Estate of Kappel v. Kappel

• Decision Date: 30 October 2012
• Docket Number: No. 32A01–1111–ES–526.,32A01–1111–ES–526.
• Citation: Estate of Kappel v. Kappel, 979 N.E.2d 642 (Ind. App. 2012)
• Parties: In the Matter of the ESTATE OF Nathaniel KAPPEL, Appellant–Cross–Appellee, v. William KAPPEL, Judith Kappel, and Mark Kappel, Appellees–Cross–Appellants.
• Court: Indiana Appellate Court

979 N.E.2d 642

In the Matter of the ESTATE OF Nathaniel KAPPEL, Appellant–Cross–Appellee,

v.William KAPPEL, Judith Kappel, and Mark Kappel, Appellees–Cross–Appellants.

No. 32A01–1111–ES–526.

Court of Appeals of Indiana.

Oct. 30, 2012.

Mark D. Gerth, Kightlinger & Gray, LLP, Indianapolis, IN, Attorney for Appellants.

Gregory W. Black, The Black Law Office, Plainfield, IN, Attorney for Appellee.

BAILEY, Judge.

Case Summary

For more than forty years, brothersNathaniel Kappel("Nathaniel") and William Kappel("William") were amicable partners in a farming operation, with each holding an insurance policy on the life of the other.Upon Nathaniel's death in 2004, the attorney for the Estate of Nathaniel Kappel("the Estate") filed in the Hendricks Superior Court, probate division, a petition to marshal assets, seeking recovery of $750,000 insurance proceeds paid to William.William and his son, Mark Kappel("Mark"), filed claims against the Estate, for $350,000 and $299,000, respectively, and William and his wife, Judith Kappel("Judith"), filed a Complaint for Contribution as to a mortgage and taxes on the brothers' farmland.The Estate counterclaimed, suing William and Judith for conversion.The Estate also sought a partnership accounting.The claims were consolidated and, at the conclusion of a bench trial, the probate court denied the Estate recovery of the insurance proceeds, directed William and Mark to withdraw their claims against the Estate, and denied the complaint for contribution.The Estate now appeals.We affirm.

Issues

The Estate presents four issues for review:

I.Whether the Estate is entitled to recover $750,000 in proceeds from a life insurance policy owned by William, insuring Nathaniel's life;

II.Whether the Estate is entitled to recover the cash surrender value of a life insurance policy owned by Nathaniel, insuring William's life;

III.Whether the probate court erroneously found the Estate counterclaim invalid for lack of requisite signatures; and

IV.Whether the Estate was entitled to a jury trial.

William, Mark, and Judith ("the Kappels") cross-appeal, claiming entitlement to attorney's fees.

Facts and Procedural History

On April 9, 1973, Nathaniel and William executed a "Partnership Agreement for Kappel Brothers" providing in relevant part:

Whereas, Nathaniel and William are partners doing business as brothers with Nathaniel owning a 50% interest and William owning a 50% interest in the partnership; and Whereas, said parties desire to provide for the purchase by the surviving party of a deceased party's interest in the business; and Whereas, the parties desire to provide for a method of evaluating the worth of the said business upon the death of the one of them first to die, to fix the purchase price to be paid for the interest of the party first to die, and the method of payment therefor.

Now, therefore, in consideration of the mutual agreements and covenants hereinafter set forth, the parties hereto mutually agree as follows:

1.The partnership agreement heretofore existing between the parties is hereby amended in the following particulars, and where the same is inconsistent herewith, the following provisions shall control.

2.During the continuance of this agreement, Nathaniel and William agree not to sell, transfer, encumber or assign any part of their respective interests in the partnership.

3.On the death of a party, the surviving party shall purchase the deceased party's entire interest in the partnership business and the deceased party's legal representative shall sell such interest to the surviving party.The purchase price of the partnership interest of the party first to die shall be computed in accordance with the provisions of Paragraph 4 hereof.

4.The parties hereto agree and stipulate that the total value of the partnership business as of the date of this Agreement is $100,000, and the value of each partner's respective interest is: Nathaniel, $50,000; William, $50,000.Within 30 days following the end of each fiscal year of the partnership, the parties shall stipulate the value of said partnership business, and shall endorse such value on Schedule A attached hereto.If for any reason the parties shall have failed to stipulate the value for the year preceding the death of a party, the value of the partnership business shall be the higher of either of the following values:

(a) The last previously stipulated value; or

(b) The book value of the partnership as of the date of death.The determination of the accountant servicing the partnership business at the time of the death of a deceased party as to the book value shall be conclusive.

In no event, however, shall the value of the interest of the party first to die be less than the amount of the insurance proceeds of the policy on such deceased party's life and subject to the terms of this agreement.

5.Nathaniel has made application for and is the owner of Policy # 78–245–473, issued by the Equitable Life Assurance Society of the United States in the face amount of $50,000, insuring the life of William.William has made application and is the owner of Policy # 73–256–404, issued by the Equitable Life Assurance Society of the United States in the face amount of $50,000, insuring the life of Nathaniel....

6.Each party agrees to apply the proceeds of the insurance policy owned by him to purchase the partnership interest of the deceased party as provided herein; said purchase to take place at the principal place of business of the partnership within 30 days of either (a) the date of the deceased party's death or (b) the date of qualification of [the] deceased party's legal representative, whichever is later.

(App. 33–34.)The agreement could be terminated only by written agreement of the parties; however, it could be altered or amended by a writing signed by the parties.In 1977, the brothers entered into a supplemental agreement, valuing the partnership by an additional $100,000 and listing two additional $50,000 life insurance policies.The brothers also purchased life insurance policies naming their wives as beneficiaries.

On December 18, 1993, Nathaniel executed his Last Will and Testament, reciting his intention to leave to his four children:

My interest in a certain partnership by and between myself and my brother, William M. Kappel, by Partnership Agreement dated April 1, 1973, including the proceeds of any life insurance provided to purchase my partnership interest pursuant to the terms of such Partnership Agreement;

My one-half (1/2) interest in a certain parcel of real estate consisting of approximately forty (40) acres and located at 10350 West Morris Street, Indianapolis, Indiana[.]

(App. 30.)In 1996, William purchased from State Life Insurance Company a policy on Nathaniel's life, in the amount of $750,000 ("the State Life policy").In turn, Nathaniel purchased from First Colony Life Insurance Company a policy on William's life, also in the amount of $750,000 ("the First Colony policy").The premiums were paid from a Kappel Brothers Partnership account.

Nathaniel, then aged seventy-six, suffered a heart attack and died on March 20, 2004.His wife and co-personal representative, Margaret Kappel("Margaret"), listed the First Colony policy (insuring William's life) as an asset of the Estate, but made the representation that she believed it had been cashed out in January 2004.Margaret (as opposed to Nathaniel's sons) was by that time the beneficiary of the policy that had been in existence when Nathaniel made his 1993 will ("the Equitable 801 policy").She did not list this policy as Estate property.

The attorney for the Estate contacted William in an effort to recover the $750,000 paid on the State Life policy insuring Nathaniel's life.When informal recovery efforts were unsuccessful, the Estate filed its Petition to Marshal Assets.In turn, William and his family members filed claims against the Estate.¹

The probate court granted summary judgment to William and Mark on the claim that they, and not the Estate, were entitled to the proceeds of the State Life policy.On appeal, a panel of this Court reversed the grant of summary judgment, finding "there are numerous facts in dispute and the undisputed material facts are capable of supporting conflicting inferences with regard to the issue of who is entitled to the proceeds of the State Life policy."In re the Estate of Nathaniel Kappel,No. 32A05–0904–CV–205, slip op. at 7, 2009 WL 3170644(Ind.Ct.App.Mar. 11, 2010), trans. denied.

The matters were consolidated for a bench trial.At the request of the Estate, an accounting of the partnership was conducted.The probate court admitted extensive financial exhibits and expert testimony.

The Estate did not challenge the accounting data.After the conclusion of the trial, the probate court entered its Findings of Fact, Conclusions of Law, and Judgment.²The ninety-four page document includes findings of fact that may be summarized in relevant part as follows:

The brothers farmed together since the 1960's, but the partnership was first formalized in a 1973 agreement, supplemented by a 1977 agreement.They did not hold the farmland as partners; rather, it was deeded to the men and their wives.

The brothers commingled personal and other assets to fund the business and such "resulted in no advantage or disadvantage to anyone."(App. 321.)They filed individual tax returns and not partnership tax returns.Funds from the brothers' construction business were also commingled with farm funds.

The 1973 partnership agreement "concerns but does not require insurance as funding the buyout of the interest in Kappel Brothers of the first brother to die."(App. 322.)The document forbids transfer of ownership in Kappel Brothers to a third party.

Initially, the brothers valued the partnership at $ 100,000 and purchased a $50,000 life insurance policy on each brother's life.The agreement contemplated that, upon death of one brother, the other would receive $50,000 and...