ATTORNEY FOR APPELLANTS: ATTORNEY FOR APPELLEE:
BRYAN LEE CIYOU JERRY GARAU
Ciyou & Dixon, P.C. Findling Garau Germano &
Indianapolis, Indiana Pennington, P.C.
COURT OF APPEALS OF INDIANA
IN THE MATTER OF THE SUPERVISED )
ADMINISTRATION OF THE ESTATE )
OF MARTHA J. WADE, DECEASED )
STEVEN GRUBB, MICHAEL GRUBB, )
And CHARLES GRUBB, )
vs. ) No. 49A02-0105-CV-276
ESTATE OF MARTHA J. WADE, )
APPEAL FROM THE MARION SUPERIOR COURT
The Honorable Charles J. Deiter, Judge
Cause No. 49D08-9902-ES-234
May 29, 2002
OPINION - FOR PUBLICATION
STATEMENT OF THE CASE
Appellants-Respondents, Charles W. Grubb, Michael J. Grubb, and Steven A. Grubb (Charles, Michael,
Steven, individually, and the Grubbs collectively), appeal from the trial courts Order Determining
Ownership of Assets.
The Grubbs raise two (2) issues for our review, which we restate as
1. Whether a presumption of fraud attaches to transactions that benefit a
2. Whether a fiduciarys family members can retain the benefits of a
FACTS AND PROCEDURAL HISTORY
On February 18, 1999, Jack Eads (Eads), the Special Administrator for the Estate
of Martha J. Wade, filed a Petition to Restore Assets of Estate.
On August 22, 2000, a trial was held and, after hearing the evidence,
the trial court took the matter under advisement. The trial court also
granted the Grubbs request for written findings on this date. We adopt
the facts as set out in the trial courts findings in its Order
Determining Ownership of Assets on March 5, 2001.
1. On January 12, 1983, Martha Juanita Wade (Mrs. Wade) executed her last will
and testament and left her residual estate to her husband, Robert Wade.
The Wades had no children. In the event that Wades husband did
not survive her, Wades residual estate was to be distributed in equal shares
to her nieces and nephews.
2. Robert Wade died in 1990.
3. On December 13, 1994, Mrs. Wade executed a general power of attorney appointing
her nephew, Charles [Grubb], as her attorney in fact.
4. At the time that Charles was appointed as her attorney in fact, Mrs.
Wade was 83 years old and living alone in Mooresville, Indiana.
5. Mrs. Wade was unsophisticated in regards to financial matters. She had depended
upon her husband [who] handled their financial affairs.
6. Following the death of her husband, Mrs. Wade depended on [the Grubbs] for
assistance with household tasks. [The Grubbs] occupied a position of trust and
responsibility with respect to Mrs. Wade. Mrs. Wade told Dorothy Wade that
Charles Grubb helped her with investments. Mrs. Wade also told Dorothy Wade
that everything was to be divided equally among fifteen nieces and nephews.
7. In late December of 1997[,] Mrs. Wade became ill. She remained in
poor health, confined primarily to hospitals and nursing homes, until her death in
November of 1998.
8. Following Charles Grubbs appointment as Mrs. Wades attorney in fact in December of
1994, a series of transactions took place directly benefiting Charles Grubb and his
brothers and reducing the assets of Martha Wades estate.
9. Following Charles Grubbs appointment as Mrs. Wades attorney in fact, Charles Grubb and
his brothers became either the co-owners or co-beneficiaries on every annuity or life
insurance policy owned or purchased by Mrs. Wade.
10. At the time Charles Grubb became Mrs. Wades attorney in fact, Mrs. Wade
owned an annuity[,] which she had purchased from the First Penn Pacific Life
Insurance Company on August 27, 1991 for $63,396.19. The primary beneficiary of
the annuity was Mrs. Wades estate. In September of 1995, after Charles
Grubb had been appointed Mrs. Wades attorney in fact, Mrs. Wades estate was
removed as beneficiary and replaced by the respondents. At the time of
Mrs. Wades death, the First Penn Pacific annuity had a value of $98,106.35.
11. On June 28, 1994, Mrs. Wade purchased an annuity from the United Home
Life Insurance Company for $89,257.96. On July 1, 1994, she added $26,500
to bring the total amount of the annuity to $115,757.96. Mrs. Wade
was listed as the owner of the policy. Charles Grubb was listed
as the insured in order to allow the annuity to pay a higher
interest rate. The beneficiaries of the annuity were Mrs. Wades fifteen nieces
and nephews as follows: Charles W. Grubb 1/6, Steven A. Grubb 1/6,
Michael J. Grubb 1/6, and 1/24 to each of [the] other twelve nieces
and nephews. These transactions on June 28, 1994 and July 7, 1994,
were the free, informed and voluntary act of Mrs. Wade.
12. On January 17, 1995, shortly after his appointment as Mrs. Wades attorney in
fact, Charles Grubb telephoned United Home Life Insurance Company to find out who
the beneficiaries were on Mrs. Wades annuity. This telephone conversation is memorialized
in the United Home Life Insurance Company file. At the time of
this telephone conversation, Charles Grubb had no ownership interest in the annuity and
no power or right to change the beneficiaries. Within ten days after
Charles Grubbs telephone inquiry, the United Home Life policy was changed so that
Charles Grubb and his brothers, Michael and Steven, were made contingent owners of
the policy. As contingent owners of the annuity, ownership of the annuity
would pass to respondents upon the death of Mrs. Wade.
13. At the time of Martha Wades death, the United Home Life annuity had
a value of $96,144.26. (Withdrawals taken by Mrs. Wade during her life
account for the difference between the purchase price of the annuity and the
value of the annuity at the time of Mrs. Wades death).
14. On December 29, 1997, while Charles Grubb was Mrs. Wades attorney in fact
and after she had become ill, Mrs. Wade purchased an annuity from the
Jackson National Life Insurance Company for $59,000. Charles Grubb arranged the meeting
with the salesperson from whom the annuity was purchased. Respondents were made
contingent owners of the annuity. As contingent owners of the annuity, ownership
of the annuity would pass to respondents upon Mrs. Wades death.
15. The $59,000 check for the Jackson National Life Insurance annuity bears Mrs. Wades
signature. However, the remainder of the check, including the entries for the
payee and dollar amount of the check, was completed by someone other than
16. At the time of Mrs. Wades death, the Jackson National Life Insurance annuity
had a value of $61,685.55.
17. On August 19, 1958, Mrs. Wade purchased a life insurance policy from the
United Home Life Insurance Company. Her husband was named the beneficiary of
18. On March 7, 1994, Mrs. Wade changed the beneficiary on the life insurance
policy to her estate.
19. On January 6, 1998, after Mrs. Wade had become ill and after Charles
Grubb had been made Mrs. Wades power of attorney, Mrs. Wades estate was
removed as beneficiary of the policy and replaced by respondents. On March
11, 1998, while Mrs. Wade was ill, Charles, Michael and Steven Grubb were
made owners of the policy. Deborah Bowman, the agent who participated in
these changes, testified at trial but was unable to recall the circumstances surrounding
20. The value of the United Home Life insurance policy at the time of
Mrs. Wades death was $40,076.28.
21. Mrs. Wade died on November 18, 1998. The total value of Mrs.
Wades estate at the time of her death was $48,955.58.
DISCUSSION AND DECISION
(Appellants App. pp. 9-13) (internal references to transcript and exhibits omitted).
On March 5, the trial court entered its Order Determining Ownership of Assets,
finding that Mrs. Wades beneficiary changes were presumptively fraudulent because of Charles fiduciary
relationship with Mrs. Wade due to his attorney in fact status, shifting the
burden to the Grubbs. The trial court found that the Grubbs failed
to meet this shifted burden, and ordered that all of the proceeds from
the annuities and the life insurance policy were property of the estate and
must be paid over by the Grubbs.
The Grubbs now appeal. Additional facts will be supplied as necessary.
I. Presumption of Fraud
We address first whether the trial court erred by requiring the Grubbs to
rebut, by clear and unequivocal evidence, the presumption that the transactions in question
from Mrs. Wade to Charles were fraudulent due to his status as her
attorney in fact.
Here, the Grubbs are appealing from a negative judgment, because, in the trial
court they were the party bearing the burden of proof and judgment was
entered adverse to their position. Therefore, our review of the trial court's
determination in the present case is one of limited scope. Additionally, we
note that the trial court granted the Grubbs request for written findings on
August 22, 2000. (Appellants App. p. 7). Thus, the trial court
entered requested findings of fact and conclusions of law.
When we review a trial court's judgment based upon findings of fact and
conclusions of law, we will reverse only if the findings and conclusions drawn
therefrom are clearly erroneous.
Crider v. Crider, 635 N.E.2d 204, 210 (Ind.
Ct. App. 1994); Ind. Trial Rule 52(A)(3). A judgment is clearly erroneous
when it is unsupported by the findings and conclusions. Id. Findings
of fact are clearly erroneous if the record fails to disclose any facts
in evidence, or any reasonable inferences from the evidence, in support of the
findings. Donovan v. Ivy Knoll Apts. Partnership, 537 N.E.2d 47, 50 (Ind.
Ct. App. 1989). We will not reweigh the evidence nor assess
the credibility of witnesses, and we will affirm the trial court unless the
evidence, when viewed in a light most favorable to the judgment, points uncontrovertibly
to an opposite conclusion. Id. at 50-51.
The Grubbs argue that the trial court improperly held that a presumption of
fraud attached to four (4) transactions that took place after Charles was appointed
as Mrs. Wades attorney in fact. Specifically, the Grubbs maintain that Mrs.
Wade executed these transactions by herself and on her own accord.
In Indiana, various legal and domestic relationships raise a presumption of confidence and
trust as to the subordinate party on the one hand and a corresponding
influence as to the dominant party on the other. Lucas v. Frazee,
471 N.E.2d 1163, 1166 (Ind. Ct. App. 1984). These relationships include, among
others, principal and agent. Id. at 1166-1167. Where the relationship is
one of principal and agent, if the plaintiffs evidence establishes (a) the existence
of a fiduciary relationship, and (b) the questioned transaction between the two (2)
parties resulted in an advantage to the dominant party in whom the subordinate
party had reposed both their trust and confidence, the law imposes a presumption
that the transaction was the result of undue influence exerted by the dominant
party, constructively dominant, and thus void. Id. at 1167. Once these
facts are established, the burden shifts to the dominant party in the relationship
to rebut the presumption by clear and unequivocal proof. Id. Undue
influence is defined as the exercise of sufficient control over the person, the
validity of whose act is brought into question, to destroy his free agency
and constrain him to do what he would not have done if such
control had not been exercised. Crider v. Crider, 635 N.E.2d 204, 210
(Ind. Ct. App. 1994).
In Villanella v. Godbey, 632 N.E.2d 786 (Ind. Ct. App. 1994), we recognized
that a presumption of fraud attaches to transactions entered into during the existence
of a fiduciary relationship regardless of whether the fiduciary actually used his fiduciary
powers to complete the transactions. In Villanella, Boucher executed a power of
attorney naming Godbey as her attorney in fact. Id. at 788.
After executing the power of attorney, Boucher signed two checks totaling more than
$48,000.00 payable to Godbey. Id. at 788-789. Boucher also executed a
handwritten note stating that she gave Godbey the check with full consent as
gifts. Id. Later, she changed her will to leave the family
farm to Godbey. Id. Boucher also signed a bank withdrawal slip
closing an account containing approximately $30,000.00 in order to transfer it to Godbeys
account. Id. In this case, the power of attorney in Godbey
created a fiduciary relationship between Godbey and Boucher. The fiduciary duty, coupled
with the transfer of thousands of dollars in cash and thirty-seven (37) acres
of real property for nominal or no consideration, gave rise to a presumption
of undue influence and fraudulent transfers. Id. at 790.
As in Villanella, the fiduciary relationship between Charles and Mrs. Wade, coupled with
the transfer of thousands of dollars from annuities, gave rise to a presumption
of undue influence and fraudulent transfers. Having determined that a presumption of
undue influence arose, we must determine whether the trial courts judgment against the
Grubbs was contrary to law and whether the evidence sufficiently sustained the judgment
under the clear and unequivocal proof standard. See Lucas, 471 N.E.2d at
In the present case, there are four (4) significant transactions triggering the presumption
of undue influence and fraudulent transfers. In each of these transactions, Mrs.
Wade changed the beneficiary from her estate to the Grubbs. The record
reflects that Mrs. Wade changed the beneficiary under her First Penn Pacific annuity
from her estate to the Grubbs on September 7, 1995. This was
(9) months after Charles was appointed attorney in fact. Charles did not
execute the beneficiary change form as her power of attorney. Mrs. Wade
executed the change form herself. However, the record also indicates that Mrs.
Wade trusted and depended on the Grubbs and, as a result, she was
the subordinate in their relationship.
Additionally, the record shows that on June 28, 1994, Mrs. Wade purchased an
annuity from the United Home Life Insurance Company. Mrs. Wade was listed as
the owner of this annuity and Charles was listed as the insured on
the annuity in order to allow the annuity to pay a higher interest
rate. The beneficiaries of the annuity were Mrs. Wades fifteen (15) nieces
and nephews. However, Charles called United Home Life Insurance Company on January
17, 1995, shortly after his appointment as Mrs. Wades attorney in fact, to
find out who the beneficiaries were on the annuity. Within ten (10)
days of his phone call, the United Home Life Insurance Company policy was
changed so that Charles and his brothers, Steven and Michael, were made contingent
owners of the policy.
The evidence presented at trial also indicates that Charles arranged a meeting at
Mrs. Wades request in order to purchase an annuity from Jackson National Life
Insurance Company for $59,000.00. The Grubbs were made the contingent owners of
this annuity with ownership of the annuity passing to them upon Mrs. Wades
death. Mrs. Wade signed the $59,000.00 check used to purchase the annuity
from Jackson National Life Insurance Company. Dorothy Wade testified that the signature
looked like Mrs. Wades signature when she was writing good (sic). (Transcript
p. 175). However, Dorothy Wade also testified that the other portions of
the check were not Mrs. Wades handwriting. Someone other than Mrs. Wade
completed the remaining portions of the check, including the entries for the payee
and the dollar amount of the check.
The evidence also confirms that on January 6, 1998, Mrs. Wades estate was
removed as the beneficiary of a United Home Life Insurance Company policy and
replaced by the Grubbs. Eventually, on March 11, 1998, the Grubbs were
named the owners of this policy.
With the above in mind, it is beyond dispute that the evidence in
this case sufficiently establishes (a) the existence of a fiduciary relationship between Charles
and Mrs. Wade, and (b) the questioned transactions between Charles and Mrs. Wade
resulted in an advantage to Charles, the dominant party in the relationship.
Lucas, 471 N.E.2d at 1167. The law presumes fraud when a person
with a fiduciary duty benefits from a questioned transaction. Clarkson v. Whitaker,
657 N.E.2d 139, 144 (Ind. Ct. App. 1995). Therefore, the burden of
proof fell upon the Grubbs to prove the validity of the transactions by
clear and unequivocal proof. The Grubbs, however, failed to present evidence from
which the trial court could reasonably conclude that Charles rebutted, by clear and
convincing evidence, the presumption of undue influence, and failed to disprove the allegations
of fraud raised by Eads. See Lucas, 471 N.E.2d at 1167.
Accordingly, the undisputed evidence creates the presumption that the transactions were the result
of undue influence, constructively fraudulent, and, therefore, void. Id.
II. Effects of Fraudulent Transactions on a Fiduciarys Family Members
Next, we address whether the trial court erred by determining that a fiduciarys
family member may not retain the benefits of fraudulent transactions. Specifically, Steven
and Michael argue that even if the trial court was correct in finding
that the transactions benefiting Charles were presumptively fraudulent, they should be allowed to
benefit from the transactions because, unlike Charles, they were not in a fiduciary
relationship with Mrs. Wade.
The rule is that transactions entered into during the existence of a fiduciary
relationship are presumptively invalid as the product of undue influence. Matter of
Good, 632 N.E.2d at 721. Here, the Grubbs contend that only a
portion of the transactions are presumptively invalid, that being Charles portion, due to
his status as Mrs. Wades attorney in fact. The evidence, however, is
insufficient to rebut the presumption of undue influence. See Lucas, 471 N.E.2d
at 1167. Because the Grubbs have failed to rebut by clear and
unequivocal evidence the presumption that the transactions that occurred while Charles was in
a fiduciary relationship with Mrs. Wade were constructively fraudulent, it is our determination
that the transactions are void in their entirety.
To adopt the Grubbs reasoning here would allow a fiduciary to escape the
presumption of fraud by funneling the benefits of such transactions to his family
members. Indiana courts have recognized this danger over the years. In
fact, we have held that a will is presumed to be void because
of fraud or undue influence if it provides a bequest to the attorney
who drafted it or one of his family members. Clarkson, 657 N.E.2d
Based on the foregoing, we conclude that a presumption of fraud attaches to
transactions that benefit a fiduciary. We also conclude that the family members
of a fiduciary cannot retain the benefits of fraudulent transactions. Therefore, we
conclude that the trial courts Order Determining Ownership of Assets was proper.
MATTINGLY-MAY, J., and VAIDIK, J., concur.
The Petitioner/Appellees request for oral argument is hereby denied.
Footnote: The nieces and nephews were identified by name in the will.
They are Mark A. Wade, David E. Wade, John W. Wade, Robert J.
Wade, James P. Wade, Richard R. Wade, Michael R. Wade, Mary M. Youngs,
Charles W. Grubb, Jr., Steven A. Grubb, Michael J. Grubb, Janice A. Nichols,
Jack E. Eads, Norma J. Salmon, and Barbara J. Wright.