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In re Estate of Forgey

Supreme Court of Nebraska

February 9, 2018

In re Estate of Glenn G. Forgey, deceased.
v.
Lyle A. Forgey, individually and as Trustee. APPELLEE, CROSS-APPELLANT, AND CROSS-APPELLEE, Dean R. Forgey et al., appellants and cross-appellees. and Bessie I. Forgey-McCoy et al., APPELLEES AND CROSS-APPELLANTS.

         1. Trusts: Equity: Appeal and Error. Absent an equity question, an appellate court reviews trust administration matters for error appearing on the record; but where an equity question is presented, appellate review of that issue is de novo on the record.

         2. Evidence: Appeal and Error. In a review de novo on the record, an appellate court reappraises the evidence as presented by the record and reaches its own independent conclusions concerning the matters at issue.

         3. ___: ___. When evidence is in conflict, the appellate court considers and may give weight to the fact that the trial judge heard and observed the witnesses and accepted one version of the facts rather than another.

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

         5. ___: ___ . An appellate court, in reviewing a judgment for errors appearing on the record, will not substitute its factual findings for those of the trial court when competent evidence supports those findings.

         6. Judgments. The existence of a fiduciary duty and the scope of that duty are questions of law for a court to decide.

         7. Judgments: Appeal and Error. On a question of law, an appellate court is obligated to reach a conclusion independent of the determination reached by the court below.

         8. Wills: Trusts. The interpretation of the words in a will or a trust presents a question of law.

         [298 Neb. 866] 9. 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.

         10. 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.

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

         12. ___ . 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.

         13. Accounting. An accounting is ordinarily an appropriate remedy for a breach of the duty to inform and report.

         14. Decedents' Estates: Jurisdiction. County courts have exclusive jurisdiction over all matters relating to decedents' estates, including the probate of wills and construction thereof.

         15. Decedents' Estates: Jurisdiction: Equity. In exercising exclusive original jurisdiction over estates, county courts may apply equitable principles to matters within probate jurisdiction.

         16. Decedents' Estates: Jurisdiction: Wills: Trusts: Minors: Mental Competency. County courts have jurisdiction over all subject matter relating to estates of decedents, including construction of wills and determination of heirs and successors of decedents, estates of protected persons, protection of minors and incapacitated persons, and trusts.

         17. Courts: Jurisdiction. County courts have full power to make orders, judgments, and decrees and to take all other actions necessary and proper to administer justice in the matters which come before them.

         18. Trusts. If a trust has two or more beneficiaries, a trustee has a duty of impartiality among beneficiaries.

         19. Attorney Fees. Attorney fees and expenses may be recovered only where provided for by statute or when a recognized and accepted uniform course of procedure has been to allow recovery of an attorney fee.

         20. Attorney Fees: Appeal and Error. When an attorney fee is authorized, the amount of the fee is addressed to the discretion of the trial court, whose ruling will not be disturbed on appeal in the absence of an abuse of discretion.

         21. Attorney Fees. To determine the value of legal services rendered by an attorney, it is proper to consider the amount involved, the nature of the litigation, the time and labor required, the novelty and difficulty of the questions raised, the skill required to properly conduct the case, the [298 Neb. 867] responsibility assumed, the care and diligence exhibited, the result of the suit, the character and standing of the attorney, and the customary charges of the bar for similar services.

         22. Laches. Laches occurs only if a litigant has been guilty of inexcusable neglect in enforcing a right and his or her adversary has suffered prejudice.

         23. Laches: Equity. Laches does not result from the mere passage of time, but because during the lapse of time, circumstances changed such that to enforce the claim would work inequitably to the disadvantage or prejudice of another.

         24. Laches. What constitutes laches depends on the circumstances of the case.

         Appeal from the County Court for Keya Paha County: James J. Orr, Judge. Affirmed in part, and in part reversed and remanded with directions.

          David A. Domina, of Domina Law Group, PC, L.L.O., for appellants.

          Michael L. Johnson, of Leininger, Smith, Johnson, Baack, Placzek & Allen, for appellee Lyle A. Forgey

          Kyle S. Irvin for appellees Bessie I. Forgey-McCoy et al.

          Miller-Lerman, Stacy, Kelch, and Funke, JJ., and Arterburn, Judge.

          Kelch, J.

         I. INTRODUCTION

         This appeal arises from a trustee's failure to distribute the corpus of the trust following the grantor's death in 1993. Marvel Forgey and her three children, all beneficiaries of the Glenn G. Forgey Revocable Trust (the trust), appeal the order of the county court for Keya Paha County resulting from their suit against Lyle A. Forgey, who was another beneficiary and was the trustee. Marvel and her children sought to remove Lyle as trustee, secure administration of the trust, value the trust assets, divide those assets into separate trusts for the beneficiaries, and determine liabilities for alleged breaches of [298 Neb. 868] fiduciary duties by Lyle. Bessie I. Forgey-McCoy and her two children, all three also beneficiaries, joined as interested parties. Primarily accepting Lyle's version of the facts, the county court valued and distributed the trust assets, assessed damages against Lyle for estate tax interest and penalties, and declined to award attorney fees or costs to any party. Marvel and her children appealed; Lyle cross-appealed, and Bessie and her children filed a separate cross-appeal. While we largely agree with the county court's findings in this case, we conclude that the county court committed error by not awarding damages for Lyle's untimely reports and accountings of his failure to collect rents on behalf of the trust. We further determine that the county court abused its discretion in declining to award attorney fees to Marvel, Bessie, and their respective children. Accordingly, we affirm in part, and in part reverse and remand with directions.

         II. BACKGROUND

         Glenn G. Forgey died in 1993. He was survived by three children: Lyle and Bessie, mentioned above, and Wayne Forgey, who is now deceased. Wayne was survived by his wife, Marvel, and by their three children.

         During his lifetime, Glenn transferred property into the trust. Lyle has been the sole trustee at all relevant times. The trust gave the trustee broad discretion to make decisions for the trust in good faith. It required the trustee to provide an annual report to the beneficiaries upon Glenn's death. The trust further directed the trustee, upon the grantor's death, to use the principal or net income of the trust to pay the grantor's legal debts, death expenses, estate administration costs, and inheritance and estate taxes. The trust, as amended, further provided:

Upon the death of the Grantor and distribution of the Grantor's estate from probate, the Trustees shall divide the residue of the assets of this trust . . . into equal shares, so as to provide one share for each then living child of the Grantor and one share for the then living issue, collectively, of each deceased child of the Grantor. In so [298 Neb. 869] dividing the assets of [this trust], . . . in funding [Lyle's] equal share of the trust assets the Trustees shall allocate to his share all common stock which [this trust] may then own in [a bank in Ainsworth, Nebraska].

(Emphasis supplied.)

         No administrative proceedings were commenced for the trust until 2013, when Marvel initiated this litigation, along with her children (hereinafter collectively Marvel). Bessie and her two children (hereinafter collectively Bessie) joined the action as interested parties. Marvel sued to remove Lyle as trustee, secure administration, value assets, divide and distribute them to separate trusts, determine liabilities for defalcations by Lyle, and recover attorney fees and costs.

         Bessie filed her own counterpetition, requesting similar relief.

         Lyle also counterpetitioned, asking the county court to approve his actions as trustee; determine or confirm the allocation of trust assets, income, expenses, and compensation; and award him attorney fees and costs.

         The sections immediately below summarize evidence relevant to the parties' claims on appeal, and we recount additional relevant facts in the analysis portion of this opinion.

         1. Division

         Pretrial litigation revealed that the corpus of the trust included agricultural real estate, bank stock, cash, and a promissory note.

         The county court, observing that the trust provided that trust assets were to be distributed upon Glenn's death, applied the principle that equity considers that done which ought to have been done and treated the division of the trust as though it had occurred upon Glenn's death.

         The county court further determined that "it was clearly Glenn's intent that his trust be divided equally and that Lyle's one-third share be funded using the bank stock and that the remaining assets would be divided between Wayne's trust and Bessie's trust."

         [298 Neb. 870] In dividing the trust this way, the county court relied on the testimony and report provided by Lyle's expert, Tyler Bartruff, an attorney working in the field of forensic accounting and federal estate taxes.

         Bartruff based his report on the hypothetical assumption that the trust was split into three equal shares as of Glenn's date of death in 1993. The report also assumed that the federal estate tax return was timely filed and that the tax was timely paid on a deferred basis under I.R.C. § 6166 (2012). The report allocated the bank stock to Lyle's share and added additional liability to Lyle's share to make the three shares proportionate. Bartruff's report then proceeded with a cashflow summary for each beneficiary's share from the split in 1993 until December 31, 2015, using data provided in other exhibits.

         2. Valuation

         (a) Bank Stock

         At the time of trial, the trust owned 13, 276 shares (bank stock), or 66.2 percent, of the holding company for a bank in Ainsworth, Nebraska. Lyle owned the remaining shares in his individual capacity.

         Two witnesses testified about the bank stock's value: Janet Labenz and Fred Lockwood, each a certified public accountant ...


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