Dawson v. Stoner-Sellers

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

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

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

          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 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 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, 2017, Chief Justice Kemp entered an order assigning the Hon. Victor Hill, retired circuit judge, to hear this case.

         Amendment 80 provides as follows regarding the assignment of special judges in circuit court:

(C) If a Circuit or District Judge is disqualified or temporarily unable to serve, or if the Chief Justice shall determine there is other need for a Special Judge to be temporarily appointed, a Special Judge may be assigned by the Chief Justice or elected by the bar of that Court, under rules prescribed by the Supreme Court, to serve during the period of temporary disqualification, absence or need.

Ark. Const. amend. 80, § 13. Administrative Order No. 16 provides the procedures for the assignment of special judges by the chief justice. Admin. Order No. 16 authorizes the chief justice to assign (A) sitting circuit court judges, (B) retired circuit, chancery, circuit/chancery, and appellate court judges and justices, and (C) sitting state district court judges, with their consent, to serve temporarily in circuit court. Admin. Order No. 16(I). The bases for assignment are disqualification pursuant to the Arkansas Code of Judicial Conduct, temporary inability to serve, or other need as determined by the chief justice. Id. § (II) (emphasis added). Section (III) of Admin. Order No. 16, which governs the process for requesting assignment of a special judge, provides that "[a]ll judges in the circuit must disqualify before an assignment will be made." The letter of request to the chief justice must include a statement that all the judges in the circuit have recused. Id., § (III)(A).

         Ray Jr. relies on section (III) of Administrative Order No. 16, along with Smith v. Wright, 2015 Ark. 189, at 20 n.14, 461 S.W.3d 687, 699 n.14 (explaining the necessity of overruling Neal v. Wilson, 321 Ark. 70, 900 S.W.2d 177 (1995) because the elected circuit judge was not disqualified and this court lacked jurisdiction or authority to appoint a special judge under the circumstances of that case), for his argument that the chief justice lacks jurisdiction to appoint a special judge unless all judges in the judicial circuit have recused. However, Ray Jr. ignores the broad language of amendment 80 and section (II) of Admin. Order No. 16, which provide the chief justice with the authority to assign a special judge if the chief justice determines there is "other need" for a special judge. Here, the chief justice apparently determined there was a need for a special judge for the sake of judicial economy due to the assigned circuit judge's docket.^[5] No one objected to the assignment. These circumstances are clearly distinguishable from a disagreement between a duly elected judge or justice and an appointed judge or justice as to who should hear a case. See Smith, supra; Neal, supra.

         We affirm on this point because the chief justice did not lack jurisdiction to appoint a special judge under the circumstances presented here.

         Jury Trial

         We address Ray Jr.'s sixth point on appeal next. Ray Jr. argues that the circuit court erred by denying the parties' requests for a jury trial. The applicable standard of review is that any claim to a jury trial is reviewed de novo on appeal. Stokes v. Stokes, 2016 Ark. 182, at 4, 491 S.W.3d 113, 117 (citing First Nat'l Bank of DeWitt v. Cruthis, 360 Ark. 528, 203 S.W.3d 88 (2005)). A jury trial is a fundamental constitutional right that is protected by article 2, section 7 of the Constitution of Arkansas. See Walker v. First Commercial Bank, N.A., 317 Ark. 617, 880 S.W.2d 316 (1994). The right to a jury trial extends only to those cases that were subject to trial by jury at the common law. Stokes, supra. In Arkansas, this court looks to the historical nature of the claim to determine whether a trial by jury is warranted.Id.

         In the second amended petition, Ray Jr. demanded a jury trial "in connection with this cause of action." Janelle and Jennifer's answer included a demand for a trial by jury "as to all issues and claims alleged" in the second amended petition. The case was initially set for a four-day jury trial. After reviewing the proposed jury instructions, however, the court determined that the case was not appropriate to submit to a jury and wrote a letter to counsel so advising them. Janelle and Jennifer submitted a response to the court's letter and argued in favor of a jury trial, writing: "Trustees respectfully submit that it would . . . be error to deny a jury trial where the petition, affirmative defenses, and counterclaim all alleged legal causes of action and the parties have demanded a trial by jury." The circuit court entered an order denying the requests for a jury ...