Alain Ellis Living Trust v. Harvey D. Ellis Living Trust
385 P.3d 533
| Kan. Ct. App. | 2016Background
- Dr. Harvey D. Ellis (settlor and trustee) removed ≈ $1.5 million from his wife Alain's revocable living trust and placed it into his own trust; Alain's beneficiaries were unaware of her trust at her death.
- Dr. Ellis amended his trust documents, named charities as ultimate beneficiaries, and died in 2011 with his trust assets exceeding $10 million.
- Plaintiffs (Alain's Trust, Harvey Jr., Roger, and Harvey Jr.'s minor daughter) sued Dr. Ellis' trust/estate, Emprise Bank (successor trustee), and attorney Cathleen Gulledge for breach of trust and related claims; charitable beneficiaries intervened.
- Pretrial rulings: district court granted summary judgment preventing plaintiffs from recovering (a) double damages under K.S.A. 58a-1002(a)(3) against Dr. Ellis' estate/trust and (b) punitive damages against Dr. Ellis' estate/trust, concluding such remedies do not survive the trustee’s death; punitive claims were allowed against other defendants.
- Jury found breach of trust and awarded plaintiffs $126,820.94 from Dr. Ellis' estate after credits; punitive damages were not awarded against Gulledge.
- Trial court awarded most attorney fees against Dr. Ellis' trust but ordered $103,000 of Harvey Jr.'s claimed fees to be paid by Alain's Trust; defendants and intervenors appealed these rulings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether punitive damages survive the death of the wrongdoer (and thus may be imposed on a deceased settlor's revocable trust) | Punitive claims should survive; denying recovery undermines punitive/exemplary purposes and is contrary to Kansas law/policy | Majority rule: punitive damages do not survive; postmortem punitive awards punish innocent beneficiaries and do not meaningfully punish or deter the wrongdoer | A claim for punitive damages does not survive the death of the wrongdoer in Kansas absent legislative authorization; district court did not err |
| Whether the double-damage penalty in K.S.A. 58a-1002(a)(3) survives the death of a malfeasant trustee | Statute’s plain language allows double damages; court should apply statute and not create a posthumous exception; transfers were for trustee's use | The double-damage provision is punitive in nature and, like punitive damages, does not survive the trustee’s death; transfers were not "to trustee's own use" because funds remained in trustee's trust and went to charities | K.S.A. 58a-1002(a)(3) is punitive; double damages do not survive the trustee’s death; but the court held Dr. Ellis did convert funds to his own use (though double damages still unavailable postmortem) |
| Whether the district court abused its discretion in awarding attorney fees and allocating $103,000 of Harvey Jr.'s fees to Alain's Trust | Harvey Jr. argued those investigative/attorney fees should be paid by Dr. Ellis' Trust | Defendants supported allocation to Alain's Trust because Harvey Jr.'s work directly benefited Alain's Trust beneficiaries | No abuse of discretion; K.S.A. 58a-1004 authorizes fee awards from the trust that benefited, so ordering Alain's Trust to pay Harvey Jr.'s fees was permissible |
Key Cases Cited
- Hayes Sight & Sound, Inc. v. ONEOK, Inc., 281 Kan. 1287 (discussion of punitive damages as relating to defendant's misconduct)
- Koch v. Merchants Mutual Bonding Co., 211 Kan. 397 (punitive damages: purpose is punishment and deterrence; payment should rest on the wrongdoer)
- Smith v. Printup, 254 Kan. 315 (punitive damages not a separate common-law cause of action; statutory scheme governs recovery)
- Fehrenbacher v. Quackenbush, 759 F. Supp. 1516 (D. Kan. 1991) (federal court applying Kansas law concluding punitive claims do not survive death)
- Bolton v. Souter, 19 Kan. App. 2d 384 (trustee applied property to his own use when he redirected its disposition)
- State v. Pratt, 114 Kan. 660 (explaining that applying money to the actor's desired use constitutes "own use")
- McCabe v. Duran, 39 Kan. App. 2d 450 (construed similar double-damage provision as penal for retroactivity analysis)