Sellon v. Abbott (In re Abbott)

295 Neb. 510

890 N.W.2d 469

IN RE CONSERVATORSHIP OF Marcia G. ABBOTT, a protected person.

Cynthia J. Sellon and Russell G. Abbott, appellees and cross-appellants,

v.Mark D. Abbott, Conservator, appellant and cross-appellee.

In re Abbott Living Trust.

Cynthia J. Sellon and Russell G. Abbott, appellees and cross-appellants,

v.Mark D. Abbott, Designated Successor Trustee, appellant and cross-appellee.

Nos. S-15-967

S-16-040.

Supreme Court of Nebraska.

Filed January 13, 2017.

Michael F. Coyle, Elizabeth A. Culhane, and Jacqueline M. DeLuca, of Fraser Stryker, P.C., L.L.O., Omaha, and G. Rosanna Moore and, on brief, John K. Green, of Pickens & Greene, L.L.P., for appellant.

John M. Lingelbach, James A. Tews, and Minja Herian, of Koley Jessen, P.C., L.L.O., Omaha, for appellees.

Heavican, C.J., Wright, Cassel, Stacy, Kelch, and Funke, JJ.

Cassel, J.

I. INTRODUCTION

We decide two consolidated appeals from county court proceedings—the first from a final order appointing a conservator and the second from a county court order that acted both as a judgment in a trustee removal proceeding and as a final order denying fees and expenses in the conservatorship proceeding.

Because the conservatorship appointment order became moot upon the protected person's death while the first appeal was pending, we dismiss the first appeal in its entirety and dismiss the cross-appeal to the extent that it pertains to the first appeal.

In the second appeal, a successor trustee appeals and two beneficiaries cross-appeal from an order removing the successor trustee, declining to surcharge him, disposing of competing attorney fee applications, and otherwise disposing of the trust and conservatorship proceedings. Applying our respective standards of review to the remaining trust and conservatorship issues, we affirm.

II. BACKGROUND

These consolidated appeals arise from proceedings initiated by Russell G. Abbott and Cynthia J. Sellon (Cynthia) to appoint a conservator for their mother, Marcia G. Abbott, and to remove Marcia as trustee of the "Abbott Living Trust"; to remove their brother, Mark D. Abbott, as successor trustee; to surcharge Mark; and for an accounting. Marcia resigned as trustee before trial, and the county court dismissed the claim seeking to remove her as moot.

Prior to oral argument, a suggestion of Marcia's death was filed in this court, accompanied by a motion to remand the conservatorship proceeding with directions to vacate and dismiss. At oral argument, we granted leave to file a written response, which we have considered. Marcia's death renders moot the issue of the appointment of her conservator, but it does not abate the cause of action.¹ Accordingly, we do not summarize the facts surrounding the appointment of a conservator, and recite only the facts relating to issues not mooted by Marcia's death.

1. ABBOTT LIVING TRUST AGREEMENT

Marcia and her husband created a revocable living trust in which they named themselves cotrustees. When Marcia's husband died, the living trust assets were divided between a revocable "Survivor's Trust" and an irrevocable "Family Trust." The two trusts primarily consist of investment accounts.

The trust agreement provided that Marcia, as the surviving spouse, was entitled to the entire net income from the Survivor's Trust account. It also permitted her to withdraw from the principal of the Survivor's Trust as much as she desired.

As to the Family Trust, Marcia had four primary rights or interests. First, she was entitled to the entire net income. Second, she had a "five-and-five power," which limited her to annually withdrawing the greater of $5,000 or 5 percent of the assets from the principal. Third, the trustee could apply an "ascertainable standard." That power permitted the trustee, in his or her discretion, to pay Marcia or her and her husband's shared descendants—Russell, Mark, and Cynthia—so much of the principal as the trustee deemed proper for their health, maintenance, support, and education. Finally, she had a "sprinkling" testamentary power of appointment—that is, a limited power allowing her to dispose of Family Trust assets by will or by a living trust. With this limited power, Marcia could appoint "some or all of the principal and any accrued but undistributed net income of the Family Trust as it exist[ed] at the death of [Marcia]" to Russell, Mark, or Cynthia in "equal or unequal amounts." There is no evidence that Marcia ever exercised this limited power of appointment.

2. MARCIA'S STROKE

In 2011, Marcia suffered a stroke that left her paralyzed on her right side. She had difficulty with speech and communication and was ultimately diagnosed with expressive aphasia—a disorder that affects the brain's ability to use and understand language. Prior to her stroke, Marcia lived at home and handled her own financial affairs, including management of the two trusts. After her stroke, Marcia needed assisted living and physical therapy and moved into a skilled-care facility. As a necessary result, Marcia's monthly living expenses grew from $500 to over $8,000. Since 2011, Mark has acted as Marcia's agent under a power of attorney.

3. MARK'S MANAGEMENT OF TRUST ASSETS

In 2011, after her stroke, Marcia "resigned" as trustee over two financial accounts that were trust assets. She appointed Mark as successor trustee of both accounts. In 2015, before trial, Marcia resigned as trustee in all matters for both trusts and Mark accepted the appointment as successor trustee in all matters.

Before Mark assumed his role as successor trustee of both trusts in the entirety, he understood his roles to be that of successor trustee of two financial accounts associated with the trusts and that of Marcia's agent under the power of attorney. Evidence at trial showed that Mark performed other actions within those roles, purporting to be the trustee of the two trusts in his signature. For example, the evidence showed that Mark signed a bill of sale for a vehicle owned by one of the trusts as "Trustee" in 2013. He also signed a state severance tax return for oil and gas royalties as "Trustee" in 2012. Mark explained that he " ‘used [his] signatures, [Marcia's] signatures, [power of attorney]/Trustee interchangeably because it really [did]n't matter.’ " He believed his power to sign as trustee came from his authority under the power of attorney executed by Marcia.

In that time, Mark also facilitated several transfers of money between different financial accounts associated with the Family Trust and the Survivor's Trust. Several of the transfers exceeded $200,000. At trial, an estate-planning attorney testified concerning the tax consequences of these transfers and opined that the transfers were a violation of the trust terms. Specifically, the witness testified that the two trusts had substantially different terms and that as a result, the trusts' assets could not be commingled. The witness further testified that because the Family Trust was irrevocable and the Survivor's Trust was revocable, the Family Trust's assets should have been kept separate from the Survivor's Trust's assets to maintain the appropriate tax basis for the assets. Additionally, the witness opined that the assets transferred to the Family Trust would have been subject to gift taxation and that Mark appeared not to have considered these tax issues in managing the trusts' assets.

The evidence at trial also showed that in managing the trusts' assets, Mark worked with Marcia's financial advisor in making investment decisions and all of his investments were recommended by the financial advisor. During the time that Mark managed the trusts, their combined assets increased in value from $1.5 million to a little over $2 million.

4. HOSTILITY BETWEEN SUCCESSOR TRUSTEE AND BENEFICIARIES

Russell and Cynthia both testified that they were concerned with Mark serving as successor trustee because of his aggression and resentment toward them. The hostility apparently began after their aunt died and left a disproportionate amount of real estate to Cynthia. Both Russell and Cynthia testified that Mark repeatedly threatened to "make it even" using the assets from the trusts and that he personally blamed Cynthia for her larger share, called her a "vulture," and even claimed Cynthia manipulated and then "murdered" their aunt for her share. Evidence presented at trial showed that Mark considered Cynthia's share to be "ill gotten" and "a grossly unequal share." Separate from the issues with the aunt's estate, Mark also believed that Russell and Cynthia stole from Marcia. And he had threatened to withhold any distributions until the property was returned. Mark's own words described the situation with his siblings as "WWIII" and characterized one of his communications to them as the "2014 equivalent of the Potsdam Declaration."

Russell and Cynthia additionally presented evidence that in 2012, they had requested information from Mark, including a copy of the document creating the trusts; a copy of the periodic statements issued for each of the trusts' financial accounts for the preceding 2 years; an explanation of "any expenditure of the Trust's assets made" by Mark in the preceding 2 years; and a list of the trusts' assets, excluding financial accounts already documented. In response to the request, Mark provided balance sheets and profit-and-loss statements for the 2 years, totaling seven pages. He did not provide copies of the document creating the trusts, periodic statements of financial accounts, or any explanations of expenditures. He explained at trial that he was advised to ignore the request of information related to administration of the trusts, because he had no obligation to supply the requested information.

5. COUNTY COURT'S ORDERS

The conservatorship case and the trust case initially proceeded to a consolidated trial. At the close of Russell and Cynthia's case, Mark moved for a directed verdict, alleging that they had no standing to assert their claims against Mark, because h...