Rose v. Rose
427 S.W.3d 698
Ark. Ct. App.2013Background
- Woody and Ruth Rose created the Rose Family Revocable Trust on Jan 17, 1994, with the residence as the sole trust asset; the trust became irrevocable upon the death of the second grantor and set forth a specific distribution scheme.
- Thomas Stone was initially the trustee; Hollingsworth was to serve as successor trustee; the trust was silent on reimbursement of residence expenses.
- Ruth and Woody (the grantors) acted as trustees of the trust for years, including buying and selling property for the trust, with deeds naming them as trustees; Stone knew he was not the trustee but did not resign.
- Following Woody Rose’s death in 2007, Ruth continued to reside in the home, later conveying it to herself and selling it in 2010; proceeds were partially deposited in court registry per a 2010 order.
- Appellants (Laura Shahsavari, Richard Rose, Michael Rose) filed suit in Nov 2010 seeking declaratory relief, damages, and a constructive trust; the circuit court in 2012 awarded Ruth $72,860.47 net reimbursement and denied appellants’ request for attorney’s fees; appellants appeal, challenging reimbursement, fiduciary duties, pre-death expenses, and fee denial.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Ruth was entitled to reimbursement as trustee or de facto trustee | Shahsavari contends Ruth was not trustee; no valid amendment; exposure to breach. | Ruth acted as de facto trustee through conduct and deeds; expenses reasonably incurred. | De facto trustee status supported; reimbursement upheld. |
| Whether Ruth breached fiduciary duties by self-dealing and commingling funds | Ruth breached fiduciary duties by selling the home in her name and keeping proceeds. | Even if breach occurred, court could still award reimbursement under statute. | Court did not clearly err in ruling on fiduciary duties; denial of explicit breach finding preserved for review. |
| Whether reimbursement for expenses incurred before Woody's death was recoverable | Expenses incurred pre-death should not be reimbursed; not preserved for review. | Pre-death expenses may be reimbursed if properly incurred to administer trust. | Issue not preserved for appellate review; not considered on appeal. |
| Whether appellants’ attorney’s fees were preserved for review | Fees should be reviewed as part of final relief. | No effective notice of appeal from the fee-denial; not reviewable. | Not preserved; fee issue dismissed. |
| Whether Ruth’s alleged amendments or modifications to the trust were valid and affected trust administration | There were attempted amendments; trust remained unamended; Ruth could not act as trustee. | Evidence showed de facto trusteeship and modification by conduct; trust not amended per final order. | Majority found no legally effective amendment; de facto trustee status supported; remand for factual clarification. |
Key Cases Cited
- In re Ruby G. Owen Trust, 2012 Ark. App. 381 (Ark. Ct. App. 2012) (equitable review in trust matters; de novo standard emphasized)
- Bankers Trust v. city of Chicago, 403 F.2d 16 (7th Cir. 1968) (de facto trustee concept to identify trustees exercising duties)
- Hosey v. Burgess, 319 Ark. 183 (Ark. 1995) (fiduciary duties breach recognized even when done in good faith)
- Hardy v. Hardy, 222 Ark. 932 (Ark. 1954) (fiduciary duties and breach concepts applied to trusts)
- First Nat’l Bank v. Hawley, 207 Ark. 587 (Ark. 1944) (trustee’s implied power to maintain trust property)