in Re Larry E Hutchinson Living Trust ( 2016 )

STATE OF MICHIGAN
COURT OF APPEALS
In re ESTATE OF LARRY E. HUTCHINSON
LIVING TRUST.
THOMAS AMOR, Personal Representative of the UNPUBLISHED
ESTATE OF JOY HUTCHINSON, July 7, 2016
Appellant,
v No. 326411
Manistee Probate Court
KAREN SCHMOKE, KARLA FRENCHI, LC No. 13-000089-TV
KAROL KROUPA, KRISTEN WILHELM and
KELLY GILMAN,
Appellees.
Before: GLEICHER, P.J., and SAWYER and M. J. KELLY, JJ.
PER CURIAM.
In this dispute involving distribution of certain trust assets, Thomas Amor, personal
representative of the Estate of Joy Hutchinson, appeals by right the probate court order granting
summary disposition for Karen Schmoke, Karla Frenchi, Karol Kroupa, Kristen Wilhelm, and
Kelly Gilman. We affirm.
I. BACKGROUND
In August 1998, Larry E. Hutchinson and his wife, Joy Hutchinson, established a
revocable living trust, the Larry E. Hutchinson Living Trust (hereinafter, “Trust”). The Trust
named Larry as settlor and Joy and Larry as trustees. In the event that Larry predeceased Joy,
the Trust created the Joy E. Hutchinson Trust for the benefit of Joy during the remainder of her
life. The Trust named Appellees—Larry’s adult daughters from a prior relationship—as
retaining a remainder interest in the Trust after Joy’s death.
Larry died in June 2004. Pursuant to the terms of the Trust, Joy became the successor
trustee and the “Joy E. Hutchinson Trust” became responsible for administering and distributing
the Trust’s real estate, which consisted of the Family Farm and the Woodland Property.
Appellees discovered the Trust and Joy’s mismanagement of the Trust’s assets nearly 10 years
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later. Litigation ensued, which ultimately resulted in entry of a Stipulated Settlement Order
pertaining to the Trust’s real estate (hereinafter, “Settlement Agreement”).
Under the Settlement Agreement, the parties agreed that Joy, as trustee of the Trust, had
to sell the Family Farm “pursuant to the terms of a Purchase Agreement” and convey to
Appellees the Woodland Property. With respect to the sale of the Family Farm, the Settlement
Agreement provides:
4. Contemporaneously with the closing of the sale of the Family Farm, the
Trustee shall pay to [Appellees’] counsel . . . the sum of $30,000.00. All
remaining proceeds of the Family Farm sale, less the expenses of transferring the
Woodland Property as set forth in Paragraph 6 herein, shall be distributed to Joy
Hutchinson in her individual capacity and thus shall no longer be held in Trust.
The parties further agreed, upon the closing of the sale of the Family Farm, to execute a mutual
release of all claims and, upon the distributions required under the Settlement Agreement, to
terminate the Trust.
After Joy as trustee executed the agreed upon distributions, the probate court entered an
order administratively closing the case. Almost a year later, at which point Joy had died,
Appellant filed the instant petition to reopen the litigation in order to transfer the Family Farm’s
mineral rights, which had not been sold under the Purchase Agreement, from the Trust to Joy’s
estate.
Appellant moved for summary disposition under MCR 2.116(C)(8) and (C)(10), arguing
that, under Paragraph 4 of the Settlement Agreement, Joy’s estate was entitled to the mineral
rights of the Family Farm. Appellees answered the petition, agreeing that the matter should be
reopened for the limited purpose of distributing the mineral rights to Appellees. Appellees also
sought summary disposition in their favor under MCR 2.116(I).
At the motion hearing, the probate court rejected Appellant’s argument that the mineral
rights were a “proceed” of the sale under Paragraph 4 of the Settlement Agreement such that
those rights had been distributed to Joy individually. Instead, the court found that the Settlement
Agreement was silent regarding the ownership of the mineral rights, that the Trust retained the
mineral rights, and that the Trust controlled resolution of the dispute. Consequently, the probate
court granted summary disposition in favor of Appellees and entered an order to that effect.
II. STANDARD OF REVIEW
“This Court reviews the grant or denial of summary disposition de novo to determine if
the moving party is entitled to judgment as a matter of law.” Maiden v Rozwood, 461 Mich. 109,
118; 597 NW2d 817 (1999). The probate court did not specify under what rule it was granting
summary disposition. The court, however, did not consider evidence outside the pleadings, i.e.,
it considered the complaint, the Settlement Agreement, and the Trust document, which was
attached to Appellees’ petition. See Liggett Restaurant Group, Inc v City of Pontiac, 260 Mich
App 127, 133; 676 NW2d 633 (2003) (in a contract action, contracts attached to the pleadings
are considered part of the pleadings); MCR 2.113(F)(1) and (2) (written instruments of public
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record are part of the pleadings). Therefore, we may consider the motion under MCR
2.116(C)(8). We accept all well-pleaded factual allegations as true in a light most favorable to
the nonmoving party. Maiden, 461 Mich. at 119. If, as a matter of law, no factual development
could possibly justify recovery, then the motion should be granted. Id. Further, if after careful
review of the pleadings, it is clear that the opposing party is entitled to judgment as a matter of
law, then summary disposition is properly granted under MCR 2.116(I)(2). To the extent we
interpret the meaning of the Settlement Agreement, review is also de novo. MacInnes v
MacInnes, 260 Mich. App. 280, 283; 677 NW2d 889 (2004).
III. ANALYSIS
Appellant first claims that the probate court erred by finding that the Settlement
Agreement is “silent” with respect to the distribution of the Family Farm’s mineral rights.
According to Appellant, the Settlement Agreement awards the mineral rights to Joy’s estate.
Appellant’s argument relies primarily on Paragraph 4 of the Settlement Agreement. Specifically,
Appellant contends that the language of Paragraph 4—“proceeds of the Family Farm sale”—
grants Joy the mineral rights in her individual capacity.
Under Michigan law, principles of contract interpretation apply to our interpretation of a
settlement agreement. Id. at 283. The primary purpose in construing a settlement agreement is
discerning the parties’ intent. Dobbelaere v Auto-Owners Ins Co, 275 Mich. App. 527, 529; 740
NW2d 503 (2007). The language used, giving it its plain and ordinary meaning, is the best
indicator of that intent. Id. If the terms of the settlement agreement are unambiguous, then it
must be applied as written and judicial construction is not permitted. In re Smith Trust, 480
Mich. 19, 24; 745 NW2d 754 (2008).
The pertinent language of the Settlement Agreement states:
2. As soon as practically possible, the Trustee shall sell the real property legally
described as follows pursuant to the terms of a Purchase Agreement attached
hereto as EXHIBIT A: [the Family Farm.]
***
4. Contemporaneously with the closing of the sale of the Family Farm, the
Trustee shall pay to [Appellees’] counsel . . . the sum of $30,000.00. All
remaining proceeds of the Family Farm sale, less the expenses of transferring the
Woodland Property as set forth in Paragraph 6 herein, shall be distributed to Joy
Hutchinson in her individual capacity and thus shall no longer be held in Trust.
5. Contemporaneously with the closing of the sale of the Family Farm, the
Trustee shall convey to [Appellees] as tenants in common, free of the Trust and
free and clear of any liens or encumbrances, the real property legally described as
follows: [the Woodland Property.] [Emphasis added.]
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The relevant language of the Purchase Agreement states:
Seller [Joy Hutchinson, not individually, but as Trustee of the Joy E. Hutchinson
Trust under the Larry E. Hutchinson Living Trust] agrees to sell to Buyer, and
Buyer agrees to purchase from Seller . . . that parcel of real estate, excluding all
oil, gas, and mineral interests, commonly known as [the Family Farm] . . . .
[Emphasis added.]
The Purchase Agreement clearly provides that the buyer will compensate the Trust for
the buyer’s purchase of the Family Farm’s surface rights. In turn, the Settlement Agreement,
under Paragraph 4, grants Joy, in her individual capacity, “all remaining proceeds of the Family
Farm sale,” which pursuant to Paragraph 2 of the Settlement Agreement, is the sale of the Family
Farm pursuant to the terms of the Purchase Agreement. Reading the Settlement Agreement and
Purchase Agreement together, Joy, then, was entitled to the proceeds from the sale of the Family
Farm’s surface rights. Neither Paragraph 4 nor any other provision of the Settlement Agreement,
by its plain terms, distributes the mineral rights to Joy individually. Nor does any provision of
the Settlement Agreement award Appellees those rights. Rather, our review of the Settlement
Agreement as a whole confirms the probate court’s finding that the Settlement Agreement is
“silent” with respect to the distribution of the Family Farm’s mineral rights.
Appellant, however, contends that the term “proceeds,” as used in Paragraph 4 of the
Settlement Agreement, should be construed broadly to include the severance of mineral rights
from the Family Farm because, in Appellant’s view, this severance is a “thing of value arising”
from the sale. “Proceeds,” as Appellant points out, is defined as “Issues; income; yield, receipts;
produce; money or articles or other thing of value arising or obtained by the sale of
property . . . .” Black’s Law Dictionary (6th ed). Significantly, “proceeds,” by definition, are
derived from a “sale,” which connotes the exchange of one thing of value for another. It follows
that “proceeds,” when read in context of the Settlement Agreement as a whole, are the buyer’s
consideration—here, money—for the Family Farm’s surface rights. It is these proceeds, minus
Appellees’ attorney fee and expenses related to the conveyance of the Woodland Property, to
which Joy’s estate is entitled under the Settlement Agreement, and nothing more. Indeed,
Appellant has not explained how the mineral rights are a “thing of value arising” from the sale.
The mineral rights existed before the sale; the severance of those rights from the Family Farm’s
surface rights cannot reasonably be characterized as consideration for the property purchased,
i.e., a “proceed.” The severance of the mineral rights was incidental to the sale.
Similarly unavailing is Appellant’s claim that the Settlement Agreement, when read as a
whole, awards Joy’s estate the mineral rights. The fact that the Settlement Agreement does not
award Appellees the mineral rights and that it was intended as a global agreement intended to
capture all Trust assets, does not lead to an indelible conclusion that Joy’s estate was to receive
the mineral rights. Further, the Purchase Agreement’s reference to “her” is a reference to Joy in
her capacity as trustee of the Trust, not a reference to Joy individually as Appellant contends. In
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any case, even if the Purchase Agreement were referring to Joy individually, there was no sale of
mineral rights and, thus, Joy was not entitled to any such proceeds.1
Appellant alternatively asserts that, even if the Settlement Agreement is silent regarding
the mineral rights, the probate court erred by relying on the “superseded” Trust rather than
holding an evidentiary hearing to discern the parties’ settlement intentions. It is certainly true, as
a matter of black letter law, that when a contract is ambiguous a court may look to extrinsic
evidence of the parties’ intent. Klapp v United Ins Group Agency, Inc, 468 Mich. 459, 470; 663
NW2d 447 (2003). Appellant, however, overlooks pertinent law pertaining to the termination of
trusts. Mainly, Michigan common law recognizes that the beneficiaries of a trust may consent to
the termination of the trust, so long as continuance of the trust is not necessary to carry out a
material purpose of the Trust. See Rose v Southern Michigan Nat’l Bank, 255 Mich. 275, 282;
238 N.W. 284 (1931), overruled in part on other grounds In re Edgar Estate, 425 Mich. 364, 366;
389 NW2d 696 (1986); Hein v Hein, 214 Mich. App. 356, 359-360; 543 NW2d 19 (1995). It
follows that if a material purpose of the Trust remains, Appellees and Joy could not, as a matter
of law, terminate the Trust and its provisions may be enforced.
Under Paragraph 8 of the Settlement Agreement, the parties agreed to terminate the Trust
“[u]pon the distributions set forth herein[,]” meaning the distributions provided for in the
Settlement Agreement. As explained, the Settlement Agreement did not distribute the Family
Farm’s mineral rights. Therefore, because a portion of the Trust’s real property—the mineral
rights—remained in the Trust subject to Appellees’ remaindermen interest, a material purpose of
the Trust remains to be fulfilled. Under these circumstances, Paragraph 8 of the Settlement
Agreement terminating the Trust was ineffective. See Rose, 255 Mich. at 282; Hein, 214 Mich
App at 359-360. Consequently, because the parties’ Settlement Agreement did not terminate the
Trust, the probate court did not err by looking to the Trust for the limited purpose of distributing
the Family Farm’s mineral rights—the sole remaining material purpose of the Trust.
Affirmed.
/s/ David H. Sawyer
/s/ Michael J. Kelly
1
Appellant also asserts that Whelan v Whelan, unpublished opinion per curiam of the Court of
Appeals, issued March 25, 2014 (Docket No. 311743), is instructive, wherein this Court
construed the language, “Should either party hereafter discover the existence of any property
interest not provided in this Judgment of Divorce, said property should be divided equally . . . .”
The panel ruled that the provision was a “catch-all provision designed to govern potential
oversights or omissions from the property division.” Slip op at 4. The instant language of the
Settlement Agreement is substantially different from that in Whelan and cannot reasonably be
described as a “catch-all” provision. Whelan, therefore, does not guide our decision.
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