Court Opinion

ID: 3181825
Source: CourtListenerOpinion
Date Created: 2016-03-02 15:13:39.715669+00
Date Added: 2024-06-11T14:07:29.487373
License: Public Domain

Cite as 2016 Ark. App. 133

                 ARKANSAS COURT OF APPEALS
                                        DIVISION IV
                                        No. CV-15-630

RIKKA I. PULLIAM                                   Opinion Delivered March   2, 2016
                                APPELLANT
                                                   APPEAL FROM THE CRITTENDEN
V.                                                 COUNTY CIRCUIT COURT
                                                   [NO. CV-14-116]

SHERRY P. MURPHY, R. CARTER                        HONORABLE VICTOR L. HILL,
PULLIAM, AND RICHARD PULLIAM,                      JUDGE
AS COTRUSTEES OF THE RAY H.
PULLIAM LIVING TRUST                               REVERSED AND REMANDED
                      APPELLEES

                                BART F. VIRDEN, Judge

       Appellant Rikka I. Pulliam filed a complaint against appellees Sherry P. Murphy, R.

Carter Pulliam, and Richard Pulliam, as cotrustees of the Ray H. Pulliam Living Trust,

alleging breach of the trust agreement. The Crittenden County Circuit Court granted

summary judgment to appellees. On appeal, Rikka argues that appellees owed a duty of

loyalty to her in their administration of the trust and that genuine issues of material fact exist

as to whether they breached that duty. We reverse and remand for trial.

                             I. Background and Procedural History

       In June 1997, Ray H. Pulliam and Ione O. Pulliam created a living trust involving

1,320 acres of farmland for the benefit of their five adult children. After the Pulliams had

passed away, four of those children, including Rikka, became cotrustees. Article Seventeen,

section five of the trust provided,
                                  Cite as 2016 Ark. App. 133

       Special Instructions Regarding the Farm. During my life, my spouse and I have
       owned tracts of land which we have referred to among ourselves and our family as
       “the farm.” The farm is the real property to be administered under Article Eleven of
       this agreement upon the death of both my spouse and I. One and a half acres of the
       farm was sold to our son, R. Carter Pulliam, for consideration of $7,500 ($5,000 per
       acre) during my lifetime. My Trustee shall offer to any of my other children the same
       privilege to purchase one and a half acre of land at the same consideration. The consideration
       need not be actual cash but may also be improvements or work on the farm, for
       example, but any construction must be farm related. In other words, the construction
       cannot be a garbage dump, gravel storage or beer parlor, etc.

(Emphasis added.)

       In addition to owning the tract of land referenced in the trust agreement, Carter,

along with Richard, leased trust property that they farmed.

       In November 2013, Rikka’s lawyer notified appellees of Rikka’s request to buy a one-

and-a-half-acre tract along Highway 79 located just north of Carter’s one-and-a-half acres.

Carter objected to selling Rikka that particular tract because the area was used for parking

farm equipment and provided access for commercial trucks to reach the granary silos on his

property. Sherry had initially agreed to sell Rikka the tract of land but soon after rescinded

her consent to the sale after speaking with Carter, citing the land’s “current use in farming”

as her reason for rescission. Richard did not object to Rikka’s request to buy the tract at

issue. A meeting of the cotrustees was held in January 2014. Article Sixteen, section eight of

the trust provides that

       [w]hen more than two Trustees are acting, the concurrence and a joinder of a
       majority of my Trustees shall control in all matters pertaining to the administration of
       any trust created under this agreement.

       Carter and Sherry voted against the sale, while Rikka and Richard voted in favor of

the sale, resulting in a tie vote. Having failed to achieve a majority of votes, Carter and

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Sherry asked Rikka to select another tract of land to purchase, but Rikka refused.

       Sherry, as president of the Board of Trustees (Board), sent a letter to Rikka’s attorney

in February 2014 informing him that the Board had voted against the sale of that particular

tract following a thorough review of “the land’s history, current use in farming, and

implications if removed from farming operation.” Sherry also pointed out that the Board had

progressed to the business of managing a farm and that Rikka had never been actively

involved in farming the land.

       In April 2014, Rikka filed a complaint against the other cotrustees alleging that they

had intentionally blocked the transfer of land because it would inconvenience Carter’s

separate farming operations; that they had willfully and intentionally failed to carry out the

terms of the trust in an attempt to deprive her of property to which she had the right to

purchase as a beneficiary; and that they had breached the trust agreement by refusing to

transfer the property.

       Carter and Sherry moved for summary judgment. Attached to their motion was

Carter’s affidavit in which he attested that the one-and-a-half-acre tract of land Rikka had

requested to purchase had been improved for use as a parking and staging area for farm

equipment; the land had also been improved for, and served as, a pass-through for

commercial trucks entering the granary; and the tract was directly adjacent to “the grain silos

and storage sheds used in the Trust farming operations.” According to Carter, if that

particular tract of land was sold to Rikka, a new site would have to be improved for parking

the farm equipment, and relocating the access road to the granary would necessitate taking

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other trust property currently devoted to growing rice and beans, causing a loss to the trust.

          In response to the motion for summary judgment, Rikka contended that appellees,

as cotrustees, had breached their duty of loyalty to her as a beneficiary. She presented her

own affidavit attesting that the land she had requested to purchase was known as “the

pasture”; that there had been no improvements to that land; that the trust did not engage in

any “farming operations” except to lease land to Carter and Richard for their personal

farming operations; and that the land Carter and Sherry offered to sell her, in lieu of

purchasing the tract at issue, was inferior in that it was in an inconvenient location, was

accessible only by a gravel road shared with heavy equipment, overlooked junk cars, and was

otherwise not worth $5,000 an acre.

                                    II. Trial Court’s Order

          In granting summary judgment to Carter and Sherry, the trial court found that the

trust did not provide that a beneficiary was entitled to purchase a tract of her choosing over

the objections of the other cotrustees; that there was no provision in the trust as to what

happened in the event of a tie vote; that appellees were correct in their reading of the trust;

and that Rikka must select another tract of land that the majority of the trustees agree to sell

to her.

                                    III. Standard of Review

          The appellate courts have repeatedly held that summary judgment is to be granted by

a trial court only when it is clear that there are no genuine issues of material fact to be

litigated, and the party is entitled to judgment as a matter of law. Cole v. Laws, 349 Ark. 177,

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76 S.W.3d 878 (2002). Once the moving party has established a prima facie entitlement to

summary judgment, the opposing party must meet proof with proof and demonstrate the

existence of a material issue of fact. Id. On appellate review, we determine if summary

judgment was appropriate based on whether the evidentiary items presented by the moving

party in support of its motion leave a material fact unanswered. Id. This court views the

evidence in a light most favorable to the party against whom the motion was filed, resolving

all doubts and inferences against the moving party. Id. Our review is not limited to the

pleadings, as we also focus on the affidavits and other documents filed by the parties. Id. After

reviewing undisputed facts, summary judgment should be denied if, under the evidence,

reasonable men might reach different conclusions from those undisputed facts. Id.

                                        IV. Arguments

       Rikka asserts that appellees, as cotrustees, breached their duty of loyalty to her by

placing their own personal interests above those of the beneficiaries. Rikka contends that

Carter had a conflict when he voted against selling her the tract at issue in that the farm

equipment and grain silos are his personal property. According to Rikka, selling that tract

would inconvenience Carter. Rikka maintains that the trust has no farming operations and

that the farming operations referred to by Carter and Sherry are Carter’s personal farming

operations. Rikka maintains that genuine issues of material fact remain to be tried regarding

this conflict.

       Carter and Sherry argue that they owed no duty to sell Rikka a specific tract of land,

especially when that sale would be detrimental to the remaining beneficiaries. They maintain

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that they administered the trust according to its terms and that, when no majority was

achieved, they had no authority to sell Rikka the tract of land she had requested. Carter and

Sherry also argue that selling the tract of land to Rikka would have immediate adverse

financial effects in that the trust would be required to improve another tract of land for the

same purpose that the tract at issue currently serves, that the trust would permanently lose

cultivated land, and that there would be increased fuel costs for rerouting trucks and moving

the farm equipment to a more remote location.

                                      V. Duty of Loyalty

       Arkansas Code Annotated section 28-73-802(a) (Repl. 2012) provides that a trustee

shall administer the trust solely in the interests of the beneficiaries. Section 28-73-802(b)

provides that a sale, encumbrance, or other transaction involving the investment or

management of trust property entered into by the trustee for the trustee’s own personal

account or which is otherwise affected by a conflict between the trustee’s fiduciary and

personal interests is voidable by a beneficiary affected by the transaction unless, among other

things, the transaction was authorized by the terms of the trust.

       It is permissible for one of several trustees or a sole trustee also to be one of several

beneficiaries of a trust, even though conflicts of interest and coincidental benefits to that

trustee-beneficiary result. Clement v. Larkey, 314 Ark. 489, 853 S.W.2d 580 (1993). The fact

of a coincidental benefit to a trustee is not alone sufficient to establish a breach of fiduciary

duty on the part of the trustee. Id. The general rule is that a trustee, in administering a trust,

is under the duty of acting exclusively and solely in the interest of the trust estate or the

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beneficiaries within the terms of the trust and is not to act in his own interest by taking part

in any transaction concerning the trust where he has an interest adverse to that of the

beneficiary. Hosey v. Burgess, 319 Ark. 183, 890 S.W.2d 262 (1995).

                                         VI. Discussion

       While we agree that the trial court correctly construed the trust agreement to require

a majority of the trustees to take action, that is not the end of the analysis. The actions of the

trustees are subject to review under the limitations and fiduciary obligations imposed by the

statutes and case law referenced above. Here, the trial court did not engage in such an

analysis. The object of summary-judgment proceedings is not to try the issues, but to

determine if there are any issues to be tried, and if there is any doubt whatsoever, the motion

should be denied. Flentje v. First Nat’l Bank of Wynne, 340 Ark. 563, 1 S.W.3d 531 (2000).

       As a preliminary matter, resolving all doubts and inferences in favor of Rikka, a plain

reading of the trust agreement’s special instructions for the farm does not bar Rikka from

purchasing any one-and-a-half-acre tract of land. The instructions read as follows: “My

Trustee shall offer to any of my other children the same privilege to purchase one and a half

acre of land at the same consideration.” The directive contains the mandatory word “shall,”

and there is no limiting language in “privilege to purchase one and a half acre of land.”

       Rikka has presented issues of material fact to be tried concerning the conflict between

Carter’s fiduciary and personal interests and how it may have affected his vote preventing

Rikka from purchasing the one-and-a-half-acre tract adjoining his land. When there are

genuine questions of material fact with regard to a party’s intent, summary judgment is

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improper. Bisbee v. Decatur State Bank, 2010 Ark. App. 459, 376 S.W.3d 505. Moreover,

summary judgment is not proper where evidence, although in no material dispute as to

actuality, reveals aspects from which inconsistent hypotheses might reasonably be drawn and

reasonable minds might differ. Bomar v. Moser, 369 Ark. 123, 251 S.W.3d 234 (2007). There

are additional disputed issues of fact, e.g., whether and how Carter’s personal farming

operations benefit the trust and whether the tract at issue was improved, and if so, whether

it was improved for a purpose that benefits the trust, as opposed to Carter personally.

       For the reasons stated above, summary judgment in this case was inappropriate.

       Reversed and remanded.

       GLADWIN , C.J., agrees.

       GRUBER , J., concurs.

       Womack, Phelps & McNeill, P.A., by: B. Wade Bowen, for appellant.

       Michael D. Snell, for appellees.

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