In Re the Estate of James E. Hurwich, Scott D. Hurwich v. Stacey R. MacDonald , 103 N.E.3d 1135 ( 2018 )

FILED
May 30 2018, 8:50 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEYS FOR APPELLANT ATTORNEY FOR APPELLEE
James M. Lewis Timothy J. Maher
Michael J. Hays Barnes & Thornburg LLP
Tuesley Hall Konopa LLP South Bend, Indiana
South Bend, Indiana
IN THE
COURT OF APPEALS OF INDIANA
In Re the Estate of James E. May 30, 2018
Hurwich, Court of Appeals Case No.
71A04-1705-EU-990
Scott D. Hurwich, Appeal from the St. Joseph Probate
Appellant-Plaintiff, Court
The Honorable Jeffrey L. Sanford,
v. Special Judge
Probate Court Cause No.
Stacey R. MacDonald, 71J01-0412-EU-56
Appellee-Defendant
Baker, Judge.
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[1] James Hurwich was the father of Scott Hurwich (“Hurwich”) and Stacey
MacDonald. The Estate of James Hurwich (“the Estate”) was opened in 2004
following his death. MacDonald administered the Estate until it closed in 2007.
In 2013, Hurwich petitioned to reopen the Estate, which the probate court
granted. In 2014, Hurwich filed a complaint against MacDonald, alleging that
she had mismanaged the Estate’s assets and breached her fiduciary duties.
MacDonald filed a motion to dismiss Hurwich’s complaint, which the probate
court granted. Hurwich then filed a motion for leave to amend his complaint,
which the probate court denied. Meanwhile, a successor personal
representative administered the Estate, issued a final report, and requested
closure of the Estate. The probate court then closed the Estate.
[2] Hurwich now appeals the probate court’s denial of his motion for leave to
amend his complaint and the procedure the probate court followed when
closing the Estate. Finding no reversible error regarding Hurwich’s motion but
that the probate court failed to follow statutory procedure when closing the
Estate, we affirm in part, reverse in part, and remand.
Facts
[3] The Estate was opened in 2004. MacDonald was appointed administrator of
the Estate, and she administered it unsupervised until it was closed in 2007.
Apparently, MacDonald failed to distribute approximately 600 items and assets
belonging to her father before the Estate was closed. On March 6, 2013,
Hurwich petitioned to reopen the Estate; the probate court granted Hurwich’s
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petition. On June 18, 2013, the probate court appointed Paul Cholis as
successor personal representative for the Estate. On October 3, 2014, Hurwich
filed a complaint against MacDonald, under the Estate cause number EU-56,
alleging that she had mismanaged the Estate’s assets and breached her fiduciary
duties. On November 14, 2014, MacDonald filed a motion to dismiss
Hurwich’s complaint under Indiana Trial Rule 12(B)(6), alleging that it had
been untimely filed after the applicable statute of limitations had run. On June
12, 2015, the probate court granted MacDonald’s motion and dismissed
Hurwich’s complaint with prejudice.
[4] On June 22, 2015, Hurwich filed a motion to reconsider. On July 27, 2015, a
hearing on the motion to reconsider took place, and the probate court took the
issue under advisement. Then, on February 9, 2016, while the motion to
reconsider was still pending, Hurwich filed a motion for leave to amend his
complaint. In his proposed amended complaint, he alleged that MacDonald
had committed fraud when, in closing the Estate, she represented that she had
fully administered the Estate and properly distributed all assets; he also alleged
that she had taken personal property from the Estate for her own use.
[5] On May 6, 2016, Cholis filed a petition for instructions for “recovery of assets
formerly owned by the decedent or in his possession at the time of his death.”
Appellant’s App. Vol. II p. 42. In this petition, Cholis:
• Stated that MacDonald testified at her deposition that she had received
gifts, including paintings, necklaces, diamond rings, and liquor bottles,
from her father within five years of his death.
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• Stated that MacDonald “testified that she, as the former Personal
Representative of the estate, did distribute to herself certain items of
tangible personal property which [Cholis] believe[d] constituted partial
distributions to her and which should be taken into account by charging
her with the value of such items so distributed upon the final distribution
of the remaining tangible personal property; . . .” Id. at 43.
• Stated that there were “numerous items of tangible personal property”
located at the decedent’s former residence that Cholis “believe[d] can and
should be distributed among the three residuary beneficiaries of the
estate” through an in-kind selection process and a public auction. Id.
• Requested the probate court to direct him to not attempt to recover items
of tangible personal property that MacDonald identified as gifts that she
received from her father before his death. Cholis cited to time limits in
the probate code for proceedings against personal representatives and to
case law in which a petition to re-open an estate was time-barred.
[6] On June 24, 2016, Hurwich filed a response to Cholis’s petition in which
Hurwich stated that the parties wanted instruction from the probate court about
how to determine whether the items that MacDonald testified were gifts were
actually gifts from their father or whether they were self-distributed items.
Hurwich requested, among other things, that Cholis identify and catalog each
of the individual items in question. Hurwich also argued that the issue was not
time-barred.
[7] A hearing took place on July 27, 2016. On July 29, 2016, the probate court
denied Hurwich’s motion for leave to amend his complaint, finding that
Hurwich was not entitled to amend a complaint that had been properly
dismissed pursuant to the statute of limitations for relief against fraud. The
probate court also found that Hurwich’s complaint was not a valid cause of
action because Hurwich filed it as part of the estate administration, rather than
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a separate cause of action, and therefore failed to pay a filing fee or have a
summons issued. The probate court ordered for Hurwich and another
beneficiary to have access to the decedent’s home for an in-kind selection
process of the 600 items located there and for all assets not selected to be sold at
a public auction. Lastly, the probate court ordered that Hurwich’s claim
against MacDonald about gifts received before their father’s death was time-
barred under the statute of limitations.
[8] Throughout the fall of 2016, Cholis distributed the Estate’s assets as ordered by
the probate court. On March 10, 2017, Cholis filed a Supplemental Report of
Distribution (“the Report”) in which he summarized the distribution of the
Estate’s assets; listed the value of the assets that Hurwich, MacDonald, and
another beneficiary received; requested that he be discharged as personal
representative; and requested that the court order the Estate closed. That same
day, the probate court approved the report and entered an order closing the
Estate. On March 20, 2017, Cholis served a copy of the Report and the probate
court’s signed order to Hurwich and other interested parties. On March 30,
2017, Hurwich filed a motion to correct error, asking the probate court to
vacate its order approving the Report because there was neither service nor an
opportunity to object to the Report. On April 10, 2017, the probate court
denied his motion. Hurwich now appeals.
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Discussion and Decision
I. Motion for Leave to Amend Complaint
[9] Hurwich first argues that the probate court erred by denying his motion for
leave to amend his complaint because he has a “right” to re-plead his claim
pursuant to Trial Rule 12(B). Appellant’s Br. p. 11. The probate court denied
Hurwich’s motion for leave to amend his complaint, finding that Hurwich’s
claim of fraud in his proposed complaint was barred by the six-year statute of
limitations for relief against fraud and that his complaint was not a valid cause
of action. Hurwich argues that he has a right to amend under Indiana Trial
Rule 12(B), that the probate court failed to consider his proposed allegation of
fraudulent concealment that could toll the statute of limitations, and that the
probate court misconstrued the nature of his complaint. MacDonald argues
that Hurwich’s action was time-barred under the probate code and that
Hurwich did not file a valid action. Although we reach the same outcome as
the probate court, we disagree with the probate court’s and the parties’ analysis.
[10] Indiana Trial Rule 12(B)(6) allows a party to move to dismiss a pleading for
failure to state a claim upon which relief can be granted. Trial Rule 12(B) also
provides that when a court dismisses a pleading under Rule 12(B)(6), “the
pleading may be amended once as of right pursuant to Rule 15(A) within ten
[10] days after service of notice of the court’s order sustaining the motion and
thereafter with permission of the court pursuant to such rule.” Under Trial
Rule 15(A), “[a] party may amend his pleading once as a matter of course at
any time before a responsive pleading is served . . . . Otherwise a party may
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amend his pleading only by leave of court or by written consent of the adverse
party; and leave shall be given when justice so requires.” To facilitate decisions
on the merits, “the Indiana Trial Rules generally implement a policy of liberal
amendment of pleadings, absent prejudice to an opponent.” Kimberlin v.
DeLong, 637 N.E.2d 121, 128 (Ind. 1994). The probate court has broad
discretion in granting or denying amendments to the pleadings, and we will
reverse only if the probate court’s decision is clearly against the logic and effect
of the facts and circumstances before it or the reasonable deductions to be
drawn therefrom. Kuehl v. Hoyle, 746 N.E.2d 104, 107 (Ind. Ct. App. 2001).
[11] According to Hurwich, Trial Rule 12(B) gives him the right to amend his
complaint. However, Hurwich ignores the part of the rule that limits when a
pleading may be amended as of right—it must be done within ten days after
service of notice of the court’s order granting the motion to dismiss. Hurwich
filed his motion for leave to amend his complaint on February 9, 2016, nearly
eight months after the probate court granted MacDonald’s motion to dismiss.
Accordingly, when Hurwich filed his motion for leave to amend his complaint,
he had no automatic right to do so. And although a court may, under Rules
12(B) and 15(A), allow a party to amend a pleading after those ten days have
passed, the court is required to do so only “when justice so requires.” T.R.
15(A). Hurwich did not argue that justice required an amendment, and we
decline to make the argument for him. The probate court did not err by
denying his motion for leave to amend his complaint.
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[12] Hurwich also challenges the probate court’s decision to dismiss his motion with
prejudice, arguing that a Trial Rule 12(B)(6) dismissal should be without
prejudice. Hurwich is correct that a dismissal under this rule “is without
prejudice, since the complaining party remains able to file an amended
complaint within the parameters of the rule.” In re Scott David Hurwich 1986
Irrevocable Tr., 59 N.E.3d 977, 984 (Ind. Ct. App. 2016) (citations and internal
quotation marks omitted). Thus, the probate court erred by dismissing his
complaint with prejudice. But a dismissal with prejudice is a final judgment, id.
at 980, and the time to appeal a final judgment is within thirty days after its
entry is noted in the Chronological Case Summary. Ind. Appellate Rule
9(A)(1). The probate court dismissed Hurwich’s complaint with prejudice on
June 12, 2015. Hurwich did not appeal that decision until he filed his notice of
appeal on May 9, 2017, nearly two years after the dismissal of his complaint.
His challenge to the probate court’s decision is untimely and unavailing.
II. The Report
[13] Hurwich next argues that the probate court erred by denying him his statutory
right to object to the Report. Our primary goal in statutory construction is to
ascertain and give effect to the intent of the legislature. Meyer v. Beta Tau House
Corp., 31 N.E.3d 501, 513 (Ind. Ct. App. 2015). We apply a de novo standard
of review to questions of statutory interpretation. Id.[14] Indiana’s Probate Code provides that when an estate is ready to be closed, the
personal representative must “render a final account and at the same time
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petition the court to decree the final distribution of the estate.” Ind. Code § 29-
1-17-2(a) (2007). “Upon the filing of any account in a decedent’s estate, hearing
and notice thereof shall be had as set forth in this section.” I.C. § 29-1-16-6(a)
(emphases added). The statute explains that
If the account is for final settlement the court or clerk shall set a
date by which all objections to such final account and petition for
distribution must be filed in writing and the clerk shall give notice
to all persons entitled to share in the final distribution of said
estate that a final report has been filed and will be acted upon by
the court on the date set unless written objections are presented
to the court on or before that date. The personal representative
shall at the time said account is filed furnish to the clerk the
names and addresses of all persons entitled to share in the
distribution of the residue of said estate, whose names and
addresses are known to the personal representative or may by
reasonable diligence be ascertained as set forth in the personal
representative's petition for distribution, together with sufficient
copies of said notice prepared for mailing. The clerk shall send a
copy of said notice by ordinary mail to each of said parties at
least fourteen (14) days prior to such date. . . .
I.C. § 29-1-16-6(b) (emphases added).
[15] Hurwich argues that the probate court erred by denying him an opportunity to
object to the Report. The probate code explicitly mandates notice following the
filing of any account. It requires that, following the filing of an account for final
settlement, the personal representative give to the clerk the names and addresses
of those entitled to share in the distribution of the estate and copies of notice
prepared for mailing. It also requires that, when an account for final settlement
is filed, the court or the clerk set a timeframe for objections and give notice to
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those entitled to share in the distribution of the estate that a final report has
been filed and that the court will act upon it on a certain date unless the court
receives written objections within the stated timeframe. Here, it is undisputed
that Hurwich is entitled to share in the distribution of the Estate, that Cholis
knew Hurwich’s name to furnish to the clerk for notice, and that Cholis did not
fulfill his duties to ensure that notice was given regarding the Report. It is also
undisputed that neither the probate court nor the clerk set a timeframe for
objections or gave notice about the Report or the timeframe for objections. In
other words, the probate court failed to follow proper statutory procedure when
closing the Estate.
[16] MacDonald suggests that this error was harmless and not prejudicial because
Hurwich had an opportunity to be heard before and during the July 27, 2016,
hearing. It is true that Hurwich filed a written objection to Cholis’s petition for
instructions before that hearing. But whether Hurwich objected to those
instructions has no bearing on and is irrelevant to whether he had an
opportunity to object to the Report, which was filed more than seven months
later, on March 10, 2017. The probate code explicitly requires notice and an
opportunity for objections to accounts for final settlements. Among other
things, the Report leaves questions about how the assets that MacDonald
distributed to herself were administered.1 Hurwich had a statutory right to
1
Cholis filed a petition for instructions on May 6, 2016. In this petition, he stated that MacDonald “testified
that she, as the former Personal Representative of the estate, did distribute to herself certain items of tangible
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receive notice of the filing of the Report and an opportunity to object to it, and
he was denied this right. As it is apparent that he had reason to object, we find
that he was harmed by the probate court’s failure to follow the procedure
described in the probate code.
[17] We reverse the closure of the Estate and remand for further proceedings giving
Hurwich the opportunity to object to the Report.
[18] The judgment of the probate court is affirmed in part, reversed in part, and
remanded for further proceedings.
Kirsch, J., and Bradford, J., concur.
personal property which the [successor personal representative] believes constituted partial distributions to
her and which should be taken into account by charging her with the value of such items so distributed upon
the final distribution of the remaining tangible personal property; . . .” Appellant’s App. Vol. II p. 43. In
other words, Cholis concluded that MacDonald had improperly distributed certain assets from the Estate and
intended to take that distribution into account during the administration of the Estate. However, it is unclear
from the Report whether MacDonald’s partial distributions to herself were, in fact, accounted for.
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