Jayne Murphy, Stephen Kelker, and Cristine Pisula v. Trustee of Star Financial Bank, Laura Lynne Bradford, Amy Myers, Abbie Fellrath, Courtney Ulrey, Eric Franke, Anne Marie Cochrane

FILED Jan 13 2020, 7:43 am

CLERK Indiana Supreme Court Court of Appeals and Tax Court

ATTORNEY FOR APPELLANTS ATTORNEYS FOR APPELLEES David P. Murphy Calvert S. Miller Greenfield, Indiana Kimberly Martin Carson LLP Fort Wayne, Indiana

IN THE COURT OF APPEALS OF INDIANA

Jayne Murphy, Stephen Kelker, January 13, 2020 and Cristine Pisula, Court of Appeals Case No. Appellants-Intervenors, 19A-TR-1529 Appeal from the Allen Superior v. Court The Honorable Jennifer L. Trustee of Star Financial Bank, DeGroote, Judge Laura Lynne Bradford, Amy Trial Court Cause No. Myers, Abbie Fellrath, Courtney 02D03-1809-TR-18 Ulrey, Eric Franke, Anne Marie Cochrane, Jason Franke, Lisa Kay Osburn Harkless, Heather Alwine Eracleous, Trent Talbott, Chris Anderson, Bradley Anderson, and Matthew Anderson, Appellees-Intervenors.

Riley, Judge. Court of Appeals of Indiana | Opinion 19A-TR-1529 | January 13, 2020 Page 1 of 16

STATEMENT OF THE CASE [1] Appellants-Intervenors, Jayne Murphy, Stephen Kelker, and Christine Pistula

(collectively, Kelker Children), appeal the trial court’s summary judgment,

determining that there was no genuine issue of material fact precluding

judgment in favor of Appellees-Intervenors, Laura Lynne Bradford, Amy

Myers, Abbie Fellrath, Courtney Ulrey, Eric Franke, Anne Marie Cochrane,

Jason Franke, Lisa Osburn, Alwine Harkless, Heather Alwine Eracieous, Trent

Talbott, Chris Anderson, Bradley Anderson, and Matthew Anderson

(collectively, Franke Grandchildren), regarding the interpretation of the Living

Trust Agreement. [2] We affirm.

ISSUE [3] The Kelker Children present one issue on appeal, which we restate as: Whether

a genuine issue of material fact exists with respect to the language of the

Distribution Provision in the Living Trust Agreement.

FACTS AND PROCEDURAL HISTORY [4] On November 7, 1990, Janice Dray (Janice) executed a Living Trust

Agreement, creating the revocable Janice A. Dray Living Trust (Trust) and

naming herself as Trustee. Pursuant to the terms of the Living Trust

Agreement, the income derived from the Trust was to be distributed to Janice’s

sister-in-law, Jacqueline Pearl Dray (Jacqueline), in a life estate, provided

Jacqueline survived Janice and Janice’s husband, Virgil Dray (Virgil). Upon Court of Appeals of Indiana | Opinion 19A-TR-1529 | January 13, 2020 Page 2 of 16

Jacqueline’s death, the Trust property was to be converted to cash and

distributed in equal shares to Janice’s sister, Alma Franke (Alma), and brother,

Ralph Kelker (Ralph). Specifically, the Distribution Provision of the Living

Trust Agreement provided:

At the death of [Jacqueline], the remaining assets are to be converted to cash and distributed in equal shares, share and share alike, to [Ralph], brother of [Janice], and [Alma], sister of [Janice], and if either said [Ralph] or [Alma] is not then living, to their surviving children, per stirpes.

(Appellant’s App. Vol. II, p. 148). The Living Trust Agreement does not

include a residuary beneficiary provision other than the Distribution Provision.

When the Living Trust Agreement was executed, Ralph had five children and

Alma had six children, of which five were surviving, in addition to many

grandchildren in both families. [5] In 1993, three years after the creation of the Trust, attorney Thomas Locke

(Attorney Locke), discussed estate planning with Janice and drafted a power of

attorney, living will declaration, and a last will and testament (collectively,

Alternative Estate Documents). This last will and testament included the

following provision regarding the distribution of the estate’s residue:

I give and bequeath all my residuary estate . . . in equal shares, share and share alike, to my brother [Ralph], and my sister [Alma]. If either of them should predecease me, then their interest goes to their surviving children, per stirpes.

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(Appellant’s App. Vol. II, p. 77). By accompanying letter dated February 22,

1993, Attorney Locke explained that this provision had been drafted to express

Janice’s intent that, upon Janice’s death, “all of the remaining assets in

[Janice’s] estate go to Ralph and Alma in equal shares. If either of them

predecease [Janice], [Janice] wanted their share to go to their children.”

(Appellant’s App. Vol. II, p. 75). In addition, pursuant to the Alternative Estate

Documents, the Trust would terminate and the assets distributed upon Janice’s

death, instead of creating a life estate for Jacqueline. Janice did not execute the

Alternative Estate Documents. [6] Virgil passed away on January 22, 1993 and Janice died on March 25, 1997,

effectuating the life estate for Jacqueline. By the time Jacqueline passed away

in June 2018, almost twenty-eight years after the creation of the Trust, she had

outlived Ralph and Alma, two of Ralph’s daughters, and all of Alma’s children.

Jacqueline was survived by three of Ralph’s children (the Kelker Children), and

three of Ralph’s grandchildren, the children of Ralph’s children who

predeceased Jacqueline, as well as by Alma’s thirteen grandchildren (the Franke

Grandchildren). [7] On September 19, 2018, Star Financial Bank, as successor trustee, filed a

petition to docket the Trust and determine heirship. The Kelker Children and

the Franke Grandchildren appeared as separate Intervenors in the proceedings.

On March 19, 2019, the Kelker Children filed their motion for summary

judgment, memorandum in support thereof, and designated evidence. In their

motion, they advanced an interpretation of the Distribution Provision of the

Court of Appeals of Indiana | Opinion 19A-TR-1529 | January 13, 2020 Page 4 of 16

Living Trust Agreement which would result in a distribution of the Trust corpus

to them, to the exclusion of the Franke Grandchildren and Ralph’s

grandchildren whose parents predeceased Jacqueline. According to the Kelker

Children, the phrase “surviving children,” as used in the Distribution Provision,

placed two conditions on the distribution of the corpus: (1) the qualified

recipient must be a child of Ralph or Alma, not a further descendant; and (2)

the recipient must be alive on the date of Jacqueline’s passing. That same day,

the Franke Grandchildren filed their motion for summary judgment,

memorandum of law, and designation of evidence claiming that the use of “per

stirpes” language in the Distribution Provision at the second-generation level

reinforced the idea that each of the Kelker and Franke families should receive

one-half of the Trust property. They contended that reading the Distribution

Provision as a whole suggests an intent on the part of Janice to create two equal

gifts to the families of her two siblings due to the use of “equal shares”

language, with a “per stirpes” division at the second-generation level. [8] On May 15, 2019, the trial court heard oral argument on the parties’ respective

motions for summary judgment. Thereafter, on June 13, 2019, the trial court

entered its summary judgment in favor of the Franke Grandchildren. Upon a

close reading of the Distribution Provision, the trial court declared the language

to be ambiguous as “surviving” generally connotes a conditional gift requiring

the beneficiary to be alive on the date of distribution, whereas “per stirpes”

indicates a distribution among branches of a family tree with a right of

representation that allows descendants of a predeceased beneficiary to take the

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beneficiary’s interest. To resolve the ambiguity, the trial court considered

external, designated evidence of the unique family histories of Ralph and Alma,

known to Janice at the time of the creation of the Trust, and determined that

there is no genuine issue of material fact that Janice intended to create equal,

unconditional, vested gifts of the remainder of the Trust corpus to the families

of her two siblings. [9] The Kelker Children now appeal. Additional evidence will be provided if

necessary.

DISCUSSION AND DECISION I. Standard of Review

[10] In reviewing a trial court’s ruling on summary judgment, this court stands in the

shoes of the trial court, applying the same standards in deciding whether to

affirm or reverse summary judgment. First Farmers Bank & Trust Co. v. Whorley,

891 N.E.2d 604, 607 (Ind. Ct. App. 2008), trans. denied. Thus, on appeal, we

must determine whether there is a genuine issue of material fact and whether

the trial court has correctly applied the law. Id. at 607-08. In doing so, we

consider all of the designated evidence in the light most favorable to the non-

moving party. Id. at 608. A fact is ‘material’ for summary judgment purposes if

it helps to prove or disprove an essential element of the plaintiff’s cause of

action; a factual issue is ‘genuine’ if the trier of fact is required to resolve an

opposing party’s different version of the underlying facts. Ind. Farmers Mut. Ins.

Group v. Blaskie, 727 N.E.2d 13, 15 (Ind. 2000). The party appealing the grant

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of summary judgment has the burden of persuading this court that the trial

court’s ruling was improper. First Farmers Bank & Trust Co., 891 N.E.2d at 607. [11] We observe that, in the present case, the trial court entered findings of fact and

conclusions of law thereon in support of its judgment. Generally, special

findings are not required in summary judgment proceedings and are not binding

on appeal. AutoXchange.com. Inc. v. Dreyer and Reinbold, Inc., 816 N.E.2d 40, 48

(Ind. Ct. App. 2004). However, such findings offer a court valuable insight into

the trial court’s rationale and facilitate appellate review. Id

II. Analysis

A. Ambiguity

[12] The Kelker Children contend that the trial court erred in issuing summary

judgment for the Franke Grandchildren. Focusing on the language of the

Distribution Provision, they maintain that the “surviving” language

predominates over “per stirpes” and therefore, the first beneficiaries are Ralph

and Alma as they both were alive on the date of the creation of the Trust;

whereas, the second class beneficiaries connotes the children of Ralph and

Alma who survived Ralph, Alma, and Jacqueline. As such, the Kelker

Children maintain that all of the Trust corpus that should have been distributed

to Alma’s children and Ralph’s predeceased children now passes to the

surviving Kelker Children because the survival of Alma’s and Ralph’s children

was a condition precedent of receiving their parent’s share.

Court of Appeals of Indiana | Opinion 19A-TR-1529 | January 13, 2020 Page 7 of 16 [13] The interpretation of a will or trust is a question of law for the court. University

of S. Ind. Found. v. Baker, 843 N.E.2d 528, 531 (Ind. 2006). The primary

purpose of the court in construing a trust instrument is to ascertain and give

effect to the settlor’s intention. Id. at 532. Indiana follows “the four corners

rule” that “extrinsic evidence is not admissible to add to, vary or explain the

terms of a written instrument if the terms of the instrument are susceptible of a

clear and unambiguous construction.” Id. Accordingly, where a trust is

capable of clear and unambiguous construction, under this doctrine, the court

must give effect to the trust’s clear meaning without resort to extrinsic evidence.

Id. A document is not ambiguous merely because parties disagree about a

term’s meaning. Kelly v. Estate of Johnson, 788 N.E.2d 933, 935 (Ind. Ct. App.

2003), trans. denied. Rather, language is ambiguous only if reasonable people

could come to different conclusions as to its meaning. Id. [14] The opening clause of the Distribution Provision reads that, upon Jacqueline’s

death, the Trust estate is to be converted to cash and “distributed in equal

shares, share and share alike” to Ralph and Alma. (Appellant’s App. Vol. II, p.

3). “Generally, when a gift is to a group of individuals sharing the same

relationship to the settlor, the use of the words ‘share and share alike’ denotes a

per capita distribution, rather than a per stirpes distribution.” Trust Agreement of

Westervelt v. First Interstate Bank of N. Ind., 551 N.E.2d 1180, 1184 (Ind. Ct. App.

1990), reh’g denied, trans. denied. “Per capita is defined as denoting that ‘an

equal share is given to each of a number of persons, all of whom stand in equal

degree to the decedent, without reference to their stocks or the right of

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representation.’” Id. (citing BLACK’S LAW DICTIONARY 1292 (Rev. 4th ed.

1968)). In Laisure v. Richards, 103 N.E. 679, 683 (Ind. Ct. App. 1913), this court

explained: “The foundation of the per capita rule of distribution rests in a large

measure on the presumption that when the beneficiaries are in equal degrees of

relationship to the testator his affection of each is equal, and therefore he will

desire to benefit each equally.” Here, Alma and Ralph stand in the same

relationship to Janice. As such, it appears Alma and Ralph take equal shares of

the trust corpus upon cessation of Jacqueline’s life estate. [15] The subsequent clause of the Distribution Provision identified the alternative

recipients in the event Ralph and Alma predeceased Jacqueline: “and if either

said [Ralph] or [Alma] is not then living, to their surviving children, per

stirpes.” (Appellants’ App. Vol. II, p. 148). “Per stirpes means literally by roots

or stocks; by representation. It denotes that method of dividing an intestate

estate where a class or group of distributees take the share which their ancestor

would have been entitled to, taking it by their right of representing such

ancestor, and not as so many individuals, or as the expression is used, per

capita.” Matter of Estate of Walters, 519 N.E.2d 1270, 1272 (Ind. Ct. App. 1988),

trans. denied. In a per stirpes distribution, the size of a beneficiary’s estate

depends on how many other beneficiaries are direct descendants of the

ancestor. Matter of Fitton, 605 N.E.2d 1164, 1169 (Ind. Ct. App. 1992). Thus,

under a per stirpes distribution, there can be no condition of survival affecting

the vesting of an interest because one’s descendants will represent the

predeceased ancestor and take the ancestor’s place and share.

Court of Appeals of Indiana | Opinion 19A-TR-1529 | January 13, 2020 Page 9 of 16 [16] If the right of representation inherent in the per stirpes distribution is ignored,

and “surviving” is treated as creating contingent remainders, the Distribution

Provision may be construed as suggested by the Kelker Children by creating

vested interests only in the three Kelker Children who survived Jacqueline. If,

on the other hand, “surviving” is interpreted as describing the timing of the

enjoyment of the interests, rather than as a condition of the gift, the

Distribution Provision may be interpreted as establishing vested interests in the

Kelker Children and Franke children, which may be inherited by their

grandchildren whose parents predeceased Jacqueline through the process of

representation inherent in the per stirpes distribution. Accordingly, with both

interpretations being equally logical and reasonable, there is an apparent

ambiguity between the “surviving” condition and the “per stirpes” term of the

Distribution Provision and we need to look to extrinsic evidence to construe the

Trust instrument. [17] Nonetheless, the Kelker Children argue that the Living Trust Agreement is

unambiguous as it created contingent remainder interests in the Trust property.

They note that there is no ambiguity in the Distribution Provision related to the

use of the terms “in equal shares, share and share alike” and “per stirpes” as

these terms describe two different distribution schemes applicable to separate

classes of beneficiaries. We agree with this contention; however, the Kelker

Children misunderstand the cause of the ambiguity. There is no conflict

between the per capita and per stirpes distributions at the first- and second-

generation levels of beneficiaries respectively. Rather, we conclude that the

Court of Appeals of Indiana | Opinion 19A-TR-1529 | January 13, 2020 Page 10 of 16 Distribution Provision is ambiguous because the terms surviving and per stirpes, both used within the same second-generation class of beneficiaries, are irreconcilable. If Alma and Ralph’s children must survive Jacqueline to advance an interest in the Trust, there can be no per stirpes distribution because the condition of survival negates the right of representation inherent in a per stirpes distribution. 1

B. Extrinsic Evidence

1 In support of their argument that the Distribution Provision of the Living Trust Agreement is unambiguous, the Kelker Children rely on Citizens’ Loan & Trust Co. v. Herron, 115 N.E. 941 (Ind. 1917), a decision which addressed the vesting of certain interests in trust instruments. In Citizens’ Loan, father created a testamentary trust for the benefit of his six children. Id. at 941-42. The trust stipulated that the corpus would not be distributed to the beneficiaries until the mother died and the youngest child attained the age of twenty-one. Id. The instrument further provided that “if any one or more of my said children shall die before said final distribution, then and in that event if the children or child so dying shall leave surviving him or her a child or children, issue of his or her body, such child or children to take and inherit the share or portion that would go to the parent if living under the provisions of this will.” Id. One of father’s children died prior to the time of distribution, leaving two children and several debts. Id. at 942. The child’s creditors claimed that the interest in the trust vested prior to his death and that they were entitled to take the child’s share of the trust property to satisfy his debts. Id. Our supreme court rejected the argument, finding that the interest was not vested, but was contingent upon the child surviving his mother and youngest brother’s twenty-first birthday. Id. at 943. In reaching this conclusion, the court declared the terms of the will to be unambiguous as the will included a detailed explanation of the interests created, the time of distribution of the trust property, and alternative beneficiaries. Id. at 942. Although there exist factual similarities between Citizens’ Loan and the case at bar, we find Citizens’ Loan to be inapplicable. Unlike the will in Citizens’ Loan, it is not evident from the terms of the Distribution Provision that Alma’s children’s interests were contingent upon them surviving Jacqueline. Instead, the Distribution Provision identifies primary and alternative beneficiaries, and the time of distribution in one sentence, as well as employing two fundamentally inconsistent terms to express the settlor’s intent. While the Kelker Children rely on several additional cases purportedly supporting their position, we caution that “[w]hile precedents are valuable aids to courts in the interpretation of trust instruments, they are very rarely conclusive, for in the analysis the meaning of every trust must be determined upon considerations pertaining to its own peculiar facts.” See Hackleman v. Hackleman, 146 N.E.590, 592 (Ind. Ct. App. 1925). “[T]he reasoning of the cases is often very refined and subtle, and involves a consideration of minute differences of language; and the final determination of each case must after all, depend upon the intention, to be gathered from all of the language used by the particular testator, whose will is before the court.” Laisure, 103 N.E. at 682

Court of Appeals of Indiana | Opinion 19A-TR-1529 | January 13, 2020 Page 11 of 16 [18] Indiana has long recognized that extrinsic evidence of the facts and

circumstances known to the settlor and existing at the time of execution may be

considered by a court when construing an instrument. See Dougherty v. Rogers,

20 N.E. 779, 781 (Ind. 1889). The rationale for admission of this evidence is

that it is not offered for the purpose of contradicting the meaning of a written

instrument, but is offered to “connect the instrument with the extrinsic facts

therein referred to, and to place the court, as nearly as may be, in the situation

occupied by the testator, so that his intention may be determined from the

language of the instrument, as it is explained by the extrinsic facts and

circumstances.” Id. In construing the Trust instrument, we are mindful that

“the law favors the vesting of estates, and looks with disfavor on the

postponement of the vesting of title, nevertheless contingent remainders are

lawful, and, if a testator by unambiguous language creates a contingent

remainder, it is the duty of the court to uphold it.” Hackleman v. Hackleman, 146

N.E.2d 590, 591 (Ind. Ct. App. 1925). [19] In Alsman v. Walters, 106 N.E. 879 (Ind. 1914), 2 our supreme court construed:

“I give and bequeath to my son, Francis M. Walters, during his natural life and

after his death to his children surviving him in fee simple the following tract of

2 Pointing to Citizens’ Loan, the Kelker Children incorrectly assert that our supreme court has “specifically disapproved the application of [Alsman] to Trust distribution cases.” (Appellants’ Br. p. 32). In Citizens’ Loan, the court merely distinguished Alsman and related cases based on the facts, noting that the holding of Alsman and related cases did not apply because, unlike in Citizens’ Loan, Alsman created an interceding life estate, after which the fee simple was given to certain designated persons, the enjoyment of which was postponed until the happening of certain events. Citizens’ Loan, 115 N.E. at 942.

Court of Appeals of Indiana | Opinion 19A-TR-1529 | January 13, 2020 Page 12 of 16 land[.]” Id. at 880. Francis had six children of which only four survived. Id. One of Francis’ daughters had a son, Hosea, who survived his mother and grandfather. Id. Francis’ four surviving children argued that Hosea was not entitled to his mother’s share of the estate because the instrument had created contingent remainders, which were conditioned upon the beneficiary being a child of Francis and being alive at the time of Francis’ death. Id. The court rejected this proffered interpretation, finding that the combination of the terms “surviving” and “fee simple” created an ambiguity. Id. at 881. To construe the will in light of the stated ambiguity, the court turned to “established rules for the construction of ambiguous devises,” including a preference for early vesting of interests and against contingencies; “partial intestacy will be avoided if possible.” Id. Based on those rules, the court rejected the children’s claim, and interpreted the will as creating vested remainders in each of Francis’ children. Id. at 882. As a vested interest, Hosea could inherit his mother’s share after her death. Id. Our supreme court explained that the rules of construction “are not mere arbitrary formalities” but have been “formulated to aid in the ascertainment of the testator’s true intent and prevent its subversion by ascribing a meaning to a word, perhaps carelessly used, which conflicts with the general intent of the testator.” Id. at 881. The court suggested that the word “surviving” had been imprudently included in the devise as

[n]othing in this will warrants the imputation to testator of an intent to make the fee-simple title of this land a grand prize to the victor in his grandchildren’s race with death. The mere definition of a single word or the position of a pronoun ought not alone to persuade a court that a testator’s purpose was devoid of Court of Appeals of Indiana | Opinion 19A-TR-1529 | January 13, 2020 Page 13 of 16

reason, prudence, and affection when making a final disposition of his property among his grandchildren.

Id. at 882. [20] Mindful of our preference for the early vesting of estates, the trial court, in its

summary judgment, reflected that the structure of the Distribution Provision,

instituting a per capita distribution at the first-generation level and a per stirpes

distribution at the second-generation level, indicated Janice’s intent to give

equal gifts to the families of both her siblings. The trial court understood that a

per stirpes distribution at the second-generation level, instead of per capita, was

necessary to effectuate this intent as Ralph and Alma did not have an equal

number of children during their lifetimes. Considering that one of Alma’s

children died in infancy, a fact known by Janice, the trial court suggested an

explanation for the use of the term “surviving” as referring to Alma’s five

children who were alive when the Living Trust Agreement was created in 1990. [21] Moreover, the designated evidence includes that three years after the creation of

the Living Trust Agreement, Janice contacted Attorney Locke with a perceived

intention to amend her estate provisions. Attorney Locke drafted Alternative

Estate Documents in which the interceding life estate for Jacqueline was

cancelled, with all other provisions remaining the same. By accompanying

letter, Attorney Locke explained to Janice that, upon her death, “all of the

remaining assets in [Janice’s] estate go to Ralph and Alma in equal shares. If

either of them predecease [Janice], [Janice] wanted their share to go to their

children.” (Appellant’s App. Vol. II, p. 75). Even though Janice never Court of Appeals of Indiana | Opinion 19A-TR-1529 | January 13, 2020 Page 14 of 16

executed these Alternative Estate Documents, it can be reasonably inferred that

Janice was aware of the division of her estate equally benefitting the families of

both her siblings. “It must be presumed that a rational, normal person in

making such a will as this would have tender and just regard for []

grandchildren who were manifestly objects of [her] bounty.” Alsman, 106 N.E.

at 882. [22] Accordingly, here, after determining that the Living Trust Agreement was

ambiguous due to the juxtaposition of two conflicting concepts by the settlor of

the Trust, the trial court employed the rules of construction set forth in Alsman,

including a preference for the early vesting of interests, in construing the

Distribution Clause. Consistent with the extrinsic designated evidence of

Janice’s intent, the trial court concluded that the term “surviving” was mere

surplusage and had been carelessly used. Accordingly, as we find that the trial

court properly applied the law and, upon review of all the designated evidence

before us, we agree with the trial court that no genuine issue of material fact

exists that Janice intended a per capita division of the Trust corpus between her

siblings, with a per stirpes division among the descendants of Alma and Ralph.

Therefore, the Franke Grandchildren are entitled to judgment as a matter of

law.

CONCLUSION [23] Based on the foregoing, we hold that no genuine issue of material fact exists

with respect to the Distribution Provision of the Living Trust Agreement, which

establishes a per capita division of the Trust corpus between the families of Court of Appeals of Indiana | Opinion 19A-TR-1529 | January 13, 2020 Page 15 of 16

Ralph and Alma and a per stirpes division between the children of Ralph and

Alma. [24] Affirmed. [25] Baker, J. and Brown, J. concur

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