Sunday, March 1, 2015

In Moot We Trust

In re Trust of Virginia B. Newman, 2015 VT 14

By Andrew Delaney

Roger and Frank are brothers. Their mom, Virginia, established a trust in the mid-1980s. The trust went through various revisions, but in its final pre-litigation formulation Virginia, Frank, Roger, and Bank of America were co-trustees.

I usually try to skip the dates, but they seem important here. In January 2012, Roger petitioned for an accounting based on his concerns about unexplained disbursements from the trust principal. In July 2012, he filed a complaint for breach of trust against Frank in the probate division. In February 2013, Frank petitioned to remove Roger as co-trustee. Frank agreed to resign as co-trustee so long as Roger was removed. In March 2013, the probate division placed Virginia under a guardianship, and also issued an order that essentially removed all the trustees and appointed Trust Company of Vermont (TCV) as sole trustee. The probate division figured that given the ongoing conflict between Roger and Frank and, you know, that nobody wanted to work with them, and the detrimental effect the conflict imposed on Virginia, it made the most sense to appoint a sole neutral institutional trustee.

Roger appealed to the civil division (this is one of the very few ways in which Vermont has an “intermediate” appellate court—appeals from the probate division go the civil division before they go to the SCOV). On April 16, 2013, the probate division lifted the automatic stay, so Roger’s removal was effective immediately. Roger appealed—again to the civil division—the next day. A discovery schedule was ordered. The civil division issued two orders in May 2013, ruling that Roger’s appeal didn’t reinstate the automatic stay, but gave Roger an opportunity for a hearing on whether it should be reinstated. According to the opinion, “Roger did not take advantage of that opportunity.”

Meanwhile, the breach-of-trust case remained with the probate division. Roger got access to the trust accounts, and had an accountant do a forensic accounting report. In August 2013, Frank moved to substitute Virginia’s guardian as petitioner or to dismiss because Roger lacked standing. In November 2013, the probate division ruled that: (1) as to the accounting, Roger’s standing was moot as he already had all the info he needed to prepare the accounting; (2) as former co-trustee and remainder beneficiary, Roger lack standing to pursue the breach-of-trust claim; (3) Virginia’s guardian could pursue the breach-of-trust action; and (4) if the guardian didn’t step in within thirty days, the thing would be tossed.

Roger tried to argue that he gained standing when Virginia lost testamentary capacity, but the probate division countered that appointment of a guardian didn’t equate to a lack of testamentary capacity, and that because remainder beneficiaries had no standing in a revocable trust (just the settlor). “Hence, the probate division concluded that no duty was owed to Roger, as a remainder beneficiary, as long as Virginia was alive.”

So the ability to pursue the breach-of-trust claim fell to the guardian, and Roger had no standing. Roger appealed that to the civil division too. 

The guardian stepped in unopposed and the probate division substituted her as the plaintiff. Meanwhile, in December 2013, Frank moved for summary affirmance of the probate division’s standing decision. The civil division treated it as a motion for summary judgment, gave Frank an opportunity to supplement, and Roger an opportunity to respond.

Roger made two primary arguments in opposition, arguing that because he was removed as co-trustee: “(1) he had standing to request an accounting and pursue his breach-of-trust claims; and (2) the probate division found Virginia to be in need of a guardian, thereby making his rights as a beneficiary ‘no longer subject to [Virginia’s] control.’”

On February 20, 2014, the civil division granted Frank’s motion for summary affirmance of the probate division’s November standing order, concluding that Roger was had no current interest in the trust and therefore no standing with respect to the breach-of-trust action.

“On March 4, 2014, Roger filed a motion to alter or amend the February 20 decision,” arguing that he had standing with respect to the breach-of-trust action because Virginia died on February 13, 2014. The civil division declined to alter or amend because Roger didn’t identify any mistake. The civil division further reasoned that Roger now had standing as a beneficiary of the trust to pursue his claims against Frank as the parties so stipulated.

On appeal, Roger argues that the civil division screwed up because: “(1) the civil division had to resolve his appeal of the probate division’s decision to remove him as co-trustee before finding that he lacked standing to pursue the breach-of-trust action; (2) its decision impaired his ability as co-trustee to fulfill his duties to safeguard the trust; and (3) he was not afforded an adequate opportunity to conduct discovery.”

The SCOV sees it this way: “We need not delve too deeply into any of these claims of error because, notwithstanding Roger’s protestations to the contrary, his appeal is moot.” The SCOV notes that when Virginia died, Roger gained standing so there’s no case or controversy.

Roger counters with an argument that he could get legal fees if his co-trustee status was reinstated. The SCOV opines that this argument is unpersuasive. He was effectively removed in April 2013 (when the stay expired), and so a reversal wouldn’t actually give him retroactive co-trustee status. Plus, Roger had already sought and received attorney’s fees, and could pursue more in his action against Frank. So, yeah.

It’s moot. It’s over. The SCOV doesn’t get into anything else, and dismisses the appeal.

But based on all the appeals in the underlying case, it may not be the last we hear of this one.

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