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Appellate court divided over trust liability

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The Indiana Court of Appeals split Monday in a probate suit involving whether trustees failed to distribute a portion of the trust corpus in a timely manner. The majority upheld finding the trustees liable, but ordered a re-evaluation of compensatory damages and attorney fees.

Brothers Harrison “Nick” Eiteljorg II and Jack Eiteljorg were the remainder beneficiaries of a trust their father set up effective upon his death in 1997. Their mother, Sonja, was designated sole beneficiary; she died in 2003. Nick, his stepson Roger, and accountant John Lienhart were co-trustees of the trust.

In October 2004, the parties met to discuss the distribution of trust property, which consisted of $6.5 million, including $3.2 million in liquid assets. Nick wanted he and his brother to receive $2 million total, but Lienhart disagreed because he was worried about any remaining estate tax that may be owed. Roger and Lienhart suggested distributing only $1 million total, which Nick rejected and later stormed out. The dispute led to a petition to probate court to remove Lienhart and Roger as trustees. Nick and Jack filed notice raising 13 claims of breach of trust, but Judge Charles Dieter only found they breached two duties and ordered immediate distribution of $1.5 million, which included about $300,000 in non-liquid assets, to Nick and Jack.

Judge Dieter died before he could rule on the issue of damages, so Judge Tanya Walton Pratt concluded that the relevant damages period lasted from October 2004 to October 2007 when the trust was wrapped up. She awarded Nick more than $150,000 representing lost earnings from an investment opportunity and awarded Jack more than $110,000 in lost profits from his missed real estate deal. She also awarded them more than $353,000 in attorney fees.

In In the Matter of the Trust of Harrison Eiteljorg, No. 49A02-1005-TR-485, Judges Nancy Vaidik and Michael Barnes upheld Judge Dieter’s finding that John and Roger breached their duty to administer the trust according to its terms, but they found Judge Pratt erred in her assessment of damages. They should not have been allowed to recover damages for their lost investment opportunities under Indiana Code 30-4-3-11(b)(3) because that section applies to profits lost to the trust corpus due to a trustee’s misuse, not to allow beneficiaries to recover for individual profits they would have allegedly generated on their personal shares but for the trustee’s failure to timely distribute, wrote Judge Vaidik. The issue here is more like a claim for conversion.

Nick and Jack were deprived of the $1.2 million ordered by Judge Deiter for only 9 months, so they are only entitled to interest for those months. Any assessment of compensatory damages beyond that point is erroneous, she wrote. The majority also reduced the attorney fees to $150,000 based on the record.

Judge John Baker dissented on the issue of whether Lienhart and Roger committed a breach of the trust. He noted that Nick originally rejected Lienhart and Roger’s distribution proposal. Lienhart had many years of experience as an accountant and believed that the $2 million he wanted to hold back for taxes was appropriate. When the dispute arose, Lienhart and Roger petitioned for instructions from the probate court, and once instructed, they immediately made the distributions as ordered.  

“In my view, to penalize John and Roger for doing that which we consistently direct trustees to do — and which they are statutorily entitled to do — is misguided and contrary to law,” he wrote.

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  1. So that none are misinformed by my posting wihtout a non de plume here, please allow me to state that I am NOT an Indiana licensed attorney, although I am an Indiana resident approved to practice law and represent clients in Indiana's fed court of Nth Dist and before the 7th circuit. I remain licensed in KS, since 1996, no discipline. This must be clarified since the IN court records will reveal that I did sit for and pass the Indiana bar last February. Yet be not confused by the fact that I was so allowed to be tested .... I am not, to be clear in the service of my duty to be absolutely candid about this, I AM NOT a member of the Indiana bar, and might never be so licensed given my unrepented from errors of thought documented in this opinion, at fn2, which likely supports Mr Smith's initial post in this thread: http://caselaw.findlaw.com/us-7th-circuit/1592921.html

  2. When I served the State of Kansas as Deputy AG over Consumer Protection & Antitrust for four years, supervising 20 special agents and assistant attorneys general (back before the IBLE denied me the right to practice law in Indiana for not having the right stuff and pretty much crushed my legal career) we had a saying around the office: Resist the lure of the ring!!! It was a take off on Tolkiem, the idea that absolute power (I signed investigative subpoenas as a judge would in many other contexts, no need to show probable cause)could corrupt absolutely. We feared that we would overreach constitutional limits if not reminded, over and over, to be mindful to not do so. Our approach in so challenging one another was Madisonian, as the following quotes from the Father of our Constitution reveal: The essence of Government is power; and power, lodged as it must be in human hands, will ever be liable to abuse. We are right to take alarm at the first experiment upon our liberties. I believe there are more instances of the abridgement of freedom of the people by gradual and silent encroachments by those in power than by violent and sudden usurpations. Liberty may be endangered by the abuse of liberty, but also by the abuse of power. All men having power ought to be mistrusted. -- James Madison, Federalist Papers and other sources: http://www.constitution.org/jm/jm_quotes.htm RESIST THE LURE OF THE RING ALL YE WITH POLITICAL OR JUDICIAL POWER!

  3. My dear Mr Smith, I respect your opinions and much enjoy your posts here. We do differ on our view of the benefits and viability of the American Experiment in Ordered Liberty. While I do agree that it could be better, and that your points in criticism are well taken, Utopia does indeed mean nowhere. I think Madison, Jefferson, Adams and company got it about as good as it gets in a fallen post-Enlightenment social order. That said, a constitution only protects the citizens if it is followed. We currently have a bevy of public officials and judicial agents who believe that their subjectivism, their personal ideology, their elitist fears and concerns and cause celebs trump the constitutions of our forefathers. This is most troubling. More to follow in the next post on that subject.

  4. Yep I am not Bryan Brown. Bryan you appear to be a bigger believer in the Constitution than I am. Were I still a big believer then I might be using my real name like you. Personally, I am no longer a fan of secularism. I favor the confessional state. In religious mattes, it seems to me that social diversity is chaos and conflict, while uniformity is order and peace.... secularism has been imposed by America on other nations now by force and that has not exactly worked out very well.... I think the American historical experiment with disestablishmentarianism is withering on the vine before our eyes..... Since I do not know if that is OK for an officially licensed lawyer to say, I keep the nom de plume.

  5. I am compelled to announce that I am not posting under any Smith monikers here. That said, the post below does have a certain ring to it that sounds familiar to me: http://www.catholicnewworld.com/cnwonline/2014/0907/cardinal.aspx

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