Schrage v. Seberger Living Trust

• Court: Indiana Appellate Court
• Writing for the Court: BROWN, Judge.
• Citation: Schrage v. Seberger Living Trust, 52 N.E.3d 45 (Ind. App. 2016)
• Decision Date: 10 March 2016
• Docket Number: No. 45A03–1506–TR–685.,45A03–1506–TR–685.
• Parties: Stephanie A. SCHRAGE, Appellant, v. In the Matter of the SEBERGER LIVING TRUST u/t/d April 27, 2009, Appellee.

52 N.E.3d 45

Stephanie A. SCHRAGE, Appellant

v.In the Matter of the SEBERGER LIVING TRUST u/t/d April 27, 2009, Appellee.

No. 45A03–1506–TR–685.

Court of Appeals of Indiana.

March 10, 2016.

Greg A. Bouwer, Koransky, Bouwer, and Poracky, P.C., Dyer, IN, Attorney for Appellant.

Benjamin T. Ballou, Preston G. Sisler, Hodges and Davis, P.C., Merrillville, IN, Attorneys for Appellee.

BROWN, Judge.

[1] Stephanie A. Schrage (“Schrage”) appeals the trial court's order denying her petition to compel the delivery of a complete and unredacted copy of the Audrey R. Seberger Living Trust u/t/d April 27, 2009 (the “Trust”). Schrage raises one issue which we revise and restate as whether Schrage is entitled to a complete copy of the Trust upon request to the trustee. We affirm.

Facts and Procedural History

[2] The relevant facts are not in dispute. On April 29, 1992, Audrey R. Seberger, as Settlor and initial Trustee, executed the Trust, which she amended and/or restated as follows: on October 14, 1996, by a Restatement of Trust; on January 27, 1999, by an Amendment to the Restatement of Trust; on August 9, 2000, by a Second Amendment to the Restatement of Trust; on March 11, 2003, by a Third Amendment to the Restatement of Trust; on January 25, 2006, by a Second Restatement of the Trust; on April 27, 2009, by a Third Restatement of the Trust; and on August 19, 2009, by an Amendment to the Third Restatement of the Trust.¹ The April 27, 2009 Third Restatement of the Trust “replace [d] and supersede[d][her] original trust, restated trusts and all prior amendments.” Appellant's Appendix at 21. The August 19, 2009 Amendment disinherited Jill R. Schrage, the mother of Schrage, and directed that Schrage receive $25,000. Seberger died on July 11, 2014, and Jack M. O'Drobinak accepted the position of Successor Trustee (the “Trustee”).

[3] On August 26, 2014, Schrage by counsel sent a letter to the Trustee requesting a copy of Seberger's will and the Trust. The following day, the Trustee authored a “Notice to Beneficiary” stating that “[a]s a Beneficiary of the Trust, you are entitled to be advised as to the change of Trustees that has taken place in the Trust, and your interest in the Trust, as shown in Exhibit A attached hereto.” Id. at 192. Exhibit A consisted of one page containing one sentence which stated: “My Trustee shall distribute the sum of $25,000 to each of the then living children of JILL R. SCHRAGE, free of trust.” Id. at 193. The Notice to Beneficiary advised that

[a] person must commence a judicial proceeding to contest the validity of a Trust that was revocable at the Settlor's death at the earliest of the following:

(1) Ninety (90) days from the date you received a copy of the Trust certification and the information contained in this Notice; or

(2) Three (3) years after the Settlor's death.

Id. at 192.

[4] The Trustee also completed a Trust Certification pursuant to Ind.Code § 30–4–4–5 on that same date which referenced Exhibit A, noted that the Trust was still in existence and had become irrevocable by Seberger's death, and provided the contact information for the Trustee. These documents were sent by the Trustee to Schrage's counsel in a letter dated August 28, 2014. The letter advised that the Trustee was under no obligation to provide a copy of Seberger's will, that as a matter of courtesy he provided a redacted copy of the Trust, and that “[a] Notice to Beneficiary relating to ... Schrage[ ] is also enclosed. I am serving her by sending this document to you as I did not have an address for her to be able to mail it to her directly.” Id. at 191.

[5] On October 22, 2014, the Trustee filed a Petition for Court Instruction stating in part:

10. Article One of the August 19, 2009 Amendment revokes Article Six and Eight of the Trust and, in pertinent part, [Schrage] is a specific distributee of the Trust.

11. Upon request, [the Trustee] provided a redacted version of the Trust to Schrage showing the specific distribution to Schrage and her siblings.

12. Subsequently, Schrage requested a complete copy of the Trust, along with all prior Amendments and Restatements.

13. Pursuant to I.C. § 30–4–3–6(b)(8), the Trustee has a duty, upon the trust becoming irrevocable, by the death of the settlor, and the written request of an income beneficiary or remainderman, to “promptly provide a copy of the complete trust instrument to the income beneficiary or remainderman.”

14. Pursuant to I.C. § 30–4–3–18(a), “[i]f there is reasonable doubt with respect to any matter relating to the administration of the trust, the trustee is entitled to be instructed by the court.”

15. There exists reasonable doubt under Indiana statutory and case law as to whether Schrage, a specific distributee of the Trust, is entitled to a complete copy of the Trust, and all prior Amendments and Restatements.

Id. at 103. That same day the Trustee filed a Petition to Docket Trust with Court stating in part:

10. That [the Trustee] is requesting to docket the Trust with the Court because he has contemporaneously herewith filed his Successor Trustee's Petition for Court Instruction.

* * * * * *

12. That the following individuals are beneficiaries of the Trust and are entitled to notice of these proceedings:

* * * * * *

J. Stephanie Schrage, c/o Attorney....

Id. at 19.

[6] On October 31, 2014, Schrage filed a Petition to Compel Trustee to Deliver the Trust to Schrage (the “Petition to Compel”) stating that “the 90 day time period within which to contest the validity of the Trust” had been triggered by the Trustee's Notice to Beneficiary sent on August 28, 2014, that the Trustee continues to not provide a complete and unredacted copy of the Trust, that under the Trust Code she is a remainder beneficiary, and that accordingly she is entitled to, upon written request, a complete copy of the Trust. Id. at 187. Schrage requested that the court compel the Trustee to provide her with a complete and unredacted copy of the Trust and to rule that the ninety-day time period she has to contest the trust's validity does not begin until she is served with a copy of the complete Trust. On November 12, 2014, the Trustee filed a response to Schrage's Petition to Compel, and on April 14, 2015, the Trustee filed a memorandum of law in support of his response. Also, on November 20, 2014, the court entered an order docketing the Trust.²

[7] On April 23, 2015, the court held a hearing on all pending petitions.³ On May 26, 2015, the court entered an order denying Schrage's Petition to Compel and instructed the Trustee “to not provide Schrage with a complete, unredacted copy of the Trust.” Id. at 16. The court's order reasoned as follows:

10. Article One of the August 19, 2009 Amendment revoked Articles Six and Eight of the Trust and, in pertinent part, Schrage is a specific distributee of the Trust.

* * * * * *

19. The language of I.C. § 30.4–3–6(b)(8) is clear and unambiguous and only refers to “income beneficiary” and “remainderman”. Under the Indiana Trust Code, the term “beneficiary” includes an “income beneficiary” and a “remainder beneficiary”. I.C. § 30–2–14–2. “Income beneficiary” is defined as a “person to whom net income of a trust is or may be payable.” I.C. § 30–2–14–5. “Remainder beneficiary” is defined as “a person entitled to receive principal when an income interest ends.” I.C. § 30–2–14–11. “Remainderman” is defined as “a beneficiary entitled to principal, including income which has been accumulated and added to the principal.” I.C. § 30.4–1.2(15). Within the definition of “remainderman”, “principal” is defined as “property that is held in trust for distribution to a remainder beneficiary when the trust terminates or that will remain perpetually vested in the trustee.” I.C. § 30–2–14–10.

20. Schrage is not an “income beneficiary” as net income of the Trust is not payable to her. Moreover, Schrage is not a “remainderman” as she is not entitled to principal as that term is defined in I.C. § 30–2–14–10. Instead, Schrage is a specific distributee of the Trust and entitled to a cash distribution prior to any disbursements of income and principal and prior to termination of the trust.

21. Like a “specific bequest” or “specific devise”, Black's Law Dictionary defines the same as “[a] testamentary gift of specific personal property ... or of a specific amount of cash.”

22. In addition, the Internal Revenue Code provides that, with exceptions, amounts distributed to beneficiaries are includable in said beneficiaries' gross income. I.R.C. §§ 662(a), 663(a)(1). Recipients of specific distributions, like Schrage, are excluded from receiving distributable net income. I.R.C. § 663(a)(1) (excluding “[a]ny amount which, under the terms of the governing instrument, is properly paid or credited as a gift or bequest of a specific sum of money or of specific property and which is paid or credited all at once or in not more than 3 installments”). Under the Internal Revenue Code, Schrage would not be considered an “income beneficiary” or a “remainderman”/“remainder beneficiary” and would not receive a Schedule K–1 as a result of [the Trustee] filing the necessary fiduciary income tax returns (Forms 1041 and IT–41) on behalf of the Trust.

23. Ind.Code § 30–4–3–6(b)(8) is silent with regard to the rights of a specific distributee to obtain a complete copy of a trust. If the legislature intended for a specific distributee to obtain a complete copy of a trust, it could have included specific language in I.C. § 30–4–3–6(b) to indicate that intent. However, the legislature did not do so, and the Court recognizes this omission in the statute. See Ross v. Ind. State Bd. of Nursing, 790 N.E.2d 110, 119 (Ind.Ct.App.2003) (explaining that one rule of statutory construction is that it is just as important to recognize what the statute does not say as it is to recognize what it does say).

24. Schrage cites Marshall & Ilsley Trust Co., NA. v. Woodward, 848 N.E.2d 1175, 1180–81 (Ind.Ct.App.2006) and argues that because her payment will

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