Wilbourn v. Wilbourn


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Docket Number: 2010-CA-00014-COA
Linked Case(s): 2010-CA-00014-COA2010-CT-00014-SCT
Oral Argument: 02-22-2012
 

 

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Court of Appeals: Opinion Link
Opinion Date: 04-24-2012
Opinion Author: Maxwell, J.
Holding: Affirmed

Additional Case Information: Topic: Wills & estates - Removal as co-trustee - Good cause - Hostility of trustee toward successor income beneficiary - Conflict of interest - Breach of fiduciary duty - Secret tape recording - Admission of letter - M.R.E. 408 - Involuntary dismissal - M.R.C.P. 41(b)
Judge(s) Concurring: Lee, C.J., Irving, P.J., Barnes, Ishee, Carlton, Russell and Fair, JJ.
Non Participating Judge(s): Griffis, P.J., and Roberts, J.
Procedural History: Bench Trial
Nature of the Case: CIVIL - WILLS, TRUSTS AND ESTATES

Trial Court: Date of Trial Judgment: 12-08-2009
Appealed from: Lauderdale County Chancery Court
Judge: Lawrence "Larry" Primeaux
Disposition: REMOVED AND DISQUALIFIED APPELLANT FROM SERVING AS COTRUSTEE OF A FAMILY TRUST, DISMISSED APPELLANT’S CLAIM TO REMOVE AND BAR APPELLEES FROM SERVING AS CO-TRUSTEE OF FAMILY TRUST
Case Number: 07-977-P

  Party Name: Attorney Name:   Brief(s) Available:
Appellant: Richard E. Wilbourn, III




GLENN GATES TAYLOR HENRY PALMER CHRISTY MICHELLE SPARKS



 
  • Appellant #1 Brief
  • Appellant #1 Reply Brief

  • Appellee: Deanna A. Wilbourn, Elizabeth W. Williamson and Garnett W. Hutton KATHRYN H. HESTER WILLIAM C. HAMMACK W. WAYNE DRINKWATER JR. MARY CLAY WADLINGTON MORGAN, KACEY GUY BAILEY  
    Appellee #2:  

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    Topic: Wills & estates - Removal as co-trustee - Good cause - Hostility of trustee toward successor income beneficiary - Conflict of interest - Breach of fiduciary duty - Secret tape recording - Admission of letter - M.R.E. 408 - Involuntary dismissal - M.R.C.P. 41(b)

    Summary of the Facts: 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, 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. 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. The chancellor concluded there were multiple justifications for judicially removing Richard III as co-trustee, while no cause existed to remove Deanna. Richard III appeals.

    Summary of Opinion Analysis: Issue 1: Removal as co-trustee Richard III makes two general arguments about the chancellor’s findings: the chancellor’s strong negative reaction to Richard III’s secret tape recordings biased the chancellor’s view of all the other evidence; and the chancellor based his decision on actions by Richard III that had no relevance to his administration of Marital Trust B. A court has inherent power to remove the trustee for good cause, such power being incidental to the court’s paramount duty to see that trusts are properly executed, and the trust estate preserved, and as broad and comprehensive as the exigencies of the case may require. Hostility of the trustee toward the successor income beneficiary could defeat the purpose of the trust, giving the chancellor sufficient ground to remove the trustee for good cause. A chancellor may also remove a trustee for a conflict of interest. Further, a serious breakdown in communications between beneficiaries and a trustee may justify removal, particularly if the trustee is responsible for the breakdown or it appears to be incurable. Serious friction between co-trustees may also warrant removal of one or both of them. A trustee has a duty to act with due regard to his obligation as a fiduciary. One in a fiduciary position, such as a trustee, cannot take advantage of that position of trust in administering the assets entrusted to him or her. The chancellor dedicated twelve pages of his opinion to his findings regarding Richard III’s secret tape recordings. Richard III claims the chancellor erroneously applied the law to find that an attorney’s secret tape recording is always unethical. The Mississippi Supreme Court does not impose a per se ban on surreptitious tape recordings by attorneys. Instead, the Court looks at the secret tape recording within the context of the circumstances then existing to determine whether the recording rises to the level of dishonesty, fraud, deceit or misrepresentation. An attorney who uses a secret recording for blackmail or to otherwise gain unfair advantage has clearly committed an unethical—if not illegal—act. The chancellor rejected Richard III’s explanation—that his purpose for secretly recording his mother was to have a “true record” of their conversations—as not supported by the evidence. Instead, the chancellor found Richard III’s purpose was to gather negative evidence against his mother, whom he was trying to have declared incompetent and, later, to have removed as co-trustee. The evidence that Richard III was secretly tape recording Deanna for his own purposes is sufficient to support the chancellor’s finding Richard III had breached his duty of loyalty. As Deanna’s fiduciary, Richard III owed her duties of good faith, trust, and candor. Deanna testified that Richard III’s actions destroyed her trust in him. And it was her learning about the recordings that led to the breakdown of communication between her and Richard III as co-trustees. According to Richard III, voting the Marital Trust B’s shares was merely “incidental” to his administrative duties of managing the Trust. The chancellor found voting the shares was an important discretionary function of Marital Trust B. He reasoned that by casting their votes, the co-trustees would effect Richard II’s intent that his immediate family continue control over the Bank. Because Richard II clearly intended that his family maintain their significant investment in the Bank, the terms of the trust restricted the co-trustees from voting Trust shares in a manner that would dilute his family’s “voting power of ownership” over the Bank without unanimous consent. By refusing to vote the shares, Richard III endangered his family’s control of the bank, allowing his immediate family’s votes to drop from a 52% majority to only 30%. His intentional and calculated inaction also prominently displayed his self-interest of ensuring he had sufficient votes to remain on the holding company Board. Under the circumstances, there was no error in the chancellor holding Richard III’s refusal to vote the Marital Trust B shares violated both his fiduciary duties and also his duties as co-trustee. Richard III also argues that the chancellor relied on inadmissible evidence to support the conclusion Richard III refused to vote the shares as a means to promote his own interest. According to Richard III, a letter to Archie Jr. and Deanna was part of a settlement negotiation and, thus, inadmissible under M.R.E. 408. Rule 408 only bars the use of compromise evidence to prove the validity or invalidity of the claim that was the subject of the compromise, not some other claim. Here, the letter was not about settling the co-trustee removal issue—the only issue at trial. Instead, the letter was about Richard III’s claim against the holding company board for his removal as chairman and for his removal from the Bank board, as evidenced by its recipients, Deanna and Archie Jr., a member of the holding company board who has no role in Marital Trust B. While the letter may not be admissible in a dispute between the holding company and Richard III, Rule 408 does not apply to its admissibility in the dispute between Richard III and his family. Rule 408 is also inapplicable when the claim is based upon some wrong that was committed in the course of the settlement discussions; e.g., libel, assault, breach of contract, unfair labor practice, and the like. Deanna, Elizabeth, and Garnett’s claim was that Richard III misused his authority as co-trustee to gain leverage in his attempt to regain his seat on the holding company board. In the letter he proposed not voting the Marital Trust B shares because without him he would be re-elected to the holding company board through his and his uncle’s shares. Thus, the letter was admissible as “proof of the instrumentality” of his breach of his fiduciary duties as co-trustee. Richard III also argues the chancellor improperly considered a 1999 memorandum of agreement between himself and his father. Richard III is correct that the agreement could not be used to prove Richard III had additional co-trustee duties that he did not fulfill. But that does not make the document inadmissible for other purposes. Both the agreement and the will were executed the same year. Both expressed Richard II’s belief in the importance of the Bank to his family’s long-term financial success. Thus, the agreement was relevant to whether Richard III was managing Marital Trust B in a way that promoted Richard II’s intention. Richard III argues that all evidence about his interactions with Archie Jr. and the Bank is irrelevant to his actions as co-trustee of Marital Trust B. The chancellor found Richard III’s enmity toward Archie Jr. was a “legitimate cause of anxiety and concern” for Deanna, Elizabeth, and Garnett. As beneficiaries to Marital Trust B, they had a right to be concerned with the Bank’s profitability. Richard III’s actions as Bank board chairman are relevant because at the time he was simultaneously co-trustee, owing complete loyalty to his beneficiaries. Richard III argues the chancellor misapplied the law on hostility. He argues, because Deanna, Elizabeth, and Garnett created the hostility in an effort to have Richard III removed as co-trustee, they were not entitled to removal on this ground. But the chancellor did not find Deanna, Elizabeth, and Garnett had created the hostility. Instead, the chancellor found Richard III had created the hostility through his adversarial acts—his secret tape recordings, his interactions with Bank officers that made his family uneasy, and his refusal to cooperate with Deanna to vote the shares of Marital Trust B. Issue 2: Involuntary dismissal Richard appeals the involuntary dismissal under M.R.C.P. 41(b) of his claims to remove Deanna as co-trustee and prevent Elizabeth or Garnett from replacing her and to be compensated for his services as co-trustee. Richard III called all three defendants as hostile witnesses during his case-in-chief. The chancellor found credible their explanations for why they attempted to remove Richard III as co-trustee under the terms of the will and for why Deanna attempted to vote the shares in an effort to maintain family control of the holding company. The chancellor held all three defendants had acted in good faith. This is a fair view of their testimony. Because Richard III has presented no record evidence of trust services and expenditures during the relevant time period entitling him to compensation, there is no manifest error in the chancellor’s dismissal of his claim for fees.


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