Estate Planning Disaster

Several years ago, I became involved as one of the attorneys in an estate case in a nearby county. I was representing a Lake County attorney seeking to collect a rather large sum of money for very valuable work he’d done for the family in getting a huge mortgage lien removed from some farm property that was owned by the decedent.

Eventually, I was able to negotiate with the Estate and my client was paid. However, during the time I was involved in the case, I saw up close and personal the extremes that can occur between families involved in disputes after mom and dad pass on. To say there was “contention” would be putting it mildly. There was definitely some “bad blood” present in this case.

After I left the case, I followed it and saw it go up to the appellate court three times. The three appeals are Kalwitz v. Estates of Kalwitz, 759 N.E.2d 228 (Ind.Ct.App.2001), reh’g denied, trans. denied; Estates of Kalwitz v. Kalwitz, 717 N.E.2d 904 (Ind.Ct.App.1999); and In re Estate of Kalwitz, 923 N.E.2d 982 (Ind.Ct.App.2010), trans. denied.

The case involved two brothers, Obed, Jr. and Eugene, and a sister, Helen. Obed, Jr. and his wife waged war for over a decade. I have no idea what kind of money was spent by them on attorneys, but I know it was significant. On the side of the estate, there was no doubt even more money spent defending against the claims and counterclaims and multiple appeals. This is a case that has a lot of notoriety in the state of Indiana. It is also the perfect example of why one ought to make absolutely sure everything is done right when it comes to planning one’s estate.

The final appeal originated as a Small Claims case filed by Obed, Jr. and his wife, against Obed’s brother Eugene and sister Helen after the Estate had closed. The Court summarized it as follows:

This case is the fifth appeal in this contentious family dispute. Obed A. Kalwitz Sr. and Helen Kalwitz married in 1940 and had four children: Obed Jr., Eugene, Sharon, and Ted. Ted died in 1979. In the early 1980s, Obed Jr. asked his parents and Eugene to co-sign on a loan so that he could purchase his own farmland. When Obed Jr. and his wife Rolene failed to pay the promissory note, the lender filed a mortgage foreclosure action in 1985. While the action was pending, Obed Jr. and Rolene persuaded Obed Sr. and Helen to transfer 331 acres to Obed Jr. and Rolene’s two children for a mere purchase price of forty dollars to protect the property from a possible deficiency judgment in the foreclosure action. The property was to be transferred back to Obed Sr. and Helen at the close of the litigation. Obed Sr. died in 1989 and Helen died in 1995. On the day of Helen’s funeral, Obed Jr. placed a locked gate at the entrance to the 331 acres, barring Eugene from returning to his residence there. Also on that day, Sharon learned that Obed Jr. had no intention of returning title to the 331 acres. The mortgage foreclosure action was resolved later in 1995 by mutual dismissal of all pending claims. The recorded mortgage lien held by the lender on the 331 acres was removed.

My client was the attorney who got the mortgage lien removed from the real estate. We had to go to court and file a claim against the Estate to get paid, but eventually, we were able to settle up with the Estate and get out of the case.

The Court in the Estate case had looked pretty close at the real estate transaction. One appeal, the Appellate Court looked real close at that transaction, too. The Court said:

In the third published appeal to this Court, we determined that (1) Obed Jr. had a confidential or fiduciary relationship with his parents and exercised dominance over them and (2) Obed Jr. and Rolene acted in concert to induce and persuade Obed Sr. and Helen to convey land to their two children. Kalwitz v. Estate of Kalwitz, 822 N.E.2d 274 (Ind.Ct.App.2005), trans. denied. [1] We thus affirmed the trial court’s judgment imposing a constructive trust on the 331 acres in favor of the estates. Id.

Then, a year after the Court closed the Estate and discharged the Personal Representatives, Obed, Jr. and his wife filed a Small Claims action against Obed’s brother Eugene and his sister, Helen. In one of the most unusual opinions you’ll ever read, the Appellate Court said (among other things):

Eugene and Sharon suffered ten years of litigation to impose a constructive trust on 331 acres that Obed Jr. and Rolene received from Obed Sr. and Helen through constructive fraud. The parties then entered into the Mediation Settlement Agreement, which was to be ” a total and complete settlement of all claims of any nature or kind which Obed may have against the Estate, Sharon and Eugene individually and as Personal Representatives.” In that agreement, Obed Jr. and Rolene agreed to remove their personal property from the estates within thirty days after the date of the probate court’s order granting distribution. Eugene testified that the thirty-day period began in January 2007. Not only did Obed Jr. still have personal property on the estates after the thirty-day period, but he had also placed booby-traps, glass, and wire on the property. Obed Jr. did not mention that any of his personal property was stolen in his motion for more time to remove his property, Tr. p. 8-9, and he subsequently filed an affidavit stating that he forfeited the right to remove any remaining items from the estates. It was not until more than a year after the estates closed that Obed Jr. and Rolene filed the small claims action alleging that Eugene and Sharon stole their property in March and April of 2007.

We conclude that a reasonable inference may be drawn that Obed Jr. and Rolene acted with malice and oppressiveness which was not the result of a mistake of fact or law, honest error of judgment, overzealousness, mere negligence, or other human failing. The small claims court stated that it was imposing punitive damages to ” punish the plaintiffs and deter [them] from further litigation designed to serve the plaintiffs’ malicious desire and apparent need to pursue a vendetta against Obed Kalwitz [Jr.'s] siblings, thereby serving the public interest by discouraging frivolous use of the court system ad infinitum.” Appellants’ App. p. 114. We cannot say that the small claims court erred by awarding punitive damages.

Then, the Appellate Court said something even more extraordinary. I have read a lot of appellate court rulings in my day, and this is a pretty strong statement made by the Court. Here’s what it said:

As a final matter, Eugene and Sharon request appellate attorney’s fees and costs pursuant to Indiana Appellate Rule 66(E), which provides in pertinent part, ” The Court may assess damages if an appeal … is frivolous or in bad faith. Damages shall be in the Court’s discretion and may include attorneys’ fees. The Court shall remand the case for execution.” The Court of Appeals uses extreme restraint in awarding appellate damages because of the potential chilling effect upon the exercise of the right to appeal. In re Estate of Carnes, 866 N.E.2d 260, 267 (Ind.Ct.App.2007). Nonetheless, this case is an example of when a chilling effect is necessary to put an end to the matter. We conclude that Obed Jr. and Rolene’s appeal, and indeed the entire lawsuit, was brought in bad faith and for purposes of harassment. We therefore remand to the small claims court for a determination of the amount of appellate attorney’s fees and costs to which Eugene and Sharon are entitled.

Various Emotions Can Drive People to Litigate

I’m not completely sure what drove this case. I do know there was a sense of outrage on the part of Obed, Jr., because he felt he was promised the land, and he’d apparently worked the land and did much, if not most, of all the farm work on the land. He clearly felt he had a right to the property. In my talks with the man, I did not ever get the sense that he was acting out of greed, but he rather that he felt he deserved the property. Clearly, his brother and sister (and the Courts) felt otherwise.

Whatever the motivations, one thing is clear from this case. Disputes can arise after mom and dad die, and more often than not, they arise because they did not make crystal clear their desires or intentions as to how their property was to be distributed. Or, there is no discussions between the siblings and the parents as to how things ought to be done. And, sometimes, a child can get greedy. I’ve seen that happen, too.

This is a sad case.  The relationship between those siblings is no doubt destroyed. If it were possible to interview them today and the question were asked of them: “What would you have done differently, in terms of your estate, after seeing the emotional blood bath between your children?” I wonder what they would have said?

Question: Have you set up your estate to insure there is no emotional blood bath that will take place on your passing?

The cite for this case is: Kalwitz v. Kalwitz, 934 N.E.2d 741 (Ind.App. 2010)

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