Collins v. Norwest Investment Management & Trust

JUSTICE COTTER,

dissenting.

¶70 I dissent from the Court’s conclusion that there is no justification for the removal of Norwest as trustee. The Court reached this conclusion pursuant to the provisions of § 72-33-618(2), MCA. I would reach the opposite conclusion, premised upon both § 72-33-618(2), MCA, and § 72-33-406, MCA.

¶71 As the Court points out, the income beneficiaries (Appellants) and five of the six residual beneficiaries joined in the petition to remove the trustee and appoint a new trustee. The Court further notes that the sixth residual beneficiary stated that she chose to “remain neutral.” (Majority Opinion, at ¶ 14). In actuality, the sixth residual beneficiary, Leslie Barrett, indicated in a “To Who it May Concern” letter made part of the record, that she chose to remain neutral because "... I am not knowledgeable in the area of Trusts and I feel it should be left to the actual Beneficiaries as well as someone with an acute business acumen and experience to handle such issues.” Thus, while Barrett expressed an interest in remaining neutral, her letter leaves the clear indication that she would defer to the actual beneficiaries (the appellants herein) as to the propriety of removing the trustee in favor of a successor trustee.

¶72 In its findings of fact and conclusions of law, the District Court referenced, but declined to apply, § 72-33-406, MCA, which allows for modification or termination of an irrevocable trust by all beneficiaries. That statute provides:

(1) Except as provided in subsection (2), if all beneficiaries of an irrevocable trust consent, they may compel modification or termination of the trust upon petition to the court.

(2) If continuance of the trust is necessary to carry out a material purpose of the trust, the trust cannot be modified or terminated unless the court, in its discretion, determines that the reason for doing so under the circumstances outweighs the interest in accomplishing a material purpose of the trust....

Section 72-33-406, MCA. I believe sub-section (1) of this statute squarely applies here, and the District Court erred in refusing to apply it.

¶73 Section 72-33-618, MCA, which specifically addresses removal of a trustee, permits a trustee to be removed by the court on its own motion or on petition of a beneficiary. Moreover, the grounds for removal of a trustee under the statute are not statutorily limited. As § 72-33-618(2)(e), MCA, indicates, a trustee may be removed by the court for specified reasons or for “other good cause.”

¶74 The District Court stated it would not apply § 72-33-406, MCA, in part because the instant action was not an action to modify or terminate the trust, but was rather a petition to remove the trustee, which is governed by § 72-33-618, MCA. I do not agree that the two statutes are mutually exclusive. Security Bank and Trust Company of Bozeman, Montana was named in the original trust agreement as trastee. Norwest is its duly authorized successor. Thus, if the trustee is to be changed, then the trust by necessity has to be modified. Appellants’ petition therefore qualifies as both a petition to modify an irrevocable trust, pursuant to § 72-33-406, MCA, and a petition for removal of a trustee, pursuant to § 72-33-618, MCA.

¶75 Section 72-33-406(1), MCA, provides that beneficiaries, if they all agree that modification is necessary, may “compel modification” of the trust upon petition to the court. I would conclude that the virtually unanimous request of the beneficiaries (seven in favor and one abstaining but not objecting) to modify the trust should have been granted pursuant to § 72-33-406, MCA, and that this statutory basis for removal of the trustee constitutes “other good cause” under § 72-33-618(2)(e), MCA.

¶76 In deferring to the trustee as it has in its Opinion, over the express objection of the beneficiaries, I believe the majority has erroneously placed the interests of the trustee ahead of the interests of the beneficiaries. Rather than spending trust money to protect its position, the trustee should have granted the request of the beneficiaries that it resign. Such an approach would not have been a disservice to the trust. More to the point, it would have avoided the instant litigation and would have prevented the significant depletion of trust monies used to pay the trustee’s fees and expenses. I would conclude that the trustee’s adamant refusal to resign in the face of a virtually unanimous request that it do so, and its concomitant depletion of trust resources to defend its position, demonstrates that it was ultimately more interested in protecting its trustee’s fees than in serving the beneficiaries of the trust. The trustee has an obligation to administer a trust “solely in the interest of the beneficiaries.” Section 72-34-103(1), MCA. I agree with the beneficiaries that the trustee’s conduct in this matter would support a finding that the trustee has breached this duty.

¶77 For the foregoing reasons, I would reverse the District Court’s decision not to remove Norwest as trustee. I dissent from our refusal to do so.