Brian a Trupp v. Deborah Naughton ( 2015 )

STATE OF MICHIGAN
COURT OF APPEALS
BRIAN A. TRUPP, UNPUBLISHED
May 26, 2015
Petitioner-Appellee,
v No. 320843
Roscommon Probate Court
DEBORAH NAUGHTON and DONNA LC No. 11-054135-TV
DUNCAN,
Respondents-Appellants.
Before: GLEICHER, P.J., and K. F. KELLY and SERVITTO, JJ.
PER CURIAM.
Respondents, Deborah Naughton and Donna Duncan, appeal by leave granted1 an order
of the probate court that terminated the Elaine Radlick-Trupp Revocable Living Trust Agreement
as Amended and Restated (the trust), at the request of petitioner, Brian Trupp. Finding no errors
warranting reversal, we affirm.
I. BASIC FACTS
Paul and Elaine Trupp had five children. In the late 1990’s, they set up an estate plan,
including the trust document at issue in this case. Only three of the children – Brian, Donna, and
Deborah—were beneficiaries of the trust. At the time of her death, the trust contained two real
properties. One was a lakefront vacation home on Higgins Lake, known as Triangle Drive, and
the second was Elaine’s residence in New Baltimore, referred to as Blakely Street. Elaine died
on December 13, 2008.
The three parties continued to use Triangle Drive for the first two years after Elaine's
death without regard to the schedule mandated by the trust. Brian initially paid the taxes,
insurance, and utilities on Triangle Drive without contribution from Deborah or Donna. In April
of 2011, Brian was unable to resolve his dispute with his sisters regarding payment of
expenditures for Triangle Drive. He removed his personal property from the house and had not
1
Brian A Trupp v Deborah Naughton, unpublished order of the Court of Appeals, entered
August 4, 2014 (Docket No. 320843).
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returned since May 2011. Both Deborah and Donna continued to use the property with Deborah
paying all of the bills.
Brian had taken possession of the Blakely Street home immediately following Elaine’s
death, but disregarded the mandate of the trust to obtain an appraisal of the property and
distribute cash equal to the fair market value of the property to Donna. Brian used the property
exclusively until June 19, 2010, when it was sold for $160,000. No payment was made to Donna
after the sale.
Brian requested the probate court supervise the trust, stating that the other beneficiaries
had not paid their respective trust obligations for the expenses of the cottage and had locked him
out of the property. Brian requested that the court terminate the trust, sell the cottage, and
reimburse Brian for expenses he had paid that were obligations of respondents.
At the conclusion of the trial, the probate court found that the parties were required to
evenly divide the expenses of Triangle Drive, with Brian and Deborah each receiving credit for
the amounts they expended. The court granted petitioner’s request to terminate the trust, and to
allow Triangle Drive to be sold under Article IV, Section 4 B of the trust. As to Blakely Street,
the probate court found that the only question was the amount of cash petitioner was required to
pay Donna under the terms of the trust, i.e., whether the mortgage amount should be subtracted
from the cash value of the property that petitioner was obligated to pay her. The probate court
found that there was a latent ambiguity in the term “fair market value” as used in the trust, and
that parole evidence could be used to resolve the ambiguity. The court relied on the testimony of
the attorney who drafted the trust, Paul T. Garvey, who testified that it was Elaine’s intention
that the value of the property be determined by looking at the net value after deducting the
mortgage balance. The parties were willing to accept the sales amount of $160,000 as
establishing the value of the property in lieu of an appraisal, so the trial court ordered that Brian
pay Donna the $64,222.00 net value of the Blakely Street property. The probate court denied
respondents’ motions for new trial and reconsideration. Deborah and Donna now appeal as of
right.
II. STANDARDS OF REVIEW
“[T]his Court reviews de novo the language used in wills and trusts as a question of law.”
In re Reisman Estate, 266 Mich App 522, 526; 702 NW2d 658 (2005). Where a probate court
sits without a jury, its findings are reviewed for clear error. In re Bennett Estate, 255 Mich App
545, 549; 662 NW2d 772 (2003). “A finding is clearly erroneous when a reviewing court is left
with a definite and firm conviction that a mistake has been made, even if there is evidence to
support the finding.” Id. The probate court’s ultimate dispositional rulings are reviewed for an
abuse of discretion. In re Temple Marital Trust, 278 Mich App 122, 128; 748 NW2d 265
(2008). The trial court abuses its discretion when it chooses an outcome outside the range of
reasonable and principled outcomes. Id.III. TERMINATION OF THE TRUST
On appeal, Deborah and Donna argue that the trial court erred in terminating the trust
because the terms of the trust provided no basis on which the trust could be terminated. They
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claim that discontinuation of the trust was not justified where the probate court could have
instead imposed rules by which the trust would operate. We disagree.
The trust provided that the beneficiaries were to make a schedule each year for use of the
cottage, and determine an appropriate method of allocating the expenses of maintaining the
cottage. It further provided that the cottage could be sold and the trust terminated under
particular conditions, including when the trustees determine that discontinuing the trust was
justified or determine that it was not economically sound to continue. The trust also provided
that the trustee could terminate the trust should termination be in the best interests of the
beneficiaries because of unforeseen circumstances. The probate court concluded that the actions
of the parties indicated that they had determined that terminating the trust was justified. Deborah
and Donna argue that, in so doing, the probate court fabricated a trust provision in terminating
the trust. However, the probate court stated that the trust was terminated under the termination
provision of the trust that stated termination could occur “[w]hen the trustees . . . determine that
discontinuation of the trust is justified.” While only one of the co-trustees explicitly sought
termination of the trust, the trustees did not attempt to fulfill the requirements of the trust.
The undisputed facts reveal the co-trustees knew the provisions of the trust because they
were present as the trust was amended, and made no attempt to implement the provisions of the
trust after Elaine’s death. The beneficiaries continued to use the cottage in total disregard of the
requirements of the trust to form a schedule and rules for cottage use. Brian became frustrated
with his sisters’ failure to pay their share of cottage expenditures to the extent that he removed
his personal property from the cottage and has removed himself from any use of or participation
in maintaining the cottage, while Deborah and Donna continued to use the cottage and pay for its
maintenance. Although Deborah and Donna note that they attempted to establish rules with an
operating agreement, an attempt for all the beneficiaries to meet to discuss operation of the trust
with the attorney who drafted the trust failed to produce any progress. The trust provisions
provided for termination of the trust in circumstances such as the one before us. MCL
700.7410(1) provides that a trust may be terminated when the purposes of the trust have become
impossible to achieve. Here, where the purpose of the trust was to allow the parties to share in
the use of the cottage, the probate court reasonably found that the purpose could not be met
where none of the parties could follow the terms of the trust. The trial court did not abuse its
discretion in granting petitioner’s motion to terminate the trust. 2
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Deborah and Donna suggest that the trust should not have been terminated because there was
another asset that would potentially flow into the trust from Elaine’s estate. However, it appears
that there was no equity in that asset and accordingly, no error in the trial court’s determination
that it would not have affected its decision. They also suggest that the trial court erred by not
ordering that Deborah’s share be held in trust and paid in installments. However, Article X, §
10.1 of the trust provided that trust assets should be distributed to the beneficiaries if the trust
were terminated. Moreover, we limited the issues that could be raised on appeal to those raised
in respondents’ delayed application for leave to appeal, see Brian A Trupp v Deborah Naughton,
unpublished order of the Court of Appeals, entered September 26, 2014 (Docket No. 320843),
and this issue was not previously raised.
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IV. PAROL EVIDENCE
Donna next argues that the probate court erred in calculating the amount due her as a
result of the sale of the Blakely Street home. The trust called for Donna to receive the fair
market value of the home based on an appraisal. Donna argues that the probate court should not
have considered extrinsic evidence to determine the meaning of the unambiguous term “fair
market value.” We disagree.
When considering a dispute concerning the meaning of a trust, a court’s sole objective is
to determine and carry out the intent of the settlor. In re Nowels Estate, 128 Mich App 174, 177;
339 NW2d 861 (1983); In re Maloney Trust, 423 Mich 632, 639; 377 NW2d 791 (1985). The
settlor’s intent is ascertained from the trust document itself, unless there is ambiguity. In re
Kostin, 278 Mich App 47, 53; 748 NW2d 583 (2008), citing In re Maloney Trust, 423 Mich at
639. A court may not construe clear and unambiguous language in such a way as to rewrite it.
In re Reisman Estate, 266 Mich App at 527.
Here, Article 2, § 2 the trust provided, in relevant part:
1. In the event that the Settlor, at the time of her death, owns a personal
residence . . . , other than the Cottage property described below, such residential
real estate shall be distributed, outright and free of trust, to the Settlor’s son,
BRIAN TRUPP, should he survive the Settlor. BRIAN TRUPP shall assume, pay
and hold the Trust harmless from all encumbrances on the property. . . .
2. In the event that the Residential Real Estate described in Paragraph 1
above is distributed to BRIAN TRUPP, an amount of cash equal to the fair market
value of such Residential Real Estate shall be distributed, outright and free of
trust, to the Settlor’s daughter, DONNA DUNCAN, should she survive the
Settlor. In this regard, the Trustee shall obtain an appraisal of the Residential
Real Estate . . . and such appraisal shall be conclusive as to value. . . .
Brian failed to abide by the trust provisions to appraise the home and distribute the fair market
value of the home to Duncan. He eventually sold the home for $160,000, which the parties
accepted as the value of the home. At the time of the sale, the home was encumbered by a
$95,778 mortgage. The probate court found a latent ambiguity as to “fair market value” and
relied on the testimony of the attorney who wrote the trust, Paul Garvey, to determine that the
fair market value included a deduction of the mortgage balance. Consequently, the trial court
ordered petitioner to pay Duncan $160,000 minus the $95,778 mortgage balance on the home
when it was sold for a total of $64,222.
Where an ambiguity exists, the court must look outside the document in order to carry out
the settlor’s intent, and may consider the circumstances surrounding the creation of the document
and the general rules of construction. In re Kostin, 278 Mich App at 53, citing In re Butterfield
Estate, 405 Mich 702, 711; 275 NW2d 262 (1979). “A patent ambiguity exists if an uncertainty
concerning the meaning appears on the face of the instrument and arises from the use of
defective, obscure, or insensible language.” In re Estate of Reisman, 266 Mich App at 527 n 5,
quoting In re Woodworth Trust, 196 Mich App 326, 327-328; 492 NW2d 818 (1992). In
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contrast, “[a] latent ambiguity exists where the language and its meaning is clear, but some
extrinsic fact creates the possibility of more than one meaning.” Id. A latent ambiguity “does
not readily appear in the language of a document, but instead arises from a collateral matter
when the document’s terms are applied or executed.” City of Grosse Pointe Park v Michigan
Municipal Liability and Property Pool, 473 Mich 188, 198; 702 NW2d 106 (2005). “[N]ot only
may extrinsic evidence be used to clarify the meaning of a latent ambiguity, but it may be used to
demonstrate that an ambiguity exists in the first place and to establish intent.” In re Kremlick
Estate, 417 Mich 237, 241; 331 NW2d 228 (1983).
Garvey, who had been performing Elaine’s estate planning since 1999, testified that
Elaine wanted to treat Brian and Donna equally as a reward for their care and attention. Elaine’s
intent was that Brian and Donna would inherit the same net value, explaining that Brian would
receive the residence and Donna the equivalent cash value that petitioner received. Garvey
recalled explicitly discussing the issue with Elaine and that Donna should have received the
value of the residence minus the amount of the mortgage. Garvey admitted that he could have
more carefully drafted her plan but that the provisions of the trust together demonstrate that he
meant net value. It was Elaine’s intent that Brian receive the house and pay the mortgage, and
that Donna receive cash equal to the value of the residence deducting the cost of the mortgage.
Elaine’s intent to provide the same amount to Duncan and petitioner could only be accomplished
if the trust term “fair market value” was deemed to mean net proceeds of the sale of the home.
The probate court did not err in considering Garvey’s deposition to determine the trust’s meaning
of “fair market value.”
V. JUDICIAL DISQUALIFICATION
Finally, Deborah and Donna argue that the trial judge erred in setting aside his order to
disqualify himself. We disagree.
“We review a trial court’s factual findings regarding a motion for disqualification for an
abuse of discretion and its application of the facts to the law de novo.” In re MKK, 286 Mich
App 546, 564; 781 NW2d 132 (2009). “An abuse of discretion occurs when the trial court’s
decision is outside the range of reasonable and principled outcomes.” Id. (internal quotation
marks omitted).
At a hearing on Brian’s motion to enter the judgment, the probate judge announced that
he had a conflict because Deborah and Donna’s counsel had been hired as the county probate
court administrator and was continuing as their counsel. The judge stated he could not preside
over the case even though he had already issued an opinion and recused himself from the case.
At a hearing on respondents’ motion for reconsideration, the judge explained that trial
counsel had been replaced, eliminating the conflict, so that the judge could now enter the
judgment. The State Court Administrative Office had reassigned him to the case after the
potential conflict was resolved when trial counsel was replaced.
A trial judge is presumed to be impartial and the party who asserts partiality has a heavy
burden of overcoming that presumption. Cain v Dep’t of Corrections, 451 Mich 470, 497; 548
NW2d 210 (1996). Grounds for disqualification are provided in MCR 2.003(C), which provides:
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(1) Disqualification of a judge is warranted for reasons that include, but
are not limited to, the following:
(a) The judge is biased or prejudiced for or against a party or attorney.
(b) The judge, based on objective and reasonable perceptions, has either
(i) a serious risk of actual bias impacting the due process rights of a party as
enunciated in Caperton v Massey, 556 US 868; 129 S Ct 2252; 173 L Ed 2d 1208(2009), or (ii) has failed to adhere to the appearance of impropriety standard set
forth in Canon 2 of the Michigan Code of Judicial Conduct.
Respondents do not argue that the judge was biased or prejudiced against them. Instead, they
argue that the judge left an appearance of impropriety by deciding issues that a probate court
employee had argued.
The test for determining whether there is an appearance of impropriety is “whether the
conduct would create in reasonable minds a perception that the judge’s ability to carry out
judicial responsibilities with integrity, impartiality and competence is impaired.” People v
Aceval, 486 Mich 887, 888-889; 781 NW2d 779 (2010), quoting Caperton, 129 S Ct at 2255.
Here, it was not reasonable to conclude that the judge’s judgment would be impaired because
Deborah and Donna’s former attorney now worked for the court. The judge had already issued
his opinion prior to the probate court employment of their trial counsel and did not rule in the
attorney’s favor. The ultimate judgment and denial of a motion for reconsideration and a new
trial were consistent with this original opinion. Accordingly, the judge did not err in reinstating
himself after recusal.
Affirmed.
/s/ Elizabeth L. Gleicher
/s/ Kirsten Frank Kelly
/s/ Deborah A. Servitto
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