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In re Irrevocable Trust of Moeder

Court of Appeals of Indiana

March 5, 2015

In the Matter of the Irrevocable Trust of Mary Ruth Moeder;
v.
Salin Bank & Trust Company, Appellee-Petitioner Susan R. Moeder, Appellant-Respondent,

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Appeal from the Marion Superior Court. The Honorable Gerald S. Zore. 49D08-0510-TR-041012.

ATTORNEY FOR APPELLANT: Michael H. Michmerhuizen, Barrett & McNagny, LLP, Fort Wayne, Indiana.

ATTORNEYS FOR APPELLEE: Brian C. Hewitt, Mark R. Galliher, Alerding Castor Hewitt, LLP, Indianapolis, Indiana.

Bailey, Judge. Robb, J., and Brown, J., concur.

OPINION

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Bailey, Judge.

Case Summary

[¶ 1] Salin Bank and Trust Company (" Salin" ), trustee of the Mary Ruth Moeder Revocable Living Trust Agreement (the " Trust" ), petitioned the probate court to approve an accounting of the Trust and to resign as trustee. Susan Moeder (" Moeder" ), the former trustee and current contingent remainder beneficiary of the Trust, objected to the accounting and alleged that Salin had breached its fiduciary duties by imprudently administering the Trust in violation of the Indiana Uniform Prudent Investor Act. The probate court entered a judgment in favor of Salin and ordered that Moeder personally pay the reasonable attorney's fees and costs Salin incurred in defending against Moeder's objection and claims. We affirm.

Issues

[¶ 2] Moeder presents four issues for review, which we reorder and restate as:

I. Whether the probate court abused its discretion in granting a one-day continuance at the outset of the hearing;
II. Whether the probate court's findings of fact were clearly erroneous and therefore do not support the judgment;
III. Whether the probate court abused its discretion in ordering Moeder to pay Salin's reasonable attorney's fees and costs because she brought or continued to litigate a groundless claim; and
IV. Whether the probate court abused its discretion in awarding $106,001.28 in attorney's fees and costs.

[¶ 3] We also address an issue raised by Salin: whether Salin is entitled to an award of appellate attorney's fees.[1]

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Facts and Procedural History

[¶ 4] Mary Ruth Moeder (" Mother" ) established the Trust on November 17, 1997, named herself the initial trustee, and named her two children, Moeder and John Moeder (" John" ), as the primary beneficiaries. The Trust provided that upon Mother's death, the Trust assets would be divided equally between her children. When Mother died in 2001, the Trust became irrevocable and Moeder became the successor trustee.

[¶ 5] On September 12, 2006, the probate court entered an order authorizing Moeder to resign as trustee and appointing Salin as successor trustee. The court also ordered the distribution of Moeder's half of the Trust assets to her. John's share was not distributed, and thus John is the primary beneficiary of the Trust. Pursuant to the Trust terms, Moeder is the contingent remainder beneficiary of John's share of the Trust.

[¶ 6] When Salin took over as trustee in November 2006, the Trust assets included cash and stocks with a total portfolio value of $686,904.65. (App.[2] 226.) Among the stocks were 14,985 shares of JP Morgan Chase & Co. stock (" the JPM stock" ), which comprised approximately 85% of the total Trust assets. At the time of the transfer, Salin was aware the Trust had a large concentration of JPM stock.

[¶ 7] Although Moeder turned over the Trust assets to Salin in November 2006, Salin did not immediately receive from Moeder the necessary information to allow Salin to make investment decisions about the Trust portfolio. In April 2007, after Salin learned that the investment cost basis of the JPM stock was $38.77 per share, Salin developed a diversification plan that called for reducing the concentration of JPM stock and diversifying the Trust assets over two years, 2007 and 2008. Salin's Vice-President Trust Officer and Chief Investment Officer John Roederer (" Roederer" ) testified that Salin " wanted to diversify over two years to . . . keep the tax impact . . . reasonable." (Tr. 286.)

[¶ 8] Pursuant to the diversification plan, Roederer sold 7,000 shares of the JPM stock on July 30, 2007 for a gain of $42,696.59 over the cost basis. (Respondent's Exhibit 6.) He described the timing of the sale as " a good opportunity to reduce substantially the risk related to that position [the concentration.]" (Tr. 286.) Salin retained the remaining shares of JPM stock because " it still could enjoy some upside" and the plan called for diversification over two years. (Tr. 286.)

[¶ 9] In 2008, Salin " put on hold the diversification program" because of the widespread financial crisis. (Tr. 323.) Salin sold no shares of the JPM stock that year, as Roederer considered JP Morgan " one of the few banks that was reasonably fundamentally sound at that point in time" and he " didn't want to sell [the JPM stock] at a distressed price." (Tr. 337.)

[¶ 10] In April 2009, as the stock market began to improve, Salin revised the Trust's diversification plan. The revised plan called for Salin to reduce the concentration of JPM stock over 2009 and 2010 by selling 500 shares of the remaining JPM stock approximately every two months. Roederer no longer considered the prices distressed, but " improving." (Tr. 337.) Salin made its first two sales of 500 shares each

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on April 20, 2009 and June 4, 2009, for losses of approximately $3,380 and $870 below the cost basis, respectively. (Respondent's Exhibit 6.) Except for these two sales, the sales made in 2009 and 2010 resulted in gains. (Respondent's Exhibit 6.) The periodic sales continued into early 2011 until the JPM stock concentration was reduced and the portfolio was diversified.

[¶ 11] On July 29, 2011, Salin filed a " Request to Redocket Trust to File Current Report and Accounting, Resign as Trustee Upon Approval of Current Accounting and for Appointment of Successor Trustee." At the time Salin filed the accounting, the diversified portfolio value was $751,214.30. (App. 234.)

[¶ 12] In response, on September 1, 2011, Moeder filed an " Objection to Trustee's Accounting," in which she alleged that Salin " generally and consistently failed to administer the Trust as a 'Prudent Investor[.]'" (Appellee's App. 16.) Specifically, Moeder alleged that Salin failed to: preserve Trust property, maintain clear records, perform a timely initial review of the Trust assets, develop and implement an appropriate investment strategy, diversify the Trust assets at the right time, consider the Trust's needs for liquidity, use special skills and expertise in investing and managing the Trust, and file an accurate accounting.

[¶ 13] The probate court scheduled a hearing on Salin's petition and Moeder's objection for December 2, 3, and 4, 2013. On December 2, 2013, both parties appeared and discovered that Judge Zore was on medical leave. Although Senior Judge Goodman had reviewed the case and was prepared to proceed, Salin moved for a continuance, citing Judge Zore's " prior involvement and familiarity with the case." (App. 165.) Judge Goodman contacted Judge Zore and learned that Judge Zore was approved to return to work the next day. Over Moeder's objection, Judge Goodman granted Salin's motion for a one-day continuance. The hearing began on December 3, 2013 with Judge Zore presiding.

[¶ 14] On February 28, 2014, the probate court entered an order containing findings of fact and conclusions thereon in which the court approved Salin's tendered accounting and entered judgment in favor of Salin on the claims raised in Moeder's objection. In addition, the court found that Moeder's claims were " time-barred or otherwise unsupported by the facts" (App. 31) and that by bringing her objection, Moeder had " done nothing to benefit John," who is blind and subject to a guardianship, but rather " eroded John's share of the Trust by forcing Salin as Trustee [to] incur the expense of litigating [Moeder's] objection." (App. 31.) Consequently, the court ordered Moeder to pay Salin's attorney's fees and costs incurred in defending against Moeder's objection pursuant to Indiana Code section 34-52-1-1(b). The court then directed Salin to file a supplemental accounting and an application for attorney's fees and costs incurred by Salin in litigating the ...


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