Reeda Short and The Short Irrevocable Trust, Ronald Short, Trustee v. Sandra K. Johnson and K. Diane Pennington (mem. dec.) ( 2020 )

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D), FILED
this Memorandum Decision shall not be
Mar 20 2020, 9:51 am
regarded as precedent or cited before any
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
Jeffrey O. Meunier John D. Keiffner, III
Carmel, Indiana Brown, DePrez & Johnson, P.A.
Shelbyville, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Reeda Short and The Short March 20, 2020
Irrevocable Trust, Ronald Short, Court of Appeals Case No.
Trustee, 19A-PL-1948
Appellants-Plaintiffs, Appeal from the Shelby Circuit
Court
v. The Honorable Terry K. Snow,
Special Judge
Sandra K. Johnson and K. Diane Trial Court Cause No.
Pennington, 73C01-1812-PL-50
Appellees-Defendants
Crone, Judge.
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Case Summary
[1] Reeda Short (“Reeda”) and the Short Irrevocable Trust, Ronald Short, Trustee
(“the Trust”) (collectively “the Shorts”), appeal the trial court’s dismissal of
their action against Sandra K. Johnson (“Sandra”) and K. Diane Pennington
(“Diane”) (collectively “Daughters”) for specific performance of a land sale
contract between the Trust and their now-deceased mother, Ruby M. Boring
(“Ruby”), and for damages related to Daughters’ actions as attorneys-in-fact
concerning Ruby’s bank accounts. We affirm.
Facts and Procedural History
[2] On November 9, 2017, ninety-eight-year-old Ruby executed a power of attorney
(“POA-1”) in favor of her friend Reeda, who assisted her with personal,
financial, and healthcare matters. Around that time, Ruby designated
survivorship beneficiaries on her accounts at Chase Bank (“Chase accounts”) as
Reeda (forty percent) and Daughters (thirty percent each). The Chase accounts
had an approximate total value of $430,000. On January 23, 2018, Ruby
executed a purchase agreement to sell her home to the Trust for $20,000.
Reeda signed the purchase agreement on behalf of the Trust. 1 Per the contract,
the Trust was required to pay $500 as earnest money. The contract called for a
closing in February 2018, but the closing never occurred.
1
It is unclear whether Reeda is, in fact, a co-trustee with Ronald. However, we need not resolve that issue.
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[3] At some point in February 2018, Ruby was admitted to a senior living facility.
On February 21, 2018, Ruby executed a power of attorney (“POA-2”) in favor
of Daughters. POA-2, drafted by Ruby’s grandson Curtis Johnson
(“Grandson”), revoked POA-1. At some point shortly thereafter, Daughters,
acting as Ruby’s attorneys-in-fact, removed Reeda as a beneficiary in the Chase
accounts. In mid-April 2018, Sandra, acting as attorney-in-fact for Ruby,
quitclaimed Ruby’s home to Diane for no consideration, with Ruby retaining a
life estate in the property. On April 29, 2018, Ruby died. On May 1, 2018, an
affidavit of survivorship was recorded in the county recorder’s office
transferring to Diane fee simple title to Ruby’s home.
[4] On May 5, 2018, Reeda filed an action (“Cause 20”) against Daughters, Chase
Bank, and Grandson, seeking an emergency temporary restraining order
(“TRO”) and seeking to set aside POA-2. In Cause 20, Reeda alleged that
Daughters and Grandson coerced Ruby to change her beneficiary designations
to exclude her or simply made the changes as attorneys-in-fact under POA-2.
She also alleged that Ruby lacked capacity to make any changes to her estate
plan and that Daughters violated their fiduciary duty and acted for their own
benefit. Appellants’ App. Vol. 2 at 45-46. Reeda asked for a TRO to prevent
any loss or misuse of funds from the Chase accounts and to prevent Chase Bank
from making any distributions. On June 4, 2018, the trial court conducted a
hearing to resolve the issues of fact and law in Cause 20. The court issued an
order denying Reeda’s petition for a TRO, finding POA-2 to be valid, and
dismissing Cause 20.
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[5] On December 13, 2018, the Shorts filed the current action against Daughters,
seeking specific performance of the January 2018 contract between the Trust
and Ruby for the purchase of Ruby’s home (Count I) and seeking monetary
damages based on their allegations that Daughters breached fiduciary duties to
Ruby and to Reeda concerning the Chase accounts (Count II) and treble
damages for conversion related to the Chase accounts (Count III). Daughters
filed a motion to dismiss under Indiana Trial Rule 12(B)(6) for failure to state a
claim. The trial court conducted a hearing and issued an order dismissing all of
the Shorts’ claims. The Shorts now appeal. Additional facts will be provided as
necessary.
Discussion and Decision
Section 1 – The trial court properly dismissed the Shorts’
specific performance claim.
[6] The Shorts contend that the trial court erred in dismissing their specific
performance claim against Daughters. We review de novo a trial court’s grant
or denial of a motion to dismiss for failure to state a claim. Freels v. Koches, 94
N.E.3d 339, 342 (Ind. Ct. App. 2018). Such a motion tests the legal sufficiency
of a claim, and as such, we review the complaint in the light most favorable to
the nonmovant, determining whether the complaint states any facts upon which
the trial court could have granted relief. Id. “If a complaint states a set of facts
that, even if true, would not support the relief requested, we will affirm the
dismissal.” Id. (quoting McPeek v. McCardle, 888 N.E.2d 171, 174 (Ind. 2008)).
We may affirm the grant of dismissal if it is sustainable on any theory. Id.Court of Appeals of Indiana | Memorandum Decision 19A-PL-1948 | March 20, 2020 Page 4 of 11
[7] In Count I of the complaint, the Shorts sought specific performance of Ruby’s
contract to sell her home to the Trust for $20,000. “Specific performance is a
matter of course when it involves contracts to purchase real estate.” Stainbrook
v. Low, 842 N.E.2d 386, 394 (Ind. Ct. App. 2006), trans. denied. “A party
seeking specific performance of a real estate contract must prove that he has
substantially performed his contract obligations or offered to do so.” Id. Ruby
died without ever having closed the sale to the Trust. “[O]rdinarily the death of
either of the parties to a contract does not extinguish it, if it is of such a nature
that it may be performed by the personal representative.” Miller v. Ready, 59 Ind.
App. 195, 108 N.E. 605, 608 (1915) (emphasis added).
[8] Daughters assert that they are not the proper defendants for this contract claim
against Ruby and therefore the Shorts failed to state a claim upon which relief
can be granted. “Specific performance can not be enforced against one who is
neither a party nor privy to the contract and on whom it is not binding, or by
whom no duty under the contract has been assumed.” Alexander v. Dowell, 669
N.E.2d 436, 440 (Ind. Ct. App. 1996). Daughters were not parties to Ruby’s
land contract with the Trust. The Shorts made no claim that Daughters
assumed a duty. The contract that the Shorts seek to enforce was executed by
only two parties: Ruby as seller and Reeda, as trustee of the Trust, as the buyer.
Thus, Ruby would have been the proper defendant in the Shorts’ action for
specific performance of the contract, and when she died, her estate became the
proper defendant. See Ind. Code Ch. 29-1-14; Ind. Code § 29-1-1-3(a)(3)
(defining claims against decedent’s estate to include “liabilities of a decedent
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which survive, whether arising in contract or tort or otherwise”). “A claim
against an estate cannot be enforced except in the manner provided by statute.”
Sheldmyer v. Bias, 112 Ind. App. 522, 531, 45 N.E.2d 347, 350 (1942).
[9] To the extent that the Shorts argue that a claim against Ruby’s estate would not
have been appropriate because the property no longer belonged to Ruby at the
time of her death, we disagree. The Shorts’ claim is based on their alleged
contract rights against Ruby and must be prosecuted through her estate in the
manner prescribed by statute. 2 The Probate Code “grants the personal
representative complete authority to maintain any suit or demand due the
decedent or the estate.” Inlow v. Henderson, Daily, Withrow & DeVoe, 787 N.E.2d
385, 391 (Ind. Ct. App. 2003), trans. denied. Simply put, the Shorts were limited
to pursuing the contract claim through Ruby’s estate, not by maintaining a
separate contract action against Daughters individually. Based on the
foregoing, we conclude that the trial court properly dismissed the Shorts’
specific performance claim against Daughters.
Section 2 – The Shorts’ claims against Daughters for damages
related to Ruby’s Chase accounts are barred by res judicata.
[10] The Shorts also challenge the trial court’s dismissal of their claims for damages
based on Daughters’ alleged self-dealing and breach of fiduciary duty to Reeda,
2
See, e.g., Ind. Code § 29-1-14-1(a), -1(d) (contract claims against decedent’s estate barred if not filed within
three months of published notice to creditors or will revocation or within nine months after decedent’s
death).
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as well as conversion related to Ruby’s Chase accounts.3 In their motion to
dismiss, Daughters asserted that these claims were litigated in Cause 20 and are
now barred by res judicata. They attached as exhibits two documents: Reeda’s
petition in Cause 20 and the trial court’s order denying that petition.
Appellants’ App. Vol. 2 at 44-49. When a Trial Rule 12(B)(6) motion is
supplemented with affidavits or other materials outside the record, it is treated
as a motion for summary judgment. Thomas v. Blackford Cty. Area Bd. of Zoning
App., 907 N.E.2d 988, 990 (Ind. 2009).
[11] We review de novo a trial court’s ruling on a summary judgment motion,
applying the same standard as the trial court. Hughley v. State, 15 N.E.3d 1000,
1003 (Ind. 2014). Summary judgment is appropriate if the designated evidence
shows that there is no genuine issue as to any material fact and that the moving
party is entitled to judgment as a matter of law. Id.; Ind. Trial Rule 56(C). The
moving party bears the onerous burden of affirmatively negating an opponent’s
claim. Hughley, 15 N.E.3d at 1003. “Any doubt as to any facts or inferences to
be drawn therefrom must be resolved in favor of the non-moving party.” Buddy
& Pals III, Inc. v. Falaschetti, 118 N.E.3d 38, 41 (Ind. Ct. App. 2019) (citation
3
Because these claims are precluded by res judicata, we need not discuss them in great detail. Nevertheless,
we note that Daughters’ fiduciary duty and duty to refrain from self-dealing as attorneys-in-fact under POA-2
extended only to Ruby, not to Reeda or the Trust. See In re Estate of Rickert, 934 N.E.2d 726, 730 (Ind. 2010)
(“A person holding a power of attorney is in a fiduciary relationship to the person granting the power.”).
Moreover, conversion applies only to the knowing or intentional exertion of unauthorized control over
property owned by another and cannot be enforced by a person holding an expectancy interest stemming from a
revocable beneficiary designation on a survivorship account. See Steiner v. Bank One Indiana, N.A., 805
N.E.2d 421, 425 (Ind. Ct. App. 2004) (designated beneficiary of IRA account had mere expectancy interest,
not a present property interest, in that account).
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omitted), trans. denied. The party that lost in the trial court bears the burden of
persuading us that the trial court erred. Biedron v. Anonymous Physician 1, 106
N.E.3d 1079, 1089 (Ind. Ct. App. 2018), trans. denied (2019).
[12] Daughters maintain that the doctrine of res judicata bars the Shorts’ claims
against them concerning the Chase accounts. Res judicata prevents repetitious
litigation of disputes that are essentially the same. Hilliard v. Jacobs, 957 N.E.2d
1043, 1046 (Ind. Ct. App. 2011), trans. denied (2012), cert. denied. The doctrine
consists of two distinct components: claim preclusion and issue preclusion. Id.“Claim preclusion applies when a final judgment on the merits has been
rendered in a prior action, and it acts to bar a subsequent action on the same
claim between the same parties.” Id. For claim preclusion to apply,
1) the former judgment must have been rendered by a court of
competent jurisdiction; 2) the former judgment must have been
rendered on the merits; 3) the matter now in issue was, or could
have been, determined in the prior action; and 4) the controversy
adjudicated in the former action must have been between the
parties to the present suit or their privies.
Id.[13] The Shorts do not challenge requirements 1, 2, or 4 of claim preclusion but
instead focus their argument on requirement 3. They assert that the issue raised
in Cause 20 concerned Ruby’s capacity to execute POA-2, which is distinct
from the issues raised in the current cause concerning the Chase accounts, that
is, Daughters’ alleged breach of fiduciary duty/self-dealing and conversion.
They rely on Biggs v. Marsh, in which another panel of this Court articulated an
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identical evidence test for determining claim preclusion: “whether identical
evidence will support the issues involved in both actions.” 446 N.E.2d 977, 982
(Ind. Ct. App. 1983). In more recent cases, the following observation has been
made concerning the application of Biggs’s identical evidence test:
[A] literal interpretation of the identical evidence test … has since
been called into question by the Seventh Circuit. In Atkins v.
Hancock County Sheriff’s Merit Board, the Seventh Circuit noted
that Indiana follows the identical evidence test, as is outlined in
Biggs. 910 F.2d 403, 405 (7th Cir. 1990). The court went on to
say “[u]nderstood literally, that approach would confine a plea of
res judicata to cases in which the claim in plaintiff's second suit
was identical to the claim in his first, and would invite piecemeal
litigation with a vengeance. We have not thought that Indiana
intended to confine res judicata so narrowly....” Id.Hilliard, 957 N.E.2d at 1047. We find this observation persuasive.
[14] In paragraph 7 of the Cause 20 complaint/petition, Reeda alleged that Ruby
“lacked capacity to sign [POA-2]” and/or “was unduly influenced to sign it.”
Appellants’ App. Vol. 2 at 45 (Respondents’ Ex. A). The petition also alleged
the following with respect to the Chase accounts: 4
10. …. To Reeda’s knowledge, she was a named beneficiary on
some or all of Ruby’s assets with Chase bank.
11. Reeda believes Daughters or Grandson may have either
coerced Ruby to change her beneficiary designations on the
4
Reeda’s Cause 20 complaint/petition uses proper names and/or different designations for the parties. For
clarity’s and consistency’s sake, we identify the parties as designated throughout this decision.
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Chase bank accounts after she lacked capacity or, used their
power of attorney to change the beneficiary designations either
reducing Reeda’s share or removing her entirely as a beneficiary.
12. Reeda alleges and asserts that any change to Ruby’s estate
plan after her January stay in Major Hospital was either made by
Ruby while she lacked capacity, or made by her attorney’s[sic]-
in-fact for their own benefit, which is a violation of their fiduciary duty
to act on behalf of Ruby.
13. As a result, Reeda requests a hearing for the court to resolve
the issues of fact and law.
Id. at 45-46 (emphases added).
[15] Reeda sought a TRO to prevent Daughters, Grandson, or Chase (as holder of
the accounts) from spending, transferring, or making disbursements from the
Chase accounts “until the issues asserted in the petition are resolved, …. [s]ince
serious questions of fact, including fraud, coercion and elder abuse remain in
this this case[.]” Id. at 46. The trial court apparently froze the accounts
pending a hearing, afforded her a hearing and considered her issues, found
POA-2 to be valid, dissolved the TRO, denied her petition for the continuation
of the TRO, and dismissed her action. See Id. at 49 (Respondents’ Ex. B).
Reeda did not appeal that order.
[16] As noted in the italicized portions above, Reeda’s Cause 20 complaint/petition
alleged that Daughters violated their fiduciary duty and acted for their own
benefit, which we find to be tantamount to claims of self-dealing and
conversion of assets rightfully belonging to another. Because these claims were
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presented and litigated in Cause 20, we conclude that the Shorts were precluded
from relitigating them in this action. Simply put, these claims were barred by
res judicata, and therefore Daughters are entitled to judgment as a matter of
law. Accordingly, we affirm the trial court in all respects.
[17] Affirmed.
May, J., and Pyle, J., concur.
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