COA reverses in part for widow in family’s trust dispute

The Indiana Court of Appeals has reversed in part a verdict against a widow in a family dispute stemming from her diversion of $8 million of her late-husband’s trust assets that effectively disinherited his son.

Before her husband’s death and during a period where he had succumbed to multiple conditions of his dementia and Alzheimer’s disease, Linda Bergal moved six assets from the Milton B. Bergal estate trust. Those assets, of which Linda was named as the primary beneficiary, totaled approximately $8 million. Their removal ultimately resulted in the Trust receiving only $200,000 instead of millions, effectively disinheriting Milton’s son, David Bergal.

Previously, Linda and Joseph Sanders had been named as successor co-trustees of the trust, which also provided for two subtrusts to be funded upon Milton’s death — Trust A, of which Linda was the primary beneficiary and Trust B, of which David was the primary beneficiary and sole trustee. However, neither David nor Sanders were aware of Linda’s diversion of the assets until after Milton’s death.

Although Linda agreed to resign as co-trustee and replace all the assets into the trust in exchange for David’s agreement to refrain from filing a lawsuit, she took no further action after resigning as co-trustee and disclaiming her status as primary beneficiary of the Vanguard Brokerage transfer on death account, which gave David $1.5 million.

The halted action prompted David to sue, alleging in his complaint undue influence, lack of testamentary capacity, breach of fiduciary duty, fraud and constructive fraud, conversion, and breach of contract. A Porter Superior jury eventually ruled in favor of David and against Linda on all of David’s claims and Linda’s counterclaims.

However, it entered a second amended judgment noting the need to avoid duplicative recovery given the overlapping claims. The Indiana Court of Appeals reversed in part in Linda S. Bergal v. David A. Bergal and Joseph M. Sanders, as Successor-Trustee of the Milton B. Bergal Trust, 19A-CT-1062, regarding one asset — the Vanguard Rollover IRA Account.

Noting that the asset was never included in the trust to begin with, the appellate court concluded that the evidence supporting the jury’s verdict on breach of contract with respect to the Vanguard IRA was insufficient.

“And as that claim is the only one related to the Vanguard IRA, the only possible outcome with respect to this asset is that Linda may retain it,” now-senior Judge John Baker wrote for the appellate court.

In all other respects of the case, the appellate court affirmed, finding that the trial court did not err by finding that the Dead Man’s Statute prevented Linda from testifying about statements made by Milton. It also declined to find error with respect to the trial court’s decision that she had untimely filed her affirmative defenses and its decision to modify the PTO in the middle of trial. Lastly, the appellate court found no issue with the trial court’s rulings related to the parties’ respective expert witnesses.

The appellate court further rejected Linda’s arguments that the trial court gave erroneous jury instructions, the verdict forms were improper and that the jury fashioned an equitable remedy.

“To the extent that Linda argues that the jury verdict is excessive, we can only find that this argument is premature. The trial court has reserved adjudication of the specific recoverable amounts for the hearing on Linda’s accounting; that hearing has been stayed pending this appeal. We cannot consider whether any error has occurred because the trial court has not yet exercised its discretion in ruling on Linda’s arguments regarding the amounts owed,” the appellate court wrote.

“Linda filed a motion for guidance with this Court, which we granted in part with respect to the transcript. She also asked that she be reimbursed for the fee she paid the court reporter for the transcript preparation. We remand this issue to the trial court, to be considered as part of the further proceedings below.”

It therefore affirmed in part, reversed in part and remanded for further proceedings.