In Re Trust B Of Felecia A. Graham, Frederick A. Graham, App v. Bank Of America, N.a., Resp ( 2019 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
In the Matter of the ) No. 79261-0-I
MARITAL TRUST B CREATED ) DIVISION ONE
UNDER THE LAST WILL AND )
TESTAMENT OF FELECIA A. )
GRAHAM DATED OCTOBER 26, ) PUBLISHED OPINION
1998, F/B/O FREDERICK A. )
GRAHAM.
FREDERICK A. GRAHAM, )
Appellant,
v.
BANK OFAMERICA, N.A., )
Respondent. ) FILED: December 30, 2019
LEACH, J. — Frederick A. Graham appeals a trial court order denying his
request for a declaration of his rights in a trust created by Felecia Graham’s will.
This trust creates a life interest in Frederick. On his death, the trust distributes its
net assets as Frederick appoints or provides in his will. If he does neither, the
assets are distributed to his estate. Frederick asked the court to declare that he
owns the remainder interest in the trust assets and can bind that interest without
No. 79261-0-1/2
it being separately represented. We disagree, affirm, and award the trustee
attorney fees and costs against Frederick.
FACTS
Felecia Graham died in 2001. In her will, she established a trust
benefitting her husband, Donald Graham Jr., for his life and giving a remainder
interest to her two sons, Frederick Graham and Donald Graham III. In 2012,
these three individuals signed a binding agreement1 that ended Donald Jr.’s
lifetime interest in the trust and divided it into two subtrusts, one for the benefit of
each son. This appeal concerns the subtrust (hereinafter “the trust”) for
Frederick Graham.
The trust directs the trustee to pay the trust income to Frederick annually
for the rest of his life. It also permits the trustee to make distributions from the
principal in certain circumstances:
If. in the judgment of the Trustee the aggregate income payable
. .
to any descendant, together with the other resources and income of
such beneficiary which the Trustee deems to be reasonably
available to him or to her for such purposes shall be insufficient
. . .
to provide for the proper support in his or her accustomed manner
of living the Trustee may distribute or expend for the benefit of
. . . ,
such beneficiary such portion of the principal of [the trust] as the
Trustee shall deem necessary for such purpose under the
circumstances.
1 See RCW 11.96A.220.
-2-
No. 79261-0-I I 3
The trust provides that when Frederick dies, his “share of the net assets of
the trust estate shall be distributed as he shall appoint or provide by his will or, in
the absence of such appointment or provision, to his estate.”
After Bank of America N.A. (the Bank) became the trustee, Frederick
disagreed with the amount that the Bank distributed to him annually. He received
an initial increase but asked the Bank for more.
Frederick did not agree with the new amount that the bank suggested.
The parties’ efforts to negotiate an agreement under the Trust and Estate
Dispute Resolution Act2 (TEDRA) failed. The Bank then asked the trial court for
guidance.
The trial court affirmed the Bank’s actions and agreed with it that there is
“a separate remainder interest” in the trust. Frederick appealed this decision. He
asked this court to determine as a matter of law that no separate remainder
interest exists. We affirmed but did not decide the issue of whether the trust
includes “a separate remainder interest” held by “unascertained remaindermen.”
We reasoned that the determination of a separate remainder interest was not
necessary to the trial court’s summary judgment decision.3
20h 11.96ARCW.
~ In re Marital Tr. B, No. 74201-9-I, slip op. at 9 (Wash. Ct. App. Nov. 28,
2016) (unpublished), http://www.courts.wa.gov/opinions/pdf/74201 9.pdf, review
denied, 188 Wash. 2d 1004 (2017).
-3-
No. 79261-0-1/4
Frederick then filed a second lawsuit, requesting a declaration of his rights
over the remainder interest in the trust. The trial court denied Frederick’s
request, concluding, “A separate remainder interest exists in the Trust, as held by
Judge Ramseyer. Mr. Graham may not virtually represent that interest in TEDRA
litigation or Non Judicial Binding Agreement, which could negatively impact the
remainder interest.”
Frederick appeals the trial court’s order.
STANDARD OF REVIEW
An appellate court generally reviews de novo decisions based on
declarations, affidavits, and written documents.4 So we review the trial court’s
decision to deny Frederick’s request for a declaration of rights de novo. When
we conduct a de novo review, we substitute our judgment for that of the trial
court.5
ANALYSIS
Frederick contends that he is the only party with a present and future
interest in the trust property and any interest in his future estate is incapable of
being represented under RCW 11.96A.120. Frederick claims that he effectively
~ In re Estate of Bowers, 132 Wash. App. 334, 339, 131 P.3d 916 (2006).
~ Skamania County v. Columbia River Gorge Comm’n, 144 Wash. 2d 30, 42,
26 P.3d 241 (2001).
-4-
No. 79261-0-I I 5
owns the property held by the trust because he controls the distribution of the
remainder, either as he directs or as part of his intestate estate.
“[T]he paramount duty of a court in construing and interpreting the
language of a will is to determine and implement the intent of the testator or
testatrix.”6 We determine the testatrix’s intent based on the provisions of the will
itself.7 We consider the entire will and give effect to every part.8
Felecia’s will notably states that “the income of [the trust] shall be . . . paid
quarterly, monthly or at such convenient intervals. . . as the Trustee [deems].” It
also gives the trustee the “same authority with respect to the distribution of
principal to the beneficiary.” This portion of the will gave Frederick a life interest.9
The will further states that upon Frederick’s death, his share of the net assets of
the trust estate “shall be distributed as he shall appoint or provide by his will or, in
the absence of such appointment or provision, to his estate.”
A testatrix’s gift of a life interest in property to a beneficiary and the
remainder to that beneficiary’s estate or appointees creates a separate future
6 In re Estate of Newbert, 16 Wash. App. 327, 330, 555 P.2d 1189 (1976)
(citing RCW 11.12.230; In re Estate of Griffen, 86 Wash. 2d 223, 543 P.2d 245
(1975)).
~ In re Estate of Berqau, 103 Wash. 2d 431, 435, 693 P.2d 703 (1985).
8 In re Estate of Price, 73 Wash. App. 745, 754, 871 P.2d 1079 (1994).
~ Kiosness v. Lende, 63 Wash. 2d 803, 813, 389 P.2d 280 (1964).
-5-
No. 79261-0-I I 6
interest for the unascertained remaindermen.1° When this occurs, legal title to
the remainder never vests in the beneficiary.11
Frederick claims that he effectively owns the trust property because any
remainder is to be distributed as he directs in his will. We disagree. Frederick
fails to appreciate the difference between a living person’s and a dead person’s
estate. While Frederick can decide who receives the remainder interest, he does
not own the trust property because legal title to it will never vest in him.12
Frederick’s TEDRA petition illustrates the flaw in his analysis. There, he alleges,
“The future interest in the Marital Estate is vested in Mr. Graham because the
Will gives that future interest to him at his death.” But once Frederick dies,
nothing can vest in him. Frederick cites no authority supporting the faulty
concept implicit in his position—that a dead person can acquire property. And
the trust does not give the future interest to him while alive. It allows him, while
alive, only to identify other persons to receive it.
And Frederick’s position would effectively give him the power to revoke
the trustee’s discretion over the trust property during Frederick’s life, contrary to
10 Bruce P. Flynn et al., Nonjudicial Dispute Resolution Agreements in
Trusts and Estates—The Washington Experience and a Proposed Act, 20
ACTEC NOTES 138, 140 (1994).
11 State ex rel. Beardsley v. London & Lancashire Indem. Co., 124 Conn.
416, 423, 200 A. 567 (1938) (holding where the testator gave the beneficiary a
life interest with remainder to that beneficiary’s appointees, legal title to trust
property never vested in the life beneficiary).
12 Beardsley, 124 Conn. at 423.
-6-
No. 79261-0-1/7
Felecia’s intent as reflected by the provisions of her will. His position also
conflicts with his agreement that he has no authority to terminate the trust.
Felecia’s will makes clear that she did not intend for Frederick to have an interest
in the remainder or own the trust property. Her will directs the trustee to
distribute income to Frederick for his lifetime. Only if this income, together with
other income and resources available to Frederick, is “insufficient to provide for
the proper support in his . . . accustomed manner of living” can the trustee
distribute principal to Frederick.
Frederick also asserts that even if unascertained remaindermen have an
interest in the trust property, under RCW 11.96A.120, the appointees Frederick
may designate do not have a cognizable interest in the trust property that is
capable of being represented. However, RCW 11.96A.120 does not indicate
this. RCW 11.96A.120 specifically states,
Where an interest has been given to a living person, and the same
interest, or a share in it, is to pass to distributees of the estate
. . .
of that living person that living person may virtually
. . . ,
represent . the distributees of the estate
. . but only to the . . . ,
extent that there is no conflict of interest between the
representative and the person(s) represented with regard to the
particular question or dispute.[13)
This language shows that the unascertained remaindermen have a
cognizable and separate interest in the trust property. It also states that a conflict
13 RCW 11.96A.120(7).
-7-
No. 79261-0-I I 8
of interest arises between a beneficiary, like Frederick, and unascertained
remaindermen, that prevents the living person from virtually representing the
unascertained remaindermen. For instance,
An example could involve an issue relating to principal distributions
to a life beneficiary. If the life beneficiary does not have a vested
interest in the entire trust corpus (e.g., the right to receive an
outright distribution of the entire trust corpus at a designated age),
his or her interests conflict with those of his or her successors—the
remainder beneficiaries of the trust.~14~
Because Frederick does not have a vested interest in the entire trust
property, a conflict of interest arises between Frederick and the unascertained
remaindermen if Frederick attempts to exhaust the trust’s funds. Frederick
cannot represent this interest. Also, “the interest of the unborn, incompetent, or
unknown beneficiaries may still be represented by a ‘special representative’ in a
nonjudicial procedure,” such as a guardian ad litem.15
So, contrary to Frederick’s claim, the unascertained remaindermen do
have a legally recognized interest, and a special representative may separately
represent such interest.
14 Flynn et al., 20 ACTEC NOTES at 141.
15 Flynn et al., 20 ACTEC NOTES at 141.
-8-
No. 79261-0-I /9
Attorney Fees
The Bank asks that this court award it fees and costs incurred both at the
superior court level and on appeal as authorized by RCW 11.96A.150 and RAP
18.1(a). ROW 11.96A.150 states,
[A]ny court on an appeal may, in its discretion, order costs,
including reasonable attorneys’ fees, to be awarded to any party:
(a) From any party to the proceedings; (b) from the assets of the
estate or trust involved in the proceedings; or (c) from any
nonprobate asset that is the subject of the proceedings. The court
may order the costs, including reasonable attorneys’ fees, to be
paid in such amount and in such manner as the court determines to
be equitable. In exercising its discretion under this section, the
court may consider any and all factors that it deems to be relevant
and appropriate, which factors may but need not include whether
the litigation benefits the estate or trust involved.[16]
This lawsuit does not benefit Felecia’s estate or the trust, and
Frederick does not prevail. So we award attorney fees to the Bank as
requested.
CONCLUSION
We affirm. Because Felecia gave Frederick only a life interest and
specifically gave any remainder to whomever Frederick appoints or as provided
in his will, a separate remainder interest exists. And a special representative
16 ROW 11.96A.150(1).
-9-
No. 79261-0-1/10
may represent that separate remainder interest. We award the Bank attorney
fees and costs to be paid by Frederick.
‘/
I
WE CONCUR:
-10-