April 17th. The Kansas Supreme Court has issued its opinion in Albert H. Nelson III and Markeyta Nelson Dewey v. Doris H. Nelson (No. 97,664), a case brought by a pair of adult children against their stepmother for their late father’s failure to abide by the terms of his divorce settlement in drawing his will. In a unanimous opinion, written by Justice Luckert, the Court found that the claim which was brought was for a breach of contract by the late Albert H. Nelson Jr and that it was not filed in time to avoid being barred by the Kansas nonclaim statute. In the course of the ruling the Court also overrules one line of its precedents and determines that constructive trusts do not require fraud be shown in order to be created.
In 1975 Albert Nelson Jr and his wife divorced. Under the terms of the divorce settlement he was to leave his entire estate to his two children. In 1978 Nelson remarried and structured his affairs in such a way that almost all his property was held in two trusts or in his new wife’s name (Doris). One trust was to ultimately benefit his children, but on their deaths to bequeath the assets to Oklahoma State and Wichita State Universities. The other was to benefit OSU and WSU after the death of Doris. Mr Nelson died in 2003 and this case was brought by his children to assert that a constructive trust existed which meant that the trusts he had funded should return the assets to the children under the terms of the 1975 divorce settlement.
The District Court and the Court of Appeals rejected this argument, finding that the case which had been brought did not show constructive fraud to have taken place, and that therefore under established precedent of the Kansas Supreme Court a constructive trust could not have been created. The Kansas Supreme Court agreed in part, finding that the Albert (III) and Markeyta had not shown that their action was one for constructive fraud, rather they were bringing an action for breach of contract, which ultimately was against Albert (Jr)’s estate, not his trusts.
However, the Court went on to investigate whether the rule in Kansas that a constructive trust could only be created where constructive fraud was shown was valid. After reviewing the case law it concluded that it was not, finding that there were two lines of cases, a recent one which asserted this principle and an older one which took a broader view. The older cases were from a time when contracts to include someone in a will were common and therefore there were more cases regarding them. The modern cases were based around constructive fraud claims, however there was not reason to limit the law this way and therefore that part of precedent was overturned.
As a result of this, the Court considered whether the claim could therefore be brought that a constructive trust existed. It found that it could not because it had not been brought in a timely manner under the Kansas nonclaim statute which sets time limits on actions such as these to allow probate to conclude with finality. While an exception exists to this statute for tort claims, the Court ruled that that exception did not apply in this case since this was essentially a contracts case (breach of the 1975 divorce settlement). Therefore the claim was time barred and the lower courts’ decisions were upheld.