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In re Conservatorship of Abbott

Supreme Court of Nebraska

January 13, 2017

In re Conservatorship of Marcia G. Abbott. A PROTECTED PERSON. Cynthia J. Sellon and Russell G. Abbott, appellees and cross-appellants, Mark D. Abbott, conservator, appellant and cross-appellee. In re Abbott Living Trust. Cynthia J. Sellon and Russell G. Abbott, appellees and cross-appellants,
v.
Mark D. Abbott, Designated Successor Trustee, appellant and cross-appellee.

         1. Guardians and Conservators: Appeal and Error. An appellate court reviews conservatorship proceedings for error appearing on the record in the county court.

         2. Judgments: Appeal and Error. When reviewing a judgment for errors appearing on the record, an appellate court's inquiry is whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable.

         3. Trusts: Equity: Appeal and Error. Appeals involving the administration of a trust are equity matters and are reviewable in an appellate court de novo on the record.

         4. Attorney Fees: Appeal and Error. A trial court's decision awarding or denying attorney fees will be upheld on appeal absent an abuse of discretion.

         5. Standing: Words and Phrases. Standing involves a real interest in the cause of action, meaning some legal or equitable right, title, or interest in the subject matter of the controversy.

         6. Trusts. Neb. Rev. Stat. § 30-3855 (Reissue 2016) does not dictate who may petition for the removal of a trustee, but, rather, describes to whom fiduciary duties are owed.

         7. Trusts: Standing. Generally, standing in a trustee removal proceeding is governed by Neb. Rev. Stat. § 30-3862(a) (Reissue 2016).

         8. Trusts. A serious breach of a fiduciary duty is only one of the grounds for removal of a trustee.

         9. Trusts: Intent. The extent of the beneficiary's interest in a trust depends upon the discretionary power that the settlor intended to grant the trustee.

         10. __:__. When the parties do not claim that the terms are unclear or contrary to the settlor's actual intent, the interpretation of a trust's terms is a question of law.

         11. Trusts. In general, trustees of support trusts have discretion to determine what is needed for the beneficiary's support and to make payments only for that purpose.

         12. __. The discretion afforded to a trustee of a support trust does not preclude a beneficiary from seeking to show that the trustee has abused its discretion in failing to make support payments.

         13. Trusts: Liability. A trustee is liable for the action of another trustee if he joins in the action, fails to prevent the cotrustee from committing a serious breach of trust, or fails to compel the cotrustee to redress a serious breach of trust.

         14. Trusts. A trustee has the duty to administer the trust in good faith, in accordance with its terms and purposes and the interests of the beneficiaries, and in accordance with the Nebraska Uniform Trust Code.

         15. __. The Nebraska Uniform Trust Code states that trustees owe the beneficiaries of a trust duties that include loyalty, impartiality, prudent administration, protection of trust property, proper recordkeeping, and informing and reporting.

         16. Trusts: Conflict of Interest. A cause for removal of a trustee is appropriate for the best interests of the trust estate where hostile relations exist between a trustee and beneficiaries of such a nature as to interfere with proper execution of the trust, particularly where it appears that the trustee's personal interests conflict with, or are antagonistic to, his or her duties as trustee under the terms of the trust.

         17. Pleadings. The issues in a given case will be limited to those which are pled.

         18. Rules of the Supreme Court: Pleadings: Notice. The Nebraska Rules of Pleading in Civil Actions, like the federal rules, have a liberal pleading requirement for both causes of action and affirmative defenses, but the touchstone is whether fair notice was provided.

         19. Trusts: Words and Phrases. Impartiality means that a trustee's treatment of beneficiaries or conduct in administering a trust is not to be influenced by the trustee's personal favoritism or animosity toward individual beneficiaries.

          20. Trusts. A finding of one serious breach of fiduciary duty is enough to warrant removal of a trustee.

         21. Appeal and Error. An appellate court is not obligated to engage in an analysis that is not necessary to adjudicate the case and controversy before it.

         22. Attorney Fees: Appeal and Error. On appeal, a trial court's decision awarding or denying attorney fees will be upheld absent an abuse of discretion.

         23. Judgments: Words and Phrases. A judicial abuse of discretion requires that the reasons or rulings of the trial court be clearly untenable insofar as they unfairly deprive a litigant of a substantial right and a just result.

         24. Trial: Evidence: Appeal and Error. In a civil case, the admission or exclusion of evidence is not reversible error unless it unfairly prejudiced a substantial right of the complaining party.

         25. Final Orders: Appeal and Error. An order affects a substantial right if the order affects the subject matter of the litigation, such as diminishing a claim or defense that the appellant had before the court entered the order.

         Appeals from the County Court for Douglas County: Lawrence E. Barrett, Judge. Appeal in No. S-15-967 dismissed. Judgment and final order in No. S-16-040 affirmed.

          Michael F. Coyle, Elizabeth A. Culhane, and Jacqueline M. DeLuca, of Fraser Stryker, P.C., L.L.O., and G. Rosanna Moore and, on brief, John K. Green, of Pickens & Greene, L.L.P., for appellant.

          John M. Lingelbach, James A. Tews, and Minja Herian, of Koley Jessen, PC, L.L.O., for appellees.

          Heavican, C.J., Wright, Cassel, Stacy, Kelch, and Funke, JJ.

          Cassel, J.

         I. INTRODUCTION

         We decide two consolidated appeals from county court proceedings-the first from a final order appointing a conservator and the second from a county court order that acted both as a judgment in a trustee removal proceeding and as a final order denying fees and expenses in the conservator-ship proceeding.

         Because the conservatorship appointment order became moot upon the protected person's death while the first appeal was pending, we dismiss the first appeal in its entirety and dismiss the cross-appeal to the extent that it pertains to the first appeal.

         In the second appeal, a successor trustee appeals and two beneficiaries cross-appeal from an order removing the successor trustee, declining to surcharge him, disposing of competing attorney fee applications, and otherwise disposing of the trust and conservatorship proceedings. Applying our respective standards of review to the remaining trust and conservatorship issues, we affirm.

         II. BACKGROUND

         These consolidated appeals arise from proceedings initiated by Russell G. Abbott and Cynthia J. Sellon (Cynthia) to appoint a conservator for their mother, Marcia G. Abbott, and to remove Marcia as trustee of the "Abbott Living Trust"; to remove their brother, Mark D. Abbott, as successor trustee; to surcharge Mark; and for an accounting. Marcia resigned as trustee before trial, and the county court dismissed the claim seeking to remove her as moot.

         Prior to oral argument, a suggestion of Marcia's death was filed in this court, accompanied by a motion to remand the conservatorship proceeding with directions to vacate and dismiss. At oral argument, we granted leave to file a written response, which we have considered. Marcia's death renders moot the issue of the appointment of her conservator, but it does not abate the cause of action.[1] Accordingly, we do not summarize the facts surrounding the appointment of a conservator, and recite only the facts relating to issues not mooted by Marcia's death.

         1. Abbott Living Trust Agreement

         Marcia and her husband created a revocable living trust in which they named themselves cotrustees. When Marcia's husband died, the living trust assets were divided between a revocable "Survivor's Trust" and an irrevocable "Family Trust.'' The two trusts primarily consist of investment accounts.

         The trust agreement provided that Marcia, as the surviving spouse, was entitled to the entire net income from the Survivor's Trust account. It also permitted her to withdraw from the principal of the Survivor's Trust as much as she desired.

         As to the Family Trust, Marcia had four primary rights or interests. First, she was entitled to the entire net income. Second, she had a "five-and-five power, " which limited her to annually withdrawing the greater of $5, 000 or 5 percent of the assets from the principal. Third, the trustee could apply an "ascertainable standard." That power permitted the trustee, in his or her discretion, to pay Marcia or her and her husband's shared descendants-Russell, Mark, and Cynthia-so much of the principal as the trustee deemed proper for their health, maintenance, support, and education. Finally, she had a "sprinkling" testamentary power of appointment-that is, a limited power allowing her to dispose of Family Trust assets by will or by a living trust. With this limited power, Marcia could appoint "some or all of the principal and any accrued but undistributed net income of the Family Trust as it exist[ed] at the death of [Marcia]" to Russell, Mark, or Cynthia in "equal or unequal amounts." There is no evidence that Marcia ever exercised this limited power of appointment.

         2. Marcia's Stroke

         In 2011, Marcia suffered a stroke that left her paralyzed on her right side. She had difficulty with speech and communication and was ultimately diagnosed with expressive aphasia-a disorder that affects the brain's ability to use and understand language. Prior to her stroke, Marcia lived at home and handled her own financial affairs, including management of the two trusts. After her stroke, Marcia needed assisted living and physical therapy and moved into a skilled-care facility. As a necessary result, Marcia's monthly living expenses grew from $500 to over $8, 000. Since 2011, Mark has acted as Marcia's agent under a power of attorney.

         3. Mark's Management of Trust Assets

         In 2011, after her stroke, Marcia "resigned" as trustee over two financial accounts that were trust assets. She appointed Mark as successor trustee of both accounts. In 2015, before trial, Marcia resigned as trustee in all matters for both trusts and Mark accepted the appointment as successor trustee in all matters.

         Before Mark assumed his role as successor trustee of both trusts in the entirety, he understood his roles to be that of successor trustee of two financial accounts associated with the trusts and that of Marcia's agent under the power of attorney. Evidence at trial showed that Mark performed other actions within those roles, purporting to be the trustee of the two trusts in his signature. For example, the evidence showed that Mark signed a bill of sale for a vehicle owned by one of the trusts as "Trustee" in 2013. He also signed a state severance tax return for oil and gas royalties as "Trustee" in 2012. Mark explained that he '"used [his] signatures, [Marcia's] signatures, [power of attorney]/Trustee interchangeably because it really [did]n't matter.'" He believed his power to sign as trustee came from his authority under the power of attorney executed by Marcia.

         In that time, Mark also facilitated several transfers of money between different financial accounts associated with the Family Trust and the Survivor's Trust. Several of the transfers exceeded $200, 000. At trial, an estate-planning attorney testified concerning the tax consequences of these transfers and opined that the transfers were a violation of the trust terms. Specifically, the witness testified that the two trusts had substantially different terms and that as a result, the trusts' assets could not be commingled. The witness further testified that because the Family Trust was irrevocable and the Survivor's Trust was revocable, the Family Trust's assets should have been kept separate from the Survivor's Trust's assets to maintain the appropriate tax basis for the assets. Additionally, the witness opined that the assets transferred to the Family Trust would have been subject to gift taxation and that Mark appeared not to have considered these tax issues in managing the trusts' assets.

         The evidence at trial also showed that in managing the trusts' assets, Mark worked with Marcia's financial advisor in making investment decisions and all of his investments were recommended by the financial advisor. During the time that Mark managed the trusts, their ...


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