O'Riley v. U.S. Bank, N.A.

• Decision Date: 29 October 2013
• Docket Number: No. WD 75307.,WD 75307.
• Citation: 412 S.W.3d 400
• Parties: Terrance O'RILEY and Gerald O'Riley, Appellants, v. U.S. BANK, N.A., Respondent.
• Court: Missouri Court of Appeals

412 S.W.3d 400

Terrance O'RILEY and Gerald O'Riley, Appellants,

v.U.S. BANK, N.A., Respondent.

No. WD 75307.

Missouri Court of Appeals, Western District.

Sept. 17, 2013. Motion for Transfer to the Supreme Court Denied Oct. 29, 2013.

Michael R. Ong, for Appellants.

Mark M. Iba, Kansas City, for Respondent.

Before Division I: VICTOR C. HOWARD, Presiding Judge, JOSEPH M. ELLIS, Judge and ANTHONY REX GABBERT, Judge.

VICTOR C. HOWARD, Judge.

Terrance O'Riley and Gerald O'Riley (Beneficiaries) appeal the judgment of the trial court in favor of U.S. Bank, N.A. (Trustee) on their claims for breach of fiduciary duty. The judgment is affirmed.

Factual and Procedural Background

Donald and Arlene O'Riley married in 1956. They had two children, Terrance and Gerald.¹ In January 1978, Donald, as Grantor, executed a Trust Agreement establishing a revocable trust and naming American National Bank, U.S. Bank's predecessor, as the trustee. Donald passed away in March 1982. Pursuant to the Trust Agreement, the trustee divided the trust estate into two shares upon Donald's death—a Marital Trust and a Non–Marital Trust. The Marital Trust “consist[ed] only of assets that qualify for the marital deduction under federal estate tax law.” It directed the trustee to pay Arlene all of the net income of the Marital Trust and also distribute to her part or all of the principal of the trust as she may request. The underlying lawsuit did not involve the administration or distribution of the Marital Trust.

The Non–Marital Trust directed the trustee to distribute to Arlene so much or all of the net income of the trust as it deemed advisable to provide for her care, support, maintenance and welfare. It also directed the trustee to distribute to any one or more of Donald's descendants so much or all of the net income of the trust not paid to Arlene as it deemed advisable to provide for their respective care, support, maintenance, education and welfare.

The Trust Agreement also authorized the trustee to “invade” and pay to the Grantor, his wife, or his children from the principal of either trust estate if it determined that the aggregate of the income and principal payable under the trusts and the funds available from all other sources were insufficient to provide adequately for their care, support, maintenance, education, comfort and medical or other attention or emergency.

Finally, the Non–Marital Trust directed the trustee to distribute the remainder of the trust estate to Grantor's then living descendants upon the death of Arlene.

Once fully funded after Donald's death, the Non–Marital Trust had an account balance of $369,604.92. Arlene made annual requests to Trustee for all of the income generated from the Non–Marital Trust to help cover her living expenses. Trustee approved Arlene's requests and distributed the income from the Non–Marital Trust until 2007 when it ceased serving as the trustee. Terrance made occasional requests for income distributions from the Non–Marital Trust in 1989, 1991, and 2000 to cover living expenses, health insurance, and an unpaid x-ray bill. Trustee approved one distribution to Terrance of $600 in 1989 and denied the other requests. Gerald never made any requests for distributions from the Non–Marital Trust. In 1987, Arlene requested a distribution of approximately $9200 from the principal of the Non–Marital Trust to reimburse her for amounts she provided to Terrance and Gerald for college expenses, auto insurance, and divorce-related expenses. Trustee denied this request by Arlene.

Between 1983 and 1995, Trustee invested the Non–Marital Trust assets in bonds, bond funds, certificates of deposit, and other fixed income assets. The Trust held no equities, common stock, or mutual funds during this period. In 1996, approximately 14% of the Non–Marital Trust assets were held in stock, and by 1999, over 40% of the Trust assets were held in stock. And between 2003 and 2007, Trustee invested 45–60% of the Non–Marital Trust assets in equities. At the end of 2007 when Trustee ceased serving as trustee of the Non–Marital Trust, the Trust had a balance of $413,405.46.

In May 2010, Beneficiaries filed their first amended petition against Trustee seeking compensatory and punitive damages and attorney's fees for breach of duty of impartiality and breach of duty to properly invest trust assets. They alleged that Trustee refused to make any distributions to them and favored the interests of Arlene over theirs and failed to provide them with account statements to advise them of the nature and extent of their interests in the Non–Marital Trust. They also alleged that Trustee invested solely in cash accounts or income producing bond funds but not in equity investments and did not sufficiently diversify the assets resulting in no appreciation of the Non–Marital Trust assets.

Following a bench trial, the trial court entered judgment in favor of Trustee on all counts. Thereafter, Trustee filed a motion for an award of attorney's fees, costs, and expenses under section 456.10–1004, RSMo Cum.Supp.2012. They sought recovery of $379,849.20 in attorney's fees and $81,867.73 in expenses and costs incurred in defending against Beneficiaries' claims. The trial court entered its first amended judgment in favor of Trustee on all counts and granted Trustee's motion for award of attorney's fees, costs, and expenses in the amount of $257,017.73 to be paid by Beneficiaries and from their interests in the Non–Marital Trust.

This appeal by Beneficiaries followed.

Standard of Review

In a bench-tried case, the judgment of the trial court will be affirmed on appeal unless there is no substantial evidence to support it, it is against the weight of the evidence, or it erroneously declares or applies the law. Pearson v. Koster, 367 S.W.3d 36, 43 (Mo. banc 2012); Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). Claims that there is no substantial evidence to support the judgment or that the judgment is against the weight of the evidence necessarily involve review of the trial court's factual determinations. Pearson, 367 S.W.3d at 43. A reviewing court will overturn a trial court's judgment under these fact-based standards of review only when the court has a firm belief that the judgment is wrong. Id. On the other hand, a claim that the judgment erroneously declares or applies the law involves review of the propriety of the trial court's construction and application of the law. Id.

An appellate court reviews questions of law de novo without deference to the trial court's conclusions. Id. at 43–44. In reviewing questions of fact, the appellate court defers to the trial court's assessment of the evidence if any facts relevant to an issue are contested. Id. at 44. This is so because the trial court is in a better position not only to judge the credibility of witnesses directly but also their sincerity and character and other trial intangibles that may not be completely revealed by the record. Id. When evidence is contested, a trial court is free to disbelieve any, all, or none of the evidence. Id. “ ‘[T]he appellate court's role is not to reevaluate testimony through its own perspective.’ ” Id. (quoting White v. Dir. of Revenue, 321 S.W.3d 298, 309 (Mo. banc 2010)). Where, as here, the parties did not request written findings of fact, the appellate court views the facts in the light most favorable to the trial court's judgment. Id. at 52 (citing Rule 73.01).

“Whether a fiduciary duty exists is a question of law, while the breach of that duty is for the trier of fact to decide.” Western Blue Print Co., LLC v. Roberts, 367 S.W.3d 7, 15 (Mo. banc 2012)(citing Scanwell Freight Express STL, Inc. v. Chan, 162 S.W.3d 477, 481 (Mo. banc 2005)).

Claims for Breach of Fiduciary Duties

In their first two points on appeal, Beneficiaries claim that the trial court's judgment erroneously applied the law in ruling that Trustee did not breach its duty of impartiality or its duty to properly invest trust assets. In making these arguments, Beneficiaries often focus solely on the facts favorable to them and ignore those that support the trial court's judgment. Of course, this court may not reweigh the evidence under the applicable standard of review.

In determining the meaning of trust provisions, the paramount rule of construction is that the grantor's intent is controlling and such intention must be ascertained primarily from the trust instrument as a whole. First Nat'l Bank of Kansas City v. Hyde, 363 S.W.2d 647, 652 (Mo.1962); Betty G. Weldon Revocable Trust v. Weldon, 231 S.W.3d 158, 173 (Mo.App. W.D.2007). A court must endeavor to ascertain the grantor's intent at the time of the creation of the trust. Weldon, 231 S.W.3d at 173. A grantor is presumed to know and intend the legal effect of the language he uses in the trust. Id. at 173–74. “Where the language used is clear and of well-defined force and meaning, it must stand as written and extrinsic evidence of what was intended in fact cannot be adduced to qualify, explain, enlarge, or contradict the language.” Hyde, 363 S.W.2d at 653. Unambiguous terms in a trust will be given effect, and a court will not attempt to rewrite an unambiguous trust under the guise of construction. Weldon, 231 S.W.3d at 174.

Generally, where a grantor vests sole discretion of a matter in a trustee and supplies no objective standard by which to evaluate the reasonableness of its conduct, a court will not interfere in the exercise of that discretion unless the trustee willfully abuses its discretion or acts arbitrarily, fraudulently, dishonestly, or with an improper motive. Hyde, 363 S.W.2d at 655;Weldon, 231 S.W.3d at 174–75;In re Heisserer, 797 S.W.2d 864, 870 (Mo.App. S.D.1990). See alsoRestatement (Second) of Trusts § 187 (1959)(“Where discretion is conferred upon the trustee with respect to the exercise of a power, its exercise is not subject to control by the court, except to prevent an abuse by the trustee of his...