In re Trust Created by Haberman

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www.nebraska.gov/apps-courts-epub/
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Nebraska Court of A ppeals A dvance Sheets
24 Nebraska A ppellate R eports
IN RE TRUST CREATED BY HABERMAN
Cite as 24 Neb. Ct. App. 359
In re Trust Created by Phyllis L. H aberman.
George H aberman, appellant, v. M ary Lou
H aberman et al., appellees.
___ N.W.2d ___
Filed November 1, 2016. No. A-15-811.
1. Trusts: Equity: Appeal and Error. Absent an equity question, an
appellate court reviews trust administration matters for error appear-
ing on the record; but where an equity question is presented, appellate
review of that issue is de novo on the record.
2. Trusts. Under Neb. Rev. Stat. § 30-3855(a) (Cum. Supp. 2014), while a
trust is revocable, rights of the beneficiaries are subject to the control of
the settlor.
3. ____. The settlor of a written revocable trust may revoke or amend the
trust by substantial compliance with a method provided in the terms of
the trust.
4. ____. The amendment of a revocable trust terminating a beneficiary’s
interest in the trust property invalidates any earlier agreements that the
beneficiary may have entered into with respect to the beneficiary’s inter-
est in the trust corpus.
5. Judgments: Appeal and Error. Where the record adequately demon-
strates that the decision of the trial court is correct, although such cor-
rectness is based on a ground or reason different from that assigned by
the trial court, an appellate court will affirm.
6. Appeal and Error. An appellate court is not obligated to engage in an
analysis that is not necessary to adjudicate the case and controversy
before it.
Appeal from the County Court for Adams County: Robert
A. Ide, Judge, Retired. Affirmed.
David V. Drew, of Drew Law Firm, P.C., L.L.O., for
appellant.
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IN RE TRUST CREATED BY HABERMAN
Cite as 24 Neb. Ct. App. 359
Daniel E. Klaus, Rembolt Ludtke, L.L.P., for appellees.
Moore, Chief Judge, and Inbody and Pirtle, Judges.
Per Curiam.
INTRODUCTION
This case concerns the disposition of the property contained
in the Phyllis L. Haberman Revocable Trust following the death
of the trust’s settlor, Phyllis L. Haberman. George Haberman,
one of Phyllis’ sons, contends that he is entitled to a portion of
the trust property despite an amendment to the trust excluding
George as a beneficiary. George argues that an earlier agree-
ment between himself, the trust, and his siblings—Phillip
Haberman, Rex S. Haberman II, and Mary Lou Haberman—
should govern the current disposition of the trust corpus. Upon
our review, we affirm the county court’s decision holding that
George is not entitled to a portion of the trust property.
BACKGROUND
Phyllis created the revocable trust at issue in this case in
1996. The trust corpus consisted primarily of land interests
held by the family company, R and P Limited Partnership
(R and P), and additional property which was separately owned
by Phyllis and her spouse.
The 1996 trust agreement named as its beneficiaries Phyllis;
Phyllis’ four children—George, Phillip, Rex, and Mary Lou;
and Phyllis’ husband who predeceased her and who is not a part
of the present dispute. The trust provided that upon the death of
Phyllis and her spouse, George, Phillip, and Mary Lou would
each receive equal shares of R and P, and Rex would receive
parcels of real estate located in Kimball County, Nebraska. Any
remaining trust assets were to be equally divided among the
four siblings.
The declaration of trust document also provided that the
trust could be amended or revoked as follows:
GRANTOR specifically reserves the following rights
during [her] lifetime:
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IN RE TRUST CREATED BY HABERMAN
Cite as 24 Neb. Ct. App. 359
. . . To remove the TRUSTEE and appoint a suc­
cessor and to modify or alter this Declaration of Trust
in whole or in part by an instrument in writing signed
by GRANTOR and delivered to the TRUSTEE or to
revoke this trust agreement in whole or in part by simi-
lar ­writing . . . .
It appears that following the creation of the trust, Phyllis
initially made two different amendments to the trust. These
first two amendments do not appear in the record before us and
are not at issue in this appeal.
In 2005, following an incident in which Phyllis attempted
suicide, Mary Lou was appointed as the guardian and conser-
vator for Phyllis. Mary Lou testified that the conservatorship
was terminated in August 2007. It appears that the guardian-
ship lasted until Phyllis’ death.
On February 17, 2006, R and P was merged into a newly
created company, Roses and Wheat, L.L.C. At trial, the attor-
ney who represented Phyllis, her husband, and the family’s
business entities testified that he recommended the merger of
R and P into Roses and Wheat because the limited liability
corporation provided a better format to administer the busi-
ness. Roses and Wheat acquired all the assets previously held
by R and P. Phyllis’ trust, Phyllis’ husband’s trust, and the four
siblings were listed as Roses and Wheat’s managers.
Also on February 17, 2006, various members of the
Haberman family executed a document entitled “Agreement
Among Parties,” which George now contends governs the
disposition of the trust property. The agreement among par-
ties stated that it was made by and between Roses and Wheat,
Phyllis’ husband’s trust, the four siblings, and “the Phyllis L.
Haberman Revocable Trust, Phyllis Haberman, Trustee (by
Mary Lou Haberman).” The agreement among parties stated,
in relevant part, as follows:
WHEREAS, upon the death of Phyllis L. Haberman,
three of her children, namely Mary Lou Haberman,
George Haberman, and Phillip Haberman, are to receive
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IN RE TRUST CREATED BY HABERMAN
Cite as 24 Neb. Ct. App. 359
equal interests in ROSES AND WHEAT, L.L.C. repre-
senting approximately seventy five percent (75%) of the
value of the real estate held by [Phyllis’ trust and her
spouse’s trust]. Phyllis L. Haberman’s other child, Rex
Haberman II, upon the death of Phyllis L. Haberman,
is to receive a specific bequest of land held by [Phyllis’
trust and her spouse’s trust]. Land to be received by Rex
Haberman II represents approximately twenty-five per-
cent (25%) of the value of the real estate held by [Phyllis’
trust and her spouse’s trust].
WHEREAS, the parties to this instrument desire an
orderly distribution of the real estate upon the death of
Phyllis L. Haberman.
WHEREAS, the parties desire that upon the death of
Phyllis L. Haberman, that instead of Rex Haberman II
receiving a specific bequest of land from [Phyllis’ trust
and her spouse’s trust], that the land he is to receive
be transferred to ROSES AND WHEAT, L.L.C. dur-
ing Phyllis L. Haberman’s life and that upon Phyllis L.
Haberman’s death, Rex Haberman II receive a twenty-
five [percent] (25%) ownership interest in ROSES AND
WHEAT, L.L.C. rather than receive his specific bequest.
THEREFORE, IT IS HEREBY AGREED BY THE
PARTIES:
1. That the parcels of land specifically devised to Rex
Haberman, II under [Phyllis’ trust and her spouse’s trust]
be transferred to Roses and Wheat, LLC, during the life
of Phyllis L. Haberman.
2. That in consideration of the transfer in paragraph
(1), Rex Haberman, II shall receive a twenty-five percent
(25%) ownership interest in Roses and Wheat, L.L.C.,
upon the death of Phyllis L. Haberman. This 25% own-
ership interest is to be received in lieu of the specific
devises Rex Haberman, II was to receive under [Phyllis’
trust and her spouse’s trust].
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IN RE TRUST CREATED BY HABERMAN
Cite as 24 Neb. Ct. App. 359
3. That after the death of Phyllis L. Haberman and the
settlement of her estate, the ownership interests of Roses
and Wheat, LLC, shall be as follows:
25% Mary Lou Haberman
25% George C. Haberman
25% Phil[l]ip J. Haberman
25% Rex S. Haberman II
The agreement was signed by the four siblings individually
and by Mary Lou as “Guardian and Conservator of Phyllis.”
On October 30, 2006, Phyllis executed a third amend-
ment to her trust. By this time, the property that had been
held outside of R and P had been transferred to Roses and
Wheat such that Roses and Wheat held all of Phyllis and her
spouse’s real estate interests. The third amendment provided
that upon Phyllis’ death, Phyllis’ membership interest in Roses
and Wheat was to be distributed equally to each of her four
children so that each of them would acquire a 25-percent inter-
est in Roses and Wheat.
Starting in late 2006, there began to be increasing ten-
sion between George and his family. At the time, George had
been working for Phillip, but claimed that Phillip had not
paid him. George filed a complaint with Wyoming’s depart-
ment of labor against Phillip. During the dispute with Phillip,
George misrepresented to his family that he had received calls
from the Internal Revenue Service regarding Phillip’s business
practices. George eventually withdrew the labor complaint
against Phillip.
George also became involved in a dispute with the family’s
farm manager regarding an unreported oil spill on property
owned by Roses and Wheat. George reported Roses and Wheat
to the Nebraska Department of Environmental Quality. As a
result, the company was forced to incur the expense of paying
for an investigation, which ultimately determined that no fur-
ther action needed to be taken.
Eventually, Phillip, Rex, and Mary Lou, as managers of
Roses and Wheat, voted to exclude George from a management
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IN RE TRUST CREATED BY HABERMAN
Cite as 24 Neb. Ct. App. 359
role in the company. Following his exclusion from Roses and
Wheat’s management, George undertook a number of unilat-
eral actions to the company’s detriment, including contacting
the company’s tenants regarding their leases and selling grain
owned by the company without authorization. George also filed
with the Counsel for Discipline of the Nebraska Supreme Court
a complaint against the company’s longtime attorney. The
Counsel for Discipline found the complaint against the attor-
ney to be unfounded and took no further action. Eventually,
Mary Lou, acting as Phyllis’ guardian, was granted a temporary
restraining order preventing George from further interfering
with Roses and Wheat’s business.
The evidence at trial demonstrated that Phyllis was troubled
by the discord between her children. For example, with respect
to the dispute between George and Phillip over wages, Phyllis
wrote to George in 2007, “Please George for your sake and
my sake and our families please stop all actions that will lead
to a life of long time consequences. . . . You and Phillip may
not agree as to what happened but both need to forget and for-
give so that life can go on peacefully.” In an e-mail to all four
of her children around the same time, Phyllis wrote, “Where
did it all start, when did it start. Each one says the other is at
fault so I wonder what it must be like to be in a family where
they all get along. Heaven knows !!” Lastly, in a 2008 e-mail
from Phyllis to George, Phyllis expressed her unhappiness at
George’s reporting the oil spill and urged him to withdraw the
complaint, writing, “The philosophy . . . that this needed to be
reported could result in bankruptcy.”
In May 2010, Phyllis amended her trust for a fourth time.
The fourth amendment stated:
Upon GRANTOR’S death and after the payment of
taxes and expenses, the TRUSTEE shall manage and dis-
tribute the assets of this Trust as follows:
A. After my death, the Trustee shall distribute all of
my membership interest in Roses and Wheat, L.L.C.,
to three of my four children, PHILLIP HABERMAN,
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IN RE TRUST CREATED BY HABERMAN
Cite as 24 Neb. Ct. App. 359
REX HABERMAN II, and MARY LOU HABERMAN,
in amounts so that after the distribution of this Trust and
[my spouse’s trust], PHILLIP, REX, and MARY LOU’s
individual membership interests in Roses and Wheat,
L.L.C., are equal.
B. After my death, the Trustee shall divide the
remaining trust assets and distribute the same to three
of my four children, PHILLIP HABERMAN, REX
HABERMAN II, and MARY LOU HABERMAN, equally,
share and share alike.
C. For reasons that are personal to me, I intentionally
omit my son, GEORGE HABERMAN and his issue from
this Trust. Unless this Trust is subsequently amended by
me, neither GEORGE HABERMAN nor his issue shall
receive any distributions from this Trust.
At trial, George contested the validity of the fourth amend-
ment to the trust due to his mother’s mental state. However, the
county court determined that Phyllis was of sound mind and
was not influenced by any other parties at the time she made
the fourth amendment to the trust. On appeal, George no longer
argues that the fourth amendment is invalid.
Phyllis passed away in May 2011 and was survived by
her four children. Phillip, Rex, and Mary Lou filed a peti-
tion requesting instructions on how the trust assets should be
distributed. George answered the petition and joined in the
request for instructions, contending that the fourth amend-
ment to the trust was invalid and that under the agreement
among parties, he should receive a 25-percent interest in Roses
and Wheat.
Following a 2-day trial, the county court determined that
the trust should be distributed in accordance with the fourth
amendment and that George was not entitled to a portion of
the trust property. The court first determined that Phyllis pos-
sessed testamentary capacity and was not subject to undue
influence at the time she made the fourth amendment. The
court next found that the agreement among parties was invalid
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IN RE TRUST CREATED BY HABERMAN
Cite as 24 Neb. Ct. App. 359
because it was not signed by Phyllis personally, but, rather,
by Mary Lou as Phyllis’ guardian and conservator. The court
also concluded that Phyllis retained and exercised her right to
modify the trust and that enforcing the agreement to distribute
the trust property in a manner other than that prescribed by
the fourth amendment would be against public policy. Finally,
the county court determined that George was also barred from
recovery by the doctrine of unclean hands because he had
interfered with Roses and Wheat’s business.
George appeals.
ASSIGNMENTS OF ERROR
George argues, restated, that the county court erred in (1)
finding that the agreement among parties was not enforce-
able, (2) analyzing the agreement among parties as a trust
amendment and not a separate contract, (3) finding the agree-
ment among parties was void as against public policy, and
(4) finding George was barred from relief by the doctrine of
unclean hands.
STANDARD OF REVIEW
[1] Absent an equity question, an appellate court reviews
trust administration matters for error appearing on the record;
but where an equity question is presented, appellate review
of that issue is de novo on the record. In re Margaret Mastny
Revocable Trust, 281 Neb. 188, 794 N.W.2d 700 (2011).
ANALYSIS
George’s first three assignments of error relate to the agree-
ment among parties. George argues that the agreement among
parties constitutes a separate, enforceable contract that deter-
mines how the siblings are currently required to divide the
trust corpus following Phyllis’ death. George argues that,
pursuant to the agreement among parties, he is entitled to a
25-percent interest in Roses and Wheat. We disagree that the
agreement among parties controls and requires that George
receive a 25-percent interest in the company. Regardless of
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IN RE TRUST CREATED BY HABERMAN
Cite as 24 Neb. Ct. App. 359
any previous agreements the beneficiaries may have made,
Phyllis exercised her continued control over the trust when
she amended it to remove George as a beneficiary. The fourth
amendment, not the agreement among parties, therefore gov-
erns the disposition of the trust property, and George’s assign-
ments of error are without merit.
[2,3] Critical to our analysis is Neb. Rev. Stat. § 30-3855(a)
(Cum. Supp. 2014). Under § 30-3855(a), while a trust is revo-
cable, rights of the beneficiaries are subject to the control of
the settlor. See Manon v. Orr, 289 Neb. 484, 856 N.W.2d 106
(2014). The settlor of a written revocable trust may revoke or
amend the trust by substantial compliance with a method pro-
vided in the terms of the trust. Neb. Rev. Stat. § 30-3854(c)(1)
(Reissue 2008).
Here, Phyllis exercised her control as settlor and amended
her trust—for a fourth time—in May 2010. In compliance with
the terms of the original trust, the fourth amendment was made
in writing, was signed, and appears to have been delivered to
the trustee. Accordingly, the fourth amendment substantially
complied with the terms of the original trust and was therefore
an effective means for Phyllis to modify the trust to remove
George as a beneficiary. See § 30-3854(c)(1).
George argues that the agreement among parties constitutes
an enforceable contract separate from the trust. As an initial
matter, it is questionable whether the agreement among par-
ties would have been enforceable at the time it was created,
because the beneficiaries’ property interests were speculative
at that time. In Manon v. Orr, supra, the beneficiaries of a
revocable trust sought to impose a constructive trust on trust
assets the settlor had sold. The court characterized the plain-
tiffs as “contingent beneficiaries of the trust” who had “no
real interest in the cause of action or a legal or equitable right,
title, or interest in the subject matter of the controversy.” Id.
at 488, 856 N.W.2d at 109. The court concluded that such a
“mere expectancy” was insufficient to confer standing on the
beneficiaries. Id.
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IN RE TRUST CREATED BY HABERMAN
Cite as 24 Neb. Ct. App. 359
Similarly to the plaintiffs in Manon, the Haberman siblings
were contingent beneficiaries of Phyllis’ revocable trust at the
time of the agreement among parties. Therefore, they pos-
sessed a “mere expectancy” and had no “equitable right, title,
or interest” in the trust property which George contends they
contracted to dispose of. See id.
It does not appear that Nebraska courts have addressed
the question of whether contingent beneficiaries of a revo-
cable trust can assign their expectancy interest in the trust
corpus while the trust remains revocable. However, we need
not decide whether the agreement among parties was a valid,
enforceable contract at the time it was created, because the
fourth amendment negated any prior property interest George
may have had in the trust assets. Under § 30-3855(a), the
rights of the beneficiaries of a revocable trust are subject to the
continued control of the settlor. Phyllis exercised this control
when she undertook the fourth amendment removing George
as a beneficiary.
[4] Accordingly, regardless of the interest George held in
the trust corpus prior to 2010, the fourth amendment unam-
biguously deprived George of any right to the property in
question. Any earlier agreement George entered into with
respect to his interest in the trust corpus was invalidated by
the subsequent amendment to the trust terminating his inter-
est in the trust property. See, e.g., Sgambelluri v. Nelson, 480
F.2d 619 (9th Cir. 1973) (holding that where son purported to
assign expect­ancy interest in his father’s estate to third party,
assignment failed to mature into enforceable right when son
inherited nothing from his father’s estate).
[5] Although our reasoning differs from that of the county
court, the trial court did not err in finding that George is not
entitled to a portion of the trust corpus. Where the record
adequately demonstrates that the decision of the trial court is
correct, although such correctness is based on a ground or rea-
son different from that assigned by the trial court, an appellate
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IN RE TRUST CREATED BY HABERMAN
Cite as 24 Neb. Ct. App. 359
court will affirm. In re Estate of Lamplaugh, 270 Neb. 941,
708 N.W.2d 645 (2006).
[6] Having determined that George is not entitled to any
portion of the trust assets under the fourth amendment to
the trust, we need not address whether George would also
be barred from recovery by the doctrine of unclean hands.
An appellate court is not obligated to engage in an analysis
that is not necessary to adjudicate the case and controversy
before it. In re Interest of Hansen, 281 Neb. 693, 798 N.W.2d
398 (2011).
CONCLUSION
We conclude that Phyllis removed George as a trust benefi-
ciary when she undertook the fourth amendment to the trust.
Any prior interest George held in the trust corpus was termi-
nated at that time. Accordingly, we affirm the holding of the
county court that George is not entitled to any portion of the
trust property.
A ffirmed.