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Hemphill v. Shore

Court of Appeals of Kansas.
Jan 23, 2015
342 P.3d 2 (Kan. Ct. App. 2015)

Opinion

No. 111,134.

2015-01-23

Daniel L. HEMPHILL, Appellant, v. Jay F. SHORE, Trustee of the Shore Family Trust, Appellee.

Appeal from Sedgwick District Court; Jeffrey E. Goering, Judge.Aaron L. Kite, of Rebein, Bangerter, PA, of Dodge City, for appellant.Jeffrey L. Carmichael, of Morris, Laing, Evans, Brock & Kennedy, Chartered, of Wichita, for appellee.


Appeal from Sedgwick District Court; Jeffrey E. Goering, Judge.
Aaron L. Kite, of Rebein, Bangerter, PA, of Dodge City, for appellant. Jeffrey L. Carmichael, of Morris, Laing, Evans, Brock & Kennedy, Chartered, of Wichita, for appellee.
Before Hill, P.J., McAnany, J., and Burgess, S.J.

MEMORANDUM OPINION


PER CURIAM.

Daniel Hemphill appeals the district court's summary judgment against his claim that his uncle, Jay Shore, committed constructive fraud in liquidating a family trust and distributing the assets to himself. Shore liquidated the Trust in 1992 following the death of Susan Shore, Hemphill's mother, and used the proceeds to build a house. In 2009, Daniel Hemphill brought suit against Shore regarding the Trust, which he argued he had only recently discovered. The district court dismissed the case due to the statute of limitations, but our Supreme Court reversed and remanded for a single claim of constructive fraud. Hemphill v. Shore, 295 Kan. 1110, 289 P.3d 1173 (2012). On remand the district court found that the use of trust assets to build a house was within the established purpose of the Trust and Shore had not committed constructive fraud in liquidating the Trust. The district court also imposed $35,867.17 in attorney fees on Hemphill. Hemphill appeals. We affirm in part and reverse in part.

Factual and Procedural Background

Factual History

Hemphill appeals on limited grounds that do not require a full recitation of all facts underlying the approximately 5 years this case has been litigated. The basic facts regarding the action are uncontroverted by the parties and are briefly summarized here for context. In 1984 Lee and Linna Shore created the Shore Family Trust (Trust) with their children Jay and Susan Shore as co-trustees to provide for the beneficiaries' “health, education, support or maintenance.” The beneficiaries of the Trust were “Jay F. Shore and Susan L. Shore, the spouses of Jay F. Shore and Susan L. Shore, and any children subsequently born to Jay F. Shore and Susan L. Shore.” Susan Shore died of leukemia in 1992. Susan left behind one son, Daniel Hemphill, who was born in 1987. At the time of Susan's death, Daniel Hemphill lived with his father who was Susan's ex-husband.

In 1992, following Susan's death, Shore had a conversation with his parents who requested he sell the Trust assets to them and use the proceeds for himself. Based upon the conversation with his parents, the Trust was liquidated and Shore took the distribution of cash proceeds from the sale. The total value of those liquidated assets was $92,152.49. Shore used the proceeds of the sale to build a house.

Shore acknowledged in deposition that he did not understand what his obligations were as trustee of the Trust. Shore noted the meeting in 1992 was the first time he was presented with the Trust document and stated he “may have skimmed over it.” Shore also acknowledged he was unaware that Hemphill was a beneficiary of the Trust. Shore could not identify any written reports or communications regarding the Trust sent to any beneficiaries regarding the status of trust assets with the exception of a reference to the Trust in Susan's will. While the parties argue over the extent Hemphill and his father were aware of the Trust, neither appeal the district court's ruling that their awareness of the existence of a trust was not such that would lead a reasonably prudent person to investigate the possibility that a constructive fraud had been committed by the trustee until 2 years of bringing this suit in 2009. Procedural History

In 2009, Hemphill brought suit against his uncle, Shore, regarding the liquidation of the Trust and distribution of the assets to himself. Shore moved to dismiss the suit because the Trust had not been in existence for approximately 14 years at that point and the statute of limitations had run. The district court dismissed the case, finding the Trust granted broad discretionary powers to distribute income and invade principle, and the claims were barred by the statute of limitations. This court affirmed. Hemphill v. Shore, 44 Kan.App.2d 595, 239 P.3d 885 (2010), aff'd in part and rev'd in part 295 Kan. 110, 289 P.3d 1173 (2012).

Our Supreme Court, however, reversed the dismissal of the case for exceeding the statute of limitations and remanded for a determination whether one remaining claim, constructive fraud, was also time barred based on the discovery of the alleged constructive fraud. Hemphill, 295 Kan. 1110 (noting an issue of fact regarding Hemphill's age and the timing of the discovery). Our Supreme Court also held that the Trust did not grant Shore, as trustee, broad discretionary powers, but the power to distribute was limited to the “ ‘ascertainable standards' “ of “ ‘health, education, support, or maintenance.’ “ Hemphill, 295 Kan. at 1119–20.

On remand, the district court found that Hemphill was not time barred from bringing the action as his awareness of the existence of a trust was not such that would lead a reasonably prudent person to investigate the possibility that a constructive fraud had been committed by the trustee. The district court found that Hemphill brought the action within 2 years of discovery of the terms of the Trust or the extent to which he was a beneficiary. The district court went on to find, however, that Shore's use of the liquidated trust property, to build a new house, was within the “ ‘ascertainable standards' “ provided for in the Trust as a new house was “ ‘shelter’ “ and within the terms “ ‘support, or maintenance.’ “ The district court then found that as the uncontroverted facts showed that Shore had distributed the liquidated trust assets in accordance with the purpose of the Trust, and he as trustee did not abuse his discretion in making that distribution, Hemphill's claim of constructive fraud failed as a matter of law. In doing this, the district court noted that it made no difference whether Shore used the assets directly to build the home or to repay the loan for building the home. The district court also noted that while Hemphill mentioned in his motions that the failure to make periodic reports as a trustee may also be evidence of constructive fraud: “Plaintiff does not appear to suggest that the alleged failure to provide periodic reports is, on its own, an additional count for constructive fraud.” Based upon this, the district court granted summary judgment in favor of Shore.

Following summary judgment, Shore moved for the assessment of attorney fees pursuant to K.S.A. 58a–1004. Hemphill opposed the motion as well as cross-motioned for the assessment of fees against Shore. The notice of appearances and journal entry of the matter indicate a hearing occurred on this issue on January 3, 2014, although no transcript is included in the record. Shore alleges the lack of transcript is due to Hemphill's waiver of the taking of a record at the hearing. The district court issued a journal entry assessing attorney fees of $35,867.17 against Hemphill pursuant to K .S.A. 58a–1004. Hemphill timely appeals both the summary judgment and the imposition of attorney fees.

Did the District Court Err in Granting Summary Judgment?

Standard of Review

The standard of review of summary judgment motions is well known:

“ ‘Summary judgment is appropriate when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. The trial court is required to resolve all facts and inferences which may reasonably be drawn from the evidence in favor of the party against whom the ruling is sought. When opposing a motion for summary judgment, an adverse party must come forward with evidence to establish a dispute as to a material fact. In order to preclude summary judgment, the facts subject to the dispute must be material to the conclusive issues in the case. On appeal, we apply the same rules and where we find reasonable minds could differ as to the conclusions drawn from the evidence, summary judgment must be denied. [Citations omitted.]’ “ O'Brien v. Leegin Creative Leather Products, Inc., 294 Kan. 318, 330, 277 P.3d 1062 (2012) (quoting Shamberg, Johnson & Bergman, Chtd. v. Oliver, 289 Kan. 891, 900, 220 P.3d 333 [2009] ).

“Questions of law, including those at the heart of summary judgment decisions, are subject to de novo review on appeal.” U.S .D. No. 446 v. Sandoval, 295 Kan. 278, 282, 286 P.3d 542 (2012).

Analysis

Hemphill's first issue on appeal appears flawed. Hemphill titles the issue: “It was reversible error for the trial court to determine that no constructive fraud occurred simply because the Defendant's self-serving liquidation of the Shore Family Trust and distribution of proceeds did not violate a duty under the [T]rust.” The majority of the argument consists of a declaration of nine facts that Hemphill states are “uncontroverted.” Hemphill appears to be asserting that additional causes for constructive fraud occurred that the district court ignored by taking a “ ‘no harm no foul’ “ approach, although it is difficult to discern if this is actually the argument. Hemphill, however, also states in concluding: “Plaintiff has come forward with sufficient facts to establish an issue that should be presented at trial.” This appears to be a claim that an issue of fact still exists. It is not clear what Hemphill is actually asserting as an issue and whether that issue is appropriately before this court following a summary judgment.

As to the issue of whether an issue of material fact exists, Hemphill has not asserted any actual argument and only references alleged uncontroverted facts. Based on that, any argument against summary judgment itself fails. There is no assertion that an issue of material fact still exists that would make summary judgment inappropriate. Hemphill's statement claiming sufficient facts exist to present at trial fails.

The remaining issue is whether the district court erred in the application of the law in this case. Hemphill, notably, does not argue that Shore's ultimate liquidation of the Trust and use of those proceeds to buy a house was not within the purpose of the Trust, which was the basis of the district court's decision. To the extent Hemphill is asserting an issue relating to the district court's application of law; he fails to cite any relevant authority or law to establish any error of law. See McCain Foods USA, Inc. v. Central Processors, Inc., 275 Kan. 1, 15, 61 P.3d 68 (2002) (“Simply pressing a point without pertinent authority, or without showing why it is sound despite a lack of supporting authority, is akin to failing to brief an issue.”); State v. McCaslin, 291 Kan. 697, 709, 245 P.3d 1030 (2011) (issue not briefed is deemed waived or abandoned); Supreme Court Rule 6.02(a)(5) (2013 Kan. Ct. R. Annot. 40) (An appellant's brief must include: “The arguments and authorities relied on.”). Hemphill makes an assertion that “[t]he Court's analysis is inappropriate under Kansas constructive trust law and the facts of this case” but doesn't explain with any clarity or citation how that analysis was wrong. As such, it is difficult to state that Hemphill has asserted an actual claim on appeal.

Hemphill's argument does appear, in some way, to indicate, based on the “no harm no foul” statement, and references to other violations of a trustee's obligation, that there may be basis for a constructive fraud claim other than the ultimate distribution of the assets. The district court, however, specifically found: “Plaintiff does not appear to suggest that the alleged failure to provide periodic reports is, on its own, an additional count for constructive fraud.” Hemphill makes no reference to this statement or any argument that the district court erroneously found that Hemphill was limited to a constructive fraud claim based only on the final distribution of the Trust and not the potential breach of other fiduciary duties. In his opposition to summary judgment, Hemphill failed to address the issues he now seems to be raising. Hemphill raised no genuine material fact as to these issues, and there are no new facts or legal theory that would preclude summary judgment. The judgment of the district court is affirmed.

Did the District Court Abuse Its Discretion in Imposing Attorney Fees?

Hemphill next argues the district court abused its discretion in imposing $35,867.17 in attorney fees against Hemphill. The district court awarded the fees pursuant to K.S.A. 58a–1004, and Hemphill does not appeal the legal authority of the district court to impose attorney fees under the statute, only that it abused its discretion. K.S.A. 58a–1004 provides:

“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 fees, to any party, to be paid by another party or from the trust that is the subject of the controversy.”

An appellate court reviews the award of attorney fees under K.S.A. 58a–1004 for abuse of discretion. In re Estate of Somers, 277 Kan. 761, 773, 89 P.3d 898 (2004). “Judicial discretion is abused when no reasonable person would adopt the position taken by the district court.” 277 Kan. at 773. Hemphill argues the district court abused its discretion because the imposition of attorney fees against Hemphill does not serve “justice and equity” under the statute, and that the attorney fees imposed are unreasonable. In briefing the argument, Hemphill fails to provide citations to the record supporting his claims.

Hemphill's claim regarding the reasonableness of attorney fees is not properly before this court. Notably, Shore claims Hemphill did not object to the reasonableness of the claims at the hearing on the issue and that Hemphill waived the taking of a record on a hearing for attorney fees. The notice of appearances and journal entry of the matter indicate a hearing occurred on this issue on January 3, 2014, although no transcript is included in the record. Hemphill's sole motion in the record regarding attorney fees does not make an argument regarding the reasonableness of the fees imposed. As there is no indication from the record that Hemphill ever raised the issue or objected, and the evaluation of attorney fees would require facts not in the record, the reasonableness of attorney fees cannot be raised here. See Central Processors, Inc., 275 Kan. at 15 (Issues not raised before the trial court cannot be raised on appeal .).

Hemphill's remaining issue is that “justice and equity” are not served by imposing attorney fees and the fees become punitive when imposed on Hemphill because they can no longer be imposed on the now-liquidated trust. Hemphill argues that he brought a fair legal challenge based on Shore's concealment of liquidating the trust and that Shore is in a better position to bear the burden of attorney fees as he is wealthier. K.S.A. 58a–1004 permits “the court, as justice and equity may require, may award costs and expenses, including reasonable attorney fees, to any party, to be paid by another party or from the trust that is the subject of the controversy.”

The district court explained the reasoning imposing the fee in the journal entry on the issue. The district court noted:

“There is nothing in the record before the Court that would suggest that simple communication between family members regarding the status of the Trust was impossible or would have been unproductive. While it may have been true that the Defendant did not notify the Plaintiff of the distribution that resulted in termination of the Trust, it should be noted that this distribution occurred when Plaintiff was approximately 8 years old and there is nothing that would have prevented Plaintiffs father or the Plaintiff himself when he became older from simply asking Defendant about the status of the Trust.”

The district court went on to balance Hemphill's financial condition against “the fact that the Defendant was forced to defend himself against a claim involving a distribution that occurred more than 15 years prior to the filing of the lawsuit, a distribution that the Court has since determined was consistent with the terms of the Trust.” As stated above, an appellate court reviews the imposition of attorney fees for abuse of discretion. Somers, 277 Kan. at 773. Here the district court did ultimately find that any distribution of trust assets was within the purpose of the trust. Based upon that conclusion alone it can be argued that the district court did not take a position that no reasonable person would adopt when imposing fees as “as justice and equity may require.” K.S.A. 58a–1004.

The district court's analysis regarding the timing of the suit is inconsistent with an award of attorney fees. The district court found that Hemphill was not time barred from bringing the action as his awareness of the existence of a trust was not such that would lead a reasonably prudent person to investigate the possibility that a constructive fraud had been committed by the trustee. The district court found that Hemphill brought the action within 2 years of discovery of the terms of the Trust or the extent to which he was a beneficiary. Based upon this ruling, the district court's subsequent analysis that Hemphill or his father could have asked Shore about the Trust earlier, or that there should be a balancing of the fact that the suit involved a “distribution that occurred more than 15 years prior to the filing of the lawsuit,” is contradictory to the fact that Hemphill was unaware of the nature or existence of the Trust until the time period he brought suit. As such, a significant portion of the district court's ruling on the reason to impose attorney fees appears undermined by its own rulings on the underlying issues.

Essentially, Hemphill brought a cause of action that the Supreme Court specifically found was appropriate and justified. The district court found that it was timely. There are no claims that the action was frivolous. Hemphill simply pursued a cause of action that the highest court in this state ruled was appropriate. Awarding attorney fees in a case such as this would have a chilling effect on those persons seeking access to the courts to seek a legal remedy to justifiable claims. The same reasoning applies to the request for attorney fees in the appellate case. The award of attorney fees in the district court is reversed, and the request for attorney fees on appeal is denied.

Affirmed in part and reversed in part.


Summaries of

Hemphill v. Shore

Court of Appeals of Kansas.
Jan 23, 2015
342 P.3d 2 (Kan. Ct. App. 2015)
Case details for

Hemphill v. Shore

Case Details

Full title:Daniel L. HEMPHILL, Appellant, v. Jay F. SHORE, Trustee of the Shore…

Court:Court of Appeals of Kansas.

Date published: Jan 23, 2015

Citations

342 P.3d 2 (Kan. Ct. App. 2015)