RILEY, Judge.
Appellant-Respondent/Cross-Appellee, Linda Goins (Goins) as Trustee of The Testamentary Trust Created Under the Last Will and Testament of William H. Riddle, f/b/o Donna Riddle (the Trust), appeals the trial court's Order on Trustee's Report in favor of Appellant-Plaintiff/Cross-Appellant, Patricia Riddle (Riddle) in her capacity as guardian of Donna Riddle (Donna).
We affirm in part, reverse in part, and remand for further proceedings.
Goins presents five issues on appeal, which we consolidate and restate as the following single issue: Whether the trial court erred when it concluded that Goins
Riddle presents two issues on cross-appeal, which we restate as:
On February 22, 2001, William H. Riddle died testate and the estate was opened shortly thereafter with Goins as the executrix of the estate. Under the provisions of the will, the testamentary Trust was established for his incapacitated daughter, Donna. Riddle was appointed Donna's guardian and Goins became the trustee of the Trust. The specific provisions establishing the Trust provide, in pertinent part
(Appellant's App. Exh. 2, pp. 2-3).
On March 18, 2001, Goins, as executrix, filed a petition with the trial court to pay the specific bequest provided for in the will and for partial distribution of the Trust. The trial court granted the petition on June 15, 2001. On April 1, 2003, Goins filed a supplemental report of distribution of the estate. The estate was closed on May 5, 2003.
On August 5, 2009, Riddle, as guardian for Donna, filed a verified petition to docket testamentary trust, requesting the trial court to docket the Trust and to order an inventory and accounting of the Trust assets from Goins, in her capacity as trustee. On August 6, 2009, the trial court docketed the Trust. Following the docketing, Goins filed two accountings on August 13, 2009 and February 23, 2010 respectively.
On May 20, 2010, the trial court conducted a hearing on Riddle's allegations that Goins had breached her fiduciary duties as trustee. On May 28, 2010, the trial court issued its Order on Trustee's Report finding that Goins had breached her fiduciary duties, and observing, in pertinent part:
(Appellant's Exh. 1, pp. 3-4). The trial court reduced the trustee's fees to $500 per calendar year for services rendered and ordered the trustee to reimburse the difference between the fees now allowed and the fees previously paid. Additionally, the trial court scheduled new hearings to receive evidence regarding the financial needs of Donna and to examine the discrepancy existing between the estate's final account and the initial funding of the Trust. With respect to attorney fees, the trial court permitted an award in the amount of $4,625 to Riddle, and determined these fees to be the personal responsibility of Goins.
Goins now appeals. Additional facts will be provided as necessary.
On appeal, Goins disputes the trial court's conclusion that she breached her fiduciary duties as trustee of the Trust.
When, as here, the trial court has entered an order containing findings of fact and conclusions of law, we apply a two-step review. In re Wilson, 930 N.E.2d 646, 650 (Ind.Ct.App.2010), reh'g denied, trans. denied. First, we consider whether the evidence supports the findings, and second, whether the findings support the judgment. Id. We will neither reweigh the evidence nor assess witness credibility, considering only the evidence most favorable to the judgment. Id. We will set aside the trial court's findings and conclusions only if they are clearly erroneous, that is, if the record contains no facts or inferences supporting them. Id. We apply a de novo standard of review to conclusions of law. Id.
Prior to commencing our analysis of Goins' claims, we note that Goins' appellate
In its Order on Trustee's Report, the trial court concluded that the trustee breached her fiduciary duty to Donna when she failed to render a proper accounting of trust assets, in violation of I.C. § 30-4-5-12 and when she failed to maintain clear and accurate records of accounts, in violation of I.C. § 30-4-3-6. Goins now contends that the trial court made "five assignments of error as to fact or law." (Appellant's Br. p. 4). We will attempt to address each contention.
In support of her respective arguments, Goins repeatedly relies on the trial court's orders issued in the estate case. Goins' main argument focuses on the order in the estate case that permitted Goins, as executrix of the estate, to fund the Trust and additionally required Riddle to file annual guardianship reports. She maintains that because this order in the estate is "binding" on the trial court in the Trust case, the trial court in the Trust case impermissibly shifted the responsibility of filing reports and determining Donna's needs from Riddle to Goins. (Appellant's Br. p. 4).
The orders in the estate case no longer have any bearing on the Trust case. The estate case was opened shortly after William H. Riddle's death on February 22, 2001. After the Trust was funded with the proceeds of the estate on June 15, 2001 and April 1, 2003 respectively, the trial court closed the estate case on May 5, 2003. With respect to the interaction between an estate case and a trust resulting from the estate, Indiana Code section 30-4-6-4(2) provides in pertinent part that "with respect to a decedent's estate docketed for the purpose of probate or administration, which either establishes a trust or makes a devise to another trust, the court shall have no continuing jurisdiction over the administration of the trust after any distribution from the estate is paid or delivered to the trustee." In other words, as soon as the Trust was created and then fully funded on April 1, 2003, the trial court handling the estate case ceased to have continuing jurisdiction over the administration of the Trust. By docketing the Trust on August 6, 2009, the trial court accepted jurisdiction over the Trust, albeit in a jurisdictional proceeding separate and independent from the estate case establishing the Trust. As such, the order issued in the estate case is of no consequence
Turning to the issues at hand, a trust is typically characterized as "a fiduciary relationship between a person who, as trustee, holds title to property and another person for whom, as beneficiary, the title is held." Ind.Code § 30-4-1-1(a). In this light, a breach of trust is "a violation by the trustee of any duty that is owed to the settler or the beneficiary." I.C. § 30-4-1-2(4). Generally, a trustee bears the burden of justifying the propriety of items in a trust account. Matter of Willey's Trust, 433 N.E.2d 1191, 1193 (Ind.Ct.App. 1982). But when a trustee files specific accounts and makes a prima facie showing that the accounts are proper, the burden of persuasion shifts to the beneficiaries to show specific instances of impropriety. Id. at 1193-94.
We have previously stated
Davis v. Davis, 889 N.E.2d 374, 385 (Ind. Ct.App.2008) (quoting Marshall & Ilsley Trust Co., N.A. v. Woodward, 848 N.E.2d 1175, 1182 (Ind.Ct.App.2006)). "Many forms of conduct permissible in a workaday world for those acting at arm's length, are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the marketplace." Davis, 889 N.E.2d at 385.
With respect to a trustee's obligation to render an accounting, I.C. § 30-4-5-12 states, in pertinent part:
Our review of the terms of the Trust instrument reveals that neither Riddle nor Donna waived Goins' responsibility to compile an annual statement of the Trust. Although Article VII of William H. Riddle's testament relieves the trustee "from any requirement as to routine Court accounting," this only pertains to an accounting submitted to the trial court, not to the annual accounting delivered to Riddle, as Donna's guardian. (Appellant's App. Exh. 2, p. 8). There is no evidence that Goins ever prepared or sent an annual accounting of the Trust's assets to Riddle or Donna.
The requirement to maintain clear and adequate records is included in I.C. § 30-4-3-6, which provides, in pertinent part:
In its findings, the trial court concluded that even though the trustee kept some records, these records were far from complete or accurate. Reviewing the evidence before us, we agree.
Goins' testimony during the hearing clearly reveals that she lacks a fundamental understanding about the distinction between an estate and a trust, and the corresponding different obligations as executrix of the estate versus as trustee of the Trust; rather, she "looked at it as all being the same amount of money." (Transcript p. 6). Specifically, at the inception of the Trust, Goins appeared to have used Trust assets to pay for expenses emanating from the estate even though the Trust instrument does not grant that authority. Furthermore, the estate account reflects that the Trust was unofficially opened on March 15, 2001 with an initial deposit of $325,220.31. However, according to the inadequate trustee's report submitted by Goins to the trial court, the beginning Trust deposit was $313,700.31, which amounts to a discrepancy of $11,520.09 between what the estate account purports to have been the initial transfer into the Trust and what the Trust account reflects. Goins could not explain this shortfall.
Within the current limited lifetime of the Trust, significant fluctuations in capital occurred. Upon being questioned about these fluctuations, Goins was unable to explain why the Trust liquidated several assets in February of 2009 and incurred capital losses in the amount of $85,514.78. Her accounting fails to include the expenditures, gains, or losses of the Trust since its inception. Goins' sole explanation consisted of asserting that she was "not the investment person." (Tr. p. 26). She even admitted that the trial court's order to submit an accounting resulted in having to "come [up] with a lot of record keeping previously I had not done[.]" (Tr. p. 83).
Although Goins submitted a very limited trustee report when required by the trial court, her testimony makes it abundantly clear that she did not know where the information contained in her accounting originated from, nor did she provide the trial court with the documents supporting the numbers in her trustee report. Likewise, transfer of assets cannot be traced and no effort has been made to allocate expenses between income and principal. Instead of accepting responsibility for her inadequate accounting, Goins attempted to shift blame to Riddle and the bank.
Additionally, the Trust provisions require Goins to "periodically contact [Donna] and other relatives" to determine Donna's needs. (Appellant's App. Exh. 2, p. 3). Goins admitted that she has made no effort to comply with this express obligation. It is troubling to note that prior to the trial court's reduction of trustee fees, Goins had paid herself more out of the Trust for her services as trustee than she ever gave to Donna, the beneficiary of the Trust.
Even though we have only highlighted some of the inconsistencies found in the trustee report, these deficiencies are important enough to support our conclusion that Goins breached her fiduciary duty as trustee to Donna and her guardian by failing to deliver a written accounting statement and to keep complete and accurate records. As such, we affirm the trial court and remand to the trial court to conduct further hearings as detailed in its Order on Trustee's Report.
On cross-appeal, Riddle, as Donna's guardian, first contends that the trial court erred in reducing her counsel's requested attorney fees and now additionally
A beneficiary of a trust may maintain an action to compel the trustee to redress a breach of trust or to remove a trustee for cause. I.C. § 30-4-3-21(a). A trustee who commits a breach of trust is liable to the beneficiary for reasonable attorney fees incurred by the beneficiary in bringing an action on the breach. I.C. § 30-4-3-11(b)(4). Here, while finding a breach of trust and finding that an award of attorney fees was warranted, the trial court nevertheless reduced Riddle's counsel's award from his request of $14,714.38 to $4,625.00.
The award or denial of attorney fees is within the sound discretion of the trial court and in the absence of error or abuse of that discretion, we must affirm the trial court's decision. Davis, 889 N.E.2d at 386. While the amount of an attorney fee award is likewise within the sound discretion of the trial court, that amount must nonetheless be reasonable and supported by the evidence. Hanson v. Valma M. Hanson Revocable Trust, 855 N.E.2d 655, 668 (Ind.Ct.App.2006).
Our court has repeatedly noted that, in determining the reasonableness of an attorney fee award, the trial court should consider:
Id. at 667.
In Hanson, beneficiaries of a trust sued the trustee for breach of duty. On remand from its original appeal, the trial court granted the trustee partial summary judgment but ordered the trustee to pay the beneficiaries $25,000.00 of their requested $55,368.00 in attorney fees. Id. The beneficiaries again appealed and argued that the trial court erred in reducing the amount of attorney fees to which they were entitled. Id. We agreed and remanded the case with orders for the trial court
Here, Riddle's counsel submitted a twelve-page, itemized accounting regarding the time spent on the case. Each entry of accounting sets forth the specific action taken, the date it was performed, by whom, the amount of time spent, the hourly rate charged, and the total charge billed. After applying a discount, Riddle's counsel requested to be paid $14,714.38.
The trial court's complete rationale for its reduction of the award was as follows:
(Appellant's App. Exh. 1, p. 8).
We find this explanation insufficient to justify the trial court's significant reduction of the attorney fee request. The trial court's overriding concern—the discrepancy in amount of time spent by Riddle's counsel versus Goins' counsel—is not one of the identified bases to determine an award of attorney fees. See Hanson, 855 N.E.2d at 667. During the hearing, Riddle's counsel clarified that he had to forensically recreate approximately nine years of Trust activity with little to no useful information provided by Goins. Although Riddle's counsel concedes that, at first glance, the issues at hand were not overly complex, the trustee's breaches and the deficient accounting transformed a simple matter into a complex, time consuming legal proceeding. In light of our court's reasoning in Hanson and the facts presented to us, we reverse the trial court's attorney fee award in the amount of $4,625.00 and remand this issue to the trial court to determine what attorney fees were reasonably incurred by Riddle's counsel in this cause.
After the trial court returned a verdict in favor of Riddle, Goins filed an appeal. On appeal, we now affirm the trial court's conclusion that Goins breached her fiduciary duties as trustee. Indiana Code section 30-4-3-11(b)(4) provides that if the trustee commits a breach of trust, he is liable to the beneficiary for reasonable attorney's fees incurred by the beneficiary in bringing an action on the breach. Also, Indiana Code section 30-4-3-22(e) stipulates that if a beneficiary successfully maintains an action to compel a trustee to perform his duties, the beneficiary is entitled to a judgment for reasonable attorney fees. Although not expressly stated, we find the language of the statute broad enough to encompass reasonable appellate attorney fees. As a result, we remand to the trial court for the determination of a reasonable award of appellate attorney fees.
Based on the foregoing, we conclude that the trial court properly concluded that Goins had breached her duties as trustee of the Trust. With respect to the cross-appeal, we remand to the trial court for
Affirmed in part, reversed in part, and remanded for further proceedings as stated in our opinion and the remaining proceedings contemplated in the trial court's Order on Trustee's Report.
ROBB, C.J., and BROWN, J., concur.
