COA ruling gives Dead Man’s Statute longer reach

Under the Indiana Dead Man’s Statute, the deceased can tell no tales, but a recent decision by the state’s Court of Appeals has created uncertainty over when the survivors can speak.

The case started with a squabble between a widow and her stepson over about $8 million in assets held in a trust. Through a diversion of the assets, the stepson had been effectively disinherited. Litigation ensured and before the trial began, the stepson convinced the Porter Superior Court that the Dead Man’s Statute prohibited the widow from testifying about the statements her late husband had made regarding the trust.

On appeal, the widow argued she should have been allowed to speak to the jury. The Dead Man’s Statute applies only to estates, and this case involved assets held in a trust.

However, in a unanimous opinion, the Court of Appeals affirmed the trial court in Linda S. Bergal v. David A. Bergal and Joseph M. Sanders, as Successor-Trustee of Milton B. Bergal Trust, 19A-CT-1062. The appellate panel cited to an 1891 Indiana Supreme Court decision and found “the Trust at issue is so central to Milton’s overall estate plan that it is akin to the estate itself.”

“This is going to open the door quite a bit,” said Sarah Jenkins, partner at Faegre Drinker Biddle & Reath LLP in Indianapolis. “… We’re expanding the Dead Man’s Statute when the trend in other jurisdictions has been to do away with it.”

The expansion is also creating uncertainty. Probate attorneys are talking about the decision and wondering when the Dead Man’s Statute will apply.

Jenkins equated the Court of Appeals ruling with creating a new test. Now the courts are going to have to determine whether a trust “is so central to the overall goal of the estate plan” that the Dead Man’s Statute will be able to be invoked.

Linda Bergal’s attorneys, Megan Craig, John Craig, and Richard Long of Craig & Craig LLC in Merrillville and Mark Anderson and Michael Anderson of Anderson & Anderson P.C. in Merrillville, also noted the confusion caused by the appellate opinion. They argue the ruling does not follow the plain language of the Dead Man’s Statute.

After a rehearing petition was denied, Linda Bergal’s attorneys are preparing to petition the Indiana Supreme Court for transfer.

“Hopefully the Indiana Supreme Court will review the matter,” Megan Craig said. “It will be a good opportunity for them to clarify the issue of when the Dead Man’s Statute applies and when it does not.”

Lips closed by law

The Dead Man’s Statute is only one issue in the complex Bergal v. Bergal, but it is the piece drawing attention and is most shocking to the probate bar, attorneys say.

Indiana Code section 34-45-2-4 spells out the application of the Dead Man’s Statute including when an executor or administrator is a party and where a judgment may be made for or against an estate that is represented by the executor or administrator. In Fisher v. Estate of Haley, 695 N.E. 2d 1022, 1026-27 (Ind. Ct. App. 1998), the appellate panel described the statute as a rule “of fairness and mutuality requiring that ‘when the lips of one party to a transaction are closed by death, the lips of the surviving party are closed by law.’”

The Bergal opinion, written by Senior Judge John Baker, pivoted on Reddick v. Keesling, 28 N.E. 316, 219 Ind. 128 (1891). Although the case is nearly 130 years old, the Court of Appeals noted it was still standing precedent and extended the Dead Man’s Statute to trust assets.

Counsel for Linda Bergal argued that cases over the last 100 years have contradicted the Reddick application. Mark Anderson reiterated the findings of the cases they cited in their brief to the Court of Appeals. Specifically, In re Knepper, 856 N.E.2d 150, 152, 156 (Ind. Ct. App. 2006) and Given v. Cappes, 486 N.E.2d 583 (Ind. Ct. App. 1985), held that in the absence of the statutory prerequisites of a claim by or against an estate and an executory or administrator as a party, the Dead Man’s Statute — on its face — does not apply.

Also in a footnote in their brief, Linda Bergal’s attorneys asserted the Reddick decision, which David Bergal relied upon, applied an earlier version of the Dead Man’s Statute. The current version, they argued, has never been applied to a case regarding trust assets where no estate was involved.

David Bergal’s attorneys, Beth Brown Nowak of Kelly Law Offices LLC in Crown Point along with Michelle Canerday of Katten Muchin Rosenman LLP and Floyd Perkins of Nixon Peabody LLP, both in Chicago, countered that argument in their brief. They maintained the version of the statute used in Reddick contains the same language Linda Bergal used in asserting the statute is inapplicable.

The attorneys’ brief went on to contend even if Linda Bergal’s interpretation is correct, the statute should still have been applied. They noted Milton Bergal’s estate plan provided the assets be placed in a trust and the Indiana Supreme Court recognized in Fulp v. Gilliland, 998 N.E.2d 204, 205 (Ind. 2013), that revocable trusts are being employed as estates.

“And,” their brief continued, “Ms. Bergal’s testimony about Dr. Bergal’s alleged statements or other assertions justifying her improper transfers is the exact type of testimony the Dead Man’s Statute was created to bar.”

Attorneys representing David Bergal did not respond to a request for comment.

Martinsville solo practitioner Gregg Gordon agreed with Megan Craig that the ruling on the Dead Man’s Statute muddies the water. Attorneys will have a more difficult time advising clients and determining how to proceed with a case in court.

“I think the Dead Man’s Statute is going to come under scrutiny” from the Legislature or the courts, Gordon said, calling the decision a “wild card.”

Falling out of favor

Gordon sees the Dead Man’s Statute as a relic from an older time when Hoosiers did not live in as close proximity as they do now and did not have multiple means of communication. So maybe friends and family could not be relied upon to accurately convey what the deceased wanted or had promised.

In modern times, he agrees the statute is in effect assuming the individual relaying the decedent’s wishes will lie. The Dead Man’s Statute usurps the authority of the factfinder, he said. By preventing the testimony of the witness, the jury or the judge is robbed of the opportunity to assess the credibility of that individual.

Quoting a colleague, Gordon said, “There’s nothing better than a good cross examination to get to the truth. If someone lies on the stand, then I think it’s incumbent on the trial attorney to do a cross examination to bring that out.”

Jenkins echoed that point, noting the jury in this case did not get to hear Linda Bergal’s story and the appellate opinion did not consider whether her testimony would have changed the outcome. “Even if she had testified, I think that it’s always a leap to think the outcome would have been different,” she said.

Across the country, Dead Man’s Statutes have been falling out of favor. Thirty states, including California, Delaware and Florida, do not have Dead Man’s Statutes, according to a 2018 analysis by McDermott Will & Emery. The remaining 20 states have the law on their books although the provisions vary greatly with some limiting the prohibition to certain proceedings and others allowing for a broader application to bar not only communications but also evidence of the transactions with the decedent.

In 2017, Indiana Court of Appeals Judge James Kirsch used his concurring opinion to highlight the problems with the Dead Man’s Statute.

The case, Childress Cattle LLC v. The Estate of Roger F. Cain, Christie Cain, personal representative, 70A05-1706-EU-1442, involved the cattle broker filing a claim against the estate for nearly $300,000 to recover payment for animals Cain had allegedly ordered. A unanimous panel affirmed the Dead Man’s Statute prevented James and Bonnie Childress from testifying about the matter.

Kirsch wrote he reluctantly concurred then quoted from several law journal articles that pointed out what the legal scholars saw as the unfairness of the statute. He then made a call for action.

“It is past time for Indiana to follow the lead of other states and repeal its Dead Man Statute,” he wrote.•