First Farmers Bank & Trust Co. v. Whorley

891 N.E.2d 604, 2008 Ind. App. LEXIS 1677, 2008 WL 2971340
CourtIndiana Court of Appeals
DecidedAugust 5, 2008
Docket34A02-0802-CV-124
StatusPublished
Cited by131 cases

This text of 891 N.E.2d 604 (First Farmers Bank & Trust Co. v. Whorley) 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
First Farmers Bank & Trust Co. v. Whorley, 891 N.E.2d 604, 2008 Ind. App. LEXIS 1677, 2008 WL 2971340 (Ind. Ct. App. 2008).

Opinion

OPINION

RILEY, Judge.

STATEMENT OF THE CASE

Appellant-Defendant, First Farmers Bank & Trust Co. (First Farmers), appeals the trial court’s denial of its motion for summary judgment and the grant of partial summary judgment in favor of Ap-pellee-Plaintiff, Dianna F. Whorley (Whor-ley), in an action for breach of fiduciary duty following a guardianship.

We affirm in part, reverse in part, and remand for further proceedings.

ISSUES

First Farmers raises two issues on appeal, which we restate as follows:

(1) Whether the trial court erred by denying First Farmers’ motion for summary judgment; and

(2) Whether the trial court erred by granting Whorley’s motion for partial summary judgment.

FACTS AND PROCEDURAL HISTORY

On September 5, 2000, Franklin Zehring (Zehring), ninety-five years old and incapable to care for himself because of impairments resulting from a disabling stroke and forms of dementia, was declared legally incompetent. The trial court appointed First Farmers as guardian over Zehring’s estate, while Zehring’s daughter, Whorley, and Robert Beeler (Beeler) were appointed co-guardians over his person. At the time he was declared legally incompetent, a significant portion of Zehring’s estate consisted of approximately 2700 acres of farmland in Howard County, Indiana, which was valued at an amount in excess of $5,000,000.00. Approximately ten percent of'the farmland was farmed by Zehr-ing’s cousin, with the remainder of the farmland incorporated in a modified share crop arrangement with Roger Greeson, Sr. (Greeson). Under this agreement with Greeson, Zehring remained the owner-operator and Greeson acted as the farmland manager. It was understood by Zehring and Whorley that this share crop arrangement allowed the farmland to be eligible for a form of taxation, known as Special Use Valuation. Special Use Valuation is codified at section 2032A(b)(2) of the Internal Revenue Code and allows real property which is , used for a qualified use by the decedent, or by a family member of the decedent at the time of the decedent’s death, to receive a favorable tax rate.

In the fall of 2000, after First Farmers’ appointment as guardian of the estate, Max Custer (Custer), First Farmers’ Senior Vice President of the Trust Department, evaluated Zehring’s financial and personal situation. Custer was concerned that the modified share crop arrangement would require hands-on participation from First Farmers and would result in high guardianship fees. Accordingly, he advised Zehring and Whorley to terminate the agreement with Greeson and convert the farmland to a cash rent arrangement. Custer noted several benefits in a cash rent arrangement including reduction in management costs, an influx of cash liquidity from the sale of farm equipment, increased cost certainty and corresponding reduction in cost risks, income stability, and elimination of concerns for crop theft or integrity of farm managers. He considered tax-related issues ranging from in *607 come taxation, equipment depreciation, loss of deductible expenses, and accrual of income. After Custer discussed these factors with Zehring and Whorley, they agreed that cash rent was a more favorable arrangement for Zehring. First Farmers did not inform Whorley or Beeler that its decision to cash rent the farmland would render the estate ineligible for Special Use Valuation or have any additional tax consequences for Zehring’s estate.

On January 24, 2002, Zehring passed away and a probate estate was opened on February 7, 2002. On October 24, 2002, First Farmers filed the estate’s tax return with the Internal Revenue Service (IRS). Despite the fact that First Farmers had converted the farmland to cash rent, First Farmers sought to elect Special Use Valuation. On December 12, 2002, First Farmers filed the Guardian’s Final Report and Petition to Terminate Guardianship. That same day, Whorley filed a Waiver and Consent to Guardian’s Final Accounting. The next day, the trial court terminated First Farmers’ guardianship and First Farmers was appointed executor and personal representative of the probate estate.

On April 12, 2004, after the probate estate had closed, the IRS notified Whor-ley that Special Use Valuation for the farmland was denied, resulting in an additional tax liability to the estate in the amount of $573,474.00. As the estate did not have sufficient liquid assets to satisfy the accrued tax liability, WTiorley, at First Farmers’ suggestion, borrowed the required amount from First Farmers.

On April 8, 2005, Whorley filed a Complaint against First Farmers, asserting that First Farmers had breached its duties as guardian of the estate by failing to evaluate the effect of converting the main corpus of the estate, 2,700 acres of farmland, from a modified share crop arrangement to a cash rent farm resulting in a significant tax liability to the estate. On January 8, 2007, Whorley filed her Motion for Partial Summary Judgment, seeking judgment as a matter of law on the issue of First Farmers’ liability for the additional taxes. Thereafter, on March 12, 2007, First Farmers filed its Response in Opposition and Cross-Motion for Summary Judgment alleging that Whorley’s claim was time-barred and she did not have standing to bring the instant cause. In addition, First Farmers denied being liable for damages as it acted in good faith. On August 15, 2007, after the parties filed respective responses, the trial court heard evidence on the motions. On January 14, 2008, the trial court entered its Order granting partial summary judgment to Whorley and denying First Farmers’ cross-motion for summary judgment.

First Farmers now appeals. Additional facts will be provided as necessary.

DISCUSSION AND DECISION

On appeal, First Farmers contests the trial court’s denial of his motion for summary judgment and the grant of Whorley’s motion for partial summary judgment and requests us to reverse the trial court’s judgment and to enter summary judgment in its favor.

I. Standard of Review

Summary judgment is appropriate only when there are no genuine issues of material fact and the moving party is entitled to a judgment as a matter of law. Ind. Trial Rule 56(C). In reviewing a trial court’s ruling on summary judgment, this court stands in the shoes of the trial court, applying the same standards in deciding whether to affirm or reverse summary judgment. Hendricks Co, Bd. of Comm’rs v. Rieth-Riley Const. Co., Inc., 868 N.E.2d 844, 848-49 (Ind.Ct.App.2007). Thus, on appeal, we must determine whether there is a genuine issue of material fact and *608 whether the trial court has correctly applied the law. Id. at 849. In doing so, we consider all of the designated evidence in the light most favorable to the non-moving party. Id. The party appealing the grant of summary judgment has the burden of persuading this court that the trial court’s ruling was improper. Id.

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Bluebook (online)
891 N.E.2d 604, 2008 Ind. App. LEXIS 1677, 2008 WL 2971340, Counsel Stack Legal Research, https://law.counselstack.com/opinion/first-farmers-bank-trust-co-v-whorley-indctapp-2008.