Lake County Trust Co., as Trustee for Lake County Trust 5434 v. United Consumers Club, Inc. ( 2012 )

Pursuant to Ind.Appellate Rule 65(D),
this Memorandum Decision shall not be
regarded as precedent or cited before FILED
any court except for the purpose of Sep 11 2012, 9:29 am
establishing the defense of res judicata,
collateral estoppel, or the law of the case. CLERK
of the supreme court,
court of appeals and
tax court
ATTORNEYS FOR APPELLANT: ATTORNEYS FOR APPELLEES:
PETER J. RUSTHOVEN KARL L. MULVANEY
Barnes & Thornburg NANA QUAY-SMITH
Indianapolis, Indiana SHANNON D. LANDRETH
Bingham Greenebaum Doll LLP
HAROLD ABRAHAMSON Indianapolis, Indiana
JONATHAN E. HALM
Abrahamson, Reed & Bilse F. JOSEPH JASKOWIAK
Hammond, Indiana Hoeppner, Wagner & Evans, LLP
Merrillville, Indiana
BRIAN CUSTY
Merrillville, Indiana
IN THE
COURT OF APPEALS OF INDIANA
LAKE COUNTY TRUST CO., as Trustee for )
Lake County Trust 5434, )
)
Appellant-Plaintiff, )
)
vs. ) No. 45A03-1111-PL-527
)
UNITED CONSUMERS CLUB, INC., )
)
Appellee-Defendant. )
APPEAL FROM THE LAKE SUPERIOR COURT
The Honorable Michael N. Pagano, Special Judge
Cause No. 45D09-0911-PL-172
September 11, 2012
MEMORANDUM DECISION – NOT FOR PUBLICATION
MAY, Judge
Lake County Trust 5434 (“the Trust”) sued United Consumers Club (“United”) for
recovery of unpaid rent. The lawsuit was brought by the Trustee only; the trust beneficiaries
were not named as plaintiffs even though the trust document explicitly provided the Trust
could not collect or receive the rents from the trust property. As the Trust did not have
standing to sue United, we reverse.
FACTS AND PROCEDURAL HISTORY
The document creating the Trust provides in part:
It is further expressly understood and agreed that [the Trust] has no right or
power whatsoever to manage, control or operate said real estate in any way or
to any extent and is not entitled at any time to collect or receive for any
purpose, directly or indirectly, the rents, issues, profits or proceeds of said real
estate or any mortgage or any disposition thereof.
(App. at 857.)
In May of 2009, the Trust, in the name of the Trustee only and not the beneficiaries,
sued United for recovery of unpaid rent. In August 2009 the Trust amended its complaint to
allege United had not paid base rent, taxes, and operating expenses as required under the
lease agreement. United moved to dismiss, and its motion was denied. In December 2009,
United filed its amended answer and counterclaim in which it alleged, among other things,
that the Trust was not the real party in interest1 or was otherwise “not qualified to bring these
claims per the terms of the lease,” (id. at 962), and “lacks standing to sue for the relief sought
in the amended complaint.” (Id. at 963.)
1
In its counterclaim United sought to join as defendants the Trust beneficiaries, and the Trust objected.
2
The parties then filed cross-motions for summary judgment, and in September of 2011
the trial court granted summary judgment for the Trust on certain issues and for United on
one issue. In its summary judgment order, it concluded the Trust had standing to bring the
lawsuit. The trial court certified its order for interlocutory appeal, and we accepted
jurisdiction.
DISCUSSION AND DECISION
As the Trust did not have standing to sue United for back rent, its lawsuit should have
been dismissed. The main purpose of standing is to insure that the party before the court has
a substantive right to enforce the claim that is being made in the litigation. In re Custody of
G.J., 796 N.E.2d 756, 759 (Ind. Ct. App. 2003), trans. denied. A court has no jurisdiction
over a particular case unless a party with standing is participating in the case. Id. An
allegation that a party lacks standing is treated as a motion to dismiss under Rule 12(B)(6) of
the Indiana Rules of Trial Procedure. Id.Under Indiana law, a trustee’s primary duty is to “administer a trust according to its
terms.” Cohen v. Gainer Bank, N.A., 628 N.E.2d 1246, 1250 (Ind. Ct. App. 1994) (quoting
Ind. Code § 30-4-3-6), reh’g denied, trans. denied. This duty is limited by a number of other
statutory duties, but all such duties may be modified in the terms of the trust. Id.3
The terms of the Trust before us do not permit it to bring an action to recover rent.
The trust document2 is explicit that the Trust “is not entitled at any time to collect or receive
for any purpose, directly or indirectly, the rents, issues, profits or proceeds of said real
estate,” (App. at 857), and we agree with United that “[u]sing the words that the Trust had
‘no power to collect rents, also left the Trustee with no power to bring a lawsuit to collect
rent.” (Reply Br. of Appellee/Cross-Appellant at 5.)
We acknowledge the Trust’s argument and supporting authority to the effect a trust
generally has authority to bring a legal action. See, e.g., Ind. Code § 30-4-3-15 (“The trustee
may maintain in his representative capacity a civil action for any legal or equitable remedy
against a third person that he could maintain in his own right if he were the owner.”). And
see Ind. R. Trial P. 17(A)(1):
An executor, administrator, guardian, bailee, trustee of an express trust, a party
with whom or in whose name a contract has been made for the benefit of
another, or a party authorized by statute may sue in his own name without
joining with him the party for whose benefit the action is brought, but stating
his relationship and the capacity in which he sues.
2
The Trust asserts United did not designate the trust instrument as evidence to support its argument the Trust
lacked standing – rather, it says, “[United] cites the Trustee’s signature page from the agreement to argue its
point.” (Reply Br. of Appellant and Br. of Appellee at 12.) The Trust offers no argument or authority to
support its apparent position that a signature page is not part of a trust document or that a provision is not
binding just because it appears on the signature page, and we decline to so hold. We previously addressed the
significance of the content of signature pages:
The identification of the co-signers as Cloverleaf’s personal guarantors, the signature pages,
the notarization of those signatures and the initialing of the signature pages by their counsel
necessarily lead to the conclusion that the co-signers guaranteed payment under the lease and
agreed to be bound by its terms. Put another way, the co-signers have, through their own
words and signatures, admitted that they were personal guarantors.
Boonville Convalescent Ctr., Inc. v. Cloverleaf Healthcare Services, Inc., 790 N.E.2d 549, 557 (Ind. Ct. App.
2003) (emphasis added), on reh’g in part, 798 N.E.2d 248 (Ind. Ct. App. 2003), trans. denied.
4
(Emphasis added.) But that authority exists only if the terms of the trust permit:
Except as provided in the terms of the trust . . . a trustee has the power to . . .
prosecute or defend actions, claims, or proceedings for the protection of:
(A) trust property; and
(B) the trustee in the performance of the trustee’s duties.
Ind. Code § 30-4-3-3. The terms of the Trust before us do not permit it to sue for back rent.
The Trust next argues that “even if there were any issue as to the Trustee’s standing,”
(Reply Br. of Appellant and Br. of Cross-Appellee at 13), United was not entitled to
summary judgment because the “Trust beneficiaries have participated in this litigation, and
stand ready (if required) to ratify the Trustee’s actions and/or join as co-plaintiffs.” (Id. at
14.)
We decline the Trust’s invitation to hold dismissal for lack of standing is necessarily
improper just because a non-party who might have standing purportedly “stands ready” to
join the lawsuit. We note that during this litigation, United tried to join as defendants the
Trust beneficiaries. The Trust strenuously objected, filing a ten-page document captioned
“Plaintiff’s Objections to the Joinder of Non-Parties and Insertion of Unrelated Claims.”
(App. at 1962-72.) It relied on a provision of the trust document3 to the effect the lease did
not create personal liability on the part of the beneficiaries. That objection suggests the
beneficiaries do not, in fact, “stand ready . . . [to] join as co-plaintiffs,” (Reply Br. of
Appellant and Br. of Cross-Appellee at 14), and we cannot find the Trust has standing on that
3
The provision on which the Trust relied is found on the signature page of the trust document, which page the
Trust now appears to argue carries no legal weight.
5
ground.
As the Trust is not a party with “a substantive right to enforce the claim that is being
made in the litigation,” In re Custody of G.J., 796 N.E.2d at 759, its lawsuit should have been
dismissed. We accordingly reverse the trial court’s denial of United’s motion to dismiss.
Reversed.
KIRSCH, J., and NAJAM, J., concur.
6