FOR PUBLICATION
ATTORNEYS FOR APPELLANTS: ATTORNEYS FOR APPELLEE
HENDERSON, DAILY, WITHROW
& DeVOE:
STEPHEN B. CAPLIN ROBERT F. WAGNER
JAME S. GOLDSTEIN DINA M. COX
Caplin Park Tousley & McCoy LISA DILLMAN
Indianapolis, Indiana Lewis & Wagner
Indianapolis, Indiana
MARVIN J. FRANK ATTORNEYS FOR APPELLEES
ROBERT M. HAMLETT WHITNEY B. GRAYSON, GRAYSON &
Frank & Kraft, P.C. ASSOCIATES, PAUL M. HARRINGTON,
Indianapolis, Indiana and THE HEARTLAND INSURANCE GROUP:
NELSON NETTLES
JOHN M. CHOPLIN II
Norris Choplin & Schroeder, LLP
Indianapolis, Indiana
ATTORNEYS FOR APPELLEE
GREAT-WEST LIFE AND ANNUITY
INSURANCE COMPANY:
MARY JANE LAPOINTE
Leagre Chandler & Millard, LLP
Indianapolis, Indiana
RAUL A. CUERVO (Pro Hac Vice)
RICHARD J. KARPINSKI (Pro Hac Vice)
Jorden Burt LLP
Washington, D.C.
_____________________________________________________________________________
IN THE
COURT OF APPEALS OF INDIANA
JASON L. INLOW, HEATHER N. INLOW, )
JEREMY H. INLOW, and SARAH C. )
INLOW, )
)
Appellants-Plaintiffs, )
)
vs. ) No. 49A02-0206-CV-476
)
HENDERSON, DAILY, WITHROW & )
DeVOE, a Partnership, WHITNEY B. )
GRAYSON, GRAYSON & ASSOCIATES, )
PAUL M. HARRINGTON, THE )
HEARTLAND INSURANCE GROUP, and )
GREAT-WEST LIFE AND ANNUITY )
INSURANCE COMPANY, )
)
Appellees-Defendants. )
APPEAL FROM THE MARION SUPERIOR COURT
The Honorable Gerald S. Zore, Judge
Cause No. 49D07-9807-CT-0098
April 23, 2003
OPINION—FOR PUBLICATION
BAKER, Judge
Appellants-plaintiffs Jason L. Inlow, Heather N. Inlow, Jeremy H. Inlow, and Sarah C.
Inlow (collectively, “Inlow Children”) appeal the trial court’s dismissal of their amended complaint
bringing suit against a law firm, attorneys working for that firm, insurance companies,
and agents of those insurance companies. The Inlow Children brought claims against
the law firm of Henderson, Daily, Withrow & DeVoe and eighteen attorneys of
Henderson, Daily, Withrow & DeVoe in their individual capacities (collectively, “Henderson Daily”).
They also asserted claims against Whitney B. Grayson, Grayson & Associates, Paul M.
Harrington, The Heartland Insurance Group, and Great-West Life and Annuity Insurance Company (collectively,
“Insurers”). These claims were brought because of harms allegedly caused to Lawrence
W. Inlow and his estate, which diminished the value of the estate.
The Inlow Children argue that in a number of capacities they: (1) have
standing to maintain their claims, (2) are real parties in interest, and (3)
have stated claims that avoid dismissal under Indiana Trial Rule 12(B)(6). The
Inlow Children also complain that the trial court erroneously struck Counts IV through
VIII of their motion for leave to file amended complaint and erroneously denied
their motion to amend the amended complaint by interlineation. They contend that
even if the dismissal of their claims, the striking of Counts IV through
VIII of their motion for leave to file amended complaint, and the denial
of their motion to amend the amended complaint by interlineation were proper; they
are still entitled to reasonable time to seek the ratification, joinder, or substitution
of the successor trustee and successor personal representative according to Indiana Trial Rule
17(A)(2).
Aside from their claims brought as assignees of the successor personal representative and
attempted claims as assignees of the successor trustee, each claim the Inlow Children
assert ultimately arises from their status as heirs. The Probate Code carefully
limits the intrusion of heirs and other interested persons into the personal representative’s
administration of an estate. As heirs, the Inlow Children have not followed
the procedures outlined in the Probate Code for intervening in the administration to
sue alleged tortfeasors of the decedent and his estate. Moreover, the Inlow
Children may not claim capacity to sue as assignees of the successor trustee
for harms befalling the estate. A successor trustee has no authority to
sue for harms resulting to an estate and, therefore, has no authority to
assign such claims. Finally, the assignments made by the personal representative and
the successor personal representative were invalid and are no basis for suit against
Henderson Daily and the Insurers.
We, therefore, affirm the trial court’s: (1) dismissal of each count of the
amended complaint, (2) denial of stricken Counts IV through VIII of the motion
for leave to file amended complaint, and (3) denial of the motion to
amend the amended complaint by interlineation. We deny the Inlow Children’s request
to remand this cause to the Marion Superior Court for the ratification, joinder,
or substitution of the successor personal representative through Trial Rule 17(A). Any
further action they take must be within the bounds of the Probate Code
as we will explain more fully below.
FACTS
Lawrence W. Inlow created the Lawrence W. Inlow Irrevocable Children Trust (Inlow Trust)
for the benefit of his children and named himself trustee. As trustee
of the trust, he purchased an insurance policy from Great-West Life and Annuity
Insurance Company (Great-West Life) on July 8, 1996. The policy designated the
trustee of the Inlow Trust as the beneficiary of the policy. In
the event of Lawrence’s death, Great-West Life was obligated to pay ten million
dollars to the successor trustee who was yet unnamed.
On May 21, 1997, Lawrence Inlow died intestate, leaving six heirs: Anita Inlow,
his second wife; Jesse Inlow, Lawrence and Anita’s minor child; and the four
plaintiffs to this action who are children of Lawrence’s first marriage. After
Lawrence’s death, Karl Kindig was appointed personal representative of the Inlow Estate.
Henderson Daily provided legal services to Kindig in his capacity as personal representative.
Kindig later executed an assignment in favor of the Inlow Children of
all claims belonging to the personal representative against all other persons, including any
claims against Henderson Daily. With the consent of the Inlow Children, the
successor personal representative agreed to pay Kindig $200,000 allegedly for his services to
the Inlow Estate. The probate of the Inlow Estate is still pending
in the Hamilton Superior Court as of the filing of the appellate briefs
in this action.
On October 10, 2001, the Inlow Children filed an amended complaint for damages.
In their amended complaint, the Inlow Children asserted claims of negligence, “intermeddling,”
and legal malpractice against Henderson Daily. They asserted these claims for harms
allegedly caused to the Inlow Estate to the detriment of their intestate shares
of the property. Though the trial court permitted the three claims against
Henderson Daily, it struck five others the Inlow Children attempted to assert.
As for the insurance companies and agents, the Inlow Children brought claims of
negligence and breach of contract, despite the fact that Great-West Life had paid
the policy proceeds in full. In addition to claims brought in the
amended complaint, the Inlow Children contend that they were entitled to assert claims
assigned by the successor trustee of the Inlow Trust. They attempted to
assert these assigned claims, not as part of their amended complaint, but in
a motion to amend the amended complaint by interlineation. The trial court
denied their motion to amend the amended complaint by interlineation.
In response to the amended complaint, Henderson Daily and the Insurers filed separate
motions to dismiss. Among other arguments, they contended that the Inlow Children
lacked standing to bring claims, the probate court had exclusive jurisdiction over certain
claims, the Inlow Children were not real parties in interest, and the Inlow
Children failed to state claims upon which relief could be granted. The
trial court granted the motions to dismiss with prejudice in favor of all
the defendants. The Inlow Children now appeal.
DISCUSSION AND DECISION
I. Standard of Review
Although the defendants made other arguments in favor of dismissal in addition to
Indiana Trial Rule 12(B)(6), we need only resolve this appeal on the basis
of that rule. “[A] complaint may not be dismissed for failure to
state a claim upon which relief can be granted unless it is clear
on the face of the complaint that the complaining party is not entitled
to relief.” City of New Haven v. Reichhart, 748 N.E.2d 374, 377
(Ind. 2001). We review the pleadings in the light most favorable to
the nonmoving party and draw every reasonable inference in favor of that party.
Id. When reviewing a motion to dismiss for failure to state
a claim, this court accepts as true the facts alleged in the complaint.
Id. We will affirm a successful Trial Rule 12(B)(6) motion when
a complaint states a set of facts, which, even if true, would not
support the relief requested in that complaint. Id. We will affirm
the trial court’s ruling if it is sustainable on any basis found in
the record. Id.
II. Claims Against Henderson Daily
The amended complaint asserted three claims against Henderson Daily. In Count I,
the Inlow Children contended that Henderson Daily was negligent in creating and funding
the Inlow Trust. According to the facts in the amended complaint, which
we accept as true, Lawrence instructed Henderson Daily to prepare a trust agreement
that would minimize tax consequences to property benefiting his children upon his death.
To fund the trust, Henderson Daily requested the Insurers to issue a
policy to the trustee for payment of proceeds in the event of Lawrence’s
death. Apparently in an effort to minimize certain tax consequences to estate
property in the event of Lawrence’s death, Henderson Daily, at Lawrence’s request, required
inclusion of a restrictive provision in the insurance policy. The insurance policy,
however, was issued without the restrictive provision.
The amended complaint contained two other counts against Henderson Daily. In Count
II, the Inlow Children sued Henderson Daily for “intermeddling” in the administration of
the Inlow Estate through its denying and withholding of information the personal representative
required to perform his duties. Finally, Count III includes a claim for
Henderson Daily’s malpractice in performing legal services for the personal representative.
The Inlow Children also attempted to bring other counts against Henderson Daily in
their motion for leave to file amended complaint. Count IV of the
motion for leave to file amended complaint advanced a claim for negligent injury
to the “Inlow Property.” Appellants’ App. p. 527. Count V advanced
a claim for breach of contract between Henderson Daily and the personal representative,
alleging that Henderson Daily had damaged the “Inlow Property.” Appellants’ App. p.
528. They brought the claim as purported third-party beneficiaries of the contract.
Count VI advanced a claim for misapplication of entrusted “Inlow Property.”
Appellants’ App. p. 529. Count VII advanced a claim for criminal conversion
of “Inlow Property.” Appellants’ App. p. 530. Finally, Count VIII advanced
a claim for Henderson Daily’s deceit and collusion against the probate court, the
judge of the probate court, and Inlow Children as parties to the proceedings
before the probate court. The trial court struck Counts IV through VIII
of the motion for leave to amend the complaint.
A. Bringing Claims as Heirs
The Inlow Children argue that, despite the ongoing administration of the estate and
based on their status as heirs to damaged estate property, they may maintain
claims against Henderson Daily. According to the Inlow Children, they may bring
suit because they hold title to estate property though the personal representative holds
possession of estate property until the administration of the estate is complete.
In their view, the Inlow Children have authority independent of the personal representative
to maintain a suit while the estate undergoes probate administration.
Were it not for the text, structure, history, and purpose of Indiana probate
law we might agree.
See footnote We think the most straightforward way to sort
out their claims brought as heirs is to begin with the statute authorizing
the personal representative to maintain suit for demands due the decedent or the
estate. Under Indiana Code section 29-1-13-3, a personal representative “shall have full
power to maintain any suit in any court of competent jurisdiction . .
. for any demand of whatever nature due the decedent or his estate.”
Once this statute is read in light of its placement in the
Probate Code, its historical underpinnings, and the purpose of probate law, it becomes
clear that the Inlow Children lack the authority to recover damages due to
Lawrence or to his estate based on their status as heirs.
The entire statute reads as follows:
Every personal representative shall have
full power to maintain any suit in any
court of competent jurisdiction, in his name as such personal representative, for any
demand of whatever nature due the decedent or his estate or for the
recovery of possession of any property of the estate or for trespass or
waste committed on the estate of the decedent in his lifetime, or while
in the possession of the personal representative; but he shall not be liable,
in his individual capacity, for any costs in such suit, and shall have
power, at his option, to examine the opposite party under oath, touching such
demand.
I.C. § 29-1-13-3 (emphasis added). The Inlow Children argue that “full power”
does not mean exclusive power. In their view, a personal representative is
granted every power necessary to maintain suit, but his power does not exclude
other litigants, including heirs, from bringing suit independent of the personal representative for
any demand due the decedent or his estate.
Their challenge to the meaning of “full power” seemingly invokes principles of statutory
interpretation. But not every judicial exposition of a statute amounts to statutory
interpretation: “When a statute is clear and unambiguous, we need not apply any
rules of construction other than to require that words and phrases be taken
in their plain, ordinary, and usual sense.” Poehlman v. Feferman, 717 N.E.2d
578, 581 (Ind. 1999). “If a statute is ambiguous, however, we must
ascertain the legislature’s intent and interpret the statute so as to effectuate that
intent. A statute is ambiguous where it is susceptible to more than
one interpretation.” Elmer Buchta Trucking, Inc. v. Stanley, 744 N.E.2d 939, 942
(Ind. 2001) (citations omitted).
The plain meaning of Indiana Code section 29-1-13-3, when read in context with
the rest of the Probate Code, requires no resort to special canons of
statutory interpretation. The statute grants the personal representative complete authority to maintain
any suit for any demand due the decedent or the estate. No
corresponding statute grants an heir or creditor the same power. Rather, the
entire Probate Code—except provisions that permit dispensing with an administration altogether—considers the personal
representative the focal point for overseeing claims on behalf of the estate.
This duty arises from the personal representative’s general responsibility to collect and manage
the estate’s assets until the estate is closed.
1. Text and Structure of Probate Code Give Exclusive
Authority to Personal Representative Not Heirs
Chapter 13 of the Probate Code outlines the authority necessary for a personal
representative’s collection and management of estate assets. The first section of Chapter
13 grants the personal representative certain rights to the decedent’s property: “Every personal
representative shall have a right to, and shall take, possession of all the
real and personal property of the decedent other than allowances . . .
.” Ind. Code § 29-1-13-1 (emphasis added). Personal property, as defined
by the Probate Code, includes “choses in action.” Ind. Code § 29-1-1-3.
A chose in action is “[t]he right to bring an action to
recover a debt, money, or thing.” Black’s Law Dictionary 234 (7th ed.
1999). This right encompasses both contract- and tort-based claims for damages.
See Picadilly, Inc. v. Raikos, 582 N.E.2d 338, 340 (Ind. 1991) (distinguishing between
the assignability of contract- and tort-based choses in action). In short, Indiana
Code section 29-1-13-1 gives a personal representative the right to the decedent’s contract
and tort claims, along with decedent’s other property interests. No such authority
is given to heirs or creditors.
The third section of Chapter 13, as set forth above, elaborates on the
general authority given to the personal representative in the first section. I.C.
§ 29-1-13-3. Here, the Probate Code establishes the personal representative’s authority to
maintain any suit “for any demand of whatever nature due the decedent or
his estate.” Id. It makes clear that any claim arising before
or after the decedent’s death is left to the personal representative to bring.
No such authority is given to heirs or creditors.
The fifth section of Chapter 13 permits a personal representative, on order of
the court, to “effect a fair and reasonable compromise with any debtor or
other obligor, or extend, renew or in any manner modify the terms of
any obligation owing to the estate.” Ind. Code § 29-1-13-5. Once
again, no such authority is given to heirs or creditors.
2. Limited Avenues for Heirs, Creditors,
and Other Interested Persons
Despite the personal representative’s plenary authority to collect and manage the assets of
an estate, a few mechanisms in the Probate Code allow for the intervention
of heirs and creditors in certain circumstances apart from the personal representative.
For instance, any “person interested in the estate” may appear before the probate
court and allege “that any person has, or is suspected to have, concealed,
embezzled, converted or disposed, of any real or personal property belonging to the
estate of a decedent, or has possession or knowledge of any such property
or of any instruments in writing relating to such property.” Ind. Code
§ 29-1-13-10. The Probate Code defines “interested persons” as “heirs, devisees,
spouses, creditors, or any others having a property right in or claim against
the estate of a decedent being administered.” I.C. § 29-1-1-3 (emphases added).
The probate court is vested with the authority to “finally adjudicate the
rights of the parties before the court with respect to such property.”
I.C. § 29-1-13-10.
Another means of intervention for heirs and creditors appears in section 16 of
Chapter 13. The first half of section 16 outlines the conditions necessary
for an interested person (e.g., an heir or creditor) to petition for the
collection of indebtedness due the estate:
Whenever any interested person files with the court having jurisdiction of an estate
a petition showing that such person has reason to believe and does believe
that the personal representative of the estate or any other person is indebted
to the estate, or that any property is in the possession of the
personal representative of the estate or of any other person, and that diligent
effort is not being made to collect such indebtedness or to secure possession
of such property for the estate, the court shall hold a hearing upon
such petition and shall determine what action, if any, shall be taken.
Ind. Code § 29-1-13-16. In sum, if any person is indebted to
the estate and the personal representative is not diligently pursuing collection of the
indebtedness, then an interested person (e.g., heir or creditor) may appear before the
probate court for a determination of what action, if any, is necessary for
collection. Indebtedness is defined as the “condition or state of owing money.”
Black’s Law Dictionary 771 (7th ed. 1999). As so defined, indebtedness
would include a claim for damages caused to the decedent or his estate.
The second half of section 16 lists the two basic options available to
the probate court when action is necessary to collect indebtedness:
Should the court decide that there is sufficient merit in the petitioner’s claim
to warrant action, it shall direct the personal representative to take such action
as the court deems necessary; provided, however, where the person claimed to be
indebted to the estate or having in his possession property belonging to the
estate is the personal representative or where the court is of the opinion
that the personal representative would not or could not for any reason prosecute
such action with sufficient vigor, it shall appoint a special administrator to take
such action as it shall direct.
Id. In other words, if action is necessary, the probate court either
directs the personal representative to collect the indebtedness or it appoints a special
administrator to collect the indebtedness.
The litigant should take note of three rules from section 16. First,
the probate court—not the litigant—determines whether a petitioner’s claim of a person’s indebtedness
has merit. Second, unless the personal representative either is the indebted person
or will not prosecute an action with “sufficient vigor,” he is presumed the
proper party to collect the indebtedness. Third, if the presumption of personal
representative fitness is overcome, then the probate court appoints a special administrator to
prosecute the action.
In its focus on the personal representative’s presumed authority and responsibility for the
estate, to the exclusion of other interested persons, Indiana Code section 29-1-13-16 is
in keeping with other provisions of the Probate Code. For example, if
the personal representative is failing to perform his duties, any interested person may
petition for his removal. Ind. Code § 29-1-10-6. Moreover, any interested
person may sue the personal representative for damages to the estate resulting from
his failure to discharge his duties. Ind. Code § 29-1-16-1. In
furtherance of these actions, the Probate Code allows any interested person to request
a verified account of a personal representative’s administration. Ind. Code § 29-1-16-3.
In conclusion, the Probate Code specifically circumscribes the instances when heirs may inject
themselves into the administration of the estate. The responsibility and duty of
maintaining claims, along with the general management of the estate, falls to the
personal representative. When an heir believes the personal representative is neglecting his
duty to the detriment of the estate, the heir must follow the procedures
of the Probate Code to rectify the problem. That is, the heir
may seek the removal of the personal representative altogether, petition for the collection
of indebtedness and the appointment of a special administrator if necessary, or sue
the personal representative for loss to the estate. During administration, the heir,
however, may not maintain a suit independent of the personal representative and without
probate court authority.
3. The History and Purpose of Probate Law
Indiana’s modern probate regime took effect on January 1, 1954. Ind. Code
§ 29-1-1-2. Case law predating the modern code unequivocally reposed authority in
the personal representative to maintain suit to the exclusion of heirs, legatees, or
creditors. According to a 1942 Indiana Court of Appeals decision, “actions to
recover the personal estate or its value must be brought by the executor
or administrator, and not by the heirs, legatees, or distributees.” Baker v.
State Bank of Akron, 112 Ind. App. 612, 623, 44 N.E.2d 257, 261
(1942) (citing 21 Am. Jur., Executors and Administrators, Sec. 904, p. 879).
A late-nineteenth-century case announced a similar rule: “So long as there is an
administrator, he is entitled to recover all debts due the estate; besides, the
heirs can have no right to sue for and recover debts due the
estate when such amounts may be needed to make payment to the creditors
of the estate.” Magel v. Milligan, 150 Ind. 582, 586, 50 N.E.
564, 565-66 (1898).
If the modern Probate Code had meant to abolish such a well-established, integral
rule of Indiana estate administration, it would have radically altered the entire probate
process. It seems odd that such a revolution would have been taken
place without the modern Probate Code anywhere mentioning the overall ascendancy of heirs,
creditors, and legatees to the demise of the personal representative. Even stranger
is the fact that the duties and authority of the personal representative have
been painstakingly specified in the modern Probate Code. On the other hand,
heirs, creditors, and legatees are relegated to the status of “interested persons,” who
have expressly limited avenues of intruding upon the administration of an estate independently
of the personal representative. The only way to solve the mystery is
to accept the conclusion that, far from completely revolutionizing probate law, the modern
Probate Code preserved the personal representative as the focal point for collecting and
managing estate assets, including the prosecution of lawsuits on behalf of the estate.
The text, structure, and history of Indiana probate law thus point to the
preservation of the personal representative’s exclusive authority to maintain suit for any demand
due the decedent or his estate. So do the purposes of Indiana
probate law. One specific purpose is to quell the natural antagonism between
a creditor of the estate and a distributee. The personal representative acts
as the agent for the benefit and protection of both. “An executor
or personal representative is regarded as the trustee or agent appointed by law
for the benefit and protection of creditors and distributees. The personal representative
of an estate represents the creditors as well as the heirs of the
decedent, and the law prohibits the personal representative from preventing bona fide creditors
from sharing in decedent’s assets.” Mutual Hosp. Servs., Inc. v. Burton, 695
N.E.2d 641, 644 (Ind. Ct. App. 1998) (citation omitted). If an heir
or creditor recovered a judgment due the estate or the decedent outside of
probate administration, there would be no efficient mechanism for equitably allocating the fruits
thereof to other heirs or creditors.
The same principle has been stated more generally: “[O]ne of the basic tenets
of public policy governing our Probate Code is the uniform and expeditious distribution
of property of a decedent.” Kuzma v. Peoples Trust & Sav. Bank,
132 Ind. App. 176, 183, 176 N.E.2d 134, 138 (1961); see also 1
Debra A. Falender, Henry’s Indiana Probate Law and Practice § 102, at 4
(8th ed. 1989) (“[T]he procedural phases of the Indiana Probate Code are molded
on the principle that the general welfare of the state is best served
by the uniform, expeditious distribution of property of a decedent.”). We can
think of few things less uniform and less expeditious than allowing an heir
or creditor to pursue a claim for any demand due the decedent and
his estate independent of probate administration. To enforce fair distribution of any
recovery and to prevent a defendant’s double payment, all other heirs and creditors
would be forced to bring suit against the initiating litigant.
The multiplicity of lawsuits resulting in a hypothetical free-for-all probate regime leads us
to a related point. An heir or creditor may not avoid the
specific avenues of probate administration based on the general doctrine of standing.
The Probate Code clarifies the status of estate property during administration:
When a person dies, his real and personal property, passes to persons to
whom it is devised by his last will, or, in the absence of
such disposition, to the persons who succeed to his estate as his heirs;
but it shall be subject to the possession of the personal representative and
to the election of the surviving spouse and shall be chargeable with the
expenses of administering the estate, the payment of other claims and the allowance
is under IC 29-1-4-1, except as otherwise provided in IC 29-1.
Ind. Code § 29-1-7-23. In other words, during administration of the estate,
the personal representative possesses the property and the property may be entirely consumed
by the election of the surviving spouse, expenses for administering the estate, the
payment of claims, or by allowance. In the end, an heir may
not be entitled to any estate property.
According to our supreme court, “‘[i]n order to invoke a court’s jurisdiction, a
plaintiff must demonstrate a personal stake in the outcome of the lawsuit and
must show that he or she has sustained or was in immediate danger
of sustaining, some direct injury as a result of the conduct at issue.’”
Hammes v. Brumley, 659 N.E.2d 1021, 1029-30 (Ind. 1995) (alteration added) (quoting
Higgins v. Hale, 476 N.E.2d 95, 101 (Ind. 1985)). To put it
another way, for a plaintiff to have standing his interest “must be a
present, substantial interest, as distinguished from a mere expectancy or future, contingent interest.”
59 Am. Jur. 2d Parties § 37, at 442 (2002) [hereinafter Parties].
As shown by Indiana Code section 29-1-7-23, expectant heirs have an interest
in the assets of the estate, but such interest is future and contingent
to the satisfaction of other obligations. Thus, “[a]n expectant heir cannot maintain
an action for the enforcement or adjudication of a right in the property
the heir may subsequently inherit.” Parties, supra, § 37, at 443.
The Inlow Children may not evade the Probate Code by claiming a general
standing to sue as expectant heirs or on any other basis deriving from
their potential share of the estate.
Equally unavailing is the argument that the Inlow Children are real parties in
interest. Standing refers to “whether a party has an actual demonstrable injury
for purposes of a lawsuit.” Hammes, 659 N.E.2d at 1029. “A
real party in interest, on the other hand, is the person who is
the true owner of the right sought to be enforced. He or
she is the person who is entitled to the fruits of the action.”
Id. at 1030 (citation omitted). Expectant heirs are not necessarily entitled
to the fruits of a lawsuit brought for injury to the decedent or
his estate. Thus, the Inlow Children may not act as real parties
in interest. The implications of the trial rule governing the substitution of
real parties in interest are discussed below. See infra Part V.
4. Conclusion
Therefore, we conclude that the Inlow Children as heirs did not have the
authority to bring claims against Henderson Daily for demands due Lawrence or his
estate. The trial court properly dismissed Counts I, II, and III against
Henderson Daily brought by the Inlow Children according to their status as heirs
and according to various other capacities which ultimately depended on their status as
heirs.
Likewise, the trial court properly struck Counts IV through VIII of the motion
for leave to file amended complaint. Each stricken count relied ultimately on
alleged harms to the estate, which purportedly affected the shares the Inlow Children
stand to acquire at the final distribution of the estate. The Inlow
Children may not avoid this conclusion by asserting their right to sue in
various other capacities such as third-party beneficiaries of a contract between Kindig and
Henderson Daily. The harm is to the estate property and the Inlow
Children are harmed only to the extent the estate is harmed. In
essence, each count of the amended complaint, as well as Counts IV through
VIII of the motion for leave to file amended complaint, are counts brought
by the Inlow Children as heirs to the Inlow Estate. As such,
Counts IV through VIII would have deserved dismissal had the trial court not
stricken them at the outset. Thus, the trial court committed no error
in striking Counts IV through VIII from the motion for leave to file
amended complaint.
B. Bringing Claims as Assignees of the Personal Representatives
The Inlow Children, in the alternative, bring claims against Henderson Daily as assignees
of Kindig, who was the Inlow Estate’s former personal representative, and as assignees
of Fifth Third Bank, which is the estate’s successor personal representative. The
assignment purported to convey “all of the right, title and interest of the
Estate, and Personal Representatives thereof, in and to all claims, choses in action
or rights of action against any person, firm, corporation or other entity which
the Estate and/or Kindig has or may have.” Appellants’ App. p. 536.
Kindig received $200,000 from the successor personal representative as a result of
the assignment. Moreover, the Inlow Children covenanted not to sue Kindig for
any act he performed as personal representative of the estate. The probate
court approved of the assignment.
We believe the assignment was invalid. First, Kindig, the Inlow Children, and
Fifth Third Bank acted outside the structures established by the Probate Code for
holding the personal representative accountable to his fiduciary duties. One provision allows
an interested person to petition for the removal of a personal representative when
he is failing to perform his duties. I.C. § 29-1-10-6. Such
removal can be accomplished without resort to a covenant not to sue the
personal representative. Moreover, if the personal representative is failing to prosecute a
meritorious claim, an interested person may petition the probate court to appoint a
special administrator to handle such a claim. Unlike assignees, a special administrator
has to make an accounting to the probate court on the termination of
his authority and is subject to the “law and procedure” relating to personal
representatives. Ind. Code § 29-1-10-15. A special administrator, therefore, would be
required to act as fiduciary for both Inlow Estate creditors and heirs.
See Mutual Hosp. Servs., 695 N.E.2d at 644.
Judge Sharpnack “recognize[d] that a personal representative could, with court approval, distribute to
an heir by assignment an asset of the estate as a partial distribution
to be credited against the heir’s share of the total net estate.”
Ernst & Young, 771 N.E.2d at 1188 (Sharpnack, J., dissenting). He cited
Indiana Code section 29-1-17-1 in support. Subsection (b) of that provision permits
distribution “to persons entitled thereto of such items of property” as “are perishable
in nature,” “would materially depreciate in value if distribution were delayed,” or “would
necessitate the expenditure of estate funds for storage or preservation if not distributed.”
I.C. § 29-1-17-1(b). We note that subsection (b) neither specifically incorporates nor
definitively excludes choses in action as items of property susceptible to partial distribution
to heirs. Under these circumstances, we need not decide to what extent
Indiana Code section 29-1-17-1(b) authorizes assignment of claims belonging to a decedent and
his estate because its procedures for partial distribution of property were not followed
here.
Second, the Inlow Children’s covenant not to sue Kindig in exchange for his
resignation—which covenant is found in the same agreement as the $200,000 payment allegedly
made for services Kindig performed as personal representative—has the unmistakable appearance of self-dealing
and, hence, impropriety. Williamson v. Williamson, 714 N.E.2d 1270, 1274 (Ind. Ct.
App. 1999) (noting that the policy behind prohibiting a personal representative from self-dealing
is “to eliminate any hint of impropriety or fraud”), trans. denied. Kindig
has a fiduciary duty both to creditors and to heirs. See Mutual
Hosp. Servs., 695 N.E.2d at 644. If Kindig failed to exercise due
care in his administration of the estate, the entire estate is harmed to
the detriment of both creditors and heirs. He may not escape his
liability to the estate by selling off estate claims to heirs. In
short, it is clear from the face of the complaint, which included the
attached assignment agreement, that the Inlow Children as assignees of claims were not
the proper parties to bring these claims. See Reichhart, 748 N.E.2d at
377. Therefore, the trial court did not err in dismissing these counts
purporting to assert claims through assignment of the personal representative.
III. Claims Against the Insurers
On appeal, the Inlow Children maintain that the Insurers are responsible for the
“diminished value of the Inlow Children’s share of the Estate by the amount
of Federal Estate tax that was paid by the Estate on account of
the [insurance] Policy.” Appellants’ Br. p. 45. In response to the
Insurers’ argument that only the trustee could bring suit against them, the Inlow
Children assert, “The Inlow Children have always alleged, in the Pre-Mortem Claims, that
the damages occurred because the Inlow Property in the Estate suffered a diminution
in value from paying taxes incurred because of the Appellees’ breaches.” Appellants’
Br. p. 53. According to their argument, they sue for damage to
the estate and not for damage to the trust:
Assuming for purposes of argument that the Trustee was the proper party to
bring a lawsuit against the Attorneys for malpractice or the Insurers for their
negligence, the damages suffered were to property held by the Estate and not
the Children’s Trust. The acts of the Appellees reduced the assets of
the Estate by increasing the overall Estate taxes, while leaving the Trust assets
intact.
. . . The Trustee in fact had no standing to sue the
Attorneys or the Insurers, because the Trust property had sustained no damage.
Appellants’ Reply Br. p. 15 (emphasis in original) (citation omitted). Even if
there were a colorable claim against the Insurers, it would be for harms
the Insurers committed against the Inlow Estate, not the Inlow Trust. Hence,
the same reasons the Inlow Children may not maintain claims against Henderson Daily
apply to the Insurers with equal force. The trial court correctly dismissed
the claims against the Insurers.
IV. Motion to Amend the Amended Complaint by Interlineation
The trial court, morever, correctly denied the Inlow Children’s motion to amend the
amended complaint by interlineation. By interlineation, the Inlow Children attempted to assert claims,
which were allegedly assigned by the successor trustee, against Henderson Daily and the
Insurers. The harm, as the Inlow Children unequivocally asserted, is to the
Inlow Estate. The successor trustee has no authority to pursue claims for
alleged harms committed against the Inlow Estate. Correspondingly, the successor trustee has
no power to assign such claims.
V. Inapplicability of Trial Rule 17(A)
We concluded above that the Inlow Children did not have standing and were
not real parties in interest. See supra Part II.A.3. Our rules
of trial procedure promote the participation of the real party interest in litigation.
In part, Trial Rule 17(A) provides:
Every action shall be prosecuted in the name of the real party in
interest.
(1) An executor, administrator, guardian, bailee, trustee of an
express trust, a party with whom or in whose name a contract has
been made for the benefit of another, or a party authorized by statute
may sue in his own name without joining with him the party for
whose benefit the action is brought, but stating his relationship and the capacity
in which he sues.
(2) . . . .
No action shall be dismissed on the ground
that it is not prosecuted in the name of the real party in
interest until a reasonable time after objection has been allowed for the real
party in interest to ratify the action, or to be joined or substituted
in the action. Such ratification, joinder, or substitution shall have the same
effect as if the action had been commenced initially in the name of
the real party in interest.
T.R. 17(A) (emphasis added).
The Inlow Children request that, if their status as heirs and assignees failed
to make them real parties in interest, this court should remand this cause
to the Marion Superior Court. Once remanded, according to the Inlow Children,
the Marion Superior Court should set a reasonable time for the successor personal
representative to ratify, join, or be substituted into the action before dismissal.
In addressing their argument, we make two observations about Trial Rule 17(A).
First, as expressed by the Civil Code Study Commission Comments, Trial Rule 17(A)
“leaves the determination of the real party in interest to be ascertained by
the prior law which remains in effect in most cases. Thus problems
arising where a receiver or personal representative fails to bring suit or does
so improperly are governed by statutory or common-law rules.” Civil Code Study
Commission Comments to Rule 17, reprinted in 2 William F. Harvey, Indiana Practice:
Rules of Procedure Annotated 212 (3d ed. 2000). To illustrate its point,
the Commission cited both the predecessor statute to Indiana Code section 29-1-13-3 (giving
personal representative full power to maintain any suit in any court of competent
jurisdiction for any demand of whatever nature due the decedent) and the predecessor
statute to Indiana Code section 29-1-13-16 (allowing interested persons to petition probate court
either to prompt personal representative to pursue a claim or to appoint a
special administrator to pursue a claim). Id. (citing Burns Ind. Stat. Ann.
§ 7-703 (Bobbs-Merrill 1953 Repl.) and Burns Ind. Stat. Ann. § 7-716 (Bobbs-Merrill
1953 Repl.), respectively). Our second and related observation is that “‘Indiana substantive
law . . . must be held to control over the procedural liberality
contained in T.R. 17(A).’” Hosler ex rel. Hosler v. Catepillar, Inc., 710
N.E.2d 193, 196 (Ind. Ct. App. 1999) (alteration added) (quoting General Motors Corp.
v. Arnett, 418 N.E.2d 546, 549 (Ind. Ct. App.1981)), trans. denied; accord 2
Harvey, supra, at 219-20. Thus, Trial Rule 17(A) in large part meant
to leave statutory and common law governing personal representatives in effect. Any
apparent conflict between the law of personal representatives and Trial Rule 17(A) is
resolved in favor of the former’s application.
To protect all creditors and heirs, the personal representative has a fiduciary duty
to collect and manage assets, including choses in action. The personal representative
is also granted authority to maintain suit and, if he fails to prosecute
a meritorious claim, a special administrator may be appointed. Given these duties
and authority, we fail to see how a personal representative could ratify or
join in this action, where the fruits of a recovery for the estate
would apparently be split between the estate and the original party plaintiffs.
Such an outcome could work to the detriment of creditors of the Inlow
Estate.
Likewise, to remand this cause to the Marion Superior Court for the substitution
of Fifth Third Bank would allow the “procedural liberality” of Trial Rule 17(A)
to overwhelm the Probate Code. As noted above, the Probate Code provides
a mechanism for interested persons to prompt the personal representative to pursue a
claim on behalf of the estate. See I.C. § 29-1-13-16; supra Part
II.A.2. They must first petition the probate court and let the probate
court decide if there is sufficient merit for any further action to be
taken. I.C. § 29-1-13-16. If there is sufficient merit to the
claim, the probate court either directs the personal representative to pursue it or,
under certain circumstances, appoints a special administrator to pursue the claim.
Though it may not seem wise to those who would rush headlong into
suspect litigation, there is some merit in patiently following the Probate Code in
these matters. The probate court and the personal representative are in the
best position to assess, among other things, the strength of a claim, the
costs to the estate in pursuing it, and the desirability of closing the
estate before certain assets depreciate in value. If Trial Rule 17(A) supersedes
the Probate Code under these circumstances, then any heir may avoid the bounds
of the Probate Code by filing an action and forcing the personal representative
to be substituted into the action. We also note that Fifth Third
Bank was aware of the Inlow Children’s claims against Henderson Daily and the
Insurers and chose to allow assignment of the claims. If Fifth Third
Bank believed the claims were worth pursuing, it would have prosecuted an action
in its role as a fiduciary to creditors and heirs of the estate.
Our decision does not leave the Inlow Children without a remedy. They
may petition the probate court either to direct the successor personal representative to
pursue these claims or to appoint a personal representative to do so.
Provided, of course, a probate court would judge these claims worth pursuing.
VI. Motions Filed on Appeal After Full Briefing
On March 21, 2003, the Inlow Children filed with this court their “Verified
Motion to Reverse and Remand with Instructions Because of Failure to Disclose Information
Which Might Reasonably Raise a Question as to Impartiality.” In the motion,
they contend that Judge Zore’s impartiality might reasonably be questioned on account of
campaign contributions made to the Zore for Judge Committee by Henderson Daily and
three individual attorneys who were parties to this lawsuit. They also maintain
that Judge Zore’s impartiality might be reasonably questioned because the treasurer of his
campaign committee was Robert J. Shula, an attorney, at that time, with Lowe
Gray Steele & Darko. Great-West Life was represented at that time by
Lowe Gray Steele & Darko in this action. For relief, the Inlow
Children ask us to remand this cause and order: (1) recusal of Judge
Zore,
See footnote (2) reversal of his judgment dismissing their amended complaint, and (3) a
rehearing on Henderson Daily’s and the Insurers’ motions to dismiss the amended complaint.
The Inlow Children attached two documents to their motion. The first document
is Zore for Judge Committee’s “Report of Receipts and Expenditures of a Political
Committee” filed with the Marion County Clerk on
January 15, 2002. It
lists Henderson Daily’s $900 contribution to the campaign. That contribution was made
five months before the dismissal of the amended complaint on April 30, 2000.
The second document is Zore for Judge Committee’s “Report of Receipts and
Expenditures of a Political Committee” filed with the Marion County Clerk on October
17, 2002. It lists the three individual attorneys’ contribution of $100 each.
Their contributions were made two months after the dismissal of the amended
complaint.
We deny the motion for two reasons. First, the Inlow Children assert
that they initially became aware of the campaign contributions and Shula’s role as
campaign treasurer on March 19, 2003. However, the first document shows that
that report was filed on January 15, 2002, three months before the dismissal
of the amended complaint. They fail to explain what prevented them from
discovering this information in time to bring it before the dismissal was granted
or at the very least before the case was fully briefed on appeal.
Second, no amount of judicial discretion would allow the Inlow Children to
continue with their amended complaint against Henderson Daily and the Insurers. The
focal point for the collection of claims against the defendants is the successor
personal representative, not the heirs. No judge has the authority to rewrite
the Probate Code to allow the Inlow Children to bring their claims as
heirs or assignees.
CONCLUSION
We affirm the dismissal of all claims that the Inlow Children brought against
Henderson Daily and the Insurers. The facts of the complaint taken as
true do not support the relief requested in the complaint. First, the
various capacities to sue described in the complaint, apart from the personal representative’s
assignment, ultimately arise from the Inlow Children’s status as heirs. The Probate
Code limits the avenues for an heir’s intervention. Second, the assignment made
by Kindig and Fifth Third Bank was invalid because it was made outside
any procedure established by the Probate Code and because it had the appearance
of a personal representative’s self-dealing to the detriment of the estate. For
these reasons also, the trial court correctly struck Counts IV through VIII of
the motion for leave to file amended complaint. Finally, the Inlow Children
may not sue, as beneficiaries of a trust, for harms caused to the
estate. Nor may they assert claims as assignees of the successor trustee
for harms allegedly caused to the estate. We deny the Inlow Children’s
request for remand; their remedies, if they choose to pursue them, are in
the probate court.
Affirmed.
RILEY, J., and MATHIAS, J., concur.
Footnote:
We are deeply indebted to Judge Sharpnack’s dissenting opinion in
Inlow v. Ernst & Young, LLP, 771 N.E.2d 1174, 1184-88 (Ind. Ct. App.
2002) (Sharpnack, J., dissenting), trans. granted. His general analysis of the Probate
Code and the assignability of the personal representative’s claims has helped inform this
opinion. Our supreme court granted transfer and vacated Inlow v. Ernst & Young,
LLP on February 27, 2003.
Footnote:
The Inlow Children informed us in an amended motion filed
on March 26, 2003, that Judge Zore has recused himself from the case.