In Re Trusts A&B Created Under The Last Will And Testament Of Rube Devine A/K/A Ruben Devine

672 N.W.2d 912 (Minn. App. 2004)

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Nature of the Case

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Facts

(Sorry about the facts but they are all needed). D is the sole current beneficiary of a testamentary trust created by his now-deceased father, Ruben Divine, and U.S. Bank (P) is one of the trustees. Ruben created two trusts, Trust A and Trust B, and named as trustees First Trust Company; respondent Neil Boderman, a long-time friend; and Patricia Divine, Ruben's wife, and D's mother. In 1991, American Bank and Trust Company, which later became Firstar Bank and ultimately D, became corporate trustee. D's parents were co-owners of the Enivid Corporation, whose sole asset is a commercial building in Saint Paul, and each parent owned half of Enivid's 50 shares of stock. Ruben died in 1986, and his 25 shares of Enivid stock became assets of the trusts, with 18 shares being held by Trust A and seven shares by Trust B. The trusts also hold interests in various limited partnerships, all of which are highly illiquid and none of which has ever generated significant income. Trust A provides that appellant's mother, who died in May 2001, was entitled to all of the net income generated by Trust A. During her lifetime, the trustees also were required to distribute to D's mother such sum or sums out of the principal of the trust as the Trustees, in their sole discretion, shall deem advisable for maintenance, care and support, taking into consideration in making such payments the then size of the trust, the station of life to which she has been accustomed, and her probable future requirements. D's mother could 'require the Trustees to distribute' to her up to $10,000 per year from the principal of Trust A. The Trust A corpus was to be transferred to Trust B when D's mother died. Trust B provides that the trustees 'pay ... the net income from the trust to D's mother during her lifetime or D, or both of them.' Trust B further provides that the Trustees may pay such amounts of principal from the trust as P, in its sole discretion, shall deem necessary for the support and maintenance of D's mother and for the support and maintenance of D, taking into consideration the station of life to which they have been accustomed, the then size of the trust estate, their probable future requirements and their other assets. The discretionary provisions were to be construed liberally and applied in the mother's interest and for her benefit, and ..., in the event of any doubt or conflict of interest, the rights and interests of all others were to be placed second to be dealt with by P as subordinate and secondary to her rights and interests. P was permitted to rely upon and need not verify the statements of D's mother as to her other assets, and its judgment as to the amount and advisability of such discretionary payments shall be final and conclusive upon all persons. P was to be released and discharged from all further liability or accountability therefor. D's mother received $5,000 per month from Trust A, an amount slightly greater than the trust's net income, and all of the net income from Trust B. P and D's mother met 'several' times in 1991 to discuss the trust assets and to determine whether they would ever provide significant income to the trusts. The trustees decided to continue monthly distributions of $5,000 from Trust A in addition to the annual $10,000 distribution that she could demand. From 1990 through 1996, D's mother also received distributions from Trust B in excess of $80,000. Because of U.S. Bank's concerns about rapid depletion of the assets of Trust A, the trustees decided in 1997 to distribute to appellant's mother a total of $5,000 per month from the two trusts' income and principal. No distributions were made to D in 1991 because of concerns about D's stability, and his ability to manage money. D began treatment for depression in 1991 and that he had not supported himself since then. D has remained unemployed since 1991. D's mother used funds she received from both trusts to support D and his family until her death. In 2000, D met with P and requested a distribution of $50,000 from the trusts to finance an 'air taxi business.' D's mother instructed P to discontinue her monthly distributions and to distribute the money to D. D got the money, but he failed to start the air-taxi business. D's mother had been diagnosed with cancer, and, as part of her estate planning, she had created her own testamentary trust to hold her 25 Enivid shares. The trust benefited of D's children, and Ds mother named as co-trustees her attorney and her former daughter-in-law, Dianna Lynn Divine, who is D's former spouse. The mother expressed concern that 'leaving D and Dianna (as trustee) as 50/50 partners in Enivid created a risk of conflict ... which could have an adverse impact on her grandchildren.' P approved the distribution of two shares of Enivid from Trust A to D's mother. U.S. Bank valued Enivid at $6,000 per share. P based this decision on the mother's right to demand distribution from the principal of Trust A. Also under will P was to apply the trust distribution provisions for' the benefit of the mother. P also exercised its own judgment that D had not shown that he would be capable of appropriately controlling the family corporation. P moved the district court for an order approving an accounting for Trust A and Trust B for the period from March 1, 1996, through February 28, 2001. D objected, contending that the trustees failed to prudently invest the trusts' assets, improperly made distributions to his mother instead of to him, and improperly distributed the two shares of Enivid to her. P moved for summary judgment. D submitted the affidavit of a trust expert, which stated that P had breached their fiduciary duty to D by distributing the two Enivid shares from Trust A to D's mother because the distribution created 'a situation where the Trusts had a minority interest in what had been a family-owned business,' and a 'prudent trustee would not have permitted a transfer of trust assets that he knew was intended to be a transfer to a non-beneficiary.' The court ruled for P and D appealed.