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Scott v. Scott

Court of Appeals of Arkansas, Division I

September 14, 2016



          R. David Lewis, for appellant.

          Michael U.Sutterfield, for appellee.

          ROBERT J. GLADWIN, Chief Judge

         Appellant Gregory Scott (Greg) appeals the July 10, 2015 order of the Pulaski County Circuit Court, which divided the remaining money in the Jane B. Scott Family Trust (Trust) and found that Greg's brother, appellee Walter Scott, while in violation of the in terrorem clause of the Trust, would not be penalized because Greg was also in violation of the clause. On appeal, Greg argues that the trial court erred in (1) denying his motion to deem facts admitted; (2) refusing to punish Walter for violating the in terrorem clause; and (3) awarding him only $11, 750 for labor and materials. We affirm in part and reverse and remand in part.

         Walter filed a petition for accounting against Greg on August 13, 2009, as cotrustee of the Trust, which had been established by their mother. He alleged that Greg had repeatedly made decisions regarding Trust assets without proper input or permission from him as required by the Trust. Greg responded with an emergency petition for sale of the family home, alleging that Walter had agreed to transfer the home to Greg in exchange for $130, 000 from the estate, and Walter had received the money and had cashed the check but would not sign the deed over to Greg. Greg ceased work on the house for a time but began improvements on it again without an agreement from Walter. He also claimed that Walter's filing for an accounting was an adverse action against the Trust, invoking the in terrorem clause, alleging that Walter already possessed all of the information on the Trust.

         The clause states:

Should any person mentioned herein but excluded from distribution, or any beneficiary, including any beneficiary under powers of appointment exercised herein, become an adverse party in the administration of Grantor's Estate or Trust, including the valuation and distribution of Grantor's Estate, such person shall forfeit his or her entire interest and his or her issue's interest in Grantor's Estate or Trust inherited from Grantor, and such interest shall pass as part of the residue of Grantor's Trust Estate; provided, however, that if such person is a beneficiary of the residue, his or her interest shall be divided proportionately among the other beneficiaries of the residue. This paragraph shall not be construed to limit the appearance by any beneficiary as a witness in any proceeding for the probate of Grantor's Will or the administration of Grantor's estate or Trust, nor to limit his or her appearance in any capacity in a proceeding for construction of Grantor's wishes.

         An order was filed on March 7, 2011, wherein Greg and Walter agreed to sell the home; Greg would provide the accounting; Walter would review it and obtain his own accounting if necessary; both would provide proof of payments made to Taylor Galusha (Walter's daughter and a beneficiary of the Trust); Greg would retain the right to attempt to collect his costs and labor for remodeling the house; and both would provide proof of their expenses.

         Taylor moved to intervene as a necessary party. She was granted intervention by order filed December 9, 2011. She filed a complaint on December 16, 2011, alleging that she was entitled to $50, 000 under the Trust; that she wanted an accounting; that a declaration that the IOU she was forced to sign by Walter and Lani, his wife, was void; and that Walter should be removed as cotrustee.

         On March 9, 2012, Greg filed requests for admissions against Walter, and on that same date, Greg filed his second amended response and amended counterpetition, alleging that Walter had not paid the real property taxes on the family home and that Greg had paid $8000 for insurance, termite coverage, electricity, gas, and water for the home since 2004. Greg also sought reimbursement for refurbishing/remodeling the family home, and he alleged that Walter had violated the in terrorem clause by filing an unnecessary petition for an accounting, alleging that the accounting petition was filed "solely as a pretext to litigate with less financially advantaged beneficiaries with the intent of holding them hostage with litigation until they settle under terms unpermitted by the Trust just to obtain funds they are entitled to."

         On April 2, 2012, Walter's attorney filed a "Notation of Forwarding Plaintiff's Responses to Requests for Admission to Defendant's Counsel, " stating that the responses were sent to Greg's attorney, Susan Gunter, on that date. On October 27, 2014, an order for substitution was filed, substituting R. David Lewis for Susan Gunter as Greg's attorney.

         On January 16, 2015, Greg filed a motion to deem facts admitted, alleging that Walter's failure to deny the requests for admissions deemed them admitted. He cited Duncan v. Olive, 2014 Ark.App. 152, and Hardesty v. Baptist Health, 2013 Ark.App. 731, 431 S.W.3d 327, both of which hold that it was not an abuse of discretion for the trial court to deem admitted the requests for admissions when the responses were not filed as required under the applicable rules of civil procedure. Walter responded that he had timely submitted his response to Greg and that Greg's lawyer had received them. Greg replied that it was of no consequence whether his attorney had received them, it mattered only that Walter did not file his responses. The trial court filed an order on April 10, 2015, stating that the notice filed on April 2, 2012, in which Walter alerted the trial court that the responses had been served, complied with the filing notice required by the rules; thus, the motion to deem facts admitted was denied.

         The trial began on April 13, 2015, but did not conclude until June 22, 2015. On May 1, 2015, Greg filed a motion to remove Walter as cotrustee, alleging that he had violated his duty as trustee, placed his own interests above his duties as trustee, and that he thought Walter would continue to frustrate the intent of the trust. Attached to the motion were portions of the transcript from the partial trial held on April 13. On May 7, 2015, Walter filed a motion to strike, ...

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