McGathey v. Matthew K. Davis Trust

• Decision Date: 03 February 2015
• Docket Number: WD 77437
• Citation: 457 S.W.3d 867
• Parties: Boyd McGathey, et al., Respondents, v. Matthew K. Davis Trust, Appellant.
• Court: Missouri Court of Appeals

457 S.W.3d 867

Boyd McGathey, et al., Respondents

v.Matthew K. Davis Trust, Appellant.

WD 77437

Missouri Court of Appeals, Western District.

OPINION FILED: February 3, 2015

Motion for Rehearing and/or Transfer to Supreme Court Denied March 3, 2015

Application for Transfer Denied April 28, 2015

Martin M. Meyers and Leonard A. Stephens, Kansas City, MO, for respondents.

Daniel P. Wheeler and Scott K. Martinsen, Overland Park, KS, for appellant.

Before Division Three: Karen King Mitchell, Presiding Judge, Cynthia L. Martin, Judge and Gary D. Witt, Judge

Opinion

Cynthia L. Martin, Judge

This is an appeal from a judgment entered in a garnishment proceeding which ordered garnishees Roger Hoyt (“Hoyt”) and Country Club Trust Company, N.A. (“Country Club Trust Company”) (collectively the “MKD Trustees”), in their capacity as the trustees of the Matthew K. Davis Trust (“MKD Trust”), to pay $105,000 into the Court following the determination of exceptions to garnishment interrogatory answers filed by Boyd McGathey and Debra Augustine (collectively “Garnishors”). The MKD Trustees argue that the trial court erred in denying their motion for summary judgment addressing Garnishors' exceptions.

Because the MKD Trustee's point relied on preserves nothing for our review, we dismiss this appeal.

Factual and Procedural History

On September 12, 2007, Garnishors won a $500,000 judgment against Matthew K. Davis (“Davis”) following a jury trial. While trying to satisfy the judgment, Garnishors learned that Davis was the beneficiary of two trusts: the May Development Trust (“May Trust”) and the MKD Trust. Davis's father (“Grantor”) created the trusts in a single Trust Agreement which provides the terms for each trust.¹

Article III of the Trust Agreement addresses the May Trust and provides that the May Trust shall hold and administer May Development Company stock and real estate—a building and parking lot—located at 4325 Troost (the “May Trust Assets”) for a period of up to fifteen years after the Grantor's death. May Development Company employee Jim Henson (“Henson”) was named the initial trustee of the May Trust. Article III, Section B, of the Trust Agreement requires Henson to make monthly payments to Davis “during the life of the trust” in an amount equal to the monthly rental income generated from the building and parking lot less any taxes due from either the May Trust or Davis (the “Mandatory Distribution”). After taxes, the Mandatory Distribution totaled $5,000 each month. Article III, Section C, of the Trust Agreement provides in pertinent part that “[u]pon the death or resignation or failure to act hereunder of Jim Henson, [the May Trust] shall be merged into and be operated as a part of the [MKD Trust] under Article V [of the Trust Agreement].”

Article V of the Trust Agreement addresses the MKD Trust and provides that the MKD Trust will hold the remainder of the Grantor's “trust estate” (the “MKD Trust Assets”). The Trust Agreement names Hoyt and Country Club Trust Company as the MKD Trustees. Article V provides in pertinent part:

The [MKD] Trustee, in its sole discretion, may make distributions to or for the benefit of Matthew K. Davis only at such times the rental income equivalent from the property located at 4325 Troost and its adjacent parking lot are not being made or are insufficient to attend to health, education, maintenance, and support of Matthew K. Davis. In such event, the discretionary payments shall not exceed the greater of the trust income or five thousand dollars ($5,000) per month.

Article V thus permits the MKD Trustees to make discretionary distributions to Davis from the MKD Trust Assets, but only if the Mandatory Distribution from the May Trust is not being made or is insufficient to support Davis. Article V does not explain the circumstances that could give rise to the Mandatory Distribution “not being made.”

Article VIII, which applies to both the May Trust and the MKD Trust, contains a spendthrift clause that provides:

To the extent permitted by law, none of the beneficiaries hereunder shall have any power to dispose of or to charge by way of anticipation or otherwise any interest given to such beneficiary; and all sums payable to any beneficiary hereunder shall be free and clear of debts, contracts, alienations and anticipations of such beneficiary, and of liabilities for levies and attachments and proceedings of any kind, at law or in equity....

Article IX, which also applies to both the May Trust and the MKD Trust, includes a resignation clause that provides “[a]ny Trustee at any time acting hereunder is authorized to resign from that office at any time, without any reason, by delivering an acknowledged instrument to that effect to the adult or otherwise legally competent beneficiaries....” The Trust Agreement defines “acknowledged instrument” as “a written instrument executed in the presence of two subscribing witnesses, or otherwise acknowledged or proved with the formalities required to permit recording of a deed of real property in the State in which Grantor is domiciled at his death.”

From March 25, 2011, to November 22, 2011, Garnishors requested that Writs of Garnishment with interrogatories be issued to Henson in his capacity as trustee of the May Trust. Garnishors were successful in capturing four Mandatory Distributions to Davis, totaling $20,000.

On March 16, 2012, Garnishors requested that another Writ of Garnishment with interrogatories be issued to Henson. Henson then sent a letter to the MKD Trustees dated April 30, 2012, stating that he was resigning as trustee of the May Trust effective immediately.² Henson thereafter answered the interrogatories and informed Garnishors that he had resigned as trustee of the May Trust on April 30, 2012.

On June 4, 2012, Garnishors requested that another Writ of Garnishment with interrogatories be issued to Henson. Henson answered the interrogatories by stating that the May Trust had ceased to exist. Garnishors filed exceptions to Henson's interrogatory answers arguing that the May Trust had not ceased to exist and that the May Trust Assets remained in the May Trust. On November 20, 2012, Henson filed a reply, arguing that he resigned as trustee on April 30, 2012, and that the May Trust terminated upon his resignation.

On August 15, 2012, Garnishors began requesting the issuance of periodic Writs of Garnishment to the MKD Trustees. Those requests have continued to this date. In each case, the MKD Trustees have answered the garnishment interrogatories by stating that the May Trust Assets are now MKD Trust Assets by virtue of merger of the trusts following Henson's resignation; and that as a result, the only distributions that can be made to Davis are discretionary distributions pursuant to Article V of the Trust Agreement that cannot be garnished as a matter of law. Garnishors have filed exceptions to the MKD Trustees' interrogatory responses which argue that the May Trust continues to exist as an independent trust, even though it is now being administered by the MKD Trustees, and that the Mandatory Distributions to Davis must still be made.

On September 5, 2013, the MKD Trustees filed a motion for summary judgment in an effort to resolve all pending garnishments. The motion argued that the May Trust Assets merged into the MKD Trust as of April 30, 2012, and were to be administered thereafter under Article V of the Trust Agreement, which only permits discretionary distributions that cannot be garnished as a matter of law.

Garnishors argued in response to the motion for summary judgment that Henson's resignation on April 30, 2012, did not comply with the terms of the Trust Agreement and was not legally effective to cause the May Trust to merge with the MKD Trust, requiring continued payment of the Mandatory Distributions by whomever has control of the May Trust Assets, whether that be Henson or the MKD Trustees.³ Garnishors alternatively argued that even if the May Trust and the MKD Trust merged on April 30, 2012, the Grantor did not intend merger to terminate the May Trust but instead intended the May Trust to be administered by the MKD Trustees, requiring the Mandatory Distributions to continue.

The MKD Trustees argued in reply that even if Henson's resignation failed to comply with the procedures described in the Trust Agreement, the resignation constituted Henson's “failure to act,” a separate trigger for merger of the May Trust into the MKD Trust pursuant to Article III, Section C, of the Trust Agreement. The MKD Trustees also disagreed with Garnishors' contention that the Grantor did not intend merger of the trusts to terminate the May Trust.

The summary judgment pleadings thus framed three issues: (1) whether Henson's April 30, 2012 resignation was effective to trigger merger of the May Trust into the MKD Trust pursuant to Article III, Section C, of the Trust Agreement; (2) whether Henson's April 30, 2012, resignation, if not effective to trigger merger, constituted a failure to act that triggered merger of the May Trust into the MKD Trust pursuant to Article III, Section C, of the Trust Agreement; and (3) whether merger of the May Trust into the MKD Trust terminated the May Trust and the corresponding obligation to make Mandatory Distributions or instead merely shifted the obligation to administer the May Trust to the MKD Trustees.⁴

On December 2, 2013, the trial court conducted a hearing in which Garnishors and the MKD Trustees participated.⁵ The trial court issued a judgment on January 31, 2014. On February 28, 2014, the trial court issued an amended judgment (“Judgment”). The Judgment held that after considering the pleadings associated with the MKD Trustees' motion for summary judgment (which the Judgment itemized), oral arguments and post-trial briefing, the motion for summary judgment was denied. The Judgment further held that:

Judgment is entered in favor of Plaintiffs and against Garnishees Country Club Trust Company, N.A. and Roger Hoyt, pursuant to Rule

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