In the Matter of: T.R. Potter, Jr. Exempt Trust FBO John M. Potter.
ED106880
| Mo. Ct. App. | Nov 5, 2019Background
- Grantor created an irrevocable, generation‑skipping exempt trust in 1988 (TRP Trust). After Randy Potter’s death the trust split and John M. Potter (Potter) became the current lifetime income beneficiary of his share; U.S. Bank is the corporate co‑trustee and David Oetting (Oetting) the individual co‑trustee.
- From July 2012–March 2014 U.S. Bank made monthly net income distributions to Potter totaling $211,030.15; Oetting says he was not consulted before those distributions though U.S. Bank sent semiannual statements showing the payments.
- In 2014 Oetting objected and demanded Potter’s personal financial information before approving further distributions; Potter refused and U.S. Bank stopped distributions and filed for instructions in probate court.
- Probate court granted summary judgment to U.S. Bank holding trustees could not require Potter’s finances and authorized distributions; after trial the court found no breach of fiduciary duty by U.S. Bank, removed Oetting as co‑trustee, and awarded attorney’s fees to U.S. Bank and Potter.
- On appeal the Court of Appeals: (a) reverses the probate court’s interpretation to the extent it barred trustees from requesting/considering a beneficiary’s financial information (the trust authorizes—but does not require—consideration); (b) affirms that U.S. Bank did not breach fiduciary duty under these facts; (c) affirms removal of Oetting as co‑trustee; and (d) reverses and remands the award of attorney’s fees/costs for reconsideration.
Issues
| Issue | Plaintiff's Argument (Oetting) | Defendant's Argument (U.S. Bank / Potter) | Held |
|---|---|---|---|
| Whether trustees may examine a beneficiary’s financial information before making discretionary income distributions | Trust language permitting distributions "as they may deem necessary or advisable" allows trustees to consider beneficiary resources; Oetting sought Potter’s records | Probate court/U.S. Bank argued distributions were authorized without needing beneficiary financials and trustees cannot demand them | Court: Trustees may request/consider beneficiary financials under the discretionary standard, but are not required to do so; beneficiary may refuse and that refusal may be considered |
| Whether U.S. Bank breached fiduciary duty by unilaterally distributing income to Potter | Unilateral distributions (without Oetting’s consent) violated the trust and harmed remainder beneficiaries (risking loss of tax‑exempt corpus) | U.S. Bank: distributions were within trust purposes; remainder beneficiaries ratified the distributions; no harm shown | Court: No breach—distributions were contemplated by the trust, the record shows no demonstrable harm to beneficiaries, so judgment for U.S. Bank affirmed |
| Whether removal of Oetting as co‑trustee was proper | Removal improper because probate court misinterpreted trust and Oetting acted reasonably to protect remaindermen | Potter/U.S. Bank: lack of cooperation, Oetting failed to administer trust effectively (did not review statements, would not communicate), impairing administration | Court: Affirmed removal—substantial evidence Oetting failed to administer the trust (didn't note distributions, refused to cooperate), meeting statutory grounds for removal |
| Whether awarding attorney’s fees and costs against Oetting was proper | Fee award was an abuse because Oetting’s challenge to the bank/trust interpretation was reasonable | U.S. Bank/Potter: Oetting prolonged litigation and misinterpreted trust; fees equitable | Court: Reversed and remanded the fee award—because appellate disposition recognizes Oetting’s position on interpretation was reasonable, probate court must reconsider equitable fee allocation |
Key Cases Cited
- ITT Commercial Fin. Corp. v. Mid‑Am. Marine Supply Corp., 854 S.W.2d 371 (Mo. banc 1993) (summary judgment standard and de novo review explained)
- Winkel v. Streicher, 295 S.W.2d 56 (Mo. 1956) ("support" language can create an absolute gift requiring trustee to provide full support without regard to other resources)
- Hertel ex rel. Hertel v. Nationsbank N.A., 37 S.W.3d 408 (Mo. App. E.D. 2001) (discretionary "necessary or advisable" standard allows consideration of beneficiary’s other resources)
- Knichel, 347 S.W.3d 127 (Mo. App. E.D. 2011) (standing principles for trustees and interested persons in trust litigation)
- Murphy v. Carron, 536 S.W.2d 30 (Mo. banc 1976) (bench‑trial standard of review: affirm unless no substantial evidence, against weight of evidence, or erroneous legal application)
- In re Estate of McKenna, 500 S.W.3d 850 (Mo. App. E.D. 2016) (distinguishing absolute income gifts from discretionary distributions)
- Whan v. Whan, 542 S.W.2d 7 (Mo. App. 1976) (hostility plus other trustee misconduct can support removal)
- Hammerstrom v. Commerce Bank of Kansas City, N.A., 808 S.W.2d 434 (Mo. App. W.D. 1991) (limits on awarding trustee‑litigation fees from trust where no demonstrable benefit to the trust)