equally among Joseph, Jeffrey, and Julie.
Issue Two: Motion for Fees and Expenses
[16] Joseph contends that the trial court abused its discretion when it denied his
motion for fees and expenses. Joseph maintains that he had never filed any
Court of Appeals of Indiana | Opinion 46A03-1410-ES-378| July 8, 2015 Page 11 of 23
such motion “as either personal representative nor as trustee.” Appellant’s Br.
at 12. Accordingly, Joseph asserts that the trial court’s order denying such fees
was entered sua sponte, which, he alleges, is improper. Joseph states that “the
trial court did not hold an evidentiary hearing or hear any evidence regarding
Joseph’s personal representative or trustee fees because no Motion or request
for those fees was made to the trial court.” Id. at 13.
[17] But Jeffrey and Julie point out that, in his November 7, 2012, motion to
dismiss, Joseph requested fees and expenses in his prayer for relief. And
Joseph’s motion to dismiss, including the request for fees and expenses, was at
issue during the July 21, 2014, hearing. Indeed, in his opening statement,
Joseph’s counsel requested that his fees “be paid by [Jeffrey and Julie].” Tr. at
10. Moreover, Joseph testified that he had “paid to this date in legal fees,
because of the suit” approximately $30,000. Id. at 65. Thus, Joseph’s
contentions that he neither requested fees nor presented evidence of his fees are
without merit.
[18] The award or denial of attorney’s fees is “in the exercise of a sound discretion,
and in the absence of an affirmative showing of error or abuse of discretion we
must affirm [the trial court’s] order.” Malachowski v. Bank One, Indpls., N.A., 682
N.E.2d 530, 533 (Ind. 1997) (quoting Zaring v. Zaring, 219 Ind. 514, 39 N.E.2d
734, 737 (1942)). Joseph has not demonstrated that the trial court abused its
discretion when it denied his request for fees and expenses.
Court of Appeals of Indiana | Opinion 46A03-1410-ES-378| July 8, 2015 Page 12 of 23
Cross-Appeal
[19] In their cross-appeal, Jeffrey and Julie contend that the trial court erred when it
denied their joint petition to dissolve and terminate the Trust. In particular,
Jeffrey and Julie maintain that Joseph is not operating the same paintball
business on the property that he was at the time Wayne executed the Trust.
Thus, they assert that the terms of the Trust require Joseph to dissolve the Trust
and distribute the property in equal shares to Joseph, Jeffrey, and Julie. In the
alternative, Jeffrey and Julie assert that, even assuming Joseph is operating a
paintball business consistent with the Trust provisions, the trial court
nonetheless should have dissolved and terminated the Trust and distributed the
interests in the property equally to Joseph, Jeffrey, and Julie while permitting
Joseph to continue to operate the paintball business on the property. We
address each contention in turn.
Paintball Business
[20] Again, the relevant trust provisions at issue here are the following:
3.02 Use of Trust Real Estate:
During the lifetime of Joseph Stayback, so long as he wishes, he
shall have the right to operate his business known as Sherwood Forest
Adventure Games, or other business name as Joe Stayback desires, on
any trust[-]owned real estate and to retain all profits and/or
losses of said businesses so as [sic] long as he desires. The Trust
shall be responsible to pay yearly taxes regarding said property.
3.03 Distribution of Undistributed Income and/or Principal after the
Death of Wayne Lewis Stayback
Court of Appeals of Indiana | Opinion 46A03-1410-ES-378| July 8, 2015 Page 13 of 23
Upon the death of Wayne Lewis Stayback, the TRUSTEE shall
divide the property of the Trust (including the proceeds of any
insurance policy payable on the death of Wayne Lewis
Stayback), into as many equally [sic] shares as shall be required
to provide and make distribution as follows:
1. Joseph Stayback, for as long as he desires, shall be able [to]
operate his business on any real estate owned by the Trust and
retain all income and losses therefrom.
2. The rest, residue and remainder of my Trust, including real
estate subject to paragraph 1 herein above shall be divided
equally among Joseph Stayback, Jeffrey Stayback and Julie
Warnke, who survive me.
Joint Ex. 1 (some emphasis added).
[21] And the trial court found and concluded in relevant part as follows:
[5.] The language in sections 3.02 and 3.03 is confusing and
somewhat contradictory. Just as it is clear in section 3.02 that
the Trustor intended Joseph to have the ability to run the
paintball business for as long as he desired, section 3.03 (1)
clearly states that Joseph has the right to operate his business on
any real estate owned by the trust. Section 3.03 (2) indicates that
the rest, residue and remainder of the trust, including real estate
subject to 3.03 (1) be divided equally between Joseph, Jeffrey,
and Julie. The intention of the Trustor in both section 3.02 and
3.03 is to allow Joseph to use the real property now within the
Trust for the paintball business. Although there is some question
about the structure of the current business organization, the evidence
supports that there is an ongoing paintball business on the property. The
real property will continue to be held in the Trust until Joseph no longer
operates a paintball business. Joseph will be considered operating a
paintball business as long as he is a named owner of a corporate entity
Court of Appeals of Indiana | Opinion 46A03-1410-ES-378| July 8, 2015 Page 14 of 23
involved with the operation of a paintball business on the property.
Appellant’s App. at 8 (emphasis added).
[22] Jeffrey and Julie
do not contest that there was evidence that a separate corporation
was conducting a paintball business on the real estate. However,
the evidence does not support that Joseph was the one operating a
paintball business. At most, Joseph was operating a maintenance
company and Sherwood Paintball, Inc. was operating a paintball
business. Jeffrey and Julie submit that the trial court erred when
it failed to find that[,] once Joseph divested himself of ownership
of the operation of the paintball business, the terms of Wayne’s
Trust no longer existed, and the Trust should have been
terminated. The Trust’s termination should have resulted in the
property being divided equally amongst the three siblings.
Appellees’ Br. at 17-18 (emphasis original).
[23] Jeffrey and Julie are correct that, at the time the Trust was created, Joseph
owned a business known as Sherwood Forest Adventure Games, a business
entity that no longer exists. Again, Section 3.02 grants Joseph the right to
operate “his business known as Sherwood Forest Adventure Games, or other
business name as Joe Stayback desires, . . . [for] as long as he desires.” Joint
Ex. 1. The first question presented on cross-appeal is whether that provision is
ambiguous or unambiguous. If it is ambiguous, we must consider the extrinsic
evidence to determine Wayne’s intent. Roy A. Miller & Sons, Inc., 775 N.E.2d at
1173.
Court of Appeals of Indiana | Opinion 46A03-1410-ES-378| July 8, 2015 Page 15 of 23
[24] In Baker, our supreme court held that the term “personal property,” while
unambiguous by technical definition, was nonetheless ambiguous “in the
context of th[e] trust instrument” the court was charged with interpreting on
appeal. 843 N.E.2d at 534. And the court considered whether the ambiguity
was patent or latent.3 The court cited with approval Dougherty v. Rogers, 119
Ind. 254, 20 N.E. 779, 781 (1889), where the court stated as follows:
“An ambiguity which arises not upon the words of the will, deed,
or other instrument, as looked at in themselves, but upon those
words when applied to the object or to the subject which they
describe,” is a latent ambiguity. 1 Amer. & Eng. Cyclop. 530,
and note. Whenever, therefore, in applying a will to the objects
or subjects therein referred to, extrinsic facts appear which
produce or develop a latent ambiguity not apparent upon the face
of the will itself, since the ambiguity is disclosed by the
introduction of extrinsic facts, the court may inquire into any
other material extrinsic fact or circumstance to which the will
certainly refers, as well as to the relation occupied by the testator
to those facts, to the end that a correct interpretation of the
language actually employed by the testator in his will may be
arrived at.
Thus, here, in interpreting the challenged Trust provision, we must apply the
words, “business known as Sherwood Forest Adventure Games, or other
business name as Joe Stayback desires,” to the subject being described, namely,
the paintball business operating on the property at the time Wayne executed the
3
The court ultimately held that “the distinction between patent and latent ambiguities is not useful, and it is
proper to admit extrinsic evidence to resolve any ambiguity.” Baker, 843 N.E.2d at 535.
Court of Appeals of Indiana | Opinion 46A03-1410-ES-378| July 8, 2015 Page 16 of 23
Trust, to determine whether that term of the provision is currently satisfied.
Joint Ex. 1; Dougherty, 20 N.E. at 781.
[25] Our review of the evidence presented on this question reveals a latent ambiguity
in the Trust provision. That is, the evidence shows that, while the business
entity known as Sherwood Forest Adventure Games no longer exists, the
business currently known as Sherwood Paintball, Inc. is, by all appearances, the
same business that was formerly known as Sherwood Forest Adventure Games,
and Joseph is, for all intents and purposes, running that business. While it is
undisputed that Joseph does not own the business entity known as Sherwood
Paintball, Inc., Joseph’s role in running the daily operation of the business has
not changed since Wayne executed the Trust, and Joseph owns a business
entity responsible for maintenance of the paintball fields and equipment. The
undisputed evidence shows that Joseph runs the same aspects of the business
now that he did at the time that the Trust was created.
[26] By all accounts, the paintball operation on the property has not changed. The
only thing that has changed is that the paintball operation is run by two
business entities instead of one. Love owns the business entity known as
Sherwood Paintball, Inc., and Joseph owns a business entity responsible for
maintaining the paintball fields and equipment. In other words, what once was
a single business entity running the paintball operation is now two business
entities, one of which is owned by Joseph, but both of which are subject to
Joseph’s ultimate control. Joseph testified that if Love did not “listen to [his]
suggestions,” his “agreement” with Love could be terminated. Tr. at 82. Love
Court of Appeals of Indiana | Opinion 46A03-1410-ES-378| July 8, 2015 Page 17 of 23
is, thus, not an independent owner but is allowed to operate the business under
Joseph’s delegated authority. The evidence is clear that Love would not be
operating the business on the property without Joseph’s consent and
supervision.
[27] We hold that the Trust is ambiguous as to whether the business entity that was
known as Sherwood Forest Adventure Games must continue to exist under that
or another name in order to keep the property in trust for Joseph’s use, or
whether it is sufficient that Joseph is running a paintball business owned by a
separate business entity, but maintained by him and his new business entity.
And we resolve this ambiguity by considering the extrinsic evidence presented
at the hearing. Herrbach testified that Wayne “never really talked in terms of
how the business was broke [sic] down. He just said, Joe, he wanted to make
sure he operated—was able to operate that paintball business.” Tr. at 31. And
Herrbach testified generally regarding Wayne’s love of the paintball business
and his desire that it continue after his death:
A: [Wayne] wanted Joe to be able to continue to run the
paintball business on his property. . . . [Wayne] was really
involved in the paintball business. He was there every day. He
enjoyed talking to the people, enjoyed talking to the paintballers,
so I think he—it was his feeling that he wanted that to continue
even if he was gone without interference from the estate.
***
A: [Under the terms of the Trust,] Joe had a right, as long as he
wishes, to run the paintball business on the real estate. And then
Court of Appeals of Indiana | Opinion 46A03-1410-ES-378| July 8, 2015 Page 18 of 23
the remainder, the rest, residue and remainder was [to be]
distributed between the three children.
***
A: We talked in terms of making sure that the real estate was
available for Joe to continue to run his paintball business.
***
A: [It] was Wayne’s desire so that the paintball business could
continue.
***
A: [Wayne liked] the fact that the paintball business would
continue. He was really adamant about that.
Tr. at 17, 22, 27, 34, 39.
[28] The primary goal in construing a trust document is to ascertain and effectuate
the intent of the settlor, which may be determined from the language of the trust
instrument and matters surrounding the formation of the trust. In re Stuart
Cochran Irrevocable Trust, 901 N.E.2d 1128, 1140 (Ind. Ct. App. 2009), trans.
denied. Wayne intended for Joseph to continue operating his paintball business,
even after Wayne’s death, and that business, as Wayne knew it, is ongoing,
albeit under different ownership and a different name. Joseph continues to
direct many of the operations of the paintball business, even though the named
business entity is owned by someone else. And Joseph owns a maintenance
Court of Appeals of Indiana | Opinion 46A03-1410-ES-378| July 8, 2015 Page 19 of 23
company responsible for maintaining the paintball fields and equipment on the
property.
[29] While Joseph does not have an ownership interest in Sherwood Paintball, Inc.,
it is obvious that Joseph’s work is an integral part of making Sherwood
Paintball, Inc., a successful enterprise. Joseph testified that he is “still operating
the paintball operation in the same manner” that he was at the time Wayne
executed the Trust. Tr. at 69. In effect, it is Joseph’s paintball business that
continues on the property. In sum, Joseph has continued to operate the
paintball business on the real estate, which was Wayne’s purpose and intent in
creating the trust. We hold that the trial court did not err when it concluded
that Joseph is running a paintball business on the property within the meaning
of Sections 3.02 and 3.03 and may continue to do so under the terms of the
Trust. And the trial court did not err when it refused to terminate and dissolve
the Trust.
Motion to Terminate and Dissolve Trust
[30] In the alternative, Jeffrey and Julie contend that, even assuming Joseph is
permitted to continue running the paintball business on the property, the trial
court should have terminated and dissolved the Trust and distributed the assets,
including the property, equally among the siblings. Again, Jeffrey and Julie
assert that section 3.03 is not ambiguous and, therefore, the trial court erred
when it considered extrinsic evidence in interpreting it. In particular, Jeffrey
and Julie maintain that the language in section 3.03 “clearly intended . . . that
the Trust would be terminated and that Joseph would be entitled to use the land
Court of Appeals of Indiana | Opinion 46A03-1410-ES-378| July 8, 2015 Page 20 of 23
for his paintball business, as long as he had a paintball business.” Appellee’s
Br. at 14. Further, they state that they
do not contest that Wayne’s intent was to allow Joseph to
continue to use the land for his paintball business, however, that
intent was not to the exclusion of the termination of the Trust
and equal distribution of the land among the three siblings, as
clearly stated in Section 3.03 of the Trust.
Id.
[31] But we read the plain meaning of Section 3.03 differently. Section 3.03 of the
Trust provides that, upon Wayne’s death, Joseph shall divide the property of
the Trust as follows: first, “for as long as he desires,” Joseph is able to operate
his business on real estate owned by the Trust “and retain all income and losses
therefrom”; and second, the rest, residue and remainder of the Trust, including
the real estate subject to the first paragraph, shall be divided equally among
Joseph, Jeffrey, and Julie. Joint Exh. 1. While perhaps not artfully drafted,
Wayne’s intent is clear: Joseph is granted a life estate in the real property for as
long as he operates a paintball business on it. At the termination of Joseph’s
conditional life estate, the property shall be distributed equally among Joseph,
Jeffrey, and Julie.
[32] Even if we were to hold that Section 3.03 is ambiguous, the evidence supports
the trial court’s findings and conclusion that the property shall not be
distributed as long as Joseph is operating a paintball business. William
Court of Appeals of Indiana | Opinion 46A03-1410-ES-378| July 8, 2015 Page 21 of 23
Herrbach, the attorney who drafted the Trust, testified in relevant part as
follows:
Q: And if the real estate is distributed out a third, a third, a third,
would that still retain the protection of the spend-thrift clause?
A: In my opinion it would not.
Q: And why?
A: Well, because then it would become subject to their personal
debts, it being their own and be subject to that.
***
A: . . . the reality of it is if he takes it out of the Trust, he’s really
not going to abide by the intention of Wayne, which was to
secure that property so that that business could operate.
***
A: The intention is clear that [the three siblings] own their share
of the property, but the bottom line is if you take it out of [the]
Trust I think it’s not honoring Wayne’s wishes.
***
A: You know clearly Wayne wanted to make sure each of his
kids got the one-third share of his real estate that they were
entitled to, but he didn’t want that to really happen until Joe was
finished running his business.
Q: And so for the protection of not only Joe, but also for the
protection of the other two children, you leave the assets in the
Trust?
A: I believe so.
Court of Appeals of Indiana | Opinion 46A03-1410-ES-378| July 8, 2015 Page 22 of 23
Tr. at 35, 47, 49, 54.
[33] The evidence shows that the overriding purpose of the Trust was to permit
Joseph to continue the paintball business after Wayne’s death. The trial court’s
conclusion that the property shall be held in trust as long as Joseph operates a
paintball business thereon is not clearly erroneous.
Conclusion
[34] The trial court did not err when it denied Joseph’s motion for fees and
expenses. The trial court erred when it ordered that the income from the
billboard leases be distributed to Joseph, Jeffrey, and Julie. That income is
derived from the real estate held in trust and belongs to Joseph as long as he
fulfills the condition of his life estate. And the trial court did not err when it
denied Jeffrey and Julie’s motion to dissolve and terminate the trust. Wayne
loved the paintball business, and the purpose of the Trust was to make certain
that Joseph would be able to continue in the paintball business after Wayne’s
death.
[35] Affirmed in part and reversed in part.
Baker, J., and Friedlander, J., concur.
Court of Appeals of Indiana | Opinion 46A03-1410-ES-378| July 8, 2015 Page 23 of 23