Pulliam v. Murphy , 2016 Ark. App. LEXIS 140 ( 2016 )

Cite as 2016 Ark. App. 133
ARKANSAS COURT OF APPEALS
DIVISION IV
No. CV-15-630
RIKKA I. PULLIAM Opinion Delivered March 2, 2016
APPELLANT
APPEAL FROM THE CRITTENDEN
V. COUNTY CIRCUIT COURT
[NO. CV-14-116]
SHERRY P. MURPHY, R. CARTER HONORABLE VICTOR L. HILL,
PULLIAM, AND RICHARD PULLIAM, JUDGE
AS COTRUSTEES OF THE RAY H.
PULLIAM LIVING TRUST REVERSED AND REMANDED
APPELLEES
BART F. VIRDEN, Judge
Appellant Rikka I. Pulliam filed a complaint against appellees Sherry P. Murphy, R.
Carter Pulliam, and Richard Pulliam, as cotrustees of the Ray H. Pulliam Living Trust,
alleging breach of the trust agreement. The Crittenden County Circuit Court granted
summary judgment to appellees. On appeal, Rikka argues that appellees owed a duty of
loyalty to her in their administration of the trust and that genuine issues of material fact exist
as to whether they breached that duty. We reverse and remand for trial.
I. Background and Procedural History
In June 1997, Ray H. Pulliam and Ione O. Pulliam created a living trust involving
1,320 acres of farmland for the benefit of their five adult children. After the Pulliams had
passed away, four of those children, including Rikka, became cotrustees. Article Seventeen,
section five of the trust provided,
Cite as 2016 Ark. App. 133
Special Instructions Regarding the Farm. During my life, my spouse and I have
owned tracts of land which we have referred to among ourselves and our family as
“the farm.” The farm is the real property to be administered under Article Eleven of
this agreement upon the death of both my spouse and I. One and a half acres of the
farm was sold to our son, R. Carter Pulliam, for consideration of $7,500 ($5,000 per
acre) during my lifetime. My Trustee shall offer to any of my other children the same
privilege to purchase one and a half acre of land at the same consideration. The consideration
need not be actual cash but may also be improvements or work on the farm, for
example, but any construction must be farm related. In other words, the construction
cannot be a garbage dump, gravel storage or beer parlor, etc.
(Emphasis added.)
In addition to owning the tract of land referenced in the trust agreement, Carter,
along with Richard, leased trust property that they farmed.
In November 2013, Rikka’s lawyer notified appellees of Rikka’s request to buy a one-
and-a-half-acre tract along Highway 79 located just north of Carter’s one-and-a-half acres.
Carter objected to selling Rikka that particular tract because the area was used for parking
farm equipment and provided access for commercial trucks to reach the granary silos on his
property. Sherry had initially agreed to sell Rikka the tract of land but soon after rescinded
her consent to the sale after speaking with Carter, citing the land’s “current use in farming”
as her reason for rescission. Richard did not object to Rikka’s request to buy the tract at
issue. A meeting of the cotrustees was held in January 2014. Article Sixteen, section eight of
the trust provides that
[w]hen more than two Trustees are acting, the concurrence and a joinder of a
majority of my Trustees shall control in all matters pertaining to the administration of
any trust created under this agreement.
Carter and Sherry voted against the sale, while Rikka and Richard voted in favor of
the sale, resulting in a tie vote. Having failed to achieve a majority of votes, Carter and
2
Cite as 2016 Ark. App. 133
Sherry asked Rikka to select another tract of land to purchase, but Rikka refused.
Sherry, as president of the Board of Trustees (Board), sent a letter to Rikka’s attorney
in February 2014 informing him that the Board had voted against the sale of that particular
tract following a thorough review of “the land’s history, current use in farming, and
implications if removed from farming operation.” Sherry also pointed out that the Board had
progressed to the business of managing a farm and that Rikka had never been actively
involved in farming the land.
In April 2014, Rikka filed a complaint against the other cotrustees alleging that they
had intentionally blocked the transfer of land because it would inconvenience Carter’s
separate farming operations; that they had willfully and intentionally failed to carry out the
terms of the trust in an attempt to deprive her of property to which she had the right to
purchase as a beneficiary; and that they had breached the trust agreement by refusing to
transfer the property.
Carter and Sherry moved for summary judgment. Attached to their motion was
Carter’s affidavit in which he attested that the one-and-a-half-acre tract of land Rikka had
requested to purchase had been improved for use as a parking and staging area for farm
equipment; the land had also been improved for, and served as, a pass-through for
commercial trucks entering the granary; and the tract was directly adjacent to “the grain silos
and storage sheds used in the Trust farming operations.” According to Carter, if that
particular tract of land was sold to Rikka, a new site would have to be improved for parking
the farm equipment, and relocating the access road to the granary would necessitate taking
3
Cite as 2016 Ark. App. 133
other trust property currently devoted to growing rice and beans, causing a loss to the trust.
In response to the motion for summary judgment, Rikka contended that appellees,
as cotrustees, had breached their duty of loyalty to her as a beneficiary. She presented her
own affidavit attesting that the land she had requested to purchase was known as “the
pasture”; that there had been no improvements to that land; that the trust did not engage in
any “farming operations” except to lease land to Carter and Richard for their personal
farming operations; and that the land Carter and Sherry offered to sell her, in lieu of
purchasing the tract at issue, was inferior in that it was in an inconvenient location, was
accessible only by a gravel road shared with heavy equipment, overlooked junk cars, and was
otherwise not worth $5,000 an acre.
II. Trial Court’s Order
In granting summary judgment to Carter and Sherry, the trial court found that the
trust did not provide that a beneficiary was entitled to purchase a tract of her choosing over
the objections of the other cotrustees; that there was no provision in the trust as to what
happened in the event of a tie vote; that appellees were correct in their reading of the trust;
and that Rikka must select another tract of land that the majority of the trustees agree to sell
to her.
III. Standard of Review
The appellate courts have repeatedly held that summary judgment is to be granted by
a trial court only when it is clear that there are no genuine issues of material fact to be
litigated, and the party is entitled to judgment as a matter of law. Cole v. Laws, 349 Ark. 177,
4
Cite as 2016 Ark. App. 133
76 S.W.3d 878 (2002). Once the moving party has established a prima facie entitlement to
summary judgment, the opposing party must meet proof with proof and demonstrate the
existence of a material issue of fact. Id. On appellate review, we determine if summary
judgment was appropriate based on whether the evidentiary items presented by the moving
party in support of its motion leave a material fact unanswered. Id. This court views the
evidence in a light most favorable to the party against whom the motion was filed, resolving
all doubts and inferences against the moving party. Id. Our review is not limited to the
pleadings, as we also focus on the affidavits and other documents filed by the parties. Id. After
reviewing undisputed facts, summary judgment should be denied if, under the evidence,
reasonable men might reach different conclusions from those undisputed facts. Id.
IV. Arguments
Rikka asserts that appellees, as cotrustees, breached their duty of loyalty to her by
placing their own personal interests above those of the beneficiaries. Rikka contends that
Carter had a conflict when he voted against selling her the tract at issue in that the farm
equipment and grain silos are his personal property. According to Rikka, selling that tract
would inconvenience Carter. Rikka maintains that the trust has no farming operations and
that the farming operations referred to by Carter and Sherry are Carter’s personal farming
operations. Rikka maintains that genuine issues of material fact remain to be tried regarding
this conflict.
Carter and Sherry argue that they owed no duty to sell Rikka a specific tract of land,
especially when that sale would be detrimental to the remaining beneficiaries. They maintain
5
Cite as 2016 Ark. App. 133
that they administered the trust according to its terms and that, when no majority was
achieved, they had no authority to sell Rikka the tract of land she had requested. Carter and
Sherry also argue that selling the tract of land to Rikka would have immediate adverse
financial effects in that the trust would be required to improve another tract of land for the
same purpose that the tract at issue currently serves, that the trust would permanently lose
cultivated land, and that there would be increased fuel costs for rerouting trucks and moving
the farm equipment to a more remote location.
V. Duty of Loyalty
Arkansas Code Annotated section 28-73-802(a) (Repl. 2012) provides that a trustee
shall administer the trust solely in the interests of the beneficiaries. Section 28-73-802(b)
provides that a sale, encumbrance, or other transaction involving the investment or
management of trust property entered into by the trustee for the trustee’s own personal
account or which is otherwise affected by a conflict between the trustee’s fiduciary and
personal interests is voidable by a beneficiary affected by the transaction unless, among other
things, the transaction was authorized by the terms of the trust.
It is permissible for one of several trustees or a sole trustee also to be one of several
beneficiaries of a trust, even though conflicts of interest and coincidental benefits to that
trustee-beneficiary result. Clement v. Larkey, 314 Ark. 489, 853 S.W.2d 580 (1993). The fact
of a coincidental benefit to a trustee is not alone sufficient to establish a breach of fiduciary
duty on the part of the trustee. Id. The general rule is that a trustee, in administering a trust,
is under the duty of acting exclusively and solely in the interest of the trust estate or the
6
Cite as 2016 Ark. App. 133
beneficiaries within the terms of the trust and is not to act in his own interest by taking part
in any transaction concerning the trust where he has an interest adverse to that of the
beneficiary. Hosey v. Burgess, 319 Ark. 183, 890 S.W.2d 262 (1995).
VI. Discussion
While we agree that the trial court correctly construed the trust agreement to require
a majority of the trustees to take action, that is not the end of the analysis. The actions of the
trustees are subject to review under the limitations and fiduciary obligations imposed by the
statutes and case law referenced above. Here, the trial court did not engage in such an
analysis. The object of summary-judgment proceedings is not to try the issues, but to
determine if there are any issues to be tried, and if there is any doubt whatsoever, the motion
should be denied. Flentje v. First Nat’l Bank of Wynne, 340 Ark. 563, 1 S.W.3d 531 (2000).
As a preliminary matter, resolving all doubts and inferences in favor of Rikka, a plain
reading of the trust agreement’s special instructions for the farm does not bar Rikka from
purchasing any one-and-a-half-acre tract of land. The instructions read as follows: “My
Trustee shall offer to any of my other children the same privilege to purchase one and a half
acre of land at the same consideration.” The directive contains the mandatory word “shall,”
and there is no limiting language in “privilege to purchase one and a half acre of land.”
Rikka has presented issues of material fact to be tried concerning the conflict between
Carter’s fiduciary and personal interests and how it may have affected his vote preventing
Rikka from purchasing the one-and-a-half-acre tract adjoining his land. When there are
genuine questions of material fact with regard to a party’s intent, summary judgment is
7
Cite as 2016 Ark. App. 133
improper. Bisbee v. Decatur State Bank, 2010 Ark. App. 459, 376 S.W.3d 505. Moreover,
summary judgment is not proper where evidence, although in no material dispute as to
actuality, reveals aspects from which inconsistent hypotheses might reasonably be drawn and
reasonable minds might differ. Bomar v. Moser, 369 Ark. 123, 251 S.W.3d 234 (2007). There
are additional disputed issues of fact, e.g., whether and how Carter’s personal farming
operations benefit the trust and whether the tract at issue was improved, and if so, whether
it was improved for a purpose that benefits the trust, as opposed to Carter personally.
For the reasons stated above, summary judgment in this case was inappropriate.
Reversed and remanded.
GLADWIN , C.J., agrees.
GRUBER , J., concurs.
Womack, Phelps & McNeill, P.A., by: B. Wade Bowen, for appellant.
Michael D. Snell, for appellees.
8