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Winston v. Winston

Court of Appeals of Missouri, Western District, Second Division

September 2, 2014

THOMAS R. WINSTON, Appellant,
v.
DAVID WINSTON and MICHELLE WINSTON, Respondents

Page 2

APPEAL FROM THE CIRCUIT COURT OF JACKSON COUNTY, MISSOURI. THE HONORABLE KATHLEEN A. FORSYTH, JUDGE.

Adam S. Davis, for Appellant.

Anne L. Pond, for Respondent.

Before: Victor C. Howard, Presiding Judge, Alok Ahuja, Judge and Mark D. Pfeiffer, Judge. All concur.

OPINION

VICTOR C. HOWARD, JUDGE

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Dr. Thomas R. Winston appeals the trial court's judgment that ordered, among other things, that distributions be made to his children from certain trusts created by his father Dr. Bernard Winston, that certain trusts be amended to remove his power to consent to all distributions to his children, and that he pay $109,117.95 of his children's attorney fees. The judgment is affirmed in part and reversed in part, and the case is remanded for proceedings in accordance with this opinion.

Factual and Procedural Background

The Trusts

Dr. Bernard Winston created numerous trusts during his lifetime and made various amendments thereto before his death in 1996. An introduction to these trusts is vital to understanding the issues in this case.

In 1989, Dr. Bernard Winston created an irrevocable trust (" 1989 Trust" ) naming United Missouri Bank of Kansas City (" UMB" ) as the sole trustee.

In 1990, Dr. Bernard Winston executed a trust agreement which created a generation skipping residuary trust (" GSRT" ) and a separate residuary trust (collectively " 1990 Trusts" ) and named himself as the trustee and appointed UMB as the successor trustee. Subsequent to the creation of the 1990 Trusts, Dr. Bernard Winston executed seven amendments thereto. Notably, the fifth amendment stated that all prior amendments were superseded by its provisions and the sixth amendment further confirmed that all amendments except the fifth amendment were revoked. In the fifth amendment, Dr. Bernard Winston created the position of " Investment Trustee" :

Notwithstanding any other provision of this Trust Agreement, all actions and decisions of the Trustee relating to investment or reinvestment of the trust estate shall be exercised only by the Investment Trustee appointed under this Paragraph A-1. Any Trustee (including the corporate Trustee) who is not acting as the Investment Trustee under this Paragraph A-1 shall not have any responsibility for, nor the authority to join in any decision regarding, the making or retaining of investments of the trust estate. However, the Trustee (other than the Investment Trustee) shall take all reasonable actions to ensure that the Investment Trustee does not violate any provisions of this Trust Agreement regarding the permissible investments of the trust estate.

Dr. Bernard further named himself as the Investment Trustee of the 1990 Trusts and named Dr. Thomas Winston as the successor Investment Trustee, providing that " if [Dr. Thomas Winston] is unable or unwilling to continue to act as such, the Trustee(s) then acting shall become the Investment Trustee, and the provisions of this Paragraph A-1 shall no longer apply."

The 1990 Trusts give the trustee discretion to make distributions to Dr. Thomas Winston or his descendants who are under age 18 as necessary for health, maintenance, and support, as well as providing for $17,500 to each descendant at the ages of 16 and 19 for the purchase of a new motor vehicle, $9,500 per year for living

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expenses for Dr. Thomas Winston's children who are " qualifying students," and amounts necessary to assist said children with the reasonable costs associated with becoming a " qualifying student." The 1990 Trusts permitted Dr. Thomas Winston to disapprove or veto distributions to his children during his lifetime, with provisions following each potential distribution to the children mandating that no distributions be made to them without his consent. The consent portion at the end of the income distribution provision reads:

Provided, however, during Thomas' life, no distribution shall be made to or for the benefit of a descendant of Thomas without the consent of Thomas (or by his legal representative during any period Thomas is under a legal disability). Notwithstanding the above provisions, Thomas' consent to any distribution to be made to one of his descendants may not be given more than sixty (60) days in advance, and shall be deemed valid only to the extent it is given freely and voluntarily.

The consent portion of the provision titled " Distributions from GSRT to or for the Benefit of Thomas' Children" reads:

Notwithstanding anything set forth in the preceding paragraph, during Thomas' life, no distribution shall be made to a child of Thomas under this Subparagraph A(3) without the specific approval of Thomas (or without the approval of Thomas' legal representative during any period Thomas is under a legal disability). Notwithstanding the above provisions, Thomas' consent to any distribution to be made to one of his descendants may not be given more than sixty (60) days in advance, and shall be deemed valid only to the extent it is given freely and voluntarily.

Additionally, there is a no-contest clause applicable to the 1990 Trusts, which reads:

If any person who has been given an interest in a trust estate under this Trust Agreement institutes or joins in (except as a party defendant) any proceeding to contest the validity of this Trust Agreement or any of its provisions, all benefits provided for that person shall be revoked[.]

In 1993, Dr. Bernard Winston executed another trust agreement that created another irrevocable trust (" 1993 Trust" ). The 1993 Trust named UMB and Dr. Thomas Winston as co-trustees, and was for the benefit of Dr. Thomas Winston and his children, having provisions for distributions similar to those in the 1990 Trusts, but providing that such distributions from the 1990 Trusts would reduce the distributions from the 1993 Trust. The 1993 Trust also contained similar consent provisions as the 1990 Trusts requiring Dr. Thomas Winston's consent for all distributions to his children. The 1993 Trust did not contain a no-contest provision.

Dr. Bernard Winston also created a number of trusts in which he placed numerous paintings, naming Dr. Thomas Winston as the trustee and Dr. Thomas Winston's children as the beneficiaries, the paintings to be held for them until they reach the age of thirty.

Litigation

Dr. Bernard Winston died in 1996, at which time Dr. Thomas Winston had two children (" the twins" ) who were six years old. UMB became the general trustee of the 1990 Trusts and Dr. Thomas Winston became the investment trustee. In July of 2010, Dr. Thomas Winston filed suit against UMB alleging breach of fiduciary duty and requesting an accounting and turnover of property. The trial of these claims has not yet occurred and the issues involved are not a part of this appeal.

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In August of 2010 UMB filed a third party petition against the twins requesting approval of its resignation as corporate trustee, appointment of a successor corporate trustee, approval of a final accounting of the trust, and a release of trustee. The twins filed an answer, as well as a counter-petition and then an amended counter-petition against Dr. Thomas Winston, in which they alleged breach of fiduciary duty and trust and violations of Uniform Transfers to Minor Act and/or conversion, and requested removal of trustee and reformation of trust. With the first two counts, the twins requested punitive damages and attorney's fees. The parties filed cross-motions for summary judgment. Before any rulings on the motions, the twins dismissed with prejudice their claim of violation of the Uniform Transfers to Minor Act and/or conversion. The trial court ruled on the summary judgment motions orally, on the first day of trial, granting Dr. Thomas Winston's motion for summary judgment as to any issues regarding the 1989 Trust and denying all other summary judgment motions.

The Judgment

With regard to the painting trusts, the trial court held that Dr. Thomas Winston had not breached his duty to safeguard the trust assets and that he did breach a duty to account to the twins about the location of the paintings, but that they had not been damaged. The court denied the twins' requests that Dr. Thomas Winston be removed as trustee, and that the painting trusts be reformed. The court ordered that Dr. Thomas Winston have the paintings appraised to ensure that they have sufficient insurance coverage, with the appraisal expense to be borne by the twins.

With regard to the 1990 Trusts, the court concluded that the twins had not violated the no-contest clause and that Dr. Thomas Winston had breached a fiduciary duty to the twins by failing to consider their best interests in determining whether or not to consent to distributions. The court declined to remove Dr. Thomas Winston as investment trustee, and it declined the twins' request to split the trust into thirds. The court also noted that any relief requested and not addressed was denied, which would include the twins' request to remove Dr. Winston's power of appointment with regard to certain assets in the residuary trust. However, the court reformed the 1990 Trust Agreement to remove Dr. Thomas Winston's power to consent to distributions to the twins. The court also ordered the corporate trustee to make specific distributions to the twins from the 1990 Trusts for automobile and educational expenses.

As to the 1993 Trust, the trial court removed Dr. Thomas Winston's consent power from the trust agreement. The court held that Dr. Thomas Winston did not breach a fiduciary duty to make distributions from the 1993 Trust, in that the 1990 Trusts contain sufficient funds. The trial court denied the twins' request for punitive damages, stating that it could not " discount the sincerity of Thomas's belief" that he had an absolute right to authorize or refuse distributions from the trusts. However, the court held that Dr. Winston should have to pay $109,117.95 of the twins' attorney's fees personally, based on the court's conclusion that he breached a fiduciary duty.

The Appeal

Dr. Thomas Winston does not appeal the trial court's rulings regarding the 1989 Trust or the Painting Trusts. All issues on appeal relate to the 1990 Trusts, the 1993 Trust, and the trial court's award of attorney fees. Dr. Thomas Winston specifically challenges the trial court's ruling

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that the corporate trustee make distributions from the 1990 Trusts to the twins for automobile and educational expenses, the trial court's amendment of the 1990 Trust Agreement and the 1993 Trust Agreement removing Dr. Thomas Winston's power to consent to all distributions to his descendants, and the trial court's award of $109,117.95 in attorney fees to the twins to be paid by Dr. Thomas Winston personally.

These challenges are based on the four arguments raised in Dr. Thomas Winston's appeal. First he argues the twins violated the no contest clause of the 1990 Trusts by filing their counter petition in this case and requesting affirmative relief in the form of removing him as trustee; removing his power of consent; either reformation, modification, or termination of the trust; and severing of the trust into three separate ones for each beneficiary. Dr. Thomas Winston also argues that the trial court erred in its legal conclusions that Dr. Thomas Winston's consent powers obligated him to act in the twins' best interests. Dr. Thomas Winston contends that the trial court erred in its legal conclusion that there was clear and convincing evidence in the record that circumstances changed such that the trusts must be reformed to effectuate Dr. Bernard Winston's intent. Finally, Dr. Thomas Winston asserts that the trial court's award of attorney's fees to the twins was erroneous because it was based on their prevailing on most issues, and the trial court erred in ruling in the twins' favor on those issues (no contest clause, breach of fiduciary duty, modification); and argues in the alternative that if this Court ...


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