In re GNB III Trust Jerita Wylie

          APPEAL FROM THE HEMPSTEAD COUNTY CIRCUIT COURT [NO. 29PR-16-79] HONORABLE DUNCAN CULPEPPER, JUDGE.

          Montgomery & Burke, by: Wm. Blake Montgomery and Jim A. Burke, for appellants.

          Wilson, Walker & Short, by: Charles M. Walker, for appellee.

          PHILLIP T. WHITEAKER, JUDGE.

         The appellants, Jerita Wylie and Doug Bobo, and the appellee, Cheryl Shaw, are siblings. They serve as cotrustees of the GNB III Trust (the Trust), which was created by their parents, Guy M. and Nellie Bobo. When a disagreement between the cotrustees arose concerning trust administration, Wylie and Bobo requested that the probate division of the Hempstead County Circuit Court make a declaration that a majority of cotrustees could act on behalf of the Trust and approve the sale of certain trust property to Bobo. The circuit court denied their request, and Wylie and Bobo appeal. We reverse in part and affirm in part.

         I. Facts and Procedural History

         Guy and Nellie created the GNB III Trust on August 13, 2004. Guy and Nellie partially funded the Trust with real estate, including their marital home and acreage. Guy and Nellie were the grantors of the Trust, the primary beneficiaries, and the initial trustees of the Trust. The Trust provided that if either Guy or Nellie was unable to serve as a trustee due to death, resignation, or incompetency, the other would assume the full duties of the office of trustee. Wylie, Bobo, and Shaw were designated as contingent beneficiaries, and in the event that both Guy and Nellie were unable to serve as trustees, then Wylie, Bobo, and Shaw were to serve as successor cotrustees. Unfortunately, Guy and Nellie failed to specify in the Trust whether the successor cotrustees must act by majority vote or by unanimity.

         In 2011, Guy was declared incapacitated, and a guardianship was created. Nellie was appointed as guardian of his person and of his estate. Based on Guy's incapacity, Nellie became the sole trustee of the Trust. Nellie passed away in 2015. Because of Nellie's death and Guy's incapacity, Wylie, Bobo, and Shaw assumed their roles as successor cotrustees of the Trust and became the beneficiaries of Nellie's one-half interest in the Trust.^[1]

         Discord among Wylie, Bobo, and Shaw developed in 2016. Bobo desired, individually and not as cotrustee or beneficiary, to purchase real estate owned by the Trust. Wylie agreed with Bobo's purchase. Bobo and his wife entered into a contract to purchase with the Trust. Because Bobo was a trustee and was attempting to purchase a trust asset, his offer to purchase was made contingent on court approval.

         Wylie and Bobo, pursuant to Arkansas Code Annotated section 28-73-802 (Repl. 2012), petitioned the Hempstead County Circuit Court to approve Bobo's offer to purchase trust property. Shaw responded and filed a counterpetition claiming that Wylie and Bobo had committed serious breaches of trust and fiduciary duty and seeking their removal as cotrustees and coguardians. She requested that the court appoint an independent third party as trustee. Shaw also claimed that Bobo had entered into a pasture-lease agreement with the Trust; that the rental rate was far below the fair rental value for comparable property in the area; that Bobo had already taken possession of the premises and had cut and baled hay thereon; and that she was willing to pay more for the subject property and more for pasture rental but had not been given an opportunity to do so. Wylie and Bobo denied the counterpetition allegations.

         Before any court action was taken on the petition or counterpetition, Wylie and Bobo filed a motion for a temporary order requesting that the court find that a majority of the three cotrustees could act with all the authority and power granted to a trustee under the trust declarations. They asserted that such a finding was necessary because banks were refusing to allow them to conduct banking business without the unanimous consent of all the cotrustees. As a result, they were having to pay trust expenses directly out of their personal funds.

         The court took no action on the request for a temporary order but did conduct a final hearing on the petition and counterpetition. After the hearing, the circuit court entered an order denying the petition to approve the sale and lease of trust lands to Bobo and provided that no further real estate transactions could occur without the unanimous agreement of the trustees or prior court approval. The order also denied Shaw's request to have a third party appointed as trustee.

         Wylie and Bobo filed a motion for new trial pursuant to Arkansas Rule of Civil Procedure 59(a)(6). They asserted that a new trial should be granted on their petition for approval of the sale of real property because (1) the sale was fair, (2) it had been authorized by the majority of trustees, and (3) it was in the best interest of the Trust and its beneficiaries. Essentially, they argued that the circuit court's denial of their petition was contrary to the preponderance of the evidence. They also argued that they should be granted a new trial on their request for declaratory relief. They cited Arkansas Code Annotated section 28-73-703(a), which provides that "[c]otrustees who are unable to reach a unanimous decision may act by majority decision." They claimed that this statute clearly and unambiguously authorized a majority of trustees to make decisions on behalf of the Trust and that the circuit court erred in concluding that any sale of real estate must be by unanimous agreement of the trustees or by court approval. Shaw responded to the motion, denying that Bobo and Wylie were entitled to a new trial on the issues.

         The circuit court did not rule on the motion within thirty days; therefore, it was deemed denied.^[2] Wylie and Bobo appeal the denial of their motion for new trial, arguing that the Arkansas Trust Code provides that a majority of three cotrustees may make decisions when unanimity cannot be obtained and that the circuit ...