Opinion
No. 106,812.
2013-02-15
Dwayne NELSEN, Appellee, v. David L. NELSEN, Trustee, Annabelle L. Nelsen Revocable Trust, Appellant.
Appeal from Cheyenne District Court; Scott Showalter, Judge. Jeffery A. Mason, of Vignery & Mason L.L.C., of Goodland, for appellant. Edward C. Hageman and Danielle N. Muir, of Edward C. Hageman, P.A ., of Stockton, for appellee.
Appeal from Cheyenne District Court; Scott Showalter, Judge.
Jeffery A. Mason, of Vignery & Mason L.L.C., of Goodland, for appellant. Edward C. Hageman and Danielle N. Muir, of Edward C. Hageman, P.A ., of Stockton, for appellee.
Before McANANY, P.J., BUSER and STANDRIDGE, JJ.
MEMORANDUM OPINION
PER CURIAM.
David L. Nelsen (David), a trustee and beneficiary of the Annabelle L. Nelsen Revocable Trust (Trust), appeals a decision in this action brought by another beneficiary, Dwayne Nelsen (Dwayne). Finding David had violated his fiduciary duties, the district court removed him as trustee and ordered him to reimburse the Trust. We affirm in part, reverse in part, and remand with directions.
Factual and Procedural Background
On July 24, 2007, Annabelle L. Nelsen (Annabelle) placed all of her property in the Trust. This property included three quarter sections of farm land (with a house on one quarter section) and a house and steel shed in Bird City. Annabelle named herself and David, one of her three surviving sons, as trustees.
The Trust required the farm land to be “distributed” to Annabelle's sons upon her death with each son receiving “[a]n undivided one-third” interest. The house and steel shed in Bird City were to “be sold as soon as practical,” with one-quarter of the proceeds going to each of Annabelle's sons and the remaining one-quarter split between her granddaughters. The Trust required the trustees to “keep accurate books of account ... of all transactions pertaining to the trust estate, and any court of competent jurisdiction may, upon application of ... any beneficiary ... require a formal accounting by the trustees.”
On June 12, 2010, Annabelle died. Subsequently, David did not distribute the farm land as required. On September 14, 2010, Dwayne filed the present lawsuit. As part of the proceedings, on February 11, 2011, Dwayne filed a pretrial questionnaire asking, among other things, for orders requiring David “to immediately distribute [f]arm [l]and to the beneficiaries.” The trial court held a pretrial conference and ordered David to distribute the farm land by February 28, 2011. On March 2, 2011, David transferred Dwayne's interest to him.
At trial on July 21, 2011, however, David maintained the Trust required him to sell the farm land and then to distribute the proceeds. He testified the Trust's direction to sell the house and shed in Bird City also applied to the farm land. David said he had, in fact, sold the farm land, but to buyers who could not secure a loan: “Haven't got it done yet. The government hasn't got them the money yet. They are broke.” There was little testimony regarding this transaction, but David acknowledged he was still living rent free in the house on the farm land.
Before the trial, David sold the house in Bird City for $119,000, more than its appraised value of $100,000. But David allowed his daughter to live in the house for 6 months before the sale. She testified to paying no rent for the first 3 months and $400 per month thereafter.
When David obtained the proceeds from the house in Bird City, he did not pay Dwayne and the other beneficiaries their full shares. David said he withheld proceeds “just to keep some money in the [Trust] account.” David eventually paid Dwayne his full share “in order to keep him off of our back” and “to shut him up to be honest with you.” But David then paid Dwayne less than his full share from a personal property auction while paying himself and his other brother their full shares. David testified that he did so because he had paid Dwayne the full share on the proceeds from the house in Bird City, and “that makes up for the house payments.”
David testified that he retained the proceeds from these sales because “I can't run a place on nothing, keep a farm going on nothing.” David said he was “working” for the Trust “to keep it a going. That's why I'm the trustee, to keep the things a going.” Asked whether he was empowered to “keep the [T]rust alive, keep working as long as you want, keep paying yourself as long as you want,” David responded, “If it's for the benefit of the Trust ... yes, I can do that myself for being trustee.”
David had not sold the steel shed in Bird City by the time of trial. David testified that he intended to purchase the shed with the proceeds of the farm sale. Despite an appraised value of $32,000, David had “put a bid in of [$]26,000.” Dwayne opposed the sale, but David still maintained at trial that he was “not planning to put [the shed] up for auction anyway. It's one of those deals—I made an offer and I hope [Dwayne] takes it so we don't have to go on.”
David produced only handwritten notes to memorialize his actions as Trustee. Dwayne moved to compel discovery, and at the pretrial conference, the trial court ordered David to provide the “supporting documentation, i.e., receipts, invoices, cancelled checks, etc., for all reimbursements [from the Trust] to David ... or any member of his family.” David did not produce these documents until trial, and although they were admitted as Plaintiff's Exhibit 7, David did not include them in the record on appeal.
At trial, David was asked about several entries in his handwritten notes, such as $400 apparently spent on a case for Annabelle's eyeglasses several months after her death. David could not explain his own entry, testifying that “[e]ver since I had West Nile I'm not the same. My wife says, no, that's not the way it is. So I'm not going to answer that is eyeglasses you want the bottom of it ask her [ sic ], she remembers more than I do.” After a recess, David testified: “That's $400.00 cash I had in an eyeglass case that I carried with me.” David testified that he typically withdrew Trust funds by writing checks to cash and keeping the cash in envelops for use as needed. In context, the $400 in the case were Trust funds.
The testimony indicated that David had taken more than $30,000 from the Trust by the time of trial, a large portion of it as payments to himself and to his family for work they allegedly performed. For example, David paid himself for dozens of hours of work he claimed that he had performed at the steel shed. His handwritten notes recorded only the number of hours worked, however, with no description of the work performed. Testimony indicated that some of the time was spent moving items to or from the shed for later sale at a personal property auction. But it appears David also charged the Trust for work performed on the shed itself in preparation for an auction of the structure.
The $30,000 amount apparently also included payments for supplies, such as David's gasoline, which he justified by stating, “When I drive to town it's for the [Trust].” Asked, “Is there anything you do that isn't for the [Trust],” David responded, “In the last year and a half I would say just absolutely about nothing.” Asked if he had another source of income, David identified only odd jobs and unemployment or disability payments. Asked on two occasions for the total amount he had taken from the Trust, David testified he did not know.
In a discussion with counsel after presentation of the evidence, the trial court asked Dwayne's counsel about the amounts David had paid himself and his family. Dwayne's counsel was willing to concede any amount paid before Annabelle's death, but “[p]ost death the Trust becomes irrevocable and he's bound by certain duties.” The trial court, therefore, ordered both counsel to submit the amounts they believed were at issue in this litigation. No submissions are in the record, and the trial court's docketing statement does not reference them. In a letter submitted after oral arguments to this court, however, counsel informed us that submissions were indeed made by both counsel.
The trial court held David's “decision to sell estate property for less than the appraised value at private auction to himself is not authorized by law or equity.” It found David had “delayed the transfer of property to increase the amount of income he would receive from the [T]rust.” The trial court also found David's claim of “nearly [$]33,000 in expenses for an estate valued at approximately $200,000 is not justified by the testimony presented. The normal expected administration expenses should be substantially less.” It found David's failure to provide “an acceptable accounting” made it “impossible to justify fully the amounts claimed ... in the administration of the [T]rust.” Nevertheless, the trial court found—without further explanation—that “funds were improperly taken from the [Trust] in the amount of $21,000.”
The trial court removed David as trustee and appointed an attorney in his place. The trial court ordered the steel shed to be sold “either at its appraised value or at public auction.” The trial court forbade further payment to David or his family in preparing the shed for auction, and it ordered a $21,000 reduction in David's share of the proceeds from the sale of the shed and the farm land for the “amount owed to the [T]rust.”
David filed a “Motion for Reconsideration; Motion for New Trial and Amendment of Judgment; Motion for Findings Pursuant to K.S.A. 60–252(b).” David contended in part that “[u]nder K.S.A. 60–252(b), the reasons for the decision of the court are not sufficiently specific. Under the Findings of Fact, it is impossible to determine how the court arrived at a calculation of the $33,000.00.” David contended further that “[u]nder Supreme Court Rule No. 165, the controlling facts are not sufficiently set forth by the court in order to justify the Findings of Fact and Conclusions of Law reached by the court.”
The trial court denied the motion without a hearing. It stated its findings were sufficient, though the court specifically found David “failed to make an appropriate accounting of costs to the [Trust] and has denied [ sic ] his full claim of expenses and costs.” David appeals.
Analysis
David contends the district court abused its discretion by (1) finding he violated his fiduciary duties, (2) removing him as trustee, and (3) finding he overcharged the Trust by $21,000 and ordering reimbursement.
In considering this matter we are guided by our standards of review. The district court's findings of fact are reviewed for substantial competent evidence. See In re Hjersted Revocable Trust, 35 Kan.App.2d 799, 804, 135 P.3d 192,rev. denied 282 Kan. 789 (2006). The district court's conclusions of law, including interpretation of the Trust instrument and the relevant statutes, are reviewed de novo. See Godley v. Valley View State Bank, 277 Kan. 736, 741, 89 P.3d 595 (2004); In re Hjersted Revocable Trust, 35 Kan.App.2d at 803–04. The district court's ultimate actions, such as removing David as trustee, are reviewed for abuse of discretion. See Rodriguez–Tocker v. Estate of Tocker, 35 Kan.App.2d 15, 34–35, 129 P.3d 586,rev. denied 281 Kan. 1379 (2006); In re Estate of Petesch, 31 Kan.App.2d 241, Syl. ¶ 2, 62 P.3d 674 (2003); Burch v. Dodge, 4 Kan.App.2d 503, Syl. ¶ 7, 608 P.2d 1032 (1980).
The Trust purported to give David “all the rights, privileges, powers, discretions, and immunities conferred by the Uniform Trustees Powers Act of the State of Kansas in effect at the time of the execution of this Agreement.” That act was repealed 4 1/2 years before the execution of the Trust. See L.2002, ch. 133, secs. 93–94. Under the successor act, the Kansas Uniform Trust Code, 58a–101 et seq., David was bound to “administer the trust in good faith, in accordance with its terms and purposes and the interests of the beneficiaries, and in accordance with this code.” K.S.A. 58a–801. “[T]he primary objective of trust law is to carry out the settlor's intent.” Godley, 277 Kan. at 741.
Violation of Fiduciary Duties
David contends he did not violate certain provisions of the Trust. The trial court generally found that David had delayed execution so he and his family could turn the Trust property to their own use. David claims the delay was occasioned by worry over possible probate filings, the same argument he raised before the district court. But on appeal, David does not cite evidence supporting his position, and we may presume it is unsupported by the record. Supreme Court Rule 6.02(d) (2011 Kan. Ct. R. Annot. 39).
Our independent review of the record also located no evidence that David was motivated by worry over possible probate filings. Instead, substantial evidence supported the trial court's finding that David had failed to administer the Trust “solely in the interests of the beneficiaries.” K.S.A. 58a–802(a). For example, David lived rent free in the farm house and billed the Trust for his gasoline when driving to town. His daughter lived rent free or at a reduced rent in the Bird City house. David withheld payments to beneficiaries while he and his family continued to bill the Trust for work allegedly performed, accumulating payments the trial court found were significantly out of proportion to the Trust's value. David generally asserts the payments were justified, but the trial court's findings to the contrary were adequately supported.
The clearest example of David's violation of his fiduciary duties was his attempted self-dealing regarding the steel shed. This conduct was uncontroverted and, as the trial court noted, was unsupported by law or equity. See K.S.A. 58a–802(b); Rodriguez–Tocker, 35 Kan.App.2d at 34. Inexplicably, David does not address this matter on appeal, which we deem a waiver of the point on appeal. See Manhattan Ice & Cold Storage v. City of Manhattan, 294 Kan. 60, 71, 274 P.3d 609 (2012).
The trial court's findings that David did not keep accurate books or provide an adequate accounting are also supported by substantial evidence. These were duties explicitly set out in the Trust and were also required by Kansas law. See K.S.A. 58a–810(a); K.S.A. 58a–813. David argues he “has kept records he can explain to anyone,” but that was not the case at trial. He could not explain the entry suggesting a $400 eyeglasses case, for example.
Other examples of shoddy record keeping included David's handwritten notes from January 2011, which showed 50.5 hours of work at the steel shed. Asked about these hours at trial, David did not specifically describe what work he had performed. David's handwritten notes from March 2011 showed 51 hours of work “in town,” and when asked “[a]gain do you have anything to substantiate how all those hours are benefiting the [T]rust,” he answered merely, “If I spent it in town. I was working for the Trust.” Asked whether “there was some reason you didn't provide the detail to show to the ... beneficiaries what it was [you] were doing and how it benefited the trust,” David answered: “Cause I'm not a certified account [ sic ], I guess, I don't know.”
This last response was inconsistent with the Trust provisions which required “accurate” books of account and with Kansas law which required “adequate records of the administration of the trust .” K.S.A. 58a–810(a). David's handwritten notes were too vague to be considered accurate or adequate without further proof. But David could not provide a sufficient explanation at trial or point to supporting documents collected in Plaintiff's Exhibit 7 for support. Judging from the record as it exists, the trial court's findings regarding a breach of fiduciary duty were well supported. And without the inclusion of Plaintiffs Exhibit 7 in the record, David has not met his burden of designating a record affirmatively showing the trial court erred. See National Bank of Andover v. Kansas Bankers Surety Co., 290 Kan. 247, 283, 225 P.3d 707 (2010).
Removal as Trustee
David contends the trial court erred by removing him as trustee. He claims he “has not breached any provision of the Trust[,] ... has not breached any duty to any beneficiaries,” but has instead “attempted to follow the terms of the [T]rust in an ‘expeditious' manner, under the circumstances he has found himself.” The trial court found otherwise and, as already described, its findings are either supported by substantial evidence or are impossible to review due to an inadequate record.
Other testimony supported the trial court's decision. David showed his inability or unwillingness to read and comply with the Trust document when he asserted a duty to sell the farm land and distribute the proceeds. He also failed to follow court orders in a timely manner regarding the distribution of the farm land and the production of Plaintiff's Exhibit 7.
The trial court was empowered to remove David for “a breach of trust” or “because of unfitness, unwillingness, or persistent failure of the trustee to administer the trust effectively.” K.S.A. 58a–706(b)(l) and (3). A decision to remove a trustee is “designed to protect the [Trust] rather than punish the [Trustee].” Rodriguez–Toeker, 35 Kan.App.2d at 35. As noted earlier, we review this particular issue using an abuse of discretion standard. 35 Kan.App.2d at 34–35. Considering all the evidence, including the numerous admissions by David to actions inconsistent with his fiduciary duties, a reasonable person could agree that the trial court did not abuse its discretion in removing David as trustee.
Inadequate Findings
David contends it “is impossible to determine the basis upon which the Court made its determination that D[avid] violated his fiduciary duties as trustee ... warranting an order of the court requiring $21,000.00 to be repaid to the trust.” He also contends the trial court erred by denying his posttrial motion for additional findings.
Findings are controlled by K.S.A. 60–252 and Supreme Court Rule 165 (2011 Kan. Ct. R. Annot. 246), which “require that trial judges state ... the controlling facts.” In re Marriage of Bradley, 258 Kan. 39, 46, 899 P.2d 471 (1995). The “rules requiring more specific findings” are “ ‘designed as an aid to the integrity of the decision’ “ and are “ ‘for the benefit of this court in facilitating appellate review.’ [Citations omitted.]” 258 Kan. at 47.
On this record, we are unable to evaluate the trial court's finding that $21,000 was improperly taken from the Trust. This is partly due to the omission of Plaintiff's Exhibit 7 and the posttrial submissions from the record on appeal. But even if these items were included, we could not determine the trial court's reasoning behind its finding regarding the $21,000 improperly taken from the Trust. Accordingly, we conclude the trial court erred in denying David's posttrial motion for additional findings. We affirm all of the trial court's other rulings, including its decision to order reimbursement, but we reverse and vacate the amount of the reimbursement and remand for additional findings regarding the proper amount of reimbursement.
Affirmed in part, reversed in part, and remanded with directions.