Mack v. American Fletcher Nat. Bank and Trust Co.

Citation510 N.E.2d 725
Decision Date22 July 1987
Docket NumberNo. 06A04-8610-CV-310,06A04-8610-CV-310
PartiesNancy Iles MACK and Arthur J. Iles, Jr., Appellants (Plaintiffs Below), v. AMERICAN FLETCHER NATIONAL BANK AND TRUST COMPANY, a National Banking Association, and Indianapolis Newspapers, Inc., Appellees (Defendants Below).
CourtCourt of Appeals of Indiana

Irwin I. Zatz, Arvey Hodes Costello & Burman, Chicago, Ill., David F. Truitt, Donaldson Andreoli & Truitt, Lebanon, for appellants.

Virgil L. Beeler, Robert K. Stanley, Baker & Daniels, Thomas A. Jenkins, John W. Houghton, Stanley C. Fickle, Barnes & Thornburg, Indianapolis, for appellees.

MILLER, Judge.

Nancy Iles Mack and Arthur J. Iles, Jr. (Beneficiaries) are two beneficiaries of a 1930 trust created by their greatgrandmother in a parcel of commercial real estate in downtown Indianapolis. Actually, Nancy and Arthur's rights did not vest under the terms of the trust until 1972, when their grandmother died. This case involves their claims filed ten years after their interests vested. The claims pertinent to this appeal contain allegations of improprieties committed by the Trustee and the lessee of the trust real estate, all of which occurred--with the approval of their ancestors pursuant to the trust agreement--prior to the vesting of the trust in 1972.

The purpose of the trust was to distribute income generated from leasing the building to certain named beneficiaries, beginning with settlor's two daughters and continuing with their lineal descendents until the death of the survivor of her grandchildren. The Beneficiaries here were vested in their interests upon their grandmother's death in 1972. The current Trustee is American Fletcher National Bank & Trust Co., successor in interest to the original trustee, Fletcher Savings & Trust Co. Since 1948, the Trustee has leased the building to Indianapolis Newspapers, Inc. (INI) and its predecessor under a long-term and thrice-amended agreement which provides options for INI to continue renting until the year 2018. (This organization, now commonly known as the Star/News, publishes both major newspapers in Indianapolis--The Indianapolis Star for the morning and The Indianapolis News for the evening.) The Beneficiaries filed their complaint against the Trustee and INI in 1982 for recovery of damages, for removal of the Trustee, and to restrain a proposed sale of the building to INI. The trial court, after reviewing a variety of stipulated facts and exhibits, granted summary judgment in all respects in favor of the Trustee and INI on the grounds of statutes of limitations and laches. The Beneficiaries appeal to us to overturn the trial court's decision on assorted grounds. Our review of the record, the Beneficiaries' briefs and the pertinent law leads us to the conclusion that what issues the Beneficiaries have not waived or are not yet ripe are barred from further adjudication by the applicable statutes of limitations. We therefore affirm the trial court.

ISSUE

Several issues have not been properly preserved here for appeal, and one is not yet ripe for litigation. The only issue we must address comprehensively is:

Whether the Beneficiaries are barred by statutes of limitations from recovering

damages from the Trustee and INI and from removing the Trustee for actions of which the Beneficiaries had notice no later than 1972 when their interests vested.

FACTS

The parties here compiled a thorough and sweeping record of stipulated facts and affidavits for the trial court to render its decision. 1 Those facts reveal the settlement of the Trust at issue here and select circumstances surrounding the establishment of the lease between that Trust and INI.

On May 26, 1930, Rosealba J. Jordan conveyed to Fletcher Savings & Trust Co. by warranty deed a parcel of commercial real estate located in the heart of downtown Indianapolis upon which stands the Meridian Life Building. Contemporaneously with this conveyance, Jordan executed a trust agreement with Fletcher Savings & Trust Co. by which said real estate was to be held by the trust company for purposes of managing and maintaining the property and of distributing the net income generated by it to Jordan's two daughters and further lineal descendants, as detailed more fully in the trust instrument. By the terms of the Trust, it shall automatically terminate by the death of the survivor of the settlor, her daughters, and her grandchildren, or sooner, if the beneficiaries living at settlor's death so agree in writing.

Of especial importance to the case at bar is the following provision in the trust instrument whereby the Trustee is given the power to manage the trust res, subject in certain instances to the consent of Esther D. Iles and Alma J. Kittle, settlor's daughters:

"1. Second party as such Trustee shall have full power and authority at all times to possess, use, improve, repair, manage, sell, lease, (for any term--not exceeding ninety-nine years), transfer and convey all or any part of said real estate and collect, reinvest, disburse and apply the proceeds thereof and the income therefrom in such manner as it shall deem best for the interests of said trust in its judgment and discretion, except that no alteration, improvement or repair costing more than fifty dollars, no sale, conveyance nor any lease for more than one year, nor any reinvestment shall be made nor any insurance affected during the lifetime of Esther D. Iles and Alma J. Kittle, without their written consent...."

Record, p. 44. And the Trustee is accountable to the beneficiaries for its actions insofar as specifically limited by another of the Trust's provisions:

"6. Second party [Trustee] shall not be answerable for any error of judgment or Record, p. 46. Pursuant to these general guidelines, the original Trustee and its successors (Fletcher Trust Co. and American Fletcher National Bank & Trust Co.) have confined their duties in large part to obtaining lessees for the Meridian Life Building and to disbursing the net income to the trust beneficiaries as their interests arise.

mistake in good faith commited [sic] by any agent or employee of second party selected with reasonable care, nor in any way otherwise answerable or accountable under any circumstances whatsoever, except for its or their own wilful default or misconduct."

The record is not clear what lease arrangements were made early in the life of the Trust, but it is clear that by mid-1948, the Meridian Life Building was netting $10,110.56 for distribution to the income beneficiaries. At this time, one of the tenants was Star Publishing Co., INI's predecessor, whose own building was connected to the Meridian Life Building by hallways, stairs and doorways. In August, 1948, the Trustee and Star Publishing entered into a ten-year lease of the entire building at an annual cash rent of $31,000 subject only to the Trustee's payment of taxes, netting to the income beneficiaries approximately $24,000 per year. (The lease was also subject to a sublease in favor of Alma Kittle's husband's business, Columbia Investment Co., for a set rental of $115 per month.) This lease agreement was approved in writing by both Esther Iles and Alma Kittle, as required by the terms of the Trust.

Later in 1948, Star Publishing contacted the Trustee to open negotiations for extensions to the lease. Star Publishing planned on making a long-term investment for improving the Meridian Life Building to accommodate not only the expansion of its publishing enterprise but to also house radio station WIRE. After the initial inquiries, the Trustee and Star Publishing engaged in extensive negotiations of which Esther and Alma were kept apprised because their consents were essential to the success of the bargaining. Throughout, however, it appears the Trustee directed the thrust of the decision-making and correspondence toward John Kittle, Alma's husband, upon whose judgment Esther seemed to rely with regard to the Trust. ("I think Mr. Kittle will be down here soon, then he can bring me up to date on the whole matter--" Esther Iles letter, March 27, 1949; "I should like to hear what Mr. Kittle thinks about it." Esther Iles letter, June 6, 1949; "if Mr. Kittle approves no doubt I'll sign when you are ready--"Esther Iles letter, June 10, 1949). After much correspondence back and forth, on or about August 29, 1949, the Trustee and Star Publishing executed a First Amendment to the original lease with Esther and Alma's signed consent. This First Amendment extended the lease term to thirty years (through August 31, 1978) and lowered the annual rent to $30,000. However, Star Publishing assumed the payment of the taxes, thereby increasing Esther and Alma's net trust income by nearly $5,000 per year.

In mid-1956, Star Publishing (now INI) requested the Trustee consider an eight-year extension on the lease with an option for another ten-year term in order to install an additional press. Again, the Trustee consulted John Kittle on behalf of Esther and Alma, and ultimately, the two life beneficiaries consented to a second amendment. This amendment provided for two ten-year options, giving INI the opportunity to rent the building through August 31, 1998. The rent during these extended terms were for the fair rental value of the property, to be determined either by agreement or by appraisal. In June, 1966, the Trustee and INI executed a Third Amendment to the lease, adding two more ten-year options through the year 2018 in order for INI to again expand its operation by an additional press. As before, both Esther and Alma gave their written consent although evidently (there exist no stipulated facts) Esther was confined to a nursing home and had difficulty reading and writing. The remaining provisions of the lease were preserved intact.

On January 7, 1972, Esther passed away, thereby vesting in the two Beneficiaries here one-half of her portion of the trust income, the other...

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