Moon v. Lesikar

230 S.W.3d 800, 2007 Tex. App. LEXIS 5592, 2007 WL 2142063

• Court: Court of Appeals of Texas
• Decided: July 10, 2007
• Docket: 14-05-00677-CV
• Status: Published

Opinions

MAJORITY OPINION

J. HARVEY HUDSON, Justice.

Appellant, Carolyn Ann Lesikar Moon, Individually and as Named Trustee of the Carolyn Ann Lesikar Moon Special Trust appeals the summary judgment granted in favor of appellees, Woody K. Lesikar, Individually, as Trustee of the Woodrow V. Lesikar Special Trust, and Independent Executor of the Estate of Woodrow V. Lesikar; West Houston Airport Corporation; Shelly Ann Lesikar, Individually and as Trustee of the S & S Trust; Stacy Jayne Lesikar Martin, Individually and as Trustee of the S & S Trust; and the S & S Trust (collectively “Airport Defendants”). We affirm.

Background

Carolyn Ann Lesikar Moon and Woody Lesikar are brother and sister. In January 1990, their father, Woodrow V. Lesikar (“Mr. Lesikar”), established the Woodrow V. Lesikar Family Trust (the “Family Trust”), naming himself and Woody co-trustees. Mr. Lesikar placed in the Family Trust 10,000 shares of stock in West Houston Airport Corporation (“Airport Stock”).

The Family Trust provided that Mr. Le-sikar would receive all net income from the trust assets during his lifetime. Upon Mr. Lesikar’s death, the trust would become irrevocable, and separate special trusts would be created for Woody, Carolyn, Margie Pugh Morgan (Mr. Lesikar’s wife), and his grandchildren. Woody’s special trust was to receive all the Airport Stock, the grandchildren’s trusts were to receive certain real property, and Margie’s trust was to receive certain stock holdings, while the remainder was to be divided between Woody’s special trust and Carolyn’s special trust. Mr. Lesikar reserved the right to revoke the trust agreement or amend the trust by written notice to the trustee. In keeping with his right to revoke, in 1991, Mr. Lesikar revoked, in writing, part of the Family Trust, removing Margie as a beneficiary.

In 1997, Mr. Lesikar decided to transfer the 10,000 shares of Airport Stock to a trust established for Woody’s children (Shelly Ann Lesikar and Stacy Jayne Lesi-kar Martin) — the S & S Trust. On September 5, 1997, Mr. Lesikar wrote Carolyn explaining his decision. Mr. Lesikar also stated in that letter he was going to revise his will to provide for Margie, he was asking Woody to have his will redrafted, with input from Carolyn and Margie, and he might make other changes.

On March 16,1998, Mr. Lesikar signed a new trust agreement that “modifies, amends and supersedes the Trust Agreement and any modifications and amendments previous to the date of the signing hereof.” The Amended Family Trust was effective as of December 31, 1997. The Amended Family Trust placed Margie back in as a beneficiary. Upon Mr. Lesi-kar’s death, $250,000 would be placed into a trust, with the income payable to Margie for her lifetime. Mr. Lesikar’s grandchildren would each receive $10,000; Shriner Children’s Hospital would receive $50,000; and the remainder would be divided equally between Woody and Carolyn and distributed to their respective special trusts. The Amended Family Trust did not mention the distribution of the Airport Stock to Woody as the original trust had.

Mr. Lesikar sold the Airport Stock to Woody for $2,000 for the benefit of the S & S Trust. On his 1997 federal income tax return, Mr. Lesikar claimed a $191,228 loss from the sale, which he used to offset a $1,674,203 gain from the sale of other stock. Although the tax return, which is dated February 24, 1998, states the sale of the stock took place on December 30,1997, Mr. Lesikar did not receive the $2,000 until December 1998. The assignment of the Airport Stock to the S & S Trust is dated December 30,1998.

On January 28, 2001, Mr. Lesikar died thereby making the Amended Family Trust irrevocable. On August 19, 2003, Carolyn filed a petition for construction of trust, declaratory judgment, accounting, appointment of a receiver, and injunctive relief against the Airport Defendants. Complaining of the sale of the Airport Stock to Woody for $2,000 as an inadequate price, Carolyn brought claims for negligence, breach of fiduciary duty, conversion, and civil conspiracy against Woody, and civil conspiracy against the S & S Trust.

Carolyn, Woody, and the Airport Defendants moved for summary judgment on the issue of the sale of the Airport Stock to Woody. The trial court denied Carolyn’s motion for summary judgment, and granted Woody’s and the Airport Defendants’ motions for summary judgment. The trial court ordered the portion of the case relating to the sale of the Airport Stock severed from the remainder of the case. Carolyn appeals the denial of her motion for summary judgment and the granting of the appellees’ motions for summary judgment.

STANDARD OF REVIEW

To prevail on a motion for summary judgment under 166a(c), the movant must establish that no material fact issue exists and that it is entitled to judgment as a matter of law. Browning v. Prostok, 165 S.W.3d 336, 344 (Tex.2005). In conducting our review of the summary judgment, we take as true all evidence favorable to the nonmovant, and make all reasonable inferences in the nonmovant’s favor. Diversicare Gen. Partner, Inc. v. Rubio, 185 S.W.3d 842, 846 (Tex.2005). A defendant is entitled to summary judgment on an affirmative defense if the defendant presents evidence that establishes each element of the affirmative defense as a matter of law. Ryland Group, Inc. v. Hood, 924 S.W.2d 120, 121 (Tex.1996). When a trial court’s order granting summary judgment does not specify the grounds upon which it relied, we must affirm the summary judgment if any of the summary judgment grounds presented are meritorious. FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872-73 (Tex.2000).

Standing

In her tenth issue, Carolyn claims the trial court erred in granting summary judgment in favor of appellees on the ground that she lacked standing to complain about the sale of the Airport Stock because she had no interest in it at the time of the sale. Carolyn asserts, as a matter of law, the 1997 Amended Family Trust was in effect at the time of the sale of Airport Stock. Carolyn contends because the 1997 Amended Family Trust makes no mention of the Airport Stock, it is part of the residuary to be divided between her and Woody. Clearly, if the 1990 Family Trust was in effect at the time of the sale, Carolyn had no interest in the Airport Stock because the Trust specifically provided Woody’s special trust was to receive the stock. However, even if the 1997 Amended Family Trust was in effect at the time of the sale, for the reasons stated below, we conclude Carolyn has no standing to challenge the sale of the Airport Stock.

Carolyn argues, as a beneficiary of the Amended Family Trust, she has standing to bring this cause of action. “Any interested person may bring an action under Section 115.001 of this Act.” Tex. PROP. Code Ann. § 115.011(a) (Vernon 2007) (emphasis added). An “interested person” is defined as “a trustee, beneficiary, or any other person having an interest in or a claim against the trust or any person who is affected by the administration of the trust.” Tex. PROP.Code Ann. § 111.004(7) (Vernon 2007) (emphasis added). A “beneficiary” is “a person for whose benefit property is held in trust, regardless of the nature of the interest.” Id. § 111.004(2). An “interest” is “any interest, whether legal or equitable or both, present or future, vested or contingent, defeasible or indefeasible.” Id. § 111.004(6) (emphasis added).

Carolyn, as a contingent beneficiary, would appear to meet the definition of an interested person with standing to bring suit against a trustee for breach of fiduciary duty. However, Mr. Lesikar, as settlor, was empowered to revoke or amend the 1997 Amended Family Trust. Until the death of Mr. Lesikar, he was also the sole beneficiary of the 1997 Amended Family Trust. The question presented is whether a contingent beneficiary can complain of a transaction by the settlor of a revocable trust, prior to the vesting of her interest upon the death of the settlor. By the cases the parties have cited and our own research, it does not appear that Texas has addressed this issue, but other jurisdictions have.

In Hoelscher v. Sandage, Thelma Warren created the Thelma L. Warren Revocable Trust, which owned 67 percent of the family home and farm, while her children owned 33 percent. 462 N.W.2d 289, 291 (Iowa Ct.App.1990). Thelma and a friend were named co-trustees. Id. Thelma and the children mortgaged the home farm to secure an operating loan. Id. In a foreclosure action against the trustees and the children, the bank acquired all of the home farm except the homestead, and Thelma voluntarily revoked the Thelma Trust. Id. The plaintiffs, who were two of children and their spouses, sued Thelma’s co-trustee for fraud. Id. The court noted that Thelma’s children possessed an interest in the trust property which would vest only upon the discretion of Thelma. Id. at 294. Under the terms of the Thelma Trust, as co-trustee and settlor of the Thelma Trust, Thelma retained discretion to use her 67 percent of the home farm “as she pleased regardless of its inclusion in the Thelma Trust.” Id. The court, thus, held the plaintiffs lacked standing to attack the co-trustee about his actions in connection with mortgaging the trust property. Id.

In In re Malasky, the Malaskys (Harry and Marion) created a joint revocable living trust of which they were the trustees. 290 A.D.2d 631, 736 N.Y.S.2d 151, 152 (N.Y.App.Div.2002). When Harry died, another individual replaced him as eo-trus-tee. Id. Harry’s children from his first marriage objected to the trust accountings. Id. Under the trust document, the Mala-sky’s were the only persons who had an interest in the income and principal of the trust during their respective joint lives and the children had no pecuniary interest in the trust during this period of time. Id. at 152-53. There was no construction of the trust giving the children any interest until Harry’s death. Id. at 153. During the lifetime of the settlors, they acted as trustees, received income from the trust, and explicitly retained the power to revoke or amend the trust at any time. Id. Therefore, the children had no pecuniary interest in the revocable trust until Harry’s death and had no right to an accounting for the period from the date the trust was created until the date of Harry’s death. Id.

The court, in Siegel v. Novak, found the beneficiaries of a revocable trust could challenge the disbursements made by the trustee where someone other than the set-tlor made distributions from the trust. 920 So.2d 89 (Fla.App.2006). Rautbord executed an Amended and Restated (Revocable) Agreement of Trust, with JP Morgan Chase Bank as trustee. Id. at 91. Under the trust, all property would be divided among Rautbord’s children. Id. After creating the trust, Rautbord executed a durable power of attorney making her daughter, Novak, her attorney-in-fact. Id. at 92. While Rautbord was alive, Novak made large withdrawals from the trust through the power of attorney; JP Morgan Chase Bank, as trustee, approved the withdrawals. Id. Applying New York law, the Florida court of appeals, held Raut-bord’s sons had standing to challenge the withdrawals prior to Rautbord’s death because the settlor and the trustee were not the same person. Id. at 95. Where a person or entity different from the settlor removes property or money from a revocable trust, those withdrawals could conceivably be made without the settlor’s knowledge or consent. Id. After the death of the settlor, the beneficiaries of a revocable trust have standing to challenge pre-death withdrawals from the trust which are outside the purposes authorized by the trust and which were not approved or ratified by the settlor personally or through a method contemplated by the trust instrument. Id.

We find the reasoning in Hoelscher and Malasky persuasive, and the reasoning in Siegel instructive. Mr. Lesikar, who was both settlor and trustee, had the power to revoke or amend the 1997 Amended Family Trust. We similarly conclude the vesting of the contingent beneficiaries’ interests was subject to Mr. Lesikar’s discretion before his death.

Carolyn complains the conveyance of the Airport Stock was not in writing, in accordance with Section 112.051(c) of the Texas Property Code, which provides “[i]f a trust was created by a written instrument, a revocation, modification, or amendment of the trust must be in writing.” Tex. PROP. Code Ann. § 112.051(c) (Vernon 2007); see also Runyan v. Mullins, 864 S.W.2d 785, 788 (Tex.App.-Fort Worth 1993, writ denied) (quoting Restatement (Second) of TRUSTS § 331 cmt. d (1959)) (“‘[I]f the Settlor reserves a power to modify the trust only in a particular manner or under particular circumstances, he can modify the trust only in that manner or under those circumstances.’ ”).

In Starcrest Tmst v. Berry, the trial court found the settlor’s execution of a deed of trust pledging certain trust property to secure a loan, manifested the set-tlor’s intention to revoke the trust. 926 S.W.2d 343, 352 (Tex.App.-Austin 1996, no writ). The court of appeals rejected the plaintiffs’ argument that there was no evidence to support the trial court’s finding because there was no evidence of a formal written revocation of the trust under section 112.051(c) of the Texas Property Code, which requires that changes to a written trust agreement also be in writing. Id. at 353. Instead, the court of appeals stated the intent to revoke must be shown in the instrument used to revoke, although it need not expressly refer to the power to revoke, and that revocation occurred by the settlor’s conveyance of the trust property to a third person. Id. (quoting Bo-gert, The Law of TRUSTS and TRUSTEES § 1001).

Carolyn argues Starcrest Trust is distinguishable because the entire corpus of the trust in that case was conveyed out of the trust. We do not read Starcrest Tmst as limited to factual scenarios in which the entire trust corpus has been conveyed to a third party. Instead, we believe the reasoning of the Starcrest Tmst applies equally to cases, such as the one here, where the settlor has conveyed only part of the trust corpus to a third party.¹ We conclude Mr. Lesikar showed his intent to revoke the Family Trust with respect to the Airport Stock by his conveyance of that stock to the S & S Trust.

Carolyn further complains Mr. Lesikar did not provide written notification of revocation to himself or Woody, as trustees, as required by the 1997 Amended Family Trust;

10.1 While the Settlor is living, he may revoke this Trust Agreement by written notice to the Trustee. The Set-tlor may amend this Trust Agreement by written notice to the Trustee (unless waived); provided, however, the Trust Agreement may not be amended to change the obligations, duties, or rights of the Trustee without the written consent of the Trustee.

When the trustee is also the settlor of the revocable trust, the settlor is not required to serve written notice on himself. See, e.g., Argo v. Moncus, 721 So.2d 218, 222 (Ala.Civ.App.1998) (holding set-tlor/trustee was not required to give written notice to herself that she was deeding her home to another); Paul, 123 P.3d at 809-10 (refusing to impose a technical requirement that the settlor/grantor deliver written notice to himself). “It would be absurd to require the settlor to call himself up on the telephone as trustee and tell himself that he is revoking the trust. It would be equally absurd to have the settlor send himself a letter as trustee to inform himself as trustee that the trust is terminated.” Barnette v. McNulty, 21 Ariz. App. 127, 516 P.2d 583, 586 (1973). Similarly, we see no reason to impose this technical requirement when Mr. Lesikar was both settlor and trustee and he effectuated the sale of the Airport Stock in his capacity as trustee of the 1997 Amended Family Trust.

We conclude that because Mr. Lesikar was the settlor of the trust with the power to revoke the' trust’, the sole beneficiary of the trust while alive, and co-trustee of the trust, Carolyn has no standing to complain of Mr. Lesikar’s disposition of Family Trust assets, including the Airport Stock. The court did not err in granting Woody’s and the Airport Defendant’s motion for summary judgment and denying Carolyn’s motion for summary judgment. Carolyn’s tenth issue is overruled.²

Accordingly, the judgment of the trial court is affirmed.

GUZMAN, J., concurs.

1 . Other jurisdictions hold the transfer of trust property out of the trust is a revocation to the extent of that property. See, e.g., In re Estate of Coleman, 129 Cal.App.4th 380, 28 Cal.Rptr.3d 282, 287 (2005) ("If the trust reserves the power in the settlor to withdraw trust property from the trust, as here, the withdrawal terminates the trust as to the property withdrawn.”); Siegel, 920 So.2d at 95 ("[A] settlor/trustee’s withdrawal of funds from a revocable trust is tantamount to a revocation or termination of the trust with respect to the funds withdrawn.”); Paul v. Arvidson, 123 P.3d 808, 811 (Okla.Civ.App.2005) ("[Set-tlor/trustee's] acts of creating a conflicting trust that was meant to include all of his property and then specifically conveying the subject property to that Trust by General Warranty Deed is clear evidence of his intent to revoke Trust No. 1 as to that property.”). Additionally, a number of commentators have reached the same conclusion. See, e.g., George Gleason Bogert, The Law of Trusts and Trustees § 1001, p. 336 (Rev.2d ed. 2005) ("Revocation may be held to have occurred by means of a conveyance by the settlor to a third person that covers the trust property.”); Austin Wakeman Scott, The Law of Trusts § 330.11, p. 371 (1989) ("Where [the settlor] simply reserves a power in general terms to revoke the trust, he ordinarily has power to revoke it in part by withdrawing some of the property from the trust.”); Restatement (Third) of Trusts § 63 cmt. e (1991) ("A power simply to revoke the trust, however, is interpreted as including also the power to revoke the trust in part, thus allowing withdrawal of some rather than all of the property from the trust, if that is all the settlor wishes to do.”); 76 Am.Jur.2d Trusts § 76 (“The revocation of a trust may be held to have occurred by means of a conveyance by the settlor to a third person that covers the tmst property.”).

2 . Because of our disposition, we need not address the other issues raised on appeal.