Stowers v. Norwest Bank Indiana, N.A.

• Decision Date: 30 November 1993
• Docket Number: No. 50A03-9212-CV-400,50A03-9212-CV-400
• Citation: 624 N.E.2d 485
• Parties: Patricia E. STOWERS, Michael P. Stowers, and Mary S. Kerr, Appellants-Plaintiffs, v. NORWEST BANK INDIANA, N.A., Appellee-Defendant.
• Court: Indiana Appellate Court

Page 485

624 N.E.2d 485

Patricia E. STOWERS, Michael P. Stowers, and Mary S. Kerr Appellants-Plaintiffs, v. NORWEST BANK INDIANA, N.A., Appellee-Defendant.

No. 50A03-9212-CV-400.

Court of Appeals of Indiana,

Third District.

Nov. 30, 1993.

Rehearing Denied Feb. 8, 1994.

G. Gene Arnholt, Columbus, for appellants-plaintiffs.

Douglas D. Small, M. Patricia Hackett, Barnes & Thornburg, South Bend, for appellee-defendant.

HOFFMAN, Judge.

Appellants-plaintiffs Patricia E. Stowers, Michael P. Stowers and Mary S. Kerr (collectively referred to as "Children") appeal the trial court's entry of summary judgment in favor of appellee-defendant Norwest Bank Indiana, N.A. ("Norwest") in an action seeking damages for an alleged breach of trust in distributing trust property per capita rather than per stirpes.

On October 6, 1976, Lucile E. Stowers executed a will and a living trust. She died on July 24, 1987. At the time of her death, Lucile was survived by three children (Children) and eight grandchildren, third-party defendants (collectively referred to as "Grandchildren"). In her will, Lucile bequeathed the residue of her estate to Norwest's predecessor in interest, National Bank and Trust Company of South Bend, as trustee of the living trust. The living trust provided for the distribution of the trust estate as follows:

"After making the provisions for the payments contemplated above, the trustee shall allocate the trust estate at my death, including property added to the estate by my will or from any other source, per stirpes among my living children and grandchildren...."

Upon Lucile's death, the Children were provided with a copy of her trust. Initially, Norwest advised the Children that they would each receive one-third of the trust estate. Upon further review, Norwest determined that the trust required an eleven-way distribution to Lucile's three Children and eight Grandchildren. Norwest contacted each of the Children to advise them of the distribution of the trust estate and to obtain information from them concerning the addresses of the Grandchildren. The trust estate was distributed equally among the Children and Grandchildren between May 18 and June 6, 1988.

Subsequent to the distribution, the Indiana Department of Revenue entered an order that the trust provision which provided for distribution, "per stirpes among my living children and grandchildren," required distribution only to the Children and not to the Grandchildren. On February 3, 1989, the Indiana Tax Court issued an order affirming the Department of Revenue's ruling.

On April 30, 1990, the Children filed their complaint against Norwest, as trustee of Lucile's trust, for a breach of trust contending that Norwest violated the terms of the trust by distributing the trust property per capita, rather than per stirpes. Norwest filed a counterclaim for declaratory relief and a third-party complaint for reimbursement from the Grandchildren. Thereafter, the Children and Norwest both moved for summary judgment. Norwest's motion for summary judgment focused on the waiver and estoppel and the unjust enrichment issues. For purposes of its motion only pertaining to the issues of waiver and estoppel, it assumed that the pertinent provisions of Lucile's trust required that the distribution be only to the Children. The Children's cross-motion for summary judgment focused on their breach of trust claim. The court heard argument on the motions. On August 27, 1992, the trial court entered an order granting Norwest's motion for summary judgment on the basis that the Children waived any objection to the distribution of the trust assets and were estopped from raising any such objections due to their consent and assistance in the distribution. In entering its order, the court stated that it was not determining whether the distribution of the trust was made in error. The Children now appeal.

The sole issue on appeal is whether the trial court erred in granting Norwest's motion and denying the Children's motion for summary judgment.

The purpose of summary judgment is to terminate litigation for which there can be no factual dispute and which can be determined as a matter of law. Chambers v. American Trans Air, Inc (1991), Ind.App., 577 N.E.2d 612, 614, trans. denied. Our standard of review is the same as that used by the trial court: whether there is a genuine issue of material fact and whether the moving party is entitled to judgment as a matter of law. Webb v. Jarvis (1991), Ind., 575 N.E.2d 992, 994. Summary judgment will be affirmed on appeal if it is sustainable on any theory or basis found in the evidentiary matter designated to the trial court. Ind. Trial Rule 56(C).

The Children argue that the trial court erred in determining that they are precluded from recovering damages from Norwest for its alleged breach of trust. Specifically, the Children contend that any consent, acquiescence, or participation, on their part, in the wrongful distribution was without knowledge of their rights.

IND.CODE Sec. 30-4-3-19 (1988 Ed.) provides:

"Relief of trustee's liability for breach of trust

(a) Unless the terms of the trust provide otherwise or unless if to do so would frustrate, impair or defeat the purposes of the trust, a beneficiary, except as provided in subsection (b) of this section, relieves the trustee from liability for breach of trust as to that beneficiary's interest if he:

(1) consents to or acquiesces in the act or omission which constitutes a breach of trust;

* * * * * *

(4) participates in the act of the trustee which constitutes the breach of trust.

(b) The consent, acquiescence, agreement to release or discharge, affirmance, or participation by a beneficiary will not relieve the trustee from liability if:

* * * * * *

(2) at the time it was given the beneficiary did not know of his rights or all of the material facts which the trustee knew or should have known;

(3) it was induced by the trustee's improper conduct[.] ..."

The Study Commission Comment to section 19 states that subsection (a) subdivision (1) follows the Restatement (Second) of Trusts Sec. 216. See IND.CODE Sec. 30-4-3-19 (Burns 1989). Whereas, subdivision (4) follows present Indiana law as exemplified in Meier v. Union Trust Co. of Indiana (1931), 93 Ind.App. 457, 176 N.E. 42, trans. denied.

Either concurrence in the act or acquiescence will release the trustee from liability for breach of trust.

Bogert, Trusts, Sec. 168 (6th Ed.1987);

Restatement (Second) of Trusts Sec. 216 comment (a) (1959).

The mere fact, however, that the beneficiary does not object to the deviation from the terms of the trust does not equal consent. Id. As cautioned by Professor Scott in his treatise,

"[a] distinction is to be drawn between consent of the beneficiary and mere failure to object. The mere fact that the beneficiary knows that the trustee is committing a breach of trust and fails to make any objection is not sufficient to preclude him from holding the trustee liable for breach of trust. On the other hand, the beneficiary is precluded by his consent from holding the trustee liable for breach of trust even though he did not request the trustee to deviate from the terms of the trust. In other words, it is immaterial whether the suggestion that the trustee should deviate from the terms of the trust came from the beneficiary or from the trustee, except that it may be easier for the beneficiary to show that his consent was improperly procured by the trustee when the suggestion came from the trustee than it is where the beneficiary himself originated the suggestion and requested the trustee to do what would otherwise render him liable for breach of trust."

Scott, The Law of Trusts, Sec. 216 at p. 1733 (3d Ed.1967).

Norwest points to the Children's failure to object to the proposed eleven-way distribution as relieving it from any possible liability for breach of trust. Failure to object, however, is not sufficient to preclude the beneficiaries from holding Norwest liable.

See Rest.2d, Trusts Sec. 216 at p. 499;

Bogert, Sec. 168 at p. 626;

Scott, Sec. 216 at p. 1733.

There is no duty on a beneficiary to take a position with regard to approval or disapproval of a proposed act of the trustee. Bogert, Sec. 168 at p. 626.

Norwest, however, asserts that the Children consented to, acquiesced, and participated in the distribution of the trust by supplying it with information regarding the Grandchildren's addresses and executing and returning W-9 tax forms. Norwest points to letters from two of the Grandchildren requesting an earlier distribution. The Children argue that any participation, acquiescence, or participation was given without knowledge of their rights which Norwest knew or should have known.

Here, the Children were initially informed by Norwest that Lucile's trust required a three-way division among the Children. Subsequently, the Children were told by Norwest that it had determined that the instrument required that its prior determination was erroneous and that the terms of the trust document instead mandated that the assets of the trust be divided equally among the Children and the Grandchildren, an eleven-way distribution. It was pursuant to Norwest's request that the Children provided Norwest with the Grandchildren's addresses. Norwest was acting in its fiduciary capacity, as trustee, and the beneficiaries cannot now be estopped from alleging breach of trust after its determination and representation to the Children that the trust document required a per capita distribution. If Norwest had any question with regard to the proper distribution of the trust's assets, it could have asked the court for guidance prior to distribution. See IND.CODE Sec. 30-4-3-18(a) (if reasonable doubt with respect to administration of trust, trustee is entitled to be instructed...