In re GNB III Trust

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          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, Hope, for appellants.

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

         OPINION

         PHILLIP T. WHITEAKER, Judge

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          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 ...