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Keywords

contractliabilityappealtrialtrustwillgood faithconstructive trustdeclaratory judgment

liabilitytrustgood faith

Related Cases

Kerper v. Kerper, 780 P.2d 923

Facts

Loujen Kerper, as trustee of the Kerper family trust, brought a declaratory judgment action after conflicts arose with her sister Meike Kerper regarding the use of a family cabin. The trial court ordered surcharges against Loujen, imposed a constructive trust on certain assets, and removed her as trustee, appointing a corporate trustee instead. The case involved multiple appeals and counterclaims from other beneficiaries, including a guardian ad litem for minor beneficiaries, regarding the management and distribution of trust assets.

Hazel and Wes Kerper created other trusts, supplements and amendments between 1965 and 1974. The last trust instrument was a document executed October 1, 1974, by Wes and Hazel Kerper, as settlors, and Loujen Kerper, as trustee.

Issue

Did the settlors of the Kerper trust intend to modify the liability of the trustee in the event she mismanaged trust assets? Did Wes and Hazel Kerper execute mutual wills containing an express and enforceable contract for the disposition of their respective estates? Did the trial court err in removing Loujen Kerper as trustee and replacing her with the First Wyoming Bank of Cody as an independent successor trustee under the terms of the trust?

Did the settlors of the Kerper trust intend to modify the liability of the trustee in the event she mismanaged trust assets?

Rule

The court held that the settlors intended a good faith standard rather than the reasonably prudent man standard to apply to the trustee's management of the trust. Additionally, mutual wills executed by the settlors constituted a binding contract for the disposition of their estates.

We hold that the provision in the two trusts 'shall not be liable for loss if they are exercised in good faith' is a limitation on liability.

Analysis

The court determined that the trial court had incorrectly applied the reasonably prudent man standard to assess Loujen Kerper's actions as trustee, rather than the good faith standard intended by the settlors. The court found that Loujen's administration of the trust was consistent with the good faith standard, and thus reversed the trial court's surcharges and removal of Loujen as trustee.

It is evident from the district court's conclusions stated in paragraphs 29 through 32 that it did not give effect to the settlors' intent to limit the trustee's liability for the administration of the trust.

Conclusion

The Supreme Court reversed the trial court's orders, reinstating Loujen Kerper as trustee and rejecting the imposition of surcharges against her for mismanagement of the trust.

Therefore, we reverse all provisions of the district court's order surcharging Loujen for mismanagement of the trust.

Who won?

Loujen Kerper prevailed in the case as the Supreme Court reversed the lower court's decision against her, affirming that she acted in good faith in her role as trustee.

Loujen Kerper proceeded to administer the trust according to the terms of the October 1, 1974 trust agreement.

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