Estate of Baumgardner v. Ready

• Decision Date: 01 March 2012
• Docket Number: No. 2010–CA–01608–SCT.,2010–CA–01608–SCT.
• Citation: 82 So.3d 592
• Parties: In The Matter of The ESTATE OF Emogene BAUMGARDNER: Veronica Baumgardner McKee Arrington, Conservator, Individually And As Executrix of The Estate of Emogene Baumgardner, and as Attorney In Fact for Charlie Baumgardner v. William E. Ready, Sr., as Trustee.
• Court: Mississippi Supreme Court

82 So.3d 592

In The Matter of The ESTATE OF Emogene BAUMGARDNER: Veronica Baumgardner McKee Arrington, Conservator, Individually And As Executrix of The Estate of Emogene Baumgardner, and as Attorney In Fact for Charlie Baumgardner

v.William E. Ready, Sr., as Trustee.

No. 2010–CA–01608–SCT.

Supreme Court of Mississippi.

March 1, 2012.

Don O. Rogers, III, Joe Clay Hamilton, Meridian, attorneys for appellant.

Robert D. Jones, Meridian, Henry P. Pate, III, attorneys for appellee.

Before CARLSON, P.J., RANDOLPH and KITCHENS, JJ.

CARLSON, Presiding Justice, for the Court:

¶ 1. This case involves fifteen years of litigation relating to two testamentary trusts. The plaintiff, Veronica Baumgardner McKee Arrington (Arrington), claims that the trustee of both trusts, William Ready (Ready), mismanaged the trusts' property, improperly allocated the trusts' funds, and wrongfully refused to render an accounting of the trusts' assets. The Chancery Court of Lauderdale County found that the trustee had acted properly and within his discretion in managing the trusts and that the trustee should not be required to render an accounting. Aggrieved, Arrington appealed to this Court. For the reasons discussed below, we affirm in part and reverse in part the judgment of the Chancery Court of Lauderdale County and remand for actions consistent with this opinion.

FACTS AND PROCEEDINGS IN THE TRIAL COURT

¶ 2. Harold Baumgardner (Harold) died on January 12, 1979. Before he died, Harold drafted a will and a codicil. Each instrument will be discussed in detail below.

A. Harold's Will and Codicil

¶ 3. Harold's will included a specific bequest of all his personal property to his wife, Emogene Baumgardner (Emogene). The will also included two general bequests of $1,000 to each of his two children, Veronica Arrington and Charlie Baumgardner (Charlie). The residue of Harold's estate passed to two testamentary trusts: a marital deduction trust and a family trust. The trustee of both trusts, William Ready, was authorized to distribute the residue of Harold's estate between the two trusts.

1. Marital Deduction Trust

¶ 4. Harold's will instructed Ready to distribute the maximum amount available under federal estate-tax law to the marital deduction trust. The majority of the trusts' property was timberland. Emogene was the life beneficiary of the marital deduction trust income. Ready was instructed to “pay the income annually or at more frequent intervals, if said trustee so elect” to Emogene. If the income from both the marital deduction trust and the family trust was insufficient to care for Emogene, Ready was instructed to distribute the corpus of the marital deduction trust for Emogene's maintenance, care, and support. After Emogene's death, the marital deduction trust was to terminate, and the corpus of the trust, as well as any income not distributed, was to be distributed according to Emogene's will. Emogene's will devised one half of the corpus and income from the marital deduction trust to Arrington, and the other half to Arrington as trustee for Charlie.

2. Family Trust

¶ 5. Almost two weeks before he died, Harold revoked the provision of his will relating to the family trust in a codicil. The family trust included two parcels of land—the “home place,” and other land that was allocated to the family trust. The family trust in Harold's will directed that Ready divide the family trust into two equal parts, and that one share should benefit Charlie and Arrington and the other should benefit Emogene.¹ The family trust provision in the will also directed that any income not distributed should be added to the corpus of the trust. Upon Emogene's death, the corpus of the trust was to be distributed to Arrington and Charlie equally. All of these provisions were revoked in Harold's codicil.

¶ 6. The codicil directs that the corpus and income of the family trust should be distributed to Emogene.² Any income not distributed to Emogene was to be added to the corpus of the trust. Upon Emogene's death, the corpus of the trust was to be distributed as follows: the home place (Harold and Emogene's home and approximately 600 acres surrounding it) to Arrington and Charlie equally; and the balance of the corpus to five named charities. ³

B. Procedural History

¶ 7. In 1996, Arrington was named conservator of Emogene's estate and person. The judgment appointing Arrington as conservator stated that two physicians had determined that Emogene was unable to handle her own affairs because of her advanced age and physical incapacity. In 1998, Arrington filed a motion for authority to institute litigation on behalf of Emogene in the Chancery Court of Lauderdale County. The motion alleged that, despite Emogene's requests, Ready had never provided Emogene with an accounting of the trusts. The motion also alleged that Ready had breached his fiduciary duty by failing to properly manage the timberland, entering into an agreement for the purchase of timber with the same party who managed the timberland, not paying all of the income from the marital deduction trust to Emogene, borrowing money from Emogene, and obtaining a revocation of power of attorney from Emogene without the knowledge of her attorney. The chancellor entered a judgment authorizing litigation in 1998.

¶ 8. Arrington then filed a complaint for accounting and removal of trustee, claiming that Ready had refused to provide an accounting of the trusts and had failed to pay Emogene funds required by the trusts. Arrington requested that the chancellor require Ready to provide an accounting, remove Ready as trustee, appoint a successor trustee, and require Ready to reimburse the trusts for the costs associated with the litigation.

¶ 9. Ready filed a response to Arrington's complaint, contending, inter alia, that the chancery court did not have jurisdiction over the matter and denying most of the allegations in the complaint. Ready also filed a motion to remove Arrington as conservator of Emogene's estate, essentially arguing that Arrington had a conflict of interest. He also filed a motion for summary judgment, contending that provisions of Harold's will relieved him of any liability for errors of judgment, other than those committed in bad faith. Ready also contended that Harold's will allowed him to refuse to provide an accounting. Harold's will states that Ready was to “serve without bond, inventory or accounting.”

¶ 10. On his own motion, the chancellor appointed Edward Kramer as Emogene's guardian ad litem. After he was appointed as guardian ad litem, Kramer filed a report and recommendation with the chancery court. In the report, Kramer stated that he had examined the trusts' records and found them to be financially sound. After receiving Kramer's report, the chancellor, sua sponte, ordered an appraisal (forester's report) of the timberland in the marital deduction trust and the family trust. The chancellor also appointed Kramer as conservator of Emogene's estate. Arrington remained as conservator of Emogene's person.

¶ 11. In May 2002, the chancellor entered an Order for Sale of Timber. In his order, the chancellor stated that the forester's report demonstrated that timber in both trusts was subject to insect infestation and was not being “managed in a manner maximizing monetary return and growth potential.” The order also stated that the timber should be sold to “preserve the capital value of each trust,” and that Ready and Kramer both agreed with his conclusion. The forester, Charlie Jones, was appointed by the chancellor to solicit bids and submit them to Ready and Kramer.

¶ 12. Seven bids were made. Ralph Morgan was the highest bidder at $3,070,840.50; $1,066,985.25 was attributable to the timber on the marital deduction trust land, $986,084.25 to the family trust land (excluding the home place), and $1,017,671 to the home-place land.⁴ Ready accepted Morgan's bid, and Kramer recommended to the chancellor that he approve Ready's actions. The chancellor entered an order accepting Ready's actions and directing him to allocate the proceeds of the timber sale to each trust. The chancellor also ordered that, after the timber sale, the assets of the marital deduction trust be transferred to Emogene's conservatorship and the marital deduction trust be dissolved. Emogene died in 2004 while the timber was being harvested.

¶ 13. In response to the chancellor's order, Arrington filed a motion requesting, inter alia, that the chancellor order Ready to distribute the timber proceeds from the home-place land to her and Charlie as remainder beneficiaries of the home-place land. The motion stated that Ready had “retained in the family trust the net of the sale of the timber on the family trust lands; and, also kept in the family trust all of the net of the sale of the timber on the home place lands. However, the family trust only owned a life estate in the home place lands.” In response to Arrington's motion, Ready argued that the proceeds of the home-place timber became part of the trust corpus and, upon Emogene's death, the liquid assets would pass to the five charities named in Harold's will.

¶ 14. After a hearing, the chancellor entered a final judgment, finding that Ready had acted within his discretion in allocating the proceeds of the timber sale. The chancellor also ordered that the parties attempt to agree on the amount of money used to support Emogene that was not paid from the trusts. The conservatorship was to be reimbursed for this amount from the trusts' accounts. The parties could not agree on an amount, and the chancellor entered a supplemental final judgment, finding that the trusts should reimburse Emogene's conservatorship for $205,000. Arrington now appeals to this Court.

DISCUSSION

¶ 15. This Court employs a limited standard of review on appeals from chancery court. Corp. Mgmt., Inc. v. Greene County, 23 So.3d 454, 459 (Miss.2009). As such, this Court “will not disturb the factual...