Davis v. U.S. Bank Nat'l Ass'n - 243 S.W.3d 425 (Mo. Ct. App. 2007)

Rule:

Mo. Rev. Stat. § 456.7-706.2(4) (2006) only requires that "qualified beneficiaries" be joined in an action to remove a trustee. Section 456.7-706.2(4) provides that the court may remove a trustee if removal is requested by all of the qualified beneficiaries. A qualified beneficiary: means a beneficiary who, on the date the beneficiary's qualification is determined: (a) is a permissible distributee; (b) would be a permissible distributee if the interests of the permissible distributees described in paragraph (a) of this subdivision terminated on that date; or (c) would be a permissible distributee if the trust terminated on that date, Mo. Rev. Stat. § 456.1-103(20) (2006).

Facts:

In 1967, respondent Harold A. Davis’ grandfather, Lorenz K. Ayers, executed a Living Trust Agreement, pursuant to which Ayers appointed himself and Mercantile Trust Company, National Association (Mercantile), as Co-Trustees. Thereafter, Ayers executed a Trust Indenture, pursuant to which Ayers appointed Mercantile as the Trustee and respondent as the income beneficiary of the Trust, entitled to receive the entire net income of the Trust for life. Upon respondent’s death, the principal of the Trust was to be divided between Respondent’s then two children. In 2006, respondent filed a petition pursuant to Section 456.7-706.2(4) and 456.7-704, seeking the removal of appellant U.S. Bank National Association as Trustee, the appointment of U.S. Trust Company of Delaware (UST) as successor Trustee, and an order transferring the Trust assets to UST. The Petition asserted that it was filed on behalf of all of the Qualified Beneficiaries of the Trust; that removal of Appellant as the Trustee best served the interests of all the beneficiaries of the Trust; that removal of Appellant was not inconsistent with a material purpose of the Trust; and that UST was a suitable successor Trustee, who was available and willing to serve. Appellant filed its Answer to the Petition, asserting that the court lacked subject matter jurisdiction to hear the dispute because respondent had failed to join as necessary and indispensable parties all of the Trust's beneficiaries and that the Petition failed to state a claim because Respondent could not virtually represent the other two qualified beneficiaries, Son and Daughter. The circuit court denied Appellant’s motion to dismiss. The appellant bank appealed.

Issue:

Under the circumstances, could the Appellant bank be removed as Trustee and be replaced with a new one?

Answer:

Yes.

Conclusion:

The appellate court found that, based on the language of Mo. Rev. Stat. § 456.1-103(20) (2006), the grandson and his son and daughter were the permissible distributees if the bank's interest or the trust terminated at the time of the filing of the suit. As such, the grandson and his children were all of the qualified beneficiaries of the trust. The remote remainder beneficiaries of the trust were not qualified beneficiaries. All of the necessary parties were before the court. The grandson and children had substantially identical interests which were not in conflict with regard to removing the bank as trustee and implementing a successor. There was no conflict of interest or issue of fact with regard to payment of capital gains taxes. The grandson presented factually supported reasons why it would be beneficial to him and the children to remove the present trustee and the bank did not put any of those reasons into dispute. The judgment was affirmed.