KIRSCH, Judge.
Howard L. ("Howard") and Elizabeth W. ("Elizabeth") Chapman (collectively, "Trustees"), parents of Stephen L. Chapman ("Stephen") and settlors of the Stephen L. Chapman Irrevocable Trust Agreement ("the Trust") filed a petition to modify the date of distribution of Trust assets to Stephen, and the trial court granted the petition. Intervenor Carrie Chapman ("Carrie"), wife of Stephen, appeals the trial court's decision, raising the following two restated issues:
We affirm in part and reverse in part.
Howard and Elizabeth, husband and wife, created the Trust on December 18, 1997. The Trust provided that a distribution of trust assets was to be made to Stephen, their son, upon his fifty-fifth birthday, which was November 13, 2010. Initially, the assets of the Trust consisted of stock in Waterfield Mortgage, a company that Elizabeth's father founded in the 1920s or 1930s, and at some point Elizabeth inherited the stock from her parents. In 2006 or 2007, Waterfield Mortgage Company was sold, and the stock was replaced with cash or other assets. Appellant's App. at 82.
At the time the Trust was created, Stephen and Carrie were engaged, and they married about a month later, on January 22, 1998. On June 29, 2009, Carrie filed a petition for dissolution of her marriage to Stephen in the Whitley Circuit Court, which was thereafter removed to Allen County Superior Court No. 7 ("dissolution court"), where it is still pending.
On May 13, 2010, Trustees filed a verified petition to reform the Trust in Allen County Superior Court No. 1 ("trial court"), seeking to delay distribution of assets to Stephen. Trustees argued for reformation based on provisions in the Trust and also pursuant to Indiana Code
On September 29, 2010, the trial court held a hearing on Trustees' verified petition to reform the Trust. At the hearing, Howard testified that the purpose of the Trust was to pass the property that had been inherited by Elizabeth "and accumulated for generations" to Stephen. Tr. at 15 (Sept. 29, 2010 hearing). He explained, "The only way ... that [Carrie] could ever become a beneficiary would be if Steve had died during the term of the trust and there were [sic] no divorce pending." Id. at 19. Carrie's testimony included her statement that she was making a claim in the dissolution action that the Trust should be considered as a marital asset. Stephen testified that he had conversations with Carrie prior to their marriage about a pre-marital agreement, but one was never prepared or signed. Referring to the dissolution proceedings, Stephen opined that "it seems" Carrie and her attorney were purposely delaying the resolution of the dissolution that was filed in June 2009. Id. at 51. Stephen's testimony neither objected to nor overtly advocated for the reformation of the Trust.
After taking the matter under advisement, and receiving post-trial briefs from the parties, the trial court issued an order on November 12, 2010 granting Trustees' petition to reform the trust. That same date, it issued a separate order including findings, discussion, and decision, explaining its reasoning. In making its decision, the trial court relied on Article II, Clause 7 of the Trust, which provides for the reformation of the Trust and states:
Appellant's App. at 200. The trial court found that "[t]he intent of the Chapmans as the Settlors of the trust was to pass the assets received by Elizabeth Chapman from her parents on to her son, his family and his issue." Id. at 201. The trial court determined that "the pending dissolution... is an event tending to greatly impair the intent and purposes of the [Trust] and that it is in the best interest of the [T]rust and the Beneficiary that [the Trust provisions] be reformed." Id. The trial court ultimately ordered:
Id. at 194. Thus, the terms of the Trust were modified
Carrie asserts that the trial court erred when it exercised jurisdiction over the Trust reformation proceedings. The vehicle by which Carrie raised the jurisdictional issue to the trial court was her motion to stay, where she argued that by reforming the Trust, Trustees "are attempting to control the distribution of marital property which they contend does not include the Trust corpus and the [T]rustees are effectively attempting to assert a right to control how the dissolution court divides the marital property."
Carrie's motion to stay argued that the dissolution court properly possessed jurisdiction of the matter because Stephen was already a party to the previously-filed dissolution action, and the petition to reform the Trust was filed specifically to affect the assets to be considered in the dissolution action. However, jurisdictional conflicts are properly placed before a court by way of an Indiana Trial Rule 12(B)(8) motion to dismiss on the ground that the same action is pending in another court, and that the defense is waived if not brought within
Waiver notwithstanding, Carrie has not established that the trial court could not or should not have exercised jurisdiction. In order for a trial court to dismiss a matter because another proceeding is pending, the courts must look to whether the actions are the same or substantially the same in the following three aspects: (1) the parties; (2) the subject matter of the cases; and (3) the remedies sought. Meade v. Marshall Superior Court, 644 N.E.2d 87, 89 (Ind.1994).
Here, regarding similarity of parties, Trustees are not parties to the dissolution action. As for the subject matter, Trustees explain that in determining whether the subject matter of two lawsuits is substantially the same, the relevant inquiry is not whether parts of one lawsuit are the same or similar to parts of the other; rather, each lawsuit as a whole should be examined. Appellees' Br. at 18 (citing Kentner v. Ind. Pub. Emp'rs' Plan, Inc., 852 N.E.2d 565, 572 (Ind.Ct.App.2006), trans. denied (2007)). In this case, as the trial court properly recognized, the subject matter of the two proceedings is not the same or substantially the same; the dissolution involves matters relating to custody, child support, and property division, while the Trust reformation proceedings involve the construction of the Trust, the Trust Code, and the rights and duties of the Trustees. Accordingly, the trial court concluded that it possessed jurisdiction over the Trust reformation proceedings. The dissolution court concluded likewise, finding that the trial court possessed "exclusive jurisdiction over the [Trust] issues," including "whether or not the Trust can be reformed under its provisions, the law, or any applicable statute." Appellant's App. at 135 (dissolution court's order denying Carrie's motion for joinder seeking to join Trust proceedings with dissolution proceedings).
We find no error, and we affirm the trial court's decision with regard to its exercise of jurisdiction over the Trust proceedings.
According to the record before us, neither side requested specific findings from the trial court, but the trial court sua sponte entered findings of fact. See Appellant's Br. at 7-8; Appellees' Br. at 12. The parties appear to agree that the following is the applicable standard of review:
Tew v. Tew, 924 N.E.2d 1262, 1264 (Ind.Ct. App.2010), trans. denied (internal citations omitted).
Trustees' petition to reform the Trust presented issues requiring the trial court to interpret the Trust, particularly Clause 7, and thus presented a question of law for the trial court. Paloutzian v. Taggart, 931 N.E.2d 921, 925 (Ind.Ct.App. 2010). An appellate court is not at liberty to rewrite a trust agreement any more than it is at liberty to rewrite contracts. Id. When a trust instrument must be construed by a court, we attempt to discern the settlor's intent in light of the facts and circumstances at the time the instrument was executed. Id.
The trial court's decision to delay distribution of assets relied primarily upon the language of Clause 7, which states:
Appellant's App. at 18-19 (emphasis added).
Pursuant to the terms of Clause 7, the trial court determined that:
Id. at 202. The trial court then reformed or modified the Trust's terms so that distribution to Stephen was delayed until at least six months after the final dissolution decree and the completion of any appeal therefrom.
Of particular importance in this appeal is the fact that Clause 7 specifically includes the term "unforeseeable" when describing those conditions under which Trustees may petition a trial court for reformation of the Trust. Here, the trial court determined that Trustees were not required to prove that dissolution of Carrie and Stephen's marriage was unforeseeable because, by definition, any event described in subsections (a) or (b) was per se unforeseeable. The trial court explained:
Id. at 200 n. 2. On appeal, Carrie asserts that the trial court's interpretation effectively reads out the term "unforeseeable" from Clause 7, contrary to the Trust's own terms, and furthermore is inconsistent with Indiana's Trust Code. We agree.
Clause 7 of the Trust does not state that the Trustees may seek reformation due to any event tending to impair the intent and purposes of the Trust; rather, it says that the Trustees may petition a court for reformation because of any unforeseeable event tending to impair the intent and purposes of the Trust. It is contrary to basic contract interpretation to fail to give plain meaning to an unambiguous contract term that exists in the document. Univ. of S. Ind. Found. v. Baker, 843 N.E.2d 528, 532 (Ind.2006) (where trust is capable of clear and unambiguous construction, court must give effect to trust's clear meaning). We therefore conclude the trial court erred when it determined that Trustees were not required to establish that the dissolution was unforeseeable. Our holding in that regard is supported by the fact that the term "unforeseeable," and like terms, have a history that can be traced back not only to Indiana's Trust Code, but its predecessors in common law.
The common law approach for allowing modification for unanticipated circumstances is sometimes referred to as "the equitable deviation doctrine," which states: if circumstances unanticipated by the settlor occur, the court may modify the administrative terms of the trust, but only to prevent the unanticipated circumstances from defeating or substantially impairing the accomplishment of the purposes of the trust. Alan Newman, The Intention of the Settlor Under the Uniform Trust Code: Whose Property Is It, Anyway? 38 Akron L.Rev. 649, 663 (2005). Indiana's statutory codification of the equitable deviation doctrine is Indiana Code section 30-4-3-26, which also follows the language of Restatement (Second) of Trusts § 167 (1959). Indiana Code section 30-4-3-26 ("Section 26"), provides in pertinent part:
Ind.Code § 30-4-3-26(a) (emphasis added). Indiana Code section 30-4-3-24.4 ("Section 24.4") is similar to Section 26 and reads in pertinent part:
Ind.Code § 30-4-3-24.4(a) (emphasis added).
Section 24.4 is patterned after Section 412(a) of the Uniform Trust Code ("UTC") which, in turn, is taken from the Restatement
This court in In re Nobbe, 831 N.E.2d 835 (Ind.Ct.App.2005), examined whether growth in the value of bank stock, placed in trust by a father for his children, constituted "unanticipated circumstances" to justify equitable deviation from the trust's specified terms concerning the distribution of stock. Id. at 841-42. The case involved a dispute between nine siblings regarding the interpretation of a testamentary trust created twenty-five years earlier under their father's will. At the time of the father's death, the stock was valued at $40,000, but during the administration of the trust the banking laws in Indiana "dramatically changed" which resulted in Fifth Third acquiring the bank's holding company, and the trust's stock value increased to over three million dollars. Id. at 838. Their disagreement centered on the proper distribution of over three million dollars worth of stock in Fifth Third Bank. Some of the children claimed that their father intended to treat all of his children substantially equally and, prior to his death, he could not foresee the "sweeping changes in Indiana banking law ... which directly impaired [his] estate plan." Id. at 841. The trial court refused to apply the equitable deviation doctrine, finding that the father was aware of possible banking law changes. In affirming the trial court, this court included some perhaps insightful language about unforeseen circumstances:
Id. at 843 (emphasis added).
Other authorities seem to follow the "truly unforeseen" approach. Indiana Law Encyclopedia states:
Michele Meyer McCarthy, J.D. & Eric C. Surette, J.D., Deviation from, or Modification of Terms of Trust, 28 Indiana Law Encyclopedia Trusts § 120 (updated Apr. 2011) (emphasis added). Eric A. Manterfield, in his article "The Revocable Irrevocable Trust: Part II," cites to Sections 24.4 and 26 and asks, "What are the `circumstances' which might lend a court to utilize this statutory power to modify or terminate a trust?" See 30 Res Gestae 498-99 (1986). He opines:
Id.
Here, the trial court interpreted the Trust and found that the dissolution filed by Carrie was a per se unforeseen circumstance that impaired the intent and purposes of the Trust and warranted modification by the trial court to delay distribution of assets to Stephen until the dissolution and any appeal of it is final. We find this is not in line with the Trust's own terms, Sections 24.4 and 26 of the Indiana Trust Code, and the history behind those provisions. We therefore hold that the trial court erred when it concluded that Trustees were not required to establish that the dissolution was an "unforeseeable" event.
Carrie asserts that the evidence does not support a finding that unforeseeable events occurred here, because, in this day and age when "divorce is a well-known fact of daily life," it is foreseeable that any marriage might end in dissolution. Appellant's Br. at 16. Carrie further asserts that the Trust itself establishes that it was foreseeable that a dissolution could occur because Article II, Clause 5 addresses the subject of a possible dissolution. It provides that Carrie would be a contingent beneficiary under certain circumstances. Specifically, if Stephen died prior to distribution at age 55, then upon the death of the last to survive of the Settlors, Stephen, and his issue, the Trustee shall distribute one-third of the then-remaining Trust property to Carrie if she was living and married to Stephen at the time of his death; however, her interest would lapse if "a petition for the dissolution of such marriage... was pending" at the time of his death. Appellant's App. at 16. Carrie argues that, considering this specific term in the Trust, "the Settlors foresaw the possibility that a dissolution of marriage action might be pending if Stephen died prior to his 55th birthday, and [they] chose specific language to deal with that scenario." Appellant's Br. at 17. We agree.
Commentary in the Restatement (Third) of Trusts provides some insight as to the significance of the fact that Clause 5 mentions the possibility of dissolution. It states in relevant part:
Restatement (Third) of Trusts § 66 at 494 cmt. b (2003). The implication, then, is that the converse is true, i.e., where a trust does, in fact, provide for subsequent developments, the circumstances were anticipated by the settlor. We find that such is the case here, where in Clause 5 the Trust mentions the possibility of a pending dissolution and directs that Carrie's contingent interest lapses if she and Stephen are not married or a dissolution is pending at the time of his death. This illustrates that Trustees, as then-Settlors, anticipated the possibility of a pending dissolution at the time of Stephen's death.
In very general terms, irrevocable trusts are most often created for tax savings purposes, for instance to reduce the size of the settlor's estate that would be subject to death taxes. See, Bogert, Trusts and Trustees § 234 Irrevocable Trusts at 56-57 (2d ed.1992). To gain the tax advantages, the settlor must permanently give up control of the gift property. Id. Thus, by their very nature, irrevocable trusts carry risks that relationships and values and circumstances may change after the date the Trust is funded, and those risks must be evaluated against the tax and other benefits received by the settlor(s). To ameliorate those risks, the Indiana legislature created Sections 24.4 and 26 to
Affirmed in part and reversed in part.
NAJAM, J., and MATHIAS, J., concur.
