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Forbes v. Forbes

Supreme Court of Wyoming

January 23, 2015

WILLIAM C. FORBES and JULIA FORBES, Trustees of the Beckton Ranch Trust U/A/D April 1, 1920, Appellants (Defendants),
v.
WALDO E. FORBES, Appellee (Plaintiff). WALDO E. FORBES, Appellant (Plaintiff),
v.
WILLIAM C. FORBES, JULIA FORBES, EDITH L. FORBES, and SARAH FORBES, Trustees of the Beckton Ranch Trust U/A/D April 1, 1920, Appellees (Defendants)

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Appeal from the District Court of Sheridan County. The Honorable William J. Edelman, Judge.

Representing William C. Forbes and Julia Forbes in Case No. S-14-0122: Patrick J. Murphy and Keith J. Dodson, Williams, Porter, Day & Neville, P.C., Casper, Wyoming. Argument by Mr. Murphy.

Representing William C. Forbes, Julia Forbes, Edith L. Forbes, and Sarah Forbes in Case No. S-14-0123: Patrick J. Murphy and Keith J. Dodson, Williams, Porter, Day & Neville, P.C., Casper, Wyoming. Argument by Mr. Murphy.

Representing Waldo E. Forbes: Debra J. Wendtland, Wendtland & Wendtland, LLP, Sheridan, Wyoming.

Before BURKE, C.J., and HILL, KITE, DAVIS, and FOX, JJ.

OPINION

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FOX, Justice.

[¶1] The Beckton Ranch Trust (BRT) was formed in 1920 by six members of the Forbes family to hold certain parcels of land and their appurtenant water and ditch rights in Sheridan County, Wyoming, for the benefit of their descendants. The number of beneficiaries grew over time to 19, but the Forbes family managed the Trust's interests without significant strife. That changed in 2007, when Waldo E. Forbes (Spike) resigned as trustee following a dispute with his siblings. Later that year, the remaining trustees--Spike's brother, William Forbes (Cam) and his sisters, Julia Forbes, Sarah Forbes, and Edith Forbes--began a series of land and water transactions that form the basis for the breach of the duty of loyalty alleged in the complaint Spike filed against them.

[¶2] After a bench trial, the district court found that two of the four trustees, Cam and Julia, had breached their duty of loyalty and should be removed. The district court made no finding regarding Sarah and Edith, and did not remove them as trustees. Both sides appeal. We reverse the district court's order removing Cam and Julia, and affirm the decision not to remove Sarah and Edith.

ISSUES

[¶3] Cam Forbes and Julia Forbes, Trustees of the BRT, raise the following issues on appeal:

1. Was the district court's decision to remove Cam and Julia as trustees because of the exchange of water rights reversible error because it was based on an unpled claim and because it made clearly erroneous findings regarding the exchange of water rights?

2. Was the district court's finding that Julia profited from the transactions that were undertaken to place a conservation easement on the BRT property clearly erroneous?

3. Did the district court err when it found that Cam and Julia improperly issued new shares in the BRT?

4. Did the district court commit reversible error when it allowed undesignated expert testimony, concluded property deeded to Cam was not suitable for development in spite of Spike's expert's testimony otherwise, and based its finding on difference in value by comparing a 2007 value of one property to a 2013 value of another?

5. Did the district court commit reversible error when it failed to address the BRT Trustees' affirmative defenses?

[¶4] Spike raises only one issue in his cross appeal:

1. Did the district court err as a matter of law when it failed to remove Edith and Sarah as trustees of the BRT?

FACTS

[¶5] The BRT is a Massachusetts Business Trust created by members of the Forbes family in 1920 to manage and hold real property in Sheridan County, Wyoming, for the benefit of the Forbes family and their descendants. The BRT holds approximately 6,000 acres of land worth roughly $20,000,000. Spike was a trustee of the BRT for approximately 44 years, from 1963 until 2007. Cam became a trustee in 1983, Edith in 1986, and Julia and Sarah in 2007. There are 19 beneficiaries of the BRT, including Spike, Cam, Edith, and Julia.[1] Spike is the

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only beneficiary to challenge the trustees' exercise of their duties. The BRT will terminate 20 years after the death of Amelia Forbes, who was born in 1915, and was alive at the time of the hearing.[2]

[¶6] Other Forbes family entities that enter the picture are the Hillside Street Trust (HST), which owns land in the same area as the BRT; the Sarah P. Forbes Revocable Trust (SPFRT), which held the family home sometimes referred to as the " Cave Creek property; " Beckton Stock Farms, Inc., which operates a cattle business on BRT and HST land; and Beckton Livestock, LLC, which owns the livestock that is operated by Beckton Stock Farms. Each of these entities has overlapping, but not identical, beneficiaries, trustees, officers, and members.

[¶7] The stage for the current dispute was set with the aging and estate tax concerns of the generation now managing the BRT; the death of their mother, Sal Forbes; the retirement of Spike as ranch manager and BRT trustee; and the looming termination of the Trust. Spike, who had become disgruntled after a difference of opinion with his siblings over remodeling and construction expenses for the Cave Creek house he lived in with Sal, and who had concluded that " my own estate planning imperatives required some ownership separation," made it clear that he would be taking any steps necessary to separate his interests from the Trust. In a May 6, 2011, email to Edith, he said: " That can happen in a way which is mutually beneficial to many shared common interests, or it can happen with a fight every step of the way." He went on to say: " The choice on 'how' it happens is in your camp: cooperatively or with fight after fight." On July 11, 2011, Spike filed the complaint that began this lawsuit.

A. The 2007 " Cam transaction"

[¶8] While Spike was still a BRT trustee, in January 2007, he proposed that:

It is appropriate that Cam own the land upon which his house sits, currently owned by the Beckton Trust. I propose that such land be sold to him by the Beckton Trust at the current fair market value established by the County which is approximately $25,000 for the home-site plus a small amount for the adjacent agricultural land.

[¶9] In August 2007, after Spike had resigned as trustee, the BRT exchanged the property on which Cam had built his house for a 31 percent interest in 80 acres of property Cam owned near Sheridan, the " Jeffries 80." A 2007 appraisal of the property Cam acquired from the BRT valued it at $320,000. A 2007 appraisal of a 35-acre " hypothetical piece of property" [3] owned by Cam valued it at $454,000. The Jeffries 80 that was ultimately exchanged to the BRT was near, but " not exactly contiguous" to the land appraised in the 2007 appraisal. A 2013 appraisal, obtained by Spike for this litigation, valued the Jeffries 80 at $205,000 (31 percent of that value is $63,550).

[¶10] Trustee Sarah Forbes explained that the trustees concluded this land exchange was in the BRT's interest because the Jeffries 80 seemed to be " premiere land" for development, and because it would be beneficial for the trust to have land that could be sold without impacting the ranch operations. They also believed that the 31% interest would be beneficial because they could " ride on Cam's coattails" when he developed the property. Spike's expert James Urbatchka, who performed both Jeffries 80 appraisals, testified that " I think there was enough relatively flat land that you could put four houses there."

[¶11] Cam recused himself from the August 27, 2007 Resolution of the BRT trustees that adopted the Jeffries 80 exchange. However, he was fully involved in the discussions and planning leading up to that point, retaining Mr. Urbatchka to do the appraisals for both properties, and making several trips over the Jeffries 80 with other BRT trustees and beneficiaries.

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B. The Cave Creek Transaction

[¶12] In 2010, when the matriarch Sal Forbes was ill, the trustees determined that the BRT should acquire her house and property, known as " Cave Creek," in an attempt to keep that property in the family after her death. To accomplish this, the BRT acquired the house and 72 acres, valued at $1,233,000, in exchange for 70 newly-issued shares in the BRT. Neither the Cave Creek transaction nor the issuance of 70 new BRT shares for that transaction were relied upon by the district court in its Findings of Fact, Conclusions of Law and Judgement [sic].

C. The Conservation Easement Exchange

[¶13] Spike testified that " [w]e started talking about a conservation easement and encouraging it in 2005 while I was a trustee." Many BRT beneficiaries had indicated a desire to preserve BRT land with such an easement. In 2010, the BRT trustees reached an agreement with the Nature Conservancy to place a conservation easement on 1,020 acres of BRT land, in exchange for $1,353,200 (net after taxes and costs) and a small piece of property called the " Polo Field." Spike was in favor of this transaction; however, he objected to a series of transactions between trustee Julia Forbes and the BRT which led up to the conservation easement transaction.

[¶14] Late in the negotiations on the conservation easement, which were to be resolved by the end of 2010 due to funding restrictions, the trustees learned that the Natural Resources Conservation Service (NRCS) would require all 19 BRT beneficiaries to be assessed for financial eligibility pursuant to 7 C.F.R. § 1491.1 et seq. prior to approving the easement. In order to avoid the cumbersome eligibility assessment and expedite the process, the trustees determined to convey the property to one person, trustee Julia Forbes.

[¶15] The idea that Julia would hold the 1,020 acres subject to the conservation easement for purposes of the transaction was fairly straightforward; however, Julia did not own sufficient shares in the BRT necessary to exchange for that amount of acreage. In order to acquire sufficient shares, Julia first exchanged 61 shares she had in the HST for 320 acres of HST land. Then, in order to acquire more BRT shares, Julia exchanged the 320 former HST acres to the BRT for 60 newly-issued BRT shares. Julia then relinquished her 210 BRT shares in exchange for 1,020 acres of BRT land. She completed the conservation easement deal as the sole owner of the 1,020 acres, and then transferred that land back to the BRT in exchange for 172 BRT shares. She also conveyed to the BRT the $1,353,200 (net after taxes and costs) that she had received for the easement. Julia still retains the Polo Field property which was also part of the easement consideration, pending resolution of this lawsuit.

[¶16] The trustees did not obtain any current appraisal of the specific pieces of property exchanged in this series of transactions (other than the appraisal of the 1,020 acres for the conservation easement), instead relying on older appraisals, appraisals of other property in the area, and a 2004 market analysis.

D. The Petitions for Change of Place of Use of BRT Water Rights

[¶17] In 2009 or 2010, the Wyoming Board of Control approached Cam and asked him to correct the discrepancies between water rights as permitted and the water as it was actually being put to beneficial use on HST and BRT lands. Significant areas of land were being irrigated where there were no water rights, and other areas for which there were water rights had not had water applied to them for many years. Prestfeldt Surveying was retained to research the water rights, means of conveyance and reliability of supply, and ultimately produced a series of maps to accompany four Petitions for Change of Place of Use. Cam testified with regard to the rearrangement of the water rights: " So really every trust benefited from this. Basically you're taking unused water and putting it where it can be used."

[¶18] The petitions were signed by Cam as

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trustee of the BRT[4] and as trustee of the HST. Although each petition stated that the petitioners (BRT and HST) were the owners of the lands at issue, in fact the petitions covered 36 acres owned by Cam individually, and 160 acres owned by Cam, Julia, and three other family members (the " Tracy property" ). Some BRT water rights were moved to the Tracy property, in exchange for which the Tracy property rights were moved to BRT property. Some Tracy water rights were also moved to Cam's property, which had no water rights prior to the changes in place of use.

[¶19] The petitions were filed in July 2011, and granted by the Wyoming Board of Control in February 2012. These water rights changes in place of use were not reported to the beneficiaries, Cam testified, because " it was not on the radar."

[¶20] No information regarding the water rights petitions was provided to Spike in discovery. Spike learned of them from another source, and shortly thereafter, his counsel listed the four Petitions for Change of Place of Use as exhibits. The BRT trustees objected promptly and repeatedly to any discussion of the petitions, arguing that the water rights issue was an unpled claim, and that the exhibits were not identified until long after the applicable deadlines.

[¶21] Although his initial complaint sought various forms of relief, by the time of trial Spike sought only the removal of the trustees. The district court found that Cam and Julia had breached their duty of loyalty and should be removed as BRT trustees. They appealed that decision. The district court made no finding as to trustees Sarah and Edith, so they continue as BRT trustees. Spike appealed that portion of the decision.

STANDARD OF REVIEW

Following a bench trial, this Court reviews a district court's findings and conclusions using a clearly erroneous standard for the factual findings and a de novo standard for the conclusions of law. Piroschak v. Whelan, 2005 WY 26, ¶ 7, 106 P.3d 887, 890 (Wyo. 2005)[.]
The factual findings of a judge are not entitled to the limited review afforded a jury verdict. While the findings are presumptively correct, the appellate court may examine all of the properly admissible evidence in the record. Due regard is given to the opportunity of the trial judge to assess the credibility of the witnesses, and our review does not entail re-weighing disputed evidence. Findings of fact will not be set aside unless they are clearly erroneous. A finding is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.
Piroschak, ¶ 7, 106 P.3d at 890. Findings may not be set aside because we would have reached a different result. Harber v. Jensen, 2004 WY 104, ¶ 7, 97 P.3d 57, 60 (Wyo. 2004). Further,
we assume that the evidence of the prevailing party below is true and give that party every reasonable inference that can fairly and reasonably be drawn from it. We do not substitute ourselves for the trial court as a finder of facts; instead, we defer to those findings unless they are unsupported by the record or erroneous as a matter of law.
Id. (quotation marks omitted) (some citations omitted).
Pennant Serv. Co. v. True Oil Co., LLC, 2011 WY 40, ¶ 7, 249 P.3d 698, 702-03 (Wyo. 2011).
BJ Hough, LLC v. City of Cheyenne, 2012 WY 140, ¶ 8, 287 P.3d 761, 764-65 (Wyo. 2012) (some citations omitted). Statutory interpretation presents a question of law which we review de novo. Sinclair v. City of Gillette, 2012 WY 19, ¶ 8, 270 P.3d 644, 646 (Wyo. 2012). An incorrect application of law can lead to errors in findings of ultimate fact. See, e.g., Brown v. Arp and Hammond Hardware Co., 2006 WY 107, ¶ 40, 141 P.3d 673, 685-86 (Wyo. 2006); Jackson Hole Mountain Resort Corp. v.

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Alpenhof Lodge Assocs., 2005 WY 46, ¶ 17, 109 P.3d 555, 561 (Wyo. 2005).

Barlow Ranch, Ltd. Partnership v. Greencore Pipeline Co. LLC, 2013 WY 34, ¶ 14, 301 P.3d 75, 82 (Wyo. 2013).

DISCUSSION

[¶23] We begin by determining the standard for measuring the performance of the trustees, a question of law which we review de novo. Id. A " trustee of a business trust, like a director and officer of a corporation, owes the trust and its investors fiduciary duties of care and loyalty[.]" Bergeron v. Ridgewood Secs. Corp., 610 F.Supp.2d 113, 135 (D. Mass. 2009). The interpretation of unambiguous trust agreements is a matter of law for the court. Evans v. Moyer, 2012 WY 111, ¶ 21, 282 P.3d 1203, 1210 (Wyo. 2012). The BRT trust agreement provides that " No trustee hereunder shall be held personally liable for any act or omission whatever which he performs, commits, or suffers in good faith." In Kerper v. Kerper, 780 P.2d 923, 929-30 (Wyo. 1989), we considered similar language in a trust and held that such a provision " is a limitation on liability," although it is " strictly construed." There, we reversed the district court's determination that the trustee had breached her fiduciary duty, because " it did not give effect to the settlors' intent to limit the trustee's liability for the administration of the trust," and instead " incorrectly used the reasonably prudent man standard[.]" Id. at 931. See also Dallas Dome Wyo. Oil Fields Co. v. Brooder, 55 Wyo. 109, 97 P.2d 311, 318 (Wyo. 1939) ( " [T]he liability which devolves on a trustee by reason of his accepting the trust may be limited by the terms of the trust instrument, and where the liability of the trustee is (so) limited . . . the general rules of law are not applicable. (Citation omitted.)" ).

[¶24] In its Findings of Fact, Conclusions of Law and Judgement [sic], the district court recognized the good-faith provision in the BRT, yet it went on to apply a higher standard to the trustees' actions in this case. For example, in reaching the conclusion that Julia breached her fiduciary duty in her handling of the Nature Conservancy transaction, the district court said: " a trustee owes a higher duty than the ordinary standard of good faith, and such conduct which may seem permissible to an ordinary person, is prohibited to a person in a fiduciary position, as he or she is held to 'something stricter than the morals of the market place.'" (Citations omitted.) Spike urges us to adopt this " good faith-plus" standard, citing, ...


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