In re Rolf H. Brennemann Testamentary Trust ( 2014 )

Nebraska Advance Sheets
IN RE ROLF H. BRENNEMANN TESTAMENTARY TRUST 389
Cite as 288 Neb. 389
Ct. R. §§ 3-310(P) (rev. 2014) and 3-323(B) of the discipli­
nary rules within 60 days after the order imposing costs and
expenses, if any, is entered by the court.
No. S-12-498 dismissed as moot.
Judgment of suspension in No. S-13-1149.
Wright, J., not participating.
In re Rolf H. Brennemann Testamentary Trust.
Kim Abbott, beneficiary, appellant, v. John E.
Brennemann et al., Trustees, appellees.
___ N.W.2d ___
Filed June 27, 2014. No. S-12-1029.
1. Trusts: Equity: Appeal and Error. Absent an equity question, an appellate
court reviews trust administration matters for error appearing on the record. But
when an equity question is presented, appellate review of that issue is de novo on
the record.
2. Trusts: Records. Where a trustee fails to maintain proper records, all doubts
regarding his administration of the trust are resolved against him.
3. Trusts: Proof. An accounting is ordinarily an appropriate remedy for a breach of
the duty to inform and report. And if ordered, the trustees would have the burden
to prove its completeness and accuracy once questioned.
4. Attorney Fees: Appeal and Error. On appeal, a trial court’s decision awarding
or denying attorney fees will be upheld absent an abuse of discretion.
Petition for further review from the Court of Appeals,
Inbody, Chief Judge, and Moore and Riedmann, Judges, on
appeal thereto from the County Court for Grant County, James
J. Orr, Judge. Judgment of Court of Appeals affirmed in part
and in part reversed, and cause remanded for further proceed-
ings on the issue of attorney fees.
David A. Domina and Jeremy R. Wells, of Domina Law
Group, P.C., L.L.O., for appellant.
Neil E. Williams and Nathaniel J. Mustion, of Lane &
Williams, P.C., L.L.O., for appellees.
Heavican, C.J., Connolly, Stephan, McCormack, Miller-
Lerman, and Cassel, JJ.
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Connolly, J.
SUMMARY
Kim Abbott sued the trustees of her grandfather’s testa-
mentary trust for breach of their fiduciary duties. The county
court dismissed her complaint, and the Nebraska Court of
Appeals affirmed. The Court of Appeals essentially concluded
that although the trustees had breached their duty to inform
and report, that breach was harmless.1 We agree with the
Court of Appeals’ general legal framework and conclusion that
the breach was harmless. But we disagree with the Court of
Appeals’ conclusion that annual schedule K-1 tax reports were
sufficient to reasonably inform beneficiaries of the trust and its
administration. And we conclude that the county court should
revisit the issue of attorney fees in light of our disposition of
the merits of this appeal. We affirm in part, and in part reverse
and remand for further proceedings on that issue.
BACKGROUND
The Testamentary Trust
Rolf H. Brennemann (Rolf) died in 1976. His will estab-
lished the “Rolf H. Brennemann Testamentary Trust.” The trust
was to hold shares in the “Rolf H. Brennemann Company,” the
primary asset of which was a 5,425-acre ranch located in Grant
and Cherry Counties, Nebraska. At all material times, the trust
held 42.42 percent of the company’s shares, with the balance
being distributed among the individual family members. The
will appointed Rolf’s three children, Edward Brennemann,
Mamie Brennemann, and Rolf William Brennemann (Bill), as
trustees. The will also provided that if any of them were unable
to serve, or ceased to serve, the oldest son of that person would
then serve as trustee.
The trust was to pay its net income to Bessie Brennemann,
Rolf’s wife, for as long as she lived. When Bessie died, the
trust was to pay its net income to Rolf’s three children, in
equal shares. When Rolf’s last child died, the trust was to dis-
tribute its holdings to Rolf’s grandchildren.
1
See In re Rolf H. Brennemann Testamentary Trust, 21 Neb. Ct. App. 353, 838
N.W.2d 336 (2013).
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Factual Background
In 1982, Edward died, at which time his oldest son, John E.
Brennemann, became a trustee. In 1986, the trustees (Rolf’s
children Bill and Mamie, and Rolf’s grandchild John) peti-
tioned the county court to allow them to vote company stock.
The trustees alleged that the company had significant liabili-
ties, had not paid dividends, and was not providing income to
the trust. The trustees alleged that John had offered to buy the
ranch and that they had accepted his offer. Kim later offered
to buy the ranch, but the trustees rejected her offer. The court
ultimately authorized the trustees to vote the stock and sell the
ranch to John and his wife. The court reviewed the purchase
agreement and determined that the sale price was at or above
fair market value and was the most advantageous price the
trustees could secure.
The purchase agreement set forth an installment payment
plan for a total purchase price of $494,021: $16,000 at the
execution of the agreement, $144,000 at closing, and $344,021
in nine annual payments, with a 10-percent interest rate and a
balloon payment of the unpaid principal and interest on July
1, 1996. Following the sale of the ranch, and having no other
assets, the company was dissolved. In 1996, John and his wife
executed two agreements with the various parties extending the
original purchase agreement for 10 years and 3 years respec-
tively, at an 8-percent interest rate.
In 1998, after Bessie died, Rolf’s three children (or their
issue) began receiving the trust income. In 2002, Bill died, at
which time his children, including Kim, became qualified ben-
eficiaries of the trust and Bill’s oldest son became a trustee. In
2006, presumably because John had made all the payments, the
bank issued a trustee’s deed of reconveyance for the ranch to
John and his wife.
The Litigation Begins
In 2009, the trust’s accountant, Dan Gilg, sent a letter to
Kim (and presumably other beneficiaries) indicating that the
trust contained roughly $75,000 and recommending that the
trust be terminated because it was “non-economical.” This
prompted Kim to take action because she believed that there
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should have been more money in the trust. In April 2010,
Kim filed a complaint against the trustees seeking a full and
complete accounting of their actions and payment of income
derived from the administration of the trust, along with costs
and attorney fees. Following their answer and cross-petition,
the trustees provided an accounting which covered January 1,
2002, through April 30, 2010, and they also provided updates
throughout the proceedings.
In August 2010, Kim amended her complaint. She alleged
that the accounting was incomplete and that the trustees had
breached their fiduciary duties. Specifically, she alleged that
they had breached their duties to maintain trust records, to
properly inform and report to the beneficiaries, and to adminis-
ter the trust in good faith. She also requested, in addition to the
requests made in her original complaint, that the court order
the trustees to pay moneys to restore the balance of the trust
to what would have been there had the trustees fulfilled their
fiduciary duties.
The Trial
At trial, and in summary, Mamie testified that she believed
that the trustees had properly administered the trust, that the
sale of the ranch was justified by its indebtedness, that the
extension agreements were done so that the trust would con-
tinue to provide income to Bessie during her lifetime, that
John had made all the necessary payments for the ranch, and
that the older trust documents (before 2002) were unavail-
able because the various banks and accounting firms had
destroyed them.
John testified similarly. John also testified about the indebt-
edness on the ranch, about how the trustees tried to pay the
debt without selling the ranch, and that he thought the trust
should be terminated. John also explained that he had received
trust documents from the trust’s accountant, but was unable to
locate them.
Kim testified that after receiving the letter from Gilg, she
requested an accounting because she believed that there should
have been more money to distribute to the grandchildren upon
Mamie’s death. She stated that she thought the trustees had
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Cite as 288 Neb. 389
breached their duties, in essence, because the trustees could
not account for the trust’s activity from 1976 through 2002,
because there were basically no records showing that John
had made the required payments, and because of the extension
agreements and lack of charged interest coming into the trust.
She also stated that once she became a beneficiary, she received
annual schedule K-1 tax reports, which included information
such as interest, her share of income, and expenses.
The parties also presented testimony and documents regard-
ing the trust’s financial information. Josh Weiss, Kim’s expert,
testified that based upon his review of various documents, the
trust should have had more money. Gilg, the trust’s accountant,
testified that Weiss’ calculations did not take into account sev-
eral items, such as the company’s indebtedness and taxation on
the ranch’s sale. He also testified that all of the trustees had
acted properly, that John had made all the necessary payments,
and that, in his opinion, “the beneficiaries did not suffer any
monetary losses by reason of the trustees’ administration of
the trust.”2
The County Court’s Order
The county court made several relevant factual findings. The
court found that the trustees provided each of the beneficiaries,
including Kim, annual schedule K-1 tax reports “showing the
beneficiaries their respective share of income and/or loss from
the Trust estate.” The court found that Kim requested a formal
accounting from the trustees in December 2009 and that the
trustees had provided a complete accounting in 2010, which
“dated back to 2002.” The court found that the trustees were
“unable to provide documentation for the years prior to 2002
because such documentation has been destroyed.”
The court noted that Kim’s main argument was that because
the trustees were “unable to provide documentation from 1976
to 2002, the court must therefore assume that there were
breaches of duty” which caused damage to Kim. The court
determined, however, that it was Kim’s burden to prove that
the trustees had breached their fiduciary duties and that her
2
Id. at 363-64, 838 N.W.2d at 344.
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argument was “an attempt to improperly switch the burden of
proof” to the trustees.
The court concluded that Kim had not met her burden. As
to the various claims of damages, the court rejected those
claims. Kim asserted that the trustees could not account for
$307,942.71 in principal and interest owed to the trust from the
ranch’s sale. The court noted that Kim
want[ed] the court to therefore assume those payments
were not received, or, that any bills, taxes and expenses
the [trustees] claim were paid out of the princip[al] were
not valid expenditures. Despite [Kim’s] having the burden
to prove these assertions, the evidence presented con-
vinces the court those payments were in fact paid.
As to Kim’s claim that the trustees had failed to collect certain
interest on late payments, the court did not believe there were
late payments. And even if there were, the court believed any
accrued interest would have been much lower. The court also
determined that the trustees would have been well within their
rights to waive any late fees “considering the entire circum-
stance of this family trust.” Finally, regarding Kim’s allega-
tion of “unaccounted princip[al] growth,” the court found that
Kim’s expert was not credible and that the alleged damages
were too speculative. The court dismissed Kim’s complaint,
denied Kim costs and attorney fees, and denied the trustees’
request to terminate the trust.
The Court of Appeals’ Opinion
On appeal, Kim assigned as error the trial court’s (1) failing
to shift the burden of proof to the trustees when the trustees
failed to provide a full accounting; (2) finding that she had not
met that burden (which she should not have borne) when proof
of her claims rested within the exclusive control of the trust-
ees; (3) finding that schedule K-1 tax reports were sufficient
accountings when no such forms were actually in evidence;
and (4) failing to award attorney fees.
The Court of Appeals first addressed the burden of proof.
The court began by noting: “In Nebraska, the issue of the
burden of proof in testamentary trust cases has not frequently
been addressed, and there is no Nebraska case law directly
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addressing the issue of the burden of proof for the duty to
inform and account to beneficiaries.”3 The court then cited out-
side jurisdictions for the proposition that there is a presumption
that a trustee has acted in good faith and that the burden is on
the one questioning the trustee’s actions and seeking to estab-
lish a breach of trust to prove the contrary.4
The Court of Appeals then looked toward the Restatement
(Third) of Trusts.5 The court observed that under the
Restatement, the trustee has a duty to keep records and provide
reports and to show that his accounting was correct and prop-
er.6 Further, if the trustee does not “maintain necessary books
and records,”7 “‘the presumptions are all against him, obscuri-
ties and doubts being resolved adversely to him . . . .’”8 But the
court noted that the Restatement also stated, “When a plaintiff
brings suit against a trustee for breach of trust, the plaintiff
generally bears the burden of proof.”9 After setting forth these
propositions, the court reviewed the county court’s order and
concluded that it had not failed to properly shift the burden
of proof, but instead had concluded that Kim had not met her
initial burden.
In assessing that conclusion, the Court of Appeals focused
on the trustees’ alleged breach of their duty to inform and
3
Id. at 366, 838 N.W.2d at 346.
4
See, In re Rolf H. Brennemann Testamentary Trust, supra note 1 (citing
Salem v. Lane Processing Trust, 72 Ark. App. 340, 37 S.W.3d 664 (2001);
Gregory v. Moose, 266 Ark. 926, 590 S.W.2d 665 (Ark. App. 1979); Estate
of James Campbell, Decsd., 42 Haw. 586 (1958); Jarvis v. Boatmen’s
National Bank of St. Louis, 478 S.W.2d 266 (Mo. 1972); First National
Bank of Kansas City v. Hyde, 363 S.W.2d 647 (Mo. 1962); In re Estate
of Damon, No. 28378, 2011 WL 576588 (Haw. App. Feb. 18, 2011)
(unpublished disposition listed at 125 Haw. 242, 257 P.3d 1219 (2011)).
5
Restatement (Third) of Trusts § 83 (2007).
6
See id., § 83, comments a. and a(1). and accompanying Reporter’s Note.
See, also, Alan Newman et al., The Law of Trusts and Trustees § 961 (3d
ed. 2010); 90A C.J.S. Trusts § 689 (2010).
7
See Restatement, supra note 5, § 83, comment a(1). at 204-05.
8
Id., Reporter’s Note comments a. and a(1). at 208 (citing Wood et al. v.
Honeyman et al., 178 Or. 484, 169 P.2d 131 (1946)).
9
See Restatement (Third) of Trusts § 100, comment f. at 68 (2012).
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report. The court’s analysis addressed three periods: 1976 to
2002, 2002 to 2005, and 2005 to 2009. Regarding the first
period, the court concluded that Kim had met her burden
because “[t]he trustees could not provide an adequate account-
ing of the trust from 1976 through 2002 . . . .”10 But the court
determined that contrary to Kim’s central argument, the record
showed that John had made all necessary payments. The court
therefore found the breach harmless.
Regarding the second period, the Court of Appeals deter-
mined that Kim had not met her burden. Under the law at
that time (before the adoption of the Nebraska Uniform Trust
Code11), the trustees were required only to keep each ben-
eficiary “reasonably informed” of the trust and its adminis-
tration.12 The court concluded that the trustees did so and that
therefore, they did not breach their duty to inform and report,
because they sent Kim annual schedule K-1 tax reports.
Regarding the third period, the Court of Appeals determined
that Kim had met her burden. The schedule K-1 tax reports,
which the court found sufficient to keep her “‘reasonably
informed’” did not satisfy the Nebraska Uniform Trust Code’s
additional reporting requirements in § 30-3878(c), which came
into effect in 2005.13 Nevertheless, the court determined that
the trustees had cured the breach once they filed a full account-
ing (for 2002 to 2010). Thus, the court found the breach, and
any related error by the trial court, harmless.
Finally, after noting that whether to award attorney fees
was within the trial court’s discretion, the Court of Appeals
affirmed the trial court’s decision not to award attorney fees.
The court recited the applicable propositions of law and held
simply: “Having reviewed the record, and based upon the cir-
cumstances of this case, we conclude that the trial court did
10
See In re Rolf H. Brennemann Testamentary Trust, supra note 1, 21 Neb.
App. at 370, 838 N.W.2d at 348.
11
See Neb. Rev. Stat. §§ 30-3801 to 30-38,110 (Reissue 2008, Cum. Supp.
2012 & Supp. 2013).
12
See Neb. Rev. Stat. § 30-2814 (Reissue 1995).
13
In re Rolf H. Brennemann Testamentary Trust, supra note 1, 21 Neb. Ct. App.
at 372, 838 N.W.2d at 349. See 2005 Neb. Laws, L.B. 533, § 45.
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not abuse its discretion in denying [Kim’s] request for attorney
fees . . . .”14 The court affirmed the trial court’s order.
ASSIGNMENTS OF ERROR
In her petition for further review, restated and consolidated,
Kim assigns that the Court of Appeals erred in (1) presum-
ing that the trustees acted in good faith and placing the bur-
den of proof on Kim to prove breaches of trust, particularly
where the trustees failed to properly maintain trust records;
(2) concluding that schedule K-1 tax reports were sufficient
to reasonably inform beneficiaries; and (3) not awarding her
attorney fees.
STANDARD OF REVIEW
[1] Absent an equity question, an appellate court reviews
trust administration matters for error appearing on the record.
But when an equity question is presented, appellate review of
that issue is de novo on the record.15
ANALYSIS
We understand Kim’s general position to be this: The
trustees breached their duty to inform and report throughout
the life of the trust. She argues that because they failed to
properly maintain trust records, they cannot fully account
for the trust’s administration and its assets. And she argues
that because they cannot fully account, it is appropriate to
surcharge them for the difference between the money on hand
and the money she alleges should have been there had the
payments for the sale of the ranch been made to the trust and
properly managed. We also understand that on appeal, Kim
takes no issue with the sale of the ranch in 1986, the $160,000
downpayment at that time, or the refinancing agreements
in 1996.
Regarding the Court of Appeals’ decision, Kim agrees that
the court’s focus on the trustees’ duty to inform and report,
14
In re Rolf H. Brennemann Testamentary Trust, supra note 1, 21 Neb. Ct. App.
at 375, 838 N.W.2d at 350-51.
15
See In re Margaret Mastny Revocable Trust, 281 Neb. 188, 794 N.W.2d
700 (2011).
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and whether they violated that duty, was appropriate. But Kim
takes issue with the court’s statements regarding the burden of
proof and whether a trustee’s actions are entitled to a presump-
tion of propriety. She takes issue with the court’s concluding
that the trustees’ distribution of schedule K-1 tax reports sat-
isfied their duty to inform and report before adoption of the
Nebraska Uniform Trust Code. She also contests the court’s
conclusion that any breaches of trust were harmless. And Kim
argues that the court erred in failing to award attorney fees.
We will address each issue in turn.
Kim first takes issue with the Court of Appeals’ state-
ments regarding the allocation of the burden of proof and a
trustee’s actions being entitled to a presumption of propriety.
In its opinion, the court cited to outside authorities for the
proposition that “the presumption is that a trustee has acted in
good faith and that the burden is on the one questioning his
actions and seeking to establish a breach of trust to prove the
contrary.”16 Kim argues that this does not square with our law,
either statutory or jurisprudential, and that the burden should
always be on the trustees to be able to accurately account for
the trust’s administration.
Specifically, Kim argues in her brief on further review that
the Court of Appeals erred in “holding a beneficiary bears
the initial burden of proof that trustees failed to account
. . . where she proved no accounting was rendered but was
not able to prove what happened to trust funds because the
records were in the trustees’ sole control.” Thus, it appears
that Kim understood the court to require her not only to prove
that she had not received an accounting, i.e., a breach of the
duty to inform and report, but also to prove what happened
to the trust’s assets. Kim also argues that the court erred in
“creat[ing] a presumption [of propriety] where . . . incomplete
records were kept, no accountings were rendered annually,
and no documents supported a ‘catchup’ accounting.” Thus,
it appears that Kim understood the court to have applied a
presumption of propriety to the trustees’ actions even where
16
In re Rolf H. Brennemann Testamentary Trust, supra note 1, 21 Neb. Ct. App.
at 367, 838 N.W.2d at 346 (citations omitted).
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the trustees failed to properly account and their recordkeeping
was abysmal.
[2,3] But Kim’s argument misperceives what the Court of
Appeals did. The Court of Appeals simply set forth the gen-
eral framework for analyzing alleged breaches of trust. The
Court of Appeals did not hold, however, that the trustees’
actions in this case were presumed correct. This is because
any presumption in the trustees’ favor obviously disappeared
once it became clear that they had failed to properly maintain
trust records. It is well established that where a trustee fails to
maintain proper records, all doubts regarding his administra-
tion of the trust are resolved against him.17 Nor did the Court
of Appeals hold that Kim was required to prove the disposi-
tion of trust assets or the accuracy of the trustees’ accounting.
She was required only to prove that the trustees breached
their duty to inform and report; in other words, that as a ben-
eficiary, she was entitled to certain information, and that the
trustees had not provided it.18 An accounting is ordinarily an
appropriate remedy for a breach of the duty to inform and
report.19 And if ordered, the trustees would have had the bur-
den to prove its completeness and accuracy once questioned.20
But here, the trustees could provide only a partial accounting
because they had not properly maintained trust records. Under
these circumstances, ordering an accounting would be futile
and the court had discretion to award “any other appropri-
ate relief.”21 But the Court of Appeals determined that no
other relief was warranted; we will discuss that conclusion in
detail below.
As for the propositions themselves—that a trustee’s actions
are presumed proper and that the burden rests on a plaintiff to
17
See, e.g., In re Estate of Hedke, 278 Neb. 727, 775 N.W.2d 13 (2009);
Honeyman et al., supra note 8; Restatement, supra note 5, § 83, comment
a(1).; Newman et al., supra note 6.
18
See §§ 30-2814 and 30-3878.
19
See § 30-3890.
20
See, e.g., In re Estate of Marlin, 140 Neb. 245, 299 N.W. 626 (1941);
Newman et al., supra note 6; 90A C.J.S., supra note 6.
21
See § 30-3890(b)(10). See, also, 90A C.J.S., supra note 6.
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prove a breach of trust—we think they are correct. We first
note that there is little difference between the two: to say that
a court presumes that a trustee’s actions are correct is simply
another way of saying the burden rests on a plaintiff to prove
a breach of trust. But regardless, these appear to be well-
established propositions. In addition to the cases cited by the
Court of Appeals, we have found other cases supporting these
propositions.22 Secondary authorities, such as the Restatement,
treatises, and legal encyclopedias, likewise support these prop-
ositions.23 And Kim has not pointed us to any persuasive
authority that does not. So we see no error in the court’s state-
ments regarding a presumption of propriety and the burden of
proof or in the framework the court employed.
Kim next takes issue with the Court of Appeals’ substan-
tive analysis, which it broke down into three periods: 1976 to
2002, 2002 to 2005, and 2005 to 2009. The court concluded
that the trustees had breached their duty to inform and report
for each period except for 2002 to 2005. Under the law at the
time, absent a request for an accounting, the trustees were
required only to keep Kim “reasonably informed of the trust
and its administration.”24 The court concluded that the trustees’
providing Kim with annual schedule K-1 tax reports was suf-
ficient to meet that obligation. Kim argues that this was error
because schedule K-1 tax reports basically offer only limited
information regarding the recipient’s taxable income; thus,
they are not sufficient to meet the trustees’ duty to inform
and report.
We agree with Kim. At the time, § 30-2814 required that
absent a request for an accounting, the trustees keep Kim
“reasonably informed of the trust and its administration.” And
22
See, e.g., Lopez v. Lopez, 250 Md. 491, 243 A.2d 588 (1968); Van de
Kamp v. Bank of Am. Nat. Trust, 204 Cal. App. 3d 819, 251 Cal. Rptr. 530
(1988); Elmhurst Nat. Bank v. Glos, 99 Ill. App. 2d 74, 241 N.E.2d 121
(1968).
23
See, Restatement, supra note 9; George Gleason Bogert & George Taylor
Bogert, The Law of Trusts and Trustees § 871 (2d ed. 1995); 90A C.J.S.,
supra note 6, § 600.
24
See § 30-2814.
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while there are no schedule K-1 tax reports in evidence, tes-
timony at trial indicated that they basically contained only
information regarding Kim’s taxable income from the trust.
As such, the trustees’ providing it to Kim each year could
not satisfy their duty to keep her “reasonably informed of the
trust and its administration.” So we disagree with the Court
of Appeals on the scope of the trustees’ breach of their duty
to inform and report. We conclude that at no time during the
relevant period did the trustees satisfy that duty.
The question remains whether Kim was entitled to relief.
Section 30-3890 lists various remedies for breaches of trust,
including an accounting, and a catchall provision allowing a
court to award “any other appropriate relief.”25 Kim argues
that the accounting she received was insufficient because it
did not account for trust assets from the trust’s inception. It
went back only to 2002. Also, she asserts it lacked any sup-
porting documentation because the trustees failed to maintain
trust records. She argues that in such a situation, surcharging
the trustees for any amount they cannot properly account for
is appropriate, and that the Court of Appeals erred in failing to
award any relief.
We disagree. Although the trustees’ conduct fell below
acceptable standards, we agree with the Court of Appeals that
the trustees’ breach of their duty to inform and report was
essentially harmless. Despite the trustees’ failure to properly
account and maintain trust records, what records and evidence
which are available show that the trust received the payments
for the ranch and that the trustees appropriately managed
the money.
Mamie and John both testified that John had made all the
payments for the ranch, as did Gilg, the trust’s accountant.
The available financial records, as well as inferences that
may be drawn from the evidence, support this conclusion.
Exhibit 103, the original purchase agreement, required John
to make payments to the Bank of Hyannis, a third-party bank
which acted as trustee and held the deed of trust to the ranch.
25
§ 30-3890(b)(10). See, also, 90A C.J.S., supra note 6.
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Exhibit 104, the amortization schedule, has notes indicating
that John made the annual payments up until July 1996, at
which time, the parties refinanced the purchase agreement.
At that time, the remaining principal owed was $254,825.37.
Exhibit 105 shows that there were two refinancing agreements
extending the payment plans: one for 3 years with the bank
(which had acquired Bill’s son’s interest) for $45,405.30, and
one for 10 years with the other parties for $209,420.07. Those
amounts totaled the remaining principal owed. In July 2006,
the bank (which both held the deed of trust and had a vested
interest in a portion of the proceeds) issued a deed of recon-
veyance for the property, which indicates that John made all of
the payments. At trial, even Kim’s expert admitted that a com-
mercial bank would not issue a deed of reconveyance if there
was not proof that John had made every payment.
Regarding the disposition of those payments, the record con-
vinces us that the trustees appropriately managed the money.
The ranch sold for $494,021; of that amount, $160,000 went to
pay closing costs and existing liabilities. The trust was entitled
to 42.42 percent of what remained, which was $141,691.71.
Exhibit 101, Rolf’s will, indicates that the trust was to main-
tain the principal while paying out the interest to the income
beneficiaries. Testimony at trial indicated that each ranch pay-
ment was made up of principal and interest, and subject to sig-
nificant taxation. Although the trustees could not provide a full
accounting, the records from 2002 to 2010 indicated that they
paid out interest income to the beneficiaries during that period.
And there were no allegations that the interest had not been
paid out throughout the life of the trust. Because the trustees
paid out the interest to the beneficiaries, the trustees had to pay
the trust’s other liabilities from the principal.
The trustees would then deposit the remaining money into
a Franklin Templeton income fund. The cost basis of the
Franklin Templeton fund in January 2008 was $139,795.27,
which was very close to the principal amount the trust was
entitled to from the sale of the ranch. The record shows that
the Franklin Templeton fund lost a significant amount of
money during the 2008 economic downturn before the trust-
ees withdrew the money from the fund. But no one argued
Nebraska Advance Sheets
IN RE ROLF H. BRENNEMANN TESTAMENTARY TRUST 403
Cite as 288 Neb. 389
at trial that investment in the Franklin Templeton fund was
irresponsible; on the contrary, Kim’s own expert testified
that it was reasonable at the time. And the remaining money
amount squared with what Gilg represented the trust to have
during litigation. Thus, our review of the record shows that
the trustees’ breach of their duties did not harm the trust or
the beneficiaries.
[4] The final issue is whether the court should have awarded
attorney fees to Kim. On appeal, a trial court’s decision
awarding or denying attorney fees will be upheld absent an
abuse of discretion.26 The Court of Appeals concluded that
“[h]aving reviewed the record, and based upon the circum-
stances of this case, . . . the trial court did not abuse its discre-
tion by denying [Kim’s] request for attorney fees . . . .”27 Kim
argues this was error, essentially because the trustees clearly
breached their duty to inform and report, and that some sanc-
tion is necessary.
The Nebraska Uniform Trust Code explicitly provides when
attorney fees are appropriate in trust administration cases.
Section 30-3893 states: “In a judicial proceeding involving the
administration of a trust, the court, as justice and equity may
require, may award costs and expenses, including reasonable
attorney’s fees, to any party, to be paid by another party or
from the trust that is the subject of the controversy.”
Here, the trustees clearly breached their duty to inform and
report, and did so for decades. They were unable to properly
account to Kim because they failed to properly maintain
trust records. In such a situation, Kim had little choice but
to resort to litigation to resolve any doubts about the trust’s
administration. Even though the trustees’ conduct ultimately
did not harm Kim or the trust, that became clear only after
litigation—litigation made necessary by the trustees’ breach
of their duties.
Under these circumstances, we agree that the Court of
Appeals erred in summarily affirming the county court’s ruling
26
See In re Trust of Rosenberg, 273 Neb. 59, 727 N.W.2d 430 (2007).
27
In re Rolf H. Brennemann Testamentary Trust, supra note 1, 21 Neb. Ct. App.
at 375, 838 N.W.2d at 350-51.
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404 288 NEBRASKA REPORTS
not to award attorney fees, particularly where that ruling was
premised on the county court’s erroneous conclusion that Kim
had failed to prove a breach of trust. But we hesitate to award
fees ourselves, because we are reviewing a cold record and the
county court oversaw the litigation. The county court is thus
in the best position to determine, in light of our disposition of
the merits of this appeal, whether “justice and equity” require
attorney fees, and in what amount. We reverse, and remand for
the court to do so.
CONCLUSION
We agree with the Court of Appeals’ general legal frame-
work and ultimate conclusion that the trustee’s breach was
harmless. We disagree, however, with the Court of Appeals’
conclusion that annual schedule K-1 tax reports were sufficient
to reasonably inform beneficiaries of the trust and its adminis-
tration. And we conclude that the county court should revisit
the issue of attorney fees in light of our disposition of the mer-
its of this appeal.
Affirmed in part, and in part reversed and
remanded for further proceedings
on the issue of attorney fees.
Wright, J., not participating.
P erry Elting et al., appellees, v.
K erwin Elting, appellant.
___ N.W.2d ___
Filed June 27, 2014. No. S-13-551.
1. Trial: Witnesses. In a bench trial of an action at law, the trial court is the
sole judge of the credibility of the witnesses and the weight to be given
their testimony.
2. Judgments: Appeal and Error. In reviewing a judgment awarded in a bench
trial of a law action, an appellate court does not reweigh evidence, but consid-
ers the evidence in the light most favorable to the successful party and resolves
evidentiary conflicts in favor of the successful party, who is entitled to every
reasonable inference deducible from the evidence.
3. ____: ____. In a bench trial of a law action, the trial court’s factual findings
have the effect of a jury verdict and will not be disturbed on appeal unless
clearly wrong.