Hetrick v. Sams

2023 Ark. App. 338

670 S.W.3d 430

Joyce HETRICK, CO-TRUSTEE OF the JARRELL SAMS AND GLADYS SAMS IRREVOCABLE TRUST, Appellant

v.The ESTATE OF Gladys SAMS, Deceased, BY Charles GRAY, Personal Representative, Appellee

No. CV-20-555

Court of Appeals of Arkansas, DIVISION II.

Opinion Delivered May 31, 2023

Beau Wilcox; and Richard F. Hatfield, P.A., by: Richard F. Hatfield, Little Rock, for appellant.

Barber Law Firm PLLC, Little Rock, by: Jim L. Julian and Mark W. Hodge, for appellee.

WENDY SCHOLTENS WOOD, Judge

Appellant Joyce Hetrick appeals the judgment entered by the Conway County Circuit Court finding that she breached her fiduciary duty as guardian of her mother, Gladys Sams. Joyce served as both guardian of her mother and co-trustee with Gladys over a trust benefiting Gladys during her lifetime and of which Joyce was the sole beneficiary at Gladys's death. On appeal, Joyce contends that the circuit court clearly erred in (1) finding that she breached her fiduciary duty as guardian when she transferred Gladys's personal funds to the trust; (2) finding that the transfer of Gladys's personal funds to the trust required a court order; and (3) calculating damages. We affirm.

Gladys and Jarrell Sams owned 120 acres of land in Conway County. They have one child, Joyce Hetrick. Joyce has two children—Patrick Alexander and Clay Alexander. Patrick Alexander has been in prison in Texas since 1992 for first-degree murder. Charles Gray is Gladys's nephew.

On January 5, 2004, Jarrell and Gladys, as grantors, established the Jarrell Sams and Gladys Sams Irrevocable Trust (the "Trust"). The Trust names Gladys and Joyce as co-trustees with either to serve as sole trustee if one of them becomes unable or unwilling to serve as a co-trustee. The Samses transferred their 120-acre parcel of land into the Trust, and the land remained in the Trust throughout their lifetimes. Under the terms of the Trust, the Samses could use the assets of the Trust for their benefit while they were both alive. Upon the death of both Jarrell and Gladys, Joyce is the sole beneficiary of the Trust.

According to Joyce, on or around the same date the Trust was formed, Gladys also executed a will (the "2004 Will"). Joyce testified that the 2004 Will contained a pour-over provision that left all of Gladys's personal property to the Trust. The 2004 Will is not in the record and was never introduced into evidence.

Jarrell passed away on January 9, 2005. As time progressed, the relationship between Gladys and Joyce began to deteriorate. In 2007, Joyce unsuccessfully attempted to establish a guardianship over Gladys. They also clashed over Gladys's remaining in contact with and sending money to Patrick in prison. Joyce had become estranged from him because of his criminal history. On March 14, 2007, Gladys revoked a power of attorney she had previously executed in favor of Joyce. And on September 15, 2010, Gladys executed a new will (the

"2010 Will"). The 2010 Will listed Patrick and Charles as her only beneficiaries and appointed Charles as executor. It provided, "None of the property owned at my death by me shall be placed into the trust." Further, the 2010 Will stated, "I am well aware of my only child, Joyce Alexander Hetrick. I leave her nothing pursuant to this will and am intentionally excluding her from distribution. She has been considered and provided for in the manner I wish to do so through the trust created in 2004." On October 6, 2016, Gladys executed a power of attorney in favor of Charles. This power of attorney also nominated Charles as her guardian should it become necessary.

On October 31, 2016, Joyce filed another guardianship action against Gladys. On April 13, 2017, Joyce was appointed Gladys's physical guardian. Charles was appointed Gladys's temporary financial guardian on the same day. While he was financial guardian, Charles filed an inventory listing all of Gladys's personal bank accounts, which included twenty-three accounts held at eight institutions, totaling $903,848.31. His guardianship expired on July 1, at which time Joyce was appointed Gladys's financial guardian. Joyce assumed her additional duties as financial guardian on August 8.

Gladys passed away on August 27.¹ At the time of her death, she had no personal bank accounts, and her only personal possessions were approximately $2,000 in furniture and clothing.

Charles opened Gladys's estate (the "Estate") on September 22, and he accepted his position as executor on October 12. On March 27, 2018, Charles filed a lawsuit against Joyce as co-trustee of the Trust. In the complaint, Charles alleged that in the nineteen days Joyce was Gladys's financial guardian, Joyce transferred Gladys's personal funds from thirty-five bank accounts at eight different institutions into the Trust, totaling $1,216,364.69 (the "Transferred Funds"). The Transferred Funds included all the accounts listed on the inventory previously filed by Charles as well as a number of other bank accounts that Joyce had discovered while she was acting as Gladys's physical guardian. The complaint alleged conversion and breach of fiduciary duty and demanded an accounting and the return of the Transferred Funds to Gladys's Estate.

The circuit court held a bench trial on January 23 and 24, 2020. At trial, Joyce testified that she and her mother served as co-trustees of the Trust after the death of Jarrell. Joyce stated that she believed during the last couple of months of Gladys's life, she was taking income from the Trust and placing it into her personal accounts. Joyce testified that in her role as co-trustee she deemed her mother's actions "as illegal" and removed funds in Gladys's personal account and placed them into the Trust "where they were supposed to have been deposited in the first place." Joyce introduced an exhibit ("Joyce's Exhibit"), and she testified that it contained evidence of the existence of Trust accounts from 2005–2017.

Joyce stated that she did not file suit against Gladys for breach of trust because she is "not that litigious." She said that instead, when she became Gladys's guardian, she used her position to close all of Gladys's personal accounts and move the money back to the Trust.

Joyce testified that returning the money to the Trust that had been improperly removed was her effort to carry out her parents’ 2004 estate plan.

During Joyce's testimony, counsel for Charles introduced an exhibit ("Charles's Exhibit") that listed the institutions, account numbers, and total dollar amounts making up the Transferred Funds, which totaled $1,216,364.69. Joyce agreed that she went to the institutions listed on Charles's Exhibit while she was Gladys's guardian, removed the funds from those accounts listed on the exhibit, and deposited them into the Trust account.

Joyce also acknowledged that she was the sole beneficiary of the Trust, but she added that at the time she transferred the funds, she believed Gladys's 2004 Will was still operative, and all of Gladys's personal assets would be placed into the Trust at Gladys's death. She denied knowing about the 2010 Will until after Gladys's death. However, there was conflicting testimony from Gladys's niece, Carolyn Payne, who stated that Joyce told her in 2017 that "the power of attorney and will are void."

At the conclusion of the trial, the circuit court took the matter under advisement and on April 23, 2020, entered a judgment finding that Joyce had breached her fiduciary duty as guardian of Gladys's Estate by withdrawing the funds from Gladys's personal accounts and depositing them into the Trust. The circuit court found that Joyce failed to establish that the source of the funds in Gladys's personal accounts was the Trust. The circuit court also found that Joyce was aware of the 2010 Will; she placed all of Gladys's personal funds into the Trust for her sole benefit, which had the effect of rewriting Gladys's estate plan; and that Joyce engaged in self-dealing in violation of her fiduciary duty. The circuit court further

found that Joyce failed to comply with Arkansas Code Annotated section 28-65-308 (Repl. 2012) when she failed to obtain court approval before transferring Gladys's personal funds into the Trust. Finally, the circuit court attached Charles's Exhibit to its judgment and ordered Joyce to repay Gladys's Estate $1,216,364.69. Joyce moved for a new trial on May 7, and the circuit court denied the motion on June 5. This appeal followed.

Joyce raises three points on appeal. She contends that the circuit court clearly erred in (1) finding that she breached her fiduciary duty as Gladys's guardian when she transferred Gladys's personal funds to the trust; (2) finding that the transfer of Gladys's personal funds to the Trust required a court order; and (3) calculating damages.

In civil bench trials, the standard of review on appeal is whether the circuit court's findings were clearly erroneous or clearly against a preponderance of the evidence. Ellis v. Thompson , 2019 Ark. App. 579, at 7, 590 S.W.3d 774, 779 (citing Tadlock v. Moncus , 2013 Ark. App. 363, 428 S.W.3d 526 ). A finding is clearly erroneous when, although there is evidence to support it, the reviewing court, on the entire evidence, is left with a firm conviction that a mistake has been made. Id. , 590 S.W.3d at 779. Due regard shall be given to the opportunity of the circuit court to judge the credibility of the witnesses. Id. , 590 S.W.3d at 779 (citing Ark. R. Civ. P. 52(a)(1) ).

For her first point on appeal, Joyce argues that the circuit court clearly erred in finding that she breached her fiduciary duty as Gladys's guardian. The duty of a guardian is to exercise due care to protect and preserve the ward's estate. Ark. Code Ann. § 28-65-301(b)(1)(A) (Repl. 2012). Guardianship shall be used only as necessary to promote and

protect the well-being of the person and his or her property. Ark. Code Ann. § 28-65-105(1) (Repl. 2012). This court has held that the "guardian of the estate of...