O'Riley v. U.S. Bank, N.A.
412 S.W.3d 400
| Mo. Ct. App. | 2013Background
- Donald O’Riley created a revocable trust (1978) that split at his 1982 death into a Marital Trust (for widow Arlene) and a Non‑Marital Trust (remaindermen: sons Terrance and Gerald). The Non‑Marital Trust authorized the trustee to pay Arlene "so much or all" of the net income as it "deem[ed] advisable" for her care, and only income remaining after payments to Arlene could be paid to the sons; the trustee also had broad invasion powers and language preferring the grantor and his wife.
- The Non‑Marital Trust opened with ~$370,000; trustee made annual income payments to Arlene for decades and infrequent/limited distributions to the sons; trustee’s asset mix shifted from fixed income (1983–1995) toward increased equities beginning in the mid‑1990s.
- Beneficiaries (Terrance and Gerald) sued trustee (U.S. Bank) alleging breaches of fiduciary duty: failure to act impartially (favoring Arlene), failure to provide accountings, and imprudent investing/lack of diversification (claiming focus on current income over growth).
- After a bench trial the court entered judgment for trustee on all claims; trial court also awarded trustee attorney’s fees and costs under Mo. Rev. Stat. § 456.10‑1004; the court of appeals affirmed and granted trustee appellate fees.
- The appellate court reviewed factual findings for substantial evidence/weight of evidence and legal questions de novo; it emphasized construction of trust terms to ascertain settlor intent and that discretion is controlled where the instrument supplies objective standards.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of duty of impartiality / distributions | Trustee put distributions on "auto‑pilot," always paying all income to Arlene without reasonably balancing needs of sons; failed to consider sons’ financial situations and failed to provide information. | Trust terms made Arlene the preferred beneficiary; trustee considered Arlene’s financial submissions and other information and acted under objective support standards; not obliged to solicit sons’ finances when no income remained for them. | Affirmed for trustee — distribution decisions were within bounds of reasonable judgment and supported by substantial evidence. |
| Failure to inform / accountings | Trustee failed to provide timely accountings to Terrance and Gerald (early years). | Beneficiaries received statements by 1988; trust required accountings only to beneficiaries "then receiving or entitled to receive income," and beneficiaries were not entitled to income while Arlene received all income; no evidence of damages from any alleged deficiency. | Affirmed for trustee — no breach shown and no damages. |
| Breach of investment duty (imprudence / lack of diversification) | Trustee invested for maximum current income (fixed income) for decades, failing to diversify into equities sooner and thus produced no appreciation. | Investment strategy tracked trust terms (preference for income/safety), contemporaneous market conditions, and changed toward equities after the Prudent Investor Act; annual reviews and expert testimony supported prudence. | Affirmed for trustee — investments met Prudent Man/Prudent Investor standards; actions were reasonable. |
| Award of attorney’s fees under § 456.10‑1004 | Plaintiffs argued American Rule bars fee award absent bad faith / vexatious litigation; their claims were not frivolous. | Statutory authorization permits courts to award fees "as justice and equity may require" in trust administration disputes; litigation required trustee to defend long administration and the court did not abuse discretion in awarding fees (incl. appellate fees). | Affirmed — trial court’s statutory fee award and appellate fee award were within discretion. |
Key Cases Cited
- Pearson v. Koster, 367 S.W.3d 36 (Mo. banc 2012) (standards of review and appellate deference in bench trials)
- Hyde v. First Nat’l Bank of Kansas City, 363 S.W.2d 647 (Mo. 1962) (settlor intent controls trust construction; limits on judicial rewrite of clear trust language)
- Vest v. Bialson, 293 S.W.2d 369 (Mo. 1956) (Prudent Man Rule; duty to diversify absent contrary trust terms)
- Engelsmann v. Holekamp, 402 S.W.2d 382 (Mo. 1966) (trustees’ duty to account and beneficiaries’ right to information)
- Klinkerfuss v. Cronin, 289 S.W.3d 607 (Mo. App. E.D. 2009) (statutory fee awards under § 456.10‑1004 and discussion of exceptions to the American Rule)
- In re Gene Wild Revocable Trust, 299 S.W.3d 767 (Mo. App. S.D. 2009) (awarding trustee fees under § 456.10‑1004 where litigation required judicial resolution of trust administration)