Will of Scheele, In re

• Decision Date: 28 December 1987
• Docket Number: No. 02A04-8611-CV-344,02A04-8611-CV-344
• Citation: 517 N.E.2d 418
• Parties: In re Trust Under the Last WILL and Testament OF Edwin F. SCHEELE. Appeal of Susann M. KELLOGG.
• Court: Indiana Appellate Court

Page 418

517 N.E.2d 418

In re Trust Under the Last WILL and Testament OF Edwin F. SCHEELE Appeal of Susann M. KELLOGG.

No. 02A04-8611-CV-344.

Court of Appeals of Indiana Fourth District.

Dec. 28, 1987.

Rehearing Denied Feb. 12, 1988.

Stephen R. Snyder, David C. Cates, Beckman, Lawson, Sandler, Snyder & Federoff, Syracuse, for appellant.

John F. Lyons, Thomas J. Markle, William F. McNagny, Dennis C. Becker, Barrett & McNagny, Fort Wayne, for appellee.

MILLER, Judge.

Susann Kellogg appeals from a summary judgment entered on Lincoln National Bank and Trust Company's petition for construction of the last will and testament of Edwin F. Scheele and for instructions on the disbursement of funds held in a trust created under that will. She raises the following issues on appeal:

1) whether the trial court erred in denying her motion to vacate the summary judgment, which was based on alleged newly discovered evidence;

2) whether the trial court erred in finding that no ademption by satisfaction occurred even though one month prior to his death, the testator gave 150 shares of stock to his son;

3) whether a genuine issue of material fact exists regarding ademption by extinction of the trust corpus;

4) whether a genuine issue of material fact exists regarding the testator's intent as to the disposition of his property;

5) whether the trial court erred in determining that the doctrines of equitable deviation and approximation were unavailable to effectuate the testator's intent; and

6) whether the trial court erred in striking portions of her contentions which alleged that the predecessor trustee breached his fiduciary duty to the benefit of his heirs and to her detriment.

We affirm.

Edwin Scheele died on August 23, 1961, approximately one month after he had given 150 shares of stock in William Scheele & Sons, Inc. to his son, Richard. In his will, Scheele named his daughter, Susann Kellogg, and Richard as co-executors. ¹ The will implemented an AB trust arrangement whereby all property qualifying for the marital deduction was to be placed in Trust A and the residue of the estate was to be placed in Trust B. Scheele's wife, Marcella, was to receive the net income from Trust B during her life; hence, the trust corpus was not to be distributed until her death. Richard was named as trustee for both trusts.

Upon distribution of the estate in 1965, the only property placed in Trust B was 495 shares of William Scheele & Sons, Inc. stock which had a value of $73,324.35. This stock was sold for $835,000.00 in May of 1975 when RKO Bottlers of Fort Wayne, Inc. purchased all of the issued and outstanding stock of William Scheele & Sons Company, Inc. The proceeds from the sale of the 495 shares were placed in Trust B. Richard died in 1975, and in July of that year Lincoln National Bank and Trust Company of Fort Wayne was appointed successor trustee.

Marcella Scheele died on July 9, 1983 and in November of that year, Lincoln National petitioned the Allen Superior Court to construe Edwin Scheele's will and to instruct it regarding disbursement of the trust corpus. The pertinent portions of Edwin Scheele's will provided:

EIGHTH: All property devised and bequeathed to my said son, RICHARD E. SCHEELE, as Trustee of Trust B, shall be held and administered by him as a separate trust as follows:

(1) I direct the Trustee to demand, collect, take and receive the income, rents and profits derived from Trust B and from such income, rents and profits the Trustee shall first pay all the necessary costs and expenses incident to the attendant upon the execution of this Trust, which, in the sole opinion and discretion of the Trustee, are properly chargeable against income but such charges which, in the sole opinion and discretion of the Trustee, are properly chargeable against the corpus of Trust B, may be charged against the corpus of, rather than the income of Trust B. The remainder of the income (hereinafter called "net income") shall be distributed as hereinafter provided:

(a) The Trustee shall pay the net income to the beneficiary or beneficiaries hereinafter designated in installments not less frequently than quarterly.

(b) The Trustee shall pay to my said wife, MARCELLA E. SCHEELE, during her lifetime, if she shall survive me and does not elect to take under the law instead of under this Will, the net income derived from the Trust Estate.

(c) Upon the death of my said wife or upon my death if she shall predecease me or if she survives me but elects to take under the law instead of under this Will, the Trustee shall divide and distribute the Trust Estate as follows:

(i) First to my son, RICHARD E. SCHEELE:

(A) Such stock of William Scheele & Sons Company, Inc., as I may own at the time of my death, but only up to a maximum of Seven Hundred Eighty (780) shares thereof, and

(B) All stock of Edwin F. Scheele Co., Inc., which I may own at the time of my death.

(ii) Then to my daughter, SUSANN M. KELLOGG:

(A) Such stock of William Scheele & Sons Company, Inc., as I may own at the time of my death in addition to that given to my son by subparagraph (i)(A) of this subparagraph (c), but only up to a maximum of One Hundred (100) shares thereof; and

(B) Such amount of the remainder of my estate as will, together with the shares of stock given her by subparagraph (A) above, equal the value as finally determined for Federal estate tax purposes of the shares of stock given my son by subparagraph (i) of this subparagraph (c).

(iii) All of the rest, residue and remainder of the Trust Estate shall be divided equally between my said son, RICHARD E. SCHEELE and my said daughter, SUSANN M. KELLOGG, share and share alike;

provided, however, if at the time of distribution of the Trust Estate, as in this subparagraph (c) first provided, either my said son or my said daughter shall then be deceased leaving lawful issue then surviving, then in such event, the share of my estate to which my son or daughter would have been entitled if then surviving, shall go to the living lawful issue of such deceased son or daughter, per stirpes and not per capita absolutely, but in the event either my said son or my said daughter shall then be deceased leaving no lawful issue then surviving, then in such event, the share of my estate to which my son or daughter would have been entitled if then surviving, shall go to the other of my said son or daughter, if living, but, if not, then to the lawful surviving issue of such deceased son or daughter, absolutely but if neither my son nor daughter, or any lawful issue of either of them then be surviving, then to the heirs at law of the last survivor of them, whoever they may be; to be determined by and distribution to be made in accordance with the laws of descent of the State of Indiana, to HAVE AND TO HOLD the same to them and their heirs and assigns forever and this Trust shall thereupon be terminated....

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NINTH: In the conduct, investment, administration, operation, management, and distribution of Trust A and Trust B and the several shares thereof (except where Trust A is specifically excluded), the Trustee and the respective beneficiaries hereunder shall be governed and controlled by the following:

(1) Subject only to the faithful discharge of the Trustees['] duty to apply the proceeds and avails of the Trust Estate to the purposes herein specified, the Trustee may perform every act in the conduct, investment, administration, operation, management and distribution of the Trust Estate which individuals may perform in the management of like property owned by them free from any trust, and in the retention, investment and reinvestment of the Trust Estate, the Trustee shall be required only to use the care and skill under the circumstances then prevailing which men of prudence, discretion and intelligence ordinarily exercise in the management of their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering income as well as safety of the principal of the Trust Estate, and the Trustee may exercise every right, power and privilege with respect to each item of property in the Trust Estate, real, personal and mixed, which individual owners of like property can exercise, including, but only by way of illustration and without limitation thereto, the following:

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(c) To improve, lease (for any period of time whatsoever), partition, alter, pledge, mortgage, encumber, sell, transfer, convey, deliver, exchange, or otherwise dispose of or deal with all or any part of the securities or other property, real or personal, at any time composing the Trust Estate, for such consideration and upon such terms and conditions as the Trustee may deem proper, and no person, firm or corporation taking such property or securities by way of lease, pledge, mortgage, encumbrance, sale, transfer, conveyance or exchange shall be required to see to the application of the purchase money or of the rents, issues, profits or proceeds of any such lease, pledge, mortgage, encumbrance, sale, transfer, conveyance or exchange or to inquire as to the authority of the Trustee in the premises.

Richard Scheele's children and Kellogg filed contentions in response to Lincoln National's petition. In her contentions, Kellogg argued that she should receive one-half of the funds contained in Trust B because the sale of the stock constituted an ademption which caused the provision for equal distribution between her and Richard to become controlling. She also argued that Edwin Scheele's intent was to provide for equal distribution between herself and Richard except to the extent Richard was to have control of the corporation. Because the sale of stock precluded Richard from controlling the corporation, Kellogg further argued that equity permitted reformation of the trust language to effectuate the deceased's intent of equal distribution. Lastly, Kellogg argued that...