Category Archives: Trust Law

Factual Background:

Decedent and his wife created a joint trust.  Decedent funded the trust with their jointly-owned residence and ten acres, horses, and stock certificates for all the shares of two closely held companies.  Decedent was suffering from cancer and began to experience debilitating pain and delusional thoughts.  He filed an ex parte against his wife, as he believed that she had attempted to kill him.  Thereafter, Decedent contacted his attorney to ask if he could withdraw assets from the joint trust.  The attorney advised him that he could possibly convey up to one-half of the joint trust assets without the consent or knowledge of his wife.  Decedent then executed his own Trust, which made no provisions for his wife.  He then transferred one-half of the assets in the joint trust to the new Trust.  After the transfer, the wife was requested to re-issue the stock shares to the new Trust, and she refused.

After Decedent’s death, his son brought an action as Trustee of the Trust, seeking a declaratory judgment that the steps Decedent took to fund the Trust were effective and that the Trustee of the Trust owned the property.

Jasper County Circuit Court, J. Mouton, Held:

The circuit court denied declaratory relief, finding that the transfers from the joint trust were in fraud of the wife’s marital rights.  Son and the other Trust beneficiaries appealed.

Court of Appeals, J. Rahmeyer, Held:

Affirmed.  Appellants contend that the trial court lacked jurisdiction to decide that the transfers were in fraud of the wife’s marital rights because it constituted a counterclaim that had not been pled.  However, Appellants failed to provide the wife’s Answer in the legal file on appeal, and thus the court did not have the materials necessary to decide this point, and thus it was denied.

Appellants’ other points were related:  the first claimed that the court erred in declaring the entire transfer “null and void” because if it was a transfer in fraud of marital rights, only one-third was needed to fund the elective share; the second claimed that the court’s finding of fraud on marital rights was unsupported by the evidence.  On review, the appellate court is primarily concerned with the correctness of the result, not the route taken by the trial court to get there.  Though the court found fraud of marital rights, substantial evidence supports the trial court’s judgment regarding the imposition of a constructive trust.  Decedent and his wife had a confidential relationship, and Decedent’s actions wrongfully deprived his wife of her right, title, and interest in property, and that deprivation was a result of Decedent’s violation of confidence.  A correct decision will not be disturbed because the court gave a wrong or insufficient reason.

Factual Background:

Ted Summers acted as secretary/treasurer of Insurance Company and was also a senior vice-president of Bank.  Bank acted as Insurance Company’s depository bank.  Insurance Company had an account at Bank known as the Wind Premium Trust Account.  After the 1970s, Summers was the only person having signature authority on the Trust Account.  In 1993, Insurance Company directed the Trust Account be combined with the general operating accounts.  The president of Insurance Company believed the Trust Account had been closed, but Summers never actually closed the Trust Account.  From 1994 to 2001, Summers misappropriated $346,597.00 from the Trust Account by writing checks to Bank and others or by purchasing cashier’s checks or personal money orders payable to Bank.  Some of the funds were used for loan payments due to Bank by other customers.

Insurance Company filed a suit against Bank and a number of other individuals, including Summers.  By the time of trial, Insurance Company only sought to proceed on its count for a constructive trust against Bank.  In its count for a constructive trust, Insurance Company alleged it was entitled to a constructive trust on the funds Summers applied from the Trust Account and credited against loans which were delinquent, in default, or just as payments on loans which were current.

Marion County Circuit Court, J. Wallace, Held:

The circuit court imposed a constructive trust in the amount of $127,789.63.  The bank appealed.

Court of Appeals, J. Dowd Jr., Held:

Reversed.  The foundation of the remedy of a constructive trust is the identification of a specific property or funds as the res upon which the trust may be attached.  Bank asserts that Insurance Company did not establish through clear, cogent, and convincing evidence any identifiable property or funds as the res.  Insurance Company suggests the funds can be traced to Bank’s general operation account.  However, the record reflects that Insurance Company did not identify a res, and its assertion is not supported by evidence from trial.  Insurance Company only presented evidence that money passed through Bank and never showed where the money was deposited.  Bank president testified that at the time of trial, there was no record of where the misappropriated funds actually went.  There is no clear, cogent, and convincing evidence showing where the funds attributed to Bank went, whether the funds were deposited into Bank, or whether Bank retained those funds.  Because there was no identification of the specific res, no constructive trust can be imposed.

Factual Background:

Decedent’s Trust provided upon his death, Defendant, as Trustee, was to divide the principal of the Trust into two equal shares: one in favor of Defendant and other in favor of Plaintiffs.  Decedent died in 2003, and in 2007, Plaintiffs filed a petition against Defendant, alleging he failed to distribute to Plaintiffs their fifty percent interest in the Trust real estate following decedent’s death.  Plaintiffs sought partition of the Trust real estate in kind, an accounting, and removal of Defendant as Trustee.

Defendant filed a counterclaim for quantum meruit, alleging that he performed valuable services and made material improvements to the Trust property that benefited all beneficiaries for which he has not received compensation or reimbursement.

Audrain County Circuit Court, J. Sutherland, Held:

The circuit court found that Defendant was owed $201,659.81, including $187,259.81 as reimbursement for uncompensated labor and expenses.  The court found that Plaintiffs were owed $152,184.15 in back rent and attorney’s fees.  After setting off these amounts, the court held that Plaintiffs were jointly and severally liable to Defendant for $49,765.66.  Plaintiffs appealed.

Court of Appeals, J. Sullivan, Held:

Reversed and remanded.  Plaintiffs argue that the trial court erred in entering the monetary award, in part because the trial court failed to apply the debits and credits on a consistent basis.  Specifically, the Plaintiffs contend the trial court’s accounting involving the actual and imputed trust rents were divided in half, since the parties were fifty percent trust beneficiaries, but Defendant received a 100 percent credit for his labor and expenses on behalf of the trust.

The net income for the property is gross income less the operating expenses.  The gross income for the property was $243,600.  The Defendant expended $187,259.81 in improvements and maintenance.  Therefore, the net income for the property was $56,340.19.  Each party had a $16,800 liability to the Trust for rental benefits they received, leaving $22,740.19 in undisbursed income.  As equal beneficiaries, Plaintiffs and Respondent were each entitled to half, or $11,370.09.  Therefore, Defendant was entitled to $11,370.09 in Trust income and $6,000 from Plaintiffs for the difference in the appraised values of the parcels after partition, for a total of $17,370.09.

Factual Background:

Settlor created a trust with multiple income beneficiaries.  Settlor specifically named remainder beneficiaries for some of the original income beneficiaries, but for all “others” stated that upon their death, their former share would go to the lawful issue of John Goulding Sr. per stirpes.  John Goulding Sr. had two sons, Patrick and John Jr..  At Patrick’s death, he and John Jr. were each receiving 34.42% of the Trust income, 3.25% of which was each brother’s original share of the income before they began receiving the income of deceased beneficiaries.

At Patrick’s death, the Trustee distributed Patrick’s 34.42% share to his children, in his stead as the lawful issue of John Sr.  In 2005, John Jr. filed a breach of trust action, alleging that when Patrick died, he was entitled to one-half of Patrick’s former share (3.25%) because the Trust stated that for all “other” beneficiaries, which included Patrick, their former share shall accrue per stirpes to the lawful issue of John Sr., which would be John Jr. and Patrick’s children.  In 2007, the court granted partial summary judgment, finding that John Jr. should have received half of Patrick’s 3.25% share, with the other half going to Patrick’s children.

In 2008, John Jr. filed an amended petition claiming that Patrick’s former share included both the 3.25% share and the additional 31.17% being distributed to him as John Sr.’s lawful issue, and thus the Trustee should have distributed half of Patrick’s entire share to John Jr. at his death.  John Jr. moved for partial summary judgment.  The Trustee also moved for partial summary judgment, asking the court to rule that the additional 31.17% being distributed to Patrick at his death was correctly distributed to his children because they took his place as issue of John Sr.

 Jackson County Circuit Court, J. Forsyth, Held:

The circuit court granted the Trustee’s motion for partial summary judgment.  The grandnephew, John Goulding Jr., appealed.

 Court of Appeals, C.J. Hardwick, Held:

Affirmed.  The Trust provides that on the death of an “other named beneficiary,” that beneficiary’s “former share” is to accrue to John Sr. if he is living, and if not, “per stirpes to the lawful issue of John Sr.”  This is not a distribution to a specifically named beneficiary, and thus it cannot be treated as increasing a specifically named beneficiary’s “former share.”  The phrase “former share” as used in the Trust Agreement refers to the amount a specifically named beneficiary received pursuant to the initial terms of the Trust, as increased by any other amount specifically directed to accrue to that named beneficiary upon the death of another beneficiary.  “Former share” does not include the amounts a specifically named beneficiary happened to be receiving by the luck of being an eligible recipient.  The language of the Trust makes the intent of the settlor clear, and that intent must be honored in interpreting the provisions of the Trust.

Factual Background:

Grantor created a testamentary Trust for the benefit of his wife, and then to his ten children as the remainder beneficiaries.  The assets of the Trust consisted primarily of shares of common stock of a family company.  In 1998, the Trustee sold 180,000 shares of the stock from the Trust to each of the ten children.  The children paid for the shares by executing ten separate and identical promissory notes.  The notes provided for fixed annual payments to the Trust by the children.  As security for the promissory notes, the Trustee entered into Stock Pledge Agreements with each beneficiary, providing that the shares purchased by the children would be held as security by the Trustee until the children made full and final payment of the notes.  The Trustee, the company, and the beneficiaries entered into Stock Redemption Agreements, which stated that if a maker of a note failed to make the required payment when due, the company would redeem a sufficient number of that maker’s shares of the company’s stock to make the required payment.

When Grantor’s wife died, each of the children had a different amount outstanding on their notes.  The Trustee proposed offsetting the cash distribution from the Trust to equalize the share each beneficiary received.  The Trustees filed a Petition for Instructions regarding the propriety of making the equalizing distributions of cash.  Nine of the children consented to the proposed distribution and filed a motion for summary judgment in support of the Trustees’ position.  Grasso, the tenth beneficiary, filed a cross motion for summary judgment seeking denial of the Trustees’ plan of distribution.

St. Louis County Circuit Court, J. Gaertner, Held:

The circuit court granted the motion for summary judgment filed by the petitioners and denied Grasso’s motion for summary judgment.  The trial court allowed the cash distribution from the Trust to Grasso to be offset by Grasso’s indebtedness by promissory note to the Trust.

Grasso appealed, arguing that the spendthrift provisions of the Trust and the non-recourse provisions of the promissory note precluded any offset.

Court of Appeals, P.J. Odenwald, Held:

Affirmed.  The Trust provision mandating an equal distribution of assets supersedes the separate spendthrift provision of the Trust or the terms of the promissory note.  Because the grantor’s overall or primary intent was to treat the beneficiaries equally, it was proper for the Trustee to offset the cash distribution from the Trust by the amount of the outstanding indebtedness owed by each beneficiary to the Trust.  The nonrecourse provision of the promissory notes did not prevent the application of a retainer or set-off from the distributive share of the debtor; instead, it simply limited the Trustees’ remedies for nonpayment of the notes.  Moreover, the proposed distribution does not run afoul of the nonrecourse provision, as the Trustees are not attempting to collect the amounts owed under the notes by seeking to recover against the beneficiaries’ personal assets.

Factual Background:

Decedent created both a Revocable Trust and an Insurance Trust. The Revocable Trust named decedent’s brother, James Wild, as trustee and directed Trustee Wild to distribute the residue equally to two charitable remainder annuity trusts (CRATs).  Trustee Wild was the lifetime beneficiary of both CRATs, with two different colleges each being the remainder beneficiary of one.  The Revocable Trust gave Trustee Wild discretionary authority to pay federal and estate taxes owed as a result of decedent’s death with such payment being charged before funding the CRATs.  It further specified if such charges were taken, they were “without reimbursement from Grantor’s Personal Representative, from any beneficiary of insurance from Grantor’s life, or any other person.”

The Insurance Trust, which was irrevocable, made a provision for “Outright Gifts” that provided: “the Trustee shall distribute, outright and free of trust, to each person who is determined under Missouri law to be ultimately responsible for any federal estate tax, state estate or inheritance tax or any other death tax as a result of Grantor’s death, an amount equal to such death taxes for which such person is determined by the Trustee to be responsible.” The next paragraph provided that if any funds remained after paying the death taxes, they are to be held in trust to benefit Trustee Wild and then distributed to the then-living descendents of Virginia Cunningham.

After decedent passed away, Trustee Wild disclaimed any personal interest in distributions from the Insurance Trust.  U.S. Bank, upon becoming the second successor trustee of Insurance Trust, filed suit to seek a declaration as to how funds should be distributed.  The Cunninghams and the two colleges all filed cross-motions for judgment on the pleadings.

Jasper County Circuit Court, J. Mouton, Held:

This trial court entered a judgment that only the Cunninghams were entitled to any distribution from the Insurance Trust.          

Court of Appeals, J. Lynch, Held:

Reversed and Remanded.  This Court found the trial court misapplied the law and the judgment was not in accordance with the grantor’s stated intent for the Insurance Trust.

Cunninghams made two arguments.  First, they tried to argue that Trustee Wild was specially excluded from receiving a distribution from the Insurance Trust because that would constitute a “reimbursement”, which was specially precluded by the language in the Revocable Trust.  The Court found this argument failed because the words must be given their plain and ordinary meaning.  The words “reimbursement” used in the Revocable Trust and “gift” used in the Insurance Trust were specifically chosen by the grantor to be different, suggesting the grantor intended the two different words to have two distinct meanings.  Therefore, nothing in the Revocable Trust language prevented Trustee Wild from receiving a gift from the Insurance Trust.

The Cunninghams’ second argument was that the Revocable Trust and Insurance Trust were inconsistent with each other.  “The paramount rule in construing a trust is that the intent of the grantor is supreme.”  Where language is clear and unambiguous as to grantor’s intent, the court must give effect to that intent.  The language of the Insurance Trust explicitly stated that Decedent’s intent in establishing and funding the Insurance Trust was so that any person who received a gift, devise, bequest or other property as the result of grantor’s death received it without being burdened by the death taxes.  The intent of the grantor in creating the Insurance Trust was clear—she wanted any and every beneficiary free of death-tax burdens.  Nothing in the Revocable Trust was inconsistent with this.  Therefore, the trial court, in giving effect to grantor’s intent, should have ordered distributions for all beneficiaries, including but not limited to, the Cunninghams.

Factual Background:

Husband and Wife were married in August 1987, had two children together, and separated in July 2007.  Wife filed a petition for dissolution of marriage.         

St. Louis County Circuit Court, J. Wallace, Held:          

The judgment of dissolution of marriage was entered on March 1, 2010.   Husband and Wife were each awarded half the value of the trust accounts held at Regions Bank.  Husband raised three points on appeal.

Court of Appeals, PER CURIAM, Held:

Affirmed as modified.  As to part of his second point on appeal, Husband argued the trial court did not have authority to distribute the trust accounts to him and Wife as sole and separate property because the two children were the sole beneficiaries, and therefore, had sole ownership in the trusts.  Wife agreed and requested this court modify the dissolution judgment to remove the division and award of the trust accounts.  This Court recognized that although a court can enter a decree of dissolution that distributes property, it does not have authority to enter a decree dividing property not owed by either the husband or the wife.  Therefore, this part of point two was granted. The court found no error in Husband’s remaining arguments, which it did not detail in its opinion.

Factual Background:         

William Knichel executed a durable power of attorney and a will in 2002, naming his two grown children as his agents and leaving his entire estate to them.  In 2003, Knichel changed the primary beneficiary on his life insurance policy to his companion of twenty years and caretaker, Anita Madsen, and transferred his home and one bank account in joint tenancy to her.  In 2004, Knichel had an attorney, Charles Amen of the Purcell and Amen law firm, prepare a new will and powers of attorney and create a trust that was intended to hold Mr. Knichel’s retirement assets and distribute them in three equal shares to Madsen and his children.  In the trust, Amen’s firm was named “special co-trustee,” granting similar rights and duties as those exercised by a standard trustee plus special additional powers.

Amen and Madsen began transferring Knichel’s retirement assets into the trust account, but UBS denied the request to transfer the UBS IRA.  Knichel died in October 2004.  When Knichel’s children requested an accounting in December 2005 and again in March 2006, Amen provided them with an inaccurate one that was incomplete in various aspects and also erroneously included the UBS IRA as a trust asset.  Ultimately, UBS distributed the UBS IRA proceeds directly to the children.  At Amen’s instruction, Madsen made an equivalent distribution from the other trust assets to herself, and paid herself a $6,000 fee as trustee and $2,400 to Amen for his representation of her as trustee.

In June 2007, having yet to receive an accurate accounting, the children filed suit against both Madsen and Amen claiming Madsen had breached her powers of attorney and fiduciary duties, unduly influenced Knichel’s asset collection, and unjustly enriched herself at their expense.  The children also sought to remove Amen’s firm as special co-trustee and counsel to Madsen in any capacity due to compounded conflicts of interest.  Madsen and Amen filed a motion to dismiss.

St. Louis City Circuit Court, J. Dowd, Held:

The trial court denied the motion to dismiss and set another hearing to focus on Amen’s potential conflicts of interest.  The trial court found Madsen had violated her fiduciary duties, removed her as trustee, and ordered her to forfeit her trustee fees and reimburse the trust for the distributions she made to herself and Amen.

The Court noted Amen, as special co-trustee, owed the same fiduciary duty to the children as Madsen had.  Therefore, once Amen began to advise and serve Madsen, he breached his fiduciary duty by not acting impartial to all beneficiaries.  The trial court removed Amen’s firm as special co-trustee and amended the trust to omit the position.

Amen challenged the trial court’s judgment asserting there was insufficient evidence to find he breached his fiduciary duty, and that the trial court abused its discretion by eliminating the special co-trustee provision.  Neither Madsen nor the children challenged the Court’s judgment.  The children filed a motion to dismiss on the basis that Amen lacked standing.

Court of Appeals, P.J. Aherns, Held:

Dismissed for lack of standing.   The Court noted that this was not the first case where the law firm of Purcell and Amen has attempted to reinstate itself as co-trustee on appeal against the wishes of the beneficiaries.  In In Re Forbeck, Amen’s partner attempted to appeal the dismissal of a guardianship petition that named his firm as “special co-trustee.”  The Court found he lacked standing.  Even though that was a guardianship case, and, therefore, differed from this case, it was cited with other Missouri precedent regarding probate matters to guide this decision.

Additionally, because chapter 456 of the Missouri Uniform Trust Code (MUTC) does not address appellate standing, the general appeals statute, section 512.020, applied and states the right to appeal belongs to: “any party to a suit aggrieved by any judgment of any trial court in any civil cause.”

Amen claimed that he was aggrieved and relied on Section 456.1-103 of the MUTC which includes fiduciaries within the definition of “interested persons.”  The definition of “interested persons” clearly enables a fiduciary or personal representative to participate in litigation on behalf of trust beneficiaries.  Here, neither Madsen nor the children challenged the Court’s judgment.

To determine when a party is “aggrieved,” the Court looked to Betty G. Weldon Revocable Trust ex. Rel. Vivion v. Weldon ex rel. Weldon, 231 S.W.3d 158,168 (MoApp.W.D. 2007).  Under Weldon, a party is “aggrieved” when the judgment operates prejudicially and directly on his personal or property rights or interest.

In this case, Amen’s right to collect fees was not a beneficial interest, but compensation allowed by law.  His personal accreditation and reputation, which he asserted would be jeopardized by his removal as special co-trustee for breach of fiduciary duty, is not a pecuniary interest either.  Therefore, Amen’s grievances provided no legal basis for recognizing Amen as an “aggrieved” party. “A party who has not been aggrieved has no standing to appeal.” Weldon.  Because Amen did not have standing to appeal, his appeal was dismissed.

Factual Background:

In 1997, the settlor, Stephen M. Gunther, established the Stephen M. Gunther Revocable Living Trust and named J. Barry Gunther as the initial trustee.  In 2006, the settlor amended the trust, naming himself as the trustee and changed the residuary beneficiary upon his death to his then-living descendants, subject to a contingent trust for any beneficiaries under the age of 25.  The settlor died in March 2009, leaving his wife, Angel, and two minor children beneficiaries.  One year after the settlor’s death, the beneficiaries filed a petition for accounting. They sought accounting of the trust from its inception on 1997 until its amendment in 2006 and from settlor’s death to date.                    

St. Louis County Circuit Court, J. Ross, Held:

The trial court concluded that the trustee had no fiduciary relationship with the beneficiaries before the settlor’s death, and therefore, the beneficiaries were not entitled to an accounting of trust transactions prior to that date.  Summary judgment was awarded against the plaintiff beneficiaries and in favor of the defendant trustee.  The beneficiaries appealed.

Court of Appeals, J. Mooney, Held:

Affirmed.  While finding no Missouri case addressing the precise question of whether the beneficiaries are entitled to an accounting covering the years the settlor was alive, the Court looked to Section 456.6-603.1 of the Missouri Uniform Trust Code which provides, “while a trust is revocable and the settlor has capacity to revoke the trust, rights of the beneficiaries are subject to the control of, and the duties of the trustee are owed exclusively to, the settlor.”  Therefore, while a trust is revocable, all rights that beneficiaries would otherwise possess are subject to settlor’s control.

While pointing out it has no precedential value, the reasoning in the Alabama case of  Ex parte Synovus Trust Co., 41 So.3d 70, 74 (Ala. 2009) was found to be persuasive in this case as well.  In Synovus, the parents, who were settlors and beneficiaries of two revocable trusts, and their children, who were also beneficiaries of the two trusts, sued the trustee and other defendants for breach of fiduciary duty and other claims.  The Alabama Court found that regardless of whether the children had suffered injuries to their rights as trust beneficiaries, the defendants owed duties exclusively to the settlors/parents during this time.

Similarly in this case, the Court found the trial court was correct in determining the trustee had no fiduciary relationship with the beneficiaries until settlor’s death, and thus, owed no duty to the beneficiaries to give them an accounting before that date.

Factual Background:

Brother and Siblings were beneficiaries of a trust.  Brother filed a petition seeking an accounting, removal of one sibling as trustee, and appointment of a new trustee.  The parties attended a mediation and agreed to a settlement whereby $475,000 and a ranch would be given to Brother in exchange for giving up all further interest in the trust.  Siblings gave brother title to the ranch and were prepared to give him the money upon execution of formal settlement documents.  Brother never executed the documents.

Siblings filed a petition for specific performance to enforce the settlement and Brother counterclaimed for his initial demands.  Brother filed a motion to dismiss the Siblings’ petition; the motion was denied.  Siblings then filed a motion for summary judgment on their specific performance claim.

St. Louis County Circuit Court, Whittington, J., Held:

The court granted Siblings’ motion for summary judgment.  Brother appealed.

Court of Appeals, Romines, J., Held:

Affirmed.  Brother argued the trial court erred in denying his motion to dismiss the petition for specific performance.  First, he argued that because the trial court dismissed the underlying suit without prejudice, the settlement agreement was no longer valid.  However, no authority suggests a valid agreement is nullified merely by a dismissal without prejudice.  In fact, Rule 67.01 specifically permits bringing another action to enforce an agreement.

Second, Brother argued Siblings abandoned the settlement agreement by requesting additional terms or it was improper because the terms of the settlement were disputed.  However, the facts show Siblings intended to be further bound by the settlement upon formal execution of the settlement.  Further, while the settlement did not specify whether the $475,000 would come from the trust or one of the siblings, this does not render the entire settlement unenforceable.  The court can supply this missing provision by reviewing the evidence in record.