145 F.3d 1187 (10th Cir. 1998), 97-3073, Wetherill v. Bank IV Kansas, N.A.
|Citation:||145 F.3d 1187|
|Party Name:||Leo G. WETHERILL, II, Christopher Wetherill, Patricia Wetherill Baumgartner, Leigh Wetherill Bogardus, Phillip John Bogardus and Katherine Bogardus, Plaintiffs-Appellants, v. BANK IV KANSAS, N.A., Defendant-Appellee.|
|Case Date:||May 28, 1998|
|Court:||United States Courts of Appeals, Court of Appeals for the Tenth Circuit|
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Dan C. Sanders of Gepford, Monaco & Sanders, L.C., Kansas City, Missouri, for Plaintiffs-Appellants.
James J. Roddy (Bruce E. Baty with him on brief), of Morrison & Hecker, L.L.P., Kansas City, Missouri, for Defendant-Appellee.
Before PORFILIO and EBEL, Circuit Judges, and BRETT, District Judge. [*]
BRETT, Senior United States District Judge.
Beneficiaries of six inter vivos trusts ("beneficiaries"), appeal an order of the United States District Court for the District of Kansas granting summary judgment to Bank IV Kansas ("Bank IV"), on beneficiaries' action to recover monies (and lost income) wrongfully converted from their bank trust fund accounts by the trustee, Gary Leitner. Beneficiaries sought to hold Bank IV liable for their losses based on theories of negligence, conversion, breach of fiduciary duties and commercially unreasonable conduct and bad faith. The district court found the beneficiaries failed to establish a prima facie case against Bank IV. We exercise jurisdiction under 28 U.S.C. § 1291, and affirm.
On February 15, 1985, Leo Wetherill ("Wetherill") established four irrevocable trusts, one for each of his four adult children. Attorney Thomas C. Brown ("Brown") was retained to create the trust instruments and was also appointed trustee. Brown served in this position from the inception of the trusts until his resignation, at Wetherill's request, on September 4, 1987, effective November 4, 1987. At that time, attorney Gary Leitner ("Leitner") was named successor trustee for the four trusts. Leitner had become a trusted advisor to Wetherill while serving as corporate secretary and providing corporate accounting services to Wetherill's corporation, LGW Resources, Inc., ("LGW") for several years prior to his appointment as trustee. 1
Following Leitner's appointment, two additional irrevocable trusts were established in 1988 and 1990, shortly after the births of Wetherill's grandson and granddaughter, respectively, naming the newly-born grandchildren as beneficiaries. Leitner was named trustee of these two trusts as well. The terms and conditions of all six trusts, for purposes of this litigation, are essentially the same.
The six trust instruments authorized Leitner "in [his] fiduciary capacity, to exercise all powers in the management of the trust fund which any individual could exercise in his own right, upon such terms and conditions as [he] may deem best." In January of 1989, acting pursuant to his authority under the trusts, Leitner opened five money market accounts at Bank IV, one for each of the then existing trust beneficiaries. A sixth money market account was opened with Bank IV in 1990. 2 In keeping with Bank IV policy requiring individuals seeking to open bank accounts as trustee of a trust to provide a copy of the trust instrument, Leitner provided a copy of each of the irrevocable trust agreements, which indicated his authority to open and maintain such accounts.
Leitner requested that the accounts be maintained in his name, as trustee, and that all monthly bank statements be sent to his personal residence in Kansas. Bank IV complied with these requests. Leitner was the sole signatory on all of the accounts and had authority to sign checks, withdraw funds, and approve telephone transfers of funds. Bank IV acted only as the depository of the trust funds and did not act in any official fiduciary capacity regarding the trusts. Wetherill was aware of and acquiesced in these arrangements.
Wetherill established each of the six trusts for his children and grandchildren as part of his overall estate planning. Wetherill anticipated and intended that his children and grandchildren would not begin drawing on the trusts' principal and income until after his death. Accordingly, Wetherill neither provided copies of the trust agreements or bank statements nor discussed the trust assets or the specific terms of the trusts with the beneficiaries. Wetherill had placed restrictions in the trust agreements limiting withdrawals by the beneficiaries to an amount equal to or less than a year's contribution to the trusts.
The beneficiaries' knowledge of the trusts was generally limited to the fact that attorney Brown had set up the trusts for them on behalf of Wetherill as part of his estate planning, and that, in 1987, Wetherill appointed Leitner as successor trustee. The beneficiaries were unaware of the terms of the trusts, the nature and extent of the trust assets, and the conditions under which they were entitled to receive trust funds. The beneficiaries did not meet with either Brown or Leitner concerning the trusts.
On at least four occasions between 1986 and August 1992, Leigh Wetherill Bogardus ("Bogardus") inquired of Wetherill concerning the parameters of the three trusts of which she and her two children were beneficiaries and what contributions were being made to them. In response to her inquiries, Wetherill stated he would instruct Leitner to provide her with an accounting of each of the three trusts, as well as copies of those trust documents. She was given various excuses why Leitner had not had time to provide the requested information but never received an accounting nor any of the documents.
Leitner did discuss the status of the trust accounts with Wetherill several times a year beginning in 1988, always representing he was receiving a very favorable rate of return. In 1992, Leitner advised Wetherill that the funds had been invested in certificates of deposit earning ten percent (10%) interest. Leitner further convinced Wetherill that it would be unwise to send account statements to any of the beneficiaries. Neither Wetherill nor the beneficiaries contacted Bank IV concerning the trust accounts.
Wetherill made annual contributions in the amount of $10,000 to each of the six trusts by delivering personal checks to Leitner payable either to the individual trusts or to Leitner as trustee. Leitner would deposit the checks in the appropriate trust accounts. During an approximate three-year period, from on or about...
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