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Probate and Trust Law

Dawn T. Christoffersen, Esquire
Bhavik R. Patel, Esquire 

Joan M. Grasso appeals a summary judgment which ruled that her indebtedness offset her cash distributive share of a trust of which she was a beneficiary.  In re the Matter of: Bruce G. Robert QTIP Marital Trust v. Grasso, No. 93836 (Mo. App. E.D., December 28, 2010), Odenwald, P.J.
Bruce G. Robert established a QTIP Marital Trust funded with stock of his company and named their 10 children as beneficiaries after his wife's death.  After Bruce's death, his wife sold the stock to their 10 children for non-recourse promissory notes.  The stock was held by the trust as security until the notes were paid off, and if the required payment was not made the stock was redeemed in the amount sufficient to make the payment.  Most children made payments, but Grasso did not.  When the wife died, Grasso also had the largest outstanding balance.  The trustees decided to terminate the trust with a cash distribution to each beneficiary, the notes forgiven, and stock released to them, all of which took into account the amount of indebtedness.  Ultimately the distribution gave Grasso no cash.  The trustees filed petition to distribute under those terms and the nine children filed a motion for summary judgment in support of that petition.  However, Grasso filed a cross-motion for summary judgment seeking denial of the plan.  Trial court granted the nine children's motion and Grasso filed a motion to reconsider, which was denied.  Grasso appealed. 
Held: Affirmed.  Grasso claims that the testator's intent of "equal distributions", the spendthrift provision and the non-recourse provision of the trust would not allow any offset.  She first asserts the "equal distribution" clause of the trust does not allow her to receive nothing from the distribution.  The appellate court looks to the document and finds that the trust provides the trustees with discretionary authority regarding the distribution.  As such, courts will ordinarily not interfere with trustees' exercise of that discretion unless to prevent abuse.  Oksner v. Jaco, 646 S.W.2d 285, 286-87 (Mo. App. E.D., 1983).  Here, the trustees' decision was in good faith and within the estate plan of Bruce Robert.  Grasso's second argument is that the spendthrift provision does not allow her interest to be pledged as security for the loan given to her.  Here, the court applies the doctrine of equitable retainer to offset her share where she is indebted.  See In re Lietman's Estate, 50 S.W. 307, 309 (Mo., 1899); Restatement (Second) of Trusts, Section 255. The Missouri Uniform Trust Code allows loans out of trust property to beneficiaries that are fair and reasonable which give the trustee a lien on future disbursements for repayment.. Sections 456.1-105.1, 456.8-816(18), RSMo.  Additionally, security for the loan "may consist of a charge on the beneficiary's interest in the trust."  Section 456.8-816 (18 and 19) Comment, RSMo.  The Comment does not address a spendthrift provision in the trust document, but the Restatement allows it.  Grasso's final argument was that of valuation and the court denies it as they find Grasso had admitted her balance and value on the record.

Eldon Bugg appeals a judgment of res judicata against him.  Bugg v. Rutter, No. 72292 (Mo. App. W.D., December 14, 2010), Mitchell, P.J.
Respondent James Rutter, as conservator for Laura Downs, filed for discovery of assets against Eldon Bugg, as co-trustee and beneficiary of a trust.  The court found Bugg was wrongfully in possession of a note and gave judgment accordingly.  Bugg appealed and lost.  Downs died, so the conservatorship ended and had no ability to enforce judgment. The estate, through personal representative Rutter and the Estate's attorney Jean Goldstein, then filed the same suit against Bugg and judgment was rendered.  Bugg appealed, lost, and fees were awarded to the estate.  The estate filed a motion for contempt, because Bugg did not pay the money owed, and the court issued a judgment for civil contempt and an order of commitment.  Bugg appealed, and the judgment was reversed because the court lacked authority.  Bugg then filed a complaint in Federal District Court against Respondents for federal civil rights conspiracy, state common law torts, and other state law actions.  The Respondents submitted a motion to dismiss.The district court granted it, dismissing the case "in its entirety."  Bugg then filed this case in the state circuit court against Respondents for claims similar to those raised in the federal case.  Respondents filed a motion to dismiss stating the claims are barred by res judicata and the circuit court granted that motion.  Bugg now appeals. 
Held: Affirmed.  Federal res judicata law is applied in deciding whether a federal judgment precludes a plaintiff from recovering under a petition filed in the state courts of Missouri.  Brown v. Simmons, 270 S.W.3d 508, 512-13 (Mo. App. S.D., 2008).  "Res judicata applies to prevent repetitive suits involving the same cause of action."  Ripplin Shoals Loan Co, LLC v. Army Corps of Eng'rs, 440 F.3d 1038, 1042 (8th Cir. 2006).  The doctrine will bar a suit if the prior judgment (1) was entered by a court of competent jurisdiction; (2) disposed of the same causes of action involved in the second suit; (3) involved the same parties (or those in privity with them) who are involved in the second suit; and (4) constituted a final judgment on the merits. Id.  The plaintiff also must have had a full and fair opportunity to litigate the issues in the prior action.  Brown, 270 S.W.3d at 513.  Additionally, claim preclusion will depend on whether the prior court ruled on substance or procedure.  Semtek Int'l, Inc. v. Lockheed Martin Corp., 531 U.S. 497, 502 (2001).  Here, all elements were found and Bugg was given a full and fair opportunity to litigate and could have appealed the district court which he forwent.  Thus, res judicata applies.

Joyce Stabler appeals a ruling that she has no standing to ask for an accounting by trustees of a revocable trust established by her late husband for health, maintenance, comfort and support.  Stabler v. Stabler, No. 94411 (Mo. App. E.D., November 30, 2010), Baker, J.
Appellant filed a petition against Respondent as trustees and personal representatives claiming she was a beneficiary and that trustees failed to provide her with an accounting.  Additionally, she claimed mismanagement of trust assets, engagement in self-dealing, and unjust enrichment because they benefited from assets that should have been expended by the trust for the health, maintenance, comfort and support for the decedent.  Respondents filed no answer, but filed two motions to dismiss based on lack of standing and failure to state a cause of action against them in their capacity as personal representatives.  The trial court granted both motions on lack of standing. The Appellant now appeals.
Held: Affirmed in part, reversed in part, and remanded.  Appellant's first point was that the court considered evidence outside the pleadings. This was denied as the court found nothing to show the trial judge considered anything not permitted by law.  Appellant's second point, that she has standing,was confirmed and the trial court reversed.  "To have standing to sue, a plaintiff must have an interest.which, if valid, gives plaintiff a right to relief."  Switzer v. Hart, 957 S.W.2d 512, 514 (Mo. App. E.D., 1997).  Where a plaintiff alleges standing as a beneficiary, it can be dismissed only if she is "unable to prove any set of facts which would make [her] a beneficiary."  Id.  A summary judgment mode of analysis is used to find standing.  Id.  Although Respondents claim the trust shows Appellant is not a beneficiary, they failed to include the trust document in the pleadings.  Evidence not included within the pleadings is not considered in determining whether a plaintiff lacked standing.  Breeden v. Hueser, 273 S.W.3d 1, 15 (Mo. App., 2008).  As such, the trial court's dismissal for lack of standing was in error.  However, the trial court's dismissal of Respondents as personal representatives is upheld as the petition does not state any claim against them in that capacity.

Linda Pence, former wife by divorce of decedent, appeals a ruling that Section 474.420 revoked provisions of her joint will with decedent, due to the will having been written prior to the divorce, despite including language such as "not to revoke".  In the Estate of: Ray L. Pence, deceased. Pence v. Haddock, as Personal Representative of the Estate of Ray L. Pence, No. 30378 (Mo. App. S.D., November 30, 2010), Francis, J.
Linda Pence, following the death of her ex-husband, filed for an "Application for Probate of Will" and "Application for Letters Testamentary" of a will she and decedent entered into jointly while married.  Sheila Gay Haddock, decedent's daughter by another marriage, filed to dismiss these applications because Linda had no standing.  Linda claimed that Section 474.155, along with the terms of the will which states the parties are "not to revoke it", show that Section 474.420, calling for the revocation of all provisions in a will toward a divorced spouse, is inapplicable.  The probate division ordered that all provisions were revoked by operation of Section 474.420 and sustained Sheila's motion to dismiss.  Linda now appeals.
Held: Affirmed.  "In construing a statute, the Court must presume the legislature was aware of the state of the law at the time of its enactment."  Nicolai v. City of St. Louis, 762 S.W.2d 423, 426 (Mo. banc, 1988).  As Section 474.420 became effective in 1956 and Section 474.155 in 1981, the court assumes the legislature was aware of the former when enacting the latter.  An exception could have been added, but it was not.  Accordingly, the two sections are not in conflict. 

John Goulding appeals a judgment denying his claims that Bank of America, as trustee, failed to distribute proceeds of the trust according to its terms.  Goulding v. Bank of America, N.A., No. 71446 (Mo. App. W.D., November 30, 2010), Hardwick, J.
John P. Goulding filed a breach of trust action against Bank of America claiming they, as trustee, failed to distribute the trust according its terms.  After the Bank filed a cross motion claiming it properly distributed the proceeds, the circuit court denied the Bank's motion and effectively awarded John his claim.  John then filed an amended petition claiming failed distribution as to another portion of the trust and moved for partial summary judgment as to that portion.  The Bank also moved for partial summary judgment.  The circuit court held the Bank had properly distributed the second portion.  John then filed a motion for reconsideration.  The court denied that Motion and entered Judgment.  John now appeals, claiming the circuit court failed to interpret the trust properly, specifically the words "accrue," "former share" and "respective former share."
Held: Affirmed.  The settlor's intent is controlling.  Blue Ridge Bank and Trust Co. v. McFall, 207 S.W.3d 149, 156 (Mo. App., 2006).  Such intent is determined from the trust agreement as a whole, giving words their usual, ordinary and natural meaning unless the agreement indicates another meaning should be given. Trustees of Green Trails Estate Subdivision v. Marble, 80 S.W.3d 841, 846 (Mo. App., 2002).  Here, based on the trust agreement, the circuit court correctly interpreted the meaning of the words. 

Sandra Lee Kile appealed denial of a motion to void appointment and temporary appointment of guardian and conservatorship, neither of which continued to exist at the time of the motion.  In the matter of: Sandra Lee Kile. Kile v. McGuire, Public Administrator of Dade County, Missouri, No. 30168 (Mo. App. S.D., November 18, 2010), Francis, J.
In 2006, Respondent filed a "Petition for Appointment of a Guardian of the Person and Conservator of the Estate" of Sandra Lee Kile in the probate division of Dade County, as well an "Application for Appointment of Temporary Guardian and Temporary Conservator."  The probate division signed the orders appointing Respondent guardian and conservator over Appellant.  In 2008, a petition for restoration was filed by Appellant and granted with regard to the guardianship, but the conservatorship was left in place.  On June 15, 2009, a petition to approve final settlement and a final settlement were filed.  Such was approved on October 8, 2009.  On October 14, 2009, Appellant filed a motion to void the 2006 temporary appointment and appointment of the Respondent as guardian and conservator.  The motion was denied and Appellant appealed.  Respondent seeks to dismiss as moot and untimely. 
Held: Dismissed as moot and lacking in case or controversy. "A threshold issue in any appellate review of a controversy is the mootness of the controversy."  Armstrong v. Elmore, 990 S.W.2d 62, 64 (Mo. App., 1999).  A cause of action is moot "when the judgment presented for decision seeks a judgment upon some matter which, if the judgment was rendered, would not have any practical effect upon any then existing controversy."  Shelton v. Farr, 996 S.W.2d 541, 543 (Mo. App., 1992).  Appellant is challenging a guardianship/conservatorship that no longer exists and, thus, the appellate court's decision is unnecessary. 

Nancy Almond appeals judgment declaring estate taxes to be paid out of the residuary estate and claims appellate jurisdiction under Section472.160.1.  In the Matter of the Estate of M. Stanley Ginn, Deceased; Almond v. Almond, No. 71554 (Mo. App. W.D., November 9, 2010), Welsh, P.J.
Nancy Almond filed a six count petition for will, construction, asking the court in one count to determine who should pay the estate taxes.  The trial court granted Respondents' motion for judgment on the pleadings and found that the taxes were to be paid from the residuary estate.  Nancy Almond appealed this judgment, claiming jurisdiction under Section 472.160.1.  The Respondents filed a motion to dismiss for lack of jurisdiction, but withdrew it at oral arguments.
Held: Dismissed for lack of jurisdiction.  Although the Respondents withdrew their motion, the court has a duty to determine whether it has jurisdiction to entertain the appeal.  Couch v. W. Sur. (In the Estate of Couch), 920 S.W.2d 165, 167 (Mo. App., 1996).  Generally, orders from the probate division of the circuit court are "interlocutory and not subject to appeal until final disposition of the matters before the court."  Standley v. Standley, 204 S.W.3d 745, 748 (Mo. App., 2006).  However, Section 472.160.1 creates an expedited right to permissively appeal.  In the Estate of Straszynski, 265  S.W.3d 394, 395 (Mo. App., 2008).  Nancy Almond claims the circuit court's refusal to apply equitable apportionment falls into Section 472.160.1 (3) and (13) which allows appeal "on all apportionment among creditors, legatees or distributees" and denial of such apportionment.  However, the action before the circuit court was not an apportionment case, but a will construction and the circuit court merely found the testator's intent to have estate taxes paid from the residuary.  Therefore, the matter is not set forth in Section 472.160 and as this was the only count determined, not all issues were fully determined.  Additionally, for the circuit court to certify appeal of a judgment resolving fewer than all claims, the judgment must expressly state "no just reason for delay." Rule 74.01(b).  Here, no such designation was made.  As the judgment was not final and no exception was present, dismissal for lack of jurisdiction resulted.

Judy Johnson appeals from a judgment denying her unjust enrichment claim against Wesley H. McFarlin's estate.  Johnson v. Estate of Wesley H. McFarlin, Deceased, by and through its duly appointed Personal Representative, Rebecca J. Lindstrom, No. 30149 (Mo. App. S.D., October 7, 2010), Bates, J.
Johnson filed suit against McFarlin's estate, claiming unjust enrichment because she had lived with McFarlin and claimed to have helped purchase the major assets in his estate, such that she should have part ownership in them.  The trial court found against Johnson because she failed to meet her burden of proving she had contributed the funds used to buy the property.
Held: Affirmed.  "To establish the elements of an unjust enrichment claim, the plaintiff must prove that (1) [plaintiff] conferred a benefit on the defendant; (2) the defendant appreciated the benefit; and (3) the defendant accepted and retained the benefit under inequitable and/or unjust circumstances."  Howard v. Turnbull, 316 S.W.3d 431, 436 (Mo. App., 2010).  The claimant has the burden of proving unjust enrichment.  AnchorCentre Partners, Ltd. v. Mercantile Bank, N.A.,803 S.W.2d 23, 32-33 (Mo. banc, 1991).  Here, Johnson does not satisfy that burden and did not give the trial court enough evidentiary bases to conclude that she conferred a benefit on McFarlin.  Therefore, the trial court is affirmed. 

The Estate of Jeffrey A. Houska seeks to make a preliminary writ of prohibition permanent to prevent the trial court from reinstating a claim barred by the statutes of limitation after James T. Panagos, LLC claimed the statute violated he and his companies due process rights.  State ex rel. Houska, Personal Representative of the Estate of Jeffrey A. Houska, Deceased v. The Honorable Ray Dickhaner,  No. 90701 (Mo. banc, October 5, 2010), Price, C.J.
James T. Panagos, LLC brought a claim against Jeffrey A. Houska's estate for payment of completed work over a year after the estate published letters of administration.  The trial court dismissed under Sections 473.444 and 473.360.  Panagos then filed a motion for rehearing to determine if Section 473.444 violated their due process rights. The trial court reinstated the claim under Tulsa ProfessionalCollection Services, Inc. v. Pope, 458 U.S. 478 (1988). The estate now seeks an order prohibiting the trial court from reinstating Panagos' original claim.  A preliminary writ of prohibition was issued.
Held: Preliminary Writ of Prohibition made Permanent.  The Due Process Clause of the Fourteenth Amendment protects the opportunity to participate of interested parties to an action from deprivation by state action.  Panagos argues the statute of limitations violates due process because it does not require actual notice to decedent's creditors before it can begin.  The trial court cited Pope and, here, the Court distinguishes Pope by showing the Oklahoma non-claim statute in that case required intimate involvement by the trial court to implement.  Here, the statute is self-executing and that Supreme Court in Pope explained that with a self executing statute of limitation, the state has no role other than the enactment of the statute.  Pope, 458 U.S. at 486.  Section 473.444 "operates independently of any notice, judicial action or jurisdiction of the probate division to bar claims" Hatfield v. McCluney, 893 S.W.2d 822, 827 (Mo. banc, 1995).  As there is little to no state action, Panagos' due process claim fails.  This holding is consistent with other jurisdictions. 

Kimberly Lynn Nichols and other trust beneficiaries appeal the trial court's judgment on their petition for partition and Joseph Donaldson's counterclaim for quantum meruit for improvements of trust property.  Nichols, v. Donaldson, Individually and as Trustee of the Walter R. Donaldson Revocable Trust, No. 94481 (Mo. App. E.D., September 28, 2010), Sullivan, P.J.
Appellants, as 50/50 beneficiaries with Respondent, filed suit against Respondent, who is trustee, for failing to distribute their 50% interest in the trust real estate following decedent grantor's death.  They sought partition of the real estate in kind, an accounting, and removal of the Respondent as trustee.  Respondent counterclaimed that he was due quantum meruit his expenses in servicing and improving the land.  The trial court ordered the trust property be divided in kind, that Respondent was owed for some expenses he incurred in taking care of the property, that Appellants were due their portion of the rental value plus interest and that Respondent, because of his breach of trustee duties, must pay Appellant's attorney fees.  Appellants appeal the trial court's accounting claiming that the trial court awarded Respondent 100% credit for his expenditures to improve the land but it should be only 50%.
Held: Reversed and remanded. The net income for the property is gross income less the operating expenses. Schindler v. Pepple, 158 S.W.3d 784, 786 (Mo. App. E.D., 2005).  Here, the trial court had done this incorrectly.  The appellate court found gross income by including rents and then subtracting the expenses incurred by Respondent to get net income.  It then split the net income between the parties.  The case was remanded to determine the new cost of attorney fees including the appeal and the new interest charge.

The Missouri Bar Courts Bulletin, 11-Mar