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Dallas v. Jerry Beus

June 29, 2011

DALLAS BEUS AND DOUG BEUS, PLAINTIFFS-RESPONDENTS,
v.
JERRY BEUS, DEFENDANT-APPELLANT,
v.
JOHN C. SOUZA, TRUSTEE OF THE LYNN G. BEUS TRUST, DEFENDANT



Appeal from the District Court of the Sixth Judicial District of the State of Idaho, in and for Bannock County. The Hon. David C. Nye, District Judge.

The opinion of the court was delivered by: Eismann, Chief Justice.

2011 Opinion No. 74

Stephen W. Kenyon, Clerk

The judgment of the district court is affirmed in part and vacated in part.

This action involves the rights of three brothers who were residuary beneficiaries under a testamentary trust. One of the brothers had been leasing the trust property when the trust terminated. After the other two brothers sued him and the trustee to determine their respective rights, the trustee terminated the lease. The one brother appeals the district court's ruling that the lease was properly terminated, that the brother was not entitled to compensation for improvements he had made to the leased property, and that his loans secured by the trust property are to be paid from his one-third share of the proceeds once the property is sold.

I. Factual Background

Lynn Beus (Decedent) died on January 5, 1986. By his will, he left his wife (Widow) certain real and personal property, and he bequeathed the remainder of his property to a trustee in trust for the purpose of providing regular income to Widow until her death. The primary asset subject to the trust was a farm consisting of approximately 2521 acres of farmland and grazing land. The will provided that upon the death of Widow, the trust was to terminate, and the remaining assets subject to the trust were to be distributed equally among his three sons, Jerry, Dallas, and Doug. In addition, if they could not agree upon the operation, management, and division of the real property, the trustee was to sell the property and divide the proceeds equally among the sons, after payment of all expenses, taxes, and liens against the property. On May 14, 1987, the trustee and the personal representative of Decedent's estate, who were the same person, entered into a "Trust Agreement," which was approved by Widow. That trustee later died, and his son was the successor trustee. At some time prior to 2002, John C. Souza became the trustee (Trustee).

Prior to Decedent's death, Jerry had been leasing the farm ground. He continued to do so after Decedent's death, signing a farm lease in 1986, an addendum to that lease in 1994, and a farm lease in 2007.

Jerry and Trustee had executed the last lease on January 1, 2007, and it provided for a lease term from that date through December 31, 2014. Jerry was to pay as rent the sum of $12,000 annually to Widow and the taxes on the leased property. The lease also provided that Jerry was to be compensated for any improvements he made to the property, that the lease was subject to the terms of Decedent's will and the Trust Agreement, and that Trustee "shall have the right to terminate said lease or to renegotiate the terms at the end of the year."

In 2007, Jerry sought a loan from his bank to pay off two loans he had secured in 2002 and to obtain additional operating funds, but the bank would not loan additional money without having the farm as security. He sought approval from Dallas and Doug to use the farm as collateral for the loan, but they refused to consent. Jerry then contacted Trustee, who on May 2, 2007, executed a promissory note in the sum of $427,500 and a mortgage on the farm as security for payment of that note. The proceeds of the loan were used to pay settlement charges totaling $77,204.50, which included prepaid interest; the balances totaling $332,141.66 that were owing on Jerry's two prior loans; and the sum of $18,153.84 to Jerry.

Widow died on June 10, 2008. In 2009, Jerry subleased the farmland to a third party for $60,000 per year. The sons could not agree on what should be done with the farm, and on May 6, 2009, Dallas and Doug filed this action against Jerry and Trustee seeking: (a) damages against and removal of Trustee for breach of his fiduciary duties; (b) a declaratory judgment that the 2007 farm lease is void and/or had been terminated; and (c) a declaratory judgment that Jerry is not entitled to reimbursement from the trust property for any improvements he had made to the property or any of his loans and that the 2007 loan was Jerry's sole responsibility and was to be paid from his share of any trust distribution.

On September 3, 2009, Dallas and Doug moved for partial summary judgment seeking a determination that: (a) the trust terminated upon Widow's death on June 10, 2008; (b) the 2007 farm lease terminated upon Widow's death or will terminate upon the sale of the trust property;

(c) the sums owing under the 2007 loan are the sole obligation of Jerry and are to be paid out of his share of the trust estate; (d) Jerry is not entitled to reimbursement for any improvements he made to the farm; (e) the trust property should be sold by the trustee at a price agreed to by the sons or the court; and (f) Trustee should be removed as trustee and an independent trustee appointed in his place. On September 13, 2009, Trustee gave Jerry notice that the 2007 farm lease was being terminated effective December 31, 2009.

After the motion for partial summary judgment was briefed and argued, the district court issued its decision holding: (a) that the trust terminated upon Widow's death on June 10, 2008;

(b) that Trustee had the right to terminate the 2007 farm lease at the end of each calendar year and that he terminated the lease effective December 31, 2009; (c) that Jerry is not entitled to compensation for any improvements to the farm because he failed to show that he made any after 2007; and (d) that the 2007 loan is the sole obligation of Jerry and that ...


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