Deutsch v. Wolff, 81296
| Decision Date | 29 June 1999 |
| Docket Number | No. 81296,81296 |
| Citation | 994 S.W.2d 561 |
| Parties | Geraldine DEUTSCH, et al., Respondents, v. Eugene L. WOLFF, et al., Appellants. |
| Court | Missouri Supreme Court |
Mark G. Arnold, Michael H. Wetmore St. Louis, Stephen R. Swofford, Nancy G, Lischer, Chicago, IL, Terese A. Drew, St. Louis, for appellants.
Gerald P. Greiman, Daniel V. Conlisk, St. Louis, for respondents.
The beneficiaries of three trusts established by the will of Marvin Deutsch sued the trustee, Eugene Wolff, and the accountant for the trusts, Alan Wolff. In an extended bench-tried case, the Circuit Court of St. Louis County removed the trustee, disqualified the successor trustee, ordered an accounting, and awarded several money judgments. The trustee and accountant appeal only the money judgments which relate to two of the trusts created by the Deutsch will. This Court granted transfer after an opinion by the court of appeals. Mo. Const. art. V, sec. 10. The judgment is affirmed.
Marvin Deutsch (Settlor) and Eugene Wolff (Trustee) were close personal friends from 1948 until the Settlor's death in May 1972, and were partners in several ventures at the time of the Settlor's death. The Trustee was also a certified public accountant (CPA) and acted as the accountant for the Settlor. In May 1972, the Settlor died unexpectedly. His will created the two testamentary trusts involved in this appeal. It established a marital deduction trust, the Living Trust, for his wife, Geraldine, and the Family Trust for Geraldine and the three children. The Settlor appointed Geraldine and the Trustee as trustees of the Living Trust and the Trustee as sole trustee of the Family Trust. Geraldine Deutsch elected to delegate her responsibilities to the Trustee. The will provided for successor trustees who were attorneys of the law firm that prepared the will. In the event those persons were unwilling or unable to serve, it named Tower Grove Bank & Trust Co.
The will directed the Trustee to distribute income and authorized the Trustee, in his sole and uncontrolled discretion, to encroach upon the principal for the "need, comfort, or welfare of Geraldine" and the "education, need, comfort, welfare, maintenance and support" of the Family Trust beneficiaries. The will authorized the Trustee to "assist a beneficiary in establishing a business, household, or profession." Additionally, the will provided, "Whenever the Trustee shall be required or authorized by the terms of this instrument to make any decision, the Trustee's decision in the absence of fraud shall be final, binding and conclusive on all parties and interests and shall not be subject to review or challenge by any court of equity or law."
The primary original assets of the Living Trust were the Beau Jardin Apartments and the Willowbrook Shopping Center. The primary original assets of the Family Trust were four projects that the Settlor was developing through four partnerships, one for each project. Prior to his death, the Settlor was the managing general partner of each of the four partnerships, and the Trustee owned or claimed ownership in each of the partnerships. The four projects were Whispering Lakes Apartments, Oxford Hill Apartments, Sierra Vista Apartments and Village Green Apartments. Three of the four projects were still in various stages of development at the time of the Settlor's death. The trust owned 70% of Whispering Lakes, and the Trustee personally owned a 5% partnership interest in Whispering Lakes. The trust owned approximately 63% of the Oxford Hill apartments, and the Trustee personally owned at least a 7% interest. The trust owned 48% of the Sierra Vista Apartments, and the Trustee also claimed an ownership interest, but that claim was rejected by the trial court. The trust owned 48% of the Village Green Apartments, and the Trustee claimed an ownership interest, but that claim also was rejected by the trial court. The trial court found that the trust owned additional equitable interests in all but Whispering Lakes.
The Trustee elected to complete the construction of the projects that were incomplete at the time of the Settlor's death. The Trustee used Marvin Deutsch Enterprises (MDE) to complete the projects. MDE was wholly owned and operated by the Family Trust, and the Trustee directed MDE's activities. The Trustee also assumed the Settlor's role as the managing general partner of the apartment partnerships. By 1977, all of the apartment projects were completed. During the remainder of the trust's ownership of the apartments, the Family Trust, directed by the Trustee, oversaw the management of the apartment projects. The trial court found that the Trustee spent "substantial time and effort overseeing the development and management of the apartment partnerships," and that Trustee "deserved substantial credit for the completion, management and ultimate sale of the apartment projects following the [Settlor's] death, which produced the foregoing benefits for the Family Trust."
In 1984, the partnerships sold two of the apartment projects and, in 1985, the remaining two projects were sold for an aggregate of $71,000,000. The Family Trust's share for this interest was at least $23,000,000. For the Living Trust, the Trustee converted 98 of the 182 Beau Jardin Apartment units into condominiums. He gave one unit to an employee of MDE and sold the rest.
The will provided for the compensation of the Trustee. "Any acting Trustee shall be entitled to compensation for his, her, or its services in accordance with such published schedule of fees as shall have been adopted by Tower Grove Bank and Trust Company and in effect at time such services are rendered." There is no dispute that Tower Grove Bank & Trust Co. subsequently became part of Commerce Bank and that the fee schedules of the bank relevant to the determination of the Trustee's fees were published in 1959, revised in 1976, 1983, 1985, 1988 and 1991.
The bank's fee schedule in effect in 1972 provided compensation for: (1) a percentage of principal under management; (2) management or sale of real estate; (3) an additional amount for unusual or special services. The 1976 version permitted: (1) 2% of "gross income collected"; (2) a percentage of principal; (3) "5 % of gross rentals collected (in lieu of percentages of principal and income)"; (4) an additional payment for "unusual, special, or extraordinary services." The 1983 version provided: (1) 4% of income; (2) a percent of principal; (3) 7% of gross rentals; and (4) payment for "unusual, special or extraordinary services." There is no objective standard in any of the schedules by which to measure compensation for unusual, special or extraordinary services. The fee schedules do not expressly mention compensation for a development of assets.
The sums paid or received by the Trustee for the twenty-two years between 1972 and 1993 were for fees, commissions, salary and proceeds of sale as follows:
1. Total Trustee's Fees
Family Trust-- $2,344,447/22=$106,566/year
Living Trust-- $1,274,594/22=$ 57,939/year
$3,802,085 $164,502/year
2. Salary paid by MDE $823,200
3. Proceeds of sales of Trustee's interests in partnerships
$2,288,500
4. Commissions paid by Family Trust on sale of partnership tax losses
$200,000
5. Trustee's personal share of rents the Family Trusts paid a partnership in
which Trustee was a partner
$126,910
Alan Wolff (Accountant) is the son of the Trustee and, like his father, he is a CPA. Accountant provided accounting services for the Trusts from their inception and assisted in calculating the Trustee's fees.
The family believed that over the years, the Trustee collected a greater amount of trustee's fees than the trusts allowed and that the Trustee had collected other payments to which he was not entitled. In 1993, Geraldine and two of the three children beneficiaries, Charles Deutsch and Patricia Deutsch Ginsberg in their capacity as beneficiaries of the trusts, filed suit against the Trustee and the Accountant for repayment of the alleged overpayments. Richard Deutsch, a son and fourth beneficiary of the trusts, is a nominal defendant.
After an extended bench trial that produced over 3,000 pages of transcript and hundreds of exhibits, the trial court entered its judgment for the beneficiaries. The trial court removed the Trustee from acting in that capacity for any of the trusts and disqualified the Accountant from acting as a successor trustee. 1
The court found that the Trustee received a net of $1,511,071 in overpayment of trustee's fees and held the Trustee and the Accountant jointly and severally liable for repayment of that amount to the trusts. The trial court found the Trustee improperly claimed an ownership interest in the sale of Oxford Hill, Sierra Vista, and Village Green and ordered the Trustee to repay the Family Trust $933,396. The trial court found that the Trustee had improperly collected a 10% sales commission on sales of tax losses and ordered the Trustee to repay $200,000. The trial court found the Trustee made a self-interested loan in the amount of $183,224.50 and ordered the Trustee to repay the Family Trust that amount. The trial court found that the Trustee improperly charged the Family Trust for $95,850 of services and ordered the Trustee to repay that amount. The trial court also found that the circumstances of the case warranted a reduction in the Trustee's fees that otherwise would be payable and ordered the Trustee to repay the Living Trust $262,519 and the Family Trust $642,801. Finally, the trial court ordered the Trustee to provide a final accounting for each trust for which he served as Trustee and appointed successor trustees to whom the accounting was to be made.
The beneficiaries sued on their own behalf and the...
To continue reading
Request your trial
-
State ex rel. Leonardi v. Sherry
...pleadings and evidence, between the parties." State ex rel. Drey v. Hoester, 608 S.W.2d 401, 404 (Mo. banc 1980); see, e.g., Deutsch v. Wolff, 994 S.W.2d 561, 567 (Mo. banc 1999); Metro. St. Louis Sewer Dist. v. Zykan, 495 S.W.2d 643, 658 (Mo.1973); Townsend v. Maplewood Inv. & Loan Co., 35......
-
Lumbermens Mut. Cas. Co. v. Thornton
...whether the accountant has exercised the degree of skill and learning ordinarily used by members of the accounting profession. Deutsch v. Wog 994 S.W.2d 561, 571 (Mo. banc 1999). The trial court's statement above, from the judgment, is an erroneous declaration of law, if interpreted to mean......
-
Forrest T. Jones and Co. v. Variable Annuity Life
...possession of controlling information, the Missouri courts often treat old claims as not reasonably capable of ascertainment. Deutsch v. Wolff 994 S.W.2d 561, 572 (Mo. bane 1999) (accountant); St. Louis Associates v. Gannon Management, 948 S.W.2d 225 (Mo.App.1997) (property management compa......
-
In re Loyal W. Sheen Family Trust
...As a beneficiary of the Trust, Janene clearly is an "interested party" who has standing to initiate such a proceeding. See Deutsch v. Wolff, 994 S.W.2d 561 (Mo. 1999) (beneficiaries have standing to bring action for removal of trustee). We therefore reject Veona and Elena's third assignment......