Court Opinion

ID: 7805110
Source: CourtListenerOpinion
Date Created: 2022-08-31 14:03:00.052517+00
Date Added: 2024-06-11T16:29:56.909014
License: Public Domain

Cite as 2022 Ark. App. 302
                    ARKANSAS COURT OF APPEALS
                                          DIVISION I
                                         No. CV-21-349

                                                  Opinion Delivered August   31, 2022
RICHARD G. GAWENIS
                                 APPELLANT
                                                  APPEAL FROM THE VAN BUREN
V.                                                COUNTY CIRCUIT COURT
                                                  [NO. 71CV-20-119]
ZELDA WALLS LIVING TRUST
                                   APPELLEE
                                                  HONORABLE SUSAN WEAVER,
                                                  JUDGE

                                                  AFFIRMED

                                  RITA W. GRUBER, Judge

        Richard Gawenis appeals from an order striking his answer and entering default

 judgment against him and in favor of Donna Bryant, as trustee of the Zelda Walls Living

 Trust. Gawenis contends that the circuit court abused its discretion by presiding over

 Bryant’s complaint for declaratory judgment because litigation involving the same parties,

 issues of fact, and issues of law was pending before a different division of the circuit court.

 We disagree and affirm the circuit court’s order.

        On October 29, 2020, Bryant, as trustee of the Zelda Walls Living Trust dated July

 25, 2019 (the Trust), filed a complaint in the Van Buren County Circuit Court against

 Gawenis for a declaration as to the rights of the trustee and beneficiaries pursuant to the

 Arkansas Trust Code—specifically, Ark. Code Ann. § 28-73-201 (Repl. 2012)—and Ark. Code
Ann. § 16-111-101 (Repl. 2016), authorizing an action for declaratory judgment. The

complaint alleged that Zelda Walls established the trust as the settlor, naming herself as

trustee and nominating Bryant as successor trustee in the event of Ms. Walls’s death or

incapacity. Bryant alleged that the Trust was funded with extensive real property in Conway

and Van Buren Counties and farming operations conducted on that property, attaching a

copy of the Trust and deeds transferring the property to the Trust. She also alleged that

Gawenis and his two sisters are children of Ms. Walls and the beneficiaries of the Trust. The

complaint stated that Ms. Walls established a spendthrift trust for each of her three children,

providing that the trustee had the sole discretion to make distributions. The intent of the

spendthrift trusts was to preserve and keep the farm intact. Bryant also stated that the Trust

had a no-contest provision providing that any beneficiary who brought suit against the Trust

or Ms. Walls; contested the validity of the Trust; or sought to void, nullify, or set aside the

Trust would receive nothing and be treated as if that beneficiary had predeceased Ms. Walls.

       Bryant alleged that Gawenis had filed a petition for guardianship on October 7, 2019,

in the Van Buren County Circuit Court, seeking to be appointed guardian over the person

and estate of Ms. Walls. An order was entered that same day naming him emergency,

temporary, and permanent guardian and declaring Ms. Walls incapacitated. On April 1,

2020, Gawenis moved to revoke the Trust within the guardianship action. He did not serve

the Trust or the trustee with process or provide notice of either the guardianship or the

motion to revoke the trust. On September 22, the court entered an order terminating and

revoking the Trust.

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       In her complaint, Bryant asked the court to declare that the Trust is valid, that it was

properly executed, that its terms and provisions are fully enforceable, that it is the owner of

the real estate deeded to it, and that any guardian of the estate of Ms. Walls has no power or

authority over the Trust property. She alleged that the order declaring Ms. Walls

incapacitated and appointing Gawenis guardian of Ms. Walls’s estate immediately elevated

Bryant to the position of trustee under the tenth article of the Trust. She also alleged that

the Trust is a necessary and indispensable party to any action to terminate it and that the

Trust had moved to intervene and vacate the order. She alleged that the court had not ruled

on either motion. Finally, she asked the court to enforce the no-contest clause in the Trust

against Gawenis and declare that he had forfeited his rights under the Trust for moving to

revoke the Trust.

       The complaint and summons were served on Gawenis on October 30, 2020. Under

Ark. R. Civ. P. 12(a)(1), Gawenis’s answer was due “within 30 days after the service of

summons and complaint upon him,” which was November 30. Gawenis did not file an

answer until December 9, ten days late. He did not acknowledge that his response was late,

indicate that he had not been served or that he had not received the complaint, or offer any

excuse for the late answer. He also simultaneously moved to consolidate the case with the

guardianship action.

       On December 23, Bryant moved to strike Gawenis’s answer and for default judgment.

She also filed a response to the motion to consolidate, stating that neither she nor the Trust

had been served with a summons or notice in the guardianship case and that the court had

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no personal jurisdiction over the Trust. She also alleged that the court in the guardianship

proceeding had no subject-matter jurisdiction to revoke the Trust, that there was no

mechanism for that type of motion in a guardianship proceeding, and that Gawenis was

required to file a separate action against the Trust to revoke rather than a motion within the

guardianship. She alleged that, in any case, Gawenis had defaulted by failing to timely file a

responsive pleading in this case and could not “cure his default” by seeking to consolidate

the declaration-of-rights case with his guardianship proceeding. Finally, she alleged that the

only valid action before any court regarding the interpretation of the terms of the Trust was

this action, that Gawenis was in default despite being properly served with process, and thus

that he had waived any defenses. Gawenis did not respond to Bryant’s motion.

       The court set a hearing date of March 29 on Bryant’s motion to strike Gawenis’s

answer and grant default judgment, providing notice to the parties’ counsel through Eflex

on March 22. Gawenis did not object to the date or move for continuance. Neither Gawenis

nor his attorney appeared for the hearing, and the court entered an order on March 30

striking Gawenis’s answer and granting Bryant’s motion for default judgment. The court

found that Gawenis’s answer was filed ten days late; he offered “no excusable neglect, or any

other reason, for his failure to comply with Rule 12”; and he was in default. The court then

found that the allegations in Bryant’s complaint are deemed admitted and ordered as follows:

               A. That the Zelda S. Walls Living Trust u/a/d[] July 25, 2019 was and is the
       valid, existing trust of Zelda S. Walls; that the Trust was created at a time when Zelda
       S. Walls had capacity to create the Trust, and it expresses her wishes; that it is
       enforceable in all respects, and has never been amended.

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              B. That the Plaintiff was the nominated Successor Trustee, and is now the
       Trustee of the Trust;

              C. That, as Trustee, Plaintiff is tasked with carrying out the terms of the Trust;
       and

             D. That the Real Property identified in this Complaint are assets of the Trust
       and subject to the control of the Trustee in accordance with the terms of the Trust;
       and

               E. That the Defendant has no right to control any property placed into the
       trust by the Settlor, even if he is the Guardian of her estate; and

              F. That because of the clear provisions of the “No Contest” clause of the trust
       the Defendant has forfeited any rights which he had or might have had under the
       trust.

       Gawenis filed this appeal from the court’s order, contending that the circuit court

abused its discretion when it “entertained jurisdiction to preside over and to allow litigation”

of Bryant’s complaint. The standard of review for considering whether a default judgment

was properly granted is whether the circuit court abused its discretion. Briney v. Bauer, 2019

Ark. App. 227, at 4, 575 S.W.3d 631, 633.

       Gawenis argues that the circuit court abused its discretion in exercising jurisdiction

over Bryant’s complaint because litigation “involving the same parties, issues of fact, and

issues of law was already pending” in Van Buren County Circuit Court, referring to the

guardianship proceeding filed by Gawenis. He contends it is an issue of subject-matter

jurisdiction and that the declaratory-judgment statutes do not confer subject-matter

jurisdiction on the circuit court. He argues that it is clear Bryant was aware of the other

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lawsuit from her complaint and claims that she cannot raise “identical issues already

pending” before the circuit court.

       We turn first to Gawenis’s argument that the circuit court had no subject-matter

jurisdiction over Bryant’s complaint. The Arkansas Trust Code, specifically cited by Bryant

in her complaint, provides,

           (a) A court may intervene in the administration of a trust to the extent its
       jurisdiction is invoked by an interested person or as provided by law.

          (b) A trust is not subject to continuing judicial supervision unless ordered by the
       court.

           (c) A judicial proceeding involving a trust may relate to any matter involving the
       trust's administration, including a request for instructions and an action to declare
       rights.

Ark. Code Ann. § 28-73-201 (Repl. 2012). The editor’s notes to this statute specifically

provide as follows:

       While the Uniform Trust Code encourages the resolution of disputes without resort
       to the courts by providing such options as the nonjudicial settlement authorized by
       Section 111, the court is always available to the extent its jurisdiction is invoked by
       interested persons. The jurisdiction of the court with respect to trust matters is
       inherent and historical and also includes the ability to act on its own initiative, to
       appoint a special master to investigate the facts of a case, and to provide a trustee with
       instructions even in the absence of an actual dispute.

       Contrary to the trust statutes in some States, the Uniform Trust Code does not create
       a system of routine or mandatory court supervision. While subsection (b) authorizes
       a court to direct that a particular trust be subject to continuing court supervision, the
       court’s intervention will normally be confined to the particular matter brought before
       it.

       Subsection (c) makes clear that the court’s jurisdiction may be invoked even absent
       an actual dispute. Traditionally, courts in equity have heard petitions for instructions
       and have issued declaratory judgments if there is a reasonable doubt as to the extent

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       of the trustee’s powers or duties. The court will not ordinarily instruct trustees on
       how to exercise discretion, however. See Restatement (Second) of Trusts Section 187,
       259 (1959). This section does not limit the court’s equity jurisdiction. Beyond
       mentioning petitions for instructions and actions to declare rights, subsection (c) does
       not attempt to list the types of judicial proceedings involving trust administration that
       might be brought by a trustee or beneficiary.

Ark. Code Ann. § 28-73-201 editor’s notes, unif. law cmt. (West current through March 15,

2022). Gawenis has cited no authority involving a trust and nothing to contradict the clear

intention of this statute. The circuit court clearly had subject-matter jurisdiction.

       Moreover, we disagree with Gawenis’s contention that his guardianship proceeding

involved identical parties, issues of fact, and issues of law. Neither the Trust nor the trustee

was ever served with process or made a party to the guardianship proceeding. And, of critical

importance here, Gawenis failed to file a timely answer to Bryant’s complaint asserting these

or any other defenses, failed to respond to Bryant’s motion to strike his answer and enter

default judgment, and failed to attend the hearing on the matter. His answer, filed ten days

late, offered no excuses for his failure.

       When a party against whom a judgment for affirmative relief is sought fails to plead

or otherwise defend as provided by the rules of civil procedure, the court may enter a default

judgment against him. Ark. R. Civ. P. 55(a) (2021). Rule 55(c) provides that a default

judgment may be set aside under the following circumstances: (1) mistake, inadvertence,

surprise, or excusable neglect; (2) the judgment is void; (3) fraud, misrepresentation, or other

misconduct of an adverse party; or (4) any other reason justifying relief from the operation

of the judgment. In its order striking Gawenis’s answer and entering default judgment, the

                                               7
court specifically found that Gawenis had offered no excusable neglect “or any other reason”

for his failure to comply with Rule 12. We hold that the circuit court did not abuse its

discretion in entering a default judgment under these circumstances.

       Affirmed.

       VIRDEN and BROWN, JJ., agree.

       William Z. White, for appellant.

       Legacy Law Group, by: Bryan J. Reis and Philip B. Montgomery, for appellee.

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