Submitted on Briefs: October 23, 2013
APPEAL FROM: District Court of the Twentieth Judicial District, In and For the County of Lake, Cause No. DV 13-72 Honorable C.B. McNeil, Presiding Judge
For Appellant Julie R. Sirrs; Boone Karlberg,
Patrick D. Dougherty; Worden Thane P.C.; Robert Long; Long Law Office
Beth Baker Justice
¶1 Pursuant to Section I, Paragraph 3(d), Montana Supreme Court Internal Operating Rules, this case is decided by memorandum opinion and shall not be cited and does not serve as precedent. Its case title, cause number, and disposition shall be included in this Court's quarterly list of noncitable cases published in the Pacific Reporter and Montana Reports.
¶2 Valma Todd (Valma) appeals the order of the Twentieth Judicial District Court, Lake County, denying her petition to remove the trustee of her family trust and to appoint a successor trustee. We affirm in part and reverse and remand in part.
¶3 Valma is the current beneficiary of the Robert L. Todd, Sr. Trust (Trust)-a trust established by her late husband Robert Todd (Robert) in 1976. As amended in 2002, the Trust's stated purpose is "to provide for the financial security for the Trustor and his wife VALMA B. TODD, and to provide for the ultimate distribution of the residue of the Trust Estate [equally to Robert's two sons and grandson]. . . ." Following payment of expenses of the Trust, the Trust document provides that "[a]ll income to the Trust . . . shall be available to the Trustor and his wife, and to the survivor, for their use and benefit for the remainder of their lifetimes . . .." The Trust document allows invasion of the principal if the income is considered by the trustees to be insufficient for the support, maintenance and care of the beneficiary. In that case, the trustees are to pay such amounts from the principal "as the Trustees shall deem sufficient for such purposes." The Trust document further provides: "The Trustees may pay income or principal to the Trustor or beneficiary or for his or her benefit, and shall have no obligation to confirm the use of such payments to which the beneficiary may put such payments." In 2003, Robert created a separate document emphasizing the trustee's right to use the principal for the benefit of the beneficiary. It clarified that the Trust document "authorizes the Trustee(s) of said trust to use both principal and income of said trust for the benefit of Trustor, Robert L Todd, Sr. and his wife, Valma B. Todd during their lifetimes." All the beneficiaries acknowledged and signed the clarification.
¶4 Robert died in 2004, leaving Valma as the sole primary beneficiary. Edward Todd (Ed), Robert's grandson, became the sole trustee. In 2008, after breaking her hip, Valma moved to California where two of her sisters could take care of her. Although they originally agreed to care for Valma for the same amount of money that Ed's parents were being paid for that purpose, the sisters soon realized they needed an increase in funds. Ed agreed to distribute $2, 200 a month to cover Valma's care. In January 2012, after apparently becoming concerned that the Trust assets were depleting too quickly, Ed notified the sisters that he would be decreasing his distribution to Valma to $1, 100 per month. Valma's third sister, Truella Hicks, joined the sisters in California and was appointed as Valma's conservator in January 2013. Adult Protective Services (APS) of Montana was contacted to conduct an investigation of the Trust distributions. Upon investigation, Janice Hinze of APS reported that Ed's refusal to provide sufficient distributions from the Trust to meet Valma's needs indicated elder financial exploitation and neglect.
¶5 Alleging numerous breaches of fiduciary duties, Valma filed a verified petition on March 19, 2013, to remove Ed as trustee and to appoint a successor trustee. The District Court held a hearing on the petition on April 10, 2013; Hinze and Ed testified and Hinze's report was admitted into evidence, along with the April 4, 2013 letter of Barnet G. Meltzer, M.D., a spreadsheet of expenses prepared by the sisters for APS, some expense receipts, and Ed's initial e-mail exchange with Valma's sister establishing $1, 150 in monthly expenses. The court issued its findings of fact, conclusions of law and order on May 7, 2013, denying all of Valma's requests. If Valma's conservator believes she needs additional funds, the District Court ordered that she provide all medical documentation to Ed, who then may choose a physician to make a recommendation as to her care and potential return to Montana if he determines those costs to be more reasonable.
¶6 We review a district court's findings of fact to determine whether they are clearly erroneous and its conclusions of law for correctness. In re Baird, 2009 MT 81, ¶ 7, 349 Mont. 501, 204 P.3d 703. A finding is clearly erroneous when it is not supported by substantial evidence, the district court misapprehended the effect of the evidence, or if, after reviewing the record, we are left with a firm conviction that a mistake has been made. In re Guardianship of Saylor, 2005 MT 236, ¶ 10, 328 Mont. 415, 121 P.3d 532. We review a district court's decision denying a petition to remove a trustee for abuse of discretion. Baird, ¶ 11. Interpretation of a trust agreement is a question of law, reviewed for correctness. In re Charles M. Bair Family Trust, 2008 MT 144, ¶ 32, 343 Mont. 138, 183 P.3d 61.
¶7 On appeal, Valma first argues that the District Court erred in determining that Ed did not breach his fiduciary duties, beginning with his duty to carry out the intent of the Trust and exercise his discretion reasonably. The District Court relied on what it considered conflicting letters from physicians-one stating that Valma suffered from a terminal diagnosis with less than a year to live and one stating that Valma was released from hospice care to complete physical therapy-and found that "no clear evidence was presented to the court that additional caregiver costs were even necessary." Upon review of the record, we conclude that the court misapprehended the effect of the evidence. First, the letters were not conflicting but instead sequential. The second letter, from Valma's primary care physician, explained her condition and specifically stated that she needed a caregiver twenty-four hours a day. Second, the court completely disregarded the evidence supplied from Hinze. Her report, admitted into evidence by the court, stated that "Valma . . . cannot be left alone; someone must be with her 24/7. She requires assistance to toilet, dress and groom herself . . . ." Hinze calculated that such caregiver costs alone could be over $6, 000 a month in Valma's locality. In light of the evidence presented, the court's finding that increased caregiver costs had not been substantiated is clearly erroneous.
¶8 The District Court also interpreted the Trust document incorrectly as a matter of law. Even when a trust confers sole discretion in a trustee, the trustee "may not act in disregard of the purposes of the trust." Section 72-34-130, MCA (2011). The trustor's intent controls our interpretation of a trust agreement, and we attempt to discern the trustor's intent from the language of the entire trust, rather than from a particular word or phrase. Bair, ¶ 32. In Bair, we held that viewing the trust document as a whole, the primary purpose of the trust was to establish a museum even though the section of the trust outlining its purpose spoke of a more general philanthropic mission. Bair, ¶ 35. Here, Ed argues and the District Court concluded that because the Trust's purpose is dual-to provide for Valma for the rest of her life and then be distributed to the remaindermen-Ed has a duty to preserve the Trust to fulfill both purposes. While the Trust requires Ed to carry out both purposes, it is apparent that Valma's care constitutes the primary purpose of the Trust. This is shown by the fact that it is a more specific purpose than leaving a remainder interest to residuary beneficiaries, the Trust document does not restrict the distributions to meet Valma's needs in order to save Trust assets for the remainder, and the Trustor expressly clarified that the principal could be invaded for the benefit of the primary beneficiaries.
¶9 The court also incorrectly interpreted the phrase allowing invasion of the principal of the Trust "as the Trustees shall deem sufficient for such purposes" to allow Ed unfettered discretion over Valma's care. While a trustee has a duty to preserve trust property, § 72-34-107, MCA (2011), the court went so far as to allow Ed to "choose a physician to evaluate Valma and make a recommendation as to the appropriate care and possible return to Montana, if such costs of care in Montana would be more reasonable . . . ." The Trust does not require that Valma live in Montana or accept the least expensive option for her care. Rather, the Trust's language suggests a more liberal distribution by stating that the trustee "shall have no obligation to confirm the use of such payments to which the beneficiary may put such payments" and by specifically allowing an invasion of the Trust's principal to care for Valma. Ed is not Valma's guardian or conservator, nor is he the arbiter of where she lives and who provides her medical care. It is evident from the testimony that there was considerable mistrust between Ed and the sisters, one of whom is Valma's conservator, regarding the uses to which the Trust distributions were being put. When asked by his counsel to ...