McPherson v. McPherson

• Decision Date: 09 June 1975
• Docket Number: No. 75--44,75--44
• Citation: McPherson v. McPherson, 258 Ark. 257, 523 S.W.2d 623 (Ark. 1975)
• Parties: W. E. McPHERSON, Sr., Appellant, v. Audra McPHERSON, et al., Appellees.
• Court: Arkansas Supreme Court

Page 623

523 S.W.2d 623

258 Ark. 257

W. E. McPHERSON, Sr., Appellant, v.Audra McPHERSON, et al., Appellees.

No. 75--44.

Supreme Court of Arkansas.

June 9, 1975.

Wm. M. Moorhead of Macom, Moorhead & Green, Stuttgart, for appellant.

George E. Pike, DeWitt, for appellees.

JONES, Justice.

This is an appeal by W. E. McPherson, Sr., from a chancery court decree holding him liable to an accounting in the administration of an express trust in favor of his two daughters and one son, Audra McPherson Johnson, Kay McPherson Dolnik and W. E. McPherson, Jr.The daughters will hereafter be referred to by their given names Audra and Kay and the son as Billy.

On December 31, 1951, W. E. McPherson, Sr., and his wife Helen executed a declaration of trust between themselves as grantors and themselves as trustees in which they declared as follows:

'Whereas, the Grantors desire to make some present provision for the economic security of their children by the establishment of separate estates for them, but due to the minority of said children it was considered advisable to place such estates in trust in order that it may be properly administered prior to the time said children reach the age of twenty-five years; and

Whereas, in fulfillment of such plan, Grantors by warranty deed dated December 29, 1951, and recorded in the office of the Recorder of Arkansas County, Arkansas, irrevocably conveyed to themselves as Trustees for their children approximately 1028 acres of land in Arkansas County, Arkansas, said land being more fully described below:

NOW, THEREFORE, the Trustees, Helen M. McPherson and W. E. McPherson, hereby declare that they hold in trust the following described property for the uses and purposes and subject to the terms and conditions hereinafter set forth, to-wit:

1.Beneficiaries of the Trust.This trust is for the equal use and benefit of Grantors' children, AUDREY NELL McPHERSON, WILLIAM E. McPHERSON, JR.AND KAY FRANCES McPHERSON.Said children are the equitable owners of the trust corpus, naked legal title only being vested in the Trustees for the purposes of management.

2.Corpus of the Trust.The initial corpus of the trust is the following described lands located in the County of Arkansas, State of Arkansas, to-wit: (legal description).

The Grantors may from time to time convey to themselves, as Trustees, additional property to be added to the corpus of this trust for the same uses and subject to the same terms and conditions as herein set forth.

3.Distribution of Income.Out of the gross income of the trust, the Trustees shall first pay all necessary and reasonable costs incident to the proper protection, management, conservation and improvement of the trust estate.The remaining net income of the trust shall be paid not less frequently than annually to AUDREY NELL McPHERSON, WILLIAM E. McPHERSON, JR. and KAY FRANCES McPHERSON, share and share alike, if living, or to the children of any deceased child, per stirpes.

4.Distribution of Corpus.This trust shall terminate when the Grantors' youngest living child reaches the age of twenty-five years.Should Kay Frances McPherson die before reaching the age of twenty-five years and the Grantors' youngest living child be above the age of twenty-five years on the death of Kay Frances McPherson, the trust shall terminate upon the death of Kay Frances McPherson.

Upon the termination of the trust, the corpus of the trust shall be distributed to AUDREY NELL McPHERSON, WILLIAM E. McPHERSON, JR. and KAY FRANCES McPHERSON in equal shares.Should any child be not then living but be then survived by a child or children, the share of such deceased child shall be distributed to the child or children of such deceased child.Should any child die before the termination of the trust, survived by no children, such child's share of the corpus shall be distributed to the Grantors' other children and the children of any other deceased child, per stirpes.Should all of said children die prior to the termination of the trust survived by no children, the trust corpus shall be distributed upon the death of the survivor of said children to the estate of said survivor.

5.Management of Trust Estate.The trustees are charged with the custody, management and protection of all properties and funds of the trust estate.The Trustees are authorized to sell or exchange and convey, at private sale, any real or personal property of the trust; to lease any trust assets, and to receive and receipt for rents, royalties, property or other interests received by the trust estate; to satisfy liens on real or personal property of the trust; to institute legal proceedings for the recovery or protection of assets of the trust; to make compromise settlements of any claims or demands of or against the trust estate; to borrow money and to execute a mortgage on trust assets to secure such a loan; to employ an agent or agents to manage, subject to the Trustee's supervisory control, any part or all of the assets of the trust estate; and otherwise, to exercise all duties, rights and authority reasonably incident to the ownership of the trust assets and the discharge of their trust responsibilities.

All acts of the Trustees, however, with reference to the management, conservation, improvement or disposition of the trust corpus and income shall be solely in their capacity as fiduciaries of the trust and the holders of naked legal title to the trust assets.The Trustees shall never under any circumstances in their capacities as individuals borrow from the trust estate, purchase any of the trust assets except at the fair market value thereof, pledge any trust assets for their own benefit, use any of the trust assets to discharge any legal or moral obligation of their own, control of use (sic) the trust estate or the income therefrom in any manner for their personal benefit, or otherwise take any action which is not in the best interests of and for the sole benefit of the beneficiaries of the trust estate.

6.Successor and Co-Trustees.WILLIAM E. McPHERSON, JR. shall become a Co-Trustee of the trust when he reaches the age of twenty-one years.In the event of the death, incapacity, or resignation as Trustee of either W. E. McPherson or Helen M. McPherson, HUBERT C. McPHERSON shall serve as a Co-Trustee.Any successor Trustee shall be vested with the same duties and authorities as the original Trustees.No Trustee shall be required to give bond.Neither W. E. McPherson, Helen M. McPherson nor William E. McPherson, Jr. shall be paid any fee for their services as Trustee.'

When the trust indenture and deed were executed, the oldest child Audra was 15 years of age; Billy was 14 years of age and Kay was seven years of age.

After the indenture was executed, Mr. McPherson rented the farm to a tenant under a rental agreement by which the trust shared in some of the expenses and took a share of the harvested crops as rental.In 1959, some seven years after the trust was executed, Mrs. McPherson obtained a divorce from the appellant on the basis of three years separation.In the divorce case, and in connection with the property rights involved, Mrs. McPherson attempted to require the appellant to make an accounting as trustee of the children's trust and to make payment of income for past years under the provisions requiring an annual distribution of the income.The divorce case was appealed to this court, McPherson v. Smith, Judge, 231 Ark. 228, 328 S.W.2d 849, and in that casewe held that two separate causes of action were asserted, one against Mr. McPherson individually for divorce, and the other against him as trustee for an accounting in his representative capacity.We granted the requested writ of prohibition prohibiting the chancellor from proceeding in the petition against Mr. McPherson for an accounting in his capacity as trustee.

Under the trust indenture Billy was to become a co-trustee upon attaining the age of 21 years.He was released from military service in May, 1960, and in anticipation of his return from the service and taking over the entire operation and personally farming the trust lands as tenant while acting as trustee, the appellant performed some preparatory work in getting the land ready for planting the 1960 crop.Upon Billy's return from the service in May, 1960, he was placed in possession of the lands and also the equipment the appellant had acquired for his use and was given complete control of the cash trust funds in the bank.Thereafter Billy acted as the sole active trustee and the appellant did nothing, nor did he attempt to do anything toward controlling the trust assets or any of its activities.

Upon termination of the trust when Kay became 25 years of age in 1969, the three children brought the present action against the appellant seeking an accounting and a judgment against him for the annual income from the trust during the period of his active administration.It was the appellant's contention that during the negotiations between him and his former wife, pertaining to their property settlement, a family agreement was entered into by all parties concerned to the effect that if he would turn the entire administration of the trust over to Billy, no accounting would be required of him.He contended that all three of the cestuis que trust thus had knowledge of his abandonment of the trust to Billy and were, therefore, estopped by limitations and laches from demanding an accounting upon the termination of the trust.The chancellor held that the plea of laches was valid as to Billy, the successor active trustee, and dismissed the suit as to him, but he permitted the suit to continue on Audra and Kay's complaint.

On the basis of reports by a certified public accountant, who initially testified for the appellant but did additional accounting work as master in chancery under direction of the chancellor, the chancellor determined that the appellant was indebted to Audra in...