Lambley v. Diehl

• Decision Date: 09 June 2020
• Docket Number: C/w WD 82652,WD 82645
• Citation: 603 S.W.3d 346
• Parties: Mignon L. LAMBLEY, et al., Appellants, v. Kim L. DIEHL, Trustee, et al., Respondents.
• Court: Missouri Court of Appeals

603 S.W.3d 346

Mignon L. LAMBLEY, et al., Appellants,

v.Kim L. DIEHL, Trustee, et al., Respondents.

WD 82645

C/w WD 82652

Missouri Court of Appeals, Western District.

Opinion filed: June 9, 2020

Barry L. Pickens, for Appellants.

Daniel P. Wheeler, Liberty, for Respondents.

Division Three: Anthony Rex Gabbert, Presiding Judge, Edward R. Ardini, Jr., Judge and W. Douglas Thomson, Judge

EDWARD R. ARDINI, JR., JUDGE

This action involves a dispute between siblings regarding the administration of their late parents’ trusts, both of which named Respondent Kim Diehl as successor trustee. Appellants Mignon Lambley and Sydney Burch filed a petition in the Circuit Court of Bates County seeking to remove their brother Kim¹ as successor trustee and requesting financial restitution for Kim's personal use of the trusts’ assets. Kim filed counter- and cross-claims asserting counts of quantum meruit, unjust enrichment, and contribution, as well as seeking a declaration of rights and instructions from the trial court. After a bench trial, the trial court entered its judgment denying Mignon and Sydney's claims and finding in favor of Kim on each of his claims. Mignon and Sydney appeal. We affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

Factual and Procedural Background²

Terms of the Trusts

Raymond O. Diehl and Phyllis S. Diehl, the parents of the parties to this action, were farmers, and the bulk of their assets were farmland, livestock, and farming equipment. On February 14, 1995, Phyllis executed the Phyllis S. Diehl Revocable Inter Vivos Trust ("Phyllis Trust") and Raymond executed the Raymond O. Diehl Revocable Living Trust ("Raymond Trust"). Phyllis was the named grantor and trustee of the Phyllis Trust and Raymond was the named grantor and trustee of the Raymond Trust. Both trusts named Kim as the successor trustee. Each trust was revocable until the death of the grantor, at which point the trust became irrevocable.

Phyllis died on January 31, 2005. The Phyllis Trust provided that the following shall occur upon her death:

ITEM VI – PROVISIONS AFTER GRANTOR'S DEATH

After the death of the Grantor, the net income derived from the Trust Estate, together with the principal thereof, shall be held, handled, divided and distributed as follows, to-wit:

...

2. During Lifetime of Spouse. During the lifetime of Raymond O. Diehl, the Trustee shall pay over and deliver to him the net income from the Trust Estate at least annually. Should the Trustee in the Trustee's sole discretion, deem that the aforesaid payments, together with such other income as my said spouse may have, is insufficient at any time due to sickness, emergency, or other compelling circumstances, properly to provide health, education, support, or maintenance for said spouse, then in addition to the above, I authorize and empower my Trustee to use, pay to, apply or expend for my said spouse, such part of the principal of the Trust Estate as in the sole discretion of the Trustee is deemed necessary and advisable under said circumstances.

3. After Death of Spouse. After the death of Raymond O. Diehl, or upon the death of the Grantor if Raymond O. Diehl shall predecease her, the principal and income of the Trust Estate will be managed and distributed as follows:

(a) The Trustee may make adequate reserves for and pay the expenses of the last illness, funeral, and marker of my spouse.....

(b) The remaining principal and interest of the Trust Estate will be paid over and distributed free of trust, in equal shares, to Grantor's children, Kim L. Diehl, Sydney Burch, and Mignon Diehl....

The assets held by the Phyllis Trust that are relevant to this action include a John Deere 4560 tractor and several tracts of real property. The parties refer to these tracts as "H Highway" (approximately 80 acres), "Wilson Place" (approximately 306 acres), "Ossie" (approximately 137 acres) and "Ralph" (approximately 40 acres).³ Collectively, we refer to this real property as the "Phyllis Trust property."

As originally executed, the Raymond Trust—like the Phyllis Trust—provided that upon the death of both spouses, "[t]he remaining principal and interest of the Trust Estate will be paid over and distributed free of trust, in equal shares to Grantor's children, Kim L. Diehl, Sydney Burch, and Mignon Diehl." However, on May 12, 2010, Raymond amended the trust provisions relating to the distribution of the Raymond Trust's assets upon his death. The amended provisions provided that:

ARTICLE VII/VIII AMENDED

...

(2) Final Distribution. The principal and interest of the trust estate will thereafter as promptly as is reasonably feasible following the conclusion of any tax returns and payment of taxes or establishment of reasonable reserves therefore, be paid over and distributed free of trust as follows:

a. The 141 acre "Cotton Place". I direct that the 141 acre "Cotton Place" joins the land of my son, Kim L. Diehl. I direct that this land be promptly distributed to Kim L. Diehl or his then living issue per stirpes. [Legal description of the "Cotton Place" land omitted.]

b. The 544 acre "Home Place". I direct that the 544 acre "Home Place" be promptly distributed to my son, Kim L. Diehl. Prior to distribution, my Trustee is directed to encumber the property for a loan of $250,000 on such terms as the Trustee may in his sole discretion may [sic] deem appropriate. From these borrowed funds, $50,000 is to be paid to my daughter, Sydney Burch, and the remaining loan proceeds of $200,000 are to be paid to my daughter, Mignon L. Diehl, now Lambley. The real estate is then to be conveyed and distributed to my son, Kim L. Diehl, subject to the mortgage, which the distributee, Kim L. Diehl, is to assume and agree to pay. I am aware that this distribution is not an equal distribution and that I am substantially favoring my son, Kim. L. Diehl. [Legal description of the "Home Place" land omitted.]

c. Livestock. With the considerable assistance of my son and his children, I have accumulated a substantial herd of livestock. All livestock in which I have any interest shall be distributed immediately and without delay at the time of my death to my son, Kim L. Diehl, or his then living issue per stirpes.

d. Farm Machinery, Equipment, Etc. All farm machinery equipment and all equipment, all tools and all supply of feed, fencing material, farm supplies, miscellaneous farm appliances and other personal property kept on hand around my farm real estate, together with all motor vehicles including motorized farm equipment and machinery, which I own at the time of my death, including all unexpired insurance thereon shall be distributed immediately and without delay at the time of my death to my son Kim L. Diehl, or his then living issue per stirpes.

e. Trust Assets Not Otherwise Herein Distributed. At the time of my death, if the Trust holds other assets not distributed under the foregoing provisions, said assets shall be distributed in equal shares, one-third to Kim L. Diehl, one-third to Mignon L. Diehl and one-third to Sydney S. Burch, or their then living issue per stirpes.

Raymond died on February 20, 2013.

Use of Phyllis Trust Property from January 31, 2005 to February 20, 2013

After Phyllis died, the income earned by the Phyllis Trust consisted of crops and government farm payments. Raymond obtained bank loans and used those funds, in part, to pay for inputs to farm on the Phyllis Trust property.⁴ The loans were secured by Raymond's cattle.

Corn and soybeans were grown on the Phyllis Trust property. When corn was harvested from Wilson Place, Ralph, and Ossie, it was distributed to Raymond, and he generally used it to feed his cattle.⁵ When soybeans were harvested from that property, Raymond generally sold the crops and added the proceeds to his personal checking account. The Farm Service Agency payments for Wilson Place, Ralph, and Ossie were directly distributed to Raymond. The Phyllis Trust did not maintain a bank account.

During this time period, Kim, his sons, and employees hired by Kim provided custom farm work for the Phyllis Trust to generate the corn and soybeans. These farm services included: anhydrous application, fertilizer application, disking, rolling and finishing, planting, spraying, combining and hauling, spraying brush, mowing roadsides, baling hay, scraping, mowing pasture, and chopping silage. To perform these services, Kim used his own diesel fuel and equipment. Kim's equipment included a tractor and auger cart, a sprayer worth approximately $175,000-$200,000, a four-wheel drive tractor worth approximately $150,000-$300,000 with an anhydrous fertilizer applicator attachment worth approximately $57,000, a combine worth approximately $500,000, a chore tractor, a wheat combine worth approximately $200,000-$300,000, a drill worth approximately $55,000, a grain wagon to transfer feed, and a trailer truck. Although Raymond owned some dated farm equipment, it was inadequate to farm the Phyllis Trust property.

Kim's Actions After Raymond's Death

After Raymond died, Kim continued to farm the Phyllis Trust property. At the time of his death, Raymond owed to Community First Bank $389,645.64 in loans, the proceeds of which had been partially used to pay for the inputs for Wilson Place, Ralph, and Ossie. On March 31, 2015, Kim personally assumed the loans. Kim also personally paid vendors who were owed for items purchased or services rendered to the Phyllis Trust, the Raymond Trust, and Raymond's estate.

Pre-Trial Procedural History

Following Raymond's death, Mignon, Sydney, and Kim engaged in protracted, yet unsuccessful, settlement negotiations regarding the disposition of the trusts’ assets.

In May 2015, Mignon and Sydney initiated this action by filing a Petition for Accounting, for Removal of Trustee and for Financial Restitution. Two months later they filed an amended petition, naming as defendants Kim in his individual capacity, Kim as trustee of the Phyllis Trust, Kim as trustee of...