RILEY, Judge.
Appellant-Plaintiff, Harold O. Fulp, Jr. (Harold), appeals the trial court's denial of his request for specific performance of a purchase agreement which he entered into with Ruth E. Fulp (Ruth) and which was rescinded by Appellee-Defendant, Nancy A. Gilliland (Gilliland), Individually and as Successor Trustee of the Ruth E. Fulp Revocable Trust.
We affirm in part and reverse in part.
Harold raises five issues on appeal, which we consolidate and restate as the following two issues:
(1) Whether Ruth, as the settlor, trustee, and sole lifetime beneficiary of the Ruth E. Fulp Revocable Trust, could properly execute a purchase agreement for the sale of the Trust property, thereby divesting the Trust; and
(2) Whether the trial court erred by determining that Gilliland did not tortiously interfere with the purchase agreement when she rescinded the agreement upon becoming successor trustee.
Ruth was married to Harold O. Fulp, Sr. (Fulp). During their marriage, three children were born: Harold, Terry Fulp (Terry), and Gilliland. The family resided at the family farm, which consisted of approximately 254.66 acres and was located in Franklin, Indiana. After Fulp's death in 1990, Harold farmed the land on a cash rent basis. On May 19, 2004, Ruth sold fifty acres, consisting mostly of woodland, to Gilliland's daughter for $110,000.
On June 29, 2005, Ruth executed the Ruth E. Fulp Revocable Trust (the Trust), designating herself as the settlor, trustee, and sole lifetime beneficiary and incorporating the family farm as the main Trust corpus by quitclaim deed. Ruth's three children were named as remainder beneficiaries. Article I of the Trust provided, in pertinent part, that "the settlor shall have the right to alter, amend or revoke this agreement in any respect or particular." (Appellant's App. p. 40).
Following the execution of the Trust and due to her advancing age and infirmity, Ruth moved to the Indiana Masonic Home in Franklin, Indiana, where she resides to this day. Of Ruth's three children, Harold was the only child interested in farming the family farm. Because Ruth wanted the farm to remain in the family, Gilliland encouraged Ruth to ask Harold about his interest in purchasing the real estate. In August 2010, while Harold visited Ruth in the nursing home, Ruth approached Harold about buying the farm. Harold indicated that he was interested if he could obtain a loan to do so. On a next visit, Harold presented his mother with a piece of paper showing a scenario of sale price options, reflecting a total sale price from four thousand dollars per acre down in one hundred dollar increments to one thousand five hundred dollars per acre. Arriving at a price of two thousand two hundred dollars per acre, Harold mentioned to Ruth that this was the sale price she had given to her granddaughter in 2004. Harold suggested that the same price per acre be used for his transaction. Ruth responded, "I guess I could" sell the farm for that price. (Transcript p. 21). Harold told his mother, "well, mom, I know the ground's worth more than that, but, [], it's up to you." (Tr. p. 70). Harold testified that his mother stated "What I done for one, I can do for another." (Tr. p. 70).
On September 7, 2010, Harold again visited his mother presenting her with a Purchase Offer Agreement to sell the farm for a total purchase price of $450,252. Even though Ruth could not read the form without her glasses, she signed the sales agreement in front of two witnesses. After signing the agreement, Ruth contacted Gilliland and advised her of the transaction. Approximately two weeks later, on September 21, 2010, Ruth resigned as trustee and Gilliland assumed the role of successor trustee of the Trust. The following day, September 22, 2010, Jack Rogers (attorney Rogers), Ruth's attorney, advised Ruth's three children that
(Appellant's App. p. 320).
On October 8, 2010, Harold's attorney wrote to Ruth, informing her that Harold had arranged financing to buy the family farm in accordance with the Purchase Offer Agreement and requesting permission to set a closing date. Four days later, on October 12, 2010, attorney Rogers responded
(Appellant's App. p. 57). Thereafter, Gilliland repudiated the Purchase Offer Agreement.
On November 22, 2010, Harold filed his Complaint seeking the docketing of the Trust, the removal of Gilliland as trustee, specific performance of the Purchase Offer Agreement, and bringing a claim for tortious interference with a contract. On April 12, 2011, Gilliland filed a counterclaim against Harold, alleging tortious interference with an inheritance. On April 30, 2011, the trial court granted Harold's motion to dismiss Gilliland's counterclaim. On July 27, 2011, the trial court conducted a bench trial. Thereafter, on October 27, 2011, the trial court entered a detailed Order and Judgment, comprised of twenty pages and one hundred and nine findings, concluding, in pertinent part, that
(Appellant's App. pp. 17-18, 19-20, 27-28).
Harold now appeals. Additional facts will be provided as necessary.
Where, as here, the trial court enters findings and conclusions sua sponte, we apply the standard of review set out in Indiana Trial Rule 52. Chidester v. City of Hobart, 631 N.E.2d 908, 909 (Ind.1994). We determine whether the evidence supports the findings and the findings support the judgment. Bowyer v. Ind. Dep't of Natural Res., 944 N.E.2d 972, 983 (Ind.Ct. App.2011). In deference to the trial court's proximity to the issues, we disturb the judgment only where there is no evidence supporting the findings or the findings fail to support the judgment. Id. We do not reweigh the evidence, but only consider the evidence favorable to the trial court's judgment. Id.
While we review findings of fact under the clearly erroneous standard, we review de novo a trial court's conclusions of law. Id. Where cases present mixed issues of fact and law, we have described the review as applying an abuse of discretion standard. Id. We will conclude a judgment is clearly erroneous if no evidence supports the findings, the findings fail to support the judgment, or if the trial court applies the incorrect legal standard. Id. at 983-84. In order to determine that a finding or conclusion is clearly erroneous, an appellate court's review of the evidence must leave it with the firm conviction that a mistake has been made. Id. However, sua sponte findings control only as to the issues they cover and a general judgment will control as to the issues upon which there are no findings. Tracy v. Morell, 948 N.E.2d 855, 862 (Ind.Ct.App. 2011). A general judgment entered with findings will be affirmed if it can be sustained on any legal theory supported by the evidence. Id.
In framing his argument that the trial court erred when it concluded that he is not entitled to the equitable remedy of specific performance of the Purchase Offer Agreement, Harold focuses on Ruth's status as settlor of the Trust. He contends that based on the provisions of the Trust, Ruth, as settlor, reserved a right to revoke and amend the Trust as she saw fit. This reserved right necessarily included a right to sell part of the Trust corpus, which was properly exercised by Ruth when she entered into the Purchase Offer Agreement. In response, Gilliland, like the trial court, concentrates her argument on Ruth's capacity as trustee, maintaining that as trustee, Ruth was required to administer the Trust solely in the interest of the beneficiaries and preserve the Trust's property. Having failed to do that, Ruth breached her fiduciary duties with Harold's aid by selling the farm significantly below fair market value. As such, Gilliland — and the trial court — conclude that Harold, having unclean hands by encouraging Ruth to breach her fiduciary duty, is not entitled to specific performance.
Evaluating the parties' respective arguments requires us to interpret and construct the Trust instrument. The interpretation of a trust is a question of law for the court. Paloutzian v. Taggart,
A trust is "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). The trust is a peculiar product of the Anglo-American system. The principles, rules and standards of the law of Trusts owe their origin and development in large part to the circumstance that England had for centuries separate courts of common law and chancery, to which is due the distinction between legal interests and equitable interests which is the basis for the law of Trusts. RESTATEMENT (SECOND) OF TRUSTS, intro. note (1959).
Within the area of trusts, the inter vivos or revocable trust is a unique legal entity. Through its use, the settlor may transfer property to a trustee, reserving the beneficial use of the property for the life of the settlor with the remainder to designated beneficiaries. In the Matter of Walz, 423 N.E.2d 729, 732 (Ind.Ct.App. 1981). Although the settlor enjoys the beneficial use of the trust property until his death, trust property is not subject to the administration of his estate. Id. Where, as here, a settlor transfers, assigns and sets over to a trustee title to property owned by him in a proceeding to create a trust inter vivos, the interest therein passes immediately to the trustee, and the trust is consummated even though the trust instrument reserves to the settlor the income for life, an absolute power to revoke the trust in whole or in part and the right to control investments and further to modify the trust in any respect. Id. (quoting Smyth v. Cleveland Trust Co., 172 Ohio St. 489, 179 N.E.2d 60 (1961)). With respect to the settlor's power to revoke, Indiana's Trust Code reads, in pertinent part, as follows:
I.C. § 30-4-3-1.5(c).
Once the settlor delivers property to a trustee by virtue of a trust agreement, the trustee takes the legal title to the property and the cestui trust or beneficiary takes the equitable title. Breeze v. Breeze, 428 N.E.2d 286, 287 (Ind. Ct.App.1981). Both have a property interest recognized by law. Id. Where the trust provides that the trustee shall hold and manage the property and pay the
Here, Ruth settled the revocable trust, transferred property into the Trust, designated herself as trustee, and became the beneficiary for life of the Trust corpus. The Trust instrument specified that upon Ruth's death, the Trust shall become irrevocable with the remainder of the corpus to be dispensed between the remainder beneficiaries, i.e., her three children. In its Order, the trial court focused on Ruth's capacity as trustee, as well as her corresponding fiduciary duty to manage the Trust and safeguard its trust corpus. However, first and foremost, Ruth is the settlor of the trust — without her transfer of property, the Trust could not be settled.
Although the question of whether an individual who combines the positions of settlor of a revocable trust, trustee, and beneficiary for life should be considered the settlor or trustee for purposes of a property transfer out of the Trust has not been examined in Indiana, the trial court in its Order relied on Marshall & Ilsley Trust Co. v. Woodward, 848 N.E.2d 1175 (Ind.Ct.App.2006). However, we find Marshall to be inapposite as it analyzes whether a named remote contingent beneficiary of an irrevocable trust is entitled to an accounting. See id. at 1178.
Closer related to the current circumstances than the Marshall case, is our recent opinion of Kesling v. Kesling, 967 N.E.2d 66, 79 (Ind.Ct.App.2012), in which we examined if a settlor, who placed shares of stock into a revocable inter vivos trust and named himself as trustee and beneficiary retained his shareholder status. Analyzing the legal status of a revocable trust in Indiana, we noted the Internal Revenue Code's treatment of a revocable trust whereby settlors with the ability to control the assets of their revocable trust possess an ownership interest and bear the tax consequences. See id. at 85. Combining the IRS view with the trust declaration's provision that the settlor could revoke the trust at any time, we concluded in Kesling that the placement of the shares in a trust did not eliminate the settlor's shareholder's status. Id. at 86.
In Moon v. Lesikar, 230 S.W.3d 800 (Tex.Ct.App.2007), the Texas appellate court was faced with a beneficiary of a revocable trust bringing an action against the trustee for breach of fiduciary duty in order to challenge the sale of stock by the settlor to the trustee prior to the settlor's death. In her concurring opinion, Justice Guzman analyzed the respective rights and duties of a settlor and trustee. She persuasively noted as follows:
Id. at 809 (internal references omitted).
In the case before us, Ruth, as settlor, retained the right to alter, amend or revoke the Trust in any respect. At the time of its creation, Ruth intended the Trust to provide her with a lifelong beneficiary income. To that end, she transferred, among others, the family farm into the Trust corpus. Following the execution of the Trust and facing advanced age, Ruth expressed a desire to keep the farm in the family. After talking with Harold, she entered into a Purchase Offer Agreement with him and sold him the family farm. Thereafter, Ruth resigned as trustee; Gilliland became the successor-trustee and rescinded the Purchase Offer Agreement.
Pursuant to the terms of the Trust, Ruth, as settlor, entered into a valid agreement with Harold, selling part of the Trust's corpus and thus, in effect partially amending the Trust. Holding otherwise and viewing Ruth as trustee would make the Trust in effect irrevocable as she would no longer be free to control her assets but instead would owe a duty to the beneficiaries which would trump her own interest as settlor and owner of the Trust corpus. Absent a finding of undue influence or mental incapacity — which Gilliland does not allege, nor did the trial court find any — Ruth entered into a valid agreement and Harold is entitled to specific performance of the Purchase Offer Agreement.
Next, Harold contends that the trial court erred when it concluded that Gilliland had not tortiously interfered with the Purchase Offer Agreement when she repudiated the agreement upon becoming the successor-trustee of the Trust.
The elements constituting an action for tortious interference with a contract are well-established: (1) the existence of a valid and enforceable contract; (2) defendant's knowledge of the existence of the contract; (3) defendant's intentional inducements of breach of the contract; (4) the absence of justification; and (5) damages resulting from defendant's wrongful inducement of the breach. Melton v. Ousley, 925 N.E.2d 430 (Ind.Ct.App.2010). All of these elements must be shown to establish this tort. Id.
On September 7, 2010, Ruth, as settlor of the Trust, and Harold entered into the valid Purchase Offer Agreement to sell the farm. On September 22, 2010, attorney Rogers notified Ruth's children that Ruth had voluntarily resigned as trustee and Gilliland had been appointed successor-trustee. Thereafter, on October 12, 2010, Rogers informed Harold's counsel that "there will be no real estate closing" and Gilliland repudiated the Purchase Offer Agreement. (Appellant's App. p. 57).
The main contention of the parties turns on the absence of justification. Harold claims that "[t]here was never any question, or reason to dispute, that [Gilliland's] repudiation of the Agreement after she became [s]uccessor [t]rustee was motivated by her intention to maximize her potential inheritance under the Trust, and for no other reason." (Appellant's Br. p. 17). Gilliland, on the other hand, contends that she was concerned about the legality of the transaction, as it depleted the Trust corpus.
In determining whether an intentional interference is justified, the following factors may be considered: (a) the nature of the defendant's conduct; (b) the defendant's motive; (c) the interests of the plaintiff with which the defendant's conduct interferes; (d) the interests sought to be advanced by the defendant; (e) the social interests in protecting the freedom of action of the defendant and the contractual interests of the plaintiff; (f) the proximity or remoteness of the defendant's conduct to the interference; and (g) the relations between the parties. Dietz v. Finlay Jewelry Corp., 754 N.E.2d 958, 970 (Ind.Ct.App.2001). The weight to be given each consideration may differ from case to case, but the overriding question is whether the defendant's conduct has been fair and reasonable under the circumstances. Bilimoria Computer Sys., LLC v. Am. Online, Inc., 829 N.E.2d 150, 156 (Ind.Ct. App.2005). This element of absence of justification is established only if the interferer acted intentionally, without legitimate business purpose and the breach is malicious and exclusively directed to the injury and damage of another. See id. The existence of a legitimate reason for the defendant's actions provides the necessary justification to avoid liability. Id.
Pursuant to the Trust instrument, the trustee has the duty to administer the Trust solely in the interest of the beneficiaries and to preserve the Trust property. Being confronted with a Purchase Offer Agreement that depleted the Trust corpus and sold the farm below fair market value, Gilliland, as successor trustee, had a legitimate and reasonable reason to repudiate the agreement. Therefore, we conclude that she did not tortiously interfere in the
Based on the foregoing, we conclude that Ruth, as the settlor, of the Trust could properly execute a purchase agreement for the sale of the Trust property and Gilliland did not tortiously interfere with the purchase agreement when she rescinded the purchase agreement upon becoming successor trustee.
Affirmed in part and reversed in part.
BAILEY, J. and CRONE, J. concur.
