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Hosey v. Burgess

890 S.W.2d 262 (1995)

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Hosey v. Burgess

Arkansas Supreme Court

890 S.W.2d 262 (1995)

Facts

Julian Watkins leased 400 acres of his farmland to his daughter from his first marriage, Leneva Hosey (defendant), and her husband, N. R. Hosey. The lease was for 25 years for $35 per acre annually. Julian later died. Julian’s will created a testamentary trust for the benefit of his second wife, Florence Watkins. Julian’s entire farm was placed in the trust, including the 400 acres leased by the Hoseys. The Hoseys were named as the trustees and instructed to manage the farm and pay any income to Florence for the rest of her life. At Florence’s death, the trust’s assets would go to Julian’s biological descendants, which included Leneva. Later, due to N. R.’s deteriorating health, the Hoseys leased the entire 1,300-acre farming operation to a third party for $88,000 annually, which was approximately $67 per acre. This transaction included a sublease for the 400 acres that were still leased to the Hoseys, but the Hoseys continued to pay Florence the lease price of $35 per acre. N. R. died, and then Florence died. Florence’s daughter, Marysue Burgess (plaintiff), was the sole beneficiary of Florence’s estate. Burgess sued Leneva, claiming that the Hoseys (1) had breached their duty of loyalty as the trustees of Julian’s testamentary trust and (2) owed Florence’s estate the difference between the $35 per acre that the Hoseys had paid Florence to lease the 400-acre parcel and the money that the Hoseys had received under their sublease. Leneva argued that she (1) had not intentionally acted in her own personal interest and (2) met an exception to the duty of loyalty for known conflicts. The county court found that the exception did not apply and that the Hoseys had breached their duty to the trust by unintentionally engaging in self-dealing. Leneva appealed.

Rule of Law

Issue

Holding and Reasoning (Holt, C.J.)

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