TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-97-00806-CV
Southwest Guaranty Trust Company, Successor to NationsBank of Texas, N.A.,
as Trustee for the Benefit of Dalia Acosta, Daphne Acosta, Jorge Acosta,
Lillian Acosta, Michael Avery, William Avery, Joe Bonura,
Timothy Bonura II, Rian Butler, et al., Appellant
v.
Providence Trust Company, in Liquidation, Appellee
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 345TH JUDICIAL DISTRICT
NO. 94-11003, HONORABLE W. JEANNE MEURER, JUDGE PRESIDING
This appeal arises from a motion for summary judgment granted in favor of
appellee Providence Trust Co. ("Providence"). In its sole point of error, appellant Southwest
Guaranty Trust Co. ("Southwest") argues that the trial court erred in granting Providence's
motion for summary judgment because Providence failed to establish any of its affirmative
defenses as a matter of law. Moreover, Southwest contends that the trial court erred in granting
summary judgment because the terms of the trust agreement do not absolve Providence of
potential liability. Because we conclude that Providence has not proved any of its grounds for
summary judgment as a matter of law, we will reverse the trial court's summary judgment and
remand the cause for further proceedings.
BACKGROUND
This case arises out of a massive "toxic tort" dispute which resulted in the creation
of ninety-seven separate trusts established for the benefit of numerous minor children (the
"Children") who were plaintiffs in an underlying series of lawsuits. More specifically, the trusts
were created as a result of two lawsuits, Cordova v. King's Park Apartments, Cause No. 87-28345, and Flores v. Truck Insurance Exchange, Cause No. 91-01595 (the "King's Park
Litigation") filed in the 157th District Court of Harris County ("the 157th Court"). The King's
Park Litigation involved "toxic tort" personal injury claims against two apartment complexes,
their management companies, and their insurance companies. Because the Children were minors
when the King's Park Litigation was filed, suit was brought on the Children's behalf by their
parents, acting as next friends.
Three separate settlements of the King's Park Litigation occurred in 1991, 1992,
and 1993, each with different groups of defendants. The 157th Court appointed a guardian ad
litem pursuant to Rule 173 of the Texas Rules of Civil Procedure to represent the Children's
interests. (1) At that point in time, the guardian ad litem displaced the next friend as the personal
representative of the Children.
The first King's Park Litigation settlement occurred in January 1991. Eileen
Fowler was appointed guardian ad litem for the Children. Fowler placed the settlement funds in
a special account at Dean Witter Reynolds, Inc. under her name. A portion of the settlement
funds were used to purchase annuities from Northbrook Insurance Company. Mike Cook, a
financial advisor with Dean Witter, assisted Fowler in managing the settlement funds.
The second settlement was reached in July 1992. Prior to approving the second
settlement, the 157th Court appointed a special master, Michael J. Wood, to review the handling
of the first settlement funds by Fowler and Dean Witter. After reviewing the special master's
report, the 157th Court removed Fowler as ad litem for the Children and appointed Susan Spruce
to replace her.
Spruce continued using Cook's services as financial advisor. Spruce and Cook
wanted to use a substantial portion of the 1992 settlement funds to purchase additional Northbrook
annuities for the Children. After determining that trusts would have to be created for the Children
under Section 142 of the Texas Property Code, (2) Spruce approached appellee, Providence Trust
Company, to discuss its willingness to act as trustee. (3) Providence was not the trustee at the time
of the purchase of the 1991 annuities, and the trusts had not been established at that time.
The parties are in dispute as to exactly what role Providence played in deciding to
purchase Northbrook annuities. Southwest contends that Providence agreed to the annuity
purchases and signed off on the trust agreements before they were submitted to the court for
approval; conversely, Providence maintains that it was merely authorized and directed to purchase
the annuities by the court and that it had very little to do with the decision. In any event, the
proposed trust agreements directed Providence to purchase variable annuities for the Children
from Northbrook. These annuities were purchased by Providence for the trusts with the approval
and authorization of the 157th Court, the guardian ad litem for the Children, the respective next
friend of each Child, the attorneys for the Children, Mike Cook, and Michael J. Wood, the special
master appointed by the 157th Court.
THE CONTROVERSY
In order to understand the issues underlying the dispute, we will describe the most
salient features of the trust agreements, which include their purpose clauses, provisions for
purchasing the annuities, annuity payout provisions, early withdrawal provisions, and termination
provisions. (4)
The purpose of the trusts was to provide for the health, education, maintenance,
and support of the Children. (5) As specified in Section 4 of the original trust agreement, "the
primary purpose of the trust [was] to pay educational and uninsured medical expenses of the
beneficiary."
In order to accomplish this purpose, Section 4 of the trust agreement directed
Providence to use a portion of the trust principal toward the purchase of a variable rate annuity
from Northbrook for the benefit of the beneficiary. In particular, Section 4 authorized Providence
to purchase an annuity that would provide a monthly payout of the principal and interest over a
five-year period (i.e., a sixty-month period) beginning when the beneficiary reached eighteen
years of age. (6) This provision also provided for early withdrawal of the annuity principal "if no
penalty is incurred under the annuity contract for the withdrawal."
Finally, Section 5 of the trust agreement, the "Termination" clause, stated that:
The Trust shall terminate when the Beneficiary attains the age of twenty-five (25)
years, or upon the Beneficiary's death prior to attaining such age. Upon
termination, the Trustee shall pay all of the then remaining Trust estate of the Trust
to the Beneficiary free of any further trust; or, if the Beneficiary is then deceased,
to the personal representative of the Beneficiary's estate.
In accordance with the trust agreements, the 157th Court rendered an order
appointing Providence as trustee. Important to this appeal, we note that paragraph five (5) of the
order states as follows:
Providence Trust Company is authorized as Trustee to purchase custom annuities
from Northbrook Life Insurance Company for all Minor Plaintiffs whose trust
agreement as approved by the next friend and guardian ad Litem, permits such a
purpose. The Trustee shall exercise its discretion in negotiating the terms and
conditions of the annuity contracts to achieve a reasonable rate of return for the
individual Minor Plaintiff Beneficiaries, taking into consideration the present age
of the Minor Plaintiff, current market conditions, and the payout instruction
contained in each trust agreement. Although the trust agreement may specify the
purchase of a "variable rate annuity," this is not meant to limit the Trustee's
discretion to purchase a fixed rate custom annuity for some of the Minor Plaintiffs
if believed by the Trustee to be in the best interest of said Minor Plaintiffs.
(Emphasis added.)
In other words, the 157th Court specifically authorized Providence to exercise its
discretion to purchase the type of annuity from Northbrook that would best serve the minor
plaintiffs according to the terms of the trust.
Exercising this discretion, the record indicates that Providence purchased what is
commonly referred to as non-qualified "retirement annuities." Accordingly, the interest earned
on the annuities was taxable and there was a ten percent tax penalty on gross income for
withdrawals prior to age of fifty-nine and one-half. Moreover, such annuities imposed a surrender
penalty on the first years of each contract. The penalties which will be imposed upon the Children
in order to access their funds total more than $356,280. As stated earlier, the trust documents
specified that the trust distributions were to be made as necessary for "the health, education,
maintenance and support" of the Children. The purchase of the annuities represented an
investment of a significant portion of the trust principal. Since the annuities were purchased, the
record shows that many of the Children have had needs which exceeded the reserve amounts
retained as liquid assets in the trusts. Therefore, these children have been forced to obtain early
distribution from Northbrook with significant penalties resulting. The record indicates that many
beneficiaries are now "out of cash" and must curb requests even for education and health because
funds are not available.
Given this result, Southwest as the successor trustee for the Children (7) sued
Providence claiming that, as trustee, Providence breached its fiduciary duty to the Children as
beneficiaries of the trust, breached its duty of good faith and fair dealing, and committed
negligence in its role as trustee. Specifically, Southwest claimed that Providence's purchase of
Northbrook annuities caused the trusts to be unsuitable for the statutorily mandated requirements
of a Section 142 trust. Moreover, Southwest claimed that the purchase of Northbrook annuities
resulted in an unacceptably low rate of return compared to a properly managed and diversified
trust portfolio. Southwest claimed that Providence breached its duties by, among other things,
failing to properly exercise its investment and disbursement discretion, improperly delegating its
investment and disbursement discretion, failing to properly invest, manage, and diversify the
trusts' assets, and failing to adequately protect the Children's interests by objecting to improper,
illegal, and/or void trust terms. Southwest sued for the difference between the amounts realized
on the annuity investments and the amounts that would have been realized by a proper investment
portfolio. Southwest also sought the recovery of expenses associated with penalties incurred
under the annuity contracts.
In response to Southwest's claims, Providence filed a motion for summary
judgment asserting several affirmative defenses including derived judicial immunity, res judicata,
collateral estoppel, as well as judicial and equitable estoppel. Providence also claimed that the
suit was barred under Section 11(b) of the trust agreement which provided that as long as
Providence was acting in "good faith reliance on any order or proceeding of the Court," it was
immune from liability.
After hearing arguments, the trial court granted Providence's motion for summary
judgment without stating a specific ground. Because we conclude that Providence has not
conclusively proved any of its grounds for summary judgment as a matter of law, we will reverse
and remand this cause for further proceedings.
STANDARD OF REVIEW
The standards for reviewing a motion for summary judgment are well established:
(1) the movant for summary judgment has the burden of showing that no genuine issue of material
fact exists and that it is entitled to judgment as a matter of law; (2) in deciding whether there is
a disputed material fact issue precluding summary judgment, evidence favorable to the nonmovant
will be taken as true; and (3) every reasonable inference must be indulged in favor of the
nonmovant and any doubts resolved in its favor. Nixon v. Mr. Property Management Co., 690
S.W.2d 546, 548-49 (Tex. 1985). The function of summary judgment is not to deprive litigants
of the right to trial by jury, but to eliminate patently unmeritorious claims and defenses. See
Swilley v. Hughes, 488 S.W.2d 64, 68 (Tex. 1972).
Summary judgment for a defendant is proper when the summary-judgment evidence
negates an essential element of the plaintiff's cause of action as a matter of law or establishes all
the elements of an affirmative defense as a matter of law. Black v. Victoria Lloyds Ins. Co., 797
S.W.2d 20, 27 (Tex. 1990). In this case, Providence moved for summary judgment on the basis
of its affirmative defenses. Therefore, Providence was required to come forward with summary-judgment evidence conclusively establishing each element of at least one affirmative defense.
Nichols v. Smith, 507 S.W.2d 518, 520 (Tex. 1974). Unless Providence conclusively establishes
each element of one of its affirmative defenses, we must reverse the grant of summary judgment
and remand to the trial court for further proceedings.
DISCUSSION
In its sole point of error, Southwest argues that the trial court's grant of summary
judgment was erroneous because Providence failed to conclusively establish its right to summary
judgment based on the affirmative defenses of derived judicial immunity, judicial estoppel,
equitable estoppel, and res judicata and/or collateral estoppel. Moreover, Southwest contends that
the terms of the trust agreement do not absolve Providence of liability as a matter of law. We will
address each of Providence's affirmative defenses individually.
Derived Judicial Immunity
In Byrd v. Woodruff, 891 S.W.2d 689 (Tex. App.--Dallas 1994, writ denied), the
court of appeals explained the doctrine of derived judicial immunity as follows:
Judges are immune from tort liability for acts performed or not performed in the
course of judicial proceedings over which they have jurisdiction. Turner v. Pruitt,
161 Tex. 532, 342 S.W.2d 422, 423 (1961). When judges delegate their authority
or appoint persons to perform services for the court, their judicial immunity may
follow that delegation or appointment. In Texas, judicial immunity applies to
officers of the court who are integral parts of the judicial process, such as a
prosecutor performing typical prosecutorial functions, court clerks, law clerks,
bailiffs, constables issuing writs, and court-appointed receivers and trustees. The
supreme court has held that as "arms of the court," bankruptcy trustees are
immune from tort liability for actions grounded in their conduct as trustees.
891 S.W.2d at 707. See also Delcourt v. Silverman, 919 S.W.2d 777, 782 (Tex. App.--Houston
[14th Dist.] 1996, writ denied) (policy underlying derived judicial immunity is to prevent
harassment and intimidation that might otherwise result if disgruntled litigants could vent anger by
suing person who either presents decision-maker with adverse information or renders adverse
opinion). Providence contends that a trustee under Section 142 is analogous to a bankruptcy
trustee. Therefore, Providence contends that, as court-appointed trustee, it was acting as an "arm
of the court" and is therefore entitled to immunity in this case. See generally Clements v. Barnes,
834 S.W.2d 45, 46 (Tex. 1992) (court-appointed bankruptcy trustee is protected from liability by
derived judicial immunity).
Southwest counters that under the "functional approach" to derived judicial
immunity, a court-appointed trustee may not always be immune from liability. The widely
followed "functional approach" directs appellate courts to determine "whether the activities of a
party seeking immunity are intimately associated with the judicial process" when deciding if such
party is entitled to derived judicial immunity. See Delcourt, 919 S.W.2d at 782 (court-appointed
psychiatrist in child custody case who performed court-ordered custody evaluation and guardian
ad litem appointed pursuant to section 11.10 of the Texas Family Code were entitled to absolute
derived judicial immunity); Byrd, 891 S.W.2d at 708 (court refused to extend immunity to guardian
ad litem since court held that ad litem was not an agent of the court). In response, Providence
rejoins that even under this functional analysis it should enjoy derived judicial immunity from tort
liability.
We agree that Providence was acting at the direction of the 157th Court. Providence
was appointed by the court and acted pursuant to a court order. However, that does not end our
inquiry. The crucial question is whether the 157th Court's direction was ministerial as Providence
argues, or cloaked with discretion as Southwest contends.
After examining the 157th Court's order, we hold that Providence was clearly
afforded considerable discretion by the court. Paragraph five (5) of the court order directs the
purchase of custom annuities and rejects outright the automatic purchase of variable annuities as
provided for in the trust agreement. The order clearly states, "Although the trust agreement may
specify the purchase of a 'variable rate annuity,' this is not meant to limit the Trustee's discretion
to purchase a fixed rate custom annuity for some of the Minor Plaintiffs if believed by the Trustee
to be in the best interests of said Minor Plaintiffs." The order directs Providence, in purchasing
the annuities, to consider such factors as the "present age of the Minor Plaintiff, current market
conditions, and the payout instruction contained in each trust agreement."
Providence responds that it eventually purchased the variable rate annuities at the
behest and counsel of the guardian ad litem and the investment counselor, and therefore acted
reasonably and in good faith when it purchased the annuities in question. While this might be a
valid defense at a trial on the merits, such an issue remains to be determined by the trier of fact.
Questions of reasonableness or negligence are generally for the jury to decide. See Hunsucker v.
Omega Indus., 659 S.W.2d 692, 698 (Tex. App.--Dallas 1983, no writ); Smith v. Muckelroy
Enters., 537 S.W.2d 104, 106 (Tex. Civ. App.--Tyler 1976, no writ). We cannot say that as a
matter of law Providence is entitled to summary judgment based on derived judicial immunity.
The Terms of the Trust Agreement
Providence also maintains that, under the express terms of the underlying trust
agreements, liability is precluded because Providence was merely following the directive of a court
order. Providence relies on Paragraph 11(b) of the trust agreement which specifically provides:
The Trustee shall not be responsible or liable to the Beneficiary or any other
person on account of any actions that the Trustee may take or fail to take in
Trustee's good faith reliance on any order or proceeding of the Court.
(Emphasis added.) Providence maintains that all claims asserted by Southwest are precluded
because it acted "in good faith reliance" on the provisions of the trust agreement which were
adopted by court order.
This argument is without merit. Paragraph five (5) of the court order allowed
Providence considerable discretion in the type of annuities it purchased from Northbrook. Given
this fact, we cannot say that Providence is shielded from liability by the terms of the underlying
trusts. Therefore, we hold that summary judgment is improper on this ground.
Judicial or Equitable Estoppel
Judicial estoppel prevents a party from contradicting a previous position successfully
maintained in a prior judicial proceeding. See Long v. Knox, 291 S.W.2d 292, 295 (Tex. 1956);
Moore v. Neff, 629 S.W.2d 827, 829 (Tex. App.--Houston [14th Dist.] 1982, writ ref'd n.r.e.).
Similarly, equitable estoppel prevents parties from asserting claims against another party which
arise out of their false representations relied upon by said party. See Stuebner Realty 19 v. Cravens
Road 88, 817 S.W.2d 160, 163 (Tex. App.--Houston [14th Dist.] 1991, no writ) (equitable estoppel
requires: false representation was made with intent that another party act on the false
representation; false representation was made by party with knowledge of the facts; party to whom
false representation was made was without knowledge or means of knowledge of real facts, and
detrimental reliance on false representation).
Providence attempts to utilize judicial estoppel to prevent Southwest from asserting
claims against Providence because the representatives of the Children in the King's Park Litigation
settlement signed an agreed order authorizing Providence to purchase the variable rate annuities
in question. Similarly, Providence contends that under the doctrine of equitable estoppel, all
claims regarding the purchase of annuities are barred because Providence was merely "relying"
on the directives of the parties to the King's Park Litigation settlement who took the position that
Providence should invest in variable rate annuities.
Having already observed that neither the trust documents nor the orders of the 157th
Court conclusively establish as a matter of law that Providence acted without discretion, we hold
that the summary-judgment record does not establish that judicial or equitable estoppel apply to the
facts of this case. Had the 157th Court instructed Providence to buy only specific variable rate
annuities, then the outcome of this case might have been different. Such is not the case before us
based upon the record presented.
Res Judicata and/or Collateral Estoppel
In support of its contention that res judicata and collateral estoppel bar Southwest
from bringing the instant cause, Providence argues that the claims and issues underlying the causes
of action asserted by Southwest were litigated, or should have been litigated, in the King's Park
Litigation and its resulting creation of the Section 142 trusts. Specifically, Providence argues that
any objection to the variable rate annuities that were acquired for the Children should have been
expressed in the King's Park Litigation settlement proceeding.
The doctrine of res judicata (also known as "claim preclusion") requires proof of
the following elements: (i) a prior final judgment on the merits by a court of competent
jurisdiction; (ii) identity of parties or those in privity with them; and (iii) a second action based on
the same claims that were raised or could have been raised in the first action. Amstadt v. U.S.
Brass Corp., 919 S.W.2d 644, 652 (Tex. 1996). None of these elements can be established in the
case at bar.
Comparing the elements of res judicata in light of the argument presented by
Providence, we conclude that Providence has not conclusively established a res judicata bar.
Southwest was not a party to the King's Park Litigation, which is an absolute requirement for res
judicata. Additionally, Providence has never been sued nor could it have been sued for the claims
brought by Southwest because any claim arising from the agreed order establishing the trusts could
arise only after the trusts were established. Moreover, even though Southwest has now assumed
the role of successor trustee and stepped into the shoes of Providence, this certainly does not bar
a lawsuit between Southwest and Providence under the principles of res judicata. Providence's
argument that Southwest is in privity with Providence might impact a claim by Southwest against
other parties to the King's Park Litigation, but it is irrelevant in a suit between Southwest and
Providence. Therefore, because the prior suit as asserted by Providence contained neither the same
parties nor the same claims as the present case, we hold that res judicata is an improper ground for
summary judgment.
Collateral estoppel, or "issue preclusion," bars relitigation of any ultimate issue that
was litigated and essential to the judgment in a prior suit and: (i) the issue sought to be litigated
in the second action was fully and fairly litigated in the first action; (ii) the issue was essential to
the judgment in the first action; and (iii) the parties were cast as adversaries. Eagle Properties Ltd.
v. Scharbaer, 807 S.W.2d 714, 721 (Tex. 1991); Bonniwell v. Beech Aircraft Corp., 663 S.W.2d
816, 818 (Tex. 1984).
Similar to our discussion above regarding the applicability of res judicata, the
doctrine of collateral estoppel is not and cannot be a bar to Southwest's suit against Providence.
As stated above, the issues sought to be litigated in the present suit were not and could not have
been "fully and fairly" litigated in the King's Park Litigation because such issues arose only after
the trusts were created. Therefore, we hold that Providence has not shown as a matter of law that
it is entitled to the defense of collateral estoppel.
CONCLUSION
Having held that no ground for summary judgment asserted by Providence is proper,
we sustain Southwest's sole point of error. Accordingly, we reverse the trial court's summary
judgment and remand the cause for further proceedings.
Mack Kidd, Justice
Before Justices Powers, Kidd and B. A. Smith
Reversed and Remanded
Filed: July 2, 1998
Publish
1. Rule 173 provides:
When a minor, lunatic, idiot or a non-compos mentis may be a defendant to a suit and has
no guardian within this State, or where such person is a party to a suit either as plaintiff,
defendant or intervenor and is represented by a next friend or a guardian who appears to
the court to have an interest adverse to such minor, lunatic, idiot or non-compos mentis,
the court shall appoint a guardian ad litem for such person and shall allow him a reasonable
fee for his services to be taxed as a part of the costs.
Tex. R. Civ. P. 173.
2. In relevant part, Section 142.005 provides:
Trust for Property
(a) In a suit in which a minor who has no legal guardian or an incapacitated person
is represented by a next friend or an appointed guardian ad litem, the court may, on
application by the next friend or the guardian ad litem and on a finding that the
creation of a trust would be in the best interests of the minor or incapacitated
person, enter a decree in the record directing the clerk to deliver any funds accruing
to the minor or incapacitated person under the judgment to a trust company or a
state or national bank having trust powers in this state.
Tex. Prop. Code Ann. § 142.005(a) (West 1998).
3. As we noted earlier, there were three different settlements reached on behalf of the
Children. The third and final King's Park Litigation settlement was reached in February 1993.
The dollar amount of the third settlement was significantly larger than the earlier two; however,
fewer of the children participated in the third settlement. Portions of these funds were also used
to purchase Northbrook annuities.
4. Our record contains a single sample trust agreement which was used as an exemplar at trial.
Southwest Guaranty Trust Co. indicated that the sample was representative of the trust agreement
form used for each of the Children.
5. Providence as trustee was directed to:
pay to or apply for the benefit of the Beneficiary such amounts out of the net
income and principal [if income is insufficient] of the Trust as were reasonably
necessary in the sole discretion of the trustee to provide for the health, education,
support and maintenance of the Beneficiary.
6. In relevant part, Section 4 of the trust agreement provides:
The Trustee shall as soon as possible distribute $______ of the Trust principal to
purchase a variable rate annuity from Northbrook Life Insurance Company for the
benefit of the Beneficiary under the general terms and conditions approved by
separate order of the 157th District Court. The annuity shall provide for a monthly
payout of the principal and interest over a five-year period . . . to the Trustee under
this Trust agreement beginning when the Beneficiary reaches 18 years of age.
The Trustee in its discretion may make application to the Northbrook Life Insurance
Company for early distribution of interest or a portion of the annuity principal if the
funds are needed to pay for educational or uninsured medical expenses of the child
and no penalty is incurred under the annuity contract for the withdrawal. The
Trustee shall not terminate the annuity contract or apply for early distribution of
interest or any portion of the annuity principal for purposes other than to pay
educational or uninsured medical expenses without an order from the 157th District
Court authorizing such termination or withdrawal.
7. While still serving as trustee, Providence was closed by the Texas Banking Commissioner
in August of 1994, and placed in liquidation. In January 1995, the trust business of Providence
was conveyed through a purchase and assumption transaction to Charter National Bank-Houston
("Charter"). Charter was then purchased by NationsBank of Texas, N.A. ("NationsBank"), who
filed a suit asserting this claim against the Providence estate. In 1997, NationsBank sold Charter's
trust business to Southwest Guaranty Trust Company which is now serving as the trustee for the
Children and has been substituted as the moving party in this cause.
STYLE="font-family: CG Times Regular"> When a minor, lunatic, idiot or a non-compos mentis may be a defendant to a suit and has
no guardian within this State, or where such person is a party to a suit either as plaintiff,
defendant or intervenor and is represented by a next friend or a guardian who appears to
the court to have an interest adverse to such minor, lunatic, idiot or non-compos mentis,
the court shall appoint a guardian ad litem for such person and shall allow him a reasonable
fee for his services to be taxed as a part of the costs.
Tex. R. Civ. P. 173.
2. In relevant part, Section 142.005 provides:
(a) In a suit in which a minor who has no legal guardian or an incapacitated person
is represented by a next friend or an appointed guardian ad litem, the court may, on
application by the next friend or the guardian ad litem and on a finding that the
creation of a trust would be in the best interests of the minor or incapacitated
person, enter a decree in the record directing the clerk to deliver any funds accruing
to the minor or incapacitated person under the judgment to a trust company or a
state or national bank having trust powers in this state.
Tex. Prop. Code Ann. § 142.005(a) (West 1998).
3. As we noted earlier, there were three different settlements reached on behalf of the
Children. The third and final King's Park Litigation settlement was reached in February 1993.
The dollar amount of the third settlement was significantly larger than the earlier two; however,
fewer of the children participated in the third settlement. Portions of these funds were also used
to purchase Northbrook annuities.
4. Our record contains a single sample trust agreement which was used as an exemplar at trial.
Southwest Guaranty Trust Co. indicated that the sample was representative of the trust agreement
form used for each of the Children.
pay to or apply for the benefit of the Beneficiary such amounts out of the net
income and principal [if income is insufficient] of the Trust as were reasonably
necessary in the sole discretion of the trustee to provide for the health, education,
support and maintenance of the Beneficiary.
6. In relevant part, Section 4 of the trust agreement provides:
The Trustee shall as soon as possible distribute $______ of the Trust principal to
purchase a