Schumacher Grp., LTD v. Schumacher

• Decision Date: 17 November 2015
• Docket Number: WD 78341
• Citation: 474 S.W.3d 615
• Parties: The Schumacher Group, Ltd, et al., Respondents, v. James Price Schumacher, et al., Appellants.
• Court: Missouri Court of Appeals

474 S.W.3d 615

The Schumacher Group, Ltd, et al., Respondents,

v.James Price Schumacher, et al., Appellants.

WD 78341

Missouri Court of Appeals, Western District.

OPINION FILED: November 17, 2015

George E. Kapke, Lee's Summit, MO, for appellants.

Danny L. Curtis and Adam S. Davis, Kansas City, MO, for respondents.

Before Division One: Anthony Rex Gabbert, Presiding Judge, Victor C. Howard, Judge and Cynthia L. Martin, Judge

Cynthia L. Martin, Judge

James Price Schumacher¹ ("James") and Cindy Sue Davis ("Davis") appeal the trial court's entry of summary judgment on counterclaims they asserted. James and Davis argue that the trial court erred in granting summary judgment because (1) the counterclaims were not barred by res judicata or collateral estoppel; (2) the counterclaims were not asserted against improper parties; and (3) summary judgment was granted after the counterclaims had been amended. Finding no error, we affirm.

Factual and Procedural Background²

This case reflects another chapter in the continuing saga of protracted litigation between family members regarding several trusts and business entities. The disputes have been before this court on two prior occasions. Schumacher v. Schumacher, 303 S.W.3d 170 (Mo. App. W.D. 2010) (" Schumacher I "); Schumacher v. Austin, 400 S.W.3d 364 (Mo. App. W.D. 2013) (" Schumacher II "). We will not belabor the complicated relationships and transactions capably described in Schumacher I and Schumacher II but will summarize the litigious history in this case only to the extent necessary to explain our resolution of this appeal.

In 1976, Louis E. Schumacher ("Father") created an irrevocable trust (the "1976 Trust"). Father named his wife, Sara N. Schumacher ("Mother"), and son, Louis Edward Austin ("Austin"), as trustees (collectively "the 1976 Trustees"). The 1976 Trust provided that income was to be distributed in equal shares to each of four children—James, Davis, Austin, and John Griffin Schumacher ("John")—during Father's lifetime and for a period of five years thereafter. The 1976 Trust terms provided that the trust would terminate five years after Father's death with the remaining principal to be distributed to Father's then-living descendants.

In 1984, the 1976 Trustees formed The Schumacher Group, Ltd. ("the Corporation").

The 1976 Trust was the Corporation's sole shareholder. Mother was president of the Corporation.

In 1986, Father and Mother created a revocable trust ("the 1986 Trust") and named themselves as trustees. Father died in May 1998. When Father died, the 1986 Trust split into three separate trusts: a qualified terminable interest property trust ("the QTIP Trust"), a marital trust ("the Marital Trust"), and a family trust ("the Family Trust"). Mother was the sole trustee of these trusts. James, Davis, Austin, and John were beneficiaries of the QTIP Trust and the Family Trust.

In January 2001, Trustee Austin³ and Mother, as co-trustee of the 1976 Trust and as sole trustee of the QTIP Trust, the Marital Trust, and the Family Trust, created a limited partnership ("the Partnership") and a limited liability company ("the LLC"). The LLC was the general partner of the Partnership. The 1976 Trustees conveyed the 1976 Trust assets to the Partnership and the LLC in exchange for a .5 percent interest in the Partnership and a .37 percent interest in the LLC. Then Mother conveyed all of the assets of the QTIP Trust, the Marital Trust, and the Family Trust to the Partnership and the LLC. Sometime prior to May 2003, the 1976 Trustees exchanged the 1976 Trust's .5 percent interest in the Partnership and .37 percent interest in the LLC for shares in the Corporation.

Per its terms, the 1976 Trust terminated in May 2003, five years after Father's death. At that time, and given the aforesaid transactions, shares in the Corporation were the only asset held in the 1976 Trust. The shares were distributed by the 1976 Trustees to the named beneficiaries of the 1976 Trust—James, Davis, Austin, and John.

In November 2005, James and Davis (collectively "the Beneficiaries") filed a lawsuit against Austin, as an individual and in his capacity as Trustee Austin; Mother, as an individual and in her capacity as a co-trustee of the 1976 Trust, and as trustee of the QTIP Trust and the Family Trust; and John, as an individual ("Suit I"). Suit I asserted several claims that, loosely summarized, challenged whether the above-described transactions involving the assets of the 1976 Trust, the QTIP Trust, and the Family Trust breached fiduciary obligations owed to the Beneficiaries. No transactions involving the Marital Trust were at issue in Suit I.

The trial court entered a declaratory judgment in Suit I in September 2008. The judgment declared that Trustee Austin and Mother violated duties owed to the Beneficiaries when they converted the assets originally held by the 1976 Trust, the QTIP Trust, and the Family Trust. The trial court declared the Partnership and LLC and the transactions by which they were funded void ab initio. Trustee Austin and Mother were directed "to take all steps necessary to transfer legal title to all property acquired by the Corporation, Partnership and LLC from, or traceable to, the [1976 Trust] and the QTIP and Family trusts back to the trust estate from which the property was transferred or is traceable." Trustee Austin and Mother also were directed to provide the named beneficiaries of each of those trusts a revised accounting, and to distribute the assets of the 1976 Trust to the beneficiaries of that trust according to the revised accounting.

Trustee Austin and Mother appealed the Suit I judgment, resulting in our opinion in Schumacher I. We affirmed the Suit I judgment in part and reversed in part, and remanded the case to the trial court to address affirmative defenses that had been asserted. Following proceedings on remand, the trial court entered judgment once again in favor of the Beneficiaries. An appeal from the judgment on remand was later dismissed.

In the meantime, in August 2011, a second lawsuit was filed. This lawsuit was initiated by Austin individually;⁴ Mother, individually and as trustee of the Marital Trust; the Corporation; and three limited liability companies⁵ ("Suit II"). Suit II named the Beneficiaries as defendants and sought damages and to quiet title based upon the fact that the Beneficiaries had filed numerous lis pendens to cloud title to real estate owned by the plaintiff limited liability companies that negatively impacted loan transactions to the financial detriment of all of the named plaintiffs, particularly plaintiffs who had personally guaranteed loans to the limited liability company plaintiffs.

While Suit II was pending, the trial court in Suit I entered a satisfaction of judgment in January 2012. The Beneficiaries appealed the satisfaction of judgment, arguing that some of the shares of the Corporation had not been distributed by the 1976 Trustees to the beneficiaries of that trust.

While the second appeal in Suit I was pending, two matters of procedural significance occurred in Suit II. First, Mother died in April 2012. Following the filing of suggestions of death, plaintiffs in Suit II sought leave to substitute successor trustees for Mother as trustee of the Marital Trust. Those successor trustees were Austin and John ("the Marital Trust Successor Trustees"). Until this point, Austin was only named as a plaintiff in Suit II in his individual capacity.⁶ And until this point, John was not at all involved in Suit II. After this point, Austin remained a plaintiff in his individual capacity, and Austin and John were plaintiffs in their representative capacities as the Marital Trust Successor Trustees.

Second, the Beneficiaries filed an amended answer in June 2012, which asserted five counterclaims. The counterclaims, loosely summarized, sought recovery of attorneys' fees incurred in Suit I; damages because 1976 Trust, QTIP Trust, and Family Trust assets were wasted by the assertion of frivolous affirmative defenses in Suit I; another accounting of the 1976 Trust, QTIP Trust, and Family Trust assets; removal of the trustees of the 1976 Trust, QTIP Trust, and Family Trust; and a finding that Trustee Austin and Mother conspired to deprive the Beneficiaries of benefits under the 1976 Trust, QTIP Trust, and Family Trust in several ways, including by the creation of the limited liability companies named as plaintiffs in Suit II. Although the introductory paragraph of the counterclaims provided that same were being asserted against "the Plaintiffs [Mother] and Austin," in fact, in the allegations applicable to all counts, the counterclaim defendants are identified as "[Mother] as Trustee" of the QTIP Trust and the Family Trust, and "[Mother] and Austin" as co-trustees of the 1976 Trust. [L.F. 591] Further, in that same section of the counterclaims, although the Beneficiaries assert that "Plaintiffs [Mother] and Austin" were found in Suit I to have breached fiduciary duties to the Beneficiaries, in fact, the declaratory judgment in Suit I did not enter a judgment against Austin individually, but rather entered judgment against "Defendant Trustees and [Mother]." [L.F. 269–71]

The Suit II plaintiffs filed a reply in response to the Beneficiaries' counterclaims, and among other things, asserted as an affirmative defense that the trial court lacked jurisdiction to determine the counterclaims because the persons against the counterclaims were actually asserted were not parties to Suit II.

In September 2012, Austin and the Marital Trust Successor Trustees filed a motion for summary judgment on the Beneficiaries' counterclaims. Austin and the Marital Trust Successor Trustees alleged: (1) that the counterclaims were barred by res judicata and/or collateral estoppel given the judgment entered in Suit I; (2) that the trial court lacked jurisdiction over the counterclaims because they sought judgment against non-parties to Suit II; and (3) that the...