scott-alan-stibbins-individually-and-as-personal-rep-of-the-estate-of ( 2015 )


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  •                                                                    Oct 14 2015, 9:56 am
    ATTORNEY FOR APPELLANT                                     ATTORNEYS FOR APPELLEES
    P. Gregory Cross                                           Thomas M. Beeman
    The Cross Law Firm, P.C.                                   Kyle B. DeHaven
    Muncie, Indiana                                            Beeman Law Office
    Anderson, Indiana
    Alexander M. Beeman
    Ciobanu Law, P.C.
    Indianapolis, Indiana
    IN THE
    COURT OF APPEALS OF INDIANA
    Scott Alan Stibbins, individually                          October 14, 2015
    and as Personal Representative                             Court of Appeals Case No.
    of the Estate of Warren E.                                 18A02-1410-PL-750
    Stibbins, and Trustee of the                               Appeal from the Delaware Circuit
    Warren E. Stibbins Revocable                               Court
    Trust, et al,                                              The Honorable Marianne L.
    Appellants-Defendants,                                     Vorhees, Judge
    Trial Court Cause No.
    v.                                                 18C01-0902-PL-4
    Carol (Stibbins) Pagano Foster,
    Angela Pagano, and Christopher
    Pagano,
    Appellees-Plaintiffs
    Baker, Judge.
    Court of Appeals of Indiana | Opinion 18A02-1410-PL-750 | October 14, 2015                Page 1 of 14
    [1]   Warren Stibbins had seven children and a complicated estate plan. In the years
    before his death, Warren became frustrated with the inability of his daughter,
    Carol, to manage her finances. He purchased an annuity for her that would
    have provided a steady source of income for the rest of her life, and then
    removed her as a beneficiary from his estate plan and from her deceased
    mother’s trust. After Warren’s death, Carol and her children filed an action
    contesting the probate of Warren’s will. They were unsuccessful after years of
    litigation and a five-day jury trial. After they lost the will contest, they sought
    to be reimbursed for their attorney fees pursuant to Indiana Code section 29-1-
    10-14. Although the trial court found that two of their three claims were
    litigated without good faith and just cause, it found that their third claim met
    that test. As a result, the trial court ordered that the estate pay all of Carol’s
    attorney fees and costs in an amount exceeding $170,000.
    [2]   The estate now appeals, arguing, among other things, that Carol and her
    children do not have standing to seek attorney fees because they are not
    devisees under the relevant statute. We agree, and reverse the judgment of the
    trial court awarding attorney fees to Carol and her children.
    Court of Appeals of Indiana | Opinion 18A02-1410-PL-750 | October 14, 2015   Page 2 of 14
    Facts     1
    [3]   Warren Stibbins (Warren) was a successful family physician who lived most of
    his life in Muncie. He and his wife, Mary Stibbins (Mary), were the parents of
    seven children: David Stibbins, Mary Liddy, Scott Stibbins, Carol Foster
    (Carol), Thomas Stibbins, Susan Stibbins, and Sarah Hohmann.
    [4]   Mary died in 1994. In accordance with the Stibbinses’ estate plan, a significant
    amount of money had been placed in a living trust in Mary’s name (Mary’s
    Trust), which became irrevocable upon her death. Mary’s Trust permitted
    Warren, the primary beneficiary, to amend some of its provisions even after the
    trust had vested, through the exercise of a power of appointment in his will.
    [5]   During the years following his wife’s death, Warren became concerned about
    Carol, who had significant difficulty managing her financial affairs. She
    received frequent monetary gifts from her parents and siblings, as well as
    distributions from Mary’s Trust, but always seemed to be in need of more.
    Eventually, in the spring of 2005, Warren decided to purchase an annuity for
    Carol that would pay her a specified sum of money—nearly $1,000 per
    month—for the rest of her life.
    [6]   On August 16, 2005, Warren executed a revocable trust (Warren’s 2005 Trust),
    providing that he would be its primary beneficiary for the balance of his
    1
    We held oral argument in this cause in Indianapolis, Indiana, on September 15, 2015. We thank counsel
    for both parties for their outstanding written and oral advocacy.
    Court of Appeals of Indiana | Opinion 18A02-1410-PL-750 | October 14, 2015                    Page 3 of 14
    lifetime, and upon his death, the property would be distributed to four of his
    children. Two of Warren’s children, David and Thomas, were very successful
    physicians, and in Warren’s judgment, they did not need this inheritance.
    Carol was also excluded as a beneficiary because he had provided for her
    otherwise with the annuity. In 2005, Warren also executed a pour-over will
    (the 2005 Will) that did not name Carol as a beneficiary.
    [7]    After an altercation at Warren’s home in January 2006, Carol and her son,
    Christopher Pagano, never saw Warren again. Carol’s daughter, Angela
    Pagano, did not see Warren again after he bought her a computer sometime in
    2005.
    [8]    In April 2007, Carol sold the present rights in her annuity. While Warren’s
    initial investment in the annuity totaled over $180,000, Carol sold it for
    approximately $70,000, to pay off some of her debts.
    [9]    Later that year, Warren realized that David, Thomas, and Carol were still
    named as beneficiaries to Mary’s Trust. On May 5, 2008, Warren executed a
    new will (the 2008 Will) exercising the power of appointment to remove David,
    Thomas, and Carol as beneficiaries.
    [10]   Warren died on October 7, 2008. Neither Carol nor her children attended his
    funeral.
    [11]   On February 13, 2009, Carol initiated an action to contest the 2008 Will.
    Christopher and Angela joined her as plaintiffs. They sought to revoke probate
    Court of Appeals of Indiana | Opinion 18A02-1410-PL-750 | October 14, 2015   Page 4 of 14
    of the will, reverse the exercise of the power of appointment with respect to
    Mary’s Trust, and restore Carol as a beneficiary of the trust. Carol and her
    children also filed a second action to challenge Warren’s 2005 Trust, which did
    not include her as a beneficiary. Eventually, the two actions were consolidated.
    [12]   A jury trial regarding the 2008 Will took place over the course of five days,
    beginning on June 16, 2014. The jury found that the will was valid, and
    judgment was entered in favor of the defendants.
    [13]   On July 24, 2014, Carol and her children filed a petition for attorney fees and
    expenses. Following a hearing, on September 22, 2014, the trial court granted
    Carol’s petition. In relevant part, the trial court found and concluded as
    follows:
    5.    Argument on Standing: Defendants argued Carol,
    Angela, and Christopher cannot recover attorneys’ fees and
    expenses because they were not devisees under the last two wills
    executed by [Warren]. . . . Plaintiffs countered by arguing that if
    they had set aside the [2008] Will, . . . they would have also
    sought to set aside the [2005 Will] . . . . If successful, they would
    have probated the [third will in line, executed in 1992, which
    included Carol as a beneficiary].
    ***
    . . . [T]he Court finds authority to support Plaintiffs’ argument
    that they have standing to seek attorneys’ fees. Although it
    would have involved a great deal of legal activity, attorneys’ fees,
    and expenses, Plaintiffs could have eventually brought to probate
    a Will naming them as beneficiaries.
    Court of Appeals of Indiana | Opinion 18A02-1410-PL-750 | October 14, 2015   Page 5 of 14
    For these reasons, the Court finds Plaintiffs have standing to
    request the Court to order their attorneys’ fees and expenses
    reimbursed and/or paid from the Estate assets.
    6.      Did Plaintiffs Bring This Action in Good Faith and With
    Just Cause? The Court does not question the attorneys’ good
    faith in litigating this matter. . . . [T]he Court will only consider
    whether Carol litigated this matter in good faith and with just
    cause in deciding whether to award attorneys’ fees and expenses.
    (A)      Fraud Action: If Plaintiffs had brought the action
    based only on Fraud, the Court would not have
    awarded fees and expenses. The Fraud argument
    was puzzling, at best, and the testimony from the
    Plaintiff’s handwriting expert bordered on the
    incredible.[2]
    (B)      Incompetency: Although this claim was a little
    stronger than the Fraud claim, the evidence on the
    Fraud and Incompetency claims together might not
    have caused the Court to find “good faith and just
    cause.” . . .
    (C)      Undue Influence: Plaintiffs’ strongest ground was
    Undue Influence. The evidence submitted required
    the Court to give a jury instruction concerning
    2
    The expert testified that dozens of specimens of Warren’s handwriting were forgeries. She was also certain
    that the signatures of all of the witnesses to nearly all of the documents at issue in this litigation were
    forgeries. Carol found this expert on the Internet. The expert received her training from another Internet
    vendor who also offered programs on, among other things, how to predict the gender of unborn children
    through the handwriting of a parent. At times, the jurors laughed audibly during the expert’s testimony.
    Court of Appeals of Indiana | Opinion 18A02-1410-PL-750 | October 14, 2015                       Page 6 of 14
    undue influence, and Defendants had to overcome
    the presumption of undue influence. . . .
    The Court finds at least on the Undue Influence Claim, Plaintiffs
    brought the action in good faith and with just cause. Because all
    three claims were so interrelated, the Court cannot divide the fees
    among the claims.
    Appellants’ App. p. 27-29. The trial court ordered the Estate to pay Carol’s
    attorney fees in an aggregate amount of $171,360.64. The Estate now appeals.
    Discussion and Decision
    I. Cross-Appeal
    [14]   First, we will consider Carol’s cross-appeal. She argues that the trial court erred
    by denying her motion for amendment of the pleadings to conform to the
    evidence presented pursuant to Indiana Trial Rule 15(B). A ruling on a Rule
    15(B) motion is within the discretion of the trial court, and we will reverse only
    upon finding a “clear and prejudicial” abuse of that discretion. Lutz v. Belli, 
    516 N.E.2d 95
    , 101 (Ind. Ct. App. 1987). Indiana Trial Rule 15(B) provides as
    follows:
    When issues not raised by the pleadings are tried by express or
    implied consent of the parties, they shall be treated in all respects
    as if they had been raised in the pleadings. Such amendment of
    the pleadings as may be necessary to cause them to conform to
    the evidence and to raise these issues may be made upon motion
    of any party at any time, even after judgment, but failure so to
    amend does not affect the result of the trial of these issues. If
    evidence is objected to at the trial on the ground that it is not
    Court of Appeals of Indiana | Opinion 18A02-1410-PL-750 | October 14, 2015   Page 7 of 14
    within the issues made by the pleadings, the court may allow the
    pleadings to be amended and shall do so freely when the
    presentation of the merits of the action will be subserved thereby
    and the objecting party fails to satisfy the court that the
    admission of such evidence would prejudice him in maintaining
    his action or defense upon the merits.
    [15]   The complaint originally filed by Carol and her children did not raise whether
    Warren’s exercise of the power of appointment over Mary’s Trust benefited the
    decedent or his estate. On the fourth day of the jury trial, Carol moved to
    amend the pleadings to incorporate that issue. The trial court denied the
    request, and Carol now appeals that ruling.
    [16]   The record reveals that in 2010, after the first round of depositions were
    completed, Carol’s attorney contacted the attorney for the estate, indicating that
    “‘Plaintiffs believe that Warren committed breach of his wife’s trust. When as
    trustee, he took the loans from the trust to himself and he exercised the power
    of appointment in a way intended to benefit himself personally.’” Tr. p. 768
    (quoting from an email between the two attorneys). Carol’s attorney asked the
    Estate’s attorney, “‘[w]ill it be necessary for us to move to amend the
    complaints to . . . assert the claims more precisely or do you agree those claims
    have been sufficiently raised to put you and the beneficiaries on notice?’” 
    Id. The Estate’s
    attorney responded, “‘Yes, it will be necessary for you to amend
    the complaint . . . . You better amend the complaint because the complaint
    does not lead this theory.’” 
    Id. at 769.
    Carol did not seek to amend the
    complaint.
    Court of Appeals of Indiana | Opinion 18A02-1410-PL-750 | October 14, 2015   Page 8 of 14
    [17]   To be entitled to amendment of the pleadings to conform to the evidence, a
    movant must establish that the issues were tried by the “express or implied
    consent of the parties[.]” Ind. Trial Rule 15(B). Here, the Estate was on record
    explicitly refusing to consent to precisely that. Carol chose not to attempt to file
    an amended complaint, and cannot now make an end-run around the opposing
    party’s objections via Trial Rule 15(B). We find that the trial court did not
    abuse its discretion in denying Carol’s motion to amend the pleadings pursuant
    to Indiana Trial Rule 15(B).
    II. Appeal
    [18]   Where, as here, the trial court issues findings of fact and conclusions of law
    based thereon, we apply a two-tiered standard to review the trial court’s order.
    Oil Supply Co. v. Hires Parts Serv., Inc., 
    726 N.E.2d 246
    , 248 (Ind. 2000). We
    determine whether the evidence supports the findings and the findings support
    the judgment. 
    Id. In deference
    to the trial court’s proximity to the issues, “we
    disturb the judgment only where there is no evidence supporting the findings or
    the findings fail to support the judgment.” 
    Id. We do
    not reweigh the evidence,
    but only consider the evidence favorable to the trial court’s judgment. 
    Id. We apply
    a de novo standard of review to questions of statutory interpretation.
    Meyer v. Beta Tau House Corp., 
    31 N.E.3d 501
    , 513 (Ind. Ct. App. 2015).
    A. Standing
    [19]   Carol and her children sought attorney fees pursuant to Indiana Code section
    29-1-10-14, which provides as follows:
    Court of Appeals of Indiana | Opinion 18A02-1410-PL-750 | October 14, 2015   Page 9 of 14
    When any person designated as executor in a will, or the
    administrator with the will annexed, or if at any time there be no
    such representative, then any devisee therein, defends it or
    prosecutes any proceedings in good faith and with just cause for
    the purpose of having it admitted to probate, whether successful
    or not, he shall be allowed out of the estate his necessary
    expenses and disbursements including reasonable attorney's fees
    in such proceedings.
    (Emphasis added).
    [20]   The Estate argues that the trial court erroneously determined that Carol and her
    children were “devisees” pursuant to Indiana Code section 29-1-10-14.
    According to the Estate, because Carol and her children were not beneficiaries
    to either the 2005 or 2008 Wills, they were not devisees and did not have
    standing to seek attorney fees following the will contest action.
    [21]   The Estate acknowledges a line of cases finding that will contestors were
    “devisees” where, while they were not devisees of the will being contested, they
    were devisees of earlier wills that were intended to be offered for probate. E.g.,
    In re Estate of Goldman, 
    813 N.E.2d 784
    (Ind. Ct. App. 2004); Brown v. Edwards,
    
    640 N.E.2d 401
    (Ind. Ct. App. 1994); Estate of Clark v. Foster, 
    568 N.E.2d 1048
    (Ind. Ct. App. 1991); Dunnuck v. Mosser, 
    546 N.E.2d 129
    (Ind. Ct. App. 1989).
    We find this line of cases distinguishable from the case before us. In each of
    these cases, the parties challenging the will were devisees under the next will in
    line to be probated. In other words, had the challenged will been set aside, the
    challengers would directly, and immediately, benefit as a result.
    Court of Appeals of Indiana | Opinion 18A02-1410-PL-750 | October 14, 2015   Page 10 of 14
    [22]   In this case, in contrast, Carol and her children were not devisees of the will
    being challenged or of the next will in line. Instead, their status as devisees is
    far more attenuated. They would have had to make successful challenges both
    to the 2008 Will and to the 2005 Will in order to have a direct right to inherit.
    We have not found any caselaw holding that will challengers with such an
    attenuated right to inherit are entitled to seek attorney fees under the statute,
    and counsel for Carol and her children acknowledged at oral argument that to
    his knowledge, there are no such cases.
    [23]   It is well established pursuant to common law that each party to litigation is
    responsible for her own financial consequences associated with the matter,
    including attorney fees. E.g., State Bd. of Tax Comm’rs v. Town of St. John, 
    751 N.E.2d 657
    , 659 (Ind. 2001). The only exceptions to this doctrine occur when a
    statute, court rule, or contractual agreement provides otherwise. Porter Dev.,
    LLC v. First Nat’l Bank of Valparaiso, 
    866 N.E.2d 775
    , 779 (Ind. 2007). Where,
    as here, a statute is enacted in derogation of the common law, that statute must
    be strictly construed. Hinshaw v. Bd. of Comm’rs of Jay Cnty., 
    611 N.E.2d 637
    ,
    639 (Ind. 1993).
    [24]   Indiana Code section 29-1-10-14 provides that when a will is challenged, “any
    devisee therein” may be entitled to attorney fees under certain circumstances.
    While, as noted above, this Court has held that “devisee” includes a person
    who stands to benefit directly if the challenged will is set aside, we simply
    cannot conclude that our General Assembly intended to include anyone beyond
    this limited group of people. If we opened the term “devisee” up as suggested
    Court of Appeals of Indiana | Opinion 18A02-1410-PL-750 | October 14, 2015   Page 11 of 14
    by Carol and her children, there would be no end to the slippery slope. If a
    ninety-year-old decedent had enacted a new will in every decade of his life, his
    college sweetheart who had been a devisee in his first will at the age of twenty
    would be entitled to attorney fees if she challenged the will in place at his death,
    notwithstanding the reality that she would have to successfully challenge six
    other wills to receive a direct benefit. We do not believe that our legislature
    intended such a result when it enacted this statute.
    [25]   Consequently, we find that a “devisee” pursuant to Indiana Code section 29-1-
    10-14 includes only devisees of the will being challenged and devisees of the
    next will in line who would directly benefit if the challenged will were set aside.
    Carol and her children do not qualify as devisees under this definition;
    consequently, they are not entitled to attorney fees pursuant to Indiana Code
    section 29-1-10-14. Therefore, we reverse the judgment of the trial court.
    B. Burden of Proof
    [26]   Although we need not address the remaining arguments made by the Estate, we
    choose to do so because we so rarely have the opportunity to address these
    issues that so frequently recur in estate practice. Among the most important
    issues raised by the Estate is the issue of who bears the burden of proof with
    respect to Indiana Code section 29-1-10-14, and what, precisely, that burden is.
    [27]   Indiana Code section 29-1-7-20 provides that a person challenging a will
    admitted to probate bears the burden of proof. It stands to reason that the same
    person would likewise bear the burden of proof in seeking attorney fees
    Court of Appeals of Indiana | Opinion 18A02-1410-PL-750 | October 14, 2015   Page 12 of 14
    following a will contest. Thus, the challenger bears the burden of proving that
    she prosecuted the will “in good faith and with just cause[.]” I.C. § 29-1-10-14.
    [28]   This Court has previously explained that “[t]he purpose and public policy of
    [Indiana Code section 29-1-10-14] is to give all parties concerned a fair trial and
    to encourage the probating or the resisting of the probate of the will where there
    are reasonable grounds or probable cause for such proceedings in good faith, without
    compelling any party to risk financial loss by underwriting the expenses of such
    proceedings.” 
    Dunnuck, 546 N.E.2d at 1291-92
    (emphasis added). We find that
    the Dunnuck Court articulated an appropriate and reasonable burden of proof,
    and hereby adopt that standard. Therefore, we hold that a party who is seeking
    attorney fees pursuant to Indiana Code section 29-1-10-14 bears the burden of
    proving by a preponderance of the evidence that she litigated in good faith and
    with just cause, meaning that she had reasonable grounds or probable cause to
    litigate the will contest. The party seeking attorney fees is not entitled to the
    benefit of the doubt; instead, that party must make an affirmative showing
    consistent with Dunnuck.
    [29]   Assuming that the party seeking attorney fees is able to make the requisite
    showing of good faith and just cause, that party still bears the burden of proof
    with respect to calculation of attorney fees. In this case, Carol and her children
    raised three claims. Two of those three claims were wholly without just cause
    or good faith. But Carol argues that because the Estate failed to separate Carol’s
    attorney fees by claim, she is entitled to all of her fees. This argument leads to
    Court of Appeals of Indiana | Opinion 18A02-1410-PL-750 | October 14, 2015   Page 13 of 14
    an impermissible shifting of the burden of proof to the Estate to disprove
    Carol’s fees. We cannot countenance this approach.
    [30]   We acknowledge that the trial court was unable to separate the fees for the three
    claims, which is understandable given the process that was followed in this
    case. To avoid precisely this issue, we hold that a different process should be
    followed. First, the claimant seeking fees must prove that some or all of her
    claims were made in good faith and with just cause. The trial court must then
    make a preliminary determination as to which of the claims meet this standard.
    Then, the claimant is required to come forward with evidence showing the
    amount of attorney fees expended only for the claims that meet the statutory
    standard. In this way, the trial court and all parties can be assured that the
    claimant receives attorney fees only for those claims that were brought in good
    faith and with just cause, and the burden of proof remains on the claimant.
    [31]   The judgment of the trial court is reversed.
    Mathias, J., concurs, and Bailey, J., concurs in result.
    Court of Appeals of Indiana | Opinion 18A02-1410-PL-750 | October 14, 2015   Page 14 of 14