Nelson v. Nelson

• Citation: 162 P.3d 43
• Decision Date: 06 July 2007
• Docket Number: No. 97,664.,97,664.
• Parties: Albert H. NELSON, III and Markeyta Nelson Dewey, Appellants, v. Doris H. NELSON, Oklahoma State University Foundation, an Oklahoma Non-profit Corporation, Wichita State University Foundation, a Kansas Non-profit Corporation, and Markeyta Nelson Dewey, in her capacity as Successor Trustee of the Albert H. Nelson, Jr. Irrevocable Trust, Appellees.
• Court: Court of Appeals of Kansas

162 P.3d 43

Albert H. NELSON, III and Markeyta Nelson Dewey, Appellants, v. Doris H. NELSON, Oklahoma State University Foundation, an Oklahoma Non-profit Corporation, Wichita State University Foundation, a Kansas Non-profit Corporation, and Markeyta Nelson Dewey, in her capacity as Successor Trustee of the Albert H. Nelson, Jr. Irrevocable Trust, Appellees.

No. 97,664.

Court of Appeals of Kansas.

July 6, 2007.

William P. Tretbar, of Fleeson, Gooing, Coulson & Kitch, L.L.C., of Wichita, for appellants.

Coy M. Martin, of Moore Martin, L.C., of Wichita, Ted D. Ayres, of Wichita State University Foundation, Robert W. Coykendall, of Morris Laing Evans Brock & Kennedy, Chtd., of Wichita, and Scott D. Jensen and Eric Ireland, of Bever Dye, L.C., of Wichita, for appellees.

Before McANANY, P.J., ELLIOTT, and GREEN, JJ.

GREEN, J.

Albert H. Nelson, III, and Markeyta Nelson Dewey (appellants) are the adult children of Margaret Nelson and Albert H. Nelson, II (Albert). Under the terms of a 1975 property settlement agreement with Margaret, Albert agreed to execute and maintain a will creating a testamentary trust funded with his entire estate and to provide in the trust for the appellants to receive one-half of the trust income. Albert died on June 19, 2003. No petition for administration of Albert's estate was filed in Kansas. Nearly 2 years after Albert died, the appellants sued Doris Nelson (Albert's second wife); Oklahoma State University Foundation, an Oklahoma Non-Profit Corporation; Wichita State University, a Kansas Non-Profit Corporation; and Intrust Bank, N.A., as Successor Trustee of the Albert H. Nelson, Jr. Irrevocable Trust (appellees). Although the appellants seek a variety of remedies, their argument was that Albert had breached the terms of the property settlement agreement by conveying various assets to third parties for inadequate consideration.

The trial court granted summary judgment in favor of the appellees, determining that the appellants should have brought their claim against Albert's estate. Under K.S.A. 59-2239, if no petition for administration of a decedent's estate is filed, an action against the decedent must be brought by starting administration of decedent's estate within 6 months of the decedent's death. Because the appellants failed to file a petition for administration of Albert's estate within 6 months of Albert's death and to assert their demand against his estate, their claims are barred by K.S.A. 59-2239. Accordingly, we determine that the trial court properly granted summary judgment in favor of the appellees.

Margaret and Albert Nelson were married in 1942. Margaret and Albert had two children, the appellants, during their marriage. Around 1946, Albert started a business in Wichita that was primarily involved in fabricating metal parts for the aviation industry. The business was incorporated in 1966 and is called Globe Engineering Co., Inc. (Globe).

Margaret and Albert divorced in 1975. In connection with the divorce proceedings, Margaret and Albert entered into a property settlement agreement. Paragraph 9 of the property settlement agreement states in relevant part:

"Husband further covenants and agrees with Wife that Husband will execute and maintain, in full force and effect, a Will creating a testamentary trust to be funded by and with Husband's entire estate. Said trust will provide that the two (2) children of the parties hereto shall receive one-half (½) of the income from the trust after deduction of all taxes, debts, costs and expenses of administration, provided, however, that upon the death of either such child, said child's share of income shall be paid to the surviving child; provided, further, that the remaining debt, if any, of Husband to Wife under paragraph 2 hereof shall be deducted from the amount otherwise distributable to said children or child from said trust. The payments to said children or child shall be made not less often than annually."

The property settlement agreement was approved by the trial court and incorporated by reference as part of the journal entry and decree of divorce.

Margaret never remarried and died in 2001. Approximately 3 years after his divorce from Margaret, Albert married Doris Nelson. Albert remained married to Doris until he died in 2003. Before their marriage, Albert and Doris executed an antenuptial agreement where they agreed that the property brought by each party into the marriage would continue to be the sole and separate property of the respective party. A provision in the antenuptial agreement stated that "each of the parties acknowledge that heretofore there has been full disclosure to and from the other of the nature and extent of their respective property and assets."

In 1987, Albert established a revocable trust to be funded with all of his stock in Globe. Doris was named as the trustee of the revocable trust. The trust provided that after Albert died, one-half of the income generated by the trust assets would be distributed to Doris for life and the remaining one-half of the income would be distributed to appellants for life. In addition, Albert deeded the real estate on which Globe operated to Doris for "one dollar and love and affection." The deed was filed in May 1987 in Sedgwick County. Globe Engineering has since paid rent to Doris for its use of the property.

In 1987, Albert also designated Doris as the beneficiary of his interest in the Globe Engineering profit sharing plan. In addition, Albert opened a brokerage account with Paine Webber, Inc. The owners of the account were Albert and Doris as joint tenants with right of survivorship. The account was funded with the proceeds from two certificates of deposit that matured that year. In addition, Albert made additions to the account with some of the mandatory distributions he received from the Globe profit sharing plan.

In 1991, Albert made a will that provided for the establishment of two testamentary trusts. The first trust, the Charitable Remainder Annuity Trust, was to be funded with one-half of the residue of Albert's estate. Under the terms of this trust, at least five percent of the net market value of the trust assets were to be distributed yearly to the appellants in equal shares for the rest of their lives. Upon the death of the surviving appellant, the trust assets were to be distributed to Oklahoma State University. Doris was named trustee of the Charitable Remainder Annuity Trust. The second trust, the Doris H. Nelson Income Trust, was to be funded with the remaining one-half of the residue of Albert's estate. Doris was to receive distributions from the principal, if necessary or advisable, and the entire income from this trust.

The same firm represented Albert in his divorce from Margaret, in preparing the antenuptial agreement between Albert and Doris, and in preparing the 1991 estate planning documents. Albert later met with Don Stahr, an attorney with a different law firm, to review his estate plan. Albert and Stahr reviewed paragraph 9 of the property settlement agreement. Stahr advised Albert that depending upon how aggressive he wanted to be, "gifting could eliminate all or substantially all income payment obligations to the children." Stahr advised Albert that "[g]ifts of your property to a charitable remainder trust or trusts, with income to you and Doris, for your respective lives, would seem to be a good solution."

Stahr prepared a pour-over will, two inter vivos trusts, and a general assignment. Albert executed these documents in June 1995. Doris was present at the time and executed the irrevocable trust and the general assignment.

One of the trusts was named the Albert H. Nelson, Jr. Living Trust (living trust). The living trust was designed to replace Albert's existing will. The living trust designated Albert as trustee during his lifetime and Doris as successor trustee upon Albert's death or disability. Albert had discretion during his lifetime to pay himself all or part of the income or principal of the trust. Upon Albert's death, one-half of the assets were to be held in the Doris H. Nelson Income Trust (income trust) and the other half of the assets were to be held in trust for the appellants. The appellants were to receive an annuity equal to six percent of the net fair market value of the assets held in trust for them. The annuity was to be divided in equal shares between the appellants; if one of the appellants died, the entire annuity was to be distributed to the survivor. Upon the death of both appellants, the remaining assets were to be distributed to Oklahoma State University Foundation and Wichita State University Endowment Association in equal shares.

Under the terms of the living trust, the income from the trust was to be paid to Doris during her life. When Doris died, the remainder of the assets in the income trust were to be distributed equally between Oklahoma State University Foundation and Wichita State University Endowment Association.

The other inter vivos trust was named the Albert H. Nelson Irrevocable Trust (irrevocable trust) with Doris designated as the trustee. Markeyta was designated as successor trustee. All trust income and, if necessary, the principal were to be paid to Doris for the rest of her life. Upon Doris' death, the remaining assets were to be distributed equally between Oklahoma State University Foundation and Wichita State University Endowment Association. The irrevocable trust authorized the trustee to sell, assign, convert, convey, or dispose of assets in the trust. The pour-over will provided for the devise of any assets owned by Albert at his death to the trustee of the living trust.

Several months after the living trust and irrevocable trust were established, Albert conveyed all of his stock in Globe to the two trusts in roughly equal shares. By March 1999, all the Globe shares owned by the trusts had been sold to the Globe employee stock ownership plan. In ...