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Reed v. Smith

Court of Appeals of Arkansas, Division III

May 16, 2018

DONNA M. REED, APPELLANT
v.
JACQUELIN R. SMITH, WILLIAM E. SMITH III, AND DIANA M. SHARP, APPELLEES

          APPEAL FROM THE GARLAND COUNTY CIRCUIT COURT [NO. 26CV-16-1077] HONORABLE LYNN WILLIAMS, JUDGE

          Robert S. Tschiemer, for appellant.

          Wood, Schnipper & Britton, by: Don Schnipper and Beau Britton, for appellees.

          PHILLIP T. WHITEAKER, Judge.

         This appeal involves a family dispute over the administration of the William E. Smith, Jr., Trust.[1] Donna Reed, the appellant, filed suit against her siblings-William E. Smith III[2]and Diana Sharp-and her mother, Jacquelin Smith, alleging that they violated the terms set forth in her father's trust agreement and misappropriated the assets of the Trust.[3] Donna requested relief in the form of a declaratory judgment, as well as compensatory and punitive damages for their alleged actions. The Garland County Circuit Court subsequently dismissed her amended complaint with prejudice under Rule 12(b)(6) of the Arkansas Rules of Civil Procedure for failing to state facts upon which relief could be granted and denied her motion to reopen the record. The court also ordered her to pay attorney's fees. We affirm the trial court's dismissal as modified and affirm the award of attorney's fees.

         The following background information is provided to understand the issues on appeal. William Jr. was married to Jacquelin. They are the parents of Donna, William III, and Diana. In September 1996, William Jr. and Jacquelin executed separate and complementary trust documents that established the William E. Smith, Jr., and Jacquelin R. Smith Trusts. They funded the trusts with a home located in Hot Springs, Arkansas, with each trust obtaining an undivided one-half interest in the property.

         William Jr. died on March 10, 2008. On December 5, 2016, Donna filed the lawsuit at issue here. She alleged that William III, Diana, and Jacquelin fraudulently entered into a real estate contract to sell the Trust's one-half interest in the home located in Hot Springs. Donna claimed that upon William Jr.'s death, she and William III became successor trustees and that Jacquelin had no authority to enter into a contract for the sale of the real estate. She further alleged that William III and Diana had falsely signed the contract as trustees of a nonexistent "Smith Family Trust" in an attempt to gain control over the property and that Jacquelin, William III, and Diana were acting in concert to use funds from a promissory note due to the Trust for their personal benefit. Donna attached a copy of the Trust as a document to her original complaint. The appellees moved to dismiss the complaint under Arkansas Rule of Civil Procedure 12(b)(6), alleging that Donna's complaint stated only conclusions and had failed to state facts upon which relief could be granted.

         On January 30, 2017, Donna filed an amended complaint and request for declaratory judgment, making essentially the same allegations as before. Her amended complaint did not incorporate by reference the original complaint.[4] She attached a copy of the Trust as an exhibit to her amended complaint as well. The appellees again moved to dismiss under Rule 12(b)(6), arguing that Donna had once again failed to allege facts sufficient to support her claims for relief. After reviewing the pleadings and hearing the arguments of counsel, the trial court dismissed Donna's amended complaint with prejudice under Rule 12(b)(6) for failing to state facts upon which relief could be granted. The court also granted the appellees' request for attorney's fees under Arkansas Code Annotated section 16-22-308 (Repl. 1999).

         Donna first argues that the trial court erred in dismissing her complaint under Rule 12(b)(6). Before addressing her arguments, we note that the parties argue this appeal under both a Rule 12(b)(6) and a Rule 56(c) analysis because extraneous documents, including an affidavit and negotiated checks, were attached to the amended complaint and the motions to dismiss. We are unable to ascertain to what extent, if any, the court considered the affidavit and negotiated checks in reaching its decision to dismiss the complaint under Rule 12(b)(6). We also note that at the hearing on the motion to dismiss, the appellees abandoned their request for the court to consider anything beyond the complaint in making its determination. For these reasons, we will conduct our analysis under Rule 12(b)(6) and consider only the amended complaint and those documents required under Rule 10(d), such as the Trust, that are properly attached thereto.[5] See O'Dell v. Peck, 2017 Ark.App. 532.

         In reviewing a trial court's order of dismissal, we treat the facts alleged in the complaint as true and view them in the light most favorable to the plaintiff. Smith v. May, 2013 Ark. 248. In testing the sufficiency of a complaint on a motion to dismiss, all reasonable inferences must be resolved in favor of the complaint, and all pleadings are to be liberally construed. Id. Rule 8(a)(1) of the Arkansas Rules of Civil Procedure requires fact pleading, not mere conclusions, in order to entitle the pleader to relief. Id. Only facts alleged in the complaint are treated as true, not the plaintiff's theories, speculation, or statutory interpretation. Id. When reviewing a dismissal for failure to state a claim under Rule 12(b)(6), our standard of review is whether the trial court abused its discretion in dismissing the complaint. Id. To have abused its discretion, the trial court must have not only made an error in its decision, but also must have acted improvidently, thoughtlessly, or without due consideration. Scott v. Scott, 2016 Ark.App. 390, 499 S.W.3d 653.

         The amended complaint in this case properly attached the Trust as a document as required under Rule 10(d) of the Arkansas Rules of Civil Procedure. From the contents of the Trust, we accept the following factual allegations as true:

         The trust agreement designated William Jr. and Jacquelin as cotrustees of the Trust with Jacquelin becoming sole trustee in the event of William Jr.'s death, resignation, or incompetency. William III and Donna were designated only as alternate successor trustees.

         Upon the death of William Jr., the Trust would become irrevocable and the principal would be divided into two separate trusts, identified as the Smith Family "A" Trust and the Smith Family "B" Trust.

         The "A" Trust would be funded first and was designed to take full advantage of marital deductions allowable under the estate tax provisions of the Internal Revenue Code. Jacquelin was the sole beneficiary of the "A" Trust with the ...


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