Cason v. Lambert, 454 S.W.3d 250

Background

J. Donald and A. Marie Eackles created the revocable Eackles Family Trust in 1995 (California law) as co-trustors and co-trustees; final joint amendment was 2000.
The trust provided that on the first spouse’s death the surviving spouse would become sole trustee and the trust assets would be divided into Trust A (survivor’s separate property + 1/2 community) and Trust B (decedent’s separate property + 1/2 community).
Donald died in 2002; Marie continued as trustee, did not physically divide Trust A and Trust B, later moved to Arkansas, and in 2004 executed amendments (and a power of appointment and will) naming Union Bank as successor trustee, changing choice of law to Arkansas, and altering distributions (disinheriting appellant Daren Cason).
Marie died in 2008; Union Bank, as successor trustee, audited and allocated assets (Trust A = 66.9%, Trust B = 33.1%), funded the trusts in 2010, and sought declaratory relief as to proper distribution; Cason counterclaimed for breach of fiduciary duty.
The trial court held (inter alia) Marie could amend Trust A post-Donald’s death but not Trust B, the Monticello house was not trust property, Arkansas law applied, and awarded attorney’s fees to Union Bank; Cason appealed.

Issues

Issue	Plaintiff's Argument (Cason)	Defendant's Argument (Union Bank / Trial Court)	Held
Whether surviving spouse could unilaterally amend trust after first spouse’s death given community-property assets	Community-property rule requires joint action; Marie could not amend alone	Trust terms expressly allow surviving grantor to amend Trust A after first death	Court: Surviving spouse could amend Trust A; trust terms control over general statute
Whether reciprocal wills / contract not to revoke prevented Marie from amending trust/will after Donald’s death	Wills were reciprocal; thus Marie was bound not to revoke	No writing proving a contract not to revoke; trust language contemplates amendment by survivor	Court: No enforceable reciprocal-will restriction; Marie could amend Trust A
Whether Monticello house was trust property	House purchased with trust funds; should be trust asset	Deed titled to Donald and Marie personally (tenancy by entirety); no trust on deed; thus not trust property	Court: House not a trust asset; became Marie’s sole property after Donald’s death
Whether failure to divide Trust A/B within six months waived Marie’s rights	Trust required division within six months; failure amounted to waiver	Trust permitted deferred distribution and separate accounting; physical segregation not required if accounting possible	Court: No waiver; trustee could keep undivided trusts with separate accounts and later allocate
Whether trustee (Union Bank) was entitled to attorney’s fees for litigation over administration	Fees improper because litigation enforced amendments benefitting Marie only	Trustee had duty to administer and defend trust; litigation necessary to resolve disputes and defend claims	Court: Trial court did not abuse discretion; awarded fees to Union Bank

Key Cases Cited

Smith v. Eisen, 97 Ark. App. 130, 245 S.W.3d 160 (clarifies presumptions from deed face when determining ownership)
Ark. Presbytery v. Hudson, 344 Ark. 332, 40 S.W.3d 301 (courts should not use construction rules when deed is clear)
Foster v. Schmeideskamp, 260 Ark. 898, 545 S.W.2d 624 (tenancy by the entirety converts to survivor’s sole property on spouse’s death)
Bailey v. Delta Trust & Bank, 359 Ark. 424, 198 S.W.3d 506 (primary rule: ascertain settlor’s intent by examining trust instrument)
Gregory v. Estate of Gregory, 315 Ark. 187, 866 S.W.2d 379 (reciprocal wills as estate-planning device)
Dotson v. Dotson, Ark. Ct. App. (2009), 372 S.W.3d 398 (reciprocal-will issues and effect on amendments)
Calvert v. Estate of Calvert, 99 Ark. App. 286, 259 S.W.3d 456 (trial court’s discretion to award attorney’s fees in estate administration)
Winchel v. Craig, 55 Ark. App. 373, 934 S.W.2d 946 (equity jurisdiction and appellate review standard for trust matters)