Stegemeier v. Magness

A. Gray Magness’s will appointed his wife, Anne Magness (defendant) and Charles Allmond III to serve as coadministrators of his estate. The will also established a residuary trust, naming Donald Magness (defendant), Gray’s brother, as trustee. Anne was designated the trust’s income beneficiary for life. After Anne’s death, the trust assets were to be divided among Gray’s six daughters. Gray owned 171 lots in a real estate development, as well as undeveloped land adjacent to the development. At his death, title to the real estate vested in Donald as trustee, subject to a power of sale granted to Anne and Allmond as administrators of the estate. After Gray’s death, Anne and Donald formed a new construction company, Magness Builders, Inc. Magness Builders purchased the real estate held in the residuary trust, built homes on it, and sold the homes to third-party purchasers. Anne and Allmond conveyed the property to Magness Builders pursuant to their power of sale. Susane Stegemeier and Diane Mulrooney (plaintiffs), two of the trust’s residuary beneficiaries, sued Anne and Donald for breach of fiduciary duty, arguing that Stegemeier and Mulrooney had not been advised of the sale of the trust property. The trial court found for Anne and Donald, reasoning that they had not engaged in self-dealing and that, because the property had sold for a fair price, the beneficiaries had not suffered a financial loss. Stegemeier and Mulrooney appealed.