Court Opinion

ID: 9897433
Source: CourtListenerOpinion
Date Created: 2023-11-14 19:11:30.324078+00
Date Added: 2024-06-11T09:15:46.401385
License: Public Domain

FILED
                                                                     Apr 05 2023, 8:49 am

                                                                         CLERK
                                                                     Indiana Supreme Court
                                                                        Court of Appeals
                                                                          and Tax Court

ATTORNEY FOR APPELLANT                                      ATTORNEYS FOR APPELLEE
Andrea L. Ciobanu                                           Michael P. Bishop
Ciobanu Law, P.C.                                           MaryEllen K. Bishop
Indianapolis, Indiana                                       John B. Bishop
                                                            Cohen Garelick & Glazier
                                                            Indianapolis, Indiana

                                             IN THE
     COURT OF APPEALS OF INDIANA

Daniel Kay Beach,                                           April 5, 2023
Appellant-Respondent,                                       Court of Appeals Case No.
                                                            22A-TR-1779
        v.                                                  Appeal from the Hamilton
                                                            Superior Court
Teresa Spiech, Trustee of                                   The Honorable Michael A. Casati,
the Dauby Family Trust,                                     Judge
                                                            The Honorable David A. Shaheed,
Appellee-Petitioner.
                                                            Senior Judge
                                                            Trial Court Cause No.
                                                            29D01-2204-TR-207

                                 Opinion by Judge Weissmann
                                 Judges May and Crone concur.

Court of Appeals of Indiana | Opinion 22A-TR-1779 | April 5, 2023                            Page 1 of 12
      Weissmann, Judge.

[1]   Upon her death, Carol Daubenspeck wanted her children, Daniel Beach and

      Teresa Spiech, to receive equal shares of her property. The only exception being

      Daubenspeck’s desire for Beach to receive her home as part of his share if he

      wished. To accomplish this, Daubenspeck placed her assets within the Dauby

      Family Trust, named her two children as equal beneficiaries, and gave Beach a

      right of first refusal “to receive” the home as part of his distribution from the

      trust. But when Beach chose to exercise his right of first refusal after

      Daubenspeck’s death, Spiech, as successor Trustee, arranged to sell the home to

      a third-party instead.

[2]   Beach refused to recognize the third-party arrangement, prompting Spiech to

      docket the Trust and ask the local trial court to force the sale. The trial court

      found that Beach’s right of first refusal only activated upon the receipt of a

      bona-fide offer from a third-party, meaning Beach must match the terms of the

      sale or forfeit his right to receive the home. We disagree. Giving full effect to

      the Trust’s language, we find that Beach’s right of first refusal gave him the

      choice to receive the home as part of his share of the Trust if he so desired.

      Accordingly, we reverse and remand to determine the value of the home at the

      time of Daubenspeck’s death so that the Trust’s assets may be divided evenly

      between the siblings with Beach receiving the home, if possible, as part of his

      distribution. We affirm the trial court’s decision on all other grounds.

      Court of Appeals of Indiana | Opinion 22A-TR-1779 | April 5, 2023          Page 2 of 12
      Facts
[3]   Daubenspeck created the Trust, in part, to “avoid[] probate or estate

      administration” and “manage [her] assets in the event of [her] . . . death.”

      Appellant’s App. Vol II, p. 13. Much of Daubenspeck’s property, including the

      home, was placed in the Trust, and her two children, Beach and Spiech, were

      named as the Trust’s beneficiaries. While the Trust required distributing the

      assets equally between Beach and Spiech upon Daubenspeck’s death, the Trust

      also gave Beach a right of first refusal “to receive [the home] as part of his

      residuary distribution.” Id. at 26.

[4]   While Daubenspeck was alive, she and Beach had an agreement that allowed

      Beach to live at the home in exchange for performing general maintenance and

      upkeep on the property. When Daubenspeck passed away in 2020, Beach had

      been living in the home with his immediate family for several years. Spiech

      became Trustee upon Daubenspeck’s death. Within a few months, Spiech

      added her husband as Co-Trustee.

[5]   Soon after becoming Trustee, Spiech discussed the sale of the home with a

      realtor. Spiech did not inform Beach of this discussion or notify him of his right

      of first refusal to the home. Yet even without that knowledge, Beach was

      generally obstructive of any effort to appraise the home or catalogue the

      personal property within. He barred appraisers from entering the property more

      than once and generally thwarted the process to dispose of Trust property.

      Court of Appeals of Indiana | Opinion 22A-TR-1779 | April 5, 2023          Page 3 of 12
[6]   Six months passed until Beach was given notice of the opportunity to exercise

      his right of first refusal. In the notice, Spiech demanded that Beach pay her

      $225,000 for her share of the home, which she valued at $450,000. In reply,

      Beach sent Spiech a certified letter through counsel stating he intended to

      exercise his right of first refusal but disputed the value assigned to the home.

[7]   Little changed until nearly a year later when the Trust received an offer from

      Ashley and Dallas Neff to purchase the home for $455,000. Spiech accepted the

      offer and entered into a purchase agreement requiring Beach to exercise his

      right of first refusal within three days. When Beach did not comply with the

      three-day deadline and refused to honor the sale of the home, Spiech docketed

      the Trust with the trial court to determine the status of Beach’s right of first

      refusal and, if necessary, order Beach to vacate the home. Beach answered by

      seeking damages and attorney’s fees due to Spiech’s alleged violation of her

      fiduciary duties as Trustee.

[8]   The trial court heard evidence from the parties over two half-day evidentiary

      hearings. Although the primary issue revolved around the interpretation of the

      Trust’s right of first refusal provision, a question of law, both parties sought to

      introduce evidence of the home’s value and the behavior of the other party as it

      related to the Trust. In particular, Spiech argued that Beach had generally

      obstructed and delayed her work as Trustee by preventing access to the home so

      that the personal property within could be catalogued and valued. Beach replied

      in kind, alleging that Spiech had abused her position as Trustee by

      unreasonably delaying the distribution of the Trust’s assets. Each party also

      Court of Appeals of Indiana | Opinion 22A-TR-1779 | April 5, 2023          Page 4 of 12
       presented their own appraisals of the home, with Spiech’s coming in at

       $387,000 and Beach’s at $275,000.

[9]    The trial court ruled for Spiech, finding that a right of first refusal is only

       activated by the receipt of a bona fide third-party offer. Accordingly, the court

       concluded that Beach must pay the value set by the Neffs’ offer to exercise his

       right of first refusal. The trial court believed Beach’s position—that he should

       receive the home as part of his distribution from the Trust at its value as of

       Daubenspeck’s death—required the court “to ignore legal precedent” on the

       meaning of a right of first refusal. Id. at pp. 240-42. The trial court also

       determined that Spiech had met her obligations as Trustee and denied Beach’s

       requests for damages and attorney’s fees.

       Discussion and Decision
[10]   Beach makes three arguments on appeal. First, Beach contends the trial court

       erred in interpreting the Trust’s right of first refusal provision and that he should

       have been allowed to receive the home at its value at the time of Daubenspeck’s

       death, not the third-party purchase price. Second, Beach argues that the trial

       court erred in its handling of the evidentiary hearings. And third, he claims the

       trial court erred in denying his request for attorney’s fees and other sanctions for

       Spiech’s conduct as Trustee.

[11]   As the trial court here entered findings of fact and conclusions, we apply our

       common two-step standard of review. We consider first whether the evidence

       supports the findings and then whether the conclusions support the judgment.

       Court of Appeals of Indiana | Opinion 22A-TR-1779 | April 5, 2023              Page 5 of 12
       In re Estate of Owen, 855 N.E.2d 603, 608 (Ind. Ct. App. 2006). In doing so, we

       neither reweigh the evidence nor reconsider witness credibility and view the

       evidence only in the light most favorable to upholding the judgment. Id. The

       trial court’s findings and conclusions will be overturned only if the record

       contains no facts or inferences supporting them. Id. In other words, the trial

       court’s judgment must be clearly erroneous. Id. Any question of law is reviewed

       de novo. Id.

       I. Right of First Refusal
[12]   Beach believes the trial court erred in its interpretation of the Trust’s right of

       first refusal provision. The section containing this provision reads in full:

               Section 3.10 Right of First Refusal Granted to Daniel Beach

               As soon as practicable after my death, the Trustee shall notify my
               son, Daniel Beach in writing, sent by certified mail, return receipt
               requested, or other verifiable means, of his right of first refusal to
               receive [the home] as part of his residuary distribution. If Daniel
               Beach predeceases me or fails to notify the Trustee in writing of
               his intention to exercise his right of first refusal within sixty days
               of receiving notice, this Right of First Refusal shall lapse, and the
               property shall be distributed in accordance with the articles that
               follow.

               If Daniel Beach does not properly exercise his right, then Teresa
               Spiech shall have the same option to receive this property as part
               of her residuary distribution.

       Appellant’s App. Vol. II, p. 26 (emphasis added).

       Court of Appeals of Indiana | Opinion 22A-TR-1779 | April 5, 2023            Page 6 of 12
       To Beach, the right of first refusal provision allowed him to receive the home as

       part of his residuary distribution, so long as he exercised this right within 60

       days after receiving notice thereof. But to Spiech and the trial court, the Trust

       provision merely allowed Beach the first opportunity to buy out Spiech’s

       interest in the property or otherwise match the terms of a third-party offer if the

       home was put up for sale. We agree with Beach’s reading.

[13]   The interpretation of trust documents is a matter of law that we review de novo.

       Gittings v. Deal, 109 N.E.3d 963, 971 (Ind. 2018). The guiding principle in

       interpreting trust documents is to “ascertain and give effect to the settlor’s

       intention.” Univ. of S. Ind. Found. v. Baker, 843 N.E.2d 528, 532 (Ind. 2006). A

       trust document is not ambiguous “merely because [the] parties disagree about a

       term’s meaning.” Id. “Rather, language is ambiguous only if reasonable people

       could come to different conclusions as to its meaning.” Id.

[14]   We have no difficulty ascertaining Daubenspeck’s intent from the plain

       language of the Trust. Beach’s “right of first refusal to receive [the home] as part

       of his residuary distribution” means what it says. Appellant’s App. Vol. II, p. 26

       (emphasis added). If he chooses, Beach may elect “to receive” the home as part

       of his share of the Trust’s assets. As Spiech is still entitled to half of the Trust

       assets, the home would necessarily come in lieu of any other property or assets

       Beach may have received. But so long as Spiech receives her half of the Trust’s

       assets, Beach is entitled to the home upon validly exercising his right of first

       refusal. The confusion here stemmed from a mistaken understanding of how

       this right of first refusal operated.

       Court of Appeals of Indiana | Opinion 22A-TR-1779 | April 5, 2023             Page 7 of 12
[15]   Broadly speaking, a right of first refusal is the “right to preempt another.”

       Hyperbaric Oxygen Therapy Sys., Inc. v. St. Joseph Med. Ctr. of Ft. Wayne, Inc., 683

       N.E.2d 243, 245 (Ind. Ct. App. 1997) (internal quotation marks omitted)

       (quoting 3 Arthur Linton Corbin & Eric Mills Holmes, Corbin on Contracts §

       11.3 468-69 (rev. ed. 1996)). More narrowly, and as it is typically applied in real

       property transactions, a right of first refusal is “a dormant set of rights that does

       not entitle the holder to take any action until receipt of a bona fide offer.” Beiger

       v. Heritage Corp.v. Est. of Kilbey, 667 N.E.2d 184, 186 (Ind. Ct. App. 1996).

       Essentially, it is “the right to meet [the] terms of [a] proposed contract before it

       is executed.” Hyperbaric Oxygen Sys., Inc., 683 N.E.2d at 248 (quoting Black’s

       Law Dictionary 1325 (6th ed. 1990)). The trial court erred in trying to shoehorn

       the Trust’s right of first refusal provision into these definitions rather than give

       effect to the provision’s plain meaning.

[16]   Indiana courts have interpreted right of first refusal provisions many times,

       usually in the context of real property transactions. See, e.g., id. Yet, neither

       party points to, nor does our own research reveal, an Indiana case examining a

       right of first refusal to receive real property. This distinction is not purely

       academic. For example, in Hyperbaric Oxygen Sys., Inc., this Court examined

       whether any distinctions existed between a “right of first refusal to purchase”

       versus a “right of first refusal to sell.” Id. Although the Court ultimately found

       no distinction between the two, it raised the possibility that not all rights of first

       refusal operate the same. We have such an example before us today. The right

       Court of Appeals of Indiana | Opinion 22A-TR-1779 | April 5, 2023                 Page 8 of 12
       of first refusal here, unlike the right in Hyperbaric Oxygen Sys., Inc., does not

       require a bona-fide offer to activate.

[17]   The Trust’s purpose is defeated if Beach must match a bona-fide third-party’s

       offer as a condition of exercising Beach’s right of first refusal. The Trust

       provides: “As soon as practicable after [Daubenspeck’s] death, the Trustee shall

       notify [Beach]” of his right of first refusal. Appellant’s App. Vol. II, p. 26

       (emphasis added). Already, this is not a standard right of first refusal. Typical

       right of first refusal language provides that the right lies dormant until the

       property is put up for sale or there is some third-party offer. See, e.g., In re Estate

       of Owen, 855 N.E.2d at 607 (“If at any time [the property] shall be placed for

       sale . . . .”); Beiger Heritage Corp., 667 N.E.2d at 185 (“If . . . at any time [the

       property’s owner] desires or is otherwise compelled . . . to sell, convey, transfer,

       assign or otherwise dispose of [the property] . . . .”); McGehee v. Elliot, 849

       N.E.2d 1180, 1187 (Ind. Ct. App. 2006) (“ . . . in event [the property] should be

       for sale at any time in the future”). Given that our guiding principle here is to

       “ascertain and give effect to the settlor’s intention,” Baker, 843 N.E.2d at 532,

       the existence of a bona-fide third party offer is superfluous to the right of first

       refusal’s own terms.

[18]   The same logic applies to the language giving Beach the right “to receive” the

       home “as part of his residuary distribution.” Appellant’s App. Vol. II, p. 26.

       Again, the typical language of a right of first refusal expressly contemplates the

       existence of a separate third-party offer. See, e.g., B&R Oil Co., 77 N.E.3d at 826

       (“right of first refusal to purchase”); Hay v. Hay, 885 N.E.2d 21, 22-23 (Ind. Ct.

       Court of Appeals of Indiana | Opinion 22A-TR-1779 | April 5, 2023              Page 9 of 12
       App. 2008) (“upon receiving an offer from a third party . . . .”). While Spiech

       and the trial court were correct in arguing that a right of first refusal typically

       requires the existence of a bona fide third-party offer, applying that result here

       ignores the Trust’s plain language which requires Beach to be notified of his

       right upon Daubenspeck’s death.

[19]   We conclude that the trial court erred in ruling that Beach must match the

       Neffs’ offer before exercising his right of first refusal. Accordingly, we remand

       to the trial court to assess the value of the home at the time of Daubenspeck’s

       death so that the Trust assets may be evenly divided among the siblings.

       II. Due Process
[20]   Beach next argues that the trial court violated his due process rights in setting a

       schedule for the evidentiary hearing that denied him the opportunity to present

       three witnesses on the issue of Spiech’s alleged breach of her fiduciary duty as

       Trustee. Although Beach does not phrase his argument in these terms, we

       understand him as alleging the trial court committed reversible error by denying

       him his “opportunity to be heard.” See generally Morton v. Ivac, 898 N.E.2d 1196,

       1199 (Ind. 2008). We review this issue de novo. D.G. v. S.G., 82 N.E.3d 342,

       347 (Ind. Ct. App. 2017).

[21]   Beach was not denied an opportunity to be heard. The record reflects that the

       trial court not only appropriately conducted the hearings, but that Beach agreed

       to the very hearing schedule of which he now complains. Several times, the trial

       court made clear to both parties’ counsel that the hearings would not be

       Court of Appeals of Indiana | Opinion 22A-TR-1779 | April 5, 2023           Page 10 of 12
       extended beyond the second day. Tr. Vol. II, pp. 56-57, 87 (“Well, you

       gentlemen can invest your time as you see fit but at 4:30 the curtain goes down

       and the show is over.”). Beach did not object to the hearing schedule and

       conveyed that he understood the time constraints. Id. at 57. And although he

       now alleges that the testimony from his three witnesses would have been

       “highly relevant,” Appellant’s Br., p. 28, Beach said to the court at the hearing:

       “If we don’t get to the [three witnesses], that’s okay.” Id. at 62. Given the

       repeated discussions with both parties about the hearing schedule and Beach’s

       decision to use his given time in ways other than calling the three witnesses, the

       trial court did not deny Beach his opportunity to be heard. D.G., 82 N.E.3d at

       346-47.

       III. Breach of Trust
[22]   Lastly, Beach argues that the trial court erred in declining to award him

       damages and attorney’s fees for Spiech’s alleged breach of the Trust and

       conduct as Trustee. We defer to the trial court’s “sound discretion” on these

       issues. In re Eiteljorg, 951 N.E.2d 565, 572 (Ind. Ct. App. 2011). And we find no

       abuse of that discretion here.

[23]   Beach bases his request for damages and attorney’s fees on a breach of trust

       claim against Spiech for not promptly liquidating and dispersing the Trust’s

       assets. There are two problems with this theory. First, as shown above, the

       Trust’s own instructions for dispersing its property were opaque. And while we

       conclude above that Spiech wrongly interpreted and administrated the Trust

       documents, this mistake does not rise to a level requiring either damages or
       Court of Appeals of Indiana | Opinion 22A-TR-1779 | April 5, 2023        Page 11 of 12
       attorney’s fees because Beach does not show any resulting harm to the Trust.

       See Goodwine v. Goodwine, 819 N.E.2d 824, 828 (Ind. Ct. App. 2004) (“If the

       trust is not harmed by any breach of trust committed by the trustee, the

       beneficiaries may not complain of the breach of trust.”).

[24]   Second, the evidence supports the trial court’s determination that Beach’s

       obstructive behavior contributed to the delay. On multiple occasions, Beach

       resisted or disrupted Spiech’s efforts to catalogue and appraise both the personal

       property within the home and the home itself. As these actions were necessary

       to accurately distribute the Trust’s assets, Beach cannot actively hinder the

       administration of the Trust with one hand while seeking damages for the

       inevitable delay that his own actions caused with the other. Accordingly, we

       affirm the trial court’s decision awarding Beach no damages or attorney’s fees.

       Conclusion
[25]   Finding the trial court erred in its interpretation of the Trust’s right of first

       refusal provision, we reverse and remand to assess the value of the home at the

       time of Daubenspeck’s death so that the Trust assets may be divided between

       the siblings with Beach receiving the home, if possible, as part of his

       distribution. The trial court’s decision is affirmed on all other grounds.

       May, J., and Crone, J., concur.

       Court of Appeals of Indiana | Opinion 22A-TR-1779 | April 5, 2023            Page 12 of 12