Trustee gets off on a technicality

In Bowen v. State, 322 S.W.3d 435 (Tex. App.—Eastland 2010, pet. filed), a Texas jury convicted Deborah Bowen of misapplication of fiduciary property valued at over $200,000 under Penal Code § 32.45.  She was then sentenced to eight years in prison, fined $10,000, and ordered to pay $350,000 in restitution.  Deborah Bowen appealed the decision and was eventually acquitted of the charges on a technicality. Because only about $100,000 was held in trust for the named beneficiary (it did not list all of the beneficiaries) and because the jury charge did not include a lesser included offense, Trustee’s conviction was reversed. Moral: Selecting an institutional trustee whose impartiality is held accountable and who is required to abide by the letter and spirit of the Creator’s intentions, can help prevent these kinds of family battles.

Background Facts: (italics are added for emphasis of key points in this case)

Alfred P. Douglass died in March 2001, leaving a substantial estate.  The community estate was valued at $1,723,991.63; Alfred’s one-half was valued at $861,995.82.  He was survived by his wife, Parnice W. Douglass, and his two children, Jackie Douglass and Deborah Bowen.  Alfred’s will established the Alfred P. Douglass Trust, which utilized the Federal Unified Gift and Estate Tax Credit to exclude the amount placed in the marital trust from estate taxes.  Parnice was the primary beneficiary; and, upon her death, the trust assets were to be distributed to Alfred’s living descendants.  The trust account was funded with $673,219 in an account at Edward D. Jones & Co. (Edward Jones) in Sweetwater.  The initial co-trustees were Parnice and Jon Bergstrom of Edward Jones.  The trust produced an income of approximately $33,000 in 2002.

Jon Bergstrom of Edward Jones, Alfred’s financial adviser for eighteen years, testified that the purpose of the trust was to take advantage of the unified tax credit under the inheritance tax exemption. Bergstrom invested the trust assets in tax-free municipal bonds because Alfred did not want the trust to invest in risky assets or to pay taxes on its income.  According to Bergstrom, Alfred wanted the trust assets to remain invested and increase until both he and his wife had died.  After Alfred’s death, Jackie Douglass became the primary caretaker of Parnice.  He lived in the same town as Parnice and farmed his own land and land owned by Parnice.  Jackie died unexpectedly in October 2002.  He was survived by his three children:  Dana White, Cody Douglass, and Michael Douglass.  Bowen and Parnice served as administrators of Jackie’s estate.

As Parnice’s daughter, Bowen became the caretaker of Parnice after Jackie’s death.  In October 2002, the month that Jackie died, Parnice executed a statutory durable power of attorney naming Bowen as her attorney-in-fact.  The power of attorney gave Bowen the power to handle all of Parnice’s financial affairs.  In the summer of 2004, Bowen and her husband moved into Parnice’s home and became her full-time caretakers.  Jon Bergstrom was asked to resign as co-trustee of the trust, and Parnice appointed Bowen as the successor co-trustee.  At the time Bowen was appointed co-trustee in May 2004, the balance in the trust account was $620,065.  Within three years, Bowen had reduced the trust account to $12,000.

It had taken Alfred and Parnice a lifetime to build an estate of $1,723,991.  At the time of Alfred’s death, Parnice had inherited $188,776 (Alfred’s one-half minus the $673,219 placed in the trust) from Alfred and her one-half of the community estate was valued at $861,995.  Thus, in addition to being the primary beneficiary of the trust, Parnice had assets of $1,050,772 when Alfred died in March 2001.  When Parnice died in March 2006, five years after Alfred died, Bowen had reduced Parnice’s assets from $1,050,772 to an estate of $603,879.87.  All of Parnice’s investments in bonds and cash had disappeared; the land owned by Parnice at her death amounted to $592,000 of the $603,879 according to Parnice’s probate inventory filed by Bowen.  At the time of Parnice’s death, the trust had assets of approximately $376,584, but Bowen as trustee did not distribute one-half of the assets to Jackie’s children as required by the trust provisions.  Bowen ultimately distributed all of the remaining trust assets to herself. By December 2006, the trust only had a balance of $124,435.61.  The Edward Jones statement for January 1 – 26, 2007, reflects a trust balance of zero.  Jason Blake of Edward Jones testified that there was only $12,000 in the trust account when Edward Jones received a lis pendens freezing the account.

Parnice had significant funds reasonably available to her from sources other than the trust.  At about the same time the trust was set up, Parnice also had a separate account with Edward Jones in the amount of $293,336.  Parnice owned approximately 1,100 acres, and she was earning income from a lease of the land to Terry Lee Coker.  Parnice also had income from Social Security, income from her IRA account, and a separate banking account that had an average balance of between $75,000 to $200,000 during Alfred’s lifetime.  At the time of her death in March 2006, Parnice had a balance of $217,000 in that account, although Bowen did not list that amount in the probate inventory she filed on behalf of Parnice’s estate.

On numerous occasions, Bowen then transferred money from the trust to her own account, her joint account with Parnice, or to Parnice’s account. Expenditures utilizing trust funds included a 1998 GMC Yukon SUV titled in Bowen’s name, many pieces of farm equipment, several farm tractors, several trailers, trucks, jeeps, an old Cadillac, a sand buggy, a Caterpillar bulldozer, a trailer to carry the bulldozer, an asphalt spreader, a Case backhoe, and many other items.  None of the items were ever titled in the name of the trust.

Bowen acknowledged that the trust was funded with $673,219 when Alfred died and that, by May 2002, the trust account had increased to $687,000.  She also acknowledged that the titles to the farm equipment, tractors, trailers, trucks, jeeps, bulldozer, backhoe, and other items were usually put in her name.  On February 17, 2006, a month before Parnice died, trust funds were used to purchase a $25,000 motor home from Fun Time RV.  Bowen said that she sold the motor home after Parnice’s death and kept the money.  Two days before Parnice died, Bowen used trust funds to purchase a classic Thunderbird for $25,000.  Bowen sold it after Parnice’s death, realizing a $9,000 profit.  Bowen kept the proceeds.

Bowen testified that the construction business she owned with her husband had filed for bankruptcy in 2002.  Although Bowen testified that all of the trucks, jeeps, trailers, a dozer, and a backhoe were purchased for the farm, a more reasonable inference is that she purchased them with trust funds for her construction business or for the benefit of her and her husband, not for the benefit of Parnice.  Bowen also testified that Parnice wanted to get back into farming after Alfred died in 2001.  Both Alfred and Parnice were eighty-one years of age in 2001.  They had quit farming years before.  Terry Lee Coker, who lives in Roby near Sylvester, testified that Alfred had turned over the farming to him.  There is no evidence that Bowen or her husband knew anything about farming.  It was not for the benefit of Parnice or “to provide for her health, support, maintenance and education, taking into consideration her age, education and station in life.”

Shortly before Parnice died, Bowen contacted an attorney, David DeFoore, to prepare a new will for Parnice that would leave all of Parnice’s estate to her.  DeFoore testified that he prepared the will at Bowen’s request but that he never spoke with Parnice.  Tom Reese Jr. testified that he had prepared similar wills for Alfred and Parnice; Parnice’s earlier will split her estate between Jackie and Bowen (or their respective descendants if one should die before Parnice).  By having Parnice execute a new will in Parnice’s final days, Bowen made certain that Jackie’s children would not participate in any of the assets that Alfred and Parnice had accumulated.

The jury returned a unanimous verdict that, as a fiduciary, Bowen had intentionally, knowingly, or recklessly misapplied property of more than $200,000 owned by Dana White or held for her benefit. Unfortunately, Bowen’s conviction was overturned on a technicality and a judgment of acquittal was rendered on appeal.

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