Michael R. Pilkington, Appellant-Plaintiff,
Karen A. Pilkington, Appellee-Defendant.
from the Delaware Circuit Court. Cause No. 18C05-1510-PL-24
The Honorable Thomas A. Cannon, Jr., Judge.
Attorneys for Appellant Thomas M. Beeman Alexander M. Beeman
Beeman Law Anderson, Indiana
Attorney for Appellee Donald K. McClellan Muncie, Indiana
Shepard, Senior Judge
Michael Pilkington sued his stepmother, alleging she breached
her duties as trustee of a trust created by her late husband,
Michael's father. The trial court dismissed the complaint
with prejudice for lack of subject matter jurisdiction. We
conclude that the court has authority to adjudicate
Michael's complaint, and reverse.
and Procedural History
Flannan and Karen Pilkington were married until Flannan's
death in 2006. At the time of his death, Flannan, Karen,
Michael, and Patrick each owned percentage interests in five
limited liability corporations that held real property.
Flannan's will was probated and Karen was named trustee
of a trust Flannan created by last will. The trust contained
Flannan's interest in the five limited liability
corporations (the "LLCs"). Karen was entitled to
income from the trust during her life. Upon her death, the
trust assets passed to her stepsons Michael and Patrick
Pilkington. The trust contained a spendthrift provision:
"No creditor of my wife or any residual beneficiary
shall have the right to invade this trust for the purpose of
satisfying the debts of my wife or any residual
beneficiary." Appellant's App. p. 12, Last Will and
Testament of Flannan M. Pilkington.
In 2009, Michael filed Chapter 7 bankruptcy. By request of
the bankruptcy trustee, his interest in the LLCs were sold to
Karen for $20, 000. The description of the interest sold was
not specific, e.g., deeds prepared by the bankruptcy trustee
quitclaimed to Karen "any interest [Michael] may have in
the . . . described real property." See
Defendant's Exhibits A, B, C, and D.
In 2015, Michael filed a complaint against Karen in the
Delaware Circuit Court, alleging (among other things) that
she breached her duties as trustee. Michael also alleged that
he retained his beneficiary interest in the trust and that
only his "entity interests" in the LLCs were sold
to Karen during the bankruptcy. Appellant's App. pp. 6-7.
Michael sought (among other things) an accounting of all
trust activity, Karen's removal as trustee, and an order
requiring Karen to restore trust assets and make up for any
losses. Id. at 9.
Separately, Patrick sued Karen in the Delaware Circuit Court
over the management, operation, and ownership of the trust
assets. They entered into a settlement in April 2015,
agreeing to sell all of the properties held by the LLCs and
divide the proceeds 51% to 49% in favor of Patrick. Michael
was not a named party and did not intervene in the action.
On February 9, 2016, Karen moved to dismiss Michael's
complaint for lack of subject matter jurisdiction. She argued
that the bankruptcy court's order and the quitclaim deeds
divested Michael of any interest he had in the LLCs,
including his remainder interest; that Michael's
complaint stemmed from the bankruptcy court's sale of his
interest in the LLCs; and that the Delaware Circuit Court, a
court of general jurisdiction, had no subject matter
jurisdiction over what Karen characterized as "a
bankruptcy court determination." Id. at 38-39.
According to Karen, the bankruptcy court first needed to
determine whether Michael retained a remainder interest in
the trust before the state court could act on his complaint
Michael responded by saying that his "complaint
[contained] no claims which would fall under the jurisdiction
of the bankruptcy court." Id. at 54. He then
argued his remainder interest in the trust was not included
in the bankruptcy sale because of the spendthrift provision,
and that under applicable law the remainder interest could
not be sold by the bankruptcy trustee.
Following a hearing, the trial court granted Karen's
motion and dismissed Michael's complaint with prejudice,
finding that it was an improper collateral attack on the
judgment issued in the litigation between Patrick and Karen,
and that Michael could have intervened in that litigation but
did not. It also noted that he could have sought relief from
the bankruptcy court.
Michael argues on appeal that the trial court erred in
concluding that the Delaware Circuit Court ...