Opinion
Civil Action No. 03-3132 Section "K" (1).
November 22, 2004
Before the Court is the United States' Motion For Partial Summary Adjudication (Rec. Doc. No. 10) and Plaintiff's cross Motion For Partial Summary Adjudication (Rec. Doc. No. 14). Having reviewed the pleadings, memorandum, and relevant law, the Court finds as follows.
I. BACKGROUND
Marietta R. Schneider ("Decedent") was a resident and domiciliary of Tangipahoa Parish, Louisiana. Decedent had three children, all of whom are still living. Decedent was the daughter of Frederick W. Reimers and brother to Warren D. Reimers who had four children. Frederick W. Reimers ("Testator") died on July 31, 1958 leaving an olographic will with two codicils. The will was submitted for probate on August 6, 1958.
In the will, the testator bequeathed to his children and grandchildren in trust all of his remaining real estate and stocks, bonds, notes, accounts, and other securities and property which remained in his estate after payment of all debts, taxes, and charges of the estate and discharge of all special legacies. (Plaintiff's Exhibit A ¶ 11, 12). In the trust, the testator bequeathed to Decedent and her brother Warren an undivided one-fourth interest and an undivided one-fourteenth interest to each of his grandchildren. Id. The testator stated that this bequest was to be divided into two trusts, one consisting of an undivided one-fourth interest for the Decedent and an undivided one-fourteenth interest for each of her three children ("Marietta Trust"). Id. The other trust was to consist of an undivided one-fourth interest for Decedent's brother and an undivided one-fourteenth interest for each of his four children ("Warren Trust"). (Plaintiff's Exhibit A ¶ 11). The value of property comprising the totality of Mr. Reimers' bequest in trust to his children and grandchildren was approximately $2.8 million and the value of the one-fourth share reserved for Decedent was approximately $700,000. (Defendant's Exhibit 3, page 8).
Decedent died on June 22, 1999. Pursuant to Section 2032(a) of the Internal Revenue Code ("IRC"), 26 U.S.C., Decedent's estate elected to value its assets for federal estate tax purposes on December 22, 1999, six months after Decedent's death. The Estate and Trust timely filed the Decedent's United States Estate Tax Return. (Complaint ¶ V, Rec. Doc. No. 1). Thereafter, defendant, through its agent, the IRS, conducted an audit examination of the Return and notified plaintiffs of proposed adjustments to the Return requiring addition federal estate taxes and additional interest. (Complaint ¶ VI). After paying the adjustments under protest, plaintiffs filed suit against the United States to recover Internal Revenue taxes and interest they believe were erroneously and illegally assessed and collected from them. (Complaint). The dispute centers on the value of the taxable estate of Decedent for federal estate tax valuation purposes.
Pursuant to Fed.R.Civ.Pro. 56(b) and (d), the United States filed a motion for summary adjudication stating that the Marietta Trust terminated as to the Decedent's interest upon the date of her death and that, at that moment, for federal estate tax purposes, Decedent held an "undivided, fractional interest" in the assets of the Marietta Trust and the Warren Trust. The plaintiffs, in their cross-motion, seek summary adjudication declaring that the Marietta Trust did not terminate as to Decedent's interest upon her death on June 22, 1999, but continues until the death of the last surviving income beneficiary. Resolution of this matter will determine the character of the property in question of Marietta Schneider.
II. LEGAL STANDARD
Rule 56(b) of the Federal Rules of Civil Procedure authorizes a party against whom a claim is asserted to move for summary judgment as to "all or any part" of the claim. Summary judgment should be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). "Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Substantive law determines the materiality of facts, and "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc. 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
The plaintiffs in this case filed a cross-motion. As a general rule, if both parties file opposing motions for summary judgment, the court's granting either party's motion is not warranted, if indeed, there exists a genuine factual dispute concerning a material issue. Schlytter v. Baker, 580 F.2d 848, 489 (5th Cir. 1978). "When the parties proceed on the same legal theory and on the same material facts, however, the basis for the rule disappears." Id. The Fifth Circuit continued, "Nonetheless, cross motions may be probative of the non-existence of a factual dispute when, as here, they demonstrate a basic agreement concerning what legal theories and material facts are dispositive." Id. ( citing Bricklayers Local 15 v. Stuart Plastering Co., 512 F.2d 1017, 1023 (5th Cir. 1975)). One commentator has suggested that, unless the parties expressly state to the contrary, the submission of cross-motions for summary judgment "'is equivalent to [consent to] a stipulated trial on an agreed statement.'" John v. Louisiana, 757 F.2d 698, 705 (5th Cir. 1985) ( citing Schwarzer, Summary Judgment Under the Federal Rules: Defining Genuine Issues of Material Fact, 99 F.R.D. 465, 484 n. 92). This Court finds that the parties in this case have demonstrated an agreement concerning the legal theories and material facts that are dispositive to the resolution of this issue; thus, the granting of either party's motion in this case is warranted.
The Court notes that defendant brought its original Motion for Summary Judgment pursuant to Fed.R.Civ.Proc. 56(b) and 56(d). The Court declines to set forth those material facts that exist without substantial controversy in an order pursuant to Rule 56(d). The Court shall hold a status conference to discuss any issues that remain in controversy.
II. ANALYSIS
Both plaintiffs and defendant agree that when the Marietta Trust was created in 1958 (at the time of the Testator's date of death), the term of the Marietta Trust would extend as to the Decedent's interest therein until the death of the Trust's last surviving income beneficiary. The applicable law determining the term of the Marietta Trust when it was created was R.S. 9:1794(2). See Succession of Rabito, 229 So.2d 380, 382 (La.App. 4 Cir. 1970) (analyzing R.S. 9:1794(2)). The Louisiana Supreme Court held that R.S. 9:1794(2), as amended by Act 209 of 1952, established that the maximum term was based upon the life of the last surviving income beneficiary. Succession of Stewart, 301 So.2d 872, 881 (La. 1974).
"Unless an earlier termination is required by the trust instrument or by the proper court, every inter vivos or testamentary trust created under this Chapter, other than such as may be established by employers for the benefit of their employees, shall terminate: (2) At the expiration of ten (10) years from the settlor's death as to a beneficiary who is a natural person or until the death of the beneficiary, whichever is the longer period; If the terms of the trust purport to require a period of duration as to any beneficiary longer than the maximum allowable period set forth above, but the trust is otherwise valid under this Chapter, the trust shall be enforced as to such beneficiary for the maximum allowable period, and shall then be terminated."
In 1964, the legislature adopted the Louisiana Trust Code and enacted a new law pertaining to the legitime in trust which shortened the duration of the trust as to the forced portion. La.Rev.Stat. 9:1841(3) provides: "Except as permitted by R.S. 9:1844, the term of the trust, as it affects the legitime, does not exceed the life of the forced heir." Thus, the trust must terminate as to the legitime upon the forced heir's death. The defendant argues that the 1964 provision changing the termination date of the legitime in trust applies retroactively to the Marietta Trust, thus, terminating Decedent's interest upon her death. The plaintiffs argue that the law in effect at the time of the Trust applies and that the 1964 provision shortening the term of the Trust does not apply retroactively. Plaintiffs aver that since the Decedent's children, other income beneficiaries of the Marietta Trust, are still living, the trust would not terminate as to Decedent's interest upon her death, but upon the death of the last surviving income beneficiary.
In its original brief, the defendant based its argument on Planiol's principles of retroactivity and failed to present an appropriate analysis to determine the retroactive application of La.Rev.Stat. 9:1841(3). The defendant did not discuss the testator's intent, retroactivity laws in the Civil Code or Louisiana Revised Statutes, by which the Court will analyze the issue. For the reasons stated below, the Court agrees that the law in effect at the time of the Trust's creation applies. The Court's opinion is based upon the intent of the Testator and the prospective application of La.Rev.Stat. 9:1841(3).
A. Section A-11(C) of the Testator's Will
In the will, the Testator included the following language as to the term of the Marietta and Warren Trusts: "Duration of Trusts. Each Trust shall continue as to each beneficiary for the maximum period of time permitted by any present or future law of the State of Louisiana." The Supreme Court of Louisiana clearly holds that "[i]n construing a trust, the settlor's intention controls and is to be ascertained and given effect, unless opposed to law or public policy." Richards v. Richards, 408 So.2d 1209, 1211 (La. 1982) ( citing Lelong v. Succession of Lelong, 164 So.2d 671 (La.App. 3d Cir. 1964). "We believe there is a strong public policy in effectuating and protecting the settlor's intent as set forth in the trust document." Albritton v. Albritton, 600 So.2d 1328, 1331 (La. 1992) ( citing Richards, supra). This Court is of the opinion that it was the settlor's intention that each trust shall continue for as long as possible as to each beneficiary and that this provision unambiguously requires that the maximum trust term permitted by "any present or future law of the State of Louisiana" be applied to the Marietta Trust. The longest possible term is the law that was in effect at the Trust's creation in 1958.
The Louisiana Supreme Court's decision in Richards supports the principle that the settlor's intention trumps all other possibilities, as long as it is not contrary to law or public policy. In Richards, the settlor created nine trusts in 1941. 408 So.2d at 1209. As to the term of the trust, each trust contained the following provision:
The legal title to all the trust estate shall be vested in the Trustees, and their successors, as Trustees, to be held by them in trust pursuant to the laws of the State of Louisiana, and particularly the Trust Estates Act, as same may from time-to-time be amended, for the maximum allowable period.Id. at 1211. After the creation of these trusts and before the trusts terminated under the 1941 Louisiana trust law, Louisiana trust laws were amended to provide for a trust term longer than the maximum trust term permitted under 1941 law. Id. at 1212. The issue before the Court was whether the language in the will allowed the court to extend the length of the trust term to the longer period permitted under the new law. The court considered the settlor's intent in writing the provision and whether or not public policy or law would prohibit a trust from including such a condition providing for the maximum allowable period under the law. Id. at 1211. The Court held that there was "nothing in the laws in effect at the time the trusts were created that would prohibit the term provision contained in the instant trusts" and thus "conclude[d] that the term provision should be given full effect in accordance with the settlor's clear intent." Id. The Court found that the settlor specifically intended to apply subsequent laws if they served to extend the terms of the trusts.
Therefore, we conclude that the term provision should be given full effect in accordance with the settlor's clear intent. Because the provision states that the term is to be for the maximum allowable period as may from time-to-time be amended, the actual term of the trust should be the maximum allowable period under current law.Id. at 1212.
On Rehearing, the Court explained further why the duration clause in the will was not prohibited. The Court stated that the duration clause (similar to the one in the Marietta Trust) is acceptable because "it [the duration clause] only seeks to make the trusts truly coterminous with the maximum allowable period." Id. at 1213.
The Richards Court was not faced with the question of which law would apply in the event that a new law would shorten the term of the trust, as is the situation concerning the Marietta Trust. In Richards, it was the "current law" that produced the longer trust term which the Court chose to apply because it was the clear intent of the settlor to utilize the maximum allowable period. In the situation before us, the law at the time the Marietta Trust was created provides the longer trust term. Thus, this Court, based upon the rational in the Richards decision, intends to honor the intent of the settlor in carrying out the trust for the maximum period of time allowable under "present or future law" which happens to be the law at the time the trust was created. The defendant argues that Richards does not allow the Court to provide the longest possible term, but rather requires the Court to apply current law governing the maximum trust duration. The Court disagrees with the defendant's argument. The defendant essentially ignores the rationale of the Richards' decision and asks the Court not to enforce the demonstrated intention of the settlor.
This Court must also determine whether the laws in effect at the time of creation of the two trusts would allow for the inclusion of Section A-11(C) of the Testator's will. The Louisiana Supreme Court determined that there was nothing in the laws at the time the Richards' trust was created to prevent the trust-duration clause, seeking the maximum allowable time period for the life of the trust. On Rehearing, the Richards Court examined the law at the time of trust, R.S. 9:1794, the same law in effect for the Marietta trust, to make this determination. Thus, this Court sees no reason to find otherwise. The trust duration clause in the Reimers' will, Section A-11(C), seeking the maximum possible term of the trusts, is very similar to the one in the Richards Case, which was found to be lawful. Furthermore, neither the plaintiffs nor defendant contest the validity of the trust-duration clause in Mr. Reimers' will. Therefore, as the Richards Court held, "we conclude that the term provision should be given full effect in accordance with the settlor's clear intent." Id. at 1212. This Court is of the opinion that the testator intended to maximize the term of the Marietta Trust; therefore, La.R.S. 9:1841(3) which would substantially shorten the duration of the Trust should not apply.
B. The Application of La.Rev.Stat. 9:2252 ("Savings Clause")
In addition to the Court's analysis based upon the testator's intent, the Court looks to La.Rev.Stat. 9:2252 ("Savings Clause") to determine whether La.Rev.Stat. 9:1841(3) should be applied retroactively. This statute informs us whether or not to apply the provisions of the Trust Code to trusts created prior to 1964. The Savings Clause provides:
Trusts heretofore created and any provisions or dispositions therein made shall be governed by the laws in effect at the time of their creation. Unless otherwise provided in the trust instrument, trusts created prior to the effective date of this Code shall be governed in all administrative and procedural matters by the provisions of this Code and not by laws in effect at the time of creation of such trusts, and trusts created prior to the adoption of any amendment to this Code shall be governed in administrative and procedural matters by the provisions of the amendment.
Louisiana Civil Law Treatise explains Section 2252 of the Trust Code as follows: "The Supreme Court of Louisiana indicated that the Trust Code could not be retroactive so far as substantive provisions were concerned. However, as a practical matter the Trust Code should cover prior trusts in routine administrative matters and court procedures." 11 LEONARD OPPENHEIM SIDNEY INGRAM, LOUISIANA CIVIL LAW TREATISE § 71 (1977).
Succession of Simms, 195 So.2d 114 (La. 1967), cert. denied 389 U.S. 850, rehearing denied 389 U.S. 864(analyzing prohibited substitutions in trusts).
Louisiana Civ. Code art. 6 and La.Rev.Stat. 1:2 statutorily govern the issue of retroactivity of laws in general. Interpreting these laws, the Louisiana Supreme Court holds that substantive laws apply prospectively only in the absence of contrary legislation, whereas, procedural and interpretative laws apply both prospectively and retroactively. Rousselle v. Plaquemines Parish School Board, 633 So.2d 1235, 1245 (La. 1994). The rules of statutory construction provide that when two statutes deal with the same subject matter they should be harmonized; if there is a conflict, however, the statute specifically directed to the matter at issue must prevail. City of Pineville v. American Federation of State, Local, and Municipal Employees, 791 So.2d 609, 612 (La. 2001). This Court does not view these statutes in conflict, nor does it see a need to harmonize them, as they are virtually the same in their interpretation and meaning. Because the prospective or retroactive application of R.S. 1841(3) of the Trust Code is the issue before this Court, the Court will utilize the Savings Clause in the Trust Code in its analysis.
"In the absence of contrary legislative expression, substantive laws apply prospectively only. Procedural and interpretative laws apply both prospectively and retroactively, unless there is a legislative expression to the contrary."
"No Section of the Revised Statutes is retroactive unless it is expressly so stated."
The second sentence of the Savings Clause addresses the issue before us. It provides that the Trust Code applies to "administrative and procedural matters" of trusts created prior to 1964, "unless otherwise provided in the trust instrument." First, this Court does not characterize the laws governing the duration of a trust as an administrative or procedural matter. Thus, La.Rev.Stat. 9:184(3) of the Trust Code would not apply retroactively. Second, even if the term of the trust were characterized as an administrative or procedural matter, the statute allows for the trust instrument to provide otherwise.
There are no Louisiana cases which specifically hold that the duration of a trust is an administrative or procedural matter under the Savings Clause. However, the Richards case held that the duration of the trust is based upon the settlor's intent, without ever mentioning whether this is an administrative or procedural issue. The majority states that the Court of Appeals erroneously misapplied the Savings Clause (focusing on the first sentence of the Savings Clause) and ignored the settlor's intent. 408 So.2d at 1211. The dissent in Richards raised the argument that the term of the trust is a substantive issue and thus under the Savings Clause, the Trust Code should not be applied retroactively. Id. at 1214. However, the Richards Court clearly stated that it applied current law to the 1941 trust because of the settlor's intention. The majority in Richards did not once state or suggest that it was applying current law because the term of the trust was an administrative or procedural matter.
In Succession of Rabito, 229 So.2d 380, 382 (La.App. 4 Cir. 1970), the sole issue before the court was the duration of the trust created in 1958. The statute which governed the term of the trust was held to apply even though the statute had been amended and superceded ultimately by the 1964 Louisiana Trust Code while the trust was still in existence. Id. The court held that the applicable law was the law in effect at the time of the trust's creation. Id. at 384. The court did not mention the Savings Clause; however, it appears obvious if the Court was of the opinion that the term of the trust was an administrative or procedural matter, it would have applied subsequent legislative enactments.
In Succession of Stewart, 301 So.2d at 883, the Louisiana Supreme Court held that clauses pertaining to the amount and time at which loans, donations, and distributions of the estate will be made within the confines of the trust's term are purely administrative matters "since it does not affect any of the substantive or vested rights of the beneficiaries of the trust estate." Id. The Court stated that the Louisiana Trust Code would apply to these matters. See also, St. Charles Land Trust, Achille Guibet v. St. Amant, 217 So.2d 385, 387, n. 1 (La. 1968) (holding that R.S. 9:2233, allowing a trustee, beneficiary, or settlor in an ordinary or summary proceeding to apply to the court for instructions concerning the trust instrument, is a procedural provision of the Trust Code and thus applies retroactively).
These cases clearly illustrate that the Supreme Court of Louisiana and other appellate courts do not regard the duration of a trust a procedural or administrative matter. Furthermore, this Court holds that the termination date of a trust is a substantive issue and thus cannot be changed or altered by subsequent legislation. The Decedent may have planned otherwise concerning her interest in the Trust had she suspected her interest would terminate upon her death.
The defendant relies upon Planiol's second principle of retroactivity to argue that La.R.S. 9:1841(3) is not barred from being applied retroactively. Planiol states that a law is operating retroactively when it modifies or suppresses the "effects of a right already acquired." Walls v. American Optical Corp., 740 So.2d 1262, 1267 (La. 1999) ( citing 1 M. Planiol, Treatise on the Civil Law, § 243 (La.St.L.Inst.Trans. 1959). The defendant argues that the plaintiffs had no vested rights, only contingent rights, at the time of the enactment of La.Rev.Stat. 9:1841(3); thus, this statute is not barred from being applied retroactively. The Court notes that defendant misapplies Planiol's principles. These principles provide instances that prohibit the retroactive application of a law; they do not necessarily determine the retroactivity of a law as defendant argues. See Morial v. Smith and Wesson Corp., 785 So.2d 1, 10 (La. 2001). "Retroactive application of new legislation is constitutionally permissible only if it does not result in impairment of the obligation of contracts or in divestiture of vested rights." Id. ( citing 2 A.N. YIANNOPOULOS, LOUISIANA CIVIL LAW TREATISE, § 10 (3d ed. 1991).
This Court has not determined that La.Rev.Stat. 9:1841(3) applies retroactively for the reasons stated above. However, even if the Court had determined that this statute were administrative or procedural and applied retroactively, the Court is of the belief that Planiol's test once applied would actually prohibit the retroactive application of La.R.S. 9:1841(3) rather than allow it. It appears that the Testator, in this instance, would be divested of his right of having his intention given full effect. Plaintiffs argue that each of the Marietta Trust beneficiaries has the right to have consolidated management of all of the trust properties by the trustee until the last surviving income beneficiaries dies. These rights, plaintiffs argue, were already acquired and terminating the trust would clearly operate to "modify" these rights. The Court is of the opinion that Planiol's principles work against the defendant's argument, instead of favoring it.
As stated above the Court does not characterize the termination of the trust to be administrative or procedural. However, if that argument were successfully made, this Court finds that the instrument provides otherwise. The settlor, Mr. Reimers, intended that the trusts continue for the maximum time under the then present law or subsequent laws.
In conclusion, under the principle in Richards, this Court finds that the settlor's intent prevails. Second, La.Rev.Stat. 9:1841(3) should not be applied retroactively because the date upon which a trust terminates is not an administrative or procedural matter. Third, even if the duration of a trust were to be considered an administrative or procedural matter, under the Savings Clause in the Trust Code, the phrase "unless otherwise provided in the trust instrument" suggests that the Court return to the testator's intent. For these reasons, the law at the time of the Trust's creation as long it remains as the "maximum period of time permitted by any present or future law of the State of Louisiana" determines the term of the Marietta Trust.
Accordingly,
IT IS ORDERED that United States' Motion For Partial Summary Adjudication (Rec. Doc. No. 10) is DENIED. IT IS FURTHER ORDERED that Plaintiffs' Motion for Partial Summary Adjudication (Rec. Doc. No. 14) is GRANTED.