Wilbourn v. Wilbourn

• Decision Date: 31 January 2013
• Docket Number: No. 2010–CA–00014–COA.,2010–CA–00014–COA.
• Citation: 106 So.3d 360
• Parties: Richard E. WILBOURN III, Appellant v. Deanna A. WILBOURN, Elizabeth W. Williamson and Garnett W. Hutton, Appellees.
• Court: Mississippi Court of Appeals

106 So.3d 360

Richard E. WILBOURN III, Appellant

v.Deanna A. WILBOURN, Elizabeth W. Williamson and Garnett W. Hutton, Appellees.

No. 2010–CA–00014–COA.

Court of Appeals of Mississippi.

April 24, 2012.

Rehearing denied Sept. 25, 2012.

Certiorari Denied Jan. 31, 2013.

Glenn Gates Taylor, Henry Palmer, Christy Michelle Sparks, attorneys for appellant.

Kathryn H. Hester, William C. Hammack, W. Wayne Drinkwater Jr., Mary Clay Wadlington Morgan, Kacey Guy Bailey, attorneys for appellees.

Before LEE, C.J., BARNES and MAXWELL, JJ.

MAXWELL, J., for the Court:

¶ 1. Deanna Wilbourn and her son Richard Wilbourn III were co-trustees of a testamentary trust created by the late Richard Wilbourn II. In his will, Richard II, the largest shareholder of Citizens National Bank of Meridian (Bank), left his Bank shares to the trust. Deanna is the sole income beneficiary, while Richard III and his sisters, Elizabeth Williamson and Garnett Hutton, are to receive the principle when Deanna dies.

¶ 2. Believing Richard III was not acting in their best interest, Deanna, Elizabeth, and Garnett attempted under the terms of the trust to remove Richard III as co-trustee. Richard III sued them, arguing his removal was ineffective, and urged the chancery court remove Deanna instead. Deanna, Elizabeth, and Garnett counterclaimed, asking the chancery court to remove Richard III if their written notice of removal had not effectively removed him.

¶ 3. Over a nineteen-day trial, the chancellor heard testimony about Richard III's secret tape recordings of conversations with Deanna, his protection of his seat on the Bank board at the expense of his family's majority voice in board elections, his fractious relationship with the Bank's chief executive officer, and his attempts to have Deanna declared incompetent while at the same time steering her to make significant financial decisions that would benefit Richard III. The chancellor concluded there were multiple justifications for judicially removing Richard III as co-trustee, while no cause existed to remove Deanna.

¶ 4. On appeal, Richard III argues the chancellor's fact findings demonstrate bias and were based on irrelevant and inadmissible evidence and an erroneous application of trust law. Our review reveals no error. Thus, we affirm the chancery court's judgment.

FACTS AND PROCEDURAL HISTORY

¶ 5. Richard II was a successful attorney and businessman. During his life he amassed a substantial amount of property, mostly shares in Citizens National Bank. He left a detailed will. But despite his efforts to provide for the management of his interest in the Bank after he was gone, less than four years of his death, his immediatefamily had sued each other over the control of the trust he created.

I. Bank and Holding Company

¶ 6. At the end of Richard II's life, he along with his wife and children were the largest shareholders of Citizens National Bank. As Richard II built his influence over the Bank, he often butted heads with the Bank's chief executive officer, Archie McDonnell Sr. But in 1999, Richard II and Archie Sr.'s son, Archie McDonnell Jr., came together to create a strategic plan for the Bank. Under this plan, Richard II became chairman of the board and Archie Jr. president and CEO of the Bank. This led to a prosperous time for the Bank, with Archie Jr. managing the day-to-day operations and Richard II controlling the board.

¶ 7. Also in 1999, Richard II brought his son Richard III onto the board—but not without limitations. The two executed a “memorandum of agreement.” If Richard II believed Richard III's services were “no longer advantageous to the Wilbourn's family overall interest,” then Richard III would resign and not run for re-election during his father's lifetime. Richard III also agreed that, upon Richard II's death or resignation, he would nominate a Wilbourn family member to replace Richard II on the board, in order to protect the family's significant financial interest in the Bank. The agreement also detailed how Richard II had gained his interest in the Bank and how he had arranged for his children to obtain individual interests as well.

¶ 8. In 2003, as a mechanism to raise capital, the Bank formed a holding company, Citizens National Bank Corp. All the Bank stock was exchanged for holding company stock. Bank shareholders became holding company shareholders, and the holding company became the sole shareholder of the Bank. Richard II became a 30% owner of the holding company. His shares combined with the shares of his immediate family gave the Wilbourns 52% ownership and majority control. The McDonnell's owned 16.5%. Another 10% was owned by Richard II's siblings, with the rest owned by neither Wilbourns nor McDonnells.

¶ 9. The holding company board selects the Bank board, which actually governs the Bank's operations. The only other role of the holding company is to determine dividends. When Richard II died unexpectedly in October 2004, the holding company's board of directors had five members: Richard II (who was chairman), Richard III, Archie Sr., Archie Jr., and Garnett. At the time, there had been no plans about who would replace Richard II as chairman of both the holding company and Bank boards. With some reluctance, Deanna, Elizabeth, and Garnett supported Archie Jr.'s nomination of Richard III for both positions. In November 2004, Richard III replaced his father as chairman of the Bank board and Elizabeth replaced her father as Bank director. And the next month, Richard III replaced his father as chairman of the holding company board, and Deanna replaced her husband as director.

II. Marital Trust B

¶ 10. In his will, Richard II left all his Bank shares to Richard III and Deanna to hold in trust for the use and benefit of Deanna. Because the holding company had been formed after the execution of the will, the Lauderdale Chancery Court granted Richard III and Deanna's petition to place Richard II's 41,910 shares of holding company stock in the testamentary trust (Marital Trust B, or Trust) to fulfill the purposes of the will. The 41,910 holding company shares are the only assets of Marital Trust B. ¶ 11. Under the terms of Marital Trust B, the co-trustees are to distribute annually all the net income to Deanna. They are also prohibited from “appoint[ing] any part of the property constituting the trust to any person other than [Deanna] during her lifetime.” At Deanna's death, the property is to be equally divided between Richard III, Elizabeth, and Garnett.

¶ 12. Richard II expressed within the terms of the Trust his intention regarding his family's ownership and control of the Bank:

I am committed during my lifetime to voting against any mergers of the bank that would dilute my interest and to opposing the sale of the stock to another bank, bank holding company or individual. I believe that I have acquired enough stock to be able to unilaterally prevent this. Having expressed these thoughts and desires, ... neither the Co–Trustees nor the proxy of the trust shall sell this stock or vote in favor of any merger or other corporate action which is calculated to lead to a merger which would dilute the voting power or ownership of the stock in The Citizens National Bank of Meridian or would lead to the sale or exchange of this stock without the unanimous consent in writing of all the beneficiaries of the income and the principal of this trust.

Richard II also provided for trustee removal:

If Richard E. Wilbourn, III or Deanna A. Wilbourn shall be or become for any reason unable or unwilling to serve as Co–Trustee of this trust, I hereby appoint Elizabeth W. Williamson as Successor Co–Trustee, to serve as if originally appointed. In the event that Elizabeth W. Williamson shall be or become for any reason unable or unwilling to serve as Trustee of this trust, I hereby appoint Garnett W. Hutton as Successor Co–Trustee, to serve as if originally appointed. Notwithstanding the foregoing, and if and only if a Co–Trustee shall become incompetent, unable to serve or grossly mismanages the trust, my wife and children, other than the child serving as Co–Trustee, acting unanimously, shall have the power to remove any Co–Trustee or Successor Co–Trustee and to appoint a Successor Trustee or Co–Trustee, such action to be accomplished by the execution and acknowledgment of a written instrument to that affect, and delivery of that instrument to all Co–Trustees.

¶ 13. In both March 2005 and March 2006, Richard III and Deanna, as co-trustees of the 41,190 holding company shares, agreed how to vote the stock in the election of holding company board members. But they were not able to agree how to vote the stock in March 2007. As a result, the shares were not voted.

III. Family Dispute

¶ 14. The voting impasse grew out of a conflict that began brewing in 2006 and eventually led to this lawsuit. From the time Richard III became chairman of the Bank board, his relationship with CEO Archie Jr. was not as cooperative as his father's. The chancery court found Richard III's actions upset the board-management balance between the Wilbourns and the McDonnells. Several Bank employees testified about what they perceived to be Richard III's interference with Archie Jr.'s daily bank management and the negative effect Richard III's mistrust of Archie Jr. had on employee morale. A consultant hired by the Bank testified Richard III had voluntarily spoken of his mistrust of Archie Jr., calling Archie Jr. a “silver-tongue devil.”

¶ 15. After an unsuccessful conversation with Richard III, Archie Jr. took his concerns to Deanna. Elizabeth testified she had interviewed Bank officers, who verified what Archie Jr. had said. In February 2006, Deanna, Elizabeth, and Garnett spoke to Richard III about the complaints and expressed their support of Archie Jr. Richard III wrote his family an apologetic letter, and for several months the looming crisis appeared to have abated. But in October 2006, Archie Jr....