September 12, 2013
Authored by: Steve Dawson
According to the Missouri Court of Appeals in Brock v. McClure, the saga began when Les Galey died and left over $200,000 in trust for the benefit of his wife, Mary, with Lawrence McClure as the trustee. After Mary’s death, Lawrence was to distribute four specific bequests totaling $40,000 and divide the remainder equally among Les Galey’s sisters, Bessie Brock and Jean McClure. Mary Galey died on August 24, 2004. When no distributions had been made after four years, Bessie Brock and her children sued Lawrence McClure for breach of fiduciary duty. In addition, Brock named Lawrence’s mother Jean McClure as a defendant claiming that she had purported to be the acting trustee after assuming Lawrence’s duties.
The trial court quickly found Lawrence, the sole trustee, liable for breach of fiduciary duty. Based on that finding, Jean argued that it was impossible for her to be liable for breach of fiduciary duty as a matter of law because the Findings of Fact specified that Lawrence was the only trustee and that he had never made any distributions. In her petition, she asserted:
Jean was never a Trustee and only a Trustee can manipulate a trust. She could not have converted any funds and could not have damaged plaintiff. Lawrence McClure was the only Trustee and he made no distributions for Jean McClure, or any other named beneficiary. Jean did not get any money.
Slip Opinion, p.2.
The trial court was convinced and found in Jean’s favor. The Brocks were less convinced, however, and Bessie Brock’s son filed an appeal.
Brock contended that Jean represented that she was acting trustee and that she had assumed all of Lawrence’s duties. Therefore, Brock argued, Jean created a fiduciary relationship with the beneficiaries.
The appellate court held that the finding that Lawrence was the only named trustee did not preclude, as a matter of law, the claim that Jean created a fiduciary relationship by her representations to the beneficiaries. The appellate court reversed and remanded to the trial court the question of whether Jean created a fiduciary obligation.
By this holding, the Missouri Court of Appeals opened the door to the possibility that a person who is not a trustee may nonetheless have a fiduciary obligation to a trust. Although the court did not articulate a specific test for determining when a person creates a fiduciary obligation by his or her representations, it now seems clear that if you act like a trustee, you might be liable as a trustee.