914 N.W.2d 571
S.D.2018Background
- Cordavee Heupel’s 1999 Family Revocable Trust created springing share trusts for her children; Chad served as co-trustee for Renee’s Share Trust after Colin resigned.
- The Family Trust held 160 acres in Meade County; the siblings disputed its disposition and the court supervised the trust, eventually approving a settlement selling the land to Colin and allocating cash shares.
- BankWest resigned as co-trustee after a fee dispute was resolved; the circuit court terminated supervision of the Family Trust but had earlier ordered Chad to obtain court approval before appointing any corporate co-trustee for Renee’s Share Trust.
- Chad appointed Family Heritage Trust Company as co-trustee without court approval; Renee moved for an order to show cause, alleging contempt, fiduciary breaches, misappropriation of trust funds, and seeking recovery and attorney fees.
- After hearings the circuit court found Chad violated its November 2015 order, breached fiduciary duties, misappropriated $27,168.31 from Renee’s Share Trust, held him in contempt, removed him as trustee, and ordered him personally to reimburse the trust and pay Renee’s attorney fees.
- Chad appealed, arguing lack of subject-matter jurisdiction, no fiduciary breach, abuse of discretion in removal, and improper personal liability for disbursements and attorney fees; the Supreme Court affirmed.
Issues
| Issue | Hansen's Argument (Plaintiff) | Heupel's Argument (Defendant) | Held |
|---|---|---|---|
| Subject-matter jurisdiction to enforce November 2015 order | Court retained authority to enforce its order requiring court approval of corporate co-trustee despite termination of supervision | Termination of supervision of the Family Trust ended court authority over Renee’s Share Trust | Court had authority to enforce its earlier order; jurisdiction to enforce survived termination of supervision |
| Breach of fiduciary duty | Chad acted adversely to Renee, distributed trust funds for personal/beneficiary advantage, and acted ultra vires | Termination of supervision restored trustee discretion; Chad acted as trustee and followed trust provisions | Trial court’s factual findings not clearly erroneous; Chad breached fiduciary duties |
| Removal as trustee | Removal warranted by breaches, contempt, conflicts, and ultra vires acts | Removal was an abuse of discretion; Chad acted to fulfill settlors’ purposes | No abuse of discretion; removal affirmed |
| Personal liability for disbursements and attorney fees | Disbursements were unauthorized; Chad acted as beneficiary/adversary, so he is personally liable and must repay trust and pay Hansen’s fees | Trust document and SDCL 55-3-13 permit repayment from trust for trustee expenses; Family Heritage approved distributions | Court correctly found distributions ultra vires and not proper trustee expenses; Chad personally liable for $27,168.31 and for Hansen’s attorney fees; trial court’s fee analysis not an abuse of discretion |
Key Cases Cited
- Sazama v. State ex rel. Muilenberg, 729 N.W.2d 335 (S.D. 2007) (court authority to enforce orders and award sanctions)
- In re Estate of Moncur, 812 N.W.2d 485 (S.D. 2012) (trustee fiduciary duties and standard of review for factual findings)
- Willers v. Wettestad, 510 N.W.2d 676 (S.D. 1994) (trustee duty to act for benefit of trust)
- In re Estate of Stevenson, 605 N.W.2d 818 (S.D. 2000) (fiduciary must avoid self-dealing and conflicts)
- City of Sioux Falls v. Kelley, 513 N.W.2d 97 (S.D. 1994) (factors for awarding attorney fees in civil cases)