Schenebeck v. Schenebeck

947 S.W.2d 367, 329 Ark. 198, 1997 Ark. LEXIS 399
CourtSupreme Court of Arkansas
DecidedJune 23, 1997
Docket96-1438
StatusPublished
Cited by3 cases

This text of 947 S.W.2d 367 (Schenebeck v. Schenebeck) 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
Schenebeck v. Schenebeck, 947 S.W.2d 367, 329 Ark. 198, 1997 Ark. LEXIS 399 (Ark. 1997).

Opinion

Robert L. Brown, Justice.

This appeal involves the interpretation of a will and a testamentary trust. James Eric Schenebeck died on October 4, 1993, at age 70. His last will and testament was dated April 4, 1991, and in his will he named his son, appellant Gerald Schenebeck, executor of the estate. After Schenebeck’s death, Gerald petitioned to open his probate estate. The petition showed the testator’s surviving spouse to be appellee Dorothy Schenebeck. It further showed the estimated value of real property to exceed $1,000,000 and personal property to exceed $100,000.

Under the will, Gerald was left specific bequests of household goods and furniture, with Dorothy receiving the remaining furnishings in the home. The will also provided that Dorothy could live in the house for one year, although the testator added that it was his request, but not his direction, that she live there longer, if she maintained the property. The will further contained a legacy of $20,000 to Dorothy. Two other children were left legacies of $5,000 each. Gerald was to receive the remainder of the estate.

The will, in addition, created a testamentary trust. The testator ordered his executor to transfer approximately 400 acres of land located on two plots to the trust. The land was used for a fish farm. The two beneficiaries of the trust were Gerald and Dorothy. Gerald was named trustee of the trust. The testator directed that the trustee distribute $36,000 per year to Dorothy from the income of the trust so long as she lived, with the remaining income from the trust going to Gerald. The trust was to terminate at Dorothy’s death, with Gerald receiving the corpus of the trust.

Probate of the estate ensued, and it consisted of a series of squabbles between Gerald and Dorothy. The disputes involved allegations of Dorothy’s auctioning furnishings at the house, Gerald’s failure to file an adequate accounting for the estate, debts and rental owed the estate by Dorothy, Dorothy’s failure to maintain the property, and, of primary importance, the failure of Gerald to pay the $20,000 legacy and the $36,000 annual income from the testamentary trust. Litigation also developed around a 1972 premarital agreement between James Eric Schenebeck and Dorothy, where he agreed to leave a life estate in his property to Dorothy. Dorothy sought to enforce the premarital agreement in chancery court, but her claim was denied.

During the probate of the estate, it came to light that on April 1, 1987, James Eric Schenebeck entered into a 15-year lease of farmland with Gerald where Gerald was to pay $75 an acre as annual rent with incremental increases of five percent every five years. Dorothy signed this lease on April 15, 1991.

On July 3, 1995, matters came to a head with Dorothy’s motion entitled Motion For Proof of Respondent’s Fulfillment of Duties as Trustee and Requirement of Remittance of Income Owed to Petitioner. In the motion, Dorothy asked for payment of the $20,000 legacy, her $36,000 annual income under the testamentary trust, proof that the testamentary trust had been funded, and an accounting of income from the 400 acres, including income from Gerald’s subleases of the leased farmland.

The probate court ordered that Gerald file an inventory for the estate and that estate taxes be paid. Gerald filed the updated accounting and inventory of assets and liabilities as well as the federal estate tax return. In connection with the federal estate tax return and in order to qualify Dorothy’s life interest in the testamentary trust as a Qualified Terminable Interest Trust, Gerald disclaimed all interest in the property and income from the testamentary trust for the balance of Dorothy’s life. Because of Gerald’s disclaimer, Dorothy claimed as hers all of the income from the farmland which formed the res of the testamentary trust, including income from the subleases.

In a motion filed with the probate court, Gerald conceded that he made annual lease payments to the estate for the leased farmland, which totaled $63,000 for 1994 and 1995. Of that lease payment he used $37,434.70 to repair the irrigation system and pay other expenses, leaving Dorothy the balance of $25,565.30. Dorothy complained that these expenses should be borne by Gerald as lessee of the farmland under the lease agreement and not by the testamentary trust.

At a hearing held on May 8, 1996, Gerald admitted that Dorothy had not been paid the $20,000 bequest and testified that the testamentary trust had not been funded because the 400 acres of farmland had not been deeded to the trust. Pie also admitted that he disclaimed his right to trust income so that the estate would get the marital deduction for estate tax purposes. He further agreed that there was no separate accounting for the testamentary trust, since the trust did not yet exist.

The probate court filed a detailed letter opinion followed by an order. The salient points of the order for purposes of this appeal follow:

• Gerald had a conflict of interest in serving as executor, lessee, sublessor, trustee, and remainderman of the trust and should be removed as trustee. It was suggested by the court that a financial institution replace him as trustee.
• Certain repairs to the irrigation pipes and pump were not a proper expense to be charged to the testamentary trust but were the responsibility of Gerald as lessee of the farmland.
• Dorothy was entitled to the full income of the testamentary trust or else the estate would lose the benefit of the marital deduction trust.
• Gerald was directed to pay the $20,000 legacy with eight percent interest from the date that Dorothy’s right to take against the will expired.
• The filed accountings are insufficient with respect to the farmland, and an accountant should be appointed to file a new accounting.

I. Probate Court Jurisdiction

Gerald first contends that the probate court lacked jurisdiction to enter the orders that affect the administration of the testamentary trust. Dorothy responds that the probate court merely undertook the administration of the probate estate, including marshalling assets of the estate, and did not improperly exercise control over the trust because the trust, though created by the will, had yet to be funded.

The Arkansas Constitution provides that probate courts have “exclusive original jurisdiction in matters relative to the probate of wills, the estates of deceased persons, executors, administrators, guardians, and persons of unsound mind.” Ark. Const, art. 7, § 34. Although probate courts clearly have jurisdiction over the probate of a will, the construction, interpretation, and operation of trusts are matters that lie within the jurisdiction of chancery courts. Thomas v. Arkansas Dep’t of Human Servs., 319 Ark. 782, 894 S.W.2d 584 (1995); Anna Flippin Long Trust v. Holk, 315 Ark. 112, 864 S.W.2d 869 (1993). The probate court also has authority to order distribution of assets of the probate estate to a trust. See Ark. Code Ann. § 28-1-104 (1987).

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Bluebook (online)
947 S.W.2d 367, 329 Ark. 198, 1997 Ark. LEXIS 399, Counsel Stack Legal Research, https://law.counselstack.com/opinion/schenebeck-v-schenebeck-ark-1997.