In the Matter of the Revocable Living Trust Agreement of Joseph W. Dague and the Revocable Living Trust Agreement of Dorothy K. Dague v. Jean E. Galloway and Joseph E. Dague (mem. dec.) ( 2016 )

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D),
this Memorandum Decision shall not be
FILED
regarded as precedent or cited before any Dec 30 2016, 5:36 am
court except for the purpose of establishing CLERK
Indiana Supreme Court
the defense of res judicata, collateral Court of Appeals
and Tax Court
estoppel, or the law of the case.
ATTORNEY FOR APPELLANTS ATTORNEY FOR APPELLEES
John J. Schwarz, II Robert M. Hamlett
Schwarz Law Office, PC Frank & Kraft, A Professional
Hudson, Indiana Corporation
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
In the Matter of the Revocable December 30, 2016
Living Trust Agreement of Court of Appeals Case No.
Joseph W. Dague and the 25A05-1602-TR-240
Revocable Living Trust Appeal from the Fulton Circuit
Agreement of Dorothy K. Court
Dague, both dated January 11, The Honorable A. Christopher
1994, as amended April 1, 1999, Lee, Judge
and May 22, 2001. Trial Court Cause No.
25C01-1503-TR-22
Jeffrey N. Dague and Judith K.
Uhrich,
Appellants-Respondents,
v.
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Jean E. Galloway and Joseph E.
Dague,
Appellees-Petitioners
Crone, Judge.
Case Summary
[1] Jeffrey N. Dague, Judith K. Uhrich, James L. Dague, Jean E. Galloway, and
Joseph E. Dague (“Joseph E.”), are siblings and remainder beneficiaries of their
parents’ trusts. The trusts named Jeffrey and Judith as trustees (“Trustees”) and
directed that after both parents died, the family farm be leased to James to farm
for a period of five years, after which it could be sold and the proceeds equally
distributed to the beneficiaries. The siblings disagreed as to when the five-year
period expired. A little over four years after their mother died, Jean and Joseph
E. (“Petitioners”) filed a petition to docket the trusts. When an agreement as to
the expiration of the five-year period could not be reached, Petitioners filed a
motion for order of sale. The trial court granted the motion and ordered
Trustees to retain a specific company to sell the farm at a public auction (“the
Order”).
[2] Trustees appeal the Order, contending that by ordering them to sell the farm in
a specific manner, the trial court infringed upon the broad discretion granted to
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them in the trusts. We agree, and therefore we reverse and remand for further
proceedings.
Facts and Procedural History 1
[3] On January 11, 1994, Joseph W. Dague and Dorothy K. Dague each executed
a revocable living trust agreement, amended on April 1, 1999, and May 22,
2001 2 (collectively referred to as “the Trust Agreements”), which placed one-
half of their 503.26-acre farm (“the Dague Farm”) into each trust. Joseph died
on June 26, 2009, and Dorothy died on February 13, 2011. Pursuant to the
Trust Agreements, upon the death of both Joseph and Dorothy, Jeffrey and
Judith became Trustees of both trusts. The Trust Agreements granted Trustees
the authority “to exercise all the powers in the management of the Trust Estate
which any individual could exercise in the management of similar property
owed in its own rights.” Appellants’ App. at 26, 55.
1
Both parties’ briefs fail to comply with the Indiana Appellate Rules in several respects. Trustees’ brief does
not provide any citations to the record in its statement of the case, which is contrary to Appellate Rule
46(A)(5). Also, Trustees’ brief fails to set forth the statement of the facts in narrative form, which is contrary
to Appellate Rule 46(A)(6). Petitioners’ brief contains subjective argument in its statement of the case and its
statement of the facts, which is contrary to Appellate Rule 46(A)(6) and -(7). See also New v. Pers.
Representative of Estate of New, 938 N.E.2d 758, 765 (Ind. Ct. App. 2010) (statement of facts section of
appellant’s brief shall neither omit relevant facts nor contain subjective argument), trans. denied (2011). In
addition, Petitioners’ brief fails to support numerous factual assertions with citations to the record and
includes factual assertions that are irrelevant to the issues presented and have not been subject to an
evidentiary determination. Trustees request in their reply brief that we strike or ignore Petitioners’
unsupported, irrelevant factual assertions, and they provide a list of thirteen of these. Appellants’ Reply Br.
at 5-6. We will ignore the factual assertions that are irrelevant and unsubstantiated. However, statements
number 7 and 8 listed on pages five and six of Trustees’ reply brief consist of argument rather than factual
assertions and are therefore appropriate for our consideration. Finally, both parties’ appendices fail to
include the date of each item in the table of contents, which is contrary to Appellate Rule 50(C), and
Petitioners’ appendix includes a copy of the transcript, which is contrary to Appellate Rule 50(F).
2
Dorothy’s second amendment was executed on July 9, 2001.
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[4] Joseph’s and Dorothy’s second amendments to the Trust Agreements (“the
Second Amendments”) directed Trustees to administer the Dague Farm as
follows:
The [Dague Farm] shall be retained in trust for the benefit of
Settlor’s children for a period of five (5) years. During that time
period, the [Dague Farm] shall be crop-leased to Settlor’s sons
[sic] James L. Dague and/or his son Andy Dague on the basis of
the existing lease rates for similar land in the county for each
growing season with the net lease payments paid out in equal
shares to Settlor’s children per stirpes. After said five (5) year
period, the [Dague Farm] may be sold and the net proceeds
divided between and among Settlor’s children in equal shares,
share and share alike, per stirpes unless all beneficiaries of the
sale agree to continue the leasing of the farm on a year-to-year
basis.
Id. at 43-44, 72-73. The Second Amendments further provided that the “rest
residue and remainder of the trust estate shall be distributed to Settlor’s
children,” Jeffrey, Judith, James, Jean, and Joseph E. Id. at 44, 73.
[5] From 2011 through 2015, James leased the Dague Farm each crop year. In
May 2015, Petitioners filed a petition to docket trusts and a petition for
accounting, removal of Trustees, and appointment of successor trustees. The
trial court entered an order authorizing the docketing of trusts and an order on
petition to require accounting. Trustees filed a statement of accounts pursuant
to Indiana Code Section 30-4-5-13 (governing the content of statements of
accounts filed with the court), and a supplemental accounting.
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[6] In August 2015, Petitioners filed a petition for instructions and an objection to
accounting. In their petition for instructions, Petitioners asserted that Trustees
had failed to provide them with a copy of Joseph’s Second Amendment, and
they argued that if Joseph had not executed the Second Amendment, then
Trustees should have sold Joseph’s half of the Dague Farm immediately
following Dorothy’s death. Petitioners also argued that if Joseph had executed
the Second Amendment, then the five-year period provided for James to lease
the Dague Farm would expire on February 13, 2016. Petitioners asked the trial
court to enter an order instructing Trustees to “immediately place the [Dague
Farm] for sale in a commercially reasonable manner” with the closing to take
place after January 1, 2016, and before March 1, 2016. Id. at 80.
[7] In September 2015, Petitioners filed a supplement to their petition for
instructions, asserting that Trustees’ counsel had informed them that “no
[S]econd [A]mendment to the Joseph’s Trust ha[d] been found.” Id. at 82.
Petitioners again asserted that in the absence of Joseph’s Second Amendment,
Trustees were required to distribute the assets of Joseph’s trust upon Dorothy’s
death.
[8] Trustees filed a motion to dismiss Petitioners’ petition for instructions and
supplement thereto, arguing that Petitioners lacked statutory authority to
petition for instructions, that Trustees believed that the five-year retention
period for the lease of the Dague Farm did not expire until the end of 2016, and
that Petitioners’ request for instructions as to selling the Dague Farm was
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premature and infringed upon Trustees’ discretion regarding the management
and disposition of trust property.
[9] In September 2015, the trial court heard argument on Petitioners’ petition for
instructions and Trustees’ motion to dismiss. Apparently, by the time of the
hearing, Trustees had produced Joseph’s executed Second Amendment, so
Petitioners abandoned their argument that Trustees were required to sell
Joseph’s half of the Dague Farm when Dorothy died. However, Trustees and
Petitioners continued to dispute when the five-year retention period for the
lease of the Dague Farm to James would expire. Petitioners argued that it
would expire February 13, 2016, exactly five years after Dorothy’s death.
Trustees argued that because the Dague Farm was already under lease when
Dorothy died, the five-year retention period did not begin to run until 2012 and
would not expire until the end of 2016. In addition, Trustees continued to
argue that Petitioners had no statutory authority to ask for instructions
pertaining to the sale of the Dague Farm and that any such instructions were
premature and infringed upon Trustees’ discretion as to how the farm would be
sold. At the conclusion of the hearing, the trial court took the matter under
advisement and ordered the parties to participate in mediation. In November
2015, the parties participated in mediation but did not reach a settlement.
[10] On December 2, 2015, Petitioners filed a motion for order of sale, asserting that
mediation was unsuccessful and that the parties continued to dispute when the
five-year retention period terminated; that under the plain terms of the Trust
Agreements, the five-year retention period would end on February 13, 2016;
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and that Trustees were obligated to sell the Dague Farm after the retention
period terminated. Petitioners stated that Halderman Real Estate Services, Inc.
(“Halderman”), and Schrader Real Estate and Auction Co., Inc. (“Schrader”),
were capable of auctioning the Dague Farm and requested that the trial court
instruct Trustees to retain Halderman, or Schrader if Halderman was
unavailable, to auction the Dague Farm on or before February 29, 2016, with
the net proceeds to be divided in equal shares among the beneficiaries.
Appellees’ App. at 49-52.
[11] On December 14, 2015, the trial court entered its Order granting Petitioners’
motion for order of sale, finding that the five-year retention period ends on
February 13, 2016, and that the Petitioners’ request that preparations for the
sale begin before the end of that period is a reasonable request, and concurring
in Petitioners’ request that Halderman or Schrader be contacted by Trustees.
The Order then provides, “Trustees are ordered to immediately contact
[Halderman] to determine its availability to conduct a public auction of the
[Dague] Farm, including the house, barns and other accessory structures, on or
before February 29, 2016, and if it is available, to engage Halderman to conduct
the auction.” Appellants’ App. at 14. The Order also provides that if
Halderman was not available to sell the farm at public auction, Trustees were to
contact Schrader.
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[12] On December 21, 2015, Trustees filed a response and objection to Petitioners’
motion for order of sale. On December 31, 2015, Trustees filed a motion to
correct error. 3 The trial court denied the motion to correct error without a
hearing. On February 1, 2016, Trustees filed a notice of appeal and a motion
for stay. On April 21, 2016, the trial court issued an order granting Trustees’
motion for stay and ordered Trustees to continue to manage the Dague Farm
pending further order.
Discussion and Decision
[13] Trustees first argue that the trial court erred by considering and granting
Petitioners’ petition for instructions and failing to grant Trustees’ motion to
dismiss. The petition for instructions and supplement thereto focused on the
absence of Joseph’s Second Amendment and the expiration of the five-year
retention period. The existence of Joseph’s Second Amendment is no longer an
issue, and Trustees do not challenge the portion of the Order that finds that the
five-year retention period expired on February 13, 2016. Therefore, we need
not address Trustees’ argument regarding Petitioners’ petition for instructions
and turn to the remaining issue raised by Trustees.
[14] Trustees contend that the trial court improperly infringed upon the discretion
granted to them under the Trust Agreements by specifically ordering them to
3
Neither Trustees’ response and objection to Petitioners’ motion for order of sale nor their motion to correct
error are included in the record before us.
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list the Dague Farm with Halderman to be sold at public auction. We agree.
In discussing this issue, we begin by noting that
[s]everal relevant principles guide trustees in the administration
of a trust unless the language of the trust instrument provides
otherwise. In particular, the trustee must administer the trust
according to its terms. Ind. Code § 30-4-3-6(b). Moreover, the
trustee must preserve the trust property and make it productive
for both income and remainder beneficiaries. Finally, the trustee
must administer the trust in a manner that is consistent with the
Prudent Investor Act, Indiana Code Sections 30-4-3.5-1 through -
13.
When we evaluate the actions of a trustee and the trustee has
been vested with discretion, we will not disturb the trustee’s
determinations unless there has been an abuse of that discretion.
Thus, where a trustee determines that it is necessary and proper
to use trust assets for a certain purpose, we will not interfere unless
the trustee acted in bad faith or in some way abused or unreasonably
exercised his discretion.
In construing a trust instrument, the primary objective is to
ascertain and carry out the settlor’s intent. If the settlor’s intent is
clear from the plain language of the instrument and is not against
public policy, we must give effect to that intent. Indeed, if the
rules of law and the terms of the trust conflict, the terms of the
trust shall control “unless the rules of law clearly prohibit or
restrict the article which the terms of the trust purport to
authorize.” Ind. Code § 30-4-1-3.
In re Trust Created Under Last Will & Testament of Stonecipher, 849 N.E.2d 1191,
1194-95 (Ind. Ct. App. 2006) (emphasis added) (citations omitted).
[15] Here, the Trust Agreements grant Trustees broad powers:
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By way of illustration and not of limitation and in addition to
any inherent, implied or statutory powers granted to trustees
generally, the Trustee[s are] specifically authorized and
empowered with respect to any property, real or personal, at any
time held under any provision of this Trust: to allot, allocate
between principal and income, assign, borrow, buy, care for,
collect, compromise claims, contract with respect to, continue
any business of the Settlor, convey, convert, deal with, dispose
of, enter into, exchange, hold, improve, incorporate any business
of the Settlor, invest, lease, manage, mortgage, grant and exercise
options with respect to, take possession of, pledge, receive,
release, repair, sell, sue for, to make distributions of divisions in
cash or in kind or partly in each without regard to the income tax
basis of such asset, and in general to exercise all the powers in the
management of the Trust Estate which any individual could exercise in
the management of similar property owned in its own right, upon such
terms and conditions as to the Trustee[s] may seem best, and to
execute and deliver any and all instruments and to do all acts
which the Trustee[s] may deem proper or necessary to carry out
the purpose of this Trust, without being limited in any way by the
specific grants of power made, and without necessity of a court
order.
Appellants’ App. at 25-26, 54-55 (emphasis added). Therefore, the Trust
Agreements provide Trustees with complete discretion in determining the
manner in which the Dague Farm should be sold.
[16] We reiterate that “[t]he court may not interfere with [the] discretionary power
of the trustee in the absence of a showing of fraud, bad faith or an arbitrary
abuse of such discretion.” State ex rel. Anderson-Madison Hosp. Dev. Corp. v.
Superior Court of Madison Cty., 245 Ind. 371, 378, 199 N.E.2d 88, 91 (1964); see
also Bray v. Old Nat’l Bank in Evansville, 113 Ind. App. 506, 517, 48 N.E.2d 846,
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850 (1943) (“[W]here a trustee is granted discretionary powers the court will not
substitute its discretion for that of the trustee in the absence of a showing of
fraud or abuse of discretion.”); Husted v. Sweeney, 113 Ind. App. 418, 427, 48
N.E.2d 1004, 1008 (1943) (“The courts will not exercise the trustee’s discretion
for him.”) (citing 3 BOGERT ON TRUSTS & TRUSTEES § 559 at 1787); Robison v.
Elston Bank & Trust Co., 113 Ind. App. 633, 650-51, 48 N.E.2d 181, 187 (1943)
(“[W]here a trustee has been vested with discretion he will not be disturbed in
the reasonable exercise thereof, but where there is a failure to exercise such
discretion in a reasonable manner the courts will intervene.”) (citing I
RESTATEMENT OF TRUSTS § 187). Here, there is no evidence that Trustees
abused their discretion or acted in bad faith or unreasonably in managing the
trusts that would justify the trial court’s intervention. When the trial court
issued the Order, the deadline for selling the Dague Farm was two months in
the future; the Trustees cannot be considered to have acted unreasonably by not
doing something that they did not yet have a legal obligation to do. We
conclude that the Order is contrary to the will and desire of Joseph and
Dorothy, who chose Jeffrey and Judith to be Trustees and granted them
complete discretion to manage and dispose of the Dague Farm. Accordingly,
we reverse the Order directing Trustees to retain Halderman or Schrader to sell
the Dague Farm at public auction and remand for further proceedings.
[17] Reversed and remanded.
Kirsch, J., and May, J., concur.
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