Estate of Warman, In re

• Decision Date: 07 July 1997
• Docket Number: No. 20A05-9606-CV-236,20A05-9606-CV-236
• Court: Indiana Appellate Court
• Parties: In re the ESTATE OF Stephen Leonard WARMAN, Eugene Topolski, Personal Representative. Carolyn WARMAN, Appellant-Petitioner, v. Randy S. WARMAN, Eric M. Wetzel, and Timberlee Massert, Appellees-Respondents.

Page 557

682 N.E.2d 557

In re the ESTATE OF Stephen Leonard WARMAN, Eugene Topolski,

Personal Representative.

Carolyn WARMAN, Appellant-Petitioner, v. Randy S. WARMAN, Eric M. Wetzel, and Timberlee Massert,

Appellees-Respondents.

No. 20A05-9606-CV-236.

Court of Appeals of Indiana.

July 7, 1997.

Mark A. Matthes, Yoder Ainlay Ulmer & Buckingham, Goshen, for Appellant-Petitioner.

David V. Bent, Bingham & Loughlin, Mishawaka, for Appellees-Respondents.

OPINION

SHARPNACK, Chief Judge.

Carolyn Warman appeals the trial court's disposition of the estate of her late husband, Stephen. Carolyn raises two issues for our review, which we restate as:

1) whether the trial court properly found that the specific bequest of the railroad settlement was not adeemed; and

2) whether the trial court properly found that the transfer of a mobile home to Eric Wetzel before Stephen's death was a gift inter vivos and not a gift causa mortis.

We reverse on the first issue and affirm on the second.

The facts most favorable to the judgment follow. Stephen executed his last will and testament on September 14, 1992. This will contained the following bequest: "I hereby give, devise, and bequeath any recovery or settlement which I may receive as a result of a railroad injury to be divided equally between my wife, Anna Carolyn Warman, and my son, Randy Stephen Warman." Record, p. 11.

On September 9, 1993, Stephen received a railroad settlement of $650,000 for personal injuries he had suffered. After attorney's fees and costs were satisfied, Stephen received the remaining $459,307.14.

On March 28, 1994, Stephen executed the certificate of title of his 1979 motor home to Wetzel. The following morning, Wetzel drove Stephen to a doctor's appointment to check a heart condition. Stephen learned that condition was not as serious as he had previously thought. However, on April 1, 1994, Stephen died of injuries sustained in a car accident.

On April 27, 1994, the personal representative for the estate filed a petition for probate of will and issuance of letters. On September 26, 1994, the personal representative filed an inventory of assets owned by Stephen at his death.

On October 4, 1994, Randy filed a petition for construction of the will, recovery of possession of assets, and distribution of specific bequests in which he asked the court to construe his father's will with respect to the railroad settlement. On November 18, 1994, the trial court conducted a hearing on the issues raised in the petition and took the matter under advisement.

On November 18, 1994, Carolyn filed a petition to include certain assets in the estate and later filed an objection to the distribution. The trial court conducted a hearing on her petition to include assets in the estate on June 27 and 28, 1995.

On February 12, 1996, the trial court entered its order. The trial court found that Stephen's bequest of the railroad settlement was not adeemed and that Stephen made a gift of the 1979 motor home to Wetzel before his death. Carolyn now appeals the trial court's judgment.

I.

The first issue raised for our review is whether the trial court properly found that the specific bequest of the railroad settlement was not adeemed. In its order, the trial court stated in part:

"The question before the Court is whether there was an ademption of the settlement received as a result of the railroad injury.

If the sum received from the railroad injury were placed into a bank account no reasonable person would argue that there had been an ademption.

If the railroad settlement had been received and placed in stocks and bonds no reasonable person could argue that there had been an ademption. Here the railroad proceeds were invested in other assets i.e. real estate, automobiles, and the question before the Court is whether this has caused an ademption.

The Court finds that it has not and that Petitioner, Randy S. Warman, should be able to trace any funds received from the railroad settlement into assets owned by the decedent at the time of his death...."

Record, pp. 156-157.

The record does not reflect a request by one of the parties for specific findings, so the trial court entered specific findings of fact and conclusions thereon sua sponte. As such, with respect to the issues covered by the findings we must determine whether the findings are sufficient to support the judgment. Nelson v. Gurley, 673 N.E.2d 497, 499 (Ind.Ct.App.1996). In reviewing the judgment, we must first determine whether the evidence supports the findings and second, whether the findings support the judgment. Id. The trial court's findings and judgment which flow therefrom will not be set aside on appeal unless they are clearly erroneous. Patterson v. Grace, 661 N.E.2d 580, 584 (Ind.Ct.App.1996). The findings are clearly erroneous if the record contains no facts which support the findings either directly or by inference. Id. The judgment is clearly erroneous if it is unsupported by the findings of fact and the conclusions which rely on those findings. Id.

Ademption by extinction has been defined as an act which causes a legacy to become inoperative because the subject matter of the legacy has been withdrawn or disappeared during the testator's lifetime. In re Scheele, 517 N.E.2d 418, 425 (Ind.Ct.App.1988), reh'g denied, trans. denied. Ademption applies only to specific legacies and occurs only when the subject matter of the legacy is so altered or extinguished that the legacy is completely voided. Pepka v. Branch, 155 Ind.App. 637, 654, 294 N.E.2d 141, 150 (1973). The legatee is not entitled to look to the general assets of the estate for satisfaction in lieu of the specific bequest. Id.

In Pepka, we established Indiana's approach to ademption by specifically adopting the "Modern Rule." Id. at 659, 294 N.E.2d at 153. This approach is sometimes referred to as the "form and substance" test. This rule eliminates the search for the intention to adeem and confines the trial court's responsibility to ascertaining whether the specific subject matter of the bequest is still in existence. Id. at 656, 294 N.E.2d at 152.

The first step under this approach is to establish the identity of the specific bequest which the testator purports to make under the terms of the will. Id. at 658, 294 N.E.2d at 153. The second step is the application of the form and substance test. Id. If there has only been a formal change in the bequest since the execution of the will, there is no ademption; however, if the specific bequest has changed in substance, the legacy is adeemed. Id. at 656, 294 N.E.2d at 152. The intent of the testator is relevant only to an examination of the four corners of the will to determine the identity or exact thing which is the subject matter of the bequest at the time of the execution of the will. Id. at 658, 294 N.E.2d at 153. As we stated, "a will speaks from the date of its execution in order to ascertain the intention of the testator with respect to the identity of the gift he intended to bequeath. Beyond that point, an inquiry into the intention of the testator is not proper." Id.

Pursuant to the two-step rule, we must first identify the specific bequest which Stephen made under the will. See id. at 658, 294 N.E.2d at 153. A specific bequest is defined as a bequest of some definite or specific part of the testator's estate which is capable of being designated, identified, and distinguished from other like things composing the testator's estate. Weaver v. Schultz, 177 Ind.App. 563, 380 N.E.2d 601, 602 (1978). Money may be a specific legacy if it is designated with sufficient certainty. Id.

Stephen's will clearly states that he intended to transfer any recovery or settlement which he received as a result of his railroad injury to his wife and to his son. Stephen designated this settlement with certainty and specificity. As such, the funds resulting from the settlement are distinguished from other monies in the estate. Thus, we find that the bequest of the railroad settlement was specific enough to be subject to ademption. See id. Therefore, the first part of the test is satisfied. See Pepka, 155 Ind.App. at 658, 294 N.E.2d at 153.

The second part of the test is the application of the form and substance test. Id. Under this part, the bequest fails if the article specifically bequeathed has been given away, lost, or destroyed during the testator's lifetime. Id. at 657, 294 N.E.2d at 152. Slight changes in form do not cause ademption. Id. at 651, 294 N.E.2d at 150.

In Diaz v. Duncan, 406 N.E.2d 991 (Ind.Ct.App.1980), the testatrix bequeathed half of the money in the credit union, half of the money in her checking account, and all of the money in a joint account to her daughter Christine. To her daughter Genevieve, she bequeathed half of the money in the checking account and half of the money in the credit union. Before the testatrix's death, Christine died, and the testatrix was declared incompetent. Genevieve was appointed guardian. Genevieve opened two guardianship accounts to which she transferred the credit union account, the proceeds from a joint savings account, and the proceeds from the sale of stock.

After the testatrix's death, the trial court honored the specific bequests to Genevieve and to Christine's heirs despite the intervention of the guardianship transfers. On appeal, we held that the transfer of the accounts by the guardian did not work an ademption because of a statute concerning guardianships of incompetents, the provisions of which precluded ademption of the specific legacies. Id. at 996. Importantly, however, we noted that had the testatrix made the transfers herself, the specific bequests would have been adeemed. Id.

Aside from Diaz, Indiana case law provides little guidance as to whether a change in an asset constitutes a change in form or in substance. Nonetheless, a perusal of other jurisdictions uncovered a few cases which shed light on the circumstances before u...