Smith v. Smith ( 2017 )

2017 UT App 40THE UTAH COURT OF APPEALS
SHARON SMITH,
Appellee and Cross-appellant,
v.
KEITH SMITH,
Appellant and Cross-appellee.
Opinion
No. 20150354-CA
Filed March 2, 2017
Third District Court, Tooele Department
The Honorable Robert W. Adkins
No. 134300466
Michael D. Black, Attorney for Appellant
and Cross-appellee
Troy L. Booher and Julie J. Nelson, Attorneys for
Appellee and Cross-appellant
JUDGE STEPHEN L. ROTH authored this Opinion, in which JUDGES
GREGORY K. ORME and JILL M. POHLMAN concurred.
ROTH, Judge:
¶1 Keith Smith appeals from a divorce decree, claiming that
the trial court misinterpreted the terms of a family trust and, as a
consequence, improperly allocated certain property between the
spouses. We affirm.
Smith v. Smith
BACKGROUND
¶2 Sharon Smith and Keith Smith married in 1979. Sharon 1
came from a farming family with sufficient assets to enable
Sharon’s mother to help the couple financially from time to time.
To protect and pass her assets on to her children, Sharon’s
mother created the Luveda Fincher Family Limited Partnership
(the Family Partnership), which included Sharon and her
siblings as limited partners. In 2002, Sharon’s mother modified
the structure of the Family Partnership to begin distributing a
portion of its assets to her children on a monthly basis. Sharon
received distributions from the partnership for some years
during the marriage and used the money for family expenses.
¶3 In 2006, the Smiths drafted a family trust document to
shelter their real and personal property. The Smith Family Trust
was comprised of two constituent trusts—the Keith L. Smith
Trust and the Sharon L. Smith Trust. All assets transferred into
the Family Trust were to be part of one spouse’s individual trust
as specified in the trust documents, or, if neither individual trust
were specifically designated, the property would be “allocated
equally between [the individual trusts].” In connection with the
creation of the trust, the Smiths executed Schedule A, which was
attached to and incorporated by reference in the main trust
document.
¶4 Schedule A is the focal point of this appeal and appears to
be the primary mechanism through which the Smiths funded the
Family Trust. Schedule A contains four subsections, each
covering a different category of property. Each subsection
includes an ownership designation. Specifically, Schedule A
1. As is our practice in cases where both parties share a last
name, we refer to the parties by their first name with no
disrespect intended by the apparent informality. Earhart v.
Earhart, 2015 UT App 308, ¶ 2 n.1, 365 P.3d 719.
20150354-CA 2 2017 UT App 40Smith v. Smith
provided that “property listed under the ownership category
KLS is the exclusive property of The Keith L. Smith Trust,
property listed as SLS is the exclusive property of The Sharon L.
Smith Trust, and property designated KLS & SLS is owned
equally by the two Trusts.” The two subsections of Schedule A
relevant to this appeal read as follows:
2. The following accounts in the following
institutions, together with all future additions,
interest or accumulations therein and also
including all new accounts and the accumulations
and the future additions, interest or accumulation
in any and all other financial institutions in which
new accounts are opened in the future:
Ownership
KLS & SLS A. Tooele Federal Credit Union
[individual account information
redacted]
....
4. All right, title and interest in and to the
following:
SLS A. All interest of Sharon L. Smith
in and to Luveda Fincher
Family Limited Partnership, an
Arizona Limited Partnership.
¶5 After her mother died in 2012, Sharon received a large
inheritance distribution from the Family Partnership by check.
Sharon deposited the check into two money market accounts in
her own name that she had opened for that purpose.
¶6 In 2013, the Smiths separated their joint accounts, and not
long after, Sharon filed for divorce. The divorce proceeded to
20150354-CA 3 2017 UT App 40Smith v. Smith
trial to resolve a number of disputed questions, most of which
are not at issue on appeal. Relevant here, Keith argued that he
was entitled to half of Sharon’s inheritance distribution or, in the
alternative, that he was entitled to alimony. The trial court
rejected Keith’s primary argument and determined that the
inheritance money from the Family Partnership was Sharon’s
separate property and that Keith was not entitled to a share. The
court’s reasoning was based on two independent decisions. First,
the court determined that the inheritance distribution was a
traditional inheritance, which is ordinarily considered separate
property under Utah law. Second, the court determined that
Sharon’s inheritance did not thereafter become joint property
under subsection 2 of Schedule A when she deposited the money
in new accounts because subsection 4 of Schedule A applied to
the inheritance check. This “mean[t] all the distributions [from
the Family Partnership] belong to [Sharon]” even if she
deposited the money into a financial account held in her name.
¶7 Although the court awarded Sharon’s inheritance to her
alone, it also determined that Keith had unmet financial needs of
$502 per month. The court therefore ordered Sharon to pay him
that amount in alimony for a term up to the length of the
marriage. Keith appeals the court’s decision that the inheritance
belonged exclusively to Sharon.
ISSUE AND STANDARD OF REVIEW
¶8 The single issue presented in this appeal is whether the
trial court properly awarded Sharon the entire inheritance
distribution from her family partnership. 2 Typically, “[t]rial
2. Sharon filed a conditional cross-appeal asking us to vacate the
trial court’s alimony award if we reversed the court’s award of
the inheritance money to Sharon alone. Because we affirm the
(continued…)
20150354-CA 4 2017 UT App 40Smith v. Smith
courts have considerable discretion in determining property
distribution in divorce cases, and will be upheld on appeal
unless a clear and prejudicial abuse of discretion is
demonstrated.” Stonehocker v. Stonehocker, 2008 UT App 11, ¶ 8,
176 P.3d 476 (ellipsis, citation, and internal quotation marks
omitted). However, Keith’s argument turns on the trial court’s
interpretation of Schedule A of the Family Trust document. “A
trial court’s interpretation of a trust instrument is a question of
law, which we review for correctness.” Hull v. Wilcock, 2012 UT
App 223, ¶ 21, 285 P.3d 815 (citation and internal quotation
marks omitted).
ANALYSIS
¶9 Keith does not appeal the trial court’s determination that
the inheritance distribution itself was Sharon’s separate
property. Rather, he challenges the trial court’s decision that the
money did not become joint property under the terms of the
Family Trust when Sharon deposited it in the money market
accounts. Thus, according to Keith, “[t]he sole issue in this
appeal is the proper division of two financial accounts . . . , both
held in [Sharon’s] name.” His arguments are based on
subsection 2 of Schedule A (the Financial Accounts Provision).
He asserts that the Financial Accounts Provision established that
Sharon and Keith were to share equally both the assets in the
bank accounts specifically listed in Schedule A, as well as any
assets in “‘all new accounts . . . in any and all other financial
institutions in which new accounts are opened in the future.’”
(Quoting the Financial Accounts Provision.) Keith argues that,
under the plain language of the Financial Accounts Provision, he
(…continued)
court, the condition of the cross-appeal is not satisfied and we do
not address it.
20150354-CA 5 2017 UT App 40Smith v. Smith
became entitled to half of the substantial inheritance distribution
once Sharon deposited it in the new accounts.
¶10 Sharon counters that the “trial court correctly concluded
that when [she] deposited her separate property into her
separate account, it did not morph into marital property”
because, among other reasons, the court’s decision was
“consistent with the plain language of the Family Trust and the
intent of the settlors.” In support of her argument, Sharon points
to subsection 4 of Schedule A (the Partnership Provision), which
assigns “[a]ll right, title and interest in and to” the Family
Partnership to Sharon alone. Thus, Sharon contends that the
Partnership Provision “assigns sole ownership of the inheritance
distribution” to her irrespective of the broad language in the
Financial Accounts Provision.
¶11 Significantly, Keith does not argue that the distribution
itself was marital property in which he is entitled to a share.
Indeed, he concedes that “Sharon could take the distribution in
cash, reinvest it, spend it, or anything else.” But he asserts that,
“once Sharon placed [the distribution] in a financial account, the
account was joint property and half of the account belonged to
Keith.” Thus, our review focuses narrowly on the question of
whether the inheritance changed in character from separate
property to joint property simply because Sharon deposited it into
a financial account. We agree with the trial court that it did not.
¶12 “We employ familiar principles of contract interpretation
when construing trust instruments.” Dahl v. Dahl, 2015 UT 79,
¶ 29. “When interpreting a [trust], a court first looks to the
[trust’s] four corners to determine the parties’ intentions, which
are controlling.” Bakowski v. Mountain States Steel, Inc., 2002 UT
62, ¶ 16, 52 P.3d 1179. When a trust is unambiguous—as both
Keith and Sharon agree is the case here—“a court determines the
parties’ intentions from the plain meaning of the [trust’s]
language.” Id.
20150354-CA 6 2017 UT App 40Smith v. Smith
¶13 Keith’s argument turns on the Financial Accounts
Provision, which provides that “all new accounts . . . in any and
all other financial institutions in which new accounts are opened
in the future” will be owned equally by Keith’s and Sharon’s
individual trusts. He relies on that language for the proposition
that, “once Sharon placed [her inheritance] in a financial
account,” the inheritance converted into joint property, and
Keith was entitled to half of it.
¶14 Keith’s argument would be stronger if the Financial
Accounts Provision stood alone. However, “we consider each
[trust] provision in relation to all of the others, with a view
toward giving effect to all and ignoring none.” JENCO LC v.
Perkins Coie LLP, 2016 UT App 140, ¶ 11, 378 P.3d 131 (ellipsis,
citation, and internal quotation marks omitted). We must
therefore also consider how the other provisions in Schedule A
apply to Sharon’s inheritance distribution—in particular the
Partnership Provision, which assigns “[a]ll right, title and
interest in and to” the Family Partnership to Sharon alone.
¶15 It is uncontested that Sharon deposited her inheritance
from the Family Partnership into two newly created financial
accounts, where the money remained at the time of the divorce.
Although we do not decide the issue, if the terms of the Financial
Accounts Provision alone control, Keith might be entitled to half
of the assets in Sharon’s accounts. If the Partnership Provision
controls, however, Sharon is entitled to the total amount of her
inheritance. Thus, there is an apparent conflict between the two
provisions that we must resolve, and our review hinges on
whether a reasonable reading of Schedule A can give effect to
both provisions. Hardinge Co. v. Eimco Corp., 266 P.2d 494, 495–96
(Utah 1954) (“[I]f effect can be given to both of two apparently
conflicting provisions in a reasonable reconciliation[,] that
interpretation will control.”); Big Cottonwood Tanner Ditch Co. v.
Salt Lake City, 740 P.2d 1357, 1360 n.3 (Utah Ct. App. 1987)
(“[W]here two seemingly conflicting contract provisions
20150354-CA 7 2017 UT App 40Smith v. Smith
reasonably can be reconciled, a court is required to do so and to
give both effect.”).
¶16 Here, another canon of construction helps us to reconcile
the apparent conflict, namely the concept that “[g]eneral terms
and provisions are restricted by specific terms and provisions
following them.” 90 C.J.S. Trusts § 208 (2016); see also CoBon
Energy, LLC v. AGTC, Inc., 2011 UT App 330, ¶ 22, 264 P.3d 219(“When interpreting contract language, specific provisions
ordinarily will be regarded as qualifying the meaning of broad
general terms in relation to a particular subject.”). “Under this
canon, the specific provision is treated as an exception to the
general rule.” Antonin Scalia & Bryan A. Garner, Reading Law:
The Interpretation of Legal Texts 183 (2012) (discussing the
“general/specific canon” of construction).
¶17 There can be no question that the Financial Accounts
Provision is general in nature. Indeed, its language is written in
the broadest possible terms, purporting to cover all monies in all
accounts created in any financial institution at any point in time
after execution of the trust. Conversely, the Partnership
Provision applies particularly and exclusively to Sharon’s
interest in the Family Partnership. And in keeping with general
drafting principles and the canons of construction mentioned
above, the broad general provision comes before—and is
therefore constrained in its breadth by—the specific provision
that follows. We therefore read the Partnership Provision as a
specific exception to the otherwise broad reach of the Financial
Accounts Provision, a reading that harmonizes and gives effect
to both provisions of Schedule A. Cf. Big Cottonwood Tanner Ditch
Co., 740 P.2d at 1360 n.3. For this reason, we agree with the trial
court’s interpretation of Schedule A—the inheritance distribution
that Sharon received from the Family Partnership was exclusively
hers under the plain language of the trust document.
¶18 Our conclusion is supported by other interpretive rules.
For instance, Keith’s argument—that “Sharon could take the
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distribution in cash, reinvest it, spend it, or anything else” so
long as she did not deposit it into a financial account—ignores
the pragmatic ramifications of reading Schedule A as broadly as
he suggests. Given the financial realities of the modern world,
we question how an individual could reasonably make use of or
even secure a substantial sum of money without utilizing a
financial account of some kind. It is simply unrealistic to expect
Sharon to store a distribution in cash under the proverbial
mattress. Likewise, it is difficult to imagine how Sharon might
have undertaken the obvious next step of reinvesting her
inheritance without using a financial account at least as an
intermediary. 3 Thus, reading Schedule A as Keith proposes
works an absurd result to Sharon’s substantial detriment by
preventing her from using the most commonly available—and
almost indispensable—financial tools in conventional ways. See
Selvig v. Blockbuster Enters., LC, 2011 UT 39, ¶ 28, 266 P.3d 691(rejecting a proposed reading of a contract because it “would
countenance [an] absurd result”).
¶19 Keith argues that the provisions of Schedule A can be
harmonized under his reading. Specifically, he asserts that the
“Partnership Provision is not rendered meaningless” by his
reading of the Financial Accounts Provision because “an interest
in a limited partnership includes a right to receive distributions,
but the actual funds once distributed are not the ‘interest’ in the
partnership.” This argument likewise fails to persuade. The
claim—that Sharon’s entitlement under the Partnership
Provision to “[a]ll interest of Sharon L. Smith in and to Luveda
Fincher Family Limited Partnership” does not also include all
3. We note that the size of the distribution check does not drive
our analysis. Rather, it is the general principle of Keith’s
interpretation and its consequences that are determinative, and
those principles apply regardless of whether the check was for
$100 or $1 million.
20150354-CA 9 2017 UT App 40Smith v. Smith
interest in the assets actually distributed—has little to
recommend it. 4 An interest is a “legal share in something; all or
part of a . . . claim to or right in property.” Interest, Black’s Law
Dictionary 934 (10th ed. 2014). And a distribution is the tangible
result of “[t]he act or process of apportioning or giving out.”
Distribution, Black’s Law Dictionary 576 (10th ed. 2014). Thus, if
Sharon’s interest in the Family Partnership is her separate
property under Schedule A as Keith concedes, an “apportionment
or giving out” of some portion of the partnership’s assets—here,
a distribution of money—must also be exclusively hers. Cf.
distributive share, Black’s Law Dictionary 577 (10th ed. 2014)
(“The share of assets . . . that a partner . . . acquires after the
partnership has been dissolved.”).
¶20 Thus, Keith’s argument draws an arbitrary line between
Sharon’s interest in the Family Partnership and her interest in
the benefits derived from it. However, this argument fails for
similar reasons that his proposed reading of Schedule A leads to
absurd results. If the Financial Accounts Provision instantly
converted distributions into joint property as soon as Sharon
tried to use the money by placing it into a financial account, then
the most obvious benefit of Sharon’s sole interest in the Family
Partnership—money distributions from its assets—becomes
essentially meaningless. Because “we look for a reading [of a
written instrument] that harmonizes the provisions and avoids
rendering any provision meaningless,” Encon Utah, LLC v. Fluor
Ames Kraemer, LLC, 2009 UT 7, ¶ 28, 210 P.3d 263, we reject
Keith’s proposed interpretation of Schedule A.
¶21 For these reasons, Sharon’s reading of Schedule A
prevails over Keith’s. Her reading achieves the major goals of
trust interpretation applicable to these circumstances—it
4. The apparent implication of Keith’s argument is that, having
been given the whole cow, Sharon can use only half the milk.
20150354-CA 10 2017 UT App 40Smith v. Smith
harmonizes all the provisions of the instrument, renders none of
them meaningless, works no absurd results, and thereby best
conforms to the intent of the parties as expressed by the plain
language of the document.
CONCLUSION
¶22 We conclude that the Partnership Provision set out in
Schedule A of the Smith Family Trust established that Sharon’s
interest in the Family Partnership, including any distribution
from the partnership, was her separate and exclusive property
and that the Financial Accounts Provision did not transform the
inheritance distribution into joint property when she deposited it
into financial accounts held in her name alone.
¶23 Affirmed.
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