Kesling v. Kesling
967 N.E.2d 66
Ind. Ct. App.2012Background
- TP Orthodontics, Inc. (TPO) is a family-owned S corporation with a Shareholder Agreement restricting transfers to non-shareholders.
- In 2001 Andrew formed the Andrew C. Kesling Trust, transferring his TPO shares to the Trust, with Andrew as settlor and lifetime beneficiary and trustee.
- A 1999 Board resolution allowed transfers to revocable trusts under conditions to maintain the SB C status and required notices and agreements with the Corporation.
- In 2004 Peter agreed to sell 5,410 voting shares to Andrew; concurrent amendments added a Voting Trust and changed default provisions.
- The stock certificates were issued in the Trust’s name, though Andrew claimed ownership as shareholder; Peter later challenged the arrangement as improper.
- The trial court concluded Andrew was not a TPO shareholder on June 25, 2004 and awarded rescission to Peter; the Court of Appeals reversed and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Andrew remained a TPO shareholder on June 25, 2004 | Kesling contends trust ownership did not extinguish Andrew's shareholder status. | Kesling argues the Trust was a non-shareholder transfer disrupting ownership. | Andrew remained a shareholder; trust did not extinguish ownership. |
| Whether mutual mistake supports rescission of the June 25, 2004 stock purchase agreements | Peter asserts mutual mistake due to mischaracterization of Andrew's shareholding status. | Andrew argues there was no mutual mistake since he remained a shareholder. | No mutual mistake; rescission not warranted. |
| Whether the trial court abused its discretion in granting rescission | Peter seeks rescission based on mutual mistake and ownership status. | Andrew challenges rescission and argues proper ownership remained with the Trust under law. | Court abused its discretion by ordering rescission; reversed and remanded. |
Key Cases Cited
- Hind s. v. McNair, 235 Ind. 34, 129 N.E.2d 553 (1955) (trust creation can occur without transfer of title)
- In re Walz, 423 N.E.2d 729 (Ind.Ct.App.1981) (revocable inter vivos trust treated as a separate entity for ownership purposes)
- Marshall Cnty. Tax Awareness Comm. v. Quivey, 780 N.E.2d 380 (Ind.2002) (trusts can confer ownership rights to trustees and beneficiaries; details depend on context)
- Tracy v. Morell, 948 N.E.2d 855 (Ind.Ct.App.2011) (sua sponte findings control issues; standard for mixed issues)
- Poppe v. Jabaay, 804 N.E.2d 789 (Ind.Ct.App.2004) (rescission available for mutual mistake or fraud contexts)