Lela Smith Flowers v. Todd A. Boolos
204 So. 3d 291
| Miss. | 2016Background
- James O. Smith Jr. died in 2006; shortly before his death he had created a life-insurance funded family trust. He died within three years of creating the trust so the trust proceeds were includable in his taxable estate.
- The trust advanced the estate $2,020,000 (secured by promissory note and deed of trust) to pay estate taxes; the note was renewed multiple times and additional small advances were made.
- Disputes arose among the decedent’s children over the validity/amount of the loan, inclusion of a late‑payment clause in the deed of trust, and trustee/co-executor conduct; successor trustee Todd Boolos filed for declaratory relief to fix the debt amount and reform errors.
- The chancery court held extensive hearings, found the loan valid, reformed the deed of trust to correct mistakes (including collateral description and removal of an unintended late‑payment provision), computed the indebtedness at $2,523,004.83 plus 4% interest, and denied removal of Boolos and other claims against co‑executors.
- The Mississippi Supreme Court affirmed: it found substantial evidence supported the chancery court’s factual findings, rejected claims of fiduciary breach/conflict, upheld restricted access to corporate records, and remanded to quantify appellate attorney fees awarded to appellee Sessums.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether trustee Boolos should be removed for conflict/breach of fiduciary duty | Lela/Noah: Boolos was trustee and CPA for estate/companies; his filing favored estate interests and created conflict and self‑dealing | Boolos/chancery: No evidence of actual conflict or personal interest; actions (including filing for declaratory relief) were to clarify mistakes and protect beneficiaries | Court affirmed: no removal; record lacked evidence of actual conflict or breach and trustee’s conduct was within equitable discretion |
| Right of Lela (director/shareholder) to inspect corporate books and records | Lela: entitled to full access as director/shareholder to investigate perceived mismanagement | Companies/chancery: access may be limited; need reasonable particularization and protection of confidential data | Court affirmed restrictions: chancery provided access with limitations and protective measures; no abuse of discretion |
| Effect of March 30, 2011 agreed order (loan renewals) — res judicata / enforceability of late‑payment clause | Lela: March 30 order was interlocutory; she may still contest the indebtedness and contend late‑payment clause applies | Co‑executors/trustees/chancery: order was an agreed order ratifying renewals; deed provision was inadvertent mutual mistake subject to reformation | Court affirmed: agreed order binding; deed reformed based on parol evidence of mutual mistake; loan balance as determined by chancery upheld |
| Claims against co‑executors (breach, malpractice, fraud) and entitlement to punitive fees | Noah: co‑executors mismanaged estate, failed to collect rent, liquidated assets improperly, committed fraud, warranting surcharge and fees | Co‑executors/chancery: accountings were adequate; expenditures reasonable/necessary; objectors failed to meet burden of proof | Court affirmed dismissal: issues were not proved at trial or were not properly raised for appellate review; no punitive damages or fee award |
Key Cases Cited
- Walker v. Cox, 531 So. 2d 801 (Miss. 1988) (chancery court has inherent power to remove trustee for good cause)
- Smith v. Malouf, 826 So. 2d 1256 (Miss. 2002) (consent/agreeed orders have same force as judgments after litigation)
- Bedford v. Kravis, 622 So. 2d 291 (Miss. 1993) (parol evidence admissible to reform written instruments for mutual mistake or fraud)
- Sullivan v. Protex Weatherproofing, Inc., 913 So. 2d 256 (Miss. 2005) (separate contemporaneous instruments may be construed together)
- Bailey v. Estate of Kemp, 955 So. 2d 777 (Miss. 2007) (obligation to read and understand contracts; but reformation available where mutual mistake shown)
- Reedy v. Johnson's Estate, 26 So. 2d 685 (Miss. 1946) (equity may permit trustee to deviate from literal terms to preserve trust estate or carry out settlor’s ultimate purpose)