Donahue v. Watson

411 N.E.2d 741
CourtIndiana Court of Appeals
DecidedOctober 30, 1980
Docket2-679A178
StatusPublished
Cited by15 cases

This text of 411 N.E.2d 741 (Donahue v. Watson) is published on Counsel Stack Legal Research, covering Indiana Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Donahue v. Watson, 411 N.E.2d 741 (Ind. Ct. App. 1980).

Opinion

CHIPMAN, Judge.

Mary Cecile Donahue, individually and as trustee of her mother’s testamentary trust, appeals from adverse judgments removing her as trustee and ordering her individually to pay certain sums as reimbursement to the trust. One of the judgments arises from the civil docket of the Tippecanoe Circuit Court and the other from its probate docket. Although Mary took separate appeals we are consolidating them in accordance with Indiana Rules of Procedure, Appellate Rule 5(B) since there are common questions of law.

The common issues are:

(1) Whether Mary should have been removed as trustee and

(2) Did the trial court properly construe the trust instrument?

We affirm.

FACTS

Ellen D. Watson died testate in January of 1954 and her Will was probated on January 26, 1954. The Will established a Trust, the principal or corpus consisted of all of the real estate Ellen owned at her death. Her son, Francis D. Watson, and her daughter, Mary Cecile Donahue, were named as co-trustees. They were directed to pay the net income of the Trust to themselves,

“for and during their natural lives, share and share alike, and to the survivor, provided, that if either my said son or daughter shall have died leaving a child or children him or her surviving, such child or children shall take the share in said net income which his, her or their parent would have taken if living.”

After Ellen’s death, Francis and Mary acted as co-trustees and divided the income from the Trust as instructed. When Francis died on December 28, 1971, Mary assumed the position of sole trustee. In such capacity, she supervised the management of the Trust property, collected the Trust income and distributed the net income. She paid income one-half to herself and one-half to the children of Francis D. Watson: Edward J. Watson, Mary Ann Elliott, Francis D. Watson, Jr., Nancy Elizabeth Plaster, Sister Ellen Watson, Martha Connell, and William C. Watson.

As sole trustee, Mary sold several parcels of real estate which were part of the Trust principal. The net proceeds from the sales she then distributed as income.

On January 21, 1975, all of the grandchildren, except William C. Watson, sued Mary, individually and as trustee. The suit was filed in the Tippecanoe Circuit Court on the civil docket. Although William C. Watson was named as a defendant, he is represented by the grandchildren’s attorney and joins with the other grandchildren’s pleadings. He will be included in the group referred to in this opinion as “Grandchildren.” The Grandchildren petitioned the court to 1) construe the Trust, 2) instruct the trustee, 3) find Mary in breach of her duties as trustee, 4) enjoin her from distributing the proceeds of any future sales of the Trust property, 5) order her to restore to the Trust the proceeds from the sale of the Trust property which she distributed as income, and 6) order her to pay their attorney’s fees.

In her answer, Mary advanced a new construction of the Trust which would provide that she was the sole income beneficiary upon the death of her brother. Pursuant to this construction, she made a written demand upon the Grandchildren for the return of all the distributions of income she *744 made to them. Since the Grandchildren failed to return the money, she filed a counter-claim and cross-complaint for the return of the proceeds. The Grandchildren filed a Motion for Summary Judgment on May 28,1976. On September 20,1977, they petitioned for the removal of Mary as trustee and the appointment of a temporary trustee.

On April 3, 1978, Mary filed her trustee’s reports for the 17th, 18th and 19th trust years in the Tippecanoe Circuit Court, probate docket. On May 12, 1978, the Grandchildren filed their objections to the reports alleging she (1) failed to properly maintain separate accounts for principal and income, (2) improperly distributed principal to herself, (3) had not paid income quarterly, and (4) had not made annual written statements. Mary filed a motion to dismiss the objections alleging they were not timely filed under IC 30-4-5-14(b).

On October 17, 1977, a hearing was held on the petition to remove Mary as trustee filed on the civil docket. On October 24, 1978, the court granted- Grandchildren’s “Motion for Summary Judgment and Petition to Remove Trustee” and made the following findings and order:

“That the Plaintiffs are beneficiaries of the Ellen D. Watson Trust, having vested interests in the income and principal of said trust;
That the plaintiffs are entitled to share equally in one-half (V2) of the net income of the trust and that the defendant, Mary Cecile Donahue, is entitled to receive one-half (V2) of the net income of the trust for the rest of her natural life;
That the grandchildren of Ellen D. Watson have vested remainder interests in the trust estate, or principal, of said trust;
That Mary Cecile Donahue’s beneficial interest in said trust is limited to one-half (V2) of the net income of the trust and does not extend to any part or parcel of the principal of said trust;
That the defendant, Mary Cecile Donahue, as trustee, sold various tracts of trust property, the principal of the trust, and declared, treated, and distributed the proceeds of the various sales as income of the trust, contrary to the terms of the trust and the law applicable thereto; That such abuse of her discretionary power by the defendant has resulted in improper distributions of trust principal and in dissipation and waste of the trust estate;
That Mary Cecile Donahue, as trustee, has failed to discharge her duties under the trust in that she has failed to pay one-half (V2) of the net income of the trust to the plaintiffs since January of 1975 and that the plaintiffs are entitled to the receipt of said income;
That the trustee has established permanent residence outside the State of Indiana;
That the trustee has committed a breach of trust by having caused various charges to be made against principal which should have been made against income, and the sums so charged against principal should be restored to principal by the trustee; and
That Mary Cecile Donahue is personally liable to the trust, and to plaintiffs for breach of trust and for attorney fees and should be removed as Trustee and a successor appointed.
IT IS THEREFORE ORDERED, ADJUDGED, AND DECREED that the proper interpretation of the trust established by the Last Will and Testament of Ellen D. Watson, deceased, is in accordance with the findings, as set out above and that the Trustee, Mary Cecile Donahue, has removed her residence from the State of Indiana, failed to maintain separate accounts for principal and income, commingled funds, made improper distributions and improper charges against principal, whereby she should be, and is hereby, removed as Trustee.

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411 N.E.2d 741, Counsel Stack Legal Research, https://law.counselstack.com/opinion/donahue-v-watson-indctapp-1980.