Bell v. Jefferson
| Decision Date | 31 March 2021 |
| Docket Number | Civil Action No. 5:18-CV-32-CHB |
| Parties | MAC ROLLINS BELL, et al. Plaintiffs, v. CHRISTINA BELL JEFFERSON, as Executrix of the Estate of Carol S. Bell, Defendant. |
| Court | U.S. District Court — Eastern District of Kentucky |
This matter is before the Court on the Motion for Summary Judgment by Defendant Christina Bell Jefferson, as Executrix of the Estate of Carol S. Bell, in which Defendant challenges the timeliness of Plaintiffs' claims, [R. 50]. Plaintiffs Mac Rollins Bell and Richard McMurtry Bell filed a Response, [R. 51], and Defendant filed a Reply, [R. 52]. Also before the Court is Defendant's Second Motion for Summary Judgment, filed after the close of discovery and concerning the merits of Plaintiffs' claims, [R. 61]. Plaintiffs also filed a response to that motion, [R. 72], and Defendant filed a reply, [R. 79]. For the reasons set forth below, the Court will deny Defendant's first Motion for Summary Judgment, [R. 50], and deny in part and grant in part Defendant's Second Motion for Summary Judgment, [R. 61].
Many of the facts central to this motion are undisputed. Carol S. "Macky" Bell's mother, Kathryn Staton, and uncle, Richard McMurtry, owned seven tracts of land in Harrison County, Kentucky (hereinafter, "the Family Farm"). In Richard's will, he devised a life estate in his portion of the Family Farm to Kathryn, his sister. Richard's will provided that, upon Kathryn's death, Macky Bell would hold a life estate in the Family Farm, with her sons, Plaintiffs Mac Rollins Bell ("Mac Bell") and Richard McMurtry Bell ("Rick Bell"), holding a remainder interest. Kathryn's will similarly devised her interest in the Family Farm to Macky Bell for life, with the remainder to Mac and Rick Bell.
Richard died in 1980, at which point Kathryn possessed a life estate interest in Richard's portion of the Family Farm. Several years later, on July 3, 1997, Kathryn executed a contract for the auction of the Family Farm. [R. 50-2] The auction occurred on December 4, 1997, and sale contracts were executed for the seven tracts of land comprising the Family Farm on December 6, 1997. [R. 50-8] Shortly thereafter, Kathryn passed away. At this point, by virtue of the wills of Kathryn and Richard, Macky Bell held a life estate interest in the entirety of the Family Farm, and Mac and Rick Bell held remainder interests. [R. 38, p. 68]
Pursuant to the sale contracts, deeds of sale were executed and signed by Macky Bell and her husband, on January 12, 1998; Rick Bell and his wife on January 13, 1998; and Mac Bell on January 16, 1998. Later that month, the closings occurred. [R. 50-4]
The sale of the Family Farm netted proceeds of roughly $730,000. Plaintiffs claim, and Defendant agrees, that the proceeds were deposited directly into an Edward Jones account, No. 58304242 (hereinafter, "the Farm Account"). See [R. 51, p. 2]; [R. 50, p. 3]. It is undisputed that the approximately $730,000 deposited into the Farm Account represented the cash proceeds from the sale of Macky Bell's life estate and Plaintiffs' remainder interests in the Family Farm. The Farm Account was titled solely in Macky Bell's name, but the account bore the subtitle "Carol S. Bell Attn U/W of Kathryn M. Staton & Richard M. McMurtry." See, e.g., [R. 50-5; R. 50-6]. Similarly, the addressee listed on the account was "Carol S. Bell Attn U/W of Kathryn M. Staton & Richard M. McMurtry." [R. 38, p. 49] On some Edward Jones documents, it was also informally labeled as "Bell, Macky - Farm." See, e.g., [R. 61-6; R. 61-8].
Macky Bell and her husband (now deceased) also opened other accounts with Edward Jones around this time, including an account for their personal funds. [R. 38, p. 35] Though Macky Bell lived in North Carolina, her Edward Jones accounts, including the Farm Account, were managed by an Edward Jones branch located in Cynthiana, Kentucky. Id. at 26. After her husband died (and prior to the appointment of any powers of attorney), Macky Bell solely directed all transactions related to the accounts, including the Farm Account, through her financial advisor, Mark Trachsel, who worked at the Edward Jones Cynthiana branch. See generally, id. at 26-41.
Rick Bell testified that he and Mac Bell "firmly believed" that the funds in the Farm Account were their assets. [R. 38, pp. 79-80] A 1099-S form shows that Rick Bell claimed $260,609.00, or approximately one-third of the sale proceeds, as gross income on his 1998 taxes. [R. 72-1]. Rick also testified that he believed he and Mac Bell were the beneficiaries of the Farm Account and were listed as powers of attorney on the account at the time it was created in 1998. Id. at 83-84. This assumption was based on his own recollection and conversations with the financial advisor, but he admitted that he might have been mistaken. Id. at 90-91. There is no evidence that either son was listed as a beneficiary or attorney-in-fact at that time.
By no later than August 11, 2005, the parties executed a Power of Attorney Agreement. [R. 61-6] A few days later, the parties executed a Power of Attorney Affidavit & Indemnification Form for Edward Jones—specifically, for the Farm Account. [R. 61-7] In it, Macky Bell confirmed that Mac and Rick Bell were authorized "to give Edward Jones instructions regarding my account, including the authority to buy, sell, exchange, assign and otherwise trade securities in my account." Id. Macky Bell, Mac Bell, and Rick Bell each signed the Affidavit and Indemnification Form. Id. Later, on February 18, 2011, Macky Bell executed a Transfer onDeath Form, in which she designated Mac and Rick Bell as the beneficiaries of the Farm Account upon her death. [R. 61-8]
Throughout this time, from approximately January 1998 through November 2016, the Farm Account grew steadily. Macky regularly withdrew some funds from the account, but the bulk of the account remained intact. Her financial advisor, Trachsel, testified that funds from the Farm Account were regularly transferred to Macky Bell's bank account or her other Edward Jones account. [R. 38, pp. 54-55] He testified that the regularly transferred funds represented the "earnings," or interest, from the Farm Account, which was used for Macky Bell's expenses or savings. Id. at 55, 57. He explained that most of the income from the investment account was transferred to Macky Bell's personal accounts over the years, but the Farm Account grew in other ways. Id. at 57. By 2016, the Farm Account held over one million dollars. Id.
Though the Farm Account grew steadily from 1998 to 2016, there is no evidence that Mac or Rick Bell made any demand for payment from the account during that time. Id. at 84. Rick Bell testified that he never made any demand to have the account changed in any way. Id. at 84. However, after being granted powers of attorney, the two sons were active in the management of the account, frequently speaking with Trachsel, the financial advisor. Id. at 32. Trachsel testified that he worked with Mac and Rick Bell only in their capacities as attorneys-in-fact, and he could not recall talking with them on an issue without also talking to Macky Bell. Id.
Sometime in 2016, Macky Bell and her two sons had a falling out. On November 1, 2016, Macky revoked the 2005 Power of Attorney Agreement and completed a new agreement listing Christina Bell Jefferson (Rick Bell's daughter and Mac Bell's niece) as her power of attorney. [R. 61-9] She also contacted Trachsel and directed him to move her Edward Jones accounts, including the Farm Account, to an Edward Jones branch in North Carolina. [R. 38, pp. 40, 98]Shortly thereafter, on January 13, 2017, Macky Bell revoked the February 2011 Transfer of Death Form designating Mac and Rick Bell as the beneficiaries of her account. [R. 61-10] As a result of these actions, Mac and Rick Bell could no longer access the Farm Account. Edward Jones statements from this time period indicate that the account funds decreased dramatically, from approximately $1,045,730.77 in February 2017, [R. 72-9], to approximately $626,201.57 in March 2017, [R. 72-10]. In July 2017, Mac and Rick Bell requested an accounting of the funds in the Farm Account, but their request was denied. [R. 2-4]
Soon after, on August 31, 2017, Mac and Rick Bell filed suit against Macky Bell1 in Harrison Circuit Court, asserting claims of conversion (Count I), breach of fiduciary duty in connection with a joint venture (Count II), and breach of fiduciary duty in connection with a constructive trust (Count III). [R. 1-1] On January 5, 2018, Macky removed the case to this Court, invoking the Court's diversity jurisdiction. [R. 1] That same day, Macky filed a Motion to Dismiss, arguing lack of personal jurisdiction. [R. 2] On September 3, 2018, before the Court ruled on the Motion to Dismiss, Macky Bell passed away. [R. 9] Christina Bell Jefferson, Executrix of the Estate of Carol S. Bell, was eventually substituted as a defendant, in lieu of the original defendant, Macky Bell. [R. 23] On July 10, 2019, the Court conducted an evidentiary hearing on the Motion to Dismiss. [R. 31] It later issued a Memorandum Opinion and Order denying the motion. [R. 32]
On June 10, 2020, Defendant filed her first Motion for Summary Judgment, arguing that each of Plaintiffs' claims must be dismissed as untimely. [R. 50] On this point, the parties agree to the applicable statutes of limitations: two years for a conversion claim under KRS § 413.125;five years for a breach of fiduciary duty under KRS § 413.120(6); and five years for a constructive trust under KRS § 413.120(11). [R. 51, p. 3] However, the parties disagree about when each cause of action accrued. Defendant argues that each of these causes of action accrued in 1998, when the sale proceeds were transferred into Macky Bell's Edward Jones account. In response, Plaintiffs argue that their causes of action accrued no earlier than 2016, when ...
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