ILNews

Appellate court divided over trust liability

Back to TopCommentsE-mailPrintBookmark and Share

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.

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Whilst it may be true that Judges and Justices enjoy such freedom of time and effort, it certainly does not hold true for the average working person. To say that one must 1) take a day or a half day off work every 3 months, 2) gather a list of information including recent photographs, and 3) set up a time that is convenient for the local sheriff or other such office to complete the registry is more than a bit near-sighted. This may be procedural, and hence, in the near-sighted minds of the court, not 'punishment,' but it is in fact 'punishment.' The local sheriffs probably feel a little punished too by the overwork. Registries serve to punish the offender whilst simultaneously providing the public at large with a false sense of security. The false sense of security is dangerous to the public who may not exercise due diligence by thinking there are no offenders in their locale. In fact, the registry only informs them of those who have been convicted.

  2. Unfortunately, the court doesn't understand the difference between ebidta and adjusted ebidta as they clearly got the ruling wrong based on their misunderstanding

  3. A common refrain in the comments on this website comes from people who cannot locate attorneys willing put justice over retainers. At the same time the judiciary threatens to make pro bono work mandatory, seemingly noting the same concern. But what happens to attorneys who have the chumptzah to threatened the legal status quo in Indiana? Ask Gary Welch, ask Paul Ogden, ask me. Speak truth to power, suffer horrendously accordingly. No wonder Hoosier attorneys who want to keep in good graces merely chase the dollars ... the powers that be have no concerns as to those who are ever for sale to the highest bidder ... for those even willing to compromise for $$$ never allow either justice or constitutionality to cause them to stand up to injustice or unconstitutionality. And the bad apples in the Hoosier barrel, like this one, just keep rotting.

  4. I am one of Steele's victims and was taken for $6,000. I want my money back due to him doing nothing for me. I filed for divorce after a 16 year marriage and lost everything. My kids, my home, cars, money, pension. Every attorney I have talked to is not willing to help me. What can I do? I was told i can file a civil suit but you have to have all of Steelers info that I don't have. Of someone can please help me or tell me what info I need would be great.

  5. It would appear that news breaking on Drudge from the Hoosier state (link below) ties back to this Hoosier story from the beginning of the recent police disrespect period .... MCBA president Cassandra Bentley McNair issued the statement on behalf of the association Dec. 1. The association said it was “saddened and disappointed” by the decision not to indict Ferguson police officer Darren Wilson for shooting Michael Brown. “The MCBA does not believe this was a just outcome to this process, and is disheartened that the system we as lawyers are intended to uphold failed the African-American community in such a way,” the association stated. “This situation is not just about the death of Michael Brown, but the thousands of other African-Americans who are disproportionately targeted and killed by police officers.” http://www.thestarpress.com/story/news/local/2016/07/18/hate-cops-sign-prompts-controversy/87242664/

ADVERTISEMENT