First Farmers Bank & Trust Co. v. Whorley, No. 34A02-0802-CV-124.
| Citation | 891 N.E.2d 604 |
| Decision Date | 05 August 2008 |
| Docket Number | No. 34A02-0802-CV-124. |
| Parties | FIRST FARMERS BANK & TRUST CO., Appellant-Defendant, v. Dianna F. WHORLEY, Appellee-Plaintiff. |
| Court | Court of Appeals of Indiana |
Karl L. Mulvaney, Nana Quay-Smith, Anne L. Cowgur, Bingham McHale LLP, Indianapolis, IN, Attorneys for Appellant.
Karen T. Moses, Damian B. Gosheff, Kevin J. Mitchell, Baker & Daniels LLP, Fort Wayne, IN, Attorneys for Appellee.
Appellant-Defendant, First Farmers Bank & Trust Co. (First Farmers), appeals the trial court's denial of its motion for summary judgment and the grant of partial summary judgment in favor of Appellee-Plaintiff, Dianna F. Whorley (Whorley), in an action for breach of fiduciary duty following a guardianship.
We affirm in part, reverse in part, and remand for further proceedings.
First Farmers raises two issues on appeal, which we restate as follows:
(1) Whether the trial court erred by denying First Farmers' motion for summary judgment; and
(2) Whether the trial court erred by granting Whorley's motion for partial summary judgment.
On September 5, 2000, Franklin Zehring (Zehring), ninety-five years old and incapable to care for himself because of impairments resulting from a disabling stroke and forms of dementia, was declared legally incompetent. The trial court appointed First Farmers as guardian over Zehring's estate, while Zehring's daughter, Whorley, and Robert Beeler (Beeler) were appointed co-guardians over his person. At the time he was declared legally incompetent, a significant portion of Zehring's estate consisted of approximately 2700 acres of farmland in Howard County, Indiana, which was valued at an amount in excess of $5,000,000.00. Approximately ten percent of the farmland was farmed by Zehring's cousin, with the remainder of the farmland incorporated in a modified share crop arrangement with Roger Greeson, Sr. (Greeson). Under this agreement with Greeson, Zehring remained the owner-operator and Greeson acted as the farmland manager. It was understood by Zehring and Whorley that this share crop arrangement allowed the farmland to be eligible for a form of taxation, known as Special Use Valuation. Special Use Valuation is codified at section 2032A(b)(2) of the Internal Revenue Code and allows real property which is used for a qualified use by the decedent, or by a family member of the decedent at the time of the decedent's death, to receive a favorable tax rate.
In the fall of 2000, after First Farmers' appointment as guardian of the estate, Max Custer (Custer), First Farmers' Senior Vice President of the Trust Department, evaluated Zehring's financial and personal situation. Custer was concerned that the modified share crop arrangement would require hands-on participation from First Farmers and would result in high guardianship fees. Accordingly, he advised Zehring and Whorley to terminate the agreement with Greeson and convert the farmland to a cash rent arrangement. Custer noted several benefits in a cash rent arrangement including reduction in management costs, an influx of cash liquidity from the sale of farm equipment, increased cost certainty and corresponding reduction in cost risks, income stability, and elimination of concerns for crop theft or integrity of farm managers. He considered tax-related issues ranging from income taxation, equipment depreciation, loss of deductible expenses, and accrual of income. After Custer discussed these factors with Zehring and Whorley, they agreed that cash rent was a more favorable arrangement for Zehring. First Farmers did not inform Whorley or Beeler that its decision to cash rent the farmland would render the estate ineligible for Special Use Valuation or have any additional tax consequences for Zehring's estate.
On January 24, 2002, Zehring passed away and a probate estate was opened on February 7, 2002. On October 24, 2002, First Farmers filed the estate's tax return with the Internal Revenue Service (IRS). Despite the fact that First Farmers had converted the farmland to cash rent, First Farmers sought to elect Special Use Valuation. On December 12, 2002, First Farmers filed the Guardian's Final Report and Petition to Terminate Guardianship. That same day, Whorley filed a Waiver and Consent to Guardian's Final Accounting. The next day, the trial court terminated First Farmers' guardianship and First Farmers was appointed executor and personal representative of the probate estate.
On April 12, 2004, after the probate estate had closed, the IRS notified Whorley that Special Use Valuation for the farmland was denied, resulting in an additional tax liability to the estate in the amount of $573,474.00. As the estate did not have sufficient liquid assets to satisfy the accrued tax liability, Whorley, at First Farmers' suggestion, borrowed the required amount from First Farmers.
On April 8, 2005, Whorley filed a Complaint against First Farmers, asserting that First Farmers had breached its duties as guardian of the estate by failing to evaluate the effect of converting the main corpus of the estate, 2,700 acres of farmland, from a modified share crop arrangement to a cash rent farm resulting in a significant tax liability to the estate. On January 8, 2007, Whorley filed her Motion for Partial Summary Judgment, seeking judgment as a matter of law on the issue of First Farmers' liability for the additional taxes. Thereafter, on March 12, 2007, First Farmers filed its Response in Opposition and Cross-Motion for Summary Judgment alleging that Whorley's claim was time-barred and she did not have standing to bring the instant cause. In addition, First Farmers denied being liable for damages as it acted in good faith. On August 15, 2007, after the parties filed respective responses, the trial court heard evidence on the motions. On January 14, 2008, the trial court entered its Order granting partial summary judgment to Whorley and denying First Farmers' cross-motion for summary judgment.
First Farmers now appeals. Additional facts will be provided as necessary.
On appeal, First Farmers contests the trial court's denial of his motion for summary judgment and the grant of Whorley's motion for partial summary judgment and requests us to reverse the trial court's judgment and to enter summary judgment in its favor.
Summary judgment is appropriate only when there are no genuine issues of material fact and the moving party is entitled to a judgment as a matter of law. Ind. Trial Rule 56(C). In reviewing a trial court's ruling on summary judgment, this court stands in the shoes of the trial court, applying the same standards in deciding whether to affirm or reverse summary judgment. Hendricks Co. Bd. of Comm'rs v. Rieth-Riley Const. Co., Inc., 868 N.E.2d 844, 848-49 (Ind.Ct.App.2007). Thus, on appeal, we must determine whether there is a genuine issue of material fact and whether the trial court has correctly applied the law. Id. at 849. In doing so, we consider all of the designated evidence in the light most favorable to the non-moving party. Id. The party appealing the grant of summary judgment has the burden of persuading this court that the trial court's ruling was improper. Id. When the defendant is the moving party, the defendant must show that the undisputed facts negate at least one element of the plaintiff's cause of action or that the defendant has a factually unchallenged affirmative defense that bars the plaintiff's claim. Indiana Michigan Power Co. v. Runge, 717 N.E.2d 216, 226 (Ind.Ct.App.1999), reh'g denied. Accordingly, the grant of summary judgment must be reversed if the record discloses an incorrect application of the law to the facts. RiethRiley Const. Co., Inc., 868 N.E.2d at 849. When the parties have filed cross-motions for summary judgment, we consider each motion separately to determine whether the moving party is entitled to judgment as a matter of law. Keaton & Keaton v. Keaton, 842 N.E.2d 816, 819 (Ind.2006).
We observe that in the present case, the trial court entered detailed and helpful findings of fact and conclusions of law in support of its judgment. Special findings are not required in summary judgment proceedings and are not binding on appeal. AutoXchange.com, Inc. v. Dreyer and Reinbold, Inc., 816 N.E.2d 40, 48 (Ind.Ct.App.2004). However, such findings offer this court valuable insight into the trial court's rationale for its review and facilitate appellate review. Id.
First Farmers now claims it is entitled to summary judgment and challenges the trial court's Order on two separate procedural grounds. First, First Farmers asserts the trial court erred by concluding that Whorley's claim is governed by the tort claim statute. Rather, First Farmers maintains that Whorley's claim is subject to the one-year statutory limitation embedded in the guardianship statute. Second, First Farmers contests Whorley's standing to bring her cause of action as her claim is founded solely upon duties First Farmers owed to Zehring, not to Whorley, and which resulted in damages to his estate.
In its Order, the trial court characterized Whorley's cause of action against First Farmers as a tort claim for injury to personal property subject to Indiana's discovery rule and the two-year statute of limitations, set forth in I.C. § 34-11-2-4. Rejecting the trial court's conclusion, First Farmers asserts that as Whorley's claim is based on First Farmers' actions as a guardian over Zehring's estate, the one-year time period of Indiana's guardianship provisions governs Whorley's Complaint. Since she filed outside this one-year time limit, First Farmers maintains that Whorley's action is barred.
Indiana Code section 29-3-9-6 relates to a guardian's obligations to account to the court for the protected person's property. Subsection...
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