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In re Rolf H. Brennemann Testamentary Trust

Supreme Court of Nebraska

June 27, 2014

IN RE ROLF H. BRENNEMANN TESTAMENTARY TRUST.
v.
JOHN E. BRENNEMANN ET AL., TRUSTEES, APPELLEES KIM ABBOTT, BENEFICIARY, APPELLANT,

Petition for further review from the Court of Appeals, INBODY, Chief Judge, and MOORE and RIEDMANN, Judges, on appeal thereto from the County Court for Grant County, JAMES J. ORR, Judge.

AFFIRMED IN PART, AND IN PART REVERSED AND REMANDED FOR FURTHER PROCEEDINGS ON THE ISSUE OF ATTORNEY FEES.

David A. Domina and Jeremy R. Wells, of Domina Law Group, P.C., L.L.O., for appellant.

Neil E. Williams and Nathaniel J. Mustion, of Lane & Williams, P.C., L.L.O., for appellees.

HEAVICAN, C.J., CONNOLLY, STEPHAN, MCCORMACK, MILLER-LERMAN, and CASSEL, JJ.

OPINION

Page 459

[288 Neb. 390] Connolly, J.

SUMMARY

Kim Abbott sued the trustees of her grandfather's testamentary trust for breach of their fiduciary duties. The county court dismissed her complaint, and the Nebraska Court of Appeals affirmed. The Court of Appeals essentially concluded that although the trustees had breached their duty to inform and report, that breach was harmless.[1] We agree with the Court of Appeals' general legal framework and conclusion that the breach was harmless. But we disagree with the Court of

Page 460

Appeals' conclusion that annual schedule K-1 tax reports were sufficient to reasonably inform beneficiaries of the trust and its administration. And we conclude that the county court should revisit the issue of attorney fees in light of our disposition of the merits of this appeal. We affirm in part, and in part reverse and remand for further proceedings on that issue.

BACKGROUND

The Testamentary Trust

Rolf H. Brennemann (Rolf) died in 1976. His will established the " Rolf H. Brennemann Testamentary Trust." The trust was to hold shares in the " Rolf H. Brennemann Company," the primary asset of which was a 5,425-acre ranch located in Grant and Cherry Counties, Nebraska. At all material times, the trust held 42.42 percent of the company's shares, with the balance being distributed among the individual family members. The will appointed Rolf's three children, Edward Brennemann, Mamie Brennemann, and Rolf William Brennemann (Bill), as trustees. The will also provided that if any of them were unable to serve, or ceased to serve, the oldest son of that person would then serve as trustee.

The trust was to pay its net income to Bessie Brennemann, Rolf's wife, for as long as she lived. When Bessie died, the trust was to pay its net income to Rolf's three children, in equal shares. When Rolf's last child died, the trust was to distribute its holdings to Rolf's grandchildren.

[288 Neb. 391]Factual Background

In 1982, Edward died, at which time his oldest son, John E. Brennemann, became a trustee. In 1986, the trustees (Rolf's children Bill and Mamie, and Rolf's grandchild John) petitioned the county court to allow them to vote company stock. The trustees alleged that the company had significant liabilities, had not paid dividends, and was not providing income to the trust. The trustees alleged that John had offered to buy the ranch and that they had accepted his offer. Kim later offered to buy the ranch, but the trustees rejected her offer. The court ultimately authorized the trustees to vote the stock and sell the ranch to John and his wife. The court reviewed the purchase agreement and determined that the sale price was at or above fair market value and was the most advantageous price the trustees could secure.

The purchase agreement set forth an installment payment plan for a total purchase price of $494,021: $16,000 at the execution of the agreement, $144,000 at closing, and $344,021 in nine annual payments, with a 10-percent interest rate and a balloon payment of the unpaid principal and interest on July 1, 1996. Following the sale of the ranch, and having no other assets, the company was dissolved. In 1996, John and his wife executed two agreements with the various parties extending the original purchase agreement for 10 years and 3 years respectively, at an 8-percent interest rate.

In 1998, after Bessie died, Rolf's three children (or their issue) began receiving the trust income. In 2002, Bill died, at which time his children, including Kim, became qualified beneficiaries of the trust and Bill's oldest son became a trustee. In 2006, presumably because John had made all the payments, the bank issued a trustee's deed of reconveyance for the ranch to John and his wife.

The Litigation Begins

In 2009, the trust's accountant, Dan Gilg, sent a letter to Kim (and presumably other beneficiaries) indicating that the trust contained roughly $75,000 and recommending that the trust be terminated because it was " non-economical." This prompted Kim to take action because she believed that there [288 Neb. 392] should have been

Page 461

more money in the trust. In April 2010, Kim filed a complaint against the trustees seeking a full and complete accounting of their actions and payment of income derived from the administration of the trust, along with costs and attorney fees. Following their answer and cross-petition, the trustees provided an accounting which covered January 1, 2002, through April 30, 2010, and they also provided updates throughout the proceedings.

In August 2010, Kim amended her complaint. She alleged that the accounting was incomplete and that the trustees had breached their fiduciary duties. Specifically, she alleged that they had breached their duties to maintain trust records, to properly inform and report to the beneficiaries, and to administer the trust in good faith. She also requested, in addition to the requests made in her original complaint, that the court order the trustees to pay ...


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