Lumbard v. Farmers State Bank

• Decision Date: 26 July 2004
• Docket Number: No. 44A03-0310-CV-412.,44A03-0310-CV-412.
• Citation: 812 N.E.2d 196
• Parties: Daniel LUMBARD and Kimberly Lumbard, Appellants-Plaintiffs, v. FARMERS STATE BANK, Appellee-Defendant.
• Court: Indiana Appellate Court

812 N.E.2d 196

Daniel LUMBARD and Kimberly Lumbard, Appellants-Plaintiffs, v. FARMERS STATE BANK, Appellee-Defendant.

No. 44A03-0310-CV-412.

Court of Appeals of Indiana.

July 26, 2004.

Stacey L. Katz, Joshua A. Burkhardt, Beers, Mallers, Backs & Salin, LLP, Fort Wayne, IN, Attorneys for Appellant Daniel Lumbard.

Bill D. Eberhard, Jr., Cheryl L. Weimer, Eberhard & Gastineau, P.C., LaGrange, IN, Attorneys for Appellant Kimberly Lumbard.

Michael J. Caywood, Dresser, Dresser, Haas & Caywood, P.C., Sturgis, MI, Attorney for Appellee.

OPINION

BAKER, Judge.

The Sixteenth Century British author Henry Fielding wrote, "If you make money your god, it will plague you like the devil." In this cause, children have been turned against mother and mother against children because of money.

Appellants-plaintiffs Daniel Lumbard (Grandson) and Kimberly Lumbard (Granddaughter) appeal the entry of judgment in favor of appellee-defendant Cynthia Lumbard (Daughter) in this action to construe a trust. Specifically, Grandson claims that the trial court erroneously admitted a purported will at trial as evidence. Moreover, Grandson claims that the powers of appointment given to Vivian G. Lumbard (Grandmother) in two different trust documents were never exercised because Grandmother's will was never probated. Granddaughter contends that only one power of appointment was exercised, while Daughter maintains that both powers of appointment were exercised by Grandmother's purported will. Concluding that admission of the will as evidence cannot be challenged by Grandson and that Grandmother's purported will executed both powers of appointment, we affirm.

FACTS¹

The facts most favorable to the judgment reveal that Daughter is the sole child of Kent B. Lumbard (Grandfather) and Grandmother. Grandson and Granddaughter are Daughter's children. On September 10, 1974, Grandfather executed a trust agreement creating two trusts upon his death: the Lumbard Family Trust (Family Trust) and the Vivian G. Lumbard Trust (Vivian Trust). The Vivian Trust was created for use as a marital deduction trust under the federal estate tax code. As much property as possible was to be placed into the Vivian Trust in order to maximize the spousal deduction for estate tax purposes. The Family Trust was to contain the residual property of the marital estate. Grandfather's 160-acre farm in LaGrange County was the primary marital asset.

As part of the Vivian Trust agreement, Grandmother was granted a general power of appointment to appoint the trust's corpus "by her Last Will and Testament." Grandson's App. p. 16. The agreement also provided that if Vivian did not exercise her power of appointment, then the trustee was to "pay over and deliver all of this Trust" to the Family Trust. Grandson's App. p. 16. In a purported will dated June 22, 1985, Grandmother appointed the entire corpus of the Vivian trust to Daughter "in fee simple." Granddaughter's App. p. 30.

The Family Trust agreement also gave Grandmother the authority to appoint the corpus of the Family Trust. However, a will was not required, and, instead, Grandmother could appoint the corpus:

by language contained in her Last Will and Testament, by Deed, Conveyance, Bill of Sale, Gift, or by any written instrument executed by Settlor's wife which adequately evidences her intent to appoint pursuant to this power. If such power is exercised by her Will, such Will shall control; otherwise the last dated appointment pursuant to this power during her lifetime shall control.

Grandson's App. p. 17.

The Family Trust document also specified that if the exercise of Vivian's power of appointment "fail[ed] for any reason whatsoever," the "Trustee shall hold, administer, and distribute" the net income and principal of the trust. Grandson's App. p. 17. The net income of the trust—as deemed advisable by the trustee—was to be paid to Grandson, Daughter, and Granddaughter, "in that sequence of preferential priority," for the beneficiaries' "care comfort, support and education." Grandson's App. p. 17. The principal of the trust—as deemed advisable by the trustee—was to be paid to Grandson, Daughter, and Granddaughter, "in that sequence of preferential priority," for the beneficiaries'"care comfort, support and education." Grandson's App. p. 18. In her purported will, however, Grandmother exercised her power of appointment and bequeathed the property in the Family Trust in this fashion:

[I]n equal one-third shares to [Daughter, Granddaughter, and Grandson], or to their descendants, per stirpes, and do hereby express my intent for one-third of said assets in the [Family Trust] to go to [Grandson], or he shall receive the farm real estate now held by Shipshewana State Bank as Trustee under said Trust Agreement, whichever amount has the lesser value at the date of my death, and in the sole discretion of my Co-Personal Representatives.

Grandson's App. p. 29.

The Family Trust agreement also provided that, upon Grandson's twenty-fifth birthday—and in case Grandmother's power of appointment had not been exercised—the trustee could distribute "sixty-six and two-thirds per cent" of the trust's assets to Grandson. Grandson's App. p. 18. This provision was intended "to equip Grandson Joseph Lumbard with Settlor's one hundred sixty (160) acre farm in LaGrange County, Indiana." Grandson's App. p. 18. The "thirty-three and one-third per cent" of the property remaining in the trust was to be used for the "care, comfort, and support" of Daughter and Granddaughter. Grandson's App. p. 18. After Daughter and Granddaughter's death, any funds remaining in the "thirty-three and one-third per cent" were to revert to the Family Trust to be distributed as contained therein. Grandson's App. p. 18.

Grandfather died in 1981. Grandmother died in 1997 in Florida, but—on advice given by the trustee's attorney to Daughter—her will was never admitted to probate.² Because the provisions of the purported will were known to all parties at this time—and because all parties relied on the advice of the trustee's attorney—the property was considered to be held by Daughter, Granddaughter, and Grandson equally as tenants in common.

Apparently, the trustee's attorney questioned whether his advice had been correct³ inasmuch as on August 29, 2001, Farmers State Bank filed a petition to construe the trust, asking the trial court "to determine the rights and obligations of the remainder beneficiaries." Granddaughter's App. p. 15. On February 13, 2002, all parties jointly signed a stipulation of facts. In July 2002, Grandson and Granddaughter filed separate petitions to construe the trust, and Farmers State Bank withdrew its own petition.⁴

Grandson claimed that Grandmother's purported will was never probated and, thus, was void. Consequently, Grandson urged the trial court to distribute the property in both the Vivian Trust and Family Trust as if neither power of appointment was exercised. This would have resulted in the following steps:

1. All the property in the Vivian Trust would be poured into the Family Trust. 2. The property in the Family Trust would be divided as follows: Two-thirds to Grandson and one-third to Granddaughter and Daughter. Thus, Grandson would receive two-thirds of the property of both trusts.

Granddaughter claimed that Grandmother's purported will was never probated and, thus, the Vivian Trust's power of appointment was not exercised. However, because the purported will was a "Deed, Conveyance, Bill of Sale, Gift, or ... any written instrument," Granddaughter argued that the power of appointment with regard to the Family Trust was exercised. Grandson's App. p. 17. Accordingly, under the Granddaughter's analysis, the following would have occurred:

1. All the property in the Vivian Trust would be poured into the Family Trust.

2. The property in the Family Trust would be divided as follows: One-third each to Grandson, Granddaughter, and Daughter. Thus, each party would receive one-third of the assets of both trusts.

Daughter claimed that even though Grandmother's purported will was never probated, both powers of appointment were exercised. Daughter argued that the Vivian Trust's power of appointment was exercised because Grandmother exercised the power of appointment in her "Last Will and Testament," and, thus, did all she could while alive to express her intent. Granddaughter's App. p. 29. Additionally, Daughter argued that the Family Trust's power of appointment was exercised because the purported will—even though not probated—was a "Deed, Conveyance, Bill of Sale, Gift, or ... any written instrument." Grandson's App. p. 17. Consequently, the following would have occurred under Daughter's view:

1. All the property in the Vivian Trust would go to Daughter.

2. The property in the Family Trust would be divided as follows: One-third each to Grandson, Granddaughter, and Daughter. Thus, Daughter would receive the entire corpus of the Vivian Trust and one-third of the property in the Family Trust.

Thereafter, the trial court held a hearing on the petitions on April 15, 2003, and issued findings of fact and conclusions of law on August 25, 2003. Specifically, the trial court found that Grandmother's will "contains her expression of intent to exercise her" powers of appointment and that the lack of the will's admission to probate reflected "the intent of the personal representative." Granddaughter's App. p. 13. Thus, the trial court held that Grandmother effectively exercised her powers of appointment. The result of the trial court's ruling was that Daughter received the entire corpus of the Vivian Trust and one-third of the assets of the Family Trust. Grandson and Granddaughter now appeal.

DISCUSSION AND DECISION

I. Standard of Review

Initially, we note that, upon Grandson's request, the trial court entered findings of fact and conclusions of law under Indiana Trial Rule 52(A). However the parties here agree as to the material...