The Carl Kaetzel Trust U/T/D December 10, 1977, The Roberta Kaetzel Trust U/T/D December 10, 1977 and Carl Kaetzel, Roberta Kaetzel v. Jon Marc Kaetzel and Beverly Kaetzel

FILED
Pursuant to Ind. Appellate Rule 65(D), this
Memorandum Decision shall not be
regarded as precedent or cited before any Jul 27 2012, 9:37 am
court except for the purpose of
establishing the defense of res judicata,
CLERK
collateral estoppel, or the law of the case. of the supreme court,
court of appeals and
tax court

ATTORNEY FOR APPELLANTS: ATTORNEYS FOR APPELLEES:

KEVIN R. PATMORE DAVID L. JONES
Patmore Law Office ROBERT W. ROCK
Santa Claus, Indiana Jones – Wallace, LLC
Evansville, Indiana

IN THE
COURT OF APPEALS OF INDIANA

THE CARL KAETZEL TRUST U/T/D/ )
December 10, 1977, )
and )
THE ROBERTA KAETZEL TRUST U/T/D )
December 10, 1977, )
and )
CARL KAETZEL, ROBERTA KAETZEL, )
TIMOTHY KAETZEL and JILL KAETZEL, )
) No. 74A01-1201-PL-36
Appellants-Plaintiffs, )
)
vs. )
)
JON MARC KAETZEL and BEVERLY K. )
KAETZEL, )
)
Appellees-Defendants. )

APPEAL FROM THE SPENCER CIRCUIT COURT
The Honorable David O. Kelley, Special Judge
Cause No. 74C01-0609-PL-425
 July 27, 2012

MEMORANDUM DECISION – NOT FOR PUBLICATION

BAKER, Judge

Appellants-plaintiffs, the Carl Kaetzel Trust and the Roberta Kaetzel Trust, Carl,

Roberta, Timothy, and Jill Kaetzel (collectively, the plaintiffs), appeal the trial court’s

judgment entered in favor of appellees-defendants, Jon and Beverly Kaetzel (collectively,

the Kaetzels), on their claims for rescission of a deed and constructive fraud that related

to certain real property.

Specifically, the plaintiffs claim that the trial court erred when it entered judgment

for the Kaetzels on their claim for rescission and constructive fraud. The Kaetzels cross-

appeal, claiming that the trial court erred when it did not enter specific findings of fact

and conclusions of law as to other issues in the case, namely with regard to their

counterclaim that they brought against Timothy Kaetzel regarding his nonpayment of

property taxes and insurance premiums on the property. The Kaetzels contend that

Timothy’s failure to pay should have extinguished his life estate on the property.

We conclude that the trial court properly determined, pursuant to remand from this

court, that the plaintiffs were not entitled to the remedy of rescission and that judgment

was properly entered for the Kaetzels with regard to the other counts that were set forth in

the complaint. However, we reject the Kaetzels’ claim on cross-appeal that Timothy, as

the holder of a life estate in the property, should have been ejected from the premises in

these circumstances.

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 FACTS

Carl and Roberta have been married for sixty-one years and have three adult

children: Jon, Timothy, and Jill. In 1977, Carl and Roberta executed identical trusts,

each conveying their undivided one-half interest in 280 acres of real estate to the “Carl

Kaetzel and Roberta Kaetzel Family Trusts” (collectively, the trusts). The property

consisted of the “Home Place,” 120 acres; the Schmidt Farm, forty acres; the Heilman

Farm, eighty acres; and the Byers Farm, forty acres (collectively the “property”). Tr. p.

6, 10, 17. The Home Place contains two residences, one inhabited by Carl and Roberta,

and another by Timothy. The Home Place also consists of several outbuildings, lakes,

gardens, lawns, and cropland. The trusts named Carl, Roberta, and Jon as Trustees.

In 1987, the trusts were amended and specifically granted Jon an option to

purchase the Home Place and the Heilman Farm for $150,000, or for $100,000 if coal had

been removed from the land while Carl and Roberta were still living. Carl and Roberta

wanted their farm to remain in the Kaetzel family. From the creation of the trusts until

the conveyance that is at issue here, Carl and Roberta maintained complete control over

all of their personal and real property, including the trusts.

Sometime in 2003, Carl purchased a Case 1570 tractor, which he intended to use

in assisting with the farming operations. When Carl developed some health problems,

Jon continued to use the tractor. However, Carl demanded the return of the tractor at

some point. Jon returned the tractor, but the transmission had allegedly been damaged.

Jon’s understanding about his use of the tractor was that if it required repairs, he should

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be responsible for paying those costs. The purported estimate to fix the transmission

during Jon’s use of the tractor amounted to $10,000.

In late 2003, the Kaetzels had property taken by the State in a condemnation

action and wished to reinvest the proceeds of the condemnation for tax purposes. Jon

approached Carl and inquired whether he might be interested in selling any of the real

estate owned by the trusts, and Carl informed Jon that he would sell him the Home Place

property for $150,000. The parties agreed that the sale of the Home Place would be

subject to life estates such that Carl, Roberta and Timothy could “go on living like [they]

always did.” Id. at 19, 61, 95, 108, 110.

The Kaetzels accepted the offer, and Jon had his attorney prepare a warranty deed

to accomplish the transfer. On February 20, 2004, Jon delivered the deed and mortgage

to his parent’s home for them to review. Carl stated that there were no problems with the

deed.

On February 21, 2004, Carl and Roberta, as trustees, sold the property to the

Kaetzels for $150,000 and executed a warranty deed conveying the property to them.

Neither Carl nor Roberta recalled reading the deed prior to executing the document, and

they did not consult with their other children or legal counsel before executing it. In

actuality, the deed conveys the Home Place, the Schmitt Farm, the Byers Farm and the

Heilman Farm to the Kaetzels from the trusts, and reserved a life estate in favor of

Timothy for his residence and twelve feet surrounding the structure, which Jon had

surveyed at the advice of his attorney.

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 Timothy was also required to pay taxes on the home, provide insurance on the

residence in an amount “in the sole discretion of” the Kaetzels, and maintain the home

“in a condition satisfactory to” them. Tr. p. 177-78. Jon did not inform Carl or Roberta

that he had the boundaries of Timothy’s life estate surveyed, or that Timothy’s life estate

was limited as described in the deed. The deed also grants Carl and Roberta a separate

life estate only “for their residence and its appurtenances.” Ex. F.

When the deed was signed, the Kaetzels wrote a check for $86,000 to Carl and

Roberta. Payment was accepted, and the money was deposited in their personal checking

account. Fourteen months following the sale of the property, Jon tendered the unpaid

balance in the amount of $64,000 on April 1, 2005, which was the due date of the

mortgage. Carl and Roberta also accepted that payment and deposited those funds into

their personal checking account.

Carl and Roberta claimed that they sustained damages because they did not like

the way that Jon started treating the family after he took possession of the property.

Supposedly, Jon “quit speaking to” his parents. Tr. p. 113. When Carl stopped

receiving rental checks from a tenant that resided on the Schmitt farm, he discovered the

deed that he and Roberta had executed contained properties in addition to the Home

Place. Jon informed Carl that, with regard to the Home Place, the life estate “only

included the house, garage and the lawn on the west side of the driveway.” Tr. p. 26. Jon

also explained that the animals Carl owned would be required to stay in this particular

area. At some point, Jon established various rules that he required to be followed

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because Timothy had “clearly overstepped [his] bounds.” Ex. M. In fact, Jon threatened

to prevent Timothy from reaching his residence by way of the only access over which

Timothy had no life estate interest. Tr. p. 168.

Jon dug up some of the flowers and tore up the yard, moved all of Carl’s tools

from the shop barn into the rain, and threatened to “get rid of” all of the animals that Carl

owned. Jon stacked round bales of hay in a wall around Timothy’s home, threatened to

build fencing to prevent Carl from fishing in the pond, and contacted the police when he

believed that Carl, Roberta, or Timothy “got out of line,” such as for “cussing” at Jon for

tearing up the lawn with a skid loader, and engaging in other “terroristic” activities that

Carl could not recall. Tr. p. 35.

When Carl and Roberta discovered the discrepancy between what they had

intended to convey and what the deed actually conveyed, they initially took no action

because they wanted peace in the family. After the police had been called numerous

times, and Jon had threatened to prevent access to the property and talked about getting

“rid of” the pets, tr. p. 172-73, Carl attempted to have Jon agree to allow them to continue

to use the Home Place in a manner that was consistent with their initial understanding.

However, Jon refused to do so.

On September 18, 2006, the Plaintiffs filed a six-count complaint against the

Kaetzels, alleging breach of trust (Count I), rescission of the deed (Count II), constructive

fraud that related to the deed (Count III), the return of the tractor, (Count IV), repayment

of monies that had been loaned (Count V), and trespass (Count VI).

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 On November 17, 2008, the Kaetzels filed a two count counterclaim that sought

judgment against Timothy for the payment of delinquent property taxes and to extinguish

his conditional life estate in the property. Following a bench trial, the trial court issued

findings of fact, conclusions of law, and judgment, on November 13, 2009, finding that

Jon had committed a breach of trust by purchasing trust property and that he was

indebted to Carl and Roberta in the amount of $26,000. The trial court set aside the deed

and issued judgment on Count V in the amount of the indebtedness.

Jon appealed the trial court’s decision, and on June 30, 2010, we issued a

memorandum decision, reversing the trial court’s judgment that previously found the

deed to be void and instructed the trial court to enter judgment in favor of the Kaetzels on

the breach of trust claim. Kaetzel v. The Carl Kaetzel Trust, et. al., No. 74A01-1001-

PL-30, slip op. at 11 (Ind. Ct. App. June 30, 2010). We also ordered the trial court on

remand to “enter findings and conclusions on all remaining claims, if any,” and to

calculate the prejudgment interest from September 18, 2006, owed with regard to the loan

that was alleged in Count V. Id. at 12-13.

We determined that the terms of the trust provided Jon with an option to purchase

trust property, and because the terms of the trust specifically authorized the transaction,

no breach of trust occurred. Id. at 9. We concluded that Jon was a bona fide purchaser

because he purchased the property in good faith, for valuable consideration, and without

notice of outstanding rights of others. Moreover, we found that there was “no other

reason to invalidate the sale and purchase of the property.” Id. at 11.

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 On December 27, 2011, the trial court issued amended findings of fact,

conclusions of law, and judgment. It determined that because we held on appeal that Jon

was a “bona fide purchaser” that insulates him from committing a breach of trust in a

trustee-beneficiary relationship, our conclusions precluded the trial court from making

any findings with respect to the rescission and constructive fraud claims set forth in

Counts I, II, and III. Thus, judgment was issued in favor of the Kaetzels with regard to

those common law claims.

As for Count IV, the claim that concerned the bailment of the tractor, the trial

court made additional findings of fact and conclusions of law, and dismissed the claim

because the tractor had been returned during the pendency of this matter. Although the

tractor was alleged to have been damaged, it was determined that “Carl and Roberta did

not allege any special damages related to the tractor and they cannot attempt to prove

and/or recover alleged damages not alleged in the Complaint even though the evidence

suggested the tractor was returned in a state of disrepair.” Appellants’ App. p. 24.

Therefore, the trial court declared Count IV “moot” and it was dismissed. Id. at 26.

As to Count V, the trial court found that the Kaetzels owed Carl the sum of

$26,000 plus prejudgment interest at the statutory rate of eight percent to be calculated

from the date that the complaint was filed. Moreover, the trial court determined that

post-judgment interest should be calculated at the statutory rate of eight percent starting

from the date of the judgment, and that interest should not be compounded.

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 The trial court next determined that the life estate to the “residence and its

appurtenances” reserved in the deed essentially was a nonexclusive license to use only

the residence and “lands directly surrounding the house, as well as the roadway to the

home and gardening areas,” so long as they did not interfere with the Kaetzels’ use of the

property. Id. at 27. Finally, it was concluded that

7. [The Kaetzels] are granted judgment against Timothy . . . on their
counterclaim in the sum of . . . $2,397.15 plus post-judgment interest at the
statutory rate of eight percent to begin on the date of said Judgment and
until such sum is paid and satisfied.

Appellants’ App. p. 27. The plaintiffs now appeal, and the Kaetzels cross appeal.

DISCUSSION AND DECISION

I. Standard of Review

When the trial court enters findings of fact and conclusions of law, we apply a

two-tiered standard of review. City of South Bend v. Dollahan, 918 N.E.2d 343, 349

(Ind. Ct. App. 2009). First, we must determine whether the evidence supports the

findings; and, second, whether the findings support the judgment. Id. We will not

reweigh the evidence or assess the credibility of witnesses, but instead will consider only

the evidence most favorable to the judgment. Id. A trial court’s findings and conclusions

will only be set aside if they are clearly erroneous—that is, if the record contains no facts

or inferences to support them. Hardy v. Hardy, 910 N.E.2d 851, 856 (Ind. Ct. App.

2009). A judgment is clearly erroneous when a review of the record leaves us with a firm

conviction that a mistake has been made. Fraternal Order of Police, Evansville Lodge

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No. 73 v. City of Evansville, 940 N.E.2d 314, 318 (Ind. Ct. App. 2010), trans. denied.

Finally, we will apply a de novo standard of review to conclusions of law. Johnson v.

Johnson, 920 N.E.2d 253, 255-56 (Ind. 2010).

II. The Plaintiffs’ Claims

A. Rescission of the Deed and Constructive Fraud

The plaintiffs argue that the trial court should have set aside the warranty deed.

Specifically, the plaintiffs maintain that the trial court made improper findings that Jon

was a bona fide purchaser and that the deed was not void.

In addressing this contention, we initially observe that the law of the case doctrine

forbids the relitigation of issues that have been resolved by an appellate court. Dutchmen

Mfg., Inc. v. Reynolds, 891 N.E.2d 1074, 1082-83 (Ind. Ct. App. 2008). More

particularly, “all issues decided directly or by implication in a prior decision are binding

in all further portions of the same case.” Id.

In this case, the plaintiffs’ request for rescission was based upon Carl and

Roberta’s breach of trust and fraud theories. Tr. p. 37, 114. They based the rescission

claim upon the theory they were “unaware” of the terms and content of the warranty

deed. Id. at 114-15. Also, in the appellee/cross-appellants’ brief, the petition for

rehearing, and the petition to transfer that was filed in the initial appeal, the plaintiffs

specifically raised and consistently argued for relief pursuant to their rescission and

constructive fraud theories.

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 We clearly decided, as a matter of law, that there was no “reason to invalidate the

sale and purchase of the Property” and that the “Deed is not void.” There is no other

reasonable construction of our initial opinion. Thus, the holding is the law of the case

and not subject to re-argument and re-litigation. Dutchmen Mfg., Inc., 891 N.E.2d at

1082-83. As a result, we reject the plaintiffs’ requests to set aside the warranty deed at

this juncture and affirm the trial court’s judgment as to Counts I-III.

B. Dismissal of Count IV—Damages to the Tractor

The plaintiffs next contend that the trial court erred in dismissing Count IV of the

complaint, which related to the alleged damages to the tractor. The plaintiffs contend that

the dismissal was improper because they did not and could not have discovered the

damages until after it was returned.

The evidence in this case shows that Carl purchased the tractor to help farm and

for his son to use on the farm. The arrangement was not a bailment because the tractor

was not in Jon’s exclusive possession. Rather, the evidence established that the tractor

was meant for both of their uses. See Norris Auto. Serv. v. Melton, 526 N.E.2d 1023,

1025 (Ind. Ct. App. 1988) (observing that a bailment is created when the bailor delivers

his personal property into the exclusive possession of the bailee).

Also, even assuming that Carl had a valid legal claim and could seek damages, he

failed to carry his burden in this regard. Damages must be proven with reasonable

certainty. Noble Romans, Inc. v. Ward, 760 N.E.2d 1132, 1140 (Ind. Ct. App. 2002).

Carl testified that his tractor would no longer operate in “low range.” Tr. p. 38. But Carl

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admitted that he drove the tractor home from Jon’s and allowed a neighbor, who was

interested in buying the tractor, to test drive the tractor when it was claimed by the

interested buyer that it would no longer operate in first gear.

Carl presented no evidence of the model year, the fair market value of the tractor,

or an estimate from a mechanic to repair the tractor. In short, Carl speculated that the

repair costs might be “around $10,000,” because Timothy had a similar, but smaller,

tractor that cost around $7,000 to overhaul nearly ten years ago. Id. at 39.

In our view, Carl’s self-serving testimony and speculation about what the cost

might be, failed to satisfy his burden of proof regarding the alleged damages to the

tractor. See Noble Romans, 760 N.E.2d at 1140 (holding that damages may not be

awarded on the mere basis of conjecture or speculation); see also Marathon Oil Co. v.

Collins, 744 N.E.2d 474, 482 (Ind. Ct. App. 2001) (observing that evidence of damages

must be sufficient to allow the trier of fact to estimate the amount with a reasonable

degree of certainty and exactness). For this additional reason, we conclude that the trial

court properly entered judgment for the Kaetzels with regard to Count IV of the

complaint.

C. Trespass

The plaintiffs argue that the trial court erred in concluding that the life estate

reserved in the deed was only a limited, nonexclusive and conditional right to use some

of the property at issue. The plaintiffs argue that “the trial court’s own finding that Jon

and Beverly have exercised rights in derogation to Carl and Robert’s life estate

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unarguably constitutes a trespass . . . and that the dismissal of this count is “plain error.”

Appellants’ Br. p. 22.

In Count VI of their Complaint, the Plaintiffs alleged that “Carl’s and Robert’s

[sic] residence includes numerous barns, sheds and outbuildings, a garden and other

appurtenances, which Jon has claimed as his property.” Appellants’ App. p. 34.

Notwithstanding this allegation, the undisputed evidence at trial was that the parties

agreed that Jon has not taken any action to infringe or intervene with Carl and Roberta’s

continued use of their life estate. Tr. p. 44-46, 115-16, 122-26, 180, 206. The trial

court’s findings of fact also demonstrate that the plaintiffs continue to use their property

as they traditionally had. See Appellants’ App. p. 20. Therefore, the trial court

reasonably concluded that no trespass had occurred.

Indeed, the trial court, in its findings, recognized the established rule that an action

for trespass to real estate cannot be maintained for an invasion of a right-of-way or an

easement. State ex rel. Green v. Gibson Circuit Court, 246 Ind. 446, 449, 206 N.E.2d

135, 137 (1965). Here, the easement permits Jon to pass over areas of the life estate—the

“mixed use area”—for purposes of farming activities, and permits Carl and Roberta to

continue to use the appurtenant area as they have, provided they do not interfere with the

farming operation. And it has been held that if an individual has a fair and reasonable

belief that they have a right to be on the property of another, then that person is not guilty

of trespass. Olsen v. State, 663 N.E.2d 1194, 1196 (Ind. Ct. App. 1996). For all of these

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reasons, we affirm the trial court’s judgment in favor of the Kaetzels with regard to the

trespass count.

III. Cross-Appeal—Ruling With Regard to the Kaetzels’ Counter-Claim

Finally, we address the Kaetzels’ cross-appeal, where they claim that the trial

court failed to properly rule on their counterclaim as to the validity of Timothy’s life

estate in the property. The Kaetzels contend that because Timothy failed to pay the taxes

and insurance as required by the terms of his life estate, his interest in the property was

terminated by operation of law.

In addressing this issue, we agree with the Kaetzels’ proposition that a conditional

life estate terminates upon either the death of the grantee or upon the happening of the

condition or contingency that limits the life estate. Sims v. Gay, 109 Ind. 501, 9 N.E.

120, 122 (1886). However, as the plaintiffs point out, no one was aware that the life

estate retained for Timothy in the deed included only a few feet around his home, with no

access or ability to use buildings appurtenant to his home, despite Jon’s assurance to his

parents that the deed included language permitting Carl, Roberta and Timothy to live on

the Home Place as they “had always lived.” Tr. p. 108. Indeed, only Jon was aware that

a survey had been performed, and Timothy did not know that a deed had even been

executed by his parents.

Timothy does not dispute that Jon, in fact, made a property tax and insurance

payment on the life estate property after he failed to do so. Likewise, the plaintiffs are

aware that due to the recordation of the deed, they are presumed to have constructive

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notice of the contents of it, despite the fact that no one other than Jon and his legal

counsel were aware of the contents of the deed when it was executed.

Although the Kaetzels maintain that the Sims case compels Timothy’s ejectment

from the property, we note that Sims does not even involve the disposition of a life estate.

Rather, it was determined in that case that an estate in land granted to a surviving spouse

is limited to the period of her widowhood, and our Supreme Court’s holding was that

remarriage terminates an estate which is limited in such a fashion.

In these circumstances, we cannot say that the minor violation of the condition of

the life estate in this instance should result in the forfeiture of Timothy’s interest. More

specifically, our courts have repeatedly determined that “forfeitures are generally

disfavored by the law,” even where the remedy of forfeiture is specifically agreed upon

and required by parties’ contracts and default is clear. Rather, the law favors the award

of damages proportionate to the damages actually resulting from the non-payment, non-

performance, or non-enjoyment. Skendzel v. Marshall, 301 N.E.2d 641, 644 (Ind. 1973).

Indeed, we have previously considered the propriety of applying a forfeiture

clause of a contract by considering the factors set forth in Collins v. McKinney, 871

N.E.2d 363 (Ind. Ct. App. 2007):

(A) the extent to which the injured party will be deprived of the benefit
which he reasonably expected;

(B) the extent to which the injured party can be adequately compensated for
the part of that benefit of which he will be deprived;

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 (C) the extent to which the party failing to perform or to offer to perform
will suffer forfeiture;

(D) the likelihood that the party failing to perform or to offer to perform
will cure his failure, taking account of all the circumstances including any
reasonable assurances; and

(E) the extent to which the behavior of the party failing to perform or to
offer to perform comports with standards of good faith and fair dealing.”

Ream v. Yankee Park Homeowner’s Ass’n, 915 N.E.2d 536 (Ind. Ct. App. 2009).

In our view, the trial court properly granted judgment in Jon’s favor for the taxes

and insurance that he paid when Timothy failed to do so. Thus, Jon was adequately

compensated for any loss that he suffered as a result of Timothy’s failure to pay. On the

other hand, invoking the remedy of forfeiture will result in an eviction of Timothy from

his childhood home for the remainder of his life, which also effectively leaves Carl and

Roberta without a caretaker. Instead, Carl and Roberta will be at the mercy of the

Kaetzels.

Also, while the evidence shows that Jon has sued Timothy on two other occasions

for ejectment and recoupment of these same taxes and insurance, he notably has not sued

Timothy for any additional taxes and insurance. Thus, it is reasonable to assume that

Timothy made these payments after being informed that he now has only a life estate

over the residence and is obligated to make these payments. Finally, no evidence was

presented reflecting that Timothy failed to comport with any standards of good faith and

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fair dealing. Therefore, even if a nonexistent forfeiture clause could be implied in the

deed—along with the right-of-way or easement—the trial court was correct in not

ordering ejectment or forfeiture because of Timothy’s failure to make these payments in a

timely manner. Thus, the Kaetzels do not prevail on their counterclaim.

The judgment of the trial court is affirmed.

KIRSCH, J., and BROWN, J., concur.

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