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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. I just wanted to point out that Congressman Jim Sensenbrenner, Senator Feinstein, former Senate majority leader Bill Frist, and former attorney general John Ashcroft are responsible for this rubbish. We need to keep a eye on these corrupt, arrogant, and incompetent fools.

  2. Well I guess our politicians have decided to give these idiot federal prosecutors unlimited power. Now if I guy bounces a fifty-dollar check, the U.S. attorney can intentionally wait for twenty-five years or so and have the check swabbed for DNA and file charges. These power hungry federal prosecutors now have unlimited power to mess with people. we can thank Wisconsin's Jim Sensenbrenner and Diane Feinstein, John Achcroft and Bill Frist for this one. Way to go, idiots.

  3. I wonder if the USSR had electronic voting machines that changed the ballot after it was cast? Oh well, at least we have a free media serving as vicious watchdog and exposing all of the rot in the system! (Insert rimshot)

  4. Jose, you are assuming those in power do not wish to be totalitarian. My experience has convinced me otherwise. Constitutionalists are nearly as rare as hens teeth among the powerbrokers "managing" us for The Glorious State. Oh, and your point is dead on, el correcta mundo. Keep the Founders’ (1791 & 1851) vision alive, my friend, even if most all others, and especially the ruling junta, chase only power and money (i.e. mammon)

  5. Hypocrisy in high places, absolute immunity handed out like Halloween treats (it is the stuff of which tyranny is made) and the belief that government agents are above the constitutions and cannot be held responsible for mere citizen is killing, perhaps has killed, The Republic. And yet those same power drunk statists just reel on down the hallway toward bureaucratic fascism.

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