Dawson v. Stoner-Sellers

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          APPEAL FROM THE CRITTENDEN COUNTY CIRCUIT COURT [NO. 18PR-15-77], HONORABLE VICTOR L. HILL, JUDGE

         Andrea Brock and Rita Reed Harris, Forrest City; and Brett D. Watson, Attorney at Law, PLLC, by: Brett D. Watson, for appellant.

         Friday, Eldredge & Clark, LLP, Little Rock, by: William A. Waddell, Jr., and Lindsey H. Emerson for appellees.

         OPINION

         ROBIN F. WYNNE, Associate Justice

          Ray Dawson Jr. appeals from an order of the Crittenden County Circuit Court denying his second amended petition to direct trustee to issue trusts reports and accountings and for removal of trustees and for other relief. At issue was the administration of several family trusts. He raises the following points on appeal: (1) The court lacked jurisdiction because the chief justice had no jurisdiction to assign the special judge; (2) The court erred when it relied on extrinsic evidence to determine the meaning of unambiguous trust documents; (3) If extrinsic evidence were relevant, the court erred by disregarding the R&LD settlor’s near-contemporaneous statement of intent and the intent of the R&LD III settlor; (4) The court erred by

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not finding that Janelle breached her duties as trustee and not removing her as trustee; (5) The court erred by not requiring an accounting; (6) The court erred by denying the request for a jury trial; (7) The court erred by not appointing a master; (8) The court erred by dismissing Jennifer and by denying the motion to set aside her dismissal or, alternatively, to grant a new trial; and (9) The court erred by not invalidating the 2014 trust amendments. We reverse the denial of a jury trial on Ray Jr.’s legal claims and remand for further proceedings, and we affirm in all other respects.

         Intervenor Luetta Dawson and her husband Ray Dawson Sr.^[1] were the initial beneficiaries of the following irrevocable trusts:

R&LD Trust (created in 1986): grantor/settlor Luetta; trustee Ray Dawson Jr.; initial beneficiaries Luetta and Ray Sr.; secondary beneficiaries children of Ray Sr. and Luetta.^[2]

R&LD Trust II (1994): grantor/settlor Janelle; trustee Ray Jr.; initial beneficiaries Ray Sr. and Luetta; secondary beneficiaries Janelle and Ray Jr.

R&LD Trust III (1996): grantor/settlor Ray Jr.; trustee Janelle; initial beneficiaries Ray Sr. and Luetta; secondary beneficiaries Janelle and Ray Jr.

          The major assets of the R&LD trusts are tracts of farmland, which generate substantial rental income. All three trust agreements directed the trustees to pay sums "reasonably necessary for the support, maintenance, medical care, and education" of the initial beneficiaries during their lives, and upon the death of an initial beneficiary, to the surviving initial beneficiary for his or her life, and then to the secondary beneficiaries for the same purposes until termination of the trusts. The trustees were given broad enumerated powers, and in addition, the trust agreements stated: "It is the GRANTOR’S express intention to confer upon the TRUSTEE every power of management which might be conferred upon him." Additional trusts were created as follows:

JDS Trust (1986): grantor/settlor Luetta; co-trustees Ray Jr. and Luetta; initial beneficiary Janelle; secondary beneficiaries Janelle’s children.

JDS Trust II (1994): grantor/settlor Ray Jr.; trustee Luetta; initial beneficiaries Luetta and Janelle; secondary beneficiaries appointed by Luetta’s will or, if appointment power not exercised, Janelle’s children.

          In 1998, Ray Jr. resigned as trustee of the R&LD Trust and the R&LD Trust II, and Janelle became successor trustee. In June 2014, Ray Jr. sent Janelle, as trustee of the three R&LD trusts, a formal request for a report and accounting regarding the property of the trusts. In September 2014, Janelle executed amendments to the R&LD Trust and the R&LD Trust III naming her daughter Jennifer Bouchillon, who is a certified public accountant, as co-trustee and limiting the duty of a trustee to provide an accounting. Luetta likewise executed an amendment to the JDS Trust II to add Jennifer as co-trustee.

         Ray Jr. filed suit in April 2015, seeking trust reports and accountings and also the removal of Janelle and Jennifer as the trustees of the three R&LD Trusts. Luetta was permitted to intervene in the action as an interested party. In February 2016, the court granted partial summary judgment

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to Ray Jr. and ordered Janelle and Jennifer to provide Ray Jr. with trust accounting information that he had requested. In April 2017, Ray Jr. filed the operative pleading in this matter— the second amended petition to direct trustee to issue trusts reports and accountings and for removal of trustees and for other relief.^[3] In the second amended petition, Ray Jr. alleged the following: failure to provide an accounting (Count I); breach of fiduciary duty (Count II); conversion (Count III); removal of trustees (Count IV); injunctive relief (Count V); fraud and concealment (Count VI); and conspiracy (Count VII). The gist of his complaint was that Janelle had used the R&LD trusts to benefit herself, and that she and Jennifer had breached their duties as trustees. Janelle and Jennifer answered and asserted the following affirmative defenses: failure to state facts upon which relief can be granted under Ark. R. Civ. P. 12(b)(6); dismissal pursuant to Ark. Code Ann. § 28-73-1006 (Repl. 2012); unclean hands; and estoppel and waiver. Luetta filed an answer that included the same affirmative defenses. In addition, Janelle and Jennifer, in their capacities as trustees, filed a counterclaim and an amended counterclaim against Ray Jr. In the amended counterclaim, they alleged that Ray Jr. had approached Luetta in January 2014 when she was ill and about to have brain surgery. At that time, he obtained lease extensions with the trusts for cash rent that was below market value. The trustees alleged undue influence, self-dealing, unjust enrichment, and breach of his duties to his co-beneficiaries; they demanded a trial by jury.

         The circuit court held a bench trial on October 10-13 and December 19-21, 2017. The parties presented extensive testimony and documentary evidence during the trial. At the conclusion of Ray Jr.’s case in chief, the court dismissed the fraud and conspiracy causes of action and dismissed the petition in its entirety as to Jennifer.^[4] The parties filed post-trial briefs, and on April 9, 2018, the court denied Ray Jr.’s petition and dismissed the action with prejudice. The court also denied and dismissed the counterclaim and denied all outstanding motions, including Ray Jr.’s motion for new trial or to set aside order on motion for judgment as a matter of law. Ray Jr. appealed.

          Jurisdiction of the Chief Justice to Appoint a Special Judge

          Ray Jr. argues that the chief justice lacked jurisdiction to assign the special judge in this case, Victor Hill, who thus also lacked jurisdiction. He contends that the chief justice lacked jurisdiction because not all judges in the circuit had recused. Jurisdiction is the power of the court to hear and determine the subject matter in controversy between the parties.

         Ulmer v. Circuit Court of Polk Cty., 366 Ark. 212, 215, 234 S.W.3d 290, 293 (2006).

          Here, a special judge was requested because the newly elected circuit judge would not have a "civil term" in Crittenden County in 2018. With the agreement of the assigned circuit judge, the administrative judge of the Second Judicial District wrote a letter to Chief Justice Kemp requesting appointment of recently retired Judge Victor Hill "for the sake of judicial economy"; Judge Hill had presided over the case before his retirement. On July 25, ...