Lynch v. Romano

396 P.3d 267, 285 Or. App. 243, 2017 WL 1731034, 2017 Ore. App. LEXIS 560
CourtCourt of Appeals of Oregon
DecidedMay 3, 2017
Docket11P10955; A155071
StatusPublished
Cited by3 cases

This text of 396 P.3d 267 (Lynch v. Romano) is published on Counsel Stack Legal Research, covering Court of Appeals of Oregon primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Lynch v. Romano, 396 P.3d 267, 285 Or. App. 243, 2017 WL 1731034, 2017 Ore. App. LEXIS 560 (Or. Ct. App. 2017).

Opinion

EGAN, J.

Petitioner, as trustee of her parents’ survivor’s and decedent’s trusts, appeals from a probate court’s judgment denying petitioner’s petition for approval of her plan to redistribute trust assets between the trusts. Petitioner contends that the probate court erred as a matter of law when it refused petitioner’s plan of refunding the decedent’s trust as a remedy for her father’s actions as trustee that improperly defunded the decedent’s trust. We conclude that the probate court did not err. Accordingly, we affirm.

Neither party requests that we review de novo, and we decline to do so. See ORS 19.415(3)(b). Because petitioner requested only equitable relief and a probate court has broad discretion in crafting equitable relief, see Port of Morrow v. Aylett, 186 Or App 70, 76, 62 P3d 427 (2003), we review the probate court’s order for abuse of discretion. A court abuses its discretion if it “is exercised to an end not justified by, and clearly against, evidence and reason.” State v. Mason, 100 Or App 240, 243, 785 P2d 378 (1990). We review the court’s legal conclusions for errors of law and are bound by the court’s factual findings if there is any evidence to support them. Blunter v. Staggs, 250 Or App 215, 217, 279 P3d 826 (2012).

We describe the facts as found by the probate court, supplemented with undisputed evidence from the record. Petitioner and respondent1 are siblings. Their parents, Chris and Lois Muller, created the Muller Family Revocable Trust (MFRT), which included a survivor’s trust and a decedent’s trust. Chris and Lois properly amended the MFRT, including the decedent’s trust, twice during Lois’s lifetime. Under the original version of the decedent’s trust, respondent was to receive the family farm, where he lived; petitioner was to receive a 20-acre property in Lincoln City, Oregon, and a house in Dallas, Oregon; and both were to split the remainder of the decedent’s trust. The second amendment removed respondent as a beneficiary of the decedent’s trust and made petitioner the sole beneficiary of that trust, from which she [245]*245was to receive a collection of antiques, the Lincoln City property, and the remainder of the decedent’s trust.

Under the MFRT, when Lois died in 1993 the survivor’s and the decedent’s trusts became separately administered trusts. The decedent’s trust became an irrevocable credit shelter trust, and the survivor’s trust remained a revocable trust during Chris’s life. Chris was named trustee of both trusts. To fulfill the tax purposes of the trusts, the decedent’s trust was to be funded with $600,000 of trust property.

Chris, as trustee of the decedent’s trust after Lois’s death, had the power to choose how to initially fund the decedent’s trust. In accordance with the advice of his lawyer, Chris kept a handwritten ledger of the assets of the decedent’s trust. According to that ledger, in 1995, Chris funded the decedent’s trust with the 20-acre property in Lincoln City, which he valued at $560,708, and $32,750 in stock. The stock was sold in 1997 for $71,118.02, which remained an asset of the decedent’s trust. In 1999, Chris removed the Lincoln City property from the decedent’s trust, sold it, and used the proceeds to create a charitable remainder trust that benefitted him and his second wife, Dolores Muller. The ledger shows that Chris replaced the Lincoln City property with two Polk County properties that Chris valued at $327,000 and a Depoe Bay property valued at $175,000.

In the following years, Chris moved assets between the decedent’s and survivor’s trusts and withdrew assets from the decedent’s trust, such that he admitted to his attorney that he had lost track of which trust held which assets. His attorney warned him that his actions as trustee may have caused all of the tax benefits of the decedent’s trust to be lost and told him that he could not amend the decedent’s trust. Nevertheless, Chris directed his lawyers to stop their efforts to identify, track, and vest the trust assets. In 2008, Chris’s lawyer attempted to enlist the help of an estate planning specialist to repair the damage Chris had done and was told that the decedent’s trust could not be remedied and the tax purposes of the trust may have been effectively destroyed.

Chris amended the original survivor’s trust, created the Complete Restatement of the Chris Muller Survivor’s [246]*246Trust, and amended that restatement three times. Under the third and final amendment to the restatement of the survivor’s trust, Tony Romano, petitioner’s son, was to receive the family farm, subject to respondent’s life estate. It also granted petitioner and respondent each one half of the Depoe Bay property and the remainder of the survivor’s trust.

When Chris died in 2009, petitioner became the successor trustee. She hired Jonathan Levy, a lawyer who specializes in estate planning, to help administer the trusts, attempt to restore the tax benefits of the trusts, and repair other problems that petitioner found that Chris had created for the trusts. Levy testified that he had never seen such a damaged estate plan, and he initially believed that the trusts were beyond repair. He said that most experts would have agreed and would not have attempted to repair the damage. Levy tried to trace and unwind the improper transactions, but he could not sort through the “rat’s nest” of exchanges that Chris had done. Levy focused his attention on attempting to restore the tax benefits of the estate and to refunding the decedent’s trust to the value it would have held had the Lincoln City property not been removed in 1999. Levy testified that Chris’s transactions as trustee of the decedent’s trust “short-changed” it by nearly $400,000, in 1999 dollars, because the properties that Chris’s ledger listed to replace the Lincoln City property were worth far less than the value of the Lincoln City property at the time it was sold. Petitioner and Levy created a plan to refund the lost value of the decedent’s trust by reallocating assets held in the survivor’s trust in 1999 and at the time of Chris’s death, or assets directly traceable from those assets, to the decedent’s trust. Levy testified, however, that the probate court’s decision to approve or deny the plan would not affect the estate’s taxes.

Petitioner then petitioned the probate court for instructions and approval of her plan to refund the decedent’s trust. In the petition, petitioner asked the court for equitable relief only, specifically requesting that the probate court use its equitable powers to approve her plan to restore to the decedent’s trust the full value, in 1999 dollars, of the Lincoln City property that was removed by Chris in 1999. [247]*247Using their 1999 values, petitioner’s proposed plan sought to reallocate three properties from the survivor’s trust to the decedent’s trust—including the family farm on which respondent lived and in which he was granted a life estate in the final version of the survivor’s trust and a property that petitioner was specifically granted under the final version of the survivor’s trust—and $68,000 in cash. In addition, petitioner proposed to allocate to the survivor’s trust all other property not in the decedent’s trust, including a property in Arizona that Chris had deeded to her in 2007, two years before his death, which gave her the right of survivorship.

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Cite This Page — Counsel Stack

Bluebook (online)
396 P.3d 267, 285 Or. App. 243, 2017 WL 1731034, 2017 Ore. App. LEXIS 560, Counsel Stack Legal Research, https://law.counselstack.com/opinion/lynch-v-romano-orctapp-2017.