Court of Appeals of Missouri, Eastern District, Fourth Division
IN THE MATTER OF: T.R. POTTER, JR. EXEMPT TRUST FBO JOHN M. POTTER.
from the Circuit Court of the City of St. Louis Cause No.
1422-PR00688 Honorable Michael K. Mullen
M. Gaertner, Jr., Judge.
case involves the interpretation of an irrevocable trust
created to be a tax-exempt generation-skipping transfer from
Emily Magnus Potter (Grantor) to her descendants. David
Oetting (Oetting), a co-trustee of the trust, appeals the
judgment of the probate court interpreting the language of
the trust to allow income distributions under the
circumstances here to Grantor's grandson, Respondent John
M. Potter (Potter); finding no breach of fiduciary duty by
the corporate trustee, Respondent U.S. Bank; removing Oetting
as co-trustee of the trust; and granting attorney's fees
and expenses in favor of Potter and U.S. Bank. Because we
find the probate court improperly interpreted the trust as it
relates to the trustees' ability to request Potter's
financial information before authorizing an income
distribution from the trust, we reverse the judgment in part
and remand the probate court's order regarding
attorney's fees and expenses. However, we find
substantial evidence to support the probate court's
conclusion that U.S. Bank is not liable for breach of trust
under the circumstances here, and we agree Oetting's
removal as co-trustee was appropriate, thus we affirm the
judgment in part.
1988, Grantor funded the trust at issue here pursuant to the
tax laws applicable at the time, which allowed such trusts to
transfer up to one million dollars across generations without
incurring generation-skipping tax consequences. When Grantor
originally executed the trust, the trust estate was divided
into two equal portions, held in two separate trusts-the T.R.
Potter, Jr. Exempt Trust (TRP Trust) and the Edward M. Potter
Exempt Trust-for each of her sons and their descendants. Each
trust had a corporate trustee and an individual trustee.
Grantor's sons, T.R. Potter, Jr. (Randy Potter), and
Edward Potter, acted as individual trustees for their
respective trusts, along with Mercantile Bank as the
corporate trustee for each trust.
Potter had two sons, Respondent Potter and T.R. Potter, III
(Tom Potter). Randy Potter died in 2008. By its terms, the
TRP Trust and its assets then divided into two equal shares,
one each for the benefit of Potter and his brother Tom
Potter, and their respective descendants. After Randy
Potter's death, Oetting became the individual co-trustee
of each share of the trust under the terms of the TRP Trust.
Shortly thereafter, Potter asked Oetting to resign as
co-trustee of Potter's share of the TRP Trust, but
Oetting declined. U.S. Bank is currently the corporate
co-trustee of the TRP Trust as the successor to Mercantile
Bank. Potter is the sole beneficiary of his share of the TRP
Trust during his lifetime. Potter currently has one child,
John M. Potter, Jr. (Jack Potter), born in 2014, who is a
contingent remainder beneficiary of Potter's share of the
TRP Trust. Tom Potter is also a contingent remainder
beneficiary of Potter's share of the trust, taking
Potter's share of the trust only if Potter has no
descendants at his death.
2008 to 2013, Oetting and Potter did not communicate about
the trust. In June of 2012, Potter contacted Ann Wells
(Wells), the trust officer at U.S. Bank at the time, to
request a distribution of income from his share of the trust
in order to provide cash flow for his real estate business.
Wells believed the terms of the trust authorized income
distributions to Potter under the circumstances, and she made
arrangements to disperse income from the trust into
Potter's personal revocable trust account held at U.S.
Bank. Though the terms of the trust required both trustees to
consent to income distributions, Oetting testified no one
from U.S. Bank consulted him as co-trustee about such
distributions. In November of 2012, Wells suffered a stroke
and does not remember the details regarding the distribution
of income. She testified that U.S. Bank regularly consulted
Oetting regarding other matters for the trust, so if she
failed to consult him regarding the income distributions to
Potter, it was an oversight. U.S. Bank continued to send
semi-annual statements to Oetting reflecting the Potter
income distributions. From July 1, 2012 through March 31,
2014, U.S. Bank made monthly distributions of the net income
of the trust to Potter totaling $211, 030.15.
January of 2014, Mark Sandvos became the trust officer for
Potter's share of the TRP Trust following Wells'
retirement. In reviewing the trust file, Sandvos learned
Oetting was the co-trustee, but he could not determine from
the file whether Oetting had been consulted regarding those
income distributions to Potter. Sandvos' supervisors
contacted Oetting,  who objected to the income distributions.
Potter continued to request income distributions, but Oetting
requested Potter's personal financial information before
responding to Potter's requests. Potter and U.S. Bank
withheld Potter's financial information, maintaining that
Oetting did not have authority under the trust to require
Potter to provide such information. Oetting asserted that it
was necessary under the terms of the trust to consider
Potter's financial state before income could be
distributed. In light of this dispute, U.S. Bank ceased
distributions to Potter in April of 2014.
with Potter's continued requests for income
distributions, in October of 2014, U.S. Bank filed a petition
for instructions in the probate court, asking the probate
court to interpret the terms of the trust regarding the
circumstances under which income from the trust may be
distributed to Potter as the current sole beneficiary.
Oetting filed a counterclaim alleging breach of fiduciary
duty against U.S. Bank for unilaterally making income
distributions (Count I), requesting declaratory judgment that
Oetting was not liable for any breach of trust (Count II),
and seeking compensation for extraordinary trustee services,
attorney's fees, and expenses (Count III). Potter filed a
cross-claim asserting breach of fiduciary duty against
Oetting (Count I), seeking reformation of the trust's
provision for requesting that a trustee resign (Count II),
requesting removal of Oetting as the individual trustee
(Count III), and seeking to modify the trust terms to allow
the corporate trustee sole authority to make income
distributions from the trust (Count IV).
the pendency of the suit, Potter's wife, Emily Potter,
filed a ratification on behalf of their minor son, Jack
Potter, consenting to U.S. Bank's distribution of income
from the trust to Potter. Tom Potter also filed a
ratification as a contingent remainder beneficiary. U.S. Bank
filed a motion for summary judgment on its petition for
instructions, which the probate court granted. The probate
court concluded the trust agreement authorized income
distributions to Potter without consideration of his
probate court conducted a bench trial on the counterclaims
and cross-claims, after which it entered judgment first
affirming its prior summary judgment, finding nothing offered
at trial changed its former interpretation of the trust
agreement. The probate court also entered judgment for U.S.
Bank on Oetting's Counts I (breach of fiduciary duty) and
III (request for extraordinary trustee fees). Finding no
breach of fiduciary duty by any party, the probate court
granted Oetting's request for declaratory judgment in
Count II of his petition. Regarding Potter's
cross-claims, the probate court found in favor of Oetting on
Potter's breach of fiduciary duty claim in Count I,
granted Potter's request to remove Oetting in Count III,
and dismissed the remaining cross-claims as moot. Oetting
initial matter, U.S. Bank argues that Oetting lacks standing
to pursue the present appeal because trustees have no
interest in the corpus of the trust and therefore are not
aggrieved parties. U.S. Bank relies on In re
Knichel, 347 S.W.3d 127 (Mo. App. E.D. 2011), in which
this Court held that an appointment as a special trustee for
a decedent's estate did not create a personal right, nor
any pecuniary interest in the subject matter of the will
contest, that would have entitled the special trustee to
challenge his removal on appeal. Id. at 130-32.
However, a number of circumstances distinguish the present
case, and we find that Oetting does have standing to assert
his claims on appeal.
as this Court noted in Knichel, the statutes
governing trusts in chapter 456 contain no provision
regarding appellate standing, thus we look to the general
appeals statute, Section 512.020. Knickel, 347 S.W.3d
at 130. This section grants a right of appeal to "[a]ny
party to a suit aggrieved by any judgment of any trial court
in any civil cause," except where prohibited by the
Missouri Constitution or limited by statute. Section 512.020.
The appellant in Knichel asserted only personal
claims of removal as trustee, loss of trustee fees, and
damage to his reputation, which did not constitute a
pecuniary interest adversely affected by the judgment. 347
S.W.3d at 131. Unlike the appellant in Knichel,
Oetting is an aggrieved party in that he currently is subject
to a money judgment for attorney's fees and expenses.
Further, while Oetting does not have a personal interest in
the trust, trustees are permitted as fiduciaries to pursue
claims on behalf of beneficiaries who are aggrieved by a
judgment of a lower court. Knichel, 347 S.W.3d at
130 (applying definition of "interested persons" in
Section 456.1-103 of Missouri Uniform Trust Code). Oetting
here argues that Potter's son and any future children, as
contingent remainder beneficiaries of the trust assets, are
aggrieved by the probate court's interpretation of the
trust. See Betty G. Weldon Revocable Trust ex rel. Vivion
v. Weldon ex rel. Weldon, 231 S.W.3d 158, 168 (Mo. App.
W.D. 2007) (finding contingent remainder beneficiaries have
standing to appeal interpretation of trust and removal of
trustees). Thus, we find Oetting has standing to bring the
raises four points. In Point I, he argues that the probate
court erred in granting summary judgment in favor of U.S.
Bank on its petition for instructions because the language of
the trust permits trustees to consider the financial
resources of the beneficiary in determining whether to make a
discretionary distribution of income. In Point II, Oetting
argues the probate court erred in its judgment on
Oetting's counterclaim for breach of fiduciary duty,
specifically the court's finding that U.S. Bank's
unilateral distribution of income did not result in harm to
the beneficiaries because the remainder beneficiaries
ratified U.S. Bank's actions. In Point III, Oetting
argues the probate court erred in removing Oetting as the
individual co-trustee because the court's interpretation
of the trust language led to an erroneous conclusion that
Oetting made improper demands for Potter's financial
information. Finally, in Point IV, Oetting argues the probate
court abused its discretion in awarding attorney's fees
and costs to U.S. Bank and Potter. We discuss each in turn.
argues the probate court erred in concluding that the
language of the trust does not allow a trustee to examine a
beneficiary's financial information before permitting a
discretionary distribution of trust income. We agree.
review of summary judgment is essentially de novo. ITT
Commercial. Fin. Corp. v. Mid-Am. Marine Supply Corp.,
854 S.W.2d 371, 376 (Mo. banc 1993). We view the record in
the light most favorable to the non-moving party.
Id. The moving party must show there is no genuine
dispute as to material facts and that the movant has an
undisputed right to judgment as a matter of law. See
id. at 380. Here, while we find there is no genuine
factual dispute, we disagree with the probate court's
interpretation of the trust language as a matter of law.
paramount rule of construction in determining the meaning of
trust provisions is that the grantor's intent is
controlling." Feinberg v. Adolph K. Feinberg Hotel
Trust, 922 S.W.2d 21, 25 (Mo. App. E.D. 1996). Because
language and circumstances can vary greatly, we must examine
the specific language as well as the surrounding
circumstances, and Grantor's intention must govern.
See Winkel v. Streicher, 295 S.W.2d 56, 61 (Mo. banc
1956). "We ascertain the intent of [Grantor] from
consideration of the trust instrument as a whole."
Hertel ex rel. Hertel v. Nationsbank N.A., 37 S.W.3d
408, 410 (Mo. App. E.D. 2001).
Second of the trust contains the relevant provisions
regarding distribution of income. Before Randy Potter's
death, the TRP Trust limited distributions of income as
The Trustees shall use and apply so much of the net income of
this trust as they may deem necessary or advisable primarily
for the proper health, education, maintenance, and support of
Grantor's son, RANDY, of the children of Grantor's
son, RANDY, and of the descendants of the children of
Grantor's son, RANDY, with no requirement of equality
among such beneficiaries. Unused income shall be accumulated
and added to principal annually.
the trust divided after Randy Potter's death, the current
share for Potter's benefit no longer has a stated purpose
for health, education, maintenance, or support. Rather, the
trust provides the following for Potter's share:
The Trustees shall use and apply so much of the net income of
each descendant's share (separate trust) as they may deem
necessary or advisable to or for ...