Trust for Schwegmann v. Schwegmann Family Trust

51 So. 3d 737, 9 La.App. 5 Cir. 968, 2010 La. App. LEXIS 1241, 2010 WL 3611718
CourtLouisiana Court of Appeal
DecidedSeptember 14, 2010
Docket09-CA-968
StatusPublished
Cited by18 cases

This text of 51 So. 3d 737 (Trust for Schwegmann v. Schwegmann Family Trust) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Trust for Schwegmann v. Schwegmann Family Trust, 51 So. 3d 737, 9 La.App. 5 Cir. 968, 2010 La. App. LEXIS 1241, 2010 WL 3611718 (La. Ct. App. 2010).

Opinions

CLARENCE E. McMANUS, Judge.

| aThis is an appeal from the trial court’s grant of an exception of prescription dismissing plaintiffs’ petition, and the denial of an exception of no right of action and exception of no cause of action. For the reasons which follow, we reverse the trial court’s judgment in part, and affirm the judgment in part.

STATEMENT OF THE CASE

The Trust of Melba Margaret Schweg-mann (“Margie Trust”) was created in 1962 with Melba Margaret Schwegmann Brown (“Brown”) as the beneficiary. John F. Schwegmann was named the trustee of the Margie Trust. The Schwegmann Family Trust No. 1 was created in 1988 with John Guy Schwegmann, Laurie Schwegmann and Heidi Schwegmann as beneficiaries. Diane B. Marks and William R. Burger, Jr. were named trustees of the Schwegmann Family Trust No. 1. The Schwegmann Family Trust No. 2 was created in 1994 for the benefit of John Guy Schwegmann, Laurie Schwegmann, and Heidi Schwegmann.

|3In 2000, a petition was filed in Orleans Parish Civil District Court by Brown claiming John F. Schwegmann, as trustee for the Margie Trust, breached his fiduciary duties to the trust by diverting funds from that trust for his own personal use and failing to hold or invest the trust’s income for the benefit of the trust. Brown and the Margie Trust alleged John F. Schwegmann used the funds from the [740]*740Margie Trust to set up the Family Trusts for his own children.

Following trial, the trial court entered judgment in favor of John F. Schwegmann. Brown appealed and on December 10, 2003, the Fourth Circuit Court of Appeal found that John F. Schwegmann was liable to Brown for his breach of trust as a trustee of the trust established for her benefit by her father in 1962. Brown v. Schwegmann, 02-1509, (La.App. 4 Cir. 12/10/03), 861 So.2d 862, writ denied, 872 So.2d 489 (4/30/04). The Fourth Circuit remanded the matter to the trial court for a hearing on the issue of damages to be assessed against John F. Schwegmann for breaching his fiduciary obligation as trustee. Id. On January 26, 2005, the Orleans Parish trial court entered judgment in favor of the plaintiffs in the amount of $5,147,073.00.

In 2004, the Margie Trust and Brown, as beneficiary of the Margie Trust, filed a petition for declaratory judgment in the Twenty-Fourth Judicial District Court against the Schwegmann Family Trusts No. 1 and 2 and the trustees and beneficiaries of these trusts, attempting to recover the funds that John F. Schwegmann had diverted into the trusts for his children. The Margie Trust asserted John F. Schwegmann’s actions constituted wrongful conversion of the trust funds for his use and the use of his children’s trusts. The trust argues Louisiana law allows a beneficiary to trace and recover assets taken improperly from a trust under the principle of constructive or equitable trust. The trust contends the improper conversion entitles the beneficiaries to trace the funds and |4also entitles the beneficiaries to an accounting of all funds deposited and earnings from these funds. Plaintiffs argue if the funds can be sufficiently identified, they are entitled to a ruling that all property is being held in a constructive trust for Brown’s benefit and that she is entitled to its return. Plaintiffs sought a declaratory judgment clarifying Brown’s rights to proceed in order that they will not be deemed to have elected a remedy prematurely or to have waived any rights to either route of recovery. The plaintiffs further sought an order compelling an accounting of the Schwegmann Family Trusts and a declaration preserving their right to make a decision of which remedy to elect after conclusion of the accounting and the Orleans Parish case.

Defendants filed an exception of no right of action, an exception of no cause of action, and an exception of non-joinder of an indispensable party. On September 25, 2004, the trial court granted the exception of no right of action and no cause of action, finding that plaintiffs have no action under La. R.S. 9:2221 to compel the defendants to make an accounting because they are not beneficiaries of the defendants’ trusts. Further, the trial court concluded Louisiana law does not recognize constructive trusts. Plaintiffs appealed and this Court found the trial court correctly determined that La. R.S. 9:2221 provides a remedy for a beneficiary against a trustee of the beneficiary’s trust, but not a remedy for a beneficiary against the trustee of a different trust. Trust for Schwegmann v. Schwegmann Family Trust, 05-095, (La. App. 5 Cir. 5/25/05), 905 So.2d 1148. Therefore, this Court found the trial court correctly found the plaintiffs have no cause of action under La. R.S. 9:2221. However, this Court found plaintiffs could amend their petition to state a cause of action to enforce a right of the trust estate.

This Court further found the trust did have a claim under La. R.S. 9:2222, thus the trial court erred in refusing to allow the trust to amend its petition. This [¿Court remanded the matter to the trial court to allow the trust to amend its peti[741]*741tion. This Court also found the issue of whether there was a constructive trust in favor of Brown as beneficiary need not be decided since this matter was being remanded for amendment of the petition. Id.

On remand, plaintiffs filed a first amended petition for declaratory judgment adding a claim pursuant to La. R.S. 9:2222 alleging that John F. Schwegmann, as trustee of the Margie Trust, did not bring any action against the defendant trusts to recover assets of the Margie Trust. Thus, plaintiffs sought to enforce the rights of the Margie Trust and recover the property diverted by John from the defendants. Plaintiffs further sought in personam rights to money damages and in rem rights to trace funds converted by John F. Schwegmann for his own benefit and the benefit of the defendant trusts. Additionally, plaintiffs sought to obtain an order directing the trustees of the Schwegmann Family Trusts to provide accountings of those trusts.

By this petition, plaintiffs seek to preserve the right to make a decision, after the accounting and determination of John F. Schwegmann’s solvency, whether to pursue a remedy against the Family Trusts or John personally. The plaintiffs contend that, if the court determines the assets were diverted from the Margie Trust and taken into the possession of John F. Schwegmann prior to being delivered to his childrens’ trusts and he is insolvent, then the action of delivering those funds is reversible under a revocato-ry action. Further, plaintiffs assert that if the trustees and beneficiaries had knowledge and participated in John F. Schweg-mann’s breach and improper conversion, they are individually liable for damages.

In response to this amended petition, defendants again filed exceptions of no right of action, no cause of action, and non-joinder of a party. Defendants’ also filed an exception of prescription. On June 29, 2009, the trial court denied the | ^exceptions of no right and no cause of action and granted the exception of non-joinder of a party and the exception of prescription, dismissing all claims by plaintiffs.

Defendants filed a motion for devolutive appeal and argued the trial court correctly granted their exception of prescription because the petition was prescribed on its face. Defendants argue the plaintiffs’ claims relate to the alleged tort of conversion of money by John F. Schwegmann which is a delictual action governed by a one year prescription in La. C.C. art. 3492.

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Trust for Schwegmann v. Schwegmann Family Trust
51 So. 3d 737 (Louisiana Court of Appeal, 2010)

Cite This Page — Counsel Stack

Bluebook (online)
51 So. 3d 737, 9 La.App. 5 Cir. 968, 2010 La. App. LEXIS 1241, 2010 WL 3611718, Counsel Stack Legal Research, https://law.counselstack.com/opinion/trust-for-schwegmann-v-schwegmann-family-trust-lactapp-2010.