Weldon Revocable Trust v. Weldon

• Decision Date: 29 May 2007
• Docket Number: No. WD 66078.,No. WD 66113.,No. WD 66114.,No. WD 66079.,WD 66078.,WD 66079.,WD 66113.,WD 66114.
• Citation: 231 S.W.3d 158
• Parties: BETTY G. WELDON REVOCABLE TRUST by Larry M. VIVION and Richard F. McGonegal as Co-Successor Trustees, et al., Defendants, v. Betty G. WELDON, by and Through Her Next Friend, et al.; Plaintiff; Frank WELDON; Sally Proctor; Appellant-Respondents, Lenore Weldon, Respondent-Appellant.
• Court: Missouri Court of Appeals

231 S.W.3d 158

BETTY G. WELDON REVOCABLE TRUST by Larry M. VIVION and Richard F. McGonegal as Co-Successor Trustees, et al., Defendants, v. Betty G. WELDON, by and Through Her Next Friend, et al.; Plaintiff; Frank WELDON; Sally Proctor; Appellant-Respondents, Lenore Weldon, Respondent-Appellant.

No. WD 66078.

No. WD 66079.

No. WD 66113.

No. WD 66114.

Missouri Court of Appeals, Western District.

May 29, 2007.

Motion for Rehearing and/or Transfer to Supreme Court Denied July 31, 2007.

Application for Transfer Denied September 25, 2007.

Anjali Gandhi, Jefferson City, MO, for plaintiff, Betty Weldon.

Charles W. Hatfield, Khristine A. Heisinger, Jefferson City, MO, for appellant-respondent, Frank Weldon.

Michael W. Bartolacci, Stephen E. Cupples, and Gilbert C. Sison, St. Louis, MO, for appellant-respondent, Proctor.

Dale C. Doerhoff, Matthew A. Clement, Timothy W. Van Ronzelen, Jefferson City, MO, for respondent-appellant, Lenore Weldon.

Larry Vivion, defendant, pro se.

Richard McGonegal, defendant, pro se.

Before LISA WHITE HARDWICK, P.J., ROBERT G. ULRICH, and THOMAS H. NEWTON, JJ.

ROBERT G. ULRICH, Judge.

Frank Weldon and Sally Proctor appeal the judgment of the trial court construing the Betty G. Weldon Revocable Trust and removing and replacing the successor trustees. Lenore Weldon cross-appeals challenging the trial court's removal of her as a successor trustee. The judgment of the trial court is affirmed in part and reversed in part, and the case is remanded for entry of judgment consistent with this opinion.¹

FACTS

Betty G. Weldon, as Grantor, established the Betty G. Weldon Revocable Trust ("Trust") in September 1998. The Trust was amended in September 1999 and again in December 2000. The second amendment revoked the first amendment in its entirety so that the only two operative documents at the time of trial were the original 1998 trust agreement and the second amendment.

The beneficiaries of the Trust are Mrs. Weldon and her three children, Frank G. Weldon ("Gifford"), Sally Proctor ("Sally"), and Lenore T. Weldon ("Tony").² The Trust provides that while Mrs. Weldon is alive, she is entitled to receive all trust income and to withdraw principal. Should Mrs. Weldon become incapacitated, the co-successor trustees may apply net income and principal they deem appropriate for Mrs. Weldon's comfort, health, and general welfare. After Mrs. Weldon's death, the remaining Trust assets (after payment of debts, expenses, and taxes) shall be distributed to her three children, Gifford, Sally, and Tony, in equal shares.

Mrs. Weldon initially served as trustee of the Trust. She became incapacitated in 2001. Consequently, as provided in the Trust, Larry M. Vivion, Richard F. McGonegal, and Tony became co-successor trustees of the Trust.

Weldon Holding Company ("WHC") is an S-Corporation that owns 100 percent of various subsidiary corporations, News Tribune Company, California Democrat, Inc., and the Fulton Sun Gazette, Inc. Callaway Hills Stables, Inc. is a wholly owned subsidiary of the News Tribune. WHC has 100,000 outstanding shares of stock. The Trust owns all of the class A voting common stock — 15,970 shares.³ The two trusts of Mrs. Weldon's parents, the R.C. Goshorn Trust and the Lenore R. Goshorn Trust, own 84,030 shares of the WHC class B non-voting common stock. Mrs. Weldon holds a life estate in net income derived from her parents' trusts. After her death, her parents' trusts terminate, and all of the assets are to be distributed equally to her living lineal descendants, i.e., Gifford, Sally, and Tony. Consequently, all income of WHC is solely attributed to Mrs. Weldon and reported by her on her individual tax return. The board of directors of both WHC and the News Tribune consists of Gifford, Sally, Tony, Larry Vivion, Richard McGonegal, Robert Blosser, and Roman Patten.

The underlying lawsuit arose out of a dispute concerning the nature and scope of the future operations of Callaway Hills Stables. Callaway Hills is an American Saddlebred horse breeding and training farm located near New Bloomfield, Callaway County, Missouri, and founded by Mrs. Weldon in the 1940s. Mrs. Weldon achieved great success with the stallion, Will Shriver, born in 1966. Will Shriver won the World Championship in 1976 and soon after retired from the show ring. He then became a successful breeding stallion at Callaway Hills Stables, siring numerous other champions. He died in 1991 but his sons, Blue Northern and Caramac, are still standing at stud on the farm, as well as some grandsons, and his lineage has made Callaway Hills Stables the most renowned American Saddlebred breeding farm in the United States, if not the world. Although making a profit of over $200,000 in 2004, Callaway Hills Stables sustained aggregate losses of over $26.5 million in the previous twenty-seven years despite its reputation.

Tony has lived at Callaway Hills farm for approximately twenty years, first in the farmhouse and later in a new house she built on land Mrs. Weldon transferred to her, which is surrounded by the farm. She has been around the farm all of her life and involved in all phases of its operation for the past twenty years. She is interested in maintaining the farm while her mother is still alive and after her death. Besides managing the farm, Tony is also the manager and publisher of the Fulton Sun Gazette newspaper.

On May 31, 2005, a majority of the board of directors of WHC decided to promptly close the breeding and training operations of Callaway Hills Stables and sell most of the horses at two dispersal sales in July 2005 and October 2005. The resolutions to close Callaway Hills Stables and sell the horses were proposed by Gifford due to his concern over the financial drain that he believed Callaway Hills Stables represented on the resources of the News Tribune. Tony testified at trial that she did not receive normal notice of the May 31, 2005, board meeting, and when she learned of the meeting, she arrived late to be surprised by Gifford's proposal. She left the meeting before the vote and, therefore, did not participate in the vote. Gifford, Sally, Mr. Vivion, Mr. McGonegal, and Mr. Patten voted in favor of the resolutions, and Mr. Glosser voted against them.

PROCEDURAL HISTORY

Thereafter, Tony and Mrs. Weldon, by her next friend, filed suit against Mr. Vivion and Mr. McGonegal, individually and as co-successor trustees of the Trust, seeking a permanent injunction to enjoin the dispersal sale of the horses on July 13-15, 2005, and to enjoin the closing of operations and dissolution of Callaway Hills Stables. Mr. Vivion and Mr. McGonegal, as co-successor trustees of the Trust, and WHC subsequently filed their petition for declaratory judgment, naming Mrs. Weldon, Tony, Sally, and Gifford as parties, requesting the court to declare that they are charged with the obligation to preserve the Trust corpus and maximize the profitability of the Trust for the benefit of all of the beneficiaries and, consistent with that obligation, they may exercise their power to sell or dispose of any property or businesses owned by the Trust. The cases were consolidated.

Tony filed her answer to the petition for declaratory judgment and a counterclaim requesting the court to declare that Callaway Hills Stables not be sold or liquidated during Mrs. Weldon's life and that the three co-successor trustees are to manage the Trust in a manner that will fund the operations of Callaway Hills Stables for as long as Mrs. Weldon shall live as per Mrs. Weldon's and her parents' intentions as evidenced by their respective trusts. She then filed a first amended petition, which essentially mirrored her counterclaim and which sued Mr. Vivion and Mr. McGonegal only in their capacities as co-successor trustees of the Trust.

Trial was held on Mr. Vivion and Mr. McGonegal's petition for declaratory judgment, Tony's counterclaim, and Tony's first amended petition. Following trial, the trial court entered its judgment concluding that Betty's intent under the Trust was that "`Callaway Hills Stables' would remain intact and in operation for as long as she lived" and that it "would be available for distribution to one or more of her children upon the final distribution and termination of the Trust." Consequently, the trial court enjoined the proposed sale in October 2005 and enjoined Mr. Vivion, Mr. McGonegal, Gifford, and Sally from injecting themselves into the ongoing operations of Callaway Hills Stables to preserve the Trust assets until new co-successor trustees could effectively take charge. The court further removed Mr. Vivion, Mr. McGonegal, and Tony as co-successor trustees of the Trust. One reason cited for the removal of Mr. Vivion and Mr. McGonegal was their decision to pay Gifford and Sally each $150,000 per year to "match" the salary being paid to Tony. Next, the court appointed Eddie Barnett, the Honorable Byron L. Kinder, and Linda McAnany to serve in the vacancies. It ordered,

If the Co-Successor Trustees, after being fully advised, determine that there is a reasonable risk of financial difficulties due to the increased obligations resulting from the new press and the new building, the Co-Successor Trustees are directed to present a plan to the Court of austerity measures for all the business operations of the Trust designed to alleviate any such risk of financial distress, which plan will take into account Mrs. Weldon's intention that the training and breeding operations of `Callaway Hills Stables' be preserved.

Finally, the court ordered the new co-successor trustees to take all actions necessary to bring all the assets of WHC and its subsidiaries within their effective control including the removal of any employee or director of WHC or its various subsidiaries.

Gifford, Sally, Tony, WHC, and Mr. Vivion and Mr. McGonegal, as co-successor trustees of the Trust, filed their respective notices of appeal. Mrs. Weldon, through her next...