#27273-a-JMK

2015 S.D. 65

IN THE SUPREME COURT

OF THE

STATE OF SOUTH DAKOTA

* * * *

In the Matter of the TRUST FUND 

CREATED UNDER THE TERMS OF 

THE LAST WILL AND TESTAMENT OF 

JOSEPH BAUMGART, DECEASED.

* * * *

APPEAL FROM THE CIRCUIT COURT OF

THE FIRST JUDICIAL CIRCUIT

HUTCHINSON COUNTY, SOUTH DAKOTA

* * * *

THE HONORABLE GLEN W. ENG

Judge

* * * *

MATTHEW P. BOCK

JAMES A. POWER of

Woods, Fuller, Shultz & Smith, PC

Sioux Falls, South Dakota Attorneys for appellants Gloria 

Loos, Estate of Louis Hohn, 

Evelyn Lang, Virginia Binder 

and Gene Loos. 

VINCE M. ROCHE

JUSTIN T. CLARKE of

Davenport, Evans, Hurwitz & Smith, LLP

Sioux Falls, South Dakota Attorneys for appellees Robert 

Bormann and Paul Bormann.

* * * *

ARGUED ON MAY 27, 2015

OPINION FILED 07/22/15
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KERN, Justice

[¶1.] Petitioners—Gloria Loos, Louis Hohn, Evelyn Lang, Virginia Binder, 

and Gene Loos—filed suit against Robert and Paul Bormann (Trustees). With the 

exception of Gene Loos, Petitioners are income beneficiaries of a trust created by 

Joseph Baumgart. The trust is a court supervised trust. Petitioners sought to 

reopen previous accountings, remove Trustees, and appoint an independent thirdparty trustee on grounds of fraud, misrepresentation, material omission, selfdealing, trust mismanagement, and other breaches of fiduciary duties. After an 

evidentiary hearing on September 12, 2014, the circuit court rejected Petitioners’

claims and entered judgement in favor of Trustees. Petitioners appeal. We affirm.

Facts and Procedural History

[¶2.] In order to understand the nature of the action before this Court, it is 

necessary to review the history of the trust. On July 13, 1976, Joseph Baumgart 

executed his last will and testament establishing a trust for the benefit of his nieces 

and nephews. He designated his attorney, Henry Horstman, and his banker, Vern 

Bormann, as the trustees. The trust assets primarily included 920 acres of 

farmland located in Hutchinson and Douglas Counties of which 873.03 acres were 

tillable. Baumgart died in 1980, whereupon his nieces and nephews began 

receiving income from the trust. The income beneficiaries at the time this case was 

filed were Gloria Loos, Louis Hohn, Evelyn Lang, Virginia Binder, and Lorraine 

Woodworth. Louis Hohn passed away on October 6, 2014. Lorraine Woodworth did 

not join this lawsuit. Petitioner Gene Loos is the son of Gloria Loos and, therefore,
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is a contingent beneficiary under the trust. Gene also serves as his mother’s power 

of attorney. 

[¶3.] The trust instrument directs Trustees to pay the income from the trust 

to Baumgart’s living nieces and nephews for as long as any niece or nephew lives. 

Trust income is generated by leasing trust farmland to tenants under one-year, 

renewable leases. Upon the death of the last niece or nephew, the trust instrument 

directs Trustees to liquidate the trust’s assets and distribute the proceeds to 

Baumgart’s then living grand-nieces and grand-nephews. No grand-niece or grandnephew is entitled to any distribution from the trust until Baumgart’s last niece or 

nephew dies. Baumgart included strong exculpatory language in the trust 

instrument, expressly absolving Trustees from any “loss sustained through an error 

of judgment” and providing that Trustees would only be liable for a loss caused by 

“willful default.” 

[¶4.] The trust has been court supervised for 35 years. The first annual 

accounting was filed in 1981. Each year, Trustees submitted to the circuit court in 

Hutchison County an accounting that included a summary of receipts, 

disbursements, and tax records.1 Over the years, Trustees sent the income 

beneficiaries an annual notice of hearing setting forth the date and time when the 

 

1. SDCL 21-22-14 provides:

Within one hundred twenty days after the expiration of each 

year from the commencement of court supervision over a trust, 

the trustee shall file a verified report showing in detail its 

receipts, disbursements, and acts during the year.

The trustee may at its election make its annual report during 

the first four months of any year covering its administration 

during the preceding year ending December thirty-first.
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accounting would be presented to the circuit court. These notices also contained a 

short document with the legal descriptions of the land owned by the trust, a yearend checking account balance, and a one-page exhibit.2 From 1993 to 2012, the 

notices failed to include the legal descriptions of two parcels owned by the trust. 

The two parcels account for approximately 240 acres of trust property. While the 

notices did not list the two parcels, the accounting and tax information submitted to 

the court by Trustees during those years contained all relevant and necessary 

information for all 920 acres. 

[¶5.] Henry Horstman and Vern Bormann, the designated trustees, served 

the trust for many years. In addition to naming the two initial trustees, Baumgart 

also named Vern Bormann’s sons, Robert and Paul Bormann, as the successor 

Trustees. Robert was appointed as a co-Trustee in 1989 after the resignation of 

Henry Horstman, and Paul was appointed as a co-Trustee in 1992 after the death of 

his father.

[¶6.] For several generations, the Bormann family has owned Farmers State 

Bank. The main branch is located in Parkston, South Dakota. Baumgart, who was 

a close, personal friend of Vern Bormann, would often visit Vern at the bank during 

the final years of his life. During those visits, Baumgart discussed with Vern what 

he should do with his land after he died. Robert Bormann was also present for 

several of those conversations. Baumgart personally asked Robert Bormann to 

 

2. The one-page exhibits contained a list of total rental income receipts for the 

year along with the annual expenses. The beneficiaries would not receive a 

list identifying the tenants, a copy of the leases, or rent charged to the 

tenants. That information was contained within the trust file and available 

to the beneficiaries at the Hutchinson County courthouse. 
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serve as a successor Trustee during one of those conversations. Baumgart 

instructed Robert Bormann that he wanted the future tenants of the trust land to 

use responsible farming techniques and to be good stewards of the land.

[¶7.] All trust land is located in the far western portion of Hutchinson 

County and the eastern portion of Douglas County. The James River divides 

Hutchinson County into an eastern and western half, and Douglas County is west of 

Hutchinson. Generally, the land on the western side of the James River in 

Hutchinson County is less fertile than the land on the eastern side of the River. 

Douglas County land is typically less fertile and more arid than the land in 

Hutchinson County.

[¶8.] During his lifetime, Baumgart leased approximately two-thirds of the 

trust land to the family of Fritz Bialas. Baumgart and Bialas were close friends, 

and Baumgart even named Fritz’s issue as contingent beneficiaries of the trust 

should none of Baumgart’s nieces or nephews have any living issue when the last 

niece or nephew dies. The remaining one-third of the land consisted of two parcels, 

one in Douglas County and one in Hutchinson County. The Thuringer family 

rented the parcel in Douglas County until they ceased farming in 1997. Herbert 

Koster rented the Hutchinson County parcel. When Baumgart executed the trust 

instrument, all tenants were customers of Farmers State Bank. Similarly, all of the 

current tenants are customers of the bank. Until approximately 1999, Farmers 

State Bank was the only bank located in Parkston.
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[¶9.] At the end of 1997, the Thuringer family stopped farming the parcel in 

Douglas County and allowed their one-year lease to expire.3 Lorin Schmidt, a 

farmer who lived close to the land, had inquired of Trustees about the possibility of 

leasing the Douglas County parcel from the trust a few years before the Thuringers 

ended their farming operations. Trustees began leasing the land to Schmidt in 1998

because Schmidt was the only farmer to inquire about renting the Douglas County 

land, and Trustees believed that Schmidt used good farming practices. Prior to 

entering into a lease with Schmidt, Trustees did not advertise to the public that the 

land would be available for lease.

[¶10.] In the fall of 1997 and prior to Schmidt leasing the farmland, one of 

Robert Bormann’s sons married one of Schmidt’s daughters. Robert Bormann 

served as Trustee for Baumgart’s trust at the time of the marriage. A few years 

prior to the marriage, Bormann’s son and Schmidt’s daughter had a child together;

thus, Bormann and Schmidt share a grandchild.

[¶11.] Trustees rent the trust land in Douglas County to Schmidt to the 

present day. Schmidt also leases the trust land in Hutchinson County that was 

formerly rented by Herbert Koster. Schmidt currently rents 160 acres in Douglas 

County and 160 acres in Hutchinson County. The remaining 600 acres of trust land 

are rented to members of the Bialas family.

[¶12.] For most of the trust’s existence, Trustees rented the trust farmland on 

a sharecrop basis, meaning the trust would receive a fixed percentage of the profits 

 

3. Trustees routinely entered into one-year, renewable leases rather than multiyear leases given the advanced age of the income beneficiaries and the 

required liquidation of the trust’s assets once the last beneficiary dies.
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earned by the tenants at harvest. In 2007, two of the beneficiaries asked Trustees

to convert to cash-rent leases to attempt to stabilize the income. Trustees 

acquiesced, and beginning in 2007, the leases were converted to cash rent. Trustees 

developed rent values for each of the parcels.

[¶13.] The dispute presently before this Court began with a conversation in 

the fall of 2012 between Gene Loos and his uncle, Louis Hohn, regarding the trust 

and its assets. Hohn expressed concern about the income generated by the trust as

2012 had been a drought year. Loos told Hohn that the income had been stabilized 

because the trust now rented property on a cash-rent basis rather than a sharecrop 

basis. Hohn still had doubts, but Loos believed the rent was fair on a per acre basis. 

Loos told Hahn he was under the impression that the trust owned about 680 acres 

of land. Loos had been calculating the approximate rent per acre by dividing the 

total rental income by 680 acres instead of 920 acres. Therefore, Loos believed the 

rental rate per acre was much higher than it actually was. Hohn insisted that the 

trust owned closer to 900 acres. Loos told Hohn that he would check on the rental 

rates and how much land the trust owned.

[¶14.] On January 7, 2013, Gene Loos asked the trust’s attorney about the 

total acres owned by the trust. After repeating the request on January 10, 2013, 

Loos received a reply indicating that the trust owned approximately 900 acres. 

Loos became concerned that the rental rate per acre was below market value. On 

January 19, 2013, Loos sent an email as power of attorney for his mother, Gloria, 

stating that if the trust owned 900 acres, the per-acre rental rate for 2012 would 

have been approximately $100 per acre, and even lower in previous years. Loos
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asked the trust’s attorney to provide the rental rates for each parcel of land from 

2007 to 2012 and an estimate of the 2013 rent. Loos also asked to be contacted 

prior to the hearing scheduled for the annual accounting on February 4, 2013.

[¶15.] Robert Bormann called Loos prior to the February 4 hearing. 

Bormann gave Loos an overview of the trust and its history as well as some 

background information about Baumgart. Bormann informed Loos that the 2013 

rent would not be increased because 2012 had been a drought year. 

[¶16.] Over the course of the next seven months, Loos researched agricultural 

land rental values. Loos believed the proper rental rate per acre should be 

anywhere between $125 and $300. Loos did not contact Trustees or the trust’s 

attorney again until August 2013. At some point during this time frame, Loos also 

discovered that Bormann’s son was married to Schmidt’s daughter. Loos sent an 

email to Robert Bormann on August 28, 2013, and requested a meeting to discuss 

the 2014 rental rates. Bormann called Loos that same day. Loos sent a follow-up 

email on August 30, 2013, asking to meet with Bormann on September 5, 2013. 

Bormann responded that he would be willing to meet with Loos in the near future 

to discuss his concerns but that he was unavailable on September 5, 2013. Loos and 

Bormann did not meet. 

[¶17.] Instead, on September 9, 2013, Loos’s attorney sent a letter requesting 

that Trustees resign in exchange for a release from all potential legal claims against 

them. Loos also requested copies of past accounting information and leases, and 

directed Trustees to hold off negotiating the 2014 leases. Petitioners sought to 

remove Trustees and replace them with an independent third-party trustee. 
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Trustees responded that they would not resign. They also refused to provide copies 

of past leases, claiming they had no obligation to include beneficiaries in the 

decision making processes of the trust. On September 18, 2013, however, Trustees 

provided Petitioners with copies of the 2014 leases after they were negotiated and 

settled.

[¶18.] Loos examined the 2014 leases and found that Schmidt was receiving a 

lower lease rate than the other tenants. Petitioners filed suit in November 2013 

alleging fraud, misrepresentation, material omission, self-dealing, trust 

mismanagement, and other breaches of fiduciary duties. Petitioners also sought to 

reopen the accountings from 2007 to 2012, to obtain copies of the leases from 2007 

to 2013, and to remove the Trustees and replace them with an independent, thirdparty trustee. Trustees also prayed for damages arising out of alleged trust 

mismanagement and breaches of fiduciary duties. Trustees denied Petitioners’

claims.

[¶19.] After receiving a formal discovery request on January 21, 2014, 

Trustees provided copies of the 2007 to 2012 leases. The 2007 to 2012 leases also 

showed that Schmidt received a lower rental rate. The parties then filed crossmotions for summary judgment. Petitioners contended that the orders approving 

the 2007 to 2012 accountings were not “final” pursuant to SDCL 21-22-304 because 

 

4. SDCL 21-22-30 provides in part:

An accounting by a trustee of a court supervised trust and the 

final approval thereof by a court is conclusive against all persons 

in any way interested in the trust, and the trustee, absent fraud, 

intentional misrepresentation, or material omission, shall be 

(continued . . .)
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Trustees had omitted “material information” from their accounting reports, 

including Bormann’s relationship with Schmidt and the inaccurate notices 

containing legal descriptions for only 680 of the 920 acres. 

[¶20.] The circuit court held a hearing on April 21, 2014, and determined that 

the 2007 through 2012 accountings were in fact missing legal descriptions for two 

parcels of trust land. The court stated that the issue regarding the missing legal 

descriptions needed to be addressed before the court could fully resolve either 

party’s motions. The court did, however, grant summary judgment for the 2007 and 

2008 accountings because SDCL 21-22-27 barred Petitioners’ claims.5 The 2009 

through 2012 accountings remained in dispute. The circuit court otherwise denied 

the remaining motions for summary judgment.

[¶21.] Both parties renewed their motions for summary judgment following 

the hearing. In addition, Trustees petitioned to have the 2013 accounting approved.

Petitioners objected in part because Trustees continued to lease to Schmidt at a 

lower rate. On June 17, 2014, the circuit court held another hearing and granted 

________________________

(. . . continued)

released and discharged from any and all liability as to all 

matters set forth in the accounting.

5. The 2007 and 2008 claims were barred because the court approved those 

accountings prior to January 1, 2010. The 2009 accountings were still in 

dispute because the court did not approve them until January 26, 2010. 

SDCL 21-22-27 provides in part:

All decrees of any court of this state made prior to January 1, 

2010, settling accounts of trustees or distributing in whole or in 

part trust estates are hereby legalized, cured, and validated, 

notwithstanding any defects, omissions, or irregularities in the 

form of the petition, account, or the notice of the application 

therefor or in the manner, form, or method of giving or serving 

such notice. 
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Trustees’ motion for summary judgment concerning the 2009 to 2012 accountings, 

concluding that the accountings contained no material omissions. The circuit court 

reasoned that the omission of the legal descriptions for the 240 acres was an

inadvertent and unintentional omission and that the tax and accounting 

information filed with the court properly contained all relevant and necessary 

information. The circuit court did not address Trustees’ failure to disclose 

Bormann’s relationship with Schmidt, or the rental rates charged to individual 

tenants. The circuit court also denied summary judgment as to the removal of 

Trustees. The issues relating to the 2013 accounting and Trustees’ removal were 

set for an evidentiary hearing on September 12, 2014.

[¶22.] At the September 12, 2014 hearing, the parties submitted the 

testimony of witnesses and exhibits concerning the value of the land. Petitioners 

sought to prove that Schmidt received a preferential rate based on his relationship 

with Robert Bormann. The evidence showed that Schmidt consistently paid a lower 

rental rate than the other tenants.6 However, Trustees submitted evidence that 

Schmidt’s land had a lower soil rating than the other parcels and that Schmidt’s

parcels typically produced comparable or lower yields than the Bialas parcels. Gene 

Loos produced evidence and testified that the rental rates charged by Trustees were 

 

6. For example, from 2009 to 2012, Schmidt paid $66.13 per acre for the 

Douglas County land and $72.25 for the Hutchinson County land. The Bialas 

family members paid anywhere from $82.31 to $86.25 during that same time 

span for land in Douglas and Hutchinson counties. Schmidt consistently paid 

about 10% to 20% less than the Bialases from 2009 to 2014.
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significantly below market price.7 Trustees presented contrary evidence and

argued that charging rent at a certain rate was not as simple as looking at an index, 

but required an analysis of multiple factors.8 Most importantly, Trustees stressed 

that Baumgart wanted tenants who were good stewards of the land. Robert 

Bormann indicated that his primary motive for choosing the tenants he did, 

including Schmidt, was to honor Baumgart’s wishes and select responsible tenants.

[¶23.] At the conclusion of the hearing and after weighing the testimony and 

evidence received, the court rendered oral findings of fact and conclusions of law

systematically addressing and ultimately denying each of Petitioners claims. The 

court found that the lower rental rates for Schmidt were not based on Robert 

Bormann’s relationship to Schmidt. The court determined that the relationship did 

not constitute a personal conflict of interest or self-dealing. With regard to the 

rental rates, the court held that the rates were not so low as to warrant removal of 

Trustees. Further, the court noted that there was “a great disparity between the 

amount of income in one year as opposed to another.” The court also found that 

Petitioners’ presentation of data was an attempt to “cherry pick” useful or high-end

 

7. Loos based his calculations on a survey done by South Dakota State 

University (SDSU). The 2013 SDSU South Dakota Farm Real Estate Survey 

listed the average rental rates for nonirrigated cropland in Bon Homme,

Hutchinson, and Yankton counties as $170.40, and in Charles Mix and

Douglas counties as $125.00. The low-end rent value was $80 and the highend rent value was $300.

8. Trustees argued that they used the following factors to determine the proper 

rental rates: Baumgart’s testamentary intent for the land, Trustees’ 

experience, other rental prices in the area of the trust land, historical 

production of the trust land, soil quality, topography, drainage issues, 

weather patterns, and USDA documentation of prior rental rates in the two 

counties. 
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figures and did not take into consideration the full range of factors, data, and rental 

information.9 The court concluded that Trustees did not breach any fiduciary 

duties or violate any trust responsibilities.

[¶24.] On October 14, 2014, the circuit court entered an order and judgment 

approving Trustees 2013 annual accounting and dismissing Petitioners’ claims. The 

court also denied Petitioners’ request to remove the Trustees. The court 

incorporated into the judgment its oral findings of fact and conclusions of law from 

September 12, 2014. Petitioners now appeal to this Court.

[¶25.] Petitioners raise four issues:

1. Whether the circuit court erred when it determined that 

Robert Bormann’s relationship to Schmidt did not 

constitute self-dealing.

2. Whether the circuit court abused its discretion when it 

denied Petitioners’ request to replace Trustees with a 

neutral, third-party trustee.

3. Whether the circuit court erred when it ruled there were 

no material omissions in the accountings.

4. Whether the circuit court erred when it denied 

Petitioners’ request for damages.

Standard of Review

[¶26.] “Whether a trustee has breached a fiduciary duty is a question of fact.” 

In re Estate of Moncur, 2012 S.D. 17, ¶ 10, 812 N.W.2d 485, 487. “We review 

questions of fact under the clearly erroneous standard of review.” Id. (quoting 

 

9. The circuit court stated:

The court has examined the figures, and the court finds that the 

amount calculated by Mr. Loos is not supportable. If you take

the high values on everything, you are not going to be able to 

calculate a valid rental amount. 
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Weekley v. Prostrollo, 2010 S.D. 13, ¶ 11 n.3, 778 N.W.2d 823, 827 n.3). “However, 

we review purely legal questions de novo, giving no deference to the [circuit] court’s 

findings.” Id.

[¶27.] We review a circuit court’s decision to remove a trustee for abuse of 

discretion. See Matter of Estate of Unke, 1998 S.D. 94, ¶¶ 26 n.4, 29, 583 N.W.2d 

145, 150 & n.4; SDCL 55-3-20.1 (providing when a court may remove a trustee). 

“An abuse of discretion ‘is a fundamental error of judgment, a choice outside the 

range of permissible choices, a decision, which, on full consideration, is arbitrary 

and unreasonable.’” Gartner v. Temple, 2014 S.D. 74, ¶ 7, 855 N.W.2d 846, 850 

(quoting Arneson v. Arneson, 2003 S.D. 125, ¶ 14, 670 N.W.2d 904, 910). 

Decision

[¶28.] 1. Whether the circuit court erred when it determined that Robert 

Bormann’s relationship to Schmidt did not constitute selfdealing.

[¶29.] Petitioners first argue that Robert Bormann’s relationship with

Schmidt through a common grandchild created a situation of impermissible selfdealing. The categories of persons to whom a trustee may not lease trust property 

are expressly defined in SDCL 55-4-13. A trustee is precluded from leasing trust 

property to a relative, unless expressly authorized to do so by the trust instrument. 

SDCL 55-4-13. SDCL 55-4-1 defines “relative” as “a spouse, ancestor, descendant, 

brother, or sister.”10 Bormann and Schmidt are not relatives as defined by statute.

 

10. We note that 2015 S.D. Sess. Laws ch. 240 amended SDCL 55-4-1 (2012), but 

the definition of “relative” has remained the same.
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[¶30.] Petitioners rely on In re Estate of Stevenson, 2000 S.D. 24, 605 N.W.2d 

818, for the proposition that the close relationship between Bormann and Schmidt 

created a situation of self-dealing. In Stevenson, the trustee executed two leases, 

one to the trustee’s husband and the other to her husband’s cousin. 2000 S.D. 24, 

¶ 4, 605 N.W.2d at 820. The primary beneficiary of the trust sought to void the 

leases, arguing that the trustee committed self-dealing by leasing land to relatives. 

Id. ¶ 5. We concluded that the trust instrument did not authorize the trustee to 

lease property to herself, her husband, or a relative. Id. ¶ 17, 605 N.W.2d at 822. 

As the trustee in Stevenson was related to her husband and husband’s cousin by 

marriage (i.e., by affinity), we held that the trustee engaged in self-dealing and

voided the leases. Id.

[¶31.] Trustees argue that Bormann and Schmidt are not related in any 

manner recognized by law, i.e., they are not related by consanguinity (by blood) or 

affinity. However, a question arises whether Bormann and Schmidt are related by 

affinity because their children are married, and they share a common grandchild. 

Affinity “is the relationship which one spouse has because of the marriage to blood 

relatives of another.” State v. Allen, 304 N.W.2d 203, 207 (Iowa 1981). “Each 

spouse is related by affinity to the blood relations of the other in the same degree as 

the other, but the blood relations of one spouse are not, by reason of the marriage, 

related by affinity to the blood relations of the other[.]” Allen v. Sanders, 346 P.3d 

30, 33 (Ariz. Ct. App. 2015) (emphasis added) (quoting 41 Am. Jur. 2d Husband and 

Wife § 4 (2015)). Therefore, unlike Stevenson where the trustee/spouse was related 

by affinity to her husband’s cousin, 2000 S.D. 24, ¶ 17, 605 N.W.2d at 822, Bormann 
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and Schmidt are not related to one another by affinity simply because their children 

are married.

[¶32.] Petitioners counter that “self-dealing encompasses more than 

transactions with spouses or blood relatives. It includes any transaction that places 

a trustee’s personal interest in conflict with his obligations to the beneficiaries.”

Certainly a lack of relationship by blood or affinity does not end the inquiry when a 

party has alleged that a trustee has engaged in self-dealing. Trustees owe

beneficiaries a fiduciary duty of the “utmost good faith[.]” Id. ¶ 9, 605 N.W.2d at 

821 (quoting Am. State Bank v. Adkins, 458 N.W.2d 807, 811 (S.D. 1990)). In order 

to prevent trustees from “all temptation and to prevent any possible injury to the 

beneficiary, the rule against a trustee dividing his loyalties must be enforced with 

‘uncompromising rigidity.’” N.L.R.B. v. Amax Coal Co., a Div. of Amax, Inc., 453 

U.S. 322, 329-30, 101 S. Ct. 2789, 2794, 69 L. Ed. 2d 672 (1981) (quoting Meinhard 

v. Salmon, 164 N.E. 545, 546 (N.Y. 1928) (Cardozo, C.J.)).

[¶33.] The circuit court heard competing evidence about whether Trustees 

breached their fiduciary duty to avoid self-dealing because of Robert Bormann’s 

relationship to Schmidt. Petitioners argued that the lower rate received by Schmidt 

was a result of his relationship to Robert Bormann because the lease began at about 

the same time as the marriage, Trustees did not advertise the land when it became 

available, Schmidt was a customer of the bank, and Trustees did not disclose the 

relationship to the beneficiaries. Trustees counter that the lower rate was a result 

of the lower crop yields on the Schmidt parcels, the lower soil ratings, the 

topography of the land, drainage issues, weather, Trustees’ experience of leasing 
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the land, and other factors. Furthermore, Petitioners admitted at oral argument

that they failed to submit evidence showing that Schmidt received a reduced or 

lower rental rate than the previous tenants of the same parcels. We, therefore, hold 

that the circuit court did not err when it found that Bormann’s relationship to 

Schmidt was not one of blood or affinity and the evidence did not support a charge 

of self-dealing.

[¶34.] 2. Whether the circuit court abused its discretion when it denied 

Petitioners’ request to replace Trustees with a neutral, thirdparty trustee.

[¶35.] The circuit court found that Trustees actions did not meet any of the 

conditions warranting removal of a trustee pursuant to SDCL 55-3-20.1. In 

relevant part, SDCL 55-3-20.1 provides that a qualified beneficiary “may request 

the court to remove a trustee, or a trustee may be removed by the court on the 

court’s own initiative . . . if: (1) The trustee has committed a serious breach of 

trust[.]”11 Our statutes do not define what constitutes “a serious breach of trust,” 

but our statutes are modelled after the Uniform Trust Code. Compare SDCL 55-3-

20.1 (2012) with U.T.C. § 706 (2000). The Uniform Trust Code states:

[N]ot every breach of trust justifies removal of the trustee. The 

breach must be “serious.” A serious breach of trust may consist 

of a single act that causes significant harm or involves flagrant 

misconduct. A serious breach of trust may also consist of a 

series of smaller breaches, none of which individually justify 

removal when considered alone, but which do so when 

considered together.

 

11. We note 2015 S.D. Sess. Laws ch. 240 amended SDCL 55-3-20.1 (2012) by 

removing “has committed” and replacing it with “commits.”
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U.T.C. § 706 (2000), comment on subsection (b)(1). Petitioners again point to Robert 

Bormann’s relationship to Schmidt as evidence of a breach, which was previously 

addressed. 

[¶36.] Petitioners also point to other alleged breaches, to wit: delay in 

responding to Gene Loos’s request for information regarding historical rental rates; 

two missed payments, one a tax penalty of $27 and the other a finance charge of 

$36.38; Trustees submitted erroneous legal descriptions of the land from 1993 to 

2012; Trustees only had liability insurance for 680 acres; Trustees own the bank 

where the funds for the trust are held; Trustees leased property to customers of the 

bank, which allegedly created a conflict of interest; and Trustees consistently rented 

the trust land at below market value. Petitioners argue that these minor breaches 

had a cumulative effect and constituted a serious breach of trust warranting 

removal of Trustees.

[¶37.] The determination of whether a breach of trust has occurred is a 

factual determination, and we will not set aside factual determinations unless they 

are clearly erroneous. Moncur, 2012 S.D. 17, ¶ 10, 812 N.W.2d at 487. The circuit 

court heard the evidence now presented to this Court and determined that none of 

the alleged breaches, either individually or combined, constituted a serious breach 

of trust. Specifically, the circuit court found: in 35 years of trust management, the 

trust had only incurred $63.38 in fines and late fees, which the court found to be 

insignificant; the erroneous legal descriptions from 1993 to 2012 were the result of 

an inadvertent omission; the insurance coverage was also based on the clerical error 

and that the “liability coverage . . . would still cover [the land] in this instance”; 
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Trustees bank was the only bank in Parkston until 1999; Baumgart was a bank 

customer; Baumgart knew the Bormann family owned the bank; Baumgart chose 

the bank and Trustees; and Petitioners attempted to “cherry pick” favorable facts 

relating to the value of the land. The circuit court also found that the proposed rent 

values advocated by Gene Loos—who is not an expert in agricultural land value—

were not supported by the evidence. Additionally, Baumgart personally selected the 

successor (now current) Trustees. After review of the record, we cannot say the 

court erred in making these underlying factual determinations or in concluding that 

Trustees’ alleged breaches did not constitute a serious breach of trust. The circuit 

court’s judgment was not arbitrary or unreasonable and was firmly within its

discretion. See Unke, 1998 S.D. 94, ¶¶ 26 n.4, 29, 583 N.W.2d at 150 & n.4; SDCL 

55-3-20.1. Therefore, we affirm the circuit court and hold it did not abuse its 

discretion by denying Petitioners’ request to remove Trustees.

[¶38.] 3. Whether the circuit court erred when it ruled there were no 

material omissions in the accountings.

[¶39.] The circuit court entered summary judgment in favor of Trustees on 

the issue of whether the 2009 through 2012 accountings submitted to and approved 

by the circuit court contained any material omissions. “Summary judgment is 

proper where ‘the pleadings, depositions, answers to interrogatories, and 

admissions on file, together with the affidavits, if any, show there is no genuine 

issue as to any material fact and that the moving party is entitled to judgment as a 

matter of law.’” Titus v. Chapman, 2004 S.D. 106, ¶ 13, 687 N.W.2d 918, 923 

(quoting SDCL 15-6-56(c)). 
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[¶40.] Petitioners argue that the omission of the legal descriptions from the 

2009 through 2012 accountings was a material omission. They submit that a 

material omission is one that would prevent the court from “being able to satisfy its 

statutory duty [and] make a detailed examination of Trustees’ actions during the 

past year.” Petitioners assert that the omission of the legal descriptions prevented 

the court from making such an examination. Trustees counter that the court 

properly entered summary judgment because Trustees submitted an affidavit from 

the trust’s counsel explaining that the omission of the legal descriptions was a 

clerical error. Further, Trustees argue that Petitioners, including Gene Loos, knew 

how many acres the trust owned prior to this litigation and, therefore, the omission 

could not be material.12 Lastly, Trustees point out that the tax records and other 

documents submitted with the annual accountings correctly informed the court 

regarding trust activity. 

[¶41.] The court resolved the motion to reopen the 2009 to 2012 accountings 

at the hearing on June 17, 2014, wherein Trustees and Petitioners also renewed 

their motions for summary judgment. Trustees submitted an affidavit from the

trust’s counsel explaining that the omission of the legal descriptions was not 

intentional but the result of “an office error made in either a retyping of the 

descriptions or in cut and paste word processing.” The court file showed that all 

parcels remained in the trust and included annual tax assessments, tax payment 

receipts, and other documents referencing all the parcels.

 

12. Trustees elicited testimony from Gene Loos on cross examination that he 

knew how many acres the trust had because he had a plat map and had 

driven by each parcel owned by the trust several times.
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[¶42.] After hearing the parties’ arguments at the June 17 hearing, the court 

stated that its decision rested on SDCL 21-22-30, which provides:

An accounting by a trustee of a court supervised trust and the 

final approval thereof by a court is conclusive against all persons 

in any way interested in the trust, and the trustee, absent fraud, 

intentional misrepresentation, or material omission, shall be 

released and discharged from any and all liability as to all 

matters set forth in the accounting. For purposes of this section, 

the term, accounting, means any annual, interim, or final report 

or other statement provided by a trustee reflecting all 

transactions, receipts, and disbursements during the reporting 

period and a list of assets as of the end of the period covered by 

the report or statement.

The court found “that the 2009 through 2012 accountings are proper, that the 

inadvertent nonlisting of certain properties does not void the determination that the 

approval of the accounting is final and therefore cannot be challenged later.” The 

circuit court determined that the omission of the two legal descriptions did not 

prevent approval of the accounting because the accounting information itself

contained “all transactions, receipts, and disbursements” for all 920 acres. 

[¶43.] Further, the court rejected Petitioners argument that Trustees needed 

to give the income beneficiaries a more detailed report from 2009 through 2012. 

The circuit court reasoned, “[T]he way that I read what the [P]etitioners are asking 

is that they should be handed, in a packet, detailed materials that they would 

characterize and accept as an accounting. That is not what is required [by the 

terms of either SDCL 21-22-30 or 21-22-14].” The court explained that instead,

SDCL 21-22-30 and 21-22-14 require “that [each accounting] includes the materials”

necessary so as to permit review by the court. After examining the accountings 

submitted to the circuit court, we agree that they contained the necessary 
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information required under SDCL 21-22-30. We affirm the circuit court’s holding 

that the 2009 through 2012 accountings did not contain any material omissions. 

The court did not err by determining that no genuine issue of material fact existed 

on this issue.

[¶44.] 4. Whether the circuit court erred when it did not award damages 

to Petitioners.

[¶45.] Petitioners argue that the circuit court erred when it did not award 

damages based on Trustees alleged breach of fiduciary duties. Petitioners also 

request removal of the Trustees and appointment of an independent third-party 

trustee. Because we affirm the circuit court’s decision that the Trustees did not 

breach their fiduciary duties, we need not address this issue.

[¶46.] For all of these reasons, we affirm the circuit court.

[¶47.] GILBERTSON, Chief Justice, and ZINTER and SEVERSON, Justices, 

and SABERS, Retired Justice, concur.

[¶48.] SABERS, Retired Justice, sitting for WILBUR, Justice, disqualified.