Holmes v. Potter
2017 Ark. App. 378
| Ark. Ct. App. | 2017Background
- Fred and Betty Potter executed nearly identical (reciprocal) revocable trusts in 2004 that reserved each settlor the right to amend or revoke the trust; five family members (including appellants Holmes and the Wrights) were named residuary beneficiaries.
- Betty died in 2013; Holmes became successor trustee of Betty’s trust and later sued/was counter-sued; Fred amended his 2004 trust in September 2013 (creating a 2013 trust) and transferred assets from the 2004 trust to the 2013 trust, removing Betty’s family as beneficiaries.
- Holmes counterclaimed (and the Wrights intervened) seeking specific performance reinstating Fred’s 2004 trust, alleging a contract between Fred and Betty not to revoke reciprocal trusts, and asserting breach of fiduciary duty, conversion, promissory estoppel, and related damages.
- The circuit court granted partial summary judgment favoring Holmes on some claims in Fred’s original suit but, after bench trial, found no enforceable contract not to revoke, upheld Fred’s 2013 trust amendments, found no breach of fiduciary duty or conversion, and ruled appellants lacked standing to pursue certain claims.
- Appellants appealed; the Arkansas Court of Appeals affirmed, deferring to the trial court on credibility and applying the high evidentiary standards for contracts to make reciprocal wills/trusts and for estoppel.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Fred and Betty had an enforceable contract to make irrevocable reciprocal trusts | Holmes/Wrights: contemporaneous mirror trusts + family testimony show agreement not to revoke | Fred: trusts expressly reserved right to amend/revoke; no written contract not to revoke | No contract; trusts were revocable and amendments valid |
| Whether promissory estoppel/detrimental reliance required reinstating the 2004 trust | Holmes/Wrights: beneficiaries relied to their detriment on promise not to revoke | Fred: no promise; testimony conflicted and insufficient to prove estoppel | No promissory estoppel — trial court credited Fred; appellants failed to meet strict proof burden |
| Whether Fred breached fiduciary duties by transferring assets to his 2013 trust and whether appellants have standing | Holmes/Wrights: transfer was self-dealing and breached duties to beneficiaries | Fred: as settlor and trustee he reserved revocation/amendment rights; beneficiaries had contingent interests | No breach; beneficiaries lacked standing because interests were contingent and settlor’s rights/duties were owed to him while trust was revocable |
| Whether Fred converted Betty’s trust property by transferring assets | Holmes/Wrights: assets conveyed to Betty’s trust were converted when moved | Fred: trusts co-owned assets or transfer was within settlor’s rights; insufficient evidence of conversion | No conversion; court found co-ownership and insufficient evidence of wrongful conversion |
Key Cases Cited
- Allen v. First Nat’l Bank, 230 Ark. 201, 321 S.W.2d 750 (Ark. 1959) (mirror wills/trusts do not alone create irrevocable obligations)
- Avance v. Richards, 331 Ark. 32, 959 S.W.2d 396 (Ark. 1998) (clear, cogent, and convincing evidence required to prove contract to make reciprocal wills)
- Mabry v. McAfee, 301 Ark. 268, 783 S.W.2d 356 (Ark. 1990) (testimony of interested relatives insufficient to prove agreement not to revoke)
- Bailey v. Delta Tr. & Bank, 359 Ark. 424, 198 S.W.3d 506 (Ark. 2004) (ascertaining settlor intent is paramount; apply will-construction rules to trusts)
- Gregory v. Estate of Gregory, 315 Ark. 187, 866 S.W.2d 379 (Ark. 1993) (distinguishing cases where an actual contract to make reciprocal wills was established)