In re Conservatorship of Abbott ( 2017 )

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
01/13/2017 08:08 AM CST
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Nebraska Supreme Court A dvance Sheets
295 Nebraska R eports
IN RE CONSERVATORSHIP OF ABBOTT
Cite as 295 Neb. 510
In re Conservatorship of M arcia G. A bbott,
a protected person.
Cynthia J. Sellon and Russell G. A bbott, appellees and
cross-appellants, v. M ark D. A bbott, Conservator,
appellant and cross-appellee.
In re A bbott Living Trust.
Cynthia J. Sellon and Russell G. A bbott, appellees
and cross-appellants, v. M ark D. A bbott,
Designated Successor Trustee, appellant
and cross-appellee.
___ N.W.2d ___
Filed January 13, 2017. Nos. S-15-967, S-16-040.
1. Guardians and Conservators: Appeal and Error. An appellate court
reviews conservatorship proceedings for error appearing on the record in
the county court.
2. Judgments: Appeal and Error. When reviewing a judgment for errors
appearing on the record, an appellate court’s inquiry is whether the deci-
sion conforms to the law, is supported by competent evidence, and is
neither arbitrary, capricious, nor unreasonable.
3. Trusts: Equity: Appeal and Error. Appeals involving the administra-
tion of a trust are equity matters and are reviewable in an appellate court
de novo on the record.
4. Attorney Fees: Appeal and Error. A trial court’s decision award-
ing or denying attorney fees will be upheld on appeal absent an abuse
of discretion.
5. Standing: Words and Phrases. Standing involves a real interest in the
cause of action, meaning some legal or equitable right, title, or interest
in the subject matter of the controversy.
6. Trusts. Neb. Rev. Stat. § 30-3855 (Reissue 2016) does not dictate who
may petition for the removal of a trustee, but, rather, describes to whom
fiduciary duties are owed.
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Nebraska Supreme Court A dvance Sheets
295 Nebraska R eports
IN RE CONSERVATORSHIP OF ABBOTT
Cite as 295 Neb. 510
7. Trusts: Standing. Generally, standing in a trustee removal proceeding is
governed by Neb. Rev. Stat. § 30-3862(a) (Reissue 2016).
8. Trusts. A serious breach of a fiduciary duty is only one of the grounds
for removal of a trustee.
9. Trusts: Intent. The extent of the beneficiary’s interest in a trust
depends upon the discretionary power that the settlor intended to grant
the trustee.
10. ____: ____. When the parties do not claim that the terms are unclear or
contrary to the settlor’s actual intent, the interpretation of a trust’s terms
is a question of law.
11. Trusts. In general, trustees of support trusts have discretion to determine
what is needed for the beneficiary’s support and to make payments only
for that purpose.
12. ____. The discretion afforded to a trustee of a support trust does not
preclude a beneficiary from seeking to show that the trustee has abused
its discretion in failing to make support payments.
13. Trusts: Liability. A trustee is liable for the action of another trustee if
he joins in the action, fails to prevent the cotrustee from committing a
serious breach of trust, or fails to compel the cotrustee to redress a seri-
ous breach of trust.
14. Trusts. A trustee has the duty to administer the trust in good faith, in
accordance with its terms and purposes and the interests of the benefi-
ciaries, and in accordance with the Nebraska Uniform Trust Code.
15. ____. The Nebraska Uniform Trust Code states that trustees owe the
beneficiaries of a trust duties that include loyalty, impartiality, prudent
administration, protection of trust property, proper recordkeeping, and
informing and reporting.
16. Trusts: Conflict of Interest. A cause for removal of a trustee is appro-
priate for the best interests of the trust estate where hostile relations
exist between a trustee and beneficiaries of such a nature as to interfere
with proper execution of the trust, particularly where it appears that the
trustee’s personal interests conflict with, or are antagonistic to, his or her
duties as trustee under the terms of the trust.
17. Pleadings. The issues in a given case will be limited to those which
are pled.
18. Rules of the Supreme Court: Pleadings: Notice. The Nebraska Rules
of Pleading in Civil Actions, like the federal rules, have a liberal plead-
ing requirement for both causes of action and affirmative defenses, but
the touchstone is whether fair notice was provided.
19. Trusts: Words and Phrases. Impartiality means that a trustee’s treat-
ment of beneficiaries or conduct in administering a trust is not to be
influenced by the trustee’s personal favoritism or animosity toward indi-
vidual beneficiaries.
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Nebraska Supreme Court A dvance Sheets
295 Nebraska R eports
IN RE CONSERVATORSHIP OF ABBOTT
Cite as 295 Neb. 510
20. Trusts. A finding of one serious breach of fiduciary duty is enough to
warrant removal of a trustee.
21. Appeal and Error. An appellate court is not obligated to engage in an
analysis that is not necessary to adjudicate the case and controversy
before it.
22. Attorney Fees: Appeal and Error. On appeal, a trial court’s deci-
sion awarding or denying attorney fees will be upheld absent an abuse
of discretion.
23. Judgments: Words and Phrases. A judicial abuse of discretion
requires that the reasons or rulings of the trial court be clearly unten-
able insofar as they unfairly deprive a litigant of a substantial right and
a just result.
24. Trial: Evidence: Appeal and Error. In a civil case, the admission or
exclusion of evidence is not reversible error unless it unfairly prejudiced
a substantial right of the complaining party.
25. Final Orders: Appeal and Error. An order affects a substantial right
if the order affects the subject matter of the litigation, such as diminish-
ing a claim or defense that the appellant had before the court entered
the order.
Appeals from the County Court for Douglas County:
Lawrence E. Barrett, Judge. Appeal in No. S-15-967 dis-
missed. Judgment and final order in No. S-16-040 affirmed.
Michael F. Coyle, Elizabeth A. Culhane, and Jacqueline M.
DeLuca, of Fraser Stryker, P.C., L.L.O., 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., for appellees.
H eavican, C.J., Wright, Cassel, Stacy, K elch, and
Funke, JJ.
Cassel, J.
I. INTRODUCTION
We decide two consolidated appeals from county court
proceedings—the first from a final order appointing a con-
servator and the second from a county court order that acted
both as a judgment in a trustee removal proceeding and as
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Nebraska Supreme Court A dvance Sheets
295 Nebraska R eports
IN RE CONSERVATORSHIP OF ABBOTT
Cite as 295 Neb. 510
a final order denying fees and expenses in the conservator-
ship 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 succes-
sor trustee, declining to surcharge him, disposing of compet-
ing attorney fee applications, and otherwise disposing of the
trust and conservatorship proceedings. Applying our respec-
tive standards of review to the remaining trust and conserva-
torship issues, we affirm.
II. BACKGROUND
These consolidated appeals arise from proceedings initi-
ated 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 conser-
vator, and recite only the facts relating to issues not mooted by
Marcia’s death.
1
See In re Conservatorship of Franke, 292 Neb. 912, 875 N.W.2d 408
(2016).
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Nebraska Supreme Court A dvance Sheets
295 Nebraska R eports
IN RE CONSERVATORSHIP OF ABBOTT
Cite as 295 Neb. 510
1. A bbott Living Trust
Agreement
Marcia and her husband created a revocable living trust in
which they named themselves cotrustees. When Marcia’s hus-
band died, the living trust assets were divided between a revo-
cable “Survivor’s Trust” and an irrevocable “Family Trust.”
The two trusts primarily consist of investment accounts.
The trust agreement provided that Marcia, as the sur-
viving spouse, was entitled to the entire net income from
the Survivor’s Trust account. It also permitted her to with-
draw 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 hus-
band’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. M arcia’s Stroke
In 2011, Marcia suffered a stroke that left her paralyzed
on her right side. She had difficulty with speech and com-
munication 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
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295 Nebraska R eports
IN RE CONSERVATORSHIP OF ABBOTT
Cite as 295 Neb. 510
and handled her own financial affairs, including management
of the two trusts. After her stroke, Marcia needed assisted liv-
ing 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. M ark’s M anagement
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 suc-
cessor 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] signa-
tures, [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 trans-
fers 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
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295 Nebraska R eports
IN RE CONSERVATORSHIP OF ABBOTT
Cite as 295 Neb. 510
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 aggres-
sion 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 consid-
ered 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 situ-
ation with his siblings as “WWIII” and characterized one of
his communications to them as the “2014 equivalent of the
Potsdam Declaration.”
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Nebraska Supreme Court A dvance Sheets
295 Nebraska R eports
IN RE CONSERVATORSHIP OF ABBOTT
Cite as 295 Neb. 510
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 peri-
odic 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 pro-
vided 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 obli-
gation to supply the requested information.
5. County Court’s Orders
The conservatorship case and the trust case initially pro-
ceeded 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 he did not owe them any fiduciary duties. The court
overruled this motion and overruled it again after it was
renewed at the close of all evidence. We omit summarization of
other such motions, which are not contested on appeal.
On September 9, 2015, the county court entered separate
orders in the conservatorship and trust cases. We summarize
each order.
In the conservatorship order, the court appointed Mark as
Marcia’s conservator. The order imposed other terms and con-
ditions, but they are not relevant to the appeals before us.
In the trust case, the court concluded that Mark breached
unspecified duties to Russell and Cynthia under three sec-
tions of the Nebraska Uniform Trust Code2 but did not violate
a fourth section. The order did not elaborate regarding the
2
Neb. Rev. Stat. §§ 30-3801 to 30-38,110 (Reissue 2016).
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IN RE CONSERVATORSHIP OF ABBOTT
Cite as 295 Neb. 510
violations. The court also determined that an accounting had
already been provided but sustained the claim for accounting
as a violation of another section. The court dismissed the sur-
charge claim, concluding that no improper moneys or property
were converted to Mark for his personal use. The order stated
that Mark would be removed as successor trustee upon the
appointment of a new successor trustee. Thus, this first order
in the trust case reserved the appointment of the new successor
trustee for a later order.
Mark and Marcia timely appealed the order appointing a con-
servator and filed a supersedeas bond. This appeal was dock-
eted as case No. A-15-967. At the same time, they attempted
to appeal from the trust case. That appeal was docketed as case
No. A-15-968.
After the order in the conservatorship case appointing Mark
as conservator but before the appeal in that case was perfected,
Russell and Cynthia filed an application for attorney fees,
totaling $139,743.25, and costs, totaling $6,112.76, related to
both the trust and conservatorship proceedings. This applica-
tion was filed in both the trust case and the conservatorship
case. They also filed an application for Mark to reimburse
the trust for attorney fees expended in the trust case with
trust moneys.
Very quickly thereafter, the Nebraska Court of Appeals
dismissed the trust case appeal, case No. A-15-968, for lack
of jurisdiction—no doubt for the lack of a final order because
of the reserved appointment of a successor trustee. Before the
remaining matters were addressed by the county court, the
Court of Appeals sustained an unopposed motion to stay the
conservatorship appeal pending disposition of the remaining
matters. The Court of Appeals also ordered Mark and Marcia
to notify it when the matter was again appealed and directed
them to request consolidation of case No. A-15-967 with the
new appeal.
Shortly after the Court of Appeals’ dismissal of the trust
case appeal, the county court appointed a successor trustee,
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IN RE CONSERVATORSHIP OF ABBOTT
Cite as 295 Neb. 510
granted Russell and Cynthia’s application for attorney fees
in the sum of $44,957.98 and costs of $1,645.48 in the trust
case, denied their application for attorney fees in the con-
servatorship case, and denied the motion to require Mark to
reimburse the trust for attorney fees and costs paid from the
trust. The order was treated by the county court and the par-
ties as having been filed below in both the conservatorship
case and the trust case. The order included an attachment
titled “Attorney Fee Analysis” that indicated the $44,957.98
in attorney fees and $1,645.48 in costs were those incurred in
the trust case after Marcia resigned as trustee of two financial
accounts in April 2011 and before Marcia resigned as trustee
in March 2015.
Mark and Marcia then filed the new appeal contemplated
by the Court of Appeals. Both the parties and the county court
treated the notice of appeal as having been filed in both cases
below. The new appeal was docketed as case No. A-16-040.
Mark and Marcia then moved for consolidation of cases Nos.
A-15-967 and A-16-040, as they had been directed to do by
the Court of Appeals. The Court of Appeals then sustained the
motion and set a consolidated briefing schedule.
In due course, we moved both appeals to our docket.3 In
recognition of that action, the prefix of each case number was
changed from “A” to “S.”
III. ASSIGNMENTS OF ERROR
Mark and Marcia assign that the county court erred in (1)
appointing a conservator for Marcia; (2) failing to dismiss
Russell and Cynthia’s claims in the trust case for lack of
standing; (3) removing Mark as trustee; (4) finding that Mark
violated §§ 30-3866, 30-3867, 30-3868, and 30-3878; (5)
ordering that a portion of Russell and Cynthia’s attorney fees
and costs for the trust proceeding should be paid out of the
trust; and (6) excluding certain evidence at trial.
3
See Neb. Rev. Stat. § 24-1106(3) (Reissue 2016).
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IN RE CONSERVATORSHIP OF ABBOTT
Cite as 295 Neb. 510
Russell and Cynthia cross-appeal and assign that the county
court erred in (1) finding that Mark did not violate § 30-3869,
(2) appointing Mark as the conservator for Marcia instead of
a corporate fiduciary, (3) disallowing in its entirety Russell
and Cynthia’s attorney fees and costs in the conservatorship
proceeding, (4) reducing the amount of Russell and Cynthia’s
attorney fees and costs in the trust proceeding, and (5) declin-
ing to order Mark to reimburse the trust for attorney fees and
costs he expended in the trust proceeding.
Marcia’s death renders moot the issue of the appointment
of her conservator and abates her appeal, but it does not abate
the entire cause of action.4 Because the appeal in case No.
S-15-967 was taken only from the order appointing a con-
servator, it is dismissed. Marcia’s death also moots Russell
and Cynthia’s assignment on cross-appeal contesting Mark’s
appointment as conservator. And we dismiss Marcia as a party
in each appeal. The only remaining issue pertaining to the
conservatorship case is Russell and Cynthia’s cross-appeal in
case No. S-16-040 assigning error to the denial of their appli-
cation for attorney fees and costs. This issue was not mooted
by Marcia’s death. Thus, to the extent that it is inconsistent
with our disposition of these appeals, we overrule Mark’s
motion to remand case No. S-15-967 with directions to vacate
and dismiss.
IV. STANDARD OF REVIEW
[1,2] An appellate court reviews conservatorship proceed-
ings for error appearing on the record in the county court.5
When reviewing a judgment for errors appearing on the record,
an appellate court’s inquiry is whether the decision conforms
to the law, is supported by competent evidence, and is neither
arbitrary, capricious, nor unreasonable.6
4
See In re Conservatorship of Franke, supra note 1.
5
Id.
6
Id.
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IN RE CONSERVATORSHIP OF ABBOTT
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[3] Appeals involving the administration of a trust are equity
matters and are reviewable in an appellate court de novo on
the record.7
[4] A trial court’s decision awarding or denying attorney
fees will be upheld on appeal absent an abuse of discretion.8
V. ANALYSIS
1. Standing to Petition for
R emoval of Trustee
[5,6] On appeal, Mark renews his argument that Russell
and Cynthia lacked standing to petition for his removal as
trustee. Standing involves a real interest in the cause of action,
meaning some legal or equitable right, title, or interest in the
subject matter of the controversy.9 Mark argues that Russell
and Cynthia did not have a real interest in the trustee removal
proceeding, because, under § 30-3855, he owed fiduciary
duties exclusively to Marcia. This argument confuses the issue.
Section 30-3855 does not dictate who may petition for the
removal of a trustee, but, rather, describes to whom fiduciary
duties are owed.
[7] Generally, standing in a trustee removal proceeding is
governed by § 30-3862(a). That statute does not focus on the
fiduciary duties owed by a trustee. Rather, it provides that
“[t]he settlor, a cotrustee, or a beneficiary may request the
court to remove a trustee, or a trustee may be removed by the
court on its own initiative.”10 And, the Nebraska Uniform Trust
Code defines a beneficiary as “a person that . . . has a present
or future beneficial interest in a trust, vested or contingent[.]”11
7
In re Trust Created by Hansen, 274 Neb. 199, 739 N.W.2d 170 (2007).
8
In re Guardianship & Conservatorship of Karin P., 271 Neb. 917, 716
N.W.2d 681 (2006).
9
In re Interest of Enyce J. & Eternity M., 291 Neb. 965, 870 N.W.2d 413
(2015).
10
§ 30-3862(a).
11
§ 30-3803(3).
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The parties do not contest that Russell and Cynthia had,
at a minimum, a contingent future beneficial interest in the
trusts. Accordingly, they had standing to petition the court for
Mark’s removal.
2. M ark’s Fiduciary Duties
Having determined that Russell and Cynthia had stand-
ing to petition for Mark’s removal as trustee, we now con-
sider whether Mark owed any fiduciary duties to Russell
and Cynthia. The relevant statute distinguishes between trust-
ees’ duties in administering revocable and irrevocable trusts.12
Therefore, we will separately consider Mark’s fiduciary duties
owed to Russell and Cynthia in relation to the revocable
Survivor’s Trust and the irrevocable Family Trust.
(a) Survivor’s Trust
With regard to the Survivor’s Trust, though by its own terms
it is now irrevocable upon Marcia’s death, we must review
the trust as it was when Mark served as trustee. And, it is
uncontested that the Survivor’s Trust was revocable during
Marcia’s lifetime: Marcia was entitled to the entire net income
and could withdraw from the principal of the Survivor’s Trust
at her will. There was no limitation on this authority, and
Russell, Mark, and Cynthia were contingent beneficiaries of
the Survivor’s Trust assets.
The statute states that “[w]hile a trust is revocable, rights
of the beneficiaries are subject to the control of, and the
duties of the trustee are owed exclusively to, the settlor.”13
Marcia was the only living settlor while Mark served as trustee
of the Survivor’s Trust. Accordingly, Mark owed his duties
as trustee to Marcia, and no one else in administering the
Survivor’s Trust.14
12
§ 30-3855.
13
§ 30-3855(a) (emphasis supplied).
14
See Manon v. Orr, 289 Neb. 484, 856 N.W.2d 106 (2014).
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IN RE CONSERVATORSHIP OF ABBOTT
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[8] Although Mark did not owe fiduciary duties to Russell
and Cynthia in administering the Survivor’s Trust, this is not
the end of our analysis. A serious breach of a fiduciary duty
is only one of the grounds for removal of a trustee.15 Because
of the shared beneficiaries and trust agreement creating both
trusts, if removal for breach of fiduciary duty was appropriate
for the trustee of the Family Trust, the county court had the
power in equity to determine it was in the best interests of the
beneficiaries to remove the trustee of the Survivor’s Trust.16
(b) Family Trust
(i) Marcia’s Power
of Appointment
Mark argues that he did not owe any fiduciary duties to
Russell and Cynthia as trustee of the Family Trust, because
Marcia possessed a limited power of withdrawal that, hypo-
thetically, could have completely divested Russell and Cynthia
of their interest in the Family Trust. And, under the same stat-
ute, “the holder of a power of withdrawal has the rights of a
settlor of a revocable trust under this section and the duties of
the trustee are owed exclusively to the holder of the power to
the extent of the property subject to the power.”17 We find no
merit in this argument, because Marcia did not possess a power
of withdrawal.
The Nebraska Uniform Trust Code defines a “power of
withdrawal” as “a presently exercisable general power of
appointment.”18 A power of appointment is general when “it is
exercisable in favor of any one or more of the following: the
donee of the power, the donee’s creditors, the donee’s estate, or
the creditors of the donee’s estate.”19
15
See § 30-3862.
16
See id.
17
§ 30-3855(b) (emphasis supplied).
18
§ 30-3803(11) (emphasis supplied).
19
Restatement (Second) of Property: Donative Transfers § 11.4 (1986).
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It is clear from the language of the trust that Marcia did not
possess a presently exercisable general power of appointment.
The trust agreement provides in part:
By either a last will or by a living trust agreement,
the surviving Trustor shall have the limited testamen-
tary power to appoint to or for the benefit of our joint
descend­ants some or all of the principal and any accrued
but undistributed net income of the Family Trust as it
exists at the death of the surviving Trustor.
(Emphasis supplied.) By limiting the appointment power as
exercisable solely in favor of their joint descendants, Marcia
and her husband ensured that they would never possess a
general power of appointment in the Family Trust. Because
the limited power of appointment was not a general power
of appointment, it was not a power of withdrawal under
§ 30-3855(b).
(ii) Russell and Cynthia’s
Present Interest in Trust
Mark additionally argues that as the trustee of the Family
Trust, he owed no duties to Russell and Cynthia, because
they did not have a present interest in the trust and “during
the period the interest of any beneficiary not having a pres-
ent interest may be terminated by the exercise of a power of
appointment . . . , the duties of the trustee are owed exclusively
to the holder of the power to the extent of the property subject
to the power.”20 We find no merit in this argument, because
Russell and Cynthia had a present interest in the trust.
[9,10] The extent of the beneficiary’s interest in a trust
depends upon the discretionary power that the settlor intended
to grant the trustee.21 And, when the parties do not claim that
the terms are unclear or contrary to the settlor’s actual intent,
the interpretation of a trust’s terms is a question of law.22
20
§ 30-3855(c).
21
In re Trust Created by Hansen, supra note 7.
22
Id.
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[11,12] The trust agreement provided for the discretion-
ary payment of the Family Trust principal to Marcia, Russell,
Mark, and Cynthia. The relevant provision states:
At any time or times during the trust term, our Trustee
shall pay to or apply for the benefit of the surviving
Trustor and our joint descendants so much of the prin-
cipal of the Family Trust as our Trustee in its discre-
tion deems proper for their health, maintenance, support
and education.
(Emphasis supplied.) Though this provision grants discretion
to the trustee in determining when and how much of the prin-
cipal to pay to support Marcia, Russell, Mark, or Cynthia, it is
clear that this provision was meant to establish a support trust
for those beneficiaries. In general, trustees of support trusts
have discretion to determine what is needed for the benefi-
ciary’s support and to make payments only for that purpose.23
But this level of discretion does not preclude a beneficiary
from seeking to show that a trustee has abused its discretion in
failing to make support payments.24 For these reasons, we find
that Russell and Cynthia had an enforceable, present interest in
the Family Trust. As a result, § 30-3855(c) did not apply and,
thus, Mark owed fiduciary duties to Russell and Cynthia as
well as Marcia.
(c) Effect of Power of Attorney
Mark additionally argues that during the times that Russell
and Cynthia alleged he violated duties as trustee, he owed no
duties to them, because he was acting as Marcia’s agent under
a power of attorney and Marcia remained the trustee. The par-
ties do not contest that Marcia resigned as trustee over two
financial accounts associated with the trusts and appointed
Mark as successor trustee of those accounts in 2011. Assuming
that Marcia had the authority under the trust agreement to
resign as trustee over part of the two trusts and that Mark
23
Id.
24
Id.
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could act as successor trustee over part of the two trusts, Mark
was, at the very least, a cotrustee with Marcia.
[13] A trustee is liable for the action of another trustee if he
joins in the action, fails to prevent the cotrustee from commit-
ting a serious breach of trust, or fails to compel the cotrustee
to redress a serious breach of trust.25 At the very least, Mark
acted as cotrustee with Marcia in managing the two finan-
cial accounts and served as Marcia’s agent under a power
of attorney in managing all other trust affairs. Accordingly,
Mark joined in all actions by Marcia in administering the trust
and owed fiduciary duties to Russell and Cynthia under the
Family Trust.
3. R emoval of Trustee
Mark assigns that the county court erred in removing him
as trustee of the trust, because the evidence does not support
a finding that he owed or breached any fiduciary duties to
Russell and Cynthia. The Nebraska Uniform Trust Code autho-
rizes removal of a trustee where “the trustee has committed a
serious breach of trust” or “because of unfitness, unwilling-
ness, or persistent failure of the trustee to administer the trust
effectively, the court determines that removal of the trustee
best serves the interests of the beneficiaries.”26
[14,15] A trustee has the duty to administer the trust in
good faith, in accordance with its terms and purposes and
the interests of the beneficiaries, and in accordance with the
Nebraska Uniform Trust Code.27 The Nebraska Uniform Trust
Code states that trustees owe the beneficiaries of a trust duties
that include loyalty, impartiality, prudent administration, pro-
tection of trust property, proper recordkeeping, and informing
and reporting.28
25
See § 30-3859; Restatement (Second) of Trusts § 184 (1959).
26
§ 30-3862(b)(1) and (3).
27
Rafert v. Meyer, 290 Neb. 219, 859 N.W.2d 332 (2015).
28
In re Estate of Stuchlik, 289 Neb. 673, 857 N.W.2d 57 (2014).
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The county court found that Mark had violated several of
these duties, including his duty to administer the trust in good
faith, his duty of loyalty, his duty of impartiality, and his duty
to inform and report. The court specifically found that Mark
had not violated his duty of prudent administration.
[16] Mark’s violation of his duty of impartiality is disposi-
tive. The Nebraska Uniform Trust Code states, “If a trust has
two or more beneficiaries, the trustee shall act impartially in
investing, managing, and distributing the trust property, giv-
ing due regard to the beneficiaries’ respective interests.”29 A
cause for removal of a trustee is appropriate for the best inter-
ests of the trust estate where hostile relations exist between a
trustee and beneficiaries of such a nature as to interfere with
proper execution of the trust, particularly where it appears
that the trustee’s personal interests conflict with, or are
antagonistic to, his or her duties as trustee under the terms of
the trust.30
[17,18] Mark contends that the court did not have the
authority to consider whether he breached his fiduciary duty
of impartiality under § 30-3868, because Russell and Cynthia
did not plead violation of that duty in their petition. It is true
that the issues in a given case will generally be limited to
those which are pled.31 However, while the Nebraska Rules
of Pleading in Civil Actions, like the federal rules, have a
liberal pleading requirement for both causes of action and
affirmative defenses, the touchstone is whether fair notice
was provided.32 In our de novo review of the record, we find
that Russell and Cynthia alleged sufficient facts in their peti-
tion to put Mark on notice of this claim. And, notably, their
counsel alleged during opening statements that Mark violated
§ 30-3868 and Mark’s counsel did not object to this as beyond
29
§ 30-3868.
30
In re Estate of Stuchlik, supra note 28.
31
SFI Ltd. Partnership 8 v. Carroll, 288 Neb. 698, 851 N.W.2d 82 (2014).
32
Weeder v. Central Comm. College, 269 Neb. 114, 691 N.W.2d 508 (2005).
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the scope of the pleadings. Therefore, the issue was properly
before the county court.
[19] Impartiality means that a trustee’s treatment of benefi-
ciaries or conduct in administering a trust is not to be influ-
enced by the trustee’s personal favoritism or animosity toward
individual beneficiaries.33 The evidence on the record indicates
that Mark harbored significant bitterness and hostility toward
Russell and Cynthia. Mark accused Russell of stealing from
Marcia and accused Cynthia of murdering his aunt. He addi-
tionally threatened to “make even” the distributions from his
aunt’s will with trust assets, evidencing a personal interest in
acquiring a larger portion of the trust assets than the other ben-
eficiaries upon Marcia’s death. Here, Mark’s personal interests
conflicted with his duties as trustee. For these reasons, the
county court did not err in finding that Mark had violated his
duty of impartiality.
[20,21] A finding of one serious breach of fiduciary duty
is enough to warrant removal of a trustee.34 And an appel-
late court is not obligated to engage in an analysis that is not
necessary to adjudicate the case and controversy before it.35
Accordingly, we need not review the other assigned errors con-
cerning Mark’s other fiduciary duties.
4. Attorney Fees and Costs
(a) Application for Attorney
Fees and Costs
Russell and Cynthia assign that the county court erred when
it reduced their application for attorney fees and costs in the
trust proceeding. The application requested $139,743.25 in
attorney fees and $6,112.76 in costs, and the court awarded
$44,957.98 in attorney fees and $1,645.48 in costs. They
also assign that the county court erred in disallowing in its
33
In re Estate of Stuchlik, supra note 28.
34
§ 30-3862(b)(1).
35
Flores v. Flores-Guerrero, 290 Neb. 248, 859 N.W.2d 578 (2015).
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entirety their attorney fees and costs in the conservator-
ship proceeding.
[22,23] On appeal, a trial court’s decision awarding or deny-
ing attorney fees will be upheld absent an abuse of discre-
tion.36 A judicial abuse of discretion requires that the reasons
or rulings of the trial court be clearly untenable insofar as
they unfairly deprive a litigant of a substantial right and a just
result.37 Although the county court’s reasoning in reducing the
award of attorney fees in the trust proceeding and disallowing
the award of attorney fees in the conservatorship proceeding
was not explicit, we find no abuse of discretion in the county
court’s order.
(b) Application for Trustee
to Reimburse Trust
Russell and Cynthia additionally assign that the county court
erred when it declined to order Mark to reimburse the trust
for his attorney fees and costs paid out of the trust. We again
review for abuse of discretion and find none.
5. Exclusion of Certain Evidence
Finally, Mark assigns that the county court abused its
discretion in excluding certain evidence. He alleges that
the excluded evidence would have established Russell and
Cynthia’s wrongful motives for bringing the two lawsuits:
namely, that they “brought these lawsuits out of concern for
their potential inheritance and not due to any concerns for
[Marcia].”38 Mark argues that two pieces of evidence were
wrongfully excluded.
The first piece of evidence was an e-mail sent by Russell
to Cynthia that was not produced during pretrial discovery to
36
In re Guardianship & Conservatorship of Karin P., supra note 8; In re
Trust Created by Martin, 266 Neb. 353, 664 N.W.2d 923 (2003).
37
State on behalf of Jakai C. v. Tiffany M., 292 Neb. 68, 871 N.W.2d 230
(2015).
38
Brief for appellant at 38.
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Mark but was discovered when it was attached to a guardian
ad litem’s report. The county court excluded the evidence at
trial when Mark offered it, because he did not produce the
e-mail in response to pretrial discovery. Mark argues that the
county court erred in excluding this evidence, because Neb.
Ct. R. Disc. § 6-334(a)(1) requires parties to produce docu-
ments only “which are in the possession, custody, or control
of the party upon whom the request is served” and, at the time
he received discovery requests, he was not in possession of
the e-mail.
The second piece of evidence was a contact log created
by Cynthia that detailed events surrounding her aunt’s death
and wrapping up her estate. The county court excluded the
log as irrelevant, and Mark argues this was prejudicial error.
He asserts that the log included a party admission that con-
tradicted Russell and Cynthia’s theory that Mark was trying
to turn Marcia against them and equalize the distributions for
their aunt’s estate.
[24,25] Assuming, without deciding, that the county court
erred in excluding these two pieces of evidence, the error
was harmless. In a civil case, the admission or exclusion of
evidence is not reversible error unless it unfairly prejudiced a
substantial right of the complaining party.39 An order affects
a substantial right if the order affects the subject matter of
the litigation, such as diminishing a claim or defense that the
appellant had before the court entered the order.40 Here, the
subject matter of the litigation was Mark’s actions as trustee
and not Russell and Cynthia’s motives in petitioning for his
removal. And, to the extent that their conflicting motivations
would bear on their attorney fees, it is clearly harmless where
the county court disallowed attorney fees in the conservator-
ship case and substantially reduced the award of attorney fees
39
In re Estate of Clinger, 292 Neb. 237, 872 N.W.2d 37 (2015).
40
Kremer v. Rural Community Ins. Co., 280 Neb. 591, 788 N.W.2d 538
(2010).
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in the trust case. Accordingly, the exclusion of the evidence
did not affect a substantial right and was, at most, harm-
less error.
VI. CONCLUSION
We dismiss the appeal and cross-appeal in case No.
S-15-967 as moot, because that appeal pertained only to the
order appointing a conservator for Marcia. Turning to the
appeal and cross-appeal in case No. S-16-040, we find no
abuse of discretion in the county court’s dispositions of attor-
ney fees and costs in both the conservatorship case and the
trust case. We determine that any evidentiary error was harm-
less. And upon our de novo review, we affirm the removal of
Mark as trustee and the appointment of his successor. Thus,
we affirm the county court’s December 29, 2015, final order
in the conservatorship case and affirm the court’s judgment in
the trust case.
A ppeal in No. S-15-967 dismissed.
Judgment and final order in
No. S-16-040 affirmed.
Miller-Lerman, J., not participating.