Opinion
2016 CA 1003
08-18-2017
IN RE: THE ROBERT P. BREAZEALE, JR. TRUST
Joseph A. Prokop, Jr. Baton Rouge, Louisiana Counsel for Plaintiff-Appellee Jeffrey A. Pollard, Trustee of the Robert P. Breazeale, Jr. Trust Jennifer R. Dietz Baton Rouge, Louisiana Counsel for Defendant-Appellant Emma Ann Breazeale Sacha S. Tessier Baton Rouge, Louisiana Counsel for Defendant-Appellee Gavin Breazeale Thomas M. Lockwood Baton Rouge, Louisiana Counsel for Defendant-Appellee Kathryn S. Grigsby, Curatrix of the Interdict, Robert Phanor Breazeale, III
NOT DESIGNATED FOR PUBLICATION ON APPEAL FROM THE NINETEENTH JUDICIAL DISTRICT COURT
NUMBER 643,303, SECTION 24, PARISH OF EAST BATON ROUGE
STATE OF LOUISIANA HONORABLE R. MICHAEL CALDWELL, JUDGE Joseph A. Prokop, Jr.
Baton Rouge, Louisiana Counsel for Plaintiff-Appellee
Jeffrey A. Pollard, Trustee of the
Robert P. Breazeale, Jr. Trust Jennifer R. Dietz
Baton Rouge, Louisiana Counsel for Defendant-Appellant
Emma Ann Breazeale Sacha S. Tessier
Baton Rouge, Louisiana Counsel for Defendant-Appellee
Gavin Breazeale Thomas M. Lockwood
Baton Rouge, Louisiana Counsel for Defendant-Appellee
Kathryn S. Grigsby, Curatrix of the
Interdict, Robert Phanor Breazeale, III BEFORE: GUIDRY, WELCH, HIGGINBOTHAM, THERIOT, AND CHUTZ, JJ.
Disposition: REVERSED AND RENDERED.
CHUTZ, J.
Defendant-appellant, Emma Ann May Breazeale, appeals a district court judgment finding a provision of a trust instrument invalid as constituting a prohibited substitution. For the following reasons, we reverse the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
On February 24, 1999, Robert P. Breazeale, Jr. (the Settlor) created an inter vivos trust known as "The Robert P. Breazeale, Jr. Trust" (the Trust). The income and principal beneficiaries of the Trust were the Settlor's wife, Emma, and his three sons, Robert P. Breazeale, III (Robert), Mack McGee Breazeale (Mack), and Gavin Edward Breazeale (Gavin). The principal of the Trust was divided into six shares, with three shares held for the benefit of Emma and one share each held for the benefit of Robert, Mack, and Gavin. The Trust was to terminate upon the later of the following events: (1) the payment of death taxes and receipt of closing letters from the taxing authority; or (2) completion of the administration of the Settlor's succession.
Shortly after the creation of the trust, Mack died intestate and without descendants on April 19, 1999. On April 20, 2015, the Settlor died. Thereafter, Transamerica Life Insurance Company paid a death benefit to the Trust in the amount of $1,499,461.19.
On October 23, 2015, Jeffrey A. Pollard, the trustee of the Trust, filed a petition for instructions in the district court pursuant to La. R.S. 9:2233. Because Mack died during the term of the Trust, the trustee requested instructions in interpreting the substitute beneficiary provision contained in Section 4.1 of the Trust Instrument. When the Trust was created, La. R.S. 9:1973(A) allowed a Settlor to designate substitute beneficiaries for a principal beneficiary who died intestate and without descendants during the term of the Trust. The Trustee took the position that the substitute beneficiary provision of Section 4.1 did not conform to La. R.S. 9:1973(A) because it designated substitute beneficiaries "regardless of whether a[n] original principal beneficiary died intestate and/or without descendants."
Louisiana Revised Statutes 9:2233(A) provides:
A trustee, a beneficiary, or a settlor in an ordinary or a summary proceeding may apply to the proper court for instructions concerning the trust instrument, the interpretation of the instrument, or the administration of the trust. An order of a proper court issued pursuant to such an application shall be full authority to act in accordance thereunder, and a trustee shall be fully protected from all claims of any person who has or who may subsequently acquire an interest in the trust property.
All references in this opinion to provisions of the trust code are made to those provisions as they existed at the time the Trust was created in 1999. See La. R.S. 9:2252.
At a hearing on the matter, the district court agreed with the Trustee that the substitute beneficiary provision was invalid. In its oral reasons for judgment, the district court stated:
Under the law, since the trust agreement did not make provision to comply with the law, that is saying that if the beneficiary died without a will and without descendants, then it goes to these others, that is not a valid provision. That it is what we sometimes refer to in dealing with successions and so forth, an illegal substitution. [Emphasis added.]The district court signed a judgment on April 11, 2016, holding that the substitute beneficiary provision constituted an illegal substitution and, therefore, Mack's interest in the Trust vested in his intestate heirs, Robert and Gavin, subject to the usufruct of Mack's surviving parent, Kathryn Grigsby. Emma has now appealed, arguing the district court erred as a matter of law in its interpretation of La. R.S. 9:1973(A) and the Trust Instrument.
DISCUSSION
On appeal, Emma contends the district court committed legal error in interpreting La. R.S. 9:1973 to require the inclusion of the specific terminology, "intestate and without descendants," as a prerequisite to the validity of the substitute beneficiary provision. She argues the requirement of La. R.S. 9:1973(A) that a deceased principal beneficiary die intestate and without descendants are merely factual conditions "precedent to trigger the substitute beneficiary's interest in the principal" rather than a drafting requirement for the Trust Instrument.
Under La. R.S. 9:1972, the interest of a principal beneficiary who dies during the term of a trust vests in his heirs or legatees unless the settlor had provided otherwise in the instrument to the extent permitted by designated sections of the trust code. One of those sections is La. R.S. 9:1973, which provided that:
Section 1973 was amended in 2016 by 2016 La. Acts, No. 544, § 1. --------
A. The trust instrument may provide that the interest of either an original or a substitute principal beneficiary who dies intestate and without descendants during the term of the trust or at its termination vests in some other person or persons, each of whom shall be a substitute beneficiary.
B. Except as to the legitime in trust, the trust instrument may provide that the interest of either an original or a substitute principal beneficiary who dies without descendants during the term of the trust or at its termination vests in some other person or persons, each of whom shall be a substitute beneficiary.
In this case, the substitute beneficiary provision contained in Section 4.1 of the Trust Instrument provided, in pertinent part:
Should any beneficiary die during the term of this trust the interest of said beneficiary shall vest in the surviving beneficiaries as substitute principal beneficiaries.
The Trustee, Robert, and Gavin argued, and the district court agreed, that the substitute beneficiary provision failed to comply with La. R.S. 9:1973(A) because it did not track the language of that provision by specifically stating it applied to a deceased beneficiary who died "intestate and without descendants." In opposition, Emma contends the requirements of La. R.S. 9:1973 are met since it is undisputed Mack died intestate and without descendants. She maintains it would not violate any statutory law or public policy to enforce the Trust Instrument's substitute beneficiary provision as written.
Initially, we note that because the facts of this case are undisputed and the issue on appeal is one of statutory interpretation, we review this matter de novo, without deference to the legal conclusions of the district court. Turner v. Willis Knighton Medical Center , 12-0703 (La. 12/4/12), 108 So.3d 60, 62. The starting point in the interpretation of any statute is the language of the statute itself. When a law is clear and unambiguous and its application does not lead to absurd consequences, the law shall be applied as written. La. C.C. art. 9; La. R.S. 1:4; In re Clegg , 10-0323 (La. 7/6/10), 41 So.3d 1141, 1154.
Moreover, in reviewing Section 4.1 to determine whether it complies with the requirements of La. R.S. 9:1973, it should be remembered that the provisions of the trust code must be accorded a liberal construction in favor of freedom of disposition. La. R.S. 9:1724. The trust code is considered to sanction a disposition in trust if its text expressly or impliedly authorizes the disposition. La. R.S. 9:1724 & Comment (c); Richards v. Richards , 408 So.2d 1209, 1213 (La. 1982) (on rehearing). Further in construing a trust instrument, the settlor's intent governs and is to be ascertained and given effect, unless it is opposed to law or public policy. Richards , 408 So.2d at 1211; In re James C. Atkinson Clifford Trust , 00-0253 (La. App. 1st Cir. 6/23/00), 762 So.2d 775, 776, writ denied, 00-2262 (La. 10/27/00), 772 So.2d 655. Louisiana has a strong public policy in favor of effectuating and protecting the settlor's intent as set forth in the trust instrument. Albritton v. Albritton , 600 So.2d 1328, 1331 (La. 1992); J-W Operating Company v. Olsen , 48,756 (La. App. 2d Cir. 1/15/14), 130 So.3d 1017, 1021, writ denied, 14-0313 (La. 4/11/14), 137 So.3d 1217.
Based on our review, we find nothing in La. R.S. 9:1973(A) expressly requiring a settlor to use the language "intestate and without descendants," in order for a substitute beneficiary provision to be valid. Those prerequisites are provided by operation of law. See La. R.S. 9:1973(A). Therefore, if the Settlor's intent was for the substitutions to occur to the full extent allowed by law, and the beneficiary died intestate and without descendants, then the substitutions should take place regardless of whether or not the Trust Instrument expressly delineated those conditions. To do otherwise would thwart the Settlor's intent without advancing any public policy of this state.
No technical language is required in creating a trust. La. R.S. 9:1753; St. Charles Land Trust , Achille Guibet v. St. Amant , 253 La. 243, 252, 217 So.2d 385, 389 (1968). In the instant case, a plain reading of the unqualified language of Section 4.1 clearly reveals it was the Settlor's intent for the surviving beneficiaries to succeed to the principal interest of any beneficiary who died during the term of the Trust. To the extent possible, "[a] trust instrument shall be given an interpretation that will sustain the effectiveness of its provisions." La. R.S. 9:1753. Especially in view of the strong public policy favoring protection of the settlor's intent as expressed in the trust instrument, the terms of Section 4.1 should be implemented to the full extent permitted by law. See Albritton , 600 So.2d at 1331; J-W Operating Company , 130 So.3d at 1021. Because Mack died intestate and without descendants, Section 4.1 provided for a valid substitution of his interest in the Trust to the surviving beneficiaries. The district court erred in concluding Section 4.1 was invalid under the circumstances so that Mack's interest in the Trust vested in his intestate heirs.
Having concluded that the Trust Instrument provides for Mack's interest to vest in the surviving beneficiaries, we must next consider how that interest is to be distributed among those beneficiaries. Section 4.1 provides a deceased beneficiary's interest "shall vest in the surviving beneficiaries as substitute principal beneficiaries," but does not delineate how that interest is to be divided. We believe guidance is provided in the sentence of Section 4.1 that sets forth the respective shareholder interests of the original principal beneficiaries. In accordance with those respective shareholder interests, we find that Emma is entitled to receive one-half of Mack's interest in the Trust, with the remaining one-half of Mack's interest to be shared equally between Robert and Gavin.
CONCLUSION
For the reasons assigned, the April 11, 2016 judgment of the district court is hereby reversed and judgment is entered instructing the Trustee of the Robert P. Breazeale, Jr. Trust, Jeffrey A. Pollard, that the substitute beneficiary provision contained in Section 4.1 of the Trust Instrument should be applied as written to the interests of the deceased principal beneficiary, Mack McGee Breazeale, resulting in the substitution of principal beneficiary, Emma Ann May Breazeale, to one-half of those interests and the substitution of principal beneficiaries, Robert P. Breazeale, III and Gavin Edward Breazeale, to equal shares in the remaining one-half of those interests. The costs of this appeal are to be paid by appellees in equal shares.
REVERSED AND RENDERED.
NO. 2016 CA 1003
BEFORE: GUIDRY, WELCH, HIGGINBOTHAM, THERIOT, AND CHUTZ, JJ. HIGGINBOTHAM, J., DISSENTS AND ASSIGNS WRITTEN REASONS. HIGGINBOTHAM, J., dissenting.
I respectfully dissent because I believe that the majority's distribution of the shares is inconsistent with the settlor's original intent. NUMBER 2016 CA 1003 GUIDRY, J., dissents in part and assigns reasons. GUIDRY, J., dissenting in part.
While I agree that the district court legally erred in interpreting La. R.S. 9:1973 in such a way as to invalidate Section 4.1 of the Trust Instrument, I disagree with the majority's conclusion that in the absence of further instructions on how to distribute the pre-deceased beneficiary's share, it should be divided in proportion with the distribution of shares under the trust. I believe in the absence of further instruction from the Settlor, the fairest and most basic distribution would be to simply divide Mack's share by three. Therefore, for this reason, I respectfully dissent from that portion of the opinion.