In re Trust Created by Henry F. Augustin, deceased.
Kirtus Augustin, Trustee, appellant, Scott Augustin, appellee, and Rocky Augustin, appellee. In re Trust Created by Norval H. Augustin, deceased. Scott Augustin, appellee,
Rocky Augustin and Kirtus Augustin, individually and as Cotrustees, appellants. In re Trust Created by Henry F. Augustin, deceased. Kirtus Augustin, Trustee, appellant, and Rocky Augustin, appellee,
Scott Augustin, appellee. In re Trusts Created by Elnora Augustin and Norval H. Augustin, deceased. Kirtus Augustin and Rocky Augustin, individually and as Cotrustees, appellants,
Scott Augustin, individually and as Cotrustee, appellee.
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.
Neb.App. 594] 2. 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.
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.
Wills: Trusts. The interpretation of the
words in a will or a trust presents a question of law.
Trusts. Removal of a trustee under the
Nebraska Uniform Trust Code is a special proceeding and
affects a substantial right.
Parties: Words and Phrases. Necessary
parties are parties who have an interest in the controversy,
and should ordinarily be joined unless their interests are
separable so that the court can, without injustice, proceed
in their absence. Indispensable parties are parties whose
interest is such that a final decree cannot be entered
without affecting them or that termination of controversy in
their absence would be inconsistent with equity.
Parties. The inclusion of a necessary party
is within the trial court's discretion. However, there is
no discretion as to the inclusion of an indispensable party.
Parties: Words and Phrases. All persons
interested in the contract or property involved in an action
are necessary parties, whereas all persons whose interests
therein may be affected by a decree in equity are
Jurisdiction: Parties: Waiver. The absence
of an indispensable party to a controversy deprives the court
of subject matter jurisdiction to determine the controversy
and cannot be waived.
Trusts: Jurisdiction: Parties. A court does
not have subject matter jurisdiction over a request to
terminate a trust or remove a trustee in the absence of an
Equity. Under the doctrine of unclean hands,
a person who comes into a court of equity to obtain relief
cannot do so if he or she has acted inequitably, unfairly, or
dishonestly as to the controversy in issue.
Trusts. A trust terminates at the time at
which it becomes the duty of the trustee to wind up
administration of the trust, and not at the time when that
winding up period is actually accomplished.
Trusts: Time. The Nebraska Uniform Trust
Code provides statutory options for a trustee to seek relief
during the winding up period following the expiration or
termination of a trust by its own terms.
Trusts. Regardless of how a trust may
terminate, Neb. Rev. Stat. § 30-3 836(b) (Reissue 2016)
authorizes a trustee or beneficiary to [27 Neb.App. 595]
commence a proceeding to approve or disapprove a proposed
modification or termination under Neb. Rev. Stat.
§§ 30-3837 to 30-3842 (Reissue 2016).
Trusts: Courts: Equity: Jurisdiction. County
courts may apply equitable principles to matters within
probate jurisdiction, including trusts, and such 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.
Trusts: Time. The period for winding up the
trust is the period after the time for termination of the
trust has arrived and before the trust is terminated by the
distribution of the trust property.
Trusts: Intent. The objective of the rule
allowing judicial modification or deviation and the intended
consequences of its application are not to disregard the
intention of a settlor. The objective is to give effect to
what the settlor's intent probably would have been had
the circumstances in question been anticipated.
Trusts: Courts. The Nebraska Uniform Trust
Code allows a beneficiary or trustee to petition a county
court to consider modification or termination of a trust
which has expired or terminated pursuant to its own terms but
remains in the winding up period, including the possible
modification of or deviation from dispositive terms.
Trusts. When a trustee unduly delays
distributions from a trust, the trustee has breached a duty
of care owed to a beneficiary, and the violation of that duty
is a breach of trust.
Appeal and Error: Words and Phrases. Plain
error exists where there is an error, plainly evident from
the record but not complained of at trial, which
prejudicially affects a substantial right of a litigant and
is of such a nature that to leave it uncorrected would cause
a miscarriage of justice or result in damage to the
integrity, reputation, and fairness of the judicial process.
Trusts. A trust which is revocable when made
remains revocable during the settlor's lifetime; however,
a revocable trust necessarily becomes irrevocable upon the
Trusts: Courts. Neb. Rev. Stat. §
30-3837 (Reissue 2016) authorizes a court to modify a trust
without the consent of all beneficiaries, but it can only do
so if the modification is not inconsistent with a material
purpose of the trust and any nonconsenting beneficiary would
be adequately protected.
Trusts: Courts: Equity. Neb. Rev. Stat.
§ 30-3838 (Reissue 2016) broadens the court's
ability to apply equitable deviation to modify a trust.
Trusts: Courts: Equity: Intent. The
application of equitable deviation allows a court to modify
the dispositive provisions of a trust as well [27 Neb.App.
596] as its administrative terms. The purpose of equitable
deviation is not to disregard the settlor's intent but to
modify inopportune details to effectuate better the
settlor's broader purpose.
Trusts: Intent. Under the equitable
deviation doctrine, the objective is not to disregard the
intention of the settlor, but to give effect to what the
settlor's intent probably would have been had the
circumstances in question been anticipated.
Appeals from the County Court for Polk County: Stephen R.W.
Twiss, Judge. Affirmed in part, vacated in part, and in part
reversed and remanded for further proceedings.
Richard A. DeWitt and David J. Skalka, of Croker, Huck,
Kasher, DeWitt, Anderson & Gonderinger, L.L.C., for
Jacqueline M. Tessendorf and Ryan G. Tessendorf, of
Tessendorf and Tessendorf, P.C., for appellee Scott Augustin.
Riedmann and Bishop, Judges.
Kirtus Augustin and Rocky Augustin were opposing parties to
their younger brother, Scott Augustin, in five separate
lawsuits filed in the county court for Polk County. Scott was
the initiator of two actions in which he sought to terminate
family trusts, remove the trustees, order an accounting, and
have certain farmland distributed in accordance with specific
language in the trusts and their father's will. Kirtus
and Rocky were the initiators of two actions in which they
sought to modify the trusts based on an alleged agreement
between the brothers to preserve the farmland in the trusts
or in a business entity for another 10 years so they could
continue their joint farming operation or, alternatively, to
distribute the farmland in separate parcels in fee simple
title rather than as tenants in common. They filed a separate
action seeking amounts due from Scott for his share of costs
associated with the joint farming operation.
Neb.App. 597] Kirtus and Rocky appeal from the county
court's decision as to four of those actions, in which
the county court concluded in each case that (1) the trusts
had terminated by their own terms upon the death of the
brothers' father; (2) there was insufficient evidence to
modify the trusts, and further, the brothers' sister,
Pamela Shorney (Pamela), was a necessary party for any
modification action; (3) Scott did not file his actions with
unclean hands; (4) there was no agreement to continue the
farming operation another 10 years; (5) there was a breach of
trust by the trustees; (6) it was necessary to remove the
trustees, order an accounting, and appoint a successor
trustee; and (7) statutory language permitted the trustees to
allocate the property other than as tenants in common, but
there was insufficient evidence to approve the division of
the disputed farmland as proposed by Kirtus and Rocky.
five lawsuits were consolidated for trial, and the four
appeals have been consolidated for disposition in this court.
We affirm in part, vacate in part, and in part reverse and
remand for further proceedings.
Rocky, and Scott farmed with their father, Norval H.
Augustin, until his death in April 2010, and they maintained
a joint farming operation for a period of time thereafter.
Norval's father, Henry F. Augustin, died in 1989, and
Norval's wife, Elnora Augustin, died in 2001. In addition
to their own separate properties, the brothers jointly farmed
over 500 acres of land held in the trusts established by
their grandfather and their parents. Scott, the youngest of
the brothers, wanted to farm independently of his brothers
following their father's death; he wanted the farmland
that had been held in trust for the three brothers to be
distributed so that he could do that. However, Kirtus and
Rocky wanted to continue the joint farming operation and
leave the real property at issue in the trusts or hold it in
a separate business entity for another 10 years.
Alternatively, rather than distribute the farmland to the [27
Neb.App. 598] brothers as tenants in common as indicated in
the trusts and by appointment in their father's will,
they wanted to distribute the disputed farmland in separate
parcels titled in fee simple and equitably allocate those
parcels between them. In July 2015. after further problems
developed between the brothers, the underlying lawsuits were
filed. Their sister, Pamela, was not named as a party in any
of the litigation, nor did she participate in the
consolidated trial. Kirtus, Rocky, Scott, and Pamela will be
collectively referred to as "the siblings.''
trusts involved in the present appeals are (1) the
grandfather's trust, titled the "Henry F. Augustin
Revocable Trust (Amended and Restated), " executed on
January 7, 1980, and amended on December 30, 1981, and June
7, 1987 (Henry Trust); (2) the father's trust, titled the
"Norval H. Augustin Amended and Restated Revocable
Trust, " executed on January 27, 1993, and amended on
March 8, 1995, and August 25, 1999 (Norval Trust); and the
mother's trust, titled the "Elnora Augustin Amended
and Restated Revocable Trust, " dated January 27, 1993
is the sole trustee of the Henry Trust; the siblings are
beneficiaries of this trust. The real estate in the Henry
Trust relevant here includes an 80-acre parcel (Henry 80) and
a 160-acre parcel. The Henry Trust authorized Norval to
exercise a limited power of appointment with regard to these
properties, which Norval did through his "Last Will and
Testament of Norval H. Augustin" and his "First
Codicil to Will of Norval H. Augustin" (First Codicil).
In the First Codicil, Norval "appoint[ed] the entire
interest ... in the real property legally described as [the
Henry 80] in equal shares, outright and free of trust, to my
three sons, KIRTUS, ROCKY and SCOTT . . ., or their issue per
stirpes." Norval then appointed the 160-acre parcel to
Kirtus and Pamela as trustees, with the property to be held
for Pamela's benefit during her [27 Neb.App. 599]
lifetime, and upon her death, the land would be transferred
in equal shares to her then-living issue. Norval further
authorized Kirtus and Pamela to distribute the 160-acre
property outright and free of trust to Pamela if they, as
trustees of that parcel, determined the trust was no longer
necessary, appropriate, or in Pamela's best interests,
and "the trust shall thereupon terminate." The
160-acre parcel was not at issue in the underlying
proceedings, and only the Henry 80 in which the brothers were
given equal shares, "outright and free of trust, "
was at issue. The Henry 80 is immediately south and adjacent
to another 80-acre parcel contained in the Norval Trust and
the Elnora Trust. The parties referred to the Henry 80 and
the 80 acres immediately north of it as the
"Homeplace"; however, our reference to the
Homeplace will mean the 80 acres contained only in the Norval
Trust and the Elnora Trust.
Norval Trust and Elnora Trust
Norval Trust and the Elnora Trust were mirror trusts, meaning
the language in the trusts was identical except for one
referencing Norval and the other referencing Elnora. Each
trust contained an undivided one-half interest in the real
property at issue here, separate from the Henry 80. Upon the
death of the first spouse (in this case, Elnora), two trusts
were created for the surviving spouse (Norval): "The
Marital Trust" and "The Family Trust." The
Marital Trust was to be composed of cash, securities, and
other property having a value equal to the maximum marital
deduction, but adjustable for other tax purposes. The Family
Trust was to consist of the balance of the trust estate after
assets were selected for The Marital Trust. The surviving
spouse was to receive all the net income from The Marital
Trust. The surviving spouse also had the authority to reach
the principal in the trust, as well as withdraw all or part
of the principal in The Marital Trust. Upon the surviving
spouse's death, the entire remaining principal of The
Marital Trust was to be paid over, conveyed, and distributed
[27 Neb.App. 600] in the manner the surviving spouse may have
appointed in his or her will. If the power of appointment was
not exercised, then the entire remaining principal of The
Marital Trust was to be used to first pay taxes from the
increased value resulting from the inclusion of The Marital
Estate assets in the surviving spouse's estate, and the
balance was to be added to and become part of The Family
Trust; it was to be administered as if it had been an
original part of The Family Trust. The Family Trust was to be
held for the benefit of the surviving spouse and the children
primarily for medical care, education, support, and
maintenance. Upon the surviving spouse's death, the
entire remaining principal of The Family Trust was to be paid
over, conveyed, and distributed in accordance with the
surviving spouse's power of appointment in his or her
will, and any remaining property was to be distributed as set
forth thereafter, which we address below. The three brothers
were named cotrustees of the trusts; and according to the
trusts, "the vote of the Trustees for any action . . .
must be by majority action of the Trustees." The
siblings are all remainder beneficiaries under the trusts,
but only the brothers are beneficiaries of the farmland at
parties referred to the disputed farmland as "Big Jisa,
" "Little Jisa, " "Homeplace, " and
"Staroscik." These four properties are all located
in Polk County, Nebraska, on two sections of land (Section 6
and Section 7). Section 6 is directly north of Section 7. Big
Jisa consists of 160 acres in the northwest quarter section
of Section 6. Little Jisa consists of 80 acres immediately
south of Big Jisa. Staroscik consists of the northwest
quarter (160 acres) of Section 7; Kirtus lives in the
southwest corner of Staroscik. The Homeplace consists of 80
acres located in the north half of the southeast quarter of
Section 7. As previously noted, the Henry 80 is immediately
south of the Homeplace. And although not at issue here, there
are another 80 acres immediately north of the Homeplace owned
by RKS Farms, Inc., a company owned by the brothers for the
purpose of running their joint farming operation.
Neb.App. 601] The Norval Trust and the Elnora Trust provided
each of the siblings with specific parcels of real property:
Kirtus received a small tract of land on Staroscik, Rocky
received a small tract of land on Little Jisa, and Scott
received land separate from the trust ground at issue which,
according to Scott, was "roughly a mile and a half south
of the Homeplace. Pamela was also granted an acre of land.
The trusts then directed that "[a]ll other farmland held
by the Trust shall be distributed to the three sons of the
Grantor in equal shares as tenants in common." Each
trust then states, "The remainder of the Trust property
shall be distributed in equal shares to the Grantor's
children, outright and free of trust." There is nothing
in the record to indicate that prior to his death, Norval
exercised any power of appointment granted to him with regard
to the Elnora Trust. Therefore, the terms of the Elnora Trust
and the terms of the Norval Trust control the distribution of
the disputed farmland.
15, 2011, attorney Richard A. DeWitt sent the brothers a
letter regarding "Norval Augustin Trust
Administration." The letter described the remaining
steps to finalize the inheritance tax process and inquired
about the division of personal property. DeWitt indicated
that "[u]pon completion of these items, administration
of the Trust can be completed and the Trust assets (basically
farmland) can be distributed." The letter goes on to
state, "As written, the Trust provides for distribution
of farmland to each of you in undivided one-third
interests." DeWitt recommended either the brothers
divide the farmland into separate parcels such that each
brother would own 100 percent of his parcel or,
alternatively, the brothers could form a limited liability
company with equal interests and the farmland could be
transferred into that company. DeWitt reminded the brothers
that as trustees, they each had an equal say in the
administration of the trust, and that decisions could be made
by a "two-thirds majority vote."
Neb.App. 602] The brothers and their wives met at
DeWitt's office on July 12, 2011. According to Scott,
after some initial small talk about "dishes and stuff,
" Scott brought up getting the land out of the trust and
splitting it up, and "they immediately got hostile about
that and we were arguing about that back and forth."
Scott claimed that Rocky "slid . . . over this LLC,
which we knew nothing about, " and Rocky told them they
had to sign it. Scott said he told them he and his wife would
not sign it but would take it home and take it to their
lawyer to look over. Meanwhile, they continued to talk about
"the LLC" and what they wanted in it. Scott
acknowledged that his brothers expressed wanting to continue
farming the trust ground for 10 years, but at no time did
Scott agree to farm together for another 10 years. Kirtus
testified that Scott and Scott's wife said they wanted to
farm for 5 more years and then retire; Kirtus told them he
wanted to farm for 20 years. Kirtus proposed that they go
with a 10-year agreement, and he testified that he believed
Scott agreed with farming 10 years before splitting up the
trust ground. According to Kirtus, "We was going to
continue farming for ten more years and then after the ten
years, we was going to divide the ground up and the
machinery. That is what I believed when we walked out of that
door." Rocky testified that "Kirt[us] stood up and
he come up with an idea of wanting to farm for 20 years, but
that was too much. So, we come up with a plan of doing it for
ten years. And everyone in there did agree to this."
Both of the older brothers acknowledged that there was
nothing in writing about a 10-year agreement.
to DeWitt, there were two areas of discussion at the July
2011 meeting in his office: finalizing the division of
tangible personal property and "what [were] we going to
do with the land going forward." DeWitt recalled that
Scott expressed a desire to farm independently and farm with
his son. Scott wanted to have "individual ownership of
his share of the farmland." Kirtus and Rocky were
concerned that doing that would "force them out of
farming, because there wouldn't [27 Neb.App. 603] be
economical units left if there was a forced breakup at that
time." There was then discussion of "when would
they be ready to retire." Kirtus said in maybe 20 years,
and "Scott said that's too long. And then ten years
was suggested." DeWitt recalled that Scott said "he
could live with ten" and that "Rocky and Kirtus
said they could live with ten." DeWitt believed the
three brothers had reached an agreement to continue farming
for 10 years and then divide it up. DeWitt stated he had not
yet prepared a limited liability company operating agreement
for that meeting; his letter to the brothers, which enclosed
a draft operating agreement, was dated December 7, 2011. That
letter referred to special provisions they had discussed,
including a commitment to retain ownership of the farmland
for 10 years and a commitment at the end of 10 years to sell
the farmland. DeWitt thought that Kirtus and Rocky had signed
the operating agreement, but that Scott had not.
the July 2011 meeting at DeWitt's office, Scott and his
wife talked about buying their own farm equipment, and later
"that fall, " Scott spent approximately $900, 000
for his own farm equipment. Scott started farming with his
son in 2012. With the exception of 1 year, Scott continued to
pay his one-third share of input expenses for farming the
trust property, and he received his one-third share of the
grain harvested. Scott, however, discontinued paying his
one-third share of the annual personal property and real
estate taxes for the trust property after 2011.
conflict between the brothers escalated, Scott filed a
petition pursuant to the Nebraska Uniform Trust Code (NUTC),
Neb. Rev. Stat. §§ 30-3801 to 30-38, 110 (Reissue
2016 & Cum. Supp. 2018), in July 2015 to terminate the
Henry Trust (cases Nos. PR15-18 in county court and A-16-1182
on appeal). He claimed that he had made repeated demands to
terminate the trust, to distribute trust assets, and for a
full accounting. He alleged the trust had not been
administered [27 Neb.App. 604] effectively, including the
failure to distribute the Henry 80 to the beneficiaries.
Scott requested that "the Co-Trustees" be removed
(only Kirtus was trustee) and that a successor trustee be
appointed. He asked for the distribution of all trust assets,
a full accounting, the termination of the trust, and for
attorney fees and costs.
also filed a petition to terminate the Norval Trust (cases
Nos. PR15-19 in county court and A-16-1183 on appeal), which
was subsequently amended to include the Elnora Trust. His
allegations and requests for relief were similar to those
claimed in the Henry Trust action.
October 2015, Kirtus and Rocky filed a petition to modify the
Henry Trust (cases Nos. PR15-25 in county court and A-16-1184
on appeal). The petition acknowledged that Norval appointed
the entire interest in the Henry 80 in equal shares, outright
and free of trust, to the brothers. However, the petition
requested that the court enforce an "agreement and
partnership" between the brothers related to this
property, and to modify the trust to continue to own and
administer the property until December 31, 2021, or to
transfer ownership of the property "to the parties'
partnership to be held and not further transferred until
December 31, 2021." Alternatively, the petition sought
the court's authorization to allow Kirtus, as trustee, to
distribute to Scott "sole fee simple title to a portion
of the [Henry 80] having a value equal to approximately
one-third of the value of the entirety ... in full
satisfaction of his beneficial interest in the Trust's
and Rocky also filed a petition to modify or declare rights
to the Norval Trust and the Elnora Trust (cases Nos. PR15-26
in county court and A-16-1185 on appeal). This petition
contained allegations similar to those contained in their
Henry Trust action, and also sought modification of the
trusts to hold the properties in these trusts or transfer
ownership to "the parties' partnership" until
December 31, 2021. Alternatively, it sought an order
declaring that the terms of the trusts authorized the
trustees to distribute sole fee simple [27 Neb.App. 605]
title of the real estate to individual beneficiaries, as well
as an order permitting the trustees to do so.
October 2015, Kirtus, Rocky, and RKS Farms filed a complaint
in the county court against Scott (case No. CI 15-156)
alleging that the brothers were "parties to an oral
cash-rent year-to-year farm lease" with the Norval Trust
and the Elnora Trust, which requires the brothers to annually
pay the trusts "an amount equal to the real estate taxes
and expenses" related to the trusts. At the time of the
complaint, it was alleged that Scott had failed to pay to the
trusts $31, 895.30, which was his one-third share of the real
estate taxes owed to the trusts that he stopped paying in
2011. The complaint further requested that the court declare
void a notice to terminate that Scott had delivered to
Kirtus, Rocky, and RKS Farms. The notice was given "for
the purpose of ...