Court: Supreme Court of Arkansas; April 11, 1955; Arkansas; State Supreme Court
Fairview Memorial Park Association was established in 1922 through a declaration of trust by eight individuals and Cravens Co., pledging to manage 28 acres and any acquired property under specified trust terms. In 1953, Kenneth D. Harr and others obtained a court order to sell the property to Fairview Cemetery, Inc. Subsequently, H. E. Page and others, representing cemetery lot owners, intervened, seeking an accounting of trust expenditures, appointment of a board, and reversal of the sale decree. They appealed after most of their requests were denied.
The original organizers held twenty-four shares, with nineteen eventually passing to Kenneth and Lela Mae Harr, while Hattie B. Moore and Chi Omega National Fraternity held three and two shares, respectively. The trust established a five-member board with terms ending on November 1, 1927, but trustees continued until successors were appointed. The organizers' shares represented beneficial interests, and the directors had discretion over fund management, with a mandate to allocate 20% of lot sale proceeds to a Perpetual Care Fund. They could also draw enough from proceeds to meet an annual budget of $360.
The court found that the trust articles were recorded, no dividends had been distributed, and the Perpetual Care Fund had been inadequately maintained, leading to the use of both the fund and lot sale proceeds for cemetery upkeep.
The decree under appeal outlines several key points regarding the management and financial activities of the cemetery. Kenneth and Lela Mae Harr have admitted to controlling the cemetery since January 1, 1942, with lot sales generating $29,591.13 against expenditures of $29,857.88 for maintenance, while additional, unestimated sums were received. They argued that expenditures from the Perpetual Care Fund were necessary and that they legally sold the cemetery property to Fairview Cemetery, Inc. The original trust's implementation was challenged due to the failure of the trustees to qualify and post bond, and defenses of limitation and laches were raised since all original parties had been deceased for over seven years.
The court determined that Fairview Cemetery, Inc. held all beneficial interests and that the certificate holders were part of a Massachusetts Trust, granting them the power to sell the property. The court found the 1922 trust terms impractical and established a new maintenance method, shifting upkeep responsibility to the beneficial interest holders and reducing their contribution to the trust fund from 20% to 15% until it reached $30,000, then to 10%. The court noted that the new obligations imposed greater financial responsibility on the beneficial interest holders compared to the original agreement, ultimately benefiting the lot owners.
After assessing expenses and receipts, the court determined that the lot holders gained $3,960, contrasting with the $5,918.23 that would have been generated under the original trust obligations. The difference of $1,958.23 was ordered to be placed in an irrevocable trust fund for Fairview Cemetery, Inc., to be applied against unpaid amounts due from the purchase. Additionally, U.S. bonds valued at $800 were discovered among trust records post the elder Harr's death and were secured by authorities.
A trust agreement established on April 10, 1953, between Fairview Cemetery, Inc. and McIlroy Bank as trustee was filed on February 26, 1954. This agreement affirms that Fairview Cemetery has maintained control over its property and operations since the February 1953 proceedings, unaffected by a subsequent decree in 1954. The trust properties were sold for a total of $15,000, with $5,000 already paid. Two incorporators reside in Kansas City, Kansas, and one in Prairie Valley, Kansas; all are involved with other cemeteries. James Knowles, the manager, indicated that 20% of cash sales from burial lots is earmarked for maintenance, totaling approximately $183 or $187 since February 1953.
The cemetery includes a 'monument section' planned for development under 'religious garden ideas,' potentially featuring four or five gardens across 15 to 18 acres, with each garden designed to accommodate 600 burial spaces. William B. Roberts, an incorporator owning 500 of 1,000 shares, stated the strategy is to sell lots to future users, thereby building a substantial trust fund. Purchasers sign an agreement granting them exclusive burial rights and stipulating that 15% of the purchase price will be allocated for improvements, conditional on prior expenditures not having been met since March 1, 1953. Roberts interpreted this as a commitment to invest 15% of sales into cemetery development alongside the trust fund contribution. He also noted that an average sale price of $69 per burial lot could generate around $750,000. A deed from August 1951 included a provision requiring Fairview Memorial Park Association to allocate 20% of the sale price to a trust for the perpetual care of the cemetery.
The court identified errors in modifying obligations set by the articles of trust. It upheld defenses of limitations and laches concerning the trustees but mandated that the acreage be charged 20% of lot sales. If the parties cannot agree on the total amount from lot sales between 1922 and February 16, 1953, a master should be appointed to determine the account. This balance will fund the Permanent Care Fund, which will also include 20% of lot sales after February 16 until all acreage is sold per the original trust. Any sum due, if no agreement is reached, will become a lien on the purchased acreage. The corporation may rescind its contract if it shows all transactions have been accounted for, or affirm the contract with safeguards for the care of graves in the old cemetery area. Legislative references indicate that newer statutes do not alter contractual obligations from the 1922 trust. The 20% of lot sale proceeds is designated for maintaining and enhancing cemetery grounds indefinitely. The directors of the Association are not required to separately invest the funds but can incorporate them into yearly proceeds from lot sales, using any surplus solely for the grounds' improvement.
