## Facts

- Fred and Nell Lasater each created a testamentary trust that placed the family farm land into trust; the two trusts functioned in practice as a single pooled operation.
- The combined trust was administered by three cotrustees, who were also among the beneficiaries; trust actions could be taken by a majority vote of two trustees.
- The trust instruments contemplated that the trustees would farm and manage the land.
- Gary Lasater became a trustee and sought to lease the trust farmland to himself so that he could farm it on his own.
- The other two trustees, Patsy Lasater Wilkins and Elfred Nunn, agreed to an initial written 10-year lease to Lasater, with rent tied to crop yield.
- When the 10-year term expired, Wilkins objected to renewal, but Lasater and Nunn (as a majority) voted to renew the lease for one year.
- Wilkins sued, seeking to terminate the trust and to compel Lasater to produce financial records and supporting documents concerning his farming operations under the lease, alleging a breach of the duty of loyalty and inadequate accounting.
- During the litigation, the parties disputed an advance distribution to Wilkins. The three trustees agreed that Wilkins would receive an advance in exchange for extending Lasater’s lease for an additional three years while the case proceeded; the trial court approved the agreement.
- At trial, Lasater testified that he had not profited from leasing and farming the trust land, but he did not produce documents to substantiate his testimony (including records that would allow verification of revenues, costs, and allocation of expenses).
- The trial court upheld the lease arrangement and found no breach of fiduciary duty. It also permitted the trusts’ longtime attorney to continue representing the trusts, upheld the exclusion of Wilkins’s nontrustee husband from trustee meetings, and denied Wilkins attorney’s fees.

## Issues

1. Whether a trustee’s lease of trust property to himself violates the duty of loyalty unless authorized by the trust, approved by a court, or consented to by fully informed beneficiaries.
2. Whether a trustee who leases trust property to himself bears the burden to prove he did not personally profit or otherwise breach fiduciary duties in his conduct as tenant, including by providing adequate records.
3. Whether court approval of the trustees’ stipulation extending the lease during litigation barred later judicial review of the trustee-tenant’s conduct and accounting.
4. Whether the trial court erred by allowing the trusts’ longtime attorney to continue representing the trusts during the dispute among trustees and beneficiaries.
5. Whether excluding a nontrustee spouse from trustee meetings was permissible.
6. Whether Wilkins was entitled to attorney’s fees from the trust based on the litigation’s effect on trust administration.

## Decision

- Affirmed in part, reversed in part, and remanded.
- Held that a trustee’s lease of trust property to himself constitutes a breach of the duty of loyalty unless the trust expressly authorizes it, a court approves it, or beneficiaries consent with full knowledge of the relationship.
- Held that even when a trustee self-lease is not automatically void due to approval or informed consent, the trustee-tenant bears the burden to show he did not personally profit and did not otherwise breach fiduciary duties in fact.
- Reversed the trial court’s no-breach finding because the evidence was insufficient: Lasater’s unsupported testimony, without meaningful documentation or accounting, did not satisfy his burden.
- Remanded for further proceedings on whether Lasater’s conduct as trustee-tenant complied with fiduciary obligations and for consideration of appropriate relief.
- Affirmed the trial court’s rulings allowing continued representation by the trusts’ longtime attorney and allowing exclusion of Wilkins’s nontrustee husband from trustee meetings.
- Reversed the denial of attorney’s fees and directed that Wilkins receive fees from the trust, with the amount and allocation to be determined on remand.

## Legal Principles

- A trustee’s self-dealing transaction such as leasing trust property to himself is disallowed unless authorized by the trust terms, approved by a court, or agreed to by beneficiaries with full knowledge of the conflict.
- When a trustee is also the tenant of trust property, the trustee bears the burden of proving that his conduct did not produce personal profit at the trust’s expense and did not otherwise violate fiduciary duties.
- A trustee with a conflict must support claims of fairness with reliable records and accounting; conclusory testimony may be insufficient.
- Court approval of a stipulation affecting trust administration may validate the agreement for interim purposes but does not excuse the trustee from later scrutiny of performance and accounting.
- A court may award attorney’s fees from trust assets to a beneficiary whose action results in enforcement of fiduciary obligations or otherwise provides a meaningful service to the trust.
- Trustees may exclude nontrustees from trustee meetings when reasonably necessary for orderly administration, while still allowing a trustee-beneficiary to seek professional assistance.

## Conclusion

Wilkins v. Lasater held that leasing trust farmland to a trustee is generally barred absent authorization, court approval, or informed beneficiary consent, and that even when the lease is not automatically void, the trustee-tenant must prove through adequate records that he did not profit or breach fiduciary duties; because Lasater failed to provide sufficient documentation, the appellate court remanded for further fiduciary review, affirmed ancillary rulings on counsel and meeting attendance, and ordered an award of attorney’s fees to Wilkins.


Wilkins v. Lasater, 733 P.2d 221 (1987)