The defendants have appealed a judgment, which, among other things, ordered the termination of two family trusts. For the reasons that follow, we affirm.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
On July 11, 1996, Douglas Lamar Cockerham, Sr. (Lamar) and Ruth C. Cockerham (Ruth) established a family trust known as the Cockerham Revocable Trust (revocable trust or first trust). The act creating the trust provided that Lamar and Ruth would be the trustees and beneficiaries of the revocable trust and that, in the event of the death of either one of them, the survivor would become the sole remaining trustee and beneficiary. One of their sons, Douglas L. Cockerham, Jr. (Douglas), was named the successor trustee of the revocable trust. In addition, the act creating the revocable trust named Lamar and Ruth's sons, Douglas, Maurice Nelson Cockerham (Maurice),
Lamar died intestate on September 15, 1997. As the surviving spouse, Ruth became the sole trustee and beneficiary of the first trust in accordance with the provisions of the revocable trust. Thereafter, in March 1999, Ruth signed a declaration of trust split, in which she created a second trust named the Cockerham Irrevocable Family Trust (irrevocable trust or second trust). Into this second trust, Ruth transferred certain listed immovables from the revocable trust, while leaving the remaining assets in the first trust. The one-page document creating this irrevocable trust does not establish any further provisions for the management of the trust or for how its assets would be distributed upon its termination.
In July 2008, Ruth amended the revocable trust to remove Douglas as the sole successor trustee and to name all three of her sons as joint successor trustees in the event she died or became incapacitated. In addition, Ruth required that the decisions of the joint successor trustees be unanimous. In the event that the successor trustees could not agree, Ruth designated her granddaughter, Lisa Arline Cockerham (Lisa),
After Ruth's death, Maurice and Henry sought to have their shares of the assets from the revocable trust distributed to them in accordance with Sections 3.2 and 6.1 of the trust.
After the original petition was filed, Maurice died. The plaintiffs then amended their petition to substitute Juanita Cockerham (Nita), Maurice's wife, as a party plaintiff, in her capacity as the representative of Maurice's estate. The plaintiffs further amended their petition to add a claim to remove Lisa as the arbitrator of the trust, because she allegedly was not impartial toward the plaintiffs. Plaintiffs also added a claim against Lisa, contending that she had taken possession of, and converted, various items of property belonging to the revocable trust.
The plaintiffs subsequently amended their petition a second time upon learning of the existence of the irrevocable trust. According to the allegations of this amended petition, because the second trust did not name a trustee or beneficiary of that trust, Ruth, as settlor of the trust, was its sole trustee and beneficiary. The plaintiffs further alleged that the irrevocable trust terminated by operation of law upon Ruth's death and that the assets of the trust reverted to Ruth's estate to be probated in accordance with Louisiana law.
After a trial at which all parties appeared, except Lisa, the trial court rendered judgment terminating the revocable trust and ordering the assets of that trust distributed to Douglas, Henry, and Nita, as the representative of Maurice's estate, in equal shares. The judgment further terminated the irrevocable trust and ordered that the assets of the trust were deemed to be assets of Ruth's estate, which were to devolve to her heirs according to the laws of probate. Because the trusts were terminated, the trial court determined that the plaintiffs' claim to have Lisa removed as arbitrator was rendered moot. In addition,
In their first assignment of error, Douglas and Lisa contend that the trial court erred in terminating the trusts. Appellants further contend that Maurice and Henry did not have the authority to file suit against Douglas to judicially dissolve the trusts. Specifically, appellants argue that, because Ruth had appointed Lisa as the arbitrator to arbitrate any disputes between the trustees, the trustees were not authorized to file suit to resolve disputes or dissolve the trusts.
Authority to File Suit
A trustee shall exercise only those powers conferred upon him by the provisions of the trust instrument. LSA-R.S. 9:2111. A trustee shall further exercise only those powers necessary or appropriate to carry out the purposes of the trust and those that are not forbidden by the provisions of the trust instrument.
Termination of the Revocable Trust and Distribution of Assets
The judgment at issue decreed that the revocable trust was deemed terminated and ordered that the trust's assets were to be distributed, in equal shares, to Nita, as the representative of Maurice's estate, Henry, and Douglas. Appellants contend that this ruling by the trial court is in opposition to the settlors' intent in establishing the trust, as well as the doctrine of indestructibility of trusts established in Louisiana law. The Louisiana Supreme Court discussed the doctrine of trust indestructibility in
A review of the revocable trust instrument reveals the following provisions:
Pursuant to the above provisions, the revocable trust was to terminate, and its assets were to be distributed to the successor income and principal beneficiaries, upon the death of the last surviving beneficiary.
Douglas contends that paragraph 3.3 gives him and the other successor trustees the authority to hold on to the trust property, without distributing it, even after the death of the last surviving beneficiary, in order to maximize the value of the property prior to distribution. However, a reading of that provision in conjunction with paragraphs 3.1 and 3.2 does not support that conclusion.
As noted above, paragraphs 3.1 and 3.2 provide for the termination of the revocable trust and the distribution of its assets upon the death of the last surviving beneficiary.
Termination of Irrevocable Trust and Distribution of Assets
The judgment at issue also decreed that the irrevocable trust had terminated and that the assets of the trust were deemed to be assets of Ruth's estate. The judgment further ordered that the assets would devolve to her heirs according to the laws of probate. Again, appellants contend that this ruling is in error.
When Ruth created the second trust, she did not establish any provisions for its management, nor did she specify a trustee or beneficiary.
Louisiana Revised Statute 9:2013 provides:
Furthermore, if the trust instrument stipulates no term, the trust shall terminate upon the death of the last income beneficiary who is a natural person. LSA-R.S. 9:1833.
In this case, Ruth was the sole trustee and the sole beneficiary of the irrevocable trust. Therefore, upon her death, the irrevocable trust terminated by operation of law, and the assets of that trust returned to her estate. Furthermore, because Ruth died without a will, the assets of the irrevocable trust passed to her heirs in accordance with the laws of intestate successions. Accordingly, we find no error in this finding by the trial court.
Attorney Fees and Costs
In their second assignment of error, appellants contend that the trial court erred as a matter of law in denying Douglas's claim for reimbursement of attorney fees in defending the trusts in this matter. In addition, in their third assignment of error, appellants assert that the trial court erred as a matter of law in awarding attorney fees and costs to the plaintiffs/appellees in this matter.
A trustee is entitled to indemnity from the trust estate for expenses properly incurred by him in the administration of the trust, unless the trust instrument provides otherwise. LSA-R.S. 9:2191. A trustee may incur expenses necessary to carry out the purposes of the trust and not forbidden
Appellants argue that the trial court erred in denying Douglas's claim for reimbursement of attorney fees and travel expenses that he allegedly incurred in the administration of the trust. At trial, Douglas testified that he had paid all of the attorney fees himself, without any assistance from Lisa, despite the fact that the same attorney that was representing him was also representing her in this matter. Douglas asserts that he is entitled to reimbursement from the trusts for his attorney fees and expenses, because he incurred them attempting to defend the trust. However, Henry and Nita contend that, in fact, Douglas's actions were in contravention of the purposes of the trust and that they were required to bring their action in order to carry out the true purposes of the trust.
Douglas testified at trial that he wanted to follow the written "letter of the trust" so that they could get the maximum benefit for all of the beneficiaries. However, a review of the record demonstrates that Douglas had not been complying with the provisions of the trusts. Although the first trust had been amended to name all three sons as joint successor trustees, Douglas took many actions concerning the trust property on his own and without consulting the other trustees. Specifically, he allowed Lisa to continue to live rent-free on the trust property without the joint trustees' consent.
As noted previously, paragraph 9.1M of the first trust provides the trustee with the authority to hire an attorney, if necessary, to ensure that the trust is properly administered. However, in this case, Douglas was required to hire an attorney to defend himself because of the actions he had taken in using the assets of the trusts without the knowledge or consent of the joint trustees. In addition, Douglas's attorney also represented Lisa, who is not a trustee, in the same action. There is no provision, either in the trust instrument or in the law, which allows Lisa to be indemnified for her expenses in this matter. Nevertheless, no testimony or documentary evidence was presented at the trial to demonstrate the amount of attorney fees attributable to Douglas for issues involving alleged trust defense issues and the amount attributable to Lisa for issues connected to the claim of conversion levied against her or for efforts to evict her or remove her as arbitrator.
On the other hand, the plaintiffs were required to file the underlying suit, at great expense to themselves, in order to prevent Douglas from continuing to deplete the trusts' assets. Therefore, after a thorough review of the record, we find that there was a reasonable factual basis for the trial court's apparent finding that Douglas had not properly incurred his expenses in furtherance of the administration of the trust and for the trial court's finding that the plaintiffs were required to expend
Trustee of the Irrevocable Trust
In their fourth assignment of error, appellants contend that the trial court erred in denying Douglas's claim that he be appointed the sole trustee of the irrevocable trust. In the alternative, Douglas asserts that he and his brothers should have been recognized as joint trustees of the irrevocable trust.
Douglas based this argument on his earlier contention that the irrevocable trust was managed by the same terms that controlled the revocable trust. According to Douglas, because he had been named the sole successor trustee of the first trust, Ruth had intended that he be the sole successor trustee of the second trust. As noted previously, however, there is no evidence to support this argument, and nothing in the trust documents suggests that Ruth ever adopted the provisions of the first trust in establishing the second trust. Therefore, this assignment of error is without merit.
Transfer of Cockerham Family Property to the Trusts
In their fifth assignment of error, appellants argue that the trial court erred in finding that the Cockerham family property was not transferred in its entirety to the two trusts based on the Livingston Parish public records. As a preliminary matter, we note that the property at issue is referred to at certain times in the record as consisting of approximately ninety acres and at other times as consisting of approximately twenty-seven acres. Apparently, the property initially was much larger, and parts of it were sold off over time. Nevertheless, despite the substantial difference in size, it is the same property.
When Ruth and Lamar created the revocable trust In 1996, they placed several pieces of immovable property in the trust, including their family home located in Denham Springs, Louisiana. However, instead of placing their entire interest in the home in the trust, Schedule A to the revocable trust, which listed the property included in the trust, provided the following description:
Clearly, by that description, Ruth and Lamar only transferred an undivided one-half interest in the family home to the revocable trust.
Appellants contend that this description was made in error, but that it was subsequently corrected by a notarial act of correction signed by Douglas Sunseri, the
Lamar died intestate on September 15, 1997. At that time, the property description in Schedule A of the revocable trust provided that only an undivided one-half interest in the family home had been transferred to that trust. The notarial act of correction concerning the property description of the family home was not executed until February 23, 1999, approximately seventeen months after Lamar's death. However, immediately upon Lamar's death, his sons had acquired ownership of his estate, including his undivided one-half interest in the undivided one-half interest in the family home that had not been transferred to the revocable trust.
Moreover, LSA-R.S. 35:2.1 governs notarial acts of corrections and, at the time the notarial act of correction at issue in this matter was executed, the statute provided, in pertinent part:
Pursuant to the clear terms of the statute, notarial acts of correction may be used only for clerical errors, not substantive errors such as the one in this case where the settlors transferred only an undivided one-half interest in the family home to the trust. Accordingly, we find no error in the trial court's finding that the Cockerham family property was not transferred in its entirety to the revocable trust.
Removal of Lisa Arline Cockerham as Arbitrator
In their final assignment of error, appellants contend that the trial court erred as a matter of law in not finding that Lisa had been duly appointed as the arbitrator of the revocable trust and that she should not have been removed. The trial court found that the issue of Lisa's removal was moot, because it had determined that the trusts were terminated and that there was no need for Lisa to remain as arbitrator for trusts that no longer existed. Because we agree with the trial court's findings regarding the termination of the trusts, we also find that the issue of Lisa's removal as arbitrator is moot. Accordingly, this assignment of error is without merit.
For the foregoing reasons, we affirm the judgment of the trial court. All costs of this appeal are assessed to Douglas L. Cockerham, Jr. and Lisa Arline Cockerham.
Kline, J., concurs.