In the Matter of the Estate of Thomas E. Phelps, Colby Phelps, Hailey B. Phelps, and Kara L. Phelps v. Erica K. Book (mem. dec.) ( 2020 )

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D),
this Memorandum Decision shall not be FILED
regarded as precedent or cited before any Jun 16 2020, 9:02 am
court except for the purpose of establishing CLERK
the defense of res judicata, collateral Indiana Supreme Court
Court of Appeals
estoppel, or the law of the case. and Tax Court
ATTORNEY FOR APPELLANTS ATTORNEYS FOR APPELLEE
Patricia L. Martin John C. Theisen
Martin Law Office, P.C. Nathaniel O. Hubley
Angola, Indiana Theisen & Associates, LLC
Fort Wayne, Indiana
Allen R. Stout
Lisa L. Hanna
Stout Law Group, P.C.
Angola, Indiana
IN THE
COURT OF APPEALS OF INDIANA
In the Matter of the Estate of June 16, 2020
Thomas E. Phelps, Court of Appeals Case No.
19A-ES-2375
Colby Phelps, Hailey B. Phelps,
and Kara L. Phelps, Appeal from the Steuben Circuit
Court
Appellants,
The Honorable Allen N. Wheat,
v. Judge
Trial Court Cause No.
Erica K. Book, 76C01-1510-ES-70
Appellee.
Mathias, Judge.
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[1] Kara Phelps (“Kara”), Hailey Phelps (“Hailey”), and Colby Phelps (“Colby”)
(collectively “the Phelps Children”) appeal the order of the Steuben Circuit
Court awarding Erica K. Book (“Erica”) one-half of the net proceeds of a
settlement agreement resolving a wrongful death claim asserted on behalf of the
decedent, Thomas E. Phelps (“Thomas”), who was the father of the Phelps
Children and the estranged husband of Erica at the time of his death. On
appeal, the Phelps Children present two issues, which we restate as: (1) whether
the trial court erred in its interpretation of the wrongful death statute with
regard to the distribution of the proceeds of a wrongful death action, and (2)
whether the trial court abused its discretion by awarding Erica one-half of the
net proceeds of the wrongful death settlement. Concluding that the trial court
did not err in either regard, we affirm.
Facts and Procedural History
[2] Kara, Hailey, and Colby are the children of the decedent Thomas with his first
wife. Kara, born in December 1992, is the oldest child. A second daughter,
Hailey, was born in August 1996, and a son, Colby, was born in August 2004.
All three children had a close relationship with their father. Kara had just
received a degree in business management at the time of her father’s death. She
worked for her father’s sanitation company, Sanitation Solutions, after
graduation and lived with him until his death. Hailey was attending college at
the time of her father’s death. Thomas supported Hailey while she was in
college by paying for her health insurance, car insurance, cell phone bill, and
other college expenses. Colby was eleven years old at the time of his father’s
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death. Although Colby did not live with Thomas at the time of Thomas’s death,
Thomas paid child support and health insurance premiums for Colby.
[3] Erica was married to another man from 2003 until her divorce in 2012. Erica
had two minor children from this prior marriage. Following Erica’s divorce,
Thomas asked her to work for his business, Sanitation Solutions. In the summer
of 2012, Thomas petitioned to dissolve his marriage with his first wife, and he
and Erica began to live together.
[4] Thomas and Erica were married in October 2013, and had one daughter
together, who was born in June 2014. Prior to their marriage, Thomas and
Erica entered into a prenuptial agreement that provided in pertinent part:
Except as herein provided, in the event that the marriage of Tom
and Erica is terminated other than by the death of one of them,
or in the event of a legal separation, Erica agrees to waive and does
hereby waive all rights to Tom’s Property (as delineated in
Section 2.1 above and as set forth in the Asset and Liability
Disclosure appended hereto . . . .
Ex. Vol. p. 13 (emphasis added).
[5] Thomas and Erica separated in August 2014, at which time Erica left the
marital home to live with her parents. On February 17, 2015, Erica filed a
petition to dissolve her marriage with Thomas. Although Erica and Thomas
still saw each other periodically, and engaged in sexual intercourse at least
once, Erica also became romantically involved with another man. After the
separation, Erica became pregnant with this man’s child.
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[6] On October 19, 2015, Thomas was killed when he was struck by a vehicle while
standing on the side of the road next to one of his sanitation trucks. Thomas
died intestate. On November 2, 2015, Julie Maloy (“Maloy”) was appointed as
personal representative of Thomas’s estate. On November 20, 2015, Maloy was
appointed as special administratrix for the purposes of commencing a wrongful
death action. Maloy filed a wrongful death suit that was ultimately settled.
[7] On August 20, 2019, the trial court held a hearing regarding the apportionment
of the wrongful death proceeds and the payment of estate administration fees.
On September 13, 2019, the trial court entered findings of fact and conclusions
of law, determining in relevant part that: (1) Erica was “living in a state of
adultery” and therefore not entitled to one-half of Thomas’s net probate estate
under the intestacy statutes;1 (2) Erica was entitled to a share of the proceeds of
the wrongful death claim because such proceeds were not part of Thomas’s
estate and because, under the terms of the prenuptial agreement, she and
Thomas were not legally separated at the time of Thomas’s death; and (3) Erica
was entitled to one-half of the net proceeds of the wrongful death claim, with
Thomas’s four children each entitled to a one-eighth share. The Phelps
Children now appeal.2
1
See Ind. Code § 29-1-2-14 (“If either a husband or wife shall have left the other and shall be living at the
time of his or her death in adultery, he or she as the case may be shall take no part of the estate or trust of the
deceased husband or wife”).
2
The trial court also found that Maloy played an active role in prosecuting the wrongful death suit and ran
the day-to-day operation of Thomas’s business until it was sold. Accordingly, the trial court concluded that
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Standard of Review
[8] On appeal, the Phelps Children argue that the trial court erred in construing
and applying the general wrongful death statute and the intestacy statutes. The
construction of statutes is a matter of law that we review de novo. In re
Supervised Estate of Kent, 99 N.E.3d 634, 637 (Ind. 2018).
I. The Wrongful Death Statute
[9] The Phelps Children first claim that the trial court erred by concluding that
Erica was entitled to receive a share of the net proceeds of the wrongful death
action. With regard to damages, the general wrongful death statute provides in
relevant part:
That part of the damages which is recovered for reasonable
medical, hospital, funeral and burial expense shall inure to the
exclusive benefit of the decedent’s estate for the payment thereof.
The remainder of the damages, if any, shall, subject to the
provisions of this article, inure to the exclusive benefit of the
widow or widower, as the case may be, and to the dependent
children, if any, or dependent next of kin, to be distributed in
the same manner as the personal property of the deceased. . . .
Ind. Code § 34-23-1-1 (emphasis added). The Phelps Children contend that the
emphasized portion of the statute is ambiguous. We disagree.
Maloy should be compensated in the amount of $100,000 for her services as personal representative and that
Maloy’s counsel was entitled to $7,150 in unreimbursed out-of-pocket legal expenses.
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[10] The wrongful death statute first provides that the portion of damages recovered
for medical, hospital, funeral, and burial expenses inure to the exclusive benefit
of the decedent’s estate for the payment of such expenses. It then provides that
any remainder of damages shall inure to the “exclusive benefit of the widow . . .
and to the dependent children . . . to be distributed in the same manner as the
personal property of the deceased.” Id. (emphasis added). It is clear from this
language that Erica, who is Thomas’s widow, and Thomas’s “dependent
children”3 are entitled to share in the remainder of the proceeds of the wrongful
death action, less the amount recovered for medical, hospital, funeral, and
burial expenses, in the same manner as they would Thomas’s personal
property. We find nothing unclear or ambiguous about this portion of the
wrongful death statute.
[11] We also find the Phelps Children’s citation to In re Estate of Inlow, 916 N.E.2d
664 (Ind. 2009), to be unavailing. In that case, an agreement settling the
wrongful death claim did not specifically allocate any amounts between
different types of damages, i.e., funeral and burial costs. The children of the
decedent’s first marriage argued that the wrongful death statute required the full
payment of funeral and burial costs before distribution to any of the decedent’s
surviving family. Our supreme court noted that the wrongful death statute
contained “no provisions expressly applicable to the distribution of proceeds
3
The trial court concluded that all of Thomas’s children were “dependent children” for purposes of the
wrongful death statute. Erica does not challenge this conclusion.
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from settlements before adjudication of the amount of damages.” Id. at 666.
The court further noted that wrongful death claims are often settled for less than
the actual medical, funeral, and burial costs, and that to “impose upon all
pretrial wrongful death settlements a requirement that the net proceeds must
first be allocated to medical, hospital, funeral, and burial expenses before
distribution for other damages could frequently . . . be inequitable and create an
undesired counter-incentive to seek settlement.” Id. at 667. The court therefore
declined to construe the wrongful death act to impose such a requirement. Id.
Instead, the court held that a trial court “should direct payment from the pre-
trial wrongful death settlement that part of the medical, hospital, funeral, and
burial expenses that corresponds to the ratio of the total of such expenses to the
estimated total damages sustained.” Id. This may require that a trial court hear
evidence “to enable it to ascertain the approximate total damages and thus
determine a proportionate equitable allocation.” Id. at 667–68.
[12] In the present case, the question is not how to distribute the proceeds of the
wrongful death settlement between the hospital, medical, funeral and burial
costs on the one hand, and the survivors on the other hand. And here, the
amount of the settlement is well in excess of the actual medical, hospital,
funeral, and burial costs. See Appellant’s App. p. 57 (listing the total of these
expenses as $73,559.29). Thus, the question here is how to distribute the net
proceeds of the settlement among the survivors after such costs have been paid
from the award. And the wrongful death statute unambiguously provides that
such proceeds inure to the exclusive benefit of the decedent’s widow, i.e. Erica,
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and dependent children, “to be distributed in the same manner as the personal
property of the deceased.” I.C. § 34-23-1-1. This leads us to the Phelps
Children’s next argument.
II. Erica’s Share of the Proceeds
[13] The Phelps Children argue that the trial court abused its discretion by awarding
Erica one-half of the remainder of the proceeds of the wrongful death action.
Again, we disagree. As noted above, the wrongful death statute clearly and
unambiguously provides that Erica, as Thomas’s widow, and Thomas’s
dependent children are entitled to share in the remainder of the proceeds “in the
same manner as the personal property of [Thomas].” I.C. § 34-23-1-1. Thomas
died intestate. The relevant portion of Indiana’s intestacy statutes, Indiana
Code section 29-1-2-1, provides:
(a) The estate of a person dying intestate shall descend and be
distributed as provided in this section.
(b) Except as otherwise provided in subsection (c),[4] the
surviving spouse shall receive the following share:
(1) One-half (½) of the net estate if the intestate is survived
by at least one (1) child or by the issue of at least one (1)
deceased child . . . .
4
Subsection (c) applies only if “the surviving spouse is a second or other subsequent spouse who did not at
any time have children by the decedent[.]” As Erica had a child with Thomas, this subsection is not
applicable here.
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Ind. Code § 29-1-2-1 (emphasis added).
[14] Based on the plain language of this section, Erica, as the surviving spouse,
would generally be entitled to receive one-half of the net estate, including
personal property, because Thomas was survived by at least one child. The
plain language of the wrongful death statute, in conjunction with the plain
language of the intestacy statute, supports the trial court’s conclusion that Erica
is entitled to a one-half share of the net proceeds of the wrongful death action in
the same manner as she would be entitled to Thomas’s personal property.
[15] The Phelps Children insist that this is incorrect. They claim that Erica should
not receive one-half of the net proceeds of the wrongful death action because
Indiana Code section 29-1-2-14, part of the intestacy statutes, provides that “[i]f
either a husband or wife shall have left the other and shall be living at the time
of his or her death in adultery, he or she as the case may be shall take no part of
the estate or trust of the deceased husband or wife.” 5 Since the wrongful death
statute provides that the widow is entitled to a share of the net proceeds of the
5
Erica argues in her Appellee’s Brief that she did not leave Thomas or live in adultery. But the trial court
found otherwise, and there was ample evidence to support the trial court’s finding. Erica testified that she
“left the [marital] house,” Tr. p. 65, and that she and Thomas “did not live together after filing for divorce.”
Id. at 69. She further testified that she had sexual intercourse with another man, with whom she later had a
child, on a regular basis after the dissolution action was filed and before Thomas died. Still, Erica claims that
she was not “living in adultery” because she was living with her parents, not her paramour. But the adultery
statute does not require that the decedent’s spouse to live with his or her paramour before its provisions are
applicable; it simply requires that the decedent’s spouse be “living in adultery.” Adultery is defined as
“Consensual sexual intercourse between a married person and a person other than the spouse.” American
Heritage Dictionary online, https://www.ahdictionary.com/word/search.html?q=adultery (last visited June
4, 2020) [https://perma.cc/2A7S-ERWF]. The trial court did not clearly err by determining that the adultery
statute applied to Erica, who left the marital residence and had voluntary sexual intercourse with someone
other than Thomas while still legally married to Thomas.
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wrongful death action “in the same manner as the personal property of the
deceased,” and since Erica is not entitled to a share of Thomas’s intestate estate
due to the fact that she had left Thomas and was living in a state of adultery, the
Children argue that Erica is therefore not entitled to any share of the net
proceeds of the wrongful death action. Although this argument has some facial
appeal, it ultimately cannot stand.
[16] The “adultery” section of the intestacy code provides that a spouse who has left
the decedent and is living in a state of adultery at the time of the decedent’s
death shall take “no part of the estate or trust” of the decedent. I.C. § 29-1-2-14
(emphasis added). But it has long been held that the proceeds from a wrongful
death action are not part of the decedent’s estate. See Goldman v. Cha, 704
N.E.2d 157, 158 (Ind. Ct. App. 1999) (“Wrongful death proceeds do not
become part of the decedent’s estate and are not subject to claims of creditors of
the decedent.”) (citing In re Estate of Bruck, 632 N.E.2d 745, 748 (Ind. Ct. App.
1994)); Thomas v. Eads, 400 N.E.2d 778, 783 (Ind. Ct. App. 1980)).
[17] In Bruck, we held that wrongful death proceeds did not become part of the
intestate estate but instead “pass through intestate distribution.” 632 N.E.2d at
748 (emphasis added). In other words, wrongful death proceeds are not part of
the decedent’s estate but are distributed in the same manner as if they were part
of the intestate estate. And the adultery statute acts to bar an adulterous spouse
only from taking part of the decedent’s estate, which does not include the
proceeds of a wrongful death claim.
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[18] We therefore conclude that, even though Erica may not be entitled to share in
Thomas’s estate, the wrongful death proceeds are not part of Thomas’s estate.
Such proceeds, even though not part of the decedent’s estate, are to be
distributed as set forth in the intestacy distribution statute, which provides that
the widow of the intestate shall receive one-half of the estate if the intestate is
survived by at least one child. Ind. Code § 29-1-2-1(b)(1). Erica is therefore, as
the trial court concluded, entitled to one half of the net proceeds of the wrongful
death action.
[19] The Phelps Children claim that it is unjust for Erica to receive half of the net
proceeds of the wrongful death action. To do so, they observe that Indiana’s
child wrongful death statute—as compared to the adult wrongful death statute
at issue here—specifically excludes the distribution of damages recovered in a
wrongful death action to a “parent or grandparent who abandoned [the]
deceased child while the child was alive[.]” Ind. Code § 34-23-2-1(i)(3). And
they note that the adultery provision of the intestate probate code prohibits
Erica, as the adulterous spouse, from receiving a portion of the intestate estate.
The Phelps Children then pose the question, “If the wrongful death statutes for
the death of a child, consider the existence of abandonment, and the probate
codes address it, why wouldn’t the criteria for the adult wrongful death
distribution include a similar analysis?” Appellant’s Br. at 16. This is not a
question for a court, but for a legislative body. For whatever reason, the general
wrongful death statute simply does not include similar language regarding
abandoning spouses. Indeed, the absence of such abandonment language from
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the general wrongful death statute is all the more telling given the presence of
such language in the child wrongful death statute. We will not read into the
statute a provision the legislature clearly did not include. The Phelps Children’s
arguments that the result of this case is unjust or inequitable are inapposite
given what we consider to be the plain language of the statutes at issue.
Conclusion
[20] The trial court did not err by concluding that the wrongful death statute
unambiguously provides that the net proceeds of the wrongful death statute
inure to the exclusive benefit of Thomas’s widow, Erica, and his dependent
children, to be distributed in the same manner as Thomas’s personal property.
And under the intestacy statutes, Erica is entitled to one-half of such property as
Thomas’s widow. Although the adultery section of the intestacy code may
deprive Erica of the right to receive distributions from Thomas’s estate, the
wrongful death proceeds are not part of Thomas’s estate. Therefore, the trial
court properly determined that Erica is entitled to one-half of the net proceeds
of the wrongful death settlement, and we affirm the judgment of the trial court.
[21] Affirmed.
Riley, J., and Tavitas, J., concur.
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