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COA finds man was shareholder at time of stock sale

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A dispute between family members over stock of the family company led to the Indiana Court of Appeals addressing an issue involving shareholders and revocable trusts that hasn’t yet been addressed in Indiana: whether the settlor, who places shares of stock into a revocable inter vivos trust and names himself as trustee and beneficiary, retains his shareholder status.

At issue in Andrew C. Kesling, individually and as Trustee of the Andrew C. Kesling Trust v. Peter C. Kesling, et al., No. 45A03-1106-PL-271, is whether Peter Kesling was able, under the shareholder agreement of TP Orthodontics Inc., tosell shares of his stock in 2004 to his son, Andrew Kesling. At the time of the sale, Andrew Kesling, who was a shareholder in TPO, had placed his stock into a revocable trust which named himself as a beneficiary and trustee. TPO shareholders had an agreement that restricted the shareholder’s ability to transfer shares of the company to non-shareholders.  

Andrew Keslings siblings initiated a lawsuit, in which they asserted they were each entitled to purchase certain shares of TPO stock. Peter Kesling’s cross-claim against his son is the subject of this appeal, in which Peter Kesling argued that he later learned Andrew Kesling had transferred his shares of the company to a trust before the 2004 sale, so he couldn’t have sold his shares to Andrew Kesling because he wasn’t technically a shareholder. The trial court found the siblings’ claims were moot because it was returning the stock Peter Kesling sold back to him because the court found Andrew Kesling wasn’t a shareholder at the time of the sale.

The COA found the trial court abused its discretion in concluding that Peter Kesling was entitled to rescission of the stock purchase agreements. The judges cited the Indiana Supreme Court decision in Marshall Cnty. Tax Awareness Comm. v. Quivey, 780 N.E.2d 380, 383 (Ind. 2002),  in which an individual asserted property rights where the property was held in a revocable trust, the shareholder agreement of TPO, and the Internal Revenue Code to find that Andrew Kesling, not the trust, was the owner of the stock and therefore a shareholder.

There is no question that Andrew Kesling is the beneficial and record owner of the shares and the trust makes clear that he is entitled to vote the shares, wrote Judge Elaine Brown. Because Andrew Kesling’s trust declaration didn’t extinguish his rights as a shareholder of TPO, the trial court abused its discretion when it ordered rescission in favor of Peter Kesling.

The judges didn’t address the siblings’ claims on appeal, but remanded for the trial court to rule on the claims they raised, which include breach of fiduciary duty and constructive fraud.

 

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  1. "So we broke with England for the right to "off" our preborn progeny at will, and allow the processing plant doing the dirty deeds (dirt cheap) to profit on the marketing of those "products of conception." I was completely maleducated on our nation's founding, it would seem. (But I know the ACLU is hard at work to remedy that, too.)" Well, you know, we're just following in the footsteps of our founders who raped women, raped slaves, raped children, maimed immigrants, sold children, stole property, broke promises, broke apart families, killed natives... You know, good God fearing down home Christian folk! :/

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  3. 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.

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

  5. 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.

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