935 N.W.2d 493
Neb. Ct. App.2019Background
- Three revocable family trusts (Henry, Norval, Elnora) provided that upon Norval’s death farmland be distributed to his children—principally three sons—as equal shares/tenants in common; sister Pamela held different remainder interests. Norval died in 2010.
- After the death, the three brothers (Kirtus, Rocky, Scott) quarrelled: Scott wanted immediate distribution to farm independently; Kirtus and Rocky wanted to continue the joint farming operation (proposed a 10‑year hold/LLC). A July 2011 meeting occurred but no executed agreement committing Scott to 10 years.
- In 2015 Scott filed NUTC petitions to terminate trusts, remove trustees, obtain accounting, and distribute farmland; Kirtus and Rocky filed petitions seeking modification to hold land 10 more years or to allocate parcels in fee simple and a separate complaint sought unpaid rent/taxes. Pamela was not joined in the consolidated trial.
- The county court held the trusts terminated by their own terms at Norval’s death, found trustees had breached duties (including self‑dealing by a trustee who bought 3 acres), removed trustees, denied the requested 10‑year modification (citing lack of Scott’s and Pamela’s consent), and declined to approve the brothers’ proposed parcel allocation for lack of evidence.
- On appeal the court: affirmed most holdings about interpretation and breach of trust (as to the disputed farmland), vacated the trustee removals and related remedies for lack of jurisdiction because Pamela (an indispensable beneficiary for termination/removal/accounting) was not joined, and reversed the county court’s interpretation that § 30‑3881(a)(22) alone authorized the trustees to allocate the farmland other than as tenants in common without a modification or settlement agreement; remanded to consider modification under § 30‑3837 and § 30‑3838 with Pamela joined for remedies.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Jurisdiction / indispensable party (Pamela) | Scott: county court could interpret trusts and rule on termination/removal without Pamela | Kirtus/Rocky: Pamela is an indispensable beneficiary to termination/removal/accounting and must be joined | Court: Pamela was indispensable for orders terminating trusts, removing trustees, appointing successor, and ordering accounting/delivery; absence deprived court of subject‑matter jurisdiction for those remedies. Court had jurisdiction over disputes limited to the disputed farmland in which Pamela had no interest. |
| Whether trusts terminated on Norval’s death | Scott: trusts’ dispositive language required distribution at Norval’s death; trusts therefore terminated and trustees had duty to wind up | Kirtus/Rocky: asserted later agreement/continuance prevented immediate distribution | Held: trusts terminated by their own terms at Norval’s death; trustee duties shifted to winding up and distribution; NUTC allows seeking modification or deviation during winding‑up period. |
| Unclean hands (bar to Scott’s relief) | Kirtus/Rocky: Scott’s conduct (withholding taxes/rent, closing account, termination notice) barred equitable relief | Scott: conduct not fraudulent/illegal and not unconscionable; explained reasons | Held: No unclean hands; Scott’s conduct did not rise to fraud/illegal or unconscionable behavior that would bar relief. |
| Authority to allocate farmland as separate fee parcels / need for modification | Kirtus/Rocky: trustees (or court) may approve allocation/fee transfers (or modify trusts) to avoid partition sale and tax hit; relied on § 30‑3837 and § 30‑3838 alternatively | County court (initially): § 30‑3881(a)(22) authorizes trustee to allocate assets on distribution so no modification needed; Scott: dispositive trust terms require distribution as tenants in common and Pamela’s consent/joinder for termination/modification | Held: Reversed county court’s reliance on § 30‑3881(a)(22) as a free‑standing basis to override dispositive terms; allocation other than tenants in common requires (1) a proper nonjudicial settlement agreement among interested parties that complies with § 30‑3811 or (2) court modification under §§ 30‑3837 (consent or, if not all consent, adequate protection of nonconsenting beneficiaries) or 30‑3838 (equitable deviation for unanticipated circumstances). Case remanded to consider §§ 30‑3837 and 30‑3838 (and to join Pamela for remedies). |
Key Cases Cited
- In re Henry B. Wilson, Jr., Revocable Trust, 300 Neb. 455 (Neb. 2018) (standard of review for trust administration and equity issues)
- In re Trust of Rosenberg, 269 Neb. 310 (Neb. 2005) (removal of trustee is a special proceeding affecting substantial rights; appealable)
- Midwest Renewable Energy v. American Engr. Testing, 296 Neb. 73 (Neb. 2017) (distinction between necessary and indispensable parties; absence of indispensable party deprives subject‑matter jurisdiction)
- In re Estate of Barger, 303 Neb. 817 (Neb. 2019) (trust terminates when trustee’s duty to wind up arises; trustee retains limited winding‑up powers)
- In re Estate of Forgey, 298 Neb. 865 (Neb. 2018) (interpretation of wills/trusts is a question of law; courts may apply equity in probate matters)
- In re Trust Created by Isvik, 274 Neb. 525 (Neb. 2007) (NUTC applies to trusts created before operative date and to post‑operative judicial proceedings)