Pursuant to Ind. Appellate Rule 65(D), this Memorandum Decision shall not be regarded as precedent or cited before any court except for the purpose of Nov 20 2013, 10:02 am establishing the defense of res judicata, collateral estoppel, or the law of the case.
ATTORNEY FOR APPELLANT: ATTORNEYS FOR APPELLEES AND CROSS-APPELLANTS, CHARLES W. CURTIS E. SHIRLEY MERLAU AND CHARLES W. MERLAU Indianapolis, Indiana & SONS PARTNERSHIP:
PHILIP C. THRASHER STEVEN C. EARNHART DENNIS L. VOELKEL Indianapolis, Indiana
ATTORNEY FOR APPELLEE ESTATE OF RICHARD G. MERLAU
JOHN A. CREMER Indianapolis, Indiana
ATTORNEY FOR ESTATE OF CHARLES W. MERLAU
JOHN S. MERLAU New Palestine, Indiana
ATTORNEY FOR SUCCESSOR PERSONAL REP. OF ESTATE OF CHARLES W. MERLAU:
C. THOMAS CONE Greenfield, Indiana
ATTORNEY FOR RAYMOND A. MERLAU:
ROBERT G. BOGIGIAN Greenfield, Indiana IN THE COURT OF APPEALS OF INDIANA
IN THE MATTER OF THE ESTATE ) OF CHARLES W. MERLAU, DECEASED, ) ) PATRICIA TROUT, ) ) Appellant, ) ) vs. ) No. 30A01-1304-EU-166 ) C. THOMAS CONE, et al., ) ) Appellees. )
APPEAL FROM THE HANCOCK CIRCUIT COURT The Honorable Richard D. Culver, Judge Cause No. 30C01-0211-EU-73
November 20, 2013
MEMORANDUM DECISION – NOT FOR PUBLICATION
BAKER, Judge
This case stresses the importance of having a will. The decedent had four children
who were the heirs and initially served as co-representatives of his estate. Following
their father’s death, the children continued to operate the family’s large farming business.
Trouble started to brew among the heirs regarding the amount, value, and
distribution of certain Fifth Third Bank stock that their father had owned. The trial court
removed the heirs as personal representatives and appointed a successor in an effort to
2 curb the conflict and craft a final accounting, which the trial court eventually approved.
However, the appellant-daughter of the decedent and two cross-appellants, which
included one of the sons and the family business, appeal the trial court’s entry of the final
accounting.
Although we agree that the appellant-daughter’s arguments constitute improper
attempts to reweigh the evidence and affirm the trial court’s judgment to that extent, we
find that the successor representative improperly valued the stock, in that it should have
been valued as of the date of distribution rather than on the date of the decedent’s death.
Moreover, we agree with the cross-appellants’ contention that all of the heirs should
share equally in the payment of the taxes and the loss that was incurred on the stock.
Finally, we agree that a subsequent hearing needs to be conducted that also addresses the
issue of an administrative claim that the business lodged against the estate.
We therefore affirm in part, reverse in part, and remand this case with instructions
for the trial court to conduct further proceedings consistent with this opinion.
FACTS
Charles W. Merlau, Sr. (Merlau), died without a will in August 2002. He was the
patriarch of a large family farming operation in Hancock County. Merlau was survived
by his four children, who were the heirs to his estate: Charles W. Merlau, Jr., (Charles),
Raymond A. Merlau, Richard G. Merlau, and Patricia (Merlau) Trout (collectively
referred to as Merlau’s children). Charles, Raymond, and Richard, along with David
Merlau, are partners in the Charles W. Merlau & Sons Partnership (CWMS).
3 Merlau’s estate was opened on November 7, 2002, in accordance with the Indiana
Code provisions governing the unsupervised administration of estates. All four heirs
were appointed as co-personal representatives of the estate. However, Richard was the
primary fiduciary for the co-personal representatives.
Merlau’s children administered the estate and, together with David, continued
operating the family farming business. The four children eventually divided some of the
property among themselves and signed deeds to numerous farms. While the estate was
pending, various estate expenses were paid from funds that belonged to Charles,
Raymond, and Richard from the partnership checking account. Richard maintained the
“books” for the estate and the partnership. Appellant’s App. p. 19. A large portion of
the funds are owed to them by Patricia. However, Patricia was not able to repay that debt
because of her cash flow problems. When the estate had exhausted its liquid funds,
CWMS began paying bills on the estate’s behalf.
While the estate was open, a dispute regarding the distribution of some Fifth Third
Bank stock that Merlau had owned also arose among the heirs and co-representatives.
After failed attempts to reach a global family compromise agreement, Charles filed a
motion for the trial court to approve a preliminary final accounting that he had proposed
on October 5, 2011.
At a hearing that was scheduled on October 13, 2011, the heirs appeared by
counsel, expecting the estate to be closed. As of the time of the hearing, it was
established that CWMS had paid the estate’s bills totaling $410,121.02. The largest
4 outstanding obligation was a debt owed to the federal government that consisted of an
estate tax of $500,000. The majority of this debt is secured by a mortgage on land that
Patricia owned. Although the trial court did not hear testimony from any witnesses at
this hearing, counsel’s statements were accepted as evidence.
While the objective was approval of a final accounting to close the estate, the heirs
realized that the “numbers could change slightly as additional administrative expenses
come in.” Tr. p. 6. The heirs’ main dispute concerned the Fifth Third stock. When
Merlau died in 2002, the stock was valued at $360,608.16. However, when the stock was
distributed in 2010, it was valued at $64,063.89. Patricia, Raymond, and Richard
stipulated that Charles and Richard received some of the Fifth Third shares shortly after
Merlau died as a partial distribution of their inheritances.
As a result, the issue was whether they would be charged with receiving the date
of death value of $360,608.16, or whether the final accounting of the estate should show
them receiving sales proceeds of the stock in the amount of $64,063.89. It was asserted
that “Richard believes . . . he and Charles were the ones who took the Fifth Third stock
and he understands that . . . he will be required to stand that loss.” Tr. p. 22-23. Charles,
through counsel, testified that he did not believe that there was any such agreement.
Also, if the trial court was to determine that Patricia should have been charged with a
portion of the loss of the Fifth Third stock, the balance due from Patricia to the estate
would have been $111,986.53. Patricia commented at the hearing that:
5 If the court apportions the loss of the Fifth/Third Stock equally amongst all four [siblings], we have no objection to the numbers in this accounting. . . . So the issue is whether she owes this $411,986 or subtract from that . . . which now brings that number down to $37,850.46. So the court has before it a need to rule on whether, at the end of the day does Pat owe the estate $37,850.46 or $411,986.53.
Tr. p. 28.
The trial court declined to approve the equal distribution of the Fifth Third Bank
stock. In other words, it determined that “Richard and Charles shall bear the loss and
value of that stock,” in an order issued on October 21, 2011. Appellant’s App. p. 62.
However, the trial court did not provide any valuation date or dollar amount as guidance
in the order.
The trial court subsequently amended its original order on June 22, 2012, and
questioned the “continued wisdom of allowing the siblings to continue in their capacity
as personal representatives.” Id. at 64. The trial court also reaffirmed the original order
that the “real issue unresolved by the Court was the repayment by [Patricia] to her
brothers.” Id. Patricia suggested that she pay off the amount she owed by paying her
brothers’ share of the common debt that was owed to the IRS. Thus, Patricia believed
that if she paid a total of $37,850.46, the trial court lacked the authority to change the
order that was entered on October 21, 2011.
Patricia filed a motion to deposit $33,583.96, in exchange for a release of any
further liability to the estate or heirs. The trial court denied that motion on August 21,
2012. The trial court subsequently removed all four siblings as personal representatives
6 of the estate and appointed C. Thomas Cone as successor personal representative on June
29, 2012. Cone prepared and filed a final accounting on February 26, 2013. Among
other things, Cone was charged with determining how much Patricia owed her brothers as
well as a repayment plan for the amounts that she owed to each brother in accordance
with the trial court’s case management order. In other words, Cone purported to “adopt
the allocation of the Fifth Third stock shares to the above-mentioned beneficiaries, as
required by the Court’s [prior orders]” in 2011. Tr. p. 74.
As of October 13, 2011, there was no dispute that the “top dollar” allocation to
Patricia was $111,986.53. However, Cone used a figure of $170,556.27 as the “starting
point” in his final accounting. Tr. p. 77. Patricia maintains that this amount did not take
into account the $161,100 that the three brothers owed her through the partnership.
Cone then deducted $16,015.17, which was not the loss in the value of the Fifth
Third stock, but represented “25% of actual value of the Fifth Third Stock when sold.”
Tr. p. 77. In the end, Cone determined in the final accounting that Patricia was liable to
the estate in the amount of $154,540.30. More particularly, Cone’s final accounting
provided that
11. Due to the use of Charles W. Merlau and sons income for the expenses, Patricia [Trout] owes the estate a total of . . . $154,540.30. Said sum is allocated among the partners of Charles W. Merlau and sons as follows: $104,440.47 to Raymond A. Merlau, . . . $41,828.92 to Charles W. Merlau, Jr., and . . . $8,271.71 to Richard G. Merlau.
Appellant’s App. p. 75.
7 After Cone had prepared the final accounting, the parties were unable to agree on
the initial language that the trial court had used, particularly with regard to the stock. As
noted above, some believed that Richard and Charles would receive the stock as of the
date of distribution, while others believed the date of death value should be used. The
trial court sought to clarify this point in its final judgment when it approved Cone’s
proposed final accounting on March 19, 2013, in which the stock was valued as of the
date of distribution to Charles and Richard.
Additional concerns were raised about the allocation of Fifth Third stock
dividends that were accumulated post-mortem in an estate brokerage account. For
instance, at the October 2011 status conference, Charles learned for the first time about
the account that held such accumulated dividends. In the end, Cone distributed all of
these proposed accumulated dividends to Richard in the final accounting.
Cone relied on a withdrawal slip that instructed Fifth Third to liquidate $47,166.06
that should be sent to Richard. This slip was signed by the heirs when Richard was
acting as the estate’s primary fiduciary. Raymond presented the slip to the trial court at
the status conference in October 2011. However, no witnesses testified about the validity
or circumstances surrounding it. In short, the parties could not agree on what the
withdrawal slip actually meant.
In light of these disagreements, Patricia filed several objections to the final
accounting on March 7, 2013, maintaining that the order the trial court signed on October
21, 2011, should not have been changed. More particularly, Patricia contended that
8 “what [she] owes was determined on October 21, 2011. She should not have to bear the
cost of a special administrator or continue to be embroiled in litigation because her
brothers could not resolve who gets what of this amount, or refused to accept the court’s
prior rulings.” Appellant’s App. p. 82. Patricia also alleged that she is owed one fourth
of the increased value of the stock and that the trial court should have conducted an
evidentiary hearing on these disputes.
Charles asserts that the prior order was only interlocutory and not final and
appealable. As a result, he points out that several important issues were left unresolved
in the order, and were improperly issued without a hearing or testimony. Moreover, on
March 8, 2013, Charles, as a partner and on behalf of CWMS, filed an administrative
action for a claim in the amount of $410,121.02. Charles alleged that this was the
amount that CWMS had advanced the estate from 2002 through 2012.
Notwithstanding Patricia’s objections and the administrative action that Charles
filed, the trial court did not conduct a hearing on the objections. As a result, on March
19, 2013, the trial court approved Cone’s final accounting and rendered judgment against
Patricia that required her to pay her brothers a total of $154,540.30.
On April 5, 2013, Charles filed a motion to correct error with regard to the final
accounting. Among other things, Charles alleged that the final accounting and closing of
the estate did not occur until March 19, 2013. Charles also maintained that Cone’s
accounting “mingled” the ownership of the CWMS partnership with the indebtedness
owed to the estate. Appellant’s App. p. 96. In particular, Charles claimed that
9 8. The parties interested in the Estate and CWMS are not the same. Patricia Trout is an heir but not a partner in CWMS; but, David Merlau is a partner in CWMS but not an heir of the Estate. Therefore, if the loans are not repaid by the Estate, using funds to be provided by the heirs, Patricia Trout will enjoy a windfall and David Merlau will incur a substantial loss.
Appellant’s App. p. 96.
Charles argued that an evidentiary hearing should have been held on the final
accounting that Cone prepared so that he would be afforded an opportunity to litigate the
issues that he raised in his objections. CWMS also filed a motion to intervene in the
action. The trial court denied the motion to correct error and the motion to intervene
without a hearing.
Patricia appeals, claiming that the trial court’s order of October 21, 2011, ended
her involvement in the case, and that she should have been released from the action in the
amount of $33,583.96. Thus, Patricia argues that the trial court erred in rendering
judgment against her in the amount of $154,540.30, and asserts that a hearing should be
held on that issue.
The cross-appellants Charles and CWMS also claim that the trial court should
conduct a hearing on the issues of: (1) the trial court’s refusal to hold a hearing and
address objections to the final accounting; (2) a purported double deduction from Richard
and Charles’s inheritance for the value of the Fifth Third stock; (3) the allocation of the
dividends of the Fifth Third stock to Richard; and (4) the failure to address CWMS’s
administrative claim.
10 DISCUSSION AND DECISION
As noted above, Patricia maintains that while the trial court’s order of October 21,
2011, should have ended her involvement in the estate, Cone, as the successor personal
representative, filed a subsequent final accounting that did not coincide with the trial
court’s earlier decision that erroneously resulted in a $154,540.30 judgment being entered
against her. Thus, Patricia maintains, among other things, that because she was not
“released” in the amount of $33,583.96, she was entitled to a hearing on her objections to
the final accounting. Appellant’s Br. p. 7.
Charles and CWMS argue in their cross-appeal that a hearing on the final
accounting should be held regarding the Fifth Third stock because of the alleged
ambiguity in the trial court’s order regarding the distribution and valuation of the stock,
which of the heirs should bear the loss of the stock’s value, and who should pay the taxes
that are owed. Charles and CWMS further assert that evidence should be heard regarding
the administrative claim that CWMS presented.
I. Standard of Review
We initially observe that issues raised by an administrator’s report and objections
are “issues of fact to be tried and determined by the same rules as govern in ordinary civil
actions arising out of claims filed against estates.” Eble v. Miles, 79 Ind.App. 401, 401,
138 N.E. 361, 362 (1923). The personal representative must verify that he or she has
“fully administered the estate of the decedent by making payment, settlement, or other
disposition of all claims which were presented.” I.C. § 29-1-7.5-4. The personal
11 representative bears the burden of proof to establish the correctness of a final accounting.
In re Matter of Estate of Saylors, 671 N.E.2d 905, 907 (Ind. Ct. App. 1996). When filing
the accounting, the personal representative must also “file receipts for disbursements of
assets made during the period covered by the account.” Id. And the personal
representative must petition for his account to be settled and allowed. I.C. § 29-1-16-5.
We also note that an administrator’s final report constitutes a complaint and
objections constitute the answer. Pohlmeyer v. Second Nat. Bank of Richmond, 118
Ind.App. 651, 661, 81 N.E.2d 709, 713 (1948). As a result, a hearing is required unless
“all persons entitled to share in the final distribution of the estate waive the service of
notice by mail and consent to the final account and petition for distribution without a
hearing.” I.C. § 29-1-16-6(b).
Cone’s final accounting did not comply with these requirements, at least with
regard to Charles and CWMS’s allegations. Indeed, the proposed final accounting cannot
be treated as verified and, therefore, cannot be construed as a permissible proposed final
accounting. Moreover, as will be discussed below, Cone’s purported final accounting did
not include receipts for the disbursement of assets and did not adequately address
CWMS’s administrative claim.
II. Patricia’s Contentions
Patricia argues that the trial court’s judgment must be set aside because it
erroneously denied her petition to pay $33,583.96 for a release of any further liability to
Merlau’s estate or to the heirs. More particularly, Patricia argues that Cone should have
12 followed the accounting that had been originally proposed and should have respected the
original decision that had been entered on October 21, 2011.
When a party is appealing a negative judgment, the proper standard of review to
reverse the trial court’s decision requires evidence that is without conflict and leads to but
one conclusion and the finder of fact reached a contrary conclusion. Captain & Co. v.
Towne, 404 N.E.2d 1159, 1162 (Ind. Ct. App. 1980). As to the specific denial of
Patricia’s petition to pay into the Clerk the sum of $33,583.96 in exchange for a full
release, the trial court has the inherent power to control proceedings and the trial court’s
exercise of such power will not be reversed unless an abuse of discretion has been
demonstrated. Boyd v State, 396 N.E.2d 920, 926 (Ind. Ct. App. 1979). An abuse of
discretion will only be found if the trial court makes an erroneous conclusion that is
clearly against the logic and natural inferences to be drawn therefrom. A trial court has
the authority to fashion a remedy to cure whatever injustice has occurred and to grant just
and equitable relief. Atkins v. Niermeier, 671 N.E.2d 155, 157 (Ind. Ct. App. 1996).
In this case, the trial court had recently removed the four co-personal
representatives when it denied Patricia’s petition and appointed Cone as the successor
administrator. Cone was appointed to close the estate and resolve the outstanding issues
that had not been decided in the case management orders that were previously issued.
After mediation proved unsuccessful, it was within the trial court’s discretion to allow
Cone, the successor personal representative, to determine the amount that Patricia owed,
how she would pay the amounts, and how much that each heir should be paid.
13 That said, Patricia does not direct us to anything that might support her contention
that the trial court had determined the amount she owed was between $37,850.46 and
$111,986.53. The trial court specifically approved the proposed accounting as to “form
only” in both the original and amended estate management orders. Appellant’s App. p.
62, 64. The trial court did not specify an amount or range of amounts that Patricia owed
based on her counsel’s arguments. Tr. p. 18. Patricia is also unable to identify any
evidence of an earlier distribution where the heirs agreed that only Charles and Richard
would pay for the heirs’ purported bad judgment in retaining the stock for eight years.
Patricia has failed to support her assertion that the decline in value of the Fifth
Third stock that the trial court attributed to Charles and Richard rather than to all four
heirs equally, somehow reduced the amount that Patricia should pay her brothers. At no
time did the trial court make such a determination in either of the case managements. In
fact, the trial court’s orders did not support Patricia’s unsupported implication that the
amount she owed was somehow limited to the amounts set forth above. The trial court
heard Patricia’s counsel summarize her testimony, and those figures were not adopted.
Thus, the trial court did not confirm Patricia’s unsupported implication that the amount
she owed was somehow limited to the particular amounts that she now asserts on appeal.
To the contrary, Cone set forth in his supplemental final accounting that the loss in
value of the Fifth Third stock does not impact the amount owed by each heir or their
respective tax consequences. The trial court heard the evidence on October 11, 2011,
regarding Patricia’s obligation and permitted the heirs to prepare a plan to resolve what
14 Patricia owed and the amount that she should repay her brothers. In the end, the trial
court confirmed Cone’s final accounting with regard to what Patricia owed and the
division of that amount among her brothers. Appellant’s App. p. 74, 93.
In our view, the trial court was justified in fashioning a remedy to cure whatever
injustice has occurred and to grant just and equitable relief. Atkins, 671 N.E.2d at 157.
In sum, Patricia is requesting us to reweigh the evidence, which we will not do. Fowler
v. Perry, 830 N.E.2d 97, 102 (Ind. Ct. App. 2005). Thus, we decline to disturb the trial
court’s judgment with regard to Patricia.
III. Charles and CWMS
When examining the statutory provisions set forth above regarding our standard of
review, it is apparent that Cone’s proposed accounting did not comply with those
requirements with regard to Charles and CWMS’s cross-appeal. Indeed, Indiana Code
section 29-1-7.5-4 and -5 require a hearing when there is a dispute regarding closing
statements, i.e., accountings, in unsupervised estates.
The joint appellees—other than Charles and CWMS, the cross-appellants—
suggest that because the estate was unsupervised, no hearing with regard to the issues
raised is required under Indiana Code section 29-1-7.5-1, et seq. However, there is no
language in the probate code indicating that other sections do not apply to unsupervised
estates. To the contrary, the statutory provisions apply to all estates unless they are
specifically disqualified. Moreover, although the joint appellees rely on In re Estate of
15 McNabb, 744 N.E.2d 569 (Ind. Ct. App. 2001), in support of their proposition that a
hearing is not required, we find that case distinguishable from the circumstances here.
More specifically, the heir in McNabb sought to reopen his father’s estate five
years after the estate had been closed. Id. at 572-73. The son claimed that he was not
provided with notice of the closing statement and did not receive the assets to which he
was entitled. Id. at 573. It was determined that because the estate was unsupervised, he
was responsible for monitoring the administration but took no action in the statutory time
period, and was barred. Id.
The hearing requirements were not addressed in McNabb regarding unsupervised
estates. Indeed, it was established that the heir “had the right to challenge the closing
within three months of its filing,” but was barred only because he failed to do so. Id. at
573. That said, and notwithstanding our disposition of Patricia’s claims, the estate
management orders left a number of issues unresolved with regard to the claim of the
cross-appellants.
We also note that the joint attorney’s conference, which forms the only record
available, was created by the trial court on October 13, 2011, and concerned only the
2011 Accounting. There is no evidence of any hearing with regard to the 2013
Accounting. Moreover, Charles and Patricia both filed objections to Cone’s proposed
final accounting and therefore cannot be deemed to have waived notice of a hearing and
cannot be deemed to have consented to the 2013 Accounting. In short, the 2011 case
management conference cannot be used as a substitute for a hearing on the 2013
16 Accounting. Hence, for this additional reason, the joint appellees’ argument fails because
the instant appeal involves the errors regarding the 2013 Accounting and the lack of
hearing on the 2013 Accounting rather than the 2011 Accounting. Thus, we now proceed
to address the cross-appellants’ arguments.
IV. The Fifth Third Stock and CWMS’s Administrative Claims
CWMS points out that the final accounting did not resolve the issues that were
necessary to the estate’s closing, including CWMS’s administrative claim that was
allegedly owed to it from the estate, as well as the proper valuation and allocation of the
stock. Charles and CWMS also point out that there was no indication as to how the stock
transfers would affect the heirs’ shares in the estate or whether the federal inheritance and
estate taxes were paid. Notwithstanding these objections, the trial court did not hear
evidence and issue rulings with regard to these issues. Thus, we will address those
claims.
A. Distribution and Valuation of the Stock
We first note that Cone’s proposed final accounting presented issues that had not
been presented to the trial court and were not part of Charles’s proposed final accounting.
In essence, Cone rendered an adjudication of issues for the trial court, which stated:
The Successor Personal Representative has determined that the actual receipt of the stock dividend on Fifth Third Stock to Richard Merlau was made with the knowledge and consent of all heirs as his separate property and any objection of said distribution to Richard solely has been foreclosed as said distribution was not included in the prior approved accounting.
17 Cone admitted that the stock distribution was not included in the prior approved
accounting. This determination alone required a hearing, particularly since Charles
denies that he gave his consent as to the distribution and the amount. Also, even though
Indiana law requires that the Fifth Third stock and other probate assets should be valued
at the date of distribution, Patricia maintains that Richard and Charles should bear that
diminished value. See In re Nobbe, 831 N.E.2d 835, 841 (Ind. Ct. App. 2005) (observing
that because the decedent’s will did not provide otherwise, the appellants were entitled to
any accretion in the stock at the point of sale or, if the stock was not sold, at the time of
the trust’s termination); see also Fall v. Miller, 462 N.E.2d 1059, 1064 (Ind. Ct. App.
1984) (holding that the trial court erred in denying the beneficiary’s petition seeking
interest for the value of certain stock from one year after the date of decedent’s death to
the date of distribution).
As noted above, the estate held the stock for over eight years. And the stock
should be valued at the date of distribution and not as of the date of Merlau’s death. I.C.
§ 29-1-17-10(a) (providing that “values for the purposes of such distributions in kind
shall be determined at a time not more than ten (10) days prior to the filing of the petition
for distribution, and if necessary to avoid substantial inequities may be redetermined at
any time prior to the order of distribution”); see also I.C. § 29-1-17-11(b) (recognizing
that in-kind assets that are distributed to fewer than all of the distributees of an intestate
estate should be valued at the date of distribution). Evidence and argument were not
presented with regard to this issue.
18 We also note that the trial court’s estate case management order of October 21,
2011, which approved, in part, the proposed final accounting that the co-representatives
submitted, stated that “Richard and Charles shall bear the loss and value of [the Fifth
Third] stock.” Appellant’s App. p. 62. Thereafter, on February 26, 2013, Cone included
this finding in his proposed final accounting and reflected proposed distributions to be
based upon the date of distribution value, which is correct. Id. at 77. However, Cone
then made two adjustments, transferring one fourth of the stock value each to Patricia and
Raymond.
The October 21, 2011, estate case management order failed to follow the Indiana
Code or provide direction on valuation. In rejecting the provisions of Charles’s proposed
final accounting, the trial court did not adjudicate a date or amount upon which to value
the stock. In fact, as noted above, if the trial court intended to value the stock at the date
of death, such intent was contrary to statutory law. See I.C. § 29-1-17-11(b) (observing
that partial distributions are valued at the date of distribution). That said, Indiana law
compelled the trial court to determine that the stock should have been valued on the date
of distribution in this instance.
We note that Cone’s proposed final accounting coincided with Charles’ proposed
final accounting on this issue, stating “herewith a final accounting showing the allocation
of the Fifth Third stock shares to the above-mentioned beneficiaries, as required by the
court’s order of October 13 [sic] 2011.” Appellant’s App. p. 74. However, as noted
above, the record establishes that Cone made a second adjustment, where he subtracted
19 $16,015.17 from Charles and Richard and added that amount to Patricia and Raymond.
Id. at 77. This particular adjustment had already been made on the line that was entitled
“Allocation: Charles and Richard Give one-half 5/3 to P & R.” Id. at 79. Charles
specifically objected, but was not permitted to be heard on this issue. Moreover, there
was no evidence to support an agreement as to a partial distribution, and no evidence was
heard on this issue.
Indeed, Indiana Code section 29-1-17-1(a) provides that “upon application of the
personal representative or any distributee . . . the court may order the personal
representative to deliver to any distributee, who consents to it, possession of . . . property
to which he is entitled.” Here, there is no evidence that a partial distribution was made
prior to 2010, when possession was delivered to Charles and Richard. If the actual
transfer of the stock to Richard and Charles in 2010 was a partial distribution, the
proposed final accounting already adjusted for this. Appellant’s App. p. 87. And it was
demonstrated that the stock remained in the estate for eight years.
There was also no agreement among the heirs that supported a partial distribution,
and evidence was not heard on this issue. In fact, there was only a letter of instruction
from Fifth Third that authorized a stock transfer to Richard and Charles that had been
received for the first time by the other heirs at the case management conference on
October 13, 2011. The letter bears no date and does not indicate an intent to distribute the
stock to Richard and Charles at a date of death value. The letter was not discussed at the
20 2011 attorneys’ conference; nor was there any mention that it included the Fifth Third
stock as well as the accumulated dividends on the stock.
Also, for an agreement of this type to be enforceable, the terms must be set out in
writing, signed by all heirs, and submitted to the court for approval. I.C. § 29-1-9-2. The
trial court must then provide notice to all interested persons before ordering an approval
of the agreement. I.C. § 29-1-9-3; In re Estate of Garwood, 400 N.E.2d 758, 766, 272
Ind. 519, 530 (1980). Additionally, because the stock was in Merlau’s name, it is a non-
cash probate asset and subject to the Indiana Probate Code. I.C. § 29-1-13-1. Thus, it
was taxed at the date of death value and all four heirs should share equally in the payment
of the tax.
Here, the heirs could not agree when to sell the stock so, as noted above, it
remained in the estate for over eight years until 2010. Thus, the stock should be valued at
the date of distribution, which occurred in September 2010, and it is erroneous to value
the stock at the date of Merlau’s death.
Additionally, we note that a “compromise to any contest or controversy” regarding
the rights or interests of an heir in an estate, or the administration of an estate, is
enforceable only if certain statutory requirements are met. I.C. § 29-1-9-1. For such an
agreement to be enforceable, the terms must be set out in writing, signed by all heirs, and
submitted to the court for approval. I.C. § 29-1-9-2(a) and (b). The trial court must then
provide notice to all interested persons before ordering the agreement’s approval.
21 The above requirements were not satisfied in this instance. Rather, the only
evidence with regard to this contention was Fifth Third’s letter of direction to transfer
stock that bears no date and does not indicate an intent to distribute the stock to Richard
and Charles at a date of death value. Again, the letter does not state that the assets in the
Fifth Third account, stocks and dividends, were to be given to Richard or anyone else as
their individual property. As a result, that evidence is not sufficient to support the claim
that an agreement regarding the Fifth Third stock exists.
That said, because the stock was in Merlau’s name, it is a non-cash probate asset
and subject to Indiana Code section 29-1-13-1. Thus, the stock was taxed at the date of
death value and all four heirs share equally in the payment of that tax. And as discussed
above, even if it was established that there was some type of family agreement, it is
contrary to statutory law to value the stock at the date of death. In short, the stock is a
probate asset, and it belonged to the estate until distribution. I.C. § 29-1-13-1.
Because all of the heirs were fiduciaries of the estate, Charles and Richard could
not sell or distribute the stock without the consent of all. In other words, burdening
Charles and Richard with the loss in value creates a windfall for the other heirs, which is
a breach of their fiduciary duty to treat Charles and Richard fairly and equally with
Patricia and Raymond. Indeed, personal representatives are “regarded as . . . trustee[s]
appointed by law for the benefit of and the protection of creditors and distributees of that
estate.” In re Supervised Estate of Scholz, 859 N.E.2d 731, 736 (Ind. Ct. App. 2007).
And “every personal representative shall be liable for any loss to the estate arising from
22 his neglect or unreasonable delay in . . . selling, mortgaging or leasing the property of the
estate . . . [and] for loss to the estate through self-dealing.” I.C. § 29-1-16-1(c). As co-
personal representatives, each heir had a fiduciary duty to sell or distribute the Fifth Third
stock, especially with the knowledge that the value of the stock was plummeting. They
cannot breach that duty and avoid the penalty for doing so.
As for the stock dividends from Fifth Third, we note that a personal representative,
as a fiduciary, may deposit the funds of the estate as a general deposit in a checking or
savings account if it is consistent with proper administration of the estate. I.C. § 39-1-13-
15. The record shows that the four co-personal representatives signed a letter of
instruction authorizing the liquidation of the Fifth Third stock dividends, and to transfer
those dividends to Richard. Appellant’s App. p. 52. As the principal fiduciary at the
time, it was certainly not unreasonable that the heirs would agree to sending the
liquidated stock to Richard, presumably for transfer to an estate banking account.
However, it is apparent that Cone incorrectly determined that this act constituted an
agreement for Richard to keep the cash for himself without providing a cash credit to the
other heirs. Id. at 75.
Contrary to Cone’s recommendation in the final accounting, there is no evidence
suggesting that the heirs consented to Richard’s taking of the $47,166.06 in dividends for
himself. As mentioned above, for an agreement such as this to be enforceable, the terms
must be set out in writing, signed by the four heirs, and submitted to the court for
approval. I.C. § 29-1-9-2(a)-(b). All interested parties must then be presented with
23 notice before the court can order an approval. These requirements were not met here.
See Garwood, 272 Ind. at 533, 400 N.E.2d at 766 (observing that there was insufficient
evidence to support the existence of a family agreement when the terms were not in
writing and not all heirs were present to consent to the agreement). Because the letter of
instruction from Fifth Third alone is insufficient to provide evidence of consent to a
reduced inheritance, we are compelled to reverse this portion of the judgment and remand
this cause to the trial court with instructions that it hear evidence, as necessary, with
regard to this issue.
B. CWMS’s Administrative Claim
Cone’s proposed final accounting also acknowledges that CWMS paid
administration expenses and taxes on behalf of the estate after the liquid assets of the
estate had been exhausted. However, the final accounting does not provide for the
payment of that debt. Rather, it confuses CWMS with Raymond, Richard, and Charles as
individuals, rendering monetary judgments against Patricia in favor of her brothers.
Cone does not mention the payment of the debt by the Estate to CWMS. The record
shows that the debt owed to CWMS remains unpaid and the estate cannot be lawfully
closed. In other words, if the judgment is affirmed, the estate will not have paid CWMS
the outstanding balance of $410,121.02, exclusive of interest. The estate must pay
CWMS—not the heirs. And the heirs must reimburse the estate for their excess interim
distributions. To be fully administered the estate must return its assets and liabilities to
zero, which can only be accomplished by paying the CWMS claim. I.C. § 29-1-7.5-4. In
24 essence, disregarding an administrative claim and passing the estate’s obligation on to the
heirs is an improper way to administer the estate’s assets and liabilities.
Although it is contended that Cone never received a claim from CWMS seeking
repayment of the debt, CWMS, in fact, submitted an invoice together with its objections.
Appellant’s App. p. 91. And claims for administrative expenses “may be allowed at any
accounting.” I.C. § 29-1-14-10(b). Moreover, administrative expenses are exempt from
the statute of limitations for claims. I.C. § 29-1-14-1(a). As a result, it is apparent that
this invoice is sufficient as a claim for CWMS’s administrative expense, and the trial
court should hear evidence with regard to this issue.
CONCLUSION
In light of the foregoing, we affirm the trial court’s judgment with regard to
Patricia. However, we reverse the trial court’s order that was entered on March 19, 2013,
and remand for a hearing on Cone’s final accounting regarding the value and distribution
of the Fifth Third stock and whether CWMS is entitled to payment of its administrative
claim.
The judgment of the trial court is affirmed in part, reversed in part, and remanded
for further proceedings consistent with this opinion.
FRIEDLANDER, J., and VAIDIK, J., concur.