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Junker v. Carlson

Court of Appeals of Nebraska

December 10, 2013

Debra J. Junker et al., appellants,
Elwyn Carlson et al., appellees.


Appeal from the District Court for Kearney County: Stephen R. Illingworth, Judge. Affirmed in part, and in part reversed and remanded for further proceedings.

George G. Vinton for appellants.

Steve Windrum for appellees Elwyn Carlson and Joel Carlson.

Donald J. Pepperl, P.C., L.L.O., for appellee SLS Partners.

Inbody, Chief Judge, and Irwin and Moore, Judges.


Moore, Judge.


Debra J. Junker, Lynn P. Carlson, Dale E. Carlson, and Carol A. Carlson filed suit in the district court for Kearney County against Paul Maruska, Roger Wells and his wife, Elwyn Carlson, Joel Carlson, and SLS Partners (SLS), a Nebraska general partnership. Underlying the suit are the allegations that Wells, as trustee, breached his fiduciary duties and exceeded his authority as trustee with respect to certain trust property. Wells, his wife, and Maruska were dismissed as parties and are not involved in this appeal. As pertinent to this appeal, the suit sought to impose constructive trusts for the return of money Joel and Elwyn received for the release of a particular lease and for the return of profits SLS received in its dealings with Wells regarding certain trust property. The district court granted the motions for summary judgment filed by SLS and by Joel and Elwyn and entered judgment in their favor. Junker, Lynn, Dale, and Carol (collectively the Appellants) appeal, asserting that the district court erred in granting summary judgment against them and in failing to grant their summary judgment motions instead. Because we conclude that genuine issues of material fact exist regarding certain claims and defenses, we reverse the entry of summary judgment against the Appellants and remand the cause for further proceedings. For the same reason, we affirm the denial of summary judgment in favor of the Appellants.


Transactions Relating to Carlson Property.

In 1997, Dale and Carol, husband and wife, conveyed certain real estate (Tract 1 and Tract 2) to a trust known as Mill Creek Trust Company (Mill Creek), in the first of a lengthy series of transactions involving the property. They named Maruska as trustee of Mill Creek. Maruska, to quote the district court's summation of the evidence about him, was an individual who "extoll[ed] the virtues of setting up [t]rusts to avoid taxation and creditors." The beneficiaries of Mill Creek were Dale and Carol's children, namely; Junker, Lynn, and Michael Carlson. We note that there is no clear explanation in the record as to why Michael is not a party to this suit. Dale and Carol's children never received any benefits from Mill Creek or any of the subsequent trusts into which the property was conveyed. Dale and Carol received benefit to the extent that, after the conveyance to Mill Creek, they resided rent-free in the residence located on Tract 1 and continued to do so until the latter part of 2006.

Sometime after the formation of Mill Creek, Dale was sued in Dawson County District Court by the estate of Hugh Ralston for rent Dale owed on land from which he harvested prairie hay, and a default judgment of $35, 000 was entered against him. The Ralston estate thereafter filed a fraudulent conveyance action against Maruska and Mill Creek in the Dawson County District Court. The Ralston estate sought to set aside the conveyance of Tract 1 and Tract 2 to Mill Creek and subsequent grantees so that it could collect the default judgment entered against Dale. Wells executed a variety of instruments, including mortgages, construction liens, and Uniform Commercial Code financing statements and recorded these instruments against Tract 1 and Tract 2, in an effort to block the Ralston estate's efforts to collect the judgment against Dale.

On May 2, 2001, Maruska, as trustee of Mill Creek, conveyed both tracts to a trust called Picibo Company, of which Wells was the named trustee. The two tracts were conveyed by quitclaim deeds. No consideration was paid for the transfer. On May 16, Wells, as trustee of Picibo Company, conveyed both tracts to Aebeskiver Company Trust (Aebeskiver), again for no consideration. Wells was also trustee for Aebeskiver. The named beneficiary of this trust was Greater Earth Wisdoms, although Wells admits that Dale and Carol's children were the intended beneficiaries. Wells testified in his deposition that Greater Earth Wisdoms was a "501(c)3 corporation" for "alternative health things" that "never did get off the ground."

In December 2001, Wells, as trustee of Aebeskiver, leased the farm ground in Tract 1 to Joel and Elwyn for $160 per acre for a total of $23, 408 per year. The lease commenced on March 1, 2001, and was to terminate on the last day of February 2007. Dale helped negotiate the lease to Joel and Elwyn. Very little of the rent provided for in this lease was ever remitted to the Appellants. An accounting of this rent was never provided by Maruska or Wells.

On January 13, 2004, Wells, as trustee of Aebeskiver, sold Tract 1 to SLS for a purchase price of $200, 000. SLS is a business partnership composed of Regan Scow, Gerald Lucky, and Gary Stallcup. SLS deals with individuals and entities that cannot obtain money through normal banking channels because of their financial history. Because of the nature of its clientele, SLS' goal is to obtain an 18- to 20-percent return on the business deals it makes.

In addition to providing for the sale of Tract 1, the agreement between Aebeskiver and SLS included two additional relevant provisions. First, SLS leased Tract 1 back to Wells as trustee of Aebeskiver, for an annual rent of $21, 000 plus payment of real estate taxes in the amount of $5, 405.80. The lease was to terminate on the last day of February 2007. The lease-back provision of the agreement between Aebeskiver and SLS references Aebeskiver's "long time year to year lease with [Joel and Elwyn] on the land described herein" and states that the agreement between Aebeskiver and SLS "shall be subject to these leases." Second, the sale agreement included a provision giving Aebeskiver the option to repurchase Tract 1 from SLS prior to December 31, 2007. The repurchase price escalated as follows: $231, 000 on or before December 31, 2004; $252, 000 on or before December 31, 2005; $273, 000 on or before December 31, 2006; and $294, 000 on or before December 31, 2007.

From the proceeds of the sale of Tract 1 to SLS, the Ralston estate was paid its judgment and the encumbrances executed in 2002 were released. The balance of the proceeds from the sale to SLS of $153, 394.85 was paid to Wells as trustee of Aebeskiver. Wells never provided the balance of the proceeds to the Appellants or properly accounted for it, and it was apparently lost when Wells invested in an entity called Konza Financial.

On July 28, 2004, Wells, as trustee of Aebeskiver, entered into an agricultural lease amendment with Joel and Elwyn, which extended the end date of the original lease of the farm ground on Tract 1 to Joel and Elwyn from February 2007 to February 2014.

A final series of relevant transactions occurred on January 31, 2007. On that date, Aebeskiver repurchased Tract 1 from SLS for $294, 000 and simultaneously sold Tract 1 to Jeremy and Tricia Sitorius for $515, 000. Also, Joel and Elwyn released their lease of the farm ground on Tract 1 and were paid $152, 000 for their release. After the payment to SLS, payment to Joel and Elwyn, and payment of closing costs, Aebeskiver netted $64, 047.75. After the closing, Wells, as trustee of Aebeskiver, wired that money to Texas for an investment on a medical device. All of the money was lost and further unaccounted for by Wells.

Additional facts will be discussed in the analysis section below as necessary to the resolution of the appeal.

Procedural Background.

The Appellants filed their initial complaint in equity in the district court on December 13, 2007. They filed their operative complaint on May 6, 2009. The basis of the suit is the underlying allegations of fraudulent action by Wells and his exceeding his authority as trustee as it relates to the trust property. In their operative complaint, the Appellants sought the return of the $152, 000 that Joel and Elwyn received for the release of their lease of the farm ground on Tract 1 and the return of $153, 700 from SLS for its profit from the transactions with Wells. The Appellants sought to recover from SLS and Joel and Elwyn on the basis that they knew or should have known Wells was committing fraud and acting in bad faith, and therefore, the Appellants claim that a constructive trust should be imposed and the money returned. The Appellants also alleged that SLS made an exorbitant rate of return on its investment and that Joel and Elwyn did not give adequate consideration for ...

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