Meyer v. Northern Indiana Bank and Trust Co.

• Decision Date: 01 September 1978
• Citation: 490 N.E.2d 400
• Parties: Russel MEYER and Wesley Meyer, Individually, and Russel Meyer and Wesley Meyer, as Trustees under Declaration under Trust, Dated
• Court: Indiana Appellate Court

Page 400

490 N.E.2d 400

Russel MEYER and Wesley Meyer, Individually, and Russel

Meyer and Wesley Meyer, as Trustees under

Declaration under Trust, Dated September

1, 1978, Defendants/Appellants,

v.

NORTHERN INDIANA BANK AND TRUST COMPANY, Valparaiso,

Indiana, as Administrator for the Estate of Alfred

Schrader, deceased, Plaintiff/Appellee.

No. 3-185-A-1.

Court of Appeals of Indiana,

Third District.

March 26, 1986.

David M. Hamacher, co-counsel, Hamacher & Hamacher, Crown Point and Roger K. Claudon, co-counsel, Valparaiso, for defendants/appellants.

James L. Sullivan, Valparaiso, for plaintiff/appellee.

STATON, Presiding Judge.

On September 1, 1978, Alfred Schrader (Schrader) executed a document creating the "ATSCO Trust." The beneficiaries of that trust are those individuals holding "Certificates of Beneficial Interest." Russell and Wesley Meyer (the Trustees) are the named trustees for Schrader, who died in 1980.

The Northern Indiana Bank and Trust Company of Valparaiso, Indiana (Estate) is the administrator of Schrader's estate. The Estate seeks to obtain certain real estate contracts held outside the trust document.

The trial court found that the ATSCO Trust was a private trust that failed. An examination of the Trust by the trial court revealed that the identity of the beneficiaries was not reasonably ascertainable. Partial summary judgment was granted in favor of the Estate and a resulting trust was declared to exist.

Both the Trustees and the Estate argue that there are numerous points for us to review; however, we need only address the following two issues:

1) Whether the trial court erred as a matter of law for declaring the trust void for lack of reasonable certainty as to the beneficiaries; and

2) Whether this appeal should be dismissed because the Trustee's brief was untimely filed.

Reversed.

I Beneficiaries

The ATSCO Trust document provides that the beneficial interest can be divided into as many as one hundred (100) units in certificate form. Holders of these certificates are beneficiaries of the trust and entitled to a pro rata share of the corpus upon the termination of the trust. ¹ On the day the ATSCO Trust instrument was executed, beneficiaries were selected who would receive Certificates of Beneficial Interest. Some of those certificates were issued the day the trust was created, and others were issued the next day. Two of the holders were identified as the Sorrowful Mother Catholic Church of Wheatfield, Indiana and the Church of the Nazarene of Valparaiso, Indiana.

The Estate's contention is that the ATSCO Trust is defective as a matter of law because the trust instrument itself did not name a beneficiary. It moved for summary judgment on that ground.

The Trustees urge us to determine that the Estate is not entitled to summary judgment as a matter of law. They argue that the identity of the ATSCO Trust beneficiaries is an unresolved issue of material fact. Their argument is that the Certificates of Beneficial Interest provide a means for ascertaining the beneficiaries of the trust, and that the identity of the holders of those certificates and their existence are facts to be resolved at trial.

Summary judgment is proper where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Indiana Rules of Procedure, Trial Rule 56(C). Although this rule helps expose spurious cases and eliminate undue burdens on litigants, courts must apply caution so that a party's right to fair determination of a genuine issue is not jeopardized. Any doubt as to fact, or an inference to be drawn therefrom is to be resolved in favor of the party opposing the motion. Ashlock v. Norris (1985), Ind.App., 475 N.E.2d 1167, trans. den.; Four Winns, Inc. v. Cincinnati Ins. Co., Inc. (1984), Ind.App., 471 N.E.2d 1187, trans. den. In reviewing a summary judgment, the appellate court sits in the same position as the trial court. Lawson v. Howmet Aluminum Corp. (1983), Ind.App., 449 N.E.2d 1172.

Our analysis begins by examining the law governing the creation of a trust. The formal requirements are as follows:

Except as required in the applicable probate law for the execution of wills, no formal language is required to create a trust, but its terms must be sufficiently definite so that the trust property, the identity of the trustee, the nature of the trustee's interest, the identity of the beneficiary, the nature of the beneficiary's interest and the purpose of the trust may be ascertained with reasonable certainty.

IC 1972, 30-4-2-1(b) (Burn's Code Ed.).

Case law has made it clear that any attempt to create an express trust that omits one or more of the formal requirements would automatically fail. Pavy v. Peoples Bank & Trust Co. (1964), 135 Ind.App. 647, 195 N.E.2d 862, reh. den. That rule, however, is not a technical trap. Trusts shall be construed in a manner so as to implement the intent of the settlor and the purposes of the trust. Matter of Walz (1981), Ind.App., 423 N.E.2d 729. If the rules of law and the terms of the trust conflict, the terms of the Trust shall control unless it is a violation of some positive rule of law or against public policy. IC 1972, 30-4-1-3 (Burn's Code Ed.). Finally, we note that in construing trusts in favor of validity, extrinsic evidence is admissible to clarify the terms of a trust or remove ambiguities. Trust Code Study Commission Comment West's AIC 30-4-2-1(b) (Supp.1985). ²

The record reveals that it is uncontroverted that Schrader was a sophisticated businessman familiar with money matters. He established a trust account at the State Exchange Bank of Culver, Indiana, and funded it with $42,000.00 in cash. Later, he caused payments which were being made to him under three separate contracts for the sale of real estate to be transferred to that trust account. The Estate does not deny that Schrader intended to establish a trust.

The beneficiaries under the ATSCO Trust are those who hold a Certificate of Beneficial Interest. The term "beneficiary" is defined as follows:

"Beneficiary" means any "cestui que trust" or person named or a member of the class designated in the terms of the trust to be any person or class of persons for whose benefit the title to the trust property is held and for whom the trust is to be administered;

West's AIC 1979, 30-4-1-2(3).

Here, certificate holders form the class of persons for whose benefit the trust is administered. The issuance of certificates of beneficial interest provides a plain and unambiguous means of identifying intended beneficiaries of the ATSCO Trust. This method we believe is sufficient to satisfy the requirements of IC 30-4-2-1 that beneficiaries be ascertainable with reasonable certainty.

Our conclusion is bolstered by the Restatement (Second) of Trusts Section 112 (1957), comment a, at 243, which provides that it is sufficient that a beneficiary be capable of ascertainment from facts existing at the time of the creation of the trust. The Restatement squarely addresses the instant issue, and the certificate holders of the ATSCO Trust are an ascertainable class of beneficiaries. Given our statutory preference for valid trusts, we believe that it would be unequitable not to apply the Restatement to the present case.

The existence or non-existence of issued certificates is an unresolved issue of material fact. The Trustees have intimated the existence of such certificates in their affidavits filed in opposition to the motion for summary judgment and, since we must resolve all doubts of factual questions in favor of the non-moving party, Ashlock, supra, it is possible for us to infer that the trust does not lack specificity as to its beneficiaries.

Thus, this case is not ripe for summary judgment. It is not clear from the record that the moving party, the Estate, is entitled to summary judgment as a matter of law because the factual question regarding the identity of the certificate holders has to be answered at trial.

II Dismissal

The Estate also argues that the Trustees' appeal should be dismissed because their brief was not timely filed. We disagree.

Initially this court granted the Trustees an extension of time to file their brief up to and including June 11, 1985. On June 10th, ...