in Re Perry Family Living Trust ( 2016 )

STATE OF MICHIGAN
COURT OF APPEALS
In re PERRY FAMILY LIVING TRUST.
RONALD A. PERRY and JOSEPH R. PERRY, UNPUBLISHED
December 13, 2016
Petitioner-Appellants,
v No. 328548
Macomb Probate Court
VIRGINIA B. PERRY, Personal Representative of LC No. 2014-213655-TV
the ESTATE OF JAMES C. PERRY,
Respondent-Appellee,
and
JAMES M. PERRY, STEVEN J. PERRY, and
ROBERT E. PERRY,
Intervenors.
Before: SAAD, P.J., and METER and MURRAY, JJ.
PER CURIAM.
Petitioners, Ronald A. Perry and Joseph R. Perry, appeal as of right the probate court’s
order denying their petition for construction of the James & Virginia Perry Living Trust. For the
reasons stated herein, we affirm.
I. FACTS AND PROCEDURAL HISTORY
Jerry C. Perry (JC) died on May 14, 2014. He was survived by his wife Virginia B.
Perry, with whom he shared five sons; James M. Perry, Steven J. Perry, Robert E. Perry, Joseph
R. Perry, and Ronald A. Perry. In 2003, JC and Virginia established the James & Virginia Perry
Living Trust (“the Trust”).
In 2006, JC and Virginia restated the Trust in full, specifying that they were the co-
trustees and sole beneficiaries of the Trust during their lifetimes. The restated Trust also
specified that upon the death of the first spouse, the Trust became irrevocable and created a
Marital Trust that included all property not previously distributed under the Trust. Because the
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Martial Trust was intended to be used for the benefit of the surviving spouse, the surviving
spouse was given a general testamentary power of appointment over property in the Marital
Trust.
The Trust also listed specific and general distributions to occur upon the death of the
second spouse. Upon the death of the second spouse, the Schedule of Article Six provided the
“Perry Family Property Trust” would be created and funded with the couple’s hunting property
“provided such property is then owned by [the] Trust.” According to the Schedule, the hunting
property was to be held in trust for the benefit of two of JC and Virginia’s grandsons, used by
James and Steven, and eventually distributed to a third grandson. Article Nine stated that “[a]ll
trust property not previously distributed under the terms of [the] trust shall be divided” between
James, Steven, Robert, and Ronald. Joseph was intentionally omitted as a beneficiary of the
Trust.
JC and Virginia amended the Trust on three occasions. First, in 2007, they amended the
Schedule of Article Six. The amendment specified that upon the death of the second spouse,
rather than being held in trust, the hunting property would be distributed to James and Steven in
equal shares. Second, in 2012, JC and Virginia amended the Schedule of Article Six again,
providing that the hunting property should be held in trust for the benefit of two of their
grandsons, used by James and Steven, and eventually distributed to two of their grandsons. The
second amendment also added Section 2 to the Schedule of Article Six, specifying that upon the
death of the second spouse Robert would receive JC and Virginia’s home in Warren (the
“Marital Home”). Further, Article Nine was amended to include Joseph as a beneficiary of the
Trust.
On May 1, 2014, the Trust was amended for the third and final time. The third
amendment again altered Article Six. The language in Article Six directing the specific
distributions listed in the Schedule to occur upon the death of the second spouse was removed,
and Section 1 of the Schedule was also amended. While it still directed the hunting property be
held in trust upon the death of the second spouse, “provided such property is then owned by [the]
Trust,” it changed the beneficiaries so that James and Steven were given primary use and
enjoyment of the hunting property, but on the death of two of the four named sons, the hunting
property would be deeded to the remaining two sons. The third amendment also provided that
upon the death of the second spouse the Marital Home would be sold with the proceeds of the
sale being distributed equally to the five sons. Further, the third amendment added Section 3 to
the Schedule, stating that “[t]here are municipal bonds in the trust,” specifying “[s]aid bonds are
not to be sold before maturity,” and “[d]istribution shall be after they mature” to each of the five
sons “equally, per stirpes.”
Two weeks after the third amendment, JC died following a prolonged illness. Petitioners
allege that they have a strained relationship with Virginia and that after JC’s death she indicated
she intended to “cut them out of everything and give everything to their brothers.” Accordingly,
petitioners filed a Petition for Construction of Trust. In the petition, petitioners asserted that
Virginia believed that all of the property in the Trust, including the property delineated in Article
Six—the hunting property, the Marital Home, and the municipal bonds—was now part of the
Marital Trust, meaning Virginia had the “unrestricted ability” to expend or transfer the property.
However, petitioners argued that the property in the Schedule of Article Six did not become part
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of the Marital Trust upon JC’s death because JC intended the property to be distributed to his
sons as provided in the Schedule, and it was therefore, “previously distributed” under the Trust.
Accordingly, petitioners asked the probate court to “determine the proper administration and
distribution” of the property listed in Article Six.
Virginia filed an answer to the petition, arguing that the Trust unambiguously states that
all of the property in the Trust—including the property listed in Article Six—became part of the
Marital Trust to provide for her benefit until her death and that only after her death would any
remainder be distributed to her sons according to the terms of the Trust. Accordingly, Virginia
asked the probate court to deny petitioner’s request for an order of construction.
At several hearings, petitioners argued for a construction of the Trust establishing that the
three pieces of property in the Schedule of Article Six were not included in the Marital Trust,
meaning Virginia could not exercise her general power of appointment over the property thereby
depriving petitioners of their eventual share. Petitioners asserted that a contrary reading of the
Trust would subvert JC’s intention in making the specific devises in Article Six. At the hearings,
Virginia argued that the Trust unambiguously provided that the distributions in Article Six were
only to occur after the death of the second spouse, meaning the property listed in the Schedule of
Article Six became part of the Martial Trust upon JC’s death because Virginia was still living.
Further, Virginia argued that the Trust specified that all of the property in the Trust was intended
to support the surviving spouse and that the Trust established that “the surviving spouse has the
ability to do whatever they choose” with the property in the Trust.
At the first hearing, the probate court expressed “skepticism for the argument
[petitioners] presented,” but allowed limited discovery. At the final hearing, the probate court
stated that it permitted discovery “to see if the attorney who drafted the most recent amendment
and other documents could shed some light to see if there was a patent or latent ambiguity in this
trust language that would allow [] some greater insight into the interpretation of what the
language meant,” but concluded that the evidence did not reveal any ambiguity. Instead, the
court stated that
Rather, I believe that the respondent’s position is the correct position. That,
indeed, this is a joint revocable living trust that did become irrevocable upon the
death of the first spouse, but that the ability and the power to invade the principle
and to alienate property under a general exercise of a general power of attorney is,
in plain language, contained in the trust documents.
Further, the court found that the plain language of Article Six did not contain a distribution that
would keep the property listed in the Schedule from entering the Marital Trust;
The listing of assets which were managed in a trust upon the second of us to die is
not a distribution, as that term is normally understood in the English language.
And without some very clear parol evidence that it was intended as a distribution,
the terms of the trust, as written, must apply. And, so, the petition for
construction is granted in the sense that the court has constructed and construed
the document that finds that the position advanced by the respondent is the one
that is clearly consistent with the plain language of the trust.
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Therefore, the court denied the petition.
II. ANALYSIS
Petitioners argue that the probate court erred in its interpretation of the Trust. We review
the proper interpretation of a trust de novo. In re Miller Osborne Perry Trust, 299 Mich App
525, 529; 831 NW2d 251 (2013), citing In re Reisman Estate, 266 Mich App 522, 526; 702
NW2d 658 (2005). When interpreting a trust to resolve a dispute concerning its meaning, the
probate court’s goal is to ascertain and give effect to the intent of the settlor. In re Kostin Estate,
278 Mich App 47, 53; 748 NW2d 583 (2008). “The powers and duties of the trustees, and the
settlor’s intent regarding the purpose of the trust’s creation and its operation, are determined by
examining the trust instrument.” Id., citing In re Butterfield Estate, 418 Mich 241, 259; 341
NW2d 453 (1983).
The settlor’s intent must be determined by the trust’s plain language and “a court must
enforce the plain and unambiguous terms of a trust as they are written.” Bill & Dena Brown
Trust v Garcia, 312 Mich App 684, 694; 880 NW2d 269 (2015). However, if an ambiguity in
the trust exists, the probate court “must look outside the document to determine the settlor’s
intent, and it may consider the circumstances surrounding the creation of the trust and the general
rules of construction.” Id. at 693. Trust language is ambiguous if “an uncertainty concerning the
meaning appears on the face of the instrument and arises from the use of defective, obscure, or
insensible language,” or if “the language and its meaning is clear, but some extrinsic fact creates
the possibility of more than one meaning.” In re Woodworth Trust, 196 Mich App 326, 328; 492
NW2d 818 (1992). The fact that parties disagree concerning the meaning of a trust does not
mean that it is ambiguous. Bill & Dena Brown Trust, 312 Mich App at 693.
We agree with the probate court that the Trust is not ambiguous. Article Six deals with
specific distributions of property. Section “a” of Article Six indicates that upon the death of
each spouse the tangible personal property belonging to the deceased should be distributed
according to any “written statement or list” left by the deceased. However, both Section 1 and
Section 2 of the Schedule state that the distributions should occur only “[u]pon the death of the
second” spouse.1 Further, Section 3 indicates that the municipal bonds should not be distributed
until they mature, which is not anticipated to occur until approximately 2023. Accordingly, it is
clear from the plain language of the Trust that section “a” of Article Six lists specific
distributions to occur following the death of each spouse, but that the Schedule of Article Six
was intended to direct specific distributions of property only after the death of the second spouse.
1
Although the Schedule of Article Six contains the header “Specific Distributions of Trust
Property Upon the Death of the Second One of Us to Die,” the Trust states that “[t]he headings
of Articles, Sections, and Paragraphs used within this agreement are included solely for the
convenience and reference of the reader” and thus, “[t]hey shall have no significance in the
interpretation or construction of this agreement.” However, even absent this heading it is clear
that the Schedule of Article Six contains specific devises intended for distribution only after the
death of the second spouse.
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Accordingly, because Virginia is still living, the specific distributions listed in the Schedule have
not occurred and the property was not “previously distributed” under the Trust.
Article Seven specifies, “upon the death of one of us . . . the trust property not previously
distributed under this agreement shall be held and administrated in a Marital Trust for the benefit
of the surviving Trustmaker.” Thus, while JC’s tangible personal property may have been
“previously distributed” following his death under Section “a” of Article Six, and therefore did
not become part of the Marital Trust, the remaining property listed in Article Six was not
previously distributed, and therefore, poured into the Marital Trust.
Pursuant to Article Seven, Virginia has “the unlimited and unrestricted general power to
appoint,[2] by a valid last will and testament or by a valid living trust agreement, the entire
principal and any accrued and undistributed net income of the Marital Trust as it exists at the
Trustmaker’s death.” Further, Article Seven specifies that
[t]his general power of appointment specifically grants to the surviving
Trustmaker the right to appoint property to the surviving Trustmaker’s own estate.
It also specifically grants to the surviving Trustmaker the right to appoint the
property among persons, corporations, or other entities in equal or unequal
proportions, and on such terms and conditions, whether outright or in trust, as the
surviving Trustmaker may elect.
Thus, the Trust language is not ambiguous; because the property listed in the Schedule of Article
Six poured into the Marital Trust upon JC’s death, Virginia has the power to expend or exercise
her power of appointment over the property. See e.g., In re Estate of Reisman, 266 Mich App at
528-529 (no ambiguity existed where the plain language of the trust created a marital trust upon
the death of the first spouse, which in turn granted the surviving spouse a power of appointment
over the property in the marital trust).
Further, contrary to petitioners’ argument, the fact that the Trust became irrevocable3
upon JC’s death does not prohibit Virginia from expending or transferring the property listed in
the Schedule of Article Six. See Bill & Dena Brown Trust, 312 Mich App at 694-697 (holding
the surviving settlor-trustee of an irrevocable trust was permitted to transfer property that was
2
“A power of appointment is ‘a power created or reserved by a person having property subject to
his disposition which enables the donee of the power to designate, within any limits that may be
prescribed, the transferees of the property or the shares or the interests in which it shall be
received; but it does not include a power of sale, a power of attorney or a power of amendment
or revocation.’ ” In re Estate of Reisman, 266 Mich App at 527-528, quoting MCL 556.112(c).
“A general power is ‘a power exercisable in favor of the donee, his estate, his creditors or the
creditors of his estate, whether or not it is exercisable in favor of others.’ ” Id. at 528, quoting
MCL 556.112(h).
3
An irrevocable trust is “a trust over which no person holds a power of revocation.” MCL
556.112.
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intended to be distributed to named beneficiaries after the death of both settlors where the terms
of the trust provided the settlor-trustee with such power and “[t]he trustee’s exercise of these
powers that has the effect of diminishing trust assets available for distribution after the death of
the last surviving settlor is nowhere prohibited by the terms of the trust.”). The broad powers
given to the surviving spouse in Article Seven demonstrate that the Trust was drafted primarily
for JC and Virginia’s benefit during their lifetimes and that they intended to preserve their
control over their property while they were alive. While JC and Virginia listed specific
distributions in Article Six, they indicated that those distributions were not intended to remove
the property from their control during their lifetime by specifying that they should only occur
upon the death of the second spouse. This is further evidenced by the fact that the Trust
provided no guarantee that the listed beneficiaries in Article Six would receive any distribution
after the death of the last surviving spouse. In fact, the Schedule specifically acknowledged the
possibility that the property in the Schedule would not be owned by the Trust upon the death of
the second spouse. See Schedule, Article Six, Section 1 (directing the distribution of the hunting
property “provided such property is then owned by [the] Trust.”). Accordingly, the probate court
correctly limited its interpretation of the language of the Trust to the four corners of the
document, and correctly ruled that Article Six did not contain a distribution that would keep that
property from entering the Marital Trust and that Virginia has the power to invade the principle
of the Trust and alienate the property in Article Six under her general power of appointment.
Affirmed. Respondent, having prevailed in full on appeal, may tax costs. MCR
7.219(A).
/s/ Henry William Saad
/s/ Patrick M. Meter
/s/ Christopher M. Murray
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