Medical Park Hosp. v. BANCORPSOUTH BANK OF HOPE

166 S.W.3d 19, 357 Ark. 316
CourtSupreme Court of Arkansas
DecidedMay 6, 2004
Docket03-1199
StatusPublished
Cited by9 cases

This text of 166 S.W.3d 19 (Medical Park Hosp. v. BANCORPSOUTH BANK OF HOPE) is published on Counsel Stack Legal Research, covering Supreme Court of Arkansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Medical Park Hosp. v. BANCORPSOUTH BANK OF HOPE, 166 S.W.3d 19, 357 Ark. 316 (Ark. 2004).

Opinion

Annabelle Clinton Imber, Associate Justice.

This appeal ustice. intervene filed by Appellant Medical Park Hospital (Medical Park) against Appellees BancorpSouth (Bancorp), trustee for the W.L. King Sr. Testamentary Trust, and various members of the King family. Medical Park argues ' that the trial court abused its discretion in denying the motion to intervene, arguing that it had a right to intervene pursuant to Ark. R. Civ. P. 24(a). We disagree and affirm the trial court.

The history of the trust and the facts pertinent to the present case are as follows. W.L. King Sr. died and left a will that set up a testamentary trust, making his son, W.L. King Jr., the lifetime income beneficiary of that trust. By its terms, the trust was a spendthrift trust and was set up to allow disbursement of income “for the comfortable support and maintenance” of King Jr. The amount to be disbursed was solely at the discretion of the trustee, who was not required to pay any or all of the annual income to King Jr., but could pay as much as the trustee determined should be paid. Furthermore, if, in the judgment of the trustee, the income was not enough to pay King Jr. for his “comfortable support and maintenance,” the trustee could invade the corpus of the trust in an amount of no more than $1200 in any given year. The terms of the trust stated that the trust would terminate upon King Jr.’s death, and the corpus and any undistributed income would then be disbursed to King Sr.’s three daughters, who were the remainder-men of the trust. If the daughters predeceased King Sr. or King Jr., their issue would take their share, per stirpes.

In 1993, the trustee, Selwyn Whitehead (Kingjr.’s brother-in-law), petitioned the Lafayette County Chancery Court to be replaced as trustee and to be paid a fee for the services he had rendered during the years he had been trustee. In the course of the litigation over that petition, it was discovered that Whitehead had disbursed trust income to the three daughters contrary to the terms of the trust. Whitehead was ordered to pay back $174,015.00 in misappropriated trust income as well as $173,555.26 in interest that would have accrued on the misappropriated income. Whitehead paid back to the trust $347,570.26 plus pre-judgment interest, after which Citizens Bank of Hope, Arkansas (BancorpSouth’s predecessor), became the trustee of the King Trust.

Though the terms of the trust gave the trustee complete discretion over the amount of income to be paid to King Jr., Bancorp and its predecessor, as trustee, petitioned the court for a set amount to pay King Jr. for his comfortable support and maintenance, and the amount of $1000 per month was ordered. This was later raised to $1,500 per month, then $2,000 per month, and then finally $2,400 per month. In 2001, King Jr. was residing in a nursing home owned by Rose Care, and Bancorp petitioned the court to allow it to pay Kingjr.’s $2,400 monthly allotment directly to Rose Care because the trustee had been informed that King was not paying his bill. The chancellor found that King was not incompetent and could go home if he chose, so the court did not believe the nursing home care was necessary for King Jr.’s comfortable support or maintenance. Accordingly, the trial court denied Bancorp’s petition and ordered that the $2,400 continue to be paid to King Jr., but that it be sent to him at the Rose Care nursing home.

In 2002, the monthly $2,400 income payments continued to be paid out of the trust income. King Jr. was hospitalized at Medical Park Hospital, the appellant in this case, in February of 2002. He was a patient in Medical Park at various times between February 2002 and September 2002, and then was a patient there continuously from September 2002 until his death on December 26, 2002.

After Kingjr.’s death, Bancorp filed a petition to terminate the King Trust on January 24, 2003. In this petition, Bancorp pled that “[t]he Trustee has also been advised that W.L. King Jr. incurred various debts for nursing home care with Rose Care Nursing Home in Stamps, Arkansas . . . and hospital care with Medical Park Hospital . . . .” The trustee noted that it had distributed all the 2002 income from the trust, but had not made any disbursements of principal for the years 1996 through 2002, and asked the court to determine whether an amount up to $1200 for each year, or $8400, should be distributed to King Jr.’s estate to pay any of his debts.

Medical Park filed a motion to intervene in the action to terminate the trust, claiming an interest in the trust property by virtue of the debts incurred for King Jr.’s hospitalization. At the same time, Medical Park filed a separate civil action against Bancorp for failure to pay hospitalization expenses. This separate complaint was assigned to another division of circuit court, and, because it was never consolidated in this case, it is not at issue here. Rose Care also filed a petition to intervene in the action to terminate the trust, as well as a separate civil action requesting payment of unreimbursed nursing care expenses. The civil action was originally assigned to another division of Lafayette County Circuit Court but was later consolidated with this trust termination case.

Bancorp, as trustee, and some of the trust property remaindermen filed separate responses, asking that Medical Park’s petition to intervene be denied and Rose Care’s complaint be dismissed for failure to state a claim. The trustee and remaindermen argued that, because the trust had terminated upon King Jr.’s death, the remaindermen’s interest in the trust property had vested upon King Jr.’s death. Thus, since Medical Park’s motion to intervene was filed after King Jr.’s death, the remaindermen had already taken their interest in the trust property free and clear of King Jr.’s debts, and they were not responsible for the payment of debts that he incurred before his death.

Medical Park argued that, because it was required to provide hospital care to King Jr., and that care was “necessary,” such a necessary expenditure was covered by the terms of the trust and its claim should be paid out of the trust before the trust property could be distributed to the remaindermen. Though this was a spendthrift trust, Medical Park argued that “necessaries” are an exception to spendthrift trusts recognized by the Restatement (Second) and (Third) of Trusts and by other jurisdictions. Furthermore, Medical Park pointed out that the Arkansas Court of Appeals had followed the Restatement by allowing an exception for alimony and child-support payments to defeat a spendthrift clause in its holding in Council v. Owens, 28 Ark. App. 49, 770 S.W.2d 193 (1990). Medical Park reasoned that the holding in Council should be extended to include necessaries such as hospital expenses.

The trial court denied Medical Park’s motion to intervene and dismissed Rose Care’s complaint. The trial court’s ruling was premised on two alternative grounds. One ground was that the trust automatically terminated upon the death ofW.L. King Jr., and, upon that termination, the remaindermen’s interests in the trust assets were immediately vested; therefore, they took those assets free and clear of the claims of Medical Park and Rose Care.

The second ground for the ruling was based on Medical Park’s argument that the Court of Appeals’s decision in Council v.

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Bluebook (online)
166 S.W.3d 19, 357 Ark. 316, Counsel Stack Legal Research, https://law.counselstack.com/opinion/medical-park-hosp-v-bancorpsouth-bank-of-hope-ark-2004.