Gayle Misle v. Linda Shrier, et al.

Lincoln, Nebraska trust law lawyers represent the parties in a breach of fiduciary duty dispute.





In February 2019, Gayle filed a complaint, which she later amended, alleging claims for breach of fiduciary duties by Linda Shrier and Marsha Misle-Haugland individually and as cotrustees of the Abram Misle testamentary trust for failure to properly administer, account, and report on trust-related matters. Later, O Street Development Co. ("O Street Development") and its president, Helen Misle; Abram, LLC; and Misle Properties, LLC ("Misle Properties"), were named as necessary parties to the proceedings. In her complaint, Gayle requested judicial supervision of



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the trusts; disclosure of information sufficient to allow an accounting; damages against Marsha and Linda in favor of the trusts; surcharges against Marsha and Linda for the expenses of litigation and administrative costs; and payment of Gayle's attorney fees.



In the appellees' answer and counterclaim, they denied the allegations in the complaint and counterclaimed for payment of expenses incurred by the trust which were alleged to be the result of Gayle's unreasonable requests that resulted in excessive trust expenditures. The appellees separately filed a third-party complaint to add Howard Misle's estate as a party to the action because he managed, operated, and made significant decisions regarding a limited liability company (LLC) owned by the trust which decisions involved the same subject matter raised by Gayle, albeit directed against the trustees.



A trial was held over the course of 3 days. Testimony was adduced from James Watts, a certified public accountant; Gayle Misle; Marsha Misle-Haugland; Linda Shrier; and Jason Levy, Linda's son.



The evidence was undisputed that Abram Misle and Helen Misle were the parents of five children: Lynn Misle Weiner; Howard Misle; Gayle Misle; Linda Shrier; and Marsha Misle-Haugland. Abram Misle, and his brother, Julius, owned and operated auto dealerships on property they owned located on O Street in Lincoln, Nebraska. Abram's interest in the dealership was held in a corporation named HJA, Inc. (HJA).



In 1994, as part of his estate plan, Abram hired an attorney, David Ludtke, to draft his will. In his will, Abram appointed his wife, Helen, as the personal representative of his estate. As relevant to this appeal, the will provided that upon his death, his estate should be distributed and held in trust as follows:



Item IV. Marital Deduction. Pecuniary Formula Bequest. Maximize Unified Credit. Payable to The Spouse's Q-Tip Trust. If my wife, HELEN MISLE, shall survive me, I give to my Trustee hereinafter named cash, securities or other property of my estate (undiminished by any estate, inheritance, succession, death or similar taxes) having a value equal to the maximum marital deduction -as finally determined in my federal estate tax proceedings less the aggregate amount of marital deductions, if any, allowed for such tax purposes by reason of property or interests in property passing or which have passed to my wife otherwise than pursuant to the provisions of this Item; provided, however, the amount of this bequest shall be reduced by the amount, if any, needed to increase my taxable estate (for federal estate tax purposes) to-the largest amount that, after allowing for the unified credit, against, the federal estate tax, and the state death tax credit against such, tax (but only to the extent that the use of such, state death-tax credit does not increase the death tax payable to any state), will result in the smallest (if any) federal estate tax being imposed on my estate. The term "maximum marital deduction" shall not be construed as a direction by me to exercise any election respecting the deduction of estate, administration expenses, the-determination of the estate tax valuation date, or any other tax election- which may be available under any tax laws, only in such manner as will result in a larger allowable estate tax marital deduction than if the contrary election had been made. My Personal Representative shall have the sole discretion to select the assets which shall constitute this, bequest. In no event, however, shall there be included in this bequest any asset or the proceeds of any asset which will not qualify for the federal estate tax marital deduction,



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and this bequest shall be reduced to the extent that it cannot be created with such qualifying assets. My Personal Representative shall value any asset, selected by my Personal Representative for distribution in kind as a part of this bequest: at the value of such asset at the date of distribution of such asset.



This bequest shall be administered by my Trustee under the terms of the Spouse's Q-TIP Trust as hereinafter set forth.



ITEM V. Residuary Gift to Trustee Under the Family Credit Shelter Trust. I give all the rest, residue and remainder of my property of every kind and description (including lapsed legacies and devises), wherever situate and whether acquired before or after the execution of this Will to the Trustee of the Family Credit Shelter Trust. The Family Credit Shelter Trust shall be administered as hereinafter set forth.



Abram died in 1994. At the time of Abram's death, the property in his estate included his interest in HJA which held title to certain real estate on O Street. In 2000, while the estate was still open, the family sold the dealership, but HJA retained title to the real estate on O Street. In July 2003, HJA was reorganized into a new corporation named O Street Development, which served as a holding company for Abram, LLC, which held title to the O Street real estate. Shortly after the reorganization, the Q-TIP trust identified in Abram's will, was created and funded with the stock in O Street Development and its wholly owned subsidiary, Abram, LLC. Howard Misle was designated as the manager of Abram, LLC. In 2007, as a result of a debt problem, Howard sold the real estate on O Street to Hy-Vee and, through an Internal Revenue Code § 1031 Exchange, acquired three strip malls located in Pennsylvania. To best accommodate the exchange and the financing requirements of the transaction, Misle Properties was formed and held title to the strip mall located in Kimberly Plaza, while Abram, LLC, held title to the strip malls located at Greenville Crossing and Rossi Plaza. O Street Development remained the holding company for Abram, LLC, and Misle Properties with the exception that Helen Misle became a 1-percent owner in each LLC. The Q-TIP trust remained the 100-percent owner of the O Street Development. In 2010, Howard stepped down as the manager of the two LLC's and Linda took over as the manager of both companies.



James Watts testified that he provided accounting services to HJA beginning in 2001; helped with the reorganization of HJA into O Street Development in 2003; assisted with the exchange of the Pennsylvania strip malls; filed tax returns for the entities and the trust; and continuously provided accounting and tax services for the Q-TIP Trust, O Street Development, Abram, LLC, Misle Properties, and Helen Misle. Watts testified that the Q-TIP trust was funded with all the stock in O Street Development and that O Street Development owned both Abram, LLC, and Misle Properties, which held title to the Pennsylvania strip malls. Watts testified that he was not aware of any other assets that should have been funded into the Q-TIP trust. Watts testified that the purpose of Abram's will was to avoid the 50 percent federal estate tax and avoid income taxes to the beneficiaries by taking advantage of the $600,000 federal unified credit exemption. He testified that a life insurance policy paid out to two of Abram's children, which was subject to estate tax, was utilized to absorb the unified credit. Watts said that according to the Schedule M of the federal estate tax return, the amount distributed to the Q-TIP Trust was $2,601,860.48, and that along with the $500,000 life insurance policy paid to the children and the $100,000 for expenses



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of administration that were used to absorb the unified credit exemption, there were no other assets available to fund the Family Credit Shelter Trust.



Watts testified that in 2018, Gayle requested information governing the trust. Watts testified that he provided Gayle with 3 years of tax returns and check registers, financial statements, and bank statements. Watts testified that Gayle continued to request additional information and, eventually, when the requests became too burdensome, Watts reached out to Marsha and Linda and informed them that he was going to have to start charging the trust to produce the documents. At that time, Watts testified that he was directed to stop providing any documentation to Gayle. Prior to Gayle's initial request for information in 2018, Watts testified that he had not received requests from any beneficiary to obtain information regarding the trust or its assets. Watts testified that throughout his time providing accounting and tax services, he had not witnessed Marsha or Linda engage in any improper conduct or imprudent transactions. He testified that he believed that not funding the Family Credit Shelter Trust was consistent with Abram's will and his purpose to avoid as much tax liability as possible and constituted "brilliant" estate planning.



Gayle testified that although she was appointed as cotrustee with Marsha, she did not accept the trusteeship and had never acted as a trustee. Gayle testified that despite her requests for information, she was not provided with any documentation until after she filed her lawsuit. Gayle testified that when she asked if the Family Credit Shelter Trust had been established, she was told that it was taken care of. Gayle testified that she never received anything in writing that summarized or described the debts of the trust, any of the companies it held, or any documentation to trace the assets owned by the trust. She testified that she was not consulted about the 2003 reorganization, nor was she ever provided with documentation describing the distribution of the assets into the trust. Gayle testified that the only information she knew was that the Pennsylvania strip malls were supposed to be in the trust. She further testified that until Watts testified at trial, she never had sufficient context to understand the annual reports that she did receive through discovery. Although she acknowledged that she received about 20,000 pages of documents through discovery, she testified that she had never received anything prior to filing her lawsuit and that she was unsure whether she had received all the information she was seeking. Gayle testified that she trusted Howard's business decisions and did not believe that he mismanaged the LLCs. She testified that she believed that the establishment of one of the trusts and not the other was improper and "what should be done is what is described in [Abram's] will." She testified that the Q-TIP trust was properly providing income to Helen and those distributions were appropriate. She testified that she was aware that the trust was making payments to Jason Levy, Linda's son, but did not know the extent of his services or the agreement that was in place. In addition, she testified that Marsha took a distribution of $100,000 to pay outstanding personal expenses and that it was a loan from the trust that was still on the books and had not been repaid.



Marsha testified that she had been appointed as one of the trustees and had served as the sole trustee since 2003 when the Q-TIP trust was established and funded. Marsha testified that the second trust was not established because "I don't think there was anything left other than the real estate to fund the Q Tip Trust." Marsha testified that she keeps track of the trust assets through the leases from the tenants, the separate checking accounts maintained for each strip mall, and the monthly records for each of the strip malls forwarded to their accountant. She testified that



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essentially the real estate owned at the LLC level produced the business that flowed up to the trust. She testified that although there is not a consolidated record, Watts completed a balance sheet for each of the properties. Marsha acknowledged that she was provided $100,000 from the trust, but that Helen, Gayle, Linda, and Howard consented to it. She denied that it was a loan or that she had to pay it back and that if the record indicated that it was a loan, it was in error. Marsha denied that Linda ever acted as a trustee on behalf of the trust. Marsha testified that Gayle had not previously requested information regarding the trust until she had a dispute with Linda and that her dispute with Linda is the basis for the present action. Marsha testified that in 2018, Gayle requested information regarding the trust from Linda, but not from her.



Linda testified that she had no fiduciary role in the trust when the sale of the O Street real estate and subsequent § 1031 exchange was completed. Linda testified that she became the manager of the LLCs in 2010. Linda testified that when she took over, the strip malls were not completely occupied, and the trust was not producing cash flow to provide income to Helen. After attempting to work with two other businesses unsuccessfully, Linda's son, Jason Levy offered his services. Linda discussed the potential arrangement with Marsha and Marsha consented and drafted the consulting agreement. Thereafter, Jason was able to get all three strip malls occupied by tenants, which produced income for the trust. Linda testified that Gayle was aware that Jason was doing work for the trust. Linda denied acting as a trustee for the trust, keeping records or books for the trust, or signing on behalf of the trust.



Jason Levy testified that he had been in the real estate field for a little over 20 years, that he provides consulting services, and that he has a real estate broker license in Nebraska. Jason testified that he started providing services to the trust in 2014, but that he charged the trust a reduced fee from his customary rate. Jason testified that some months he did not receive payment from the trust for his services because the strip malls were operating at a deficit. He stated that now they are all currently producing income and are nearly 100 percent occupied with tenants. Jason testified that he also did not charge late fees or interest for the trust's failure to compensate him for his services although he normally would charge 16 percent for delinquent payments. As a result, he said that he has saved the trust the additional expenses it would have otherwise incurred. Jason testified that he received two separate payments for $90,000 in addition to his regular compensation. He testified that one payment was the 5 percent commission for establishing a new leasing tenant and the second payment was compensation that he had deferred until the trust was able to pay him for the services he already provided.



On December 29, 2023, the district court entered an order finding that



Marsha has not breached her fiduciary duties. She has properly administered the QTIP Trust. Not funding the Family Trust was prudent and consistent with Abram's goal to avoid as much tax liability as possible under then existing laws. The only assets of the Q-TIP Trust are Abram, LLC and Misle Properties . . . There are no other assets that should have been placed in the QTIP Trust. The only debt of the QTIP Trust is a mortgage on one of the Pennsylvania properties.



The sale of the property on O Street was justified by its indebtedness. The 1031 Exchange for the Pennsylvania property was done so that the trust could avoid tax liability and continue to provide income to Helen during her lifetime. All of the beneficiaries were



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consulted when these decisions were made. Gayle was in favor of both the sale and acquisition of the properties in Pennsylvania.



Marsha has maintained adequate records. Gayle has been kept reasonably informed as to the trust, first by continuous communications and when that stopped, by having her requests for the production of documents met. Annual reports have been provided since 2019. Marsha has not engaged in self-dealing nor has she failed her duty of impartially.



Gayle has not suffered any harm or damages by the administration of the trust.



Gayle has not shown any breach by or liability on the part of any of the defendants.



[Gayle's] complaint is dismissed with prejudice. Marsha's Counterclaim is dismissed with prejudice. Each party is to pay his/her/its attorney fees and costs.





Misle v. Shrier, A-24-010 (Neb. App. Nov 12, 2024)

Affirmed