Endres v. Endres
| Decision Date | 28 December 2022 |
| Docket Number | 29552-r-JMK |
| Parties | 2022 S.D. 80 v. GREGORY ENDRES, individually and as Co-Trustee of the Endres Family Trust; DONALD ENDRES, as Co-Trustee of the Endres Family Trust; CAROL WATERS, as Co-Trustee of the Endres Family Trust; JUDY ENDRES (fka Judy Zeiger), as Co-Trustee of the Endres Family Trust; and RUTH PARKHURST, as Co-Trustee of the Endres Family Trust, Defendants and Appellees. TERRY ENDRES, Plaintiff and Appellant, GREGORY ENDRES, Plaintiff and Appellee, v. TERRY ENDRES, Defendant and Appellant, and DONALD ENDRES, GREGORY ENDRES CAROL WATERS, JUDY ENDRES (fka Judy Zeiger), JANET ENDRES and RUTH PARKHURST, in their capacity as Co-Trustees of the Endres Family Trust, Defendants and Appellees. IN THE MATTER OF THE ENDRES FAMILY TRUST. |
| Court | South Dakota Supreme Court |
ARGUED OCTOBER 5, 2021
APPEAL FROM THE CIRCUIT COURT OF THE FIFTH JUDICIAL CIRCUIT ROBERTS COUNTY, SOUTH DAKOTA THE HONORABLE SCOTT P. MYREN Judge
RONALD A. PARSONS, JR. PAMELA R. REITER SHANNON R. FALON of Johnson Janklow, Abdallah & Reiter, LLP Sioux Falls, South Dakota Attorneys for appellant Terry Endres.
ALEX HAGEN of Cadwell, Sanford, Deibert & Garry, LLP Sioux Falls, South Dakota Attorneys for appellee Janet Endres.
JASON R. SUTTON THOMAS WELK of Boyce Law Firm, LLP Sioux Falls South Dakota Attorneys for appellees Donald Endres, Carol Waters, Judy Zeiger, and Ruth Parkhurst.
JOE ERICKSON LEE SCHOENBECK of Schoenbeck Law Office, P.C. Watertown, South Dakota Attorneys for appellee Gregory Endres.
[¶1.] James (Jim) Endres through a Declaration of Trust created the irrevocable Endres Family Trust (Trust) in March 1992 designating his seven children as beneficiaries: Gregory Endres, Donald Endres, Ruth Parkhurst, Carol Waters, Judy Endres, Terry Endres, and Janet Endres. Jim served as the sole trustee. The Trust was twice modified after its formation, primarily changing the trustees and procedures for governance. In 2009, Jim's second wife and step-mother of the beneficiaries, Maxine Endres, was designated as co-trustee of the Trust with Jim. Due to Jim's failing health, he and Maxine were removed as co-trustees in May 2016, and Jim's seven children were designated as co-trustees.
[¶2.] In 2017, Terry Endres commenced litigation seeking court supervision of the Trust and to remove five of the co-trustees for breach of fiduciary duties. Several additional lawsuits were filed by co-trustees and various claims, cross-claims, and counter-claims ensued. Based upon a stipulation by the parties, the circuit court consolidated all proceedings into one action in Roberts County. The consolidated case was eventually resolved through a global settlement, except for Terry's application for attorney fees, which was preserved as an issue to be decided by the circuit court. Terry moved for $389,121.12 in attorney fees expenses, sales tax, and interest,[1] arguing that he was entitled to attorney fees in his capacity as a co-trustee and as a beneficiary of the Trust. The circuit court denied Terry's request, and he appeals. We reverse and remand.
[¶3.] The corpus of this Trust was comprised of nearly 1,900 acres of Jim's farmland valued in excess of $10 million located in Grant, Roberts, and Codington Counties. The Trust had two primary sources of income: (1) rental income from tenants farming the Trust's land; and (2) payments to the Trust under the United States Department of Agriculture's (USDA) Conservation Reserve Program (CRP). "Under the terms of the Trust, Donald, Gregory, and Terry were each entitled to receive 20%" of the income earned from the Trust's assets. "Ruth, Carol, Judy, and Janet were each entitled to receive 10% of the income." The Trust would endure until the last of the brothers died or until written direction to terminate was given by them or the survivors among them. Upon termination of the Trust, each sibling would receive a distribution of principal from the Trust corresponding to his or her income percentage.
[¶4.] The circuit court entered an order modifying the Trust (First Modification) in September 2009, designating Maxine, as a co-trustee. Other than changing the trustee designation, minimal changes were made by the First Modification, none of which affect the current proceedings.
[¶5.] In October 2009, Jim, acting as trustee, entered into two agricultural lease agreements with Gregory Endres. Pursuant to the written leases, Gregory would rent specific parcels of Trust property in Grant and Roberts Counties allowing him to farm some of the Trust's irrigated land. The leases indicate that the rent for the irrigated acres was set at $100 and $95 per acre which was significantly below fair market value. Further, the leases were for five crop years, commencing with the execution of the lease and ending on December 1, 2014. Following the initial five-year term, the leases would automatically renew each year unless Gregory gave notice of nonrenewal before December 1 of the year preceding the crop year for which the renewal was effective. The leases would terminate "December 1 of the year in which the Trust's real property [became] distributable under the Declaration of Trust or after 20 years" from their commencement (December 2030), whichever occurred first.
[¶6.] Jim also entered into an agreement with Terry that allowed him to farm Trust property located in Codington County. In addition, Jim loaned Terry Trust funds, with the arrangement memorialized by a Promissory Note (Note) in March 2011. The Note, which authorized a loan of up to $334,600, was due in full to the Trust on or before March 30, 2016.
[¶7.] In the spring of 2016, Jim, Maxine, and all beneficiaries requested a second order modifying the Trust (Second Modification). The circuit court granted the modification on May 9, 2016, which removed Jim and Maxine as co-trustees, replacing them with each of Jim's seven children who were designated as co-trustees. The Second Modification also included new procedures for governance, creating a board of co-trustees with the power to act as authorized under Section 5.1.1, which provided:
[¶8.] Section 5.1.2, apart from leasing, required a super majority vote to convey or distribute land. The Second Modification further required the co-trustees to meet annually.
[¶9.] Despite two modifications, Article 10 of the Declaration of Trust remained unchanged. Article 10 sets forth powers held by the Trustee as follows:
[¶10.] As required by Section 5.1.1.1, the co-trustees met to elect officers, selecting Donald to serve as president/chairman of the Board. As president, he was granted "authority to conduct the day-to-day business of the Trust," including the ability to modify and execute rental agreements and the authority, if approved by the co-trustees, to amend Trust agreements. Throughout the duration of the Trust, the co-trustees held numerous meetings. Donald alleged in his affidavit that the Board memorialized every action taken through written minutes or by an email confirming any action taken by the co-trustees.
[¶11.] Shortly after the Second Modification, the co-trustees, along with Jim and Maxine, discussed "terminating the trust and transferring its assets and debt to a limited liability partnership (LLP)." It appears the co-trustees considered the LLP structure beneficial for tax purposes, to terminate Gregory's leases, and to distribute certain Trust land to Terry. Although all co-trustees participated in initial discussions regarding formation of the LLP, Terry and Janet opposed terminating the Trust and forming an LLP, and the Trust's assets and debts were never transferred.
[¶12.] In December 2016, Gregory signed eight CRP contracts, placing the Trust's CRP payments in his name.[2] Under this arrangement, Gregory as "tenant" would pay all CRP proceeds he received to the Trust as part of his rent. Donald testified in his deposition that all co-trustees were aware of this plan, although there are no meeting minutes or emails reflecting this agreement. Terry, however, asserted that many of the Board's actions were not memorialized in writing, including this agreement with Gregory. Terry claimed that he did not know about this plan with Gregory and that it was not until after he told Donald about the problems with the CRP payments that Donald acted, changing the CRP contracts to designate the Trust as payee. Gregory never received a CRP payment, and the Trust did not incur any penalties or fines relating to the CRP.
[¶13.] In July 2017, Terry brought the first of several lawsuits challenging the way in which the Trust was being managed. Terry filed a petition in Codington County for court supervision of the Trust and to remove Donald, Gregory, Judy Carol, and Ruth (the Majority) as co-trustees. In his petition, Terry made allegations for breach of trust against the Majority as well as against Donald and Gregory in their individual capacities as co-trus...
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