Hemphill v. Shore
295 Kan. 1110
| Kan. | 2012Background
- In 1984 the Shore Family Trust was created with Jay F. Shore and Susan L. Shore as trustees and as principal beneficiaries, including Hemphill as Susan’s child.
- The trust vested discretionary power in the trustee to pay income or invade principal to provide for the health, education, support, or maintenance of Jay and Susan and their issue.
- Susan died in 1992, leaving Hemphill as her only child, who did not know of the trust until 2008 according to his response to dismissal.
- Hemphill filed suit on April 8, 2009, alleging breach of trust, breach of fiduciary duty, conversion, and constructive fraud, seeking a constructive trust and related relief.
- The district court dismissed the action as time-barred; the Court of Appeals affirmed, and this court reviews whether the constructive fraud claim survives and whether limitations and repose barred the others.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Interpretation of the trust instrument | Hemphill argues ascertainable standards limit trustee discretion | Shore contends trustee had unfettered discretion | Instrument contains ascertainable standards limiting discretion (not purely discretionary) |
| Adequacy of pleading of constructive fraud | Constructive fraud pled with confidential relationship and breach of duty | Pleading insufficient to show betrayal of confidence | Pleading meets standard; constructive fraud sufficiently pled under either pleading standard |
| Effect of statutes of limitations and repose | Discovery rule applies; timely if discovered within 2 years prior to suit | Claims time-barred under limitations/repose statutes | Constructive fraud timely; remedies not time-barred; remand for proceedings consistent with ruling |
Key Cases Cited
- Nelson v. Nelson, 288 Kan. 570 (2009) (defines constructive fraud elements)
- Jennings v. Jennings, 211 Kan. 515 (1973) (fraud discovery rule; fraud not subject to 10-year repose)
- Schuck v. Rural Telephone Service Co., 286 Kan. 19 (2008) (confidential relationship required for constructive fraud)
- Miller v. Kansas Dept. of S.R.S., 275 Kan. 349 (2003) (trusts; ascertainable standards vs. discretion)
- Stark v. Mercantile Bank NA, 29 Kan. App. 2d 717 (2000) (fraud pleading standards in context of trust)