King v. King

• Decision Date: 15 January 2013
• Docket Number: No. 49A02–1202–MF–73.,49A02–1202–MF–73.
• Citation: 982 N.E.2d 1026
• Parties: George Dean KING, Appellant–Defendant, v. Kay S. KING, et al., Appellees–Plaintiffs.
• Court: Indiana Appellate Court

982 N.E.2d 1026

George Dean KING, Appellant–Defendant,

v.Kay S. KING, et al., Appellees–Plaintiffs.

No. 49A02–1202–MF–73.

Court of Appeals of Indiana.

Jan. 15, 2013.

Alan S. Brown, Julia Blackwell Gelinas, Darren A. Craig, Frost Brown Todd, LLC, Indianapolis, IN, Attorneys for Appellant.

Jon Laramore, David R. Hamer, Teresa A. Griffin, Faegre Baker Daniels, LLP, Indianapolis, IN, Attorneys for Appellees.

OPINION

RILEY, Judge.

STATEMENT OF THE CASE

Appellant–Defendant, George Dean King (George), appeals the trial court's findings of fact and conclusions of law approving the Receiver's Verified Final Accounting relating to the receivership of eight business entities founded by George W. King (George Sr.) and the distribution of the receivership assets among George Sr.'s three children, George, Robert King (Bob), and Kay S. King (Kay) (collectively, the Siblings).¹

We affirm.

ISSUES

George raises four issues on appeal, which we restate as follows:

(1) Whether the trial court abused its discretion by approving the elimination of certain inter-company accounts receivable belonging to Crown Associates, Inc. (Crown) prior to conveying Crown to George;

(2) Whether the trial court properly decided that the Receiver was not required to reimburse World Corporation (World) for tax payments relating to intercompany accounts prior to conveying World to George;

(3) Whether the trial court properly applied the Receiver's approved Plan of Distribution, which required that any beneficiary who unsuccessfully appealed a Receiver's action pursuant to the Plan bears the Receiver's legal costs of the appeal; and

(4) Whether the trial court properly released the Receiver from liability for all actions taken during the pendency of the receivership.

FACTS AND PROCEDURAL HISTORY

This case arises out of a dispute concerning the ownership of several corporations and partnerships between Kay and her minor son, Christopher King (Christopher), on one side and Kay's brothers, George and Bob, on the other side. Throughout his lifetime, George Sr., the Siblings' father, established several companies. In 1949, he founded G.W. King as a for-profit Indiana corporation. He subsequently incorporated R.L. King, Inc. and K.S. King, Inc. as Indiana for-profit corporations in 1963; World as an Indiana for-profit corporation in 1981; and Crown as a Florida corporation in 1989. He also founded three limited partnerships, G.W. King Co., R.L. King Co., and N.E. King, Co. In 1999, Kay lived with George Sr. in his Indianapolis' residence and worked for his investment company. The Siblings had a strained relationship and Kay and George often quarreled over who would control George Sr.'s multimillion dollar estate after his death.

George Sr. died in 2001. A couple of weeks prior to George Sr.'s death, George shot Kay and Christopher multiple times. George was subsequently charged with and convicted of two Counts of attempted murder and is currently serving a fifty-year prison sentence.²See King v. State, 799 N.E.2d 42, 46 (Ind.Ct.App.2003), trans. denied, cert. denied,543 U.S. 817, 125 S.Ct. 54, 160 L.Ed.2d 24 (2004).

On April 4, 2003, Kay and Christopher filed a Complaint on behalf of themselves, as well as K.S. King Co. and C.K. Co.³ (collectively, Appellees) against George, Bob, and the five corporations, G.W. King, Inc., K.S. King, Inc., R.L. King, Inc., Crown, and World, and the three partnerships, G.W. King Co., R.L. King, Co., and N.E. King Co. (collectively, the Receivership Entities). The Complaint alleged thirteen different counts and sought a determination on the ownership of certain Receivership Entities, dissolution of the Receivership Entities, and the appointment of a Receiver to manage the dissolution, winding up and accounting of the Entities.

On June 5, 2003, the trial court appointed John M. Davis as the Receiver and directed him “to immediately recover, receive, take charge and possession of the business, cash, assets, leases, general intangible[s], accounts, proceeds from sales, note[s], bills receivable, and choses in action, and all of the tangible and intangible property and records ...” of the Receivership Entities. (Appellant's App. p. 135). The trial court's order permitted the Receiver to obtain the necessary insurance, open bank accounts, invest assets, determine any taxes owed, and “take such actions as may be necessary and appropriate to prevent the dissipation or concealment of any funds or assets.” (Appellant's App. pp. 136–37). The order also mandated the Receiver to take custody of the business records of the Receivership Entities, to recommend the disposition of their assets, and allowed him to “initiate legal actions as he deems appropriate in discharging his duties as Receiver.” (Appellant's App. pp. 138–39).

The Receiver spent more than five years, well into 2008, marshalling the assets of the Receivership Entities and addressing related tax issues. In 2004, the Receiver filed numerous tax returns for the Receivership Entities and paid more than two million dollars in outstanding tax liabilities. To pay these liabilities, the Receiver drew on Crown's assets as this company had more liquid assets available than the other Receivership Entities. The Receiver accounted for his use of Crown assets to pay the tax obligations owed by other Receivership Entities by crediting an account receivable in favor of Crown with corresponding payables charged to the Receivership or the Receivership Entities. These “intercompany accounts [were] the result of the operation, management, and paying taxes by the [R]eceivership for the affiliated companies.” (Transcript p. 51). At the beginning, Crown's accounts receivable was valued at $437,512; in 2007, it stood at $687,278.

On February 22, 2005, the Siblings entered into a Term Sheet for Settlement of Litigation (Term Sheet), which represented their partial agreement on the broad outlines of asset distribution. The Term Sheet constructed a complex distribution scheme in which the allocation of certain specific assets to certain Siblings was contemplated instead of equally dividing the receivership assets among the Siblings. For example, the Term Sheet provided that

The assets and/or equity interest of [Crown] shall be conveyed by the Receiver to [George], free and clear of any claims that were asserted or could have been asserted by any plaintiffs or any defendants in the King Receivership Litigation,subject only to claims for any unpaid taxes and the claims of third-party creditors of [Crown].

(Appellant's App. p. 363). It also gave George a condominium in the Geist neighborhood of Marion County, a lakefront lot in the same area, and three automobiles. Because not all issues over the division of receivership assets were resolved in the Term Sheet, it also specified that the Siblings' further agreements would be set forth in greater detail in a separate Liquidation Agreement and that any distributions to the Siblings would be expedited through a liquidating trust. In the event of continuing disagreement between the Siblings, the Term Sheet provided

Until dismissal of the King Receivership Litigation, the Receivership Court shall retain jurisdiction to enforce the terms of the Term Sheet and the Liquidation Agreement. If counsel for the King Family are unable to agree upon any term or condition of the Liquidation Agreement following execution of this Term Sheet, the parties agree that such dispute may be submitted by any other party to the Receivership Court for determination and the determination of the Receivership Court shall be final and non-appealable.

(Appellant's App. pp. 369–70).

The Siblings failed to enter into the Liquidation Agreement; instead, each Sibling presented his or her own draft liquidation agreement to the trial court. On February 24, 2006, the trial court issued its Entry Resolving Disputes Between Plaintiffs and Defendants Concerning Settlement of Litigation, which decided two issues raised by the Siblings. With respect to the accounts receivable created by the Receiver and now claimed by George, the trial court concluded that “the Receiver should eliminate all inter-company accounts prior to making the transfers contemplated by the Term Sheet and that a definitive Settlement Agreement should be executed by the parties in accordance with these findings of the [c]ourt.” (Appellant's App. p. 70). Regarding George's request to retain stock in the Receivership Entities by having Bob and Kay transfer their shares in the Receivership Entities to him in exchange for the shares' monetary value, the trial court concluded, in pertinent part

42. [ ] that the tax deferral mechanism which [George] seeks to have imposed under the Term Sheet, given his prior history of tax fraud and asset concealment, places an unacceptable risk upon the other King siblings, particularly should [George] liquidate the assets of the corporations and place himself in a position where he is unable to pay whatever subsequent tax liabilities might be claims against those entities. Accordingly, the Settlement Agreement should not be modified to provide for acquisition of stock in the [Receivership Entities] by [George].

(Appellant's App. p. 75).

Again, the Siblings were unable to reach an agreement to divide the assets. Consequently, on November 25, 2008, the Receiver submitted his Plan of Distribution for the trial court's approval. In his Plan, the Receiver acknowledged that he intended to follow the Term Sheet “to the greatest extent practicable under the circumstances” and to the extent its provisions remained relevant. (Appellant's App. p. 343). He proposed the elimination of the accounts receivable held by Crown prior to its conveyance to George and recommended to eliminate the liquidating agent contemplated by the Term Sheet and instead allow him to manage, liquidate, and distribute the assets. The Plan further suggested to distribute certain specified receivership assets to certain...