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Cassibry v. Cassibry

Court of Appeals of Mississippi

January 24, 2017


          DATE OF JUDGMENT: 07/30/2013





          BARNES, J.

         ¶1. This appeal results from the Bolivar County Chancery Court's findings that Napoleon Cassibry III, as the Trustee of three separate irrevocable trusts, breached a duty of loyalty and a fiduciary duty to one of the trusts' beneficiaries, Graham Cassibry, and was liable for damages, costs, and attorney's fees. Napoleon argues that, as to two of the trusts, the chancery court erred in finding that he breached the duty of loyalty, and the damages awarded should be reduced. He also contends the court erred in awarding Graham attorney's fees.[1]

         ¶2. On review, we affirm the chancery court's award of damages. However, as the attorney's fees itemization was not properly admitted into the chancery court's record, we reverse and remand for a hearing on the issue of attorney's fees.


         1. The Family Trust

         ¶3. The patriarch of the Cassibry family, Napoleon Cassibry Jr., died on July 21, 1998, leaving an estate of $1, 225, 064. He was survived by his wife, June Cassibry; three sons: Napoleon, Graham, and John Cassibry; and their issue. Per the terms of his will, the Napoleon LePoint Cassibry Jr. Family Trust (Family Trust) was established, and his eldest son, Napoleon, was appointed as Trustee. The trust was initially valued at approximately $300, 000, consisting of 2, 789 shares of Mr. Cassibry's stock in Cleveland State Bank (CSB) (valued at $93 per share), and a one-half interest in the marital home, which was valued at $75, 000. By June 2004, the Family Trust owned 5, 558 shares of CSB stock and 7, 500 shares of Covenant Bank stock. While the Family Trust was established "for the principal benefit" of June "for her lifetime, " the Trustee was authorized "in his discretion to pay to or for the benefit of my children and/or their issue any such withheld income deemed advisable for their maintenance, health and education (including post[-]graduate education)." The Trustee was also authorized to "sprinkle income to other beneficiaries, " after first looking to June's "maintenance and health." Upon June's death, the Trustee was to transfer any remaining trust property in equal shares to the three sons.

         ¶4. From May 2003 to January 2008, it is undisputed that Napoleon withdrew at least $55, 325 in funds from the Family Trust, which he characterized as "loans."[2] He claimed that June authorized the withdrawals. Napoleon also disbursed funds from the account for his daughters' expenses. In 2004, Napoleon pledged the Family Trust's stock holdings as collateral for a $200, 000 CSB loan to buy stock in Paragon National Bank (Paragon).[3]Because of a loss in stock value due to the economic climate, the pledged stock had to be sold in 2007 to repay the loan debt.

         2. The Children's Trust

         ¶5. On February 23, 1999, June formed the Cassibry Children Irrevocable Trust (Children's Trust), with Napoleon appointed as Trustee. The trust was funded with 5, 563 of June's shares of CSB stock, which were collectively valued at approximately $517, 000, and the beneficiaries were Napoleon, John, and Graham. The purpose of the trust was to avoid estate gift tax and to protect the assets from pending lawsuits involving John's ex-wives. Although the agreement required the Trustee to "divide the Trust Principal into equal shares to create one Trust for each of the Grantor's children[, ]" with "[e]ach share [to] be administered separately, "[4] the trust was at all times managed as one corpus.

         ¶6. Under article 4.2(a)(1) of the Children's Trust agreement, Napoleon was vested with broad discretion to "pay to or for the benefit of the beneficiary any amount of the income along with any amount of principal from the Trust as the Trustee deems advisable for the health, education, maintenance, support and comfort of such beneficiary." Article 5.6 stated that "[i]f there is insufficient cash to satisfy the withdrawal demand of a beneficiary, Trustee either may make a distribution in kind, or raise cash through a sale or borrowing, to satisfy the demand." Furthermore, upon written request to the Trustee, each beneficiary could withdraw up to $10, 000 within thirty days of the trust's creation or within thirty days after additional contributions to the trust had been made "during any calendar year." However, Napoleon withdrew funds in excess of the trust's annual withdrawal provisions. He also pledged the trust's entire 5, 563 shares of CSB stock as collateral for a $200, 000 loan to buy Paragon stock, which he was authorized to do under the trust's terms.

         3. The JCC Trust

         ¶7. On February 28, 2000, June established the June C. Cassibry Irrevocable Trust (JCC Trust), with Napoleon as Trustee, and the three brothers as beneficiaries. The sole purpose of this trust was to receive life-insurance proceeds upon June's death. After expenses of the estate were paid, the beneficiaries were to receive the remaining proceeds in equal shares.

         4. The Paragon Transaction

         ¶8. In 2004, Napoleon had the opportunity to purchase 40, 000 shares of Paragon stock at $10 per share as an investment. He purchased 20, 000 shares in his own name, and the other 20, 000 shares were held by a shell partnership, Cassibry Brothers Partnership (CBP).[5]Graham refused to participate in the Paragon venture; so Napoleon and John were the only CBP partners. As the chancery court noted in its findings, although the shares were held by Napoleon and CBP, there was a stock-collateralization agreement that stated actual ownership of the stock was "roughly" as follows: the Family Trust and CBP collectively owned seventy-five percent (75%), while Napoleon's two daughters owned twenty-five percent (25%).[6]

         ¶9. To purchase the shares, Napoleon used a personal $200, 000 line of credit at CSB, as well as a Family Trust CSB $200, 000 line of credit. The lines of credit were secured by the following collateral: 5, 563 CSB shares associated with the Children's Trust; 5, 558 shares of CSB stock held by the Family Trust; 7, 500 shares of Covenant Bank stock held by the Family Trust; and the life-insurance policy associated with the JCC Trust. The record reflects that, on October 22, 2004, Napoleon withdrew $190, 000 from the Family Trust Union Planters (UP) checking account. The chancellor noted that $40, 000 of that withdrawal was deposited into what the record suggests were Napoleon's personal accounts. Napoleon claims that money also went to purchase the Paragon stock, but there is no documentation to that regard.

         ¶10. Unfortunately, the value of the Paragon stock plummeted in 2007 due to economic conditions.[7] The loans used to purchase the stock were in default; so the trusts' stock holdings were under threat of being sold at auction. To satisfy the debt, Napoleon found a purchaser for the CSB stock. However, since Graham never agreed to participate in the Paragon stock purchase, Napoleon and John distributed to Graham one-third of the Children's Trust CSB stock.

         ¶11. Napoleon also sold June's home, and Graham purchased her a condominium with the real-estate proceeds. June died in 2008, and $401, 559.26 was paid into the JCC Trust. Napoleon used the assets to pay off debts and liabilities associated with the Paragon transaction, even though the trust's terms did not authorize such expenditures.


         ¶12. On June 19, 2009, Graham filed a complaint against Napoleon, as Trustee and individually, and his brother, John, alleging that Napoleon breached his fiduciary duty in relation to the three trusts.[8] Graham claimed that Napoleon had "misappropriated his mother's, the trusts' and/or partnership assets for his own use, " and pledged those assets in order to borrow money personally and/or purchase stock "from which he benefitted both directly and indirectly." Graham also asserted that Napoleon, as his mother's attorney-in-fact, had withdrawn monies from June's IRA and pension accounts for Napoleon's personal or family use, rendering June "virtually penniless" at the time of her death on December 21, 2008. Graham requested that Napoleon be removed as trustee and a constructive trust be established. Napoleon responded that "all transactions related to any of the Trusts were done with the knowledge and acquiescence" of Graham and John, and that "all said transactions were reasonable, warranted and justified under the circumstances then existing." He further argued that any losses resulting from his investment of trust assets, i.e., the Paragon stock, were attributable to the economy.

         ¶13. On August 20, 2009, the chancery court preliminarily ordered Napoleon to deposit $239, 299.60 related to the JCC Trust into the court registry. An accounting was ordered by the chancery court on August 5, 2010. After meeting with the parties and their attorneys over the next few months, the accountant, Danny Barfield, CPA, rendered his findings on December 29, 2010. The accounting report noted discrepancies in the accounting provided by Napoleon and the accountant's findings. The accountant determined that Napoleon had withdrawn a total of $426, 373.46 "as a beneficiary of his mother and father's estate." The items charged to John as a beneficiary totaled $155, 371.71. As no items were charged to Graham "from the estates or life[-]insurance proceeds, " the accountant concluded that Graham was due $155, 317.71 from the life-insurance proceeds to "even him up with John" and that the remaining $70, 578.71 from the life-insurance proceeds was "to be divided evenly" between John and Graham. He further concluded that Napoleon owed John and Graham $78, 588.85 each.

         ¶14. Months later, Napoleon filed a motion in limine on September 27, 2011, seeking to exclude Barfield's accounting report and to strike Barfield from testifying regarding his findings. At the motion hearing on December 6, 2011, Barfield testified that he had reviewed bank statements on "six or seven bank accounts from 1999 until 2010, " noting the documentation he received was "very disorganized[, v]ery convoluted, mixed up, thrown about." He said Napoleon had provided accountings that were "somewhat helpful in that there were checks that he had written to himself or for his personal benefit, " which Barfield "charged" to him. Barfield determined that there should have been $807, 587.29 in the estate or trust had the withdrawals not been made. Dividing that number by three, he calculated that each heir would be entitled to $269, 195.76 "if those personal withdrawals had not been made to the benefit of Napo[leon] and John[, ] and if the two general partners and the partnership repaid the loans from the insurance trust and the estate." Therefore, he concluded Napoleon had withdrawn $157, 177.70 ($426, 373.46 - $269, 195.76) more than he was entitled; divided that figure by two; and determined that Napoleon owed John and Graham $78, 588.85 each. Napoleon did not contest Barfield's characterization of the transactions during their meetings. When Napoleon's counsel questioned Barfield as to why he did not do a more detailed reconciled accounting, Barfield stated that he had told counsel in a previous meeting he was not going to "burn up two hundred thousand dollars doing useless work[.]"[9]

         ¶15. Noting the accountant was "agreed upon by the parties, " and the issues cited by Napoleon were brought several months after the issuance of Barfield's report, the chancellor denied Napoleon's motion in limine and accepted the report "as a working document for information purposes." She did clarify that whether something was classified as a loan or investment would be determined by the court, not Barfield. Graham's motion to establish a constructive trust was also denied, as the court found that the assets of the trusts had essentially been depleted.

         ¶16. After a bench trial, the chancery court entered its findings of fact on May 17, 2013. Although the chancellor determined that Napoleon's investment decisions concerning Paragon were not a breach of fiduciary duty, since no one could have predicted the economic downturn, she did conclude that Napoleon had a duty of loyalty as Trustee, and his cash withdrawals and loans for his own benefit from the three trusts were a "blatant example of breach of fiduciary duty." The chancellor held: "[Napoleon] took advantage of the situation and used the trusts as his own personal accounts. He made withdrawal after withdrawal that served only him and did nothing for the other beneficiaries. . . . These withdrawals depleted the trusts and proximately caused injury to the other beneficiaries." The chancellor also determined that Graham was entitled to 7, 757 of the Paragon shares, as a beneficiary of the Family Trust. The chancery court, however, rejected Graham's remaining claims and Napoleon's counterclaim, and denied Graham's request for an award of attorney's fees. In the final judgment entered on May 28, 2013, the chancery court awarded Graham and John the remaining JCC Trust insurance proceeds on deposit with the chancery clerk, with each receiving $109, 190.07. Furthermore, Napoleon was ordered to pay Graham an additional money judgment of $143, 665.86, "plus post-judgment interest in the amount of eight percent (8%) per annum from the date of the judgment."[10]

         ¶17. Both parties filed Mississippi Rule of Civil Procedure 59 motions to alter or amend the judgment. Napoleon argued the chancery court should have allowed him credit for certain deposits made into the trusts, totaling $112, 887.65. Attached to the motion was a document created by Napoleon containing dates and amounts. Graham cited several issues in his motion for reconsideration, including requests that the transfer of Paragon shares be addressed in the final judgment and that he be awarded attorney's fees. On July 30, 2013, the chancery court issued supplemental findings. She denied Napoleon's request to be given credit for the deposits, noting the accountant had listed the designated deposits as "Misc./Unexplained, " and Napoleon knew since December 2010 that he had not been given credit for "these mysterious deposits." The chancellor concluded that "it remain[ed] unclear where those funds originated." The court did amend the judgment, however, awarding Graham $28, 500 in attorney's fees, in addition to $144, 865.86 in monetary damages.[11]Napoleon was also ordered to pay $17, 902 in costs (for the accounting), and to transfer 7, 757 shares of Paragon National Bank stock to Graham.

         ¶18. Napoleon brings three arguments on appeal: (1) the chancellor erred in finding his "loans" from the Children's Trust constituted a breach of the duty of loyalty; (2) the chancellor erred in awarding damages for the Family Trust, as he had June's "express knowledge and consent" to make the withdrawals; and (3) there was no credible evidence to support the award of attorney's fees to Graham. Napoleon does not appeal the award of funds to Graham and John related to the JCC Trust, the award of the costs for the accountant, or the transfer of Paragon stock to Graham. He requests that this Court reverse the damage award related to the Family Trust and Children's Trust ($135, 045) and the award of attorney's fees, and render a judgment of $9, 820.86 in damages (JCC Trust) and $17, 902 in costs. Alternatively, he argues that a remand on the issue of attorney's fees is warranted.

         ¶19. Finding substantial evidence supports the chancery court's findings related to the Children's Trust and the Family Trust, we affirm the judgment in part. We reverse and remand on the issue of attorney's fees, however, as Graham admits that the ...

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