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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. Where may I find an attorney working Pro Bono? Many issues with divorce, my Disability, distribution of IRA's, property, money's and pressured into agreement by my attorney. Leaving me far less than 5% of all after 15 years of marriage. No money to appeal, disabled living on disability income. Attorney's decision brought forward to judge, no evidence ever to finalize divorce. Just 2 weeks ago. Please help.

  2. For the record no one could answer the equal protection / substantive due process challenge I issued in the first post below. The lawless and accountable only to power bureaucrats never did either. All who interface with the Indiana law examiners or JLAP be warned.

  3. Hi there I really need help with getting my old divorce case back into court - I am still paying support on a 24 year old who has not been in school since age 16 - now living independent. My visitation with my 14 year old has never been modified; however, when convenient for her I can have him... I am paying past balance from over due support, yet earn several thousand dollars less. I would contact my original attorney but he basically molest me multiple times in Indy when I would visit.. Todd Woodmansee - I had just came out and had know idea what to do... I have heard he no longer practices. Please help1

  4. Yes diversity is so very important. With justice Rucker off ... the court is too white. Still too male. No Hispanic justice. No LGBT justice. And there are other checkboxes missing as well. This will not do. I say hold the seat until a physically handicapped Black Lesbian of Hispanic heritage and eastern religious creed with bipolar issues can be located. Perhaps an international search, with a preference for third world candidates, is indicated. A non English speaker would surely increase our diversity quotient!!!

  5. First, I want to thank Justice Rucker for his many years of public service, not just at the appellate court level for over 25 years, but also when he served the people of Lake County as a Deputy Prosecutor, City Attorney for Gary, IN, and in private practice in a smaller, highly diverse community with a history of serious economic challenges, ethnic tensions, and recently publicized but apparently long-standing environmental health risks to some of its poorest residents. Congratulations for having the dedication & courage to practice law in areas many in our state might have considered too dangerous or too poor at different points in time. It was also courageous to step into a prominent and highly visible position of public service & respect in the early 1990's, remaining in a position that left you open to state-wide public scrutiny (without any glitches) for over 25 years. Yes, Hoosiers of all backgrounds can take pride in your many years of public service. But people of color who watched your ascent to the highest levels of state government no doubt felt even more as you transcended some real & perhaps some perceived social, economic, academic and professional barriers. You were living proof that, with hard work, dedication & a spirit of public service, a person who shared their same skin tone or came from the same county they grew up in could achieve great success. At the same time, perhaps unknowingly, you helped fellow members of the judiciary, court staff, litigants and the public better understand that differences that are only skin-deep neither define nor limit a person's character, abilities or prospects in life. You also helped others appreciate that people of different races & backgrounds can live and work together peacefully & productively for the greater good of all. Those are truths that didn't have to be written down in court opinions. Anyone paying attention could see that truth lived out every day you devoted to public service. I believe you have been a "trailblazer" in Indiana's legal community and its judiciary. I also embrace your belief that society's needs can be better served when people in positions of governmental power reflect the many complexions of the population that they serve. Whether through greater understanding across the existing racial spectrum or through the removal of some real and some perceived color-based, hope-crushing barriers to life opportunities & success, movement toward a more reflective representation of the population being governed will lead to greater and uninterrupted respect for laws designed to protect all peoples' rights to life, liberty & the pursuit of happiness. Thanks again for a job well-done & for the inevitable positive impact your service has had - and will continue to have - on countless Hoosiers of all backgrounds & colors.

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