Court Opinion

ID: 4523654
Source: CourtListenerOpinion
Date Created: 2020-04-08 19:03:37.485881+00
Date Added: 2024-06-11T12:09:46.832719
License: Public Domain

FILED
                                                                          Apr 08 2020, 7:32 am

                                                                              CLERK
                                                                          Indiana Supreme Court
                                                                             Court of Appeals
                                                                               and Tax Court

      ATTORNEYS FOR APPELLANT                                     ATTORNEYS FOR APPELLEES
      Eric J. Benner                                              Christopher D. Lee
      Laurie D. Johnson                                           Ronald G. Salatich
      Boje Benner Becker Markovich &                              James A. Carter
      Hixson LLP                                                  Wooden McLaughlin LLP
      Noblesville, Indiana                                        Indianapolis, Indiana

                                                   IN THE
           COURT OF APPEALS OF INDIANA

      Raquel Walters,                                             April 8, 2020
      Appellant,                                                  Court of Appeals Case No.
                                                                  19A-TR-1069
              v.                                                  Appeal from the Marion Superior
                                                                  Court
      Brittany M. Corder, Matthew T.                              The Honorable Steven R.
      O’Brien, and Molly L. O’Brien,                              Eichholtz, Judge
      Appellees.                                                  Trial Court Cause No.
                                                                  49D08-1805-TR-19653

      Sharpnack, Senior Judge.

                                       Statement of the Case
[1]   Raquel Walters, a natural child of David Walters, appeals the trial court’s entry

      of summary judgment that Brittany M. Corder, Matthew T. O’Brien, and Molly

      L. O’Brien (“O’Brien Children”), who are also natural children of David

      Walters but who were adopted out of the Walters family, are beneficiaries

      Court of Appeals of Indiana | Opinion 19A-TR-1069 | April 8, 2020                           Page 1 of 14
      under two trusts established by Mildred Goodman, their great grandmother.

      On this issue of first impression, we hold that under these facts where the

      children were adopted out of the family after the settlor’s death, the adopted out

      children retained their status as beneficiaries of Mildred. We therefore affirm

      the trial court.

                                                       Issue
[2]   Raquel presents two issues for our review, which we restate as one: whether

      the trial court erred in granting summary judgment based upon its

      determination that the beneficiaries of both an irrevocable trust and a

      testamentary trust included children who had been adopted out of the settlor’s

      family.

                                Facts and Procedural History
[3]   Mildred Goodman had a son, Charles Walters, who married Ann. In 1968,

      Mildred established a trust (the Irrevocable Trust) for Charles. The Irrevocable

      Trust provides that trust income goes to Charles and then, upon Charles’ death,

      to his wife, Ann. At Ann’s death, the trust property is to be distributed “to the

      issue of Charles [ ] per stirpes.” Appellant’s App. Vol. 2, p. 37, ¶ 2.

[4]   In 1960, Charles and Ann had a son, David. David married Joan, and they had

      three children: Brittany (1990), Matthew (1992), and Molly (1994).

[5]   In 1991, Mildred executed a will that created a trust for David (the

      Testamentary Trust). The Testamentary Trust provides that trust income goes

      Court of Appeals of Indiana | Opinion 19A-TR-1069 | April 8, 2020         Page 2 of 14
      to David and, on his death, the trust property passes to “his then living

      children, share and share alike.” Id. at 22, ¶ 6. Mildred died in 1994.

[6]   David and Joan divorced in 1995. David married Michele, and they had a

      daughter, Raquel, in 1996. Joan married Thomas O’Brien. In 1996, Thomas

      adopted Joan and David’s three children, Brittany, Matthew, and Molly.

[7]   David died in 2017. Thereafter, the trustee of the two trusts petitioned the

      probate court for instructions regarding the interpretation of the trusts as to

      whether the O’Brien Children should be included in the beneficiary classes as

      the “then living children” of David under the Testamentary Trust and as the

      “issue of Charles” under the Irrevocable Trust. The O’Brien Children and

      Raquel filed claims and counterclaims. Each filed a motion for summary

      judgment. The probate court entered summary judgment for the O’Brien

      Children and against Raquel as follows:

              It is hereby declared and determined that Brittany M. Corder,
              Matthew T. O’Brien, Molly L. O’Brien and Raquel Walters are
              determined to be the “then living children” of David Walters at
              the time of his death solely for the purpose of determining the
              beneficiaries of the Testamentary Trust of Mildred W. Goodman
              created pursuant to the Last Will and Testament of Mildred W.
              Goodman on July 9, 1991; and

              It is hereby declared and determined that Brittany M. Corder,
              Matthew T. O’Brien[,] Molly L. O’Brien and Raquel Walters are
              considered the children of David Walters solely for the purpose
              of determining the beneficiaries and class of issue of Charles
              Henry Walters and David Walters in the Irrevocable Trust of
              Mildred W. Goodman created on August 8, 1968[.]

      Court of Appeals of Indiana | Opinion 19A-TR-1069 | April 8, 2020           Page 3 of 14
      Appealed Order, pp. 2-3. It is from this order that Raquel appeals.

                                     Discussion and Decision
[8]   The trial court’s grant of summary judgment is presumed valid, and the party

      who lost in the trial court has the burden of demonstrating that the grant of

      summary judgment was erroneous. Consumer Attorney Servs., P.A. v. State, 71
N.E.3d 362, 364 (Ind. 2017). On appeal, we apply the same standard of review

      as the trial court: summary judgment is appropriate only where the designated

      evidentiary matter shows there is no genuine issue as to any material fact and

      that the moving party is entitled to judgment as a matter of law. Young v. Hood’s

      Gardens, Inc., 24 N.E.3d 421, 423-24 (Ind. 2015); see also Ind. Trial Rule 56(C).

      Appellate review is limited to those materials specifically designated to the trial

      court, and all facts and reasonable inferences drawn from those facts are

      construed in favor of the nonmovant. Sheehan Const. Co., Inc. v. Cont’l Cas. Co.,

      938 N.E.2d 685, 688 (Ind. 2010).

[9]   The issue in this case arose due to David’s death in 2017. Mildred’s will

      created a trust for her grandsons, David and his brother, and provided:

              Upon the death of either of my grandsons, the Trustee shall
              distribute the then remaining principal and undistributed income
              of such grandchild’s trust share to his then living children, share and
              share alike, or if such deceased grandchild shall leave no surviving
              child or children, then the share to which such deceased
              grandchild would have been entitled shall be added to the share
              of my other grandchild, or if my other grandchild is not then
              living, the then surviving children of such deceased grandchild

      Court of Appeals of Indiana | Opinion 19A-TR-1069 | April 8, 2020             Page 4 of 14
               shall take the share their parent would have been entitled, share
               and share alike.

       Appellant’s App. Vol. 2, p. 22, ¶ 6 (emphasis added).

[10]   In 1968, Mildred executed the Irrevocable Trust. The provision at issue within

       that trust provides:

               Upon the death of [Ann], in the event that she survives her
               husband and qualifies as set out above, or upon the death of
               Charles Henry Walters in the event he survives her, all of the
               trust estate shall forthwith be distributed to the issue of Charles
               Henry Walters per stirpes and not per capita, provided that each
               and all of said issue shall have attained the age of twenty-one (21)
               years.
Id. at 37, ¶ 2 (emphasis added). At the time of the hearing on the parties’

       motions for summary judgment, Ann was still living. However, the trustee

       included the Irrevocable Trust in its request for instructions from the court as to

       the interpretation of Mildred’s trust agreements because, upon Ann’s passing,

       the trustee will again face the question concerning the inclusion of the O’Brien

       Children as beneficiaries.

[11]   Raquel first asserts and summarily concludes that she is the only member of the

       class of beneficiaries described in Mildred’s Testamentary Trust as the “then

       living children” of David because of the adoption out of the O’Brien Children.

       However, at the time of David’s death, all four of his biological children were

       living. Raquel’s argument begs the question at the heart of this appeal: are the

       O’Brien Children David’s “children” within the terms of Mildred’s trust?

       Court of Appeals of Indiana | Opinion 19A-TR-1069 | April 8, 2020           Page 5 of 14
[12]   The interpretation of trusts is a question of law for the court. Fulp v. Gilliland,

       998 N.E.2d 204, 207 (Ind. 2013). The terms of a trust are “the manifestation of

       the intent of a settlor” with respect to the trust. Ind. Code § 30-4-1-2(22) (2019).

       Thus, the primary goal in construing a trust document is to ascertain and give

       effect to the intent of the settlor. Fulp, 998 N.E.2d at 207. This guiding

       principle has been codified in our trust code, which provides: “The rules of law

       contained in this article shall be interpreted and applied to the terms of the trust

       so as to implement the intent of the settlor and the purposes of the trust. If the

       rules of law and the terms of the trust conflict, the terms of the trust shall

       control unless the rules of law clearly prohibit or restrict the article which the

       terms of the trust purport to authorize.” Ind. Code § 30-4-1-3. This Court is

       not permitted to rewrite a trust agreement any more than it is permitted to

       rewrite a contract. Malachowski v. Bank One, Indianapolis, 590 N.E.2d 559, 565-

       66 (Ind. 1992). Nevertheless, when a court must construe a trust instrument,

       the well-established rule of trust construction is that the settlor’s intent must be

       determined from the language of the trust instrument and the facts and

       circumstances existing at the time the trust was formed. Univ. of S. Ind. Found.

       v. Baker, 843 N.E.2d 528, 533 (Ind. 2006).

[13]   We begin with the language that created the trust. Upon David’s death, his

       share of the trust is to be divided among his living children. The term

       “children” is not defined in the terms of the trust, and the term is not qualified

       or restricted in any way (other than requiring the children to be “living”).

       Further, the trust language is silent as to adopted children—whether adopted in

       Court of Appeals of Indiana | Opinion 19A-TR-1069 | April 8, 2020           Page 6 of 14
       or out of the family. At the time Mildred included in her will the Testamentary
                                                                                                           1
       Trust in 1991, the Indiana Trust Code did not define the term “children.”

       Further, caselaw indicates that the ordinary, popular, and legal sense of the

       word “children” embraces the first generation of offspring. Casper v. Helvie, 83
Ind. App. 166, 146 N.E. 123, 127 (1925). All four of David’s offspring were

       living at the time of his death.

[14]   We now turn to the circumstances existing at the time Mildred executed her

       will establishing the Testamentary Trust in 1991. David was married to his first

       wife, Joan, and they had only one child, Brittany. During the course of their

       marriage, and while Mildred was alive, David and Joan had their second child,

       Matthew, in 1992. When Mildred died in 1994, David and Joan were still

       married, and Joan was pregnant with their third child, Molly. Moreover, the

       unrefuted designated evidence shows that, prior to her death, Mildred knew

       that Joan was pregnant with a third child, and that Mildred had a close

       relationship with both Brittany and Matthew during her lifetime. Mildred

       never knew that David and Joan got divorced or that David consented to the

       adoption of Brittany, Matthew, and Molly; these events all occurred after

       Mildred’s death.

       1
        Interestingly, it was not until July 1, 2019, that the Trust Code was amended to include the definition of
       “child.” See Ind. Code § 30-4-1-2(7) (defining “child” as “an adopted child or a child that is in gestation
       before the death of a deceased parent and born within forty-three (43) weeks after the death of that parent.
       The term does not include a grandchild or other more remote descendants, nor, except as provided in IC 29-
       1-2-7, a child born out of wedlock”).

       Court of Appeals of Indiana | Opinion 19A-TR-1069 | April 8, 2020                                Page 7 of 14
[15]   As we did with her Testamentary Trust, we examine Mildred’s intent with

       regard to the Irrevocable Trust. The term “issue” is not defined by the terms of

       the trust, and, other than requiring the issue to be twenty-one, the language of

       this provision does not restrict or limit the term or create a separate class for

       adopted children. The document is silent with regard to issue that may be

       adopted in or out of the family. The term “issue” is not defined in the trust

       code, but it has been defined in caselaw as meaning “descendants.” Allen v.

       Craft, 109 Ind. 476, 9 N.E. 919, 922 (1887); see also Black’s Law Dictionary

       (11th ed. 2019) (defining “issue” as lineal descendants; offspring). Here, David

       was a descendant of Charles, and Brittany, Matthew, Molly, and Raquel are all

       descendants or offspring of David.

[16]   As to the facts and circumstances existing at the time Mildred established this

       trust in 1968, we have little information. David was only eight years old so

       Mildred had no knowledge of whether he would marry and/or have children.

       Beyond that information, there is no evidence that Mildred intended to exclude

       any of her descendants from this class of beneficiaries.

[17]   Rather than focusing on the settlor’s intent and the circumstances at the time

       she executed the trust documents, Raquel concentrates on the situation that

       occurred after Mildred’s death. Particularly, she claims that the O’Brien

       Children cannot be in the class of beneficiaries of either trust because their

       familial ties to the Walters family were severed due to their adoption out of the

       family. In support of this argument, she cites Indiana Code section 31-19-15-1

       Court of Appeals of Indiana | Opinion 19A-TR-1069 | April 8, 2020           Page 8 of 14
       (2009), which is entitled “Effect upon duties, obligations and rights of biological

       parents,” and which provides, in pertinent part:

               (a) [I]f the biological parents of an adopted person are alive, the
               biological parents are:

                        (1) relieved of all legal duties and obligations to the
                        adopted child; and

                        (2) divested of all rights with respect to the child;

               and the parent-child relationship is terminated after the adoption
               unless the parent-child relationship was terminated by an earlier
               court action, operation of law, or otherwise.

               (b) The obligation to support the adopted person continues until
               the entry of the adoption decree. The entry of the adoption
               decree does not extinguish the obligation to pay past due child
               support owed for the adopted person before the entry of the
               adoption decree.

[18]   The purpose of Section 31-19-15-1 “‘is to shield the adoptive family from

       unnecessary instability and uncertainty arising from unwanted intrusions by the

       child’s biological family.’” In re Adoption of J.T.A., 988 N.E.2d 1250, 1253 (Ind.

       Ct. App. 2013) (quoting In re Adoption of K.S.P., 804 N.E.2d 1253, 1257 (Ind.

       Ct. App. 2004)), trans. denied. Here, the O’Brien Children are all adults, and the

       biological family is not trying to interfere with any aspect of the relationship

       between them and their adoptive family. Rather, their biological great

       Court of Appeals of Indiana | Opinion 19A-TR-1069 | April 8, 2020             Page 9 of 14
                                                                                    2
       grandmother, with whom two of the three O’Brien Children had contact and a

       relationship from their birth until her death, included them as beneficiaries of

       her trusts. Although Raquel claims that a determination that the O’Brien

       Children are beneficiaries under the terms of Mildred’s trusts would

       “undermine the purpose of the adoption statutes,” we disagree. Appellant’s Br.

       p. 20. The objective of Section 31-19-15-1 is not advanced by depriving the

       O’Brien Children of their status as beneficiaries merely because their biological

       father consented for them to be adopted after the death of the settlor of the

       trusts. The statute was designed as a shield to protect new adoptive families,

       not as a sword to prohibit adopted children from receiving a trust distribution,

       per the settlor’s wishes, from a member of the family from which the children

       have been adopted out. Indeed, allowing this statute to be used in such a

       manner would contravene one of the cardinal principles of trust law: the settlor

       has the right to arrange for the distribution of her estate as she sees fit.

       Paloutzian v. Taggart, 931 N.E.2d 921, 925 (Ind. Ct. App. 2010) (citing Jay M.

       Zitter, Annotation, Adopted Child as Within Class Named Deed or Inter Vivos

       Instrument, 37 A.L.R. 5th 237, § 2(a) (1996)).

[19]   Raquel also cites to Indiana Code section 30-4-2.1-2 (2003), which provides, in

       pertinent part:

       2
        At the time of Mildred’s death, Molly had not yet been born. Joan was pregnant with Molly when Mildred
       died.

       Court of Appeals of Indiana | Opinion 19A-TR-1069 | April 8, 2020                          Page 10 of 14
                (a) [I]n construing a trust naming as beneficiary a person
                described by relationship to the settlor or to another, a person
                adopted before:

                (1) the person is twenty-one (21) years of age; and

                (2) the death of the settlor;

                shall be considered the child of the adopting parent or parents
                and not the child of the natural or previous adopting parents.

       However, this statute does not apply in this case for two reasons. First, the

       statute requires the adoption to occur prior to the death of the settlor, and the
                                                                                       3
       O’Brien Children were adopted after the death of Mildred. Second, this statute

       was enacted in order to abrogate an antiquated rule known as the “stranger-to-
                                4
       the-adoption rule” concerning children adopted into a family. The O’Brien

       Children, on the other hand, were adopted out of the family.

[20]   In addition, Raquel contends that to conclude that the O’Brien Children are

       beneficiaries conflicts with both Indiana Code section 29-1-2-8 (1987) of the

       probate code and Section 6-4.1-1-3 (2012) of the tax code. Section 29-1-2-8

       3
        Even if we were to find that Indiana Code section 30-4-2.1-2(a) did apply to the instant matter in construing
       Mildred’s trusts, the statute would not require the O’Brien Children to be considered the children of the
       adopting parents rather than the children of the natural parents, given the fact that Mildred died before the
       O’Brien Children were adopted.
       4
        Under the stranger-to-the-adoption rule, the adopted child could inherit from or be considered a beneficiary
       of a trust of his or her adoptive parents but not from the relatives of the adoptive parents. Paloutzian, 931
N.E.2d at 926. Because they were “strangers” to the adoption process, these relatives were presumed not to
       have intended for their property to be inherited or distributed outside of the bloodline. Id.

       Court of Appeals of Indiana | Opinion 19A-TR-1069 | April 8, 2020                               Page 11 of 14
       provides that, for purposes of intestate succession, an adopted child will be

       treated as a natural child of the child’s adopting parents and will cease to be

       treated as a child of the natural parents. Section 6-4.1-1-3 states that, for

       purposes of inheritance taxes, a legally adopted child is to be treated as if the

       child were the natural child of the child’s adopting parent if the adoption

       occurred before the individual was totally emancipated. These statutes apply

       only to intestate distributions and inheritance taxes, respectively, and do not

       constitute rules of trust construction. For that reason, they are of no

       significance in ascertaining the intention of a settlor in designating his or her

       intended beneficiaries when the children were adopted out of the family after

       the death of the settlor. Stated another way, the question we are presented with

       is not whether the O’Brien Children would take as heirs if Mildred had died

       intestate or what class of transferee they are in for purposes of calculating

       inheritance tax due. Rather, the question is whether Mildred intended to

       include the O’Brien Children in the classes of beneficiaries when she used the

       term “children” in her Testamentary Trust and when she used the term “issue

       per stirpes” in her Irrevocable Trust.

[21]   Finally, Raquel opines that to allow the O’Brien Children to be considered

       beneficiaries under Mildred’s trusts “creates dangerous precedent that opens the

       doors to allow adoption decrees to be undone in similar cases in which adopted

       out children seek to come in and claim to be beneficiaries within a class of issue

       under a trust created by their biological family.” Appellant’s Br. p. 25. We

       disagree. Nothing about our decision in this case creates a means for this or

       Court of Appeals of Indiana | Opinion 19A-TR-1069 | April 8, 2020         Page 12 of 14
       any other adoption decree to be invalidated. We are not dealing with the

       O’Brien Children’s adoption decree and our decision certainly does nothing to

       invalidate that decree. Rather, we are ascertaining and giving effect to the

       intent of the settlor (i.e., Mildred). Furthermore, the notion that our decision

       opens the door to allow adopted out children to come into court and randomly

       claim to be members of a class of beneficiaries is far-fetched. There must be a

       basis for any such claim, and, as is the case here, the claims would be

       determined according to the terms of the trust document and the intent of the

       settlor.

[22]   The courts of our state have made it abundantly clear that the settlor’s intent is

       the sovereign guide in the interpretation of the terms of a trust. See, e.g., Doll v.

       Post, 132 N.E.3d 34, 38 (Ind. Ct. App. 2019) (primary purpose in construing

       trust is to ascertain and give effect to settlor’s intention), trans. denied (2020).

       We have before us no evidence of an intent on the part of Mildred to exclude

       her three eldest grandchildren from membership in the classes of beneficiaries of

       these two trusts merely because her grandson gave his consent to their adoption

       by their stepfather after Mildred’s death. Therefore, we determine that, despite

       the fact that the O’Brien Children were adopted out of the Walters family, they

       retain their status as beneficiaries in the two trusts as the “children” of David

       and the “issue” of David’s father.

       Court of Appeals of Indiana | Opinion 19A-TR-1069 | April 8, 2020            Page 13 of 14
                                                  Conclusion
[23]   Accordingly, absent any evidence in the trusts or in the surrounding

       circumstances of an intent to exclude the O’Brien Children because of an

       unanticipated adoption, we affirm the trial court’s entry of summary judgment

       in favor of the O’Brien Children.

[24]   Affirmed.

       Bradford, C.J., and Tavitas, J., concur.

       Court of Appeals of Indiana | Opinion 19A-TR-1069 | April 8, 2020      Page 14 of 14