Schlicht v. Olguin , 2014 NMCA 74 ( 2014 )

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New Mexico Compilation
Commission, Santa Fe, NM
'00'04- 10:39:33 2014.07.28
IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
Opinion Number: 2014-NMCA-074Filing Date: April 17, 2014
Docket No. 32,632
IN THE MATTER OF THE ESTATE OF
DARRELL R. SCHLICHT, deceased,
and concerning
STEPHAN E. BARLOW,
Plaintiff-Appellant,
v.
RODNEY OLGUIN, as personal representative
of the Estate of Darrell Robert Schlicht,
Defendant-Appellee.
APPEAL FROM THE DISTRICT COURT OF VALENCIA COUNTY
James Lawrence Sanchez, District Judge
Pregenzer Baysinger Wideman & Sale, P.C.
Marcy Baysinger
Albuquerque, NM
for Appellant
Law Office of Tibo J. Chavez, Jr.
Tibo J. Chavez, Jr.
Belen, NM
for Appellee
OPINION
SUTIN, Judge.
{1} In this trust litigation, we interpret a statute in the Uniform Trust Code in order to
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resolve a conflict between Plaintiff Stephen E. Barlow, who was to take under a trust, and
Defendant Rodney Olguin, who was to take under a will if the trust settlor successfully
revoked the trust with the will. The critical question is whether a will that revokes a trust
can constitute an effective revocation, given that a will is generally considered ineffective
unless and until the testator dies and the will is probated. The district court held that the trust
was effectively revoked by the will, thus permitting distribution of the settlor’s/testator’s
property to Olguin. Barlow appeals. We hold that the district court did not err.
BACKGROUND
{2} Darrell R. Schlicht (the settlor) executed the Darrell R. Schlicht Revocable Trust
Agreement on November 1, 1991. The last, amendment number four, of several
amendments to the trust executed by the settlor, reflects that as of the date of the fourth
amendment, November 3, 1998, the settlor and Mae Verlea Schlicht, his wife, were trustees
of the trust, and if the settlor and Verlea were unable to serve as successor trustees, Stephen
E. Barlow, was to serve as successor trustee. Further, based on an earlier amendment
pursuant to which Verlea was named as the intended recipient distributee of any balance
remaining in the trust, the fourth amendment stated, “[i]n the event of the death of Mae
Verlea Schlicht prior to complete distribution of her share, such trust share or the remainder
thereof, shall be distributed to Stephan E. Barlow, or to his descendants by right of
representation should she predecease me.” Barlow was Verlea’s nephew.
{3} Section 5.1 of the trust contained the following provision related to revocation of the
trust.
The [settlor] reserves the right and power at any time or times during
[the settlor’s] lifetime without the consent of any other person to amend this
Agreement in whole or in part, and to revoke or terminate this Agreement as
it affects the [settlor’s] separate and community property by a duly executed
instrument to that effect, signed by the [settlor] and delivered to the Trustee.
This revocation-related Section 5.1 came into question when Verlea died on December 17,
2010, and Darrell died a day later on December 18, 2010, leaving a Last Will and Testament
he had executed on December 16, 2010 (the will). The will stated:
That I, Darrell Robert Schlicht . . . , hereby make, publish[,] and
declare this to be my LAST WILL AND TESTAMENT, hereby revoking any
and all former Wills, Codicils[,] and Testamentary dispositions of any kind
or nature heretofore made by me at any time, and also revoking any trust
provision of the Darrell R. Schlicht Revocable Trust Agreement dated
November 1, 1991, relating to the death of Mae Verlea Schlicht and her share
in such trust agreement, which shall pass into my estate and be distributed in
accordance with the provisions of my last will and testament.
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{4} The settlor, as testator under his will, appointed Rodney Olguin as personal
representative and gave, devised, and bequeathed all of his estate to Olguin. Olguin and his
wife were the caretakers for the settlor and Verlea for a number of years.
{5} The will was admitted to informal probate on January 3, 2011, in the district court.
Olguin was appointed personal representative of the estate. On February 15, 2012, Olguin
filed a motion to be appointed successor trustee of the trust on the ground that the will
revoked the trust. Barlow opposed the motion. And Olguin replied. After a hearing on
Olguin’s motion in March 2012, the district court (Judge Richard Knowles) requested further
briefs on whether the trust was revoked by the will’s revocation clause.
{6} After a hearing in October 2012 on the supplemental briefing, the district court
(Judge James Lawrence Sanchez) granted Olguin’s motion in a November 26, 2012, order.
NMSA 1978, Section 46A-6-602(C) (2007) was central to the issue before the court. The
section states:
C. The settlor may revoke or amend a revocable trust:
(1) by substantial compliance with a method provided in the
terms of the trust; or
(2) if the terms of the trust do not provide a method or the
method provided in the terms is not expressly made exclusive, by:
(a) a later will or codicil that expressly refers to the trust or
specifically devises property that would otherwise have passed
according to the terms of the trust; or
(b) any other method manifesting clear and convincing
evidence of the settlor’s intent.
Id.{7} The court determined that (1) Section 46A-6-602(C) applied to the method of
revocation of the trust; (2) Section 5.1 of the trust set out the requirements for revocation of
the trust, but did not expressly state that those requirements were the exclusive means by
which the trust could be revoked; (3) the revocation of the trust in the will demonstrated
substantial compliance with the terms of the trust related to its revocation and manifested the
settlor’s intent to revoke the trust; and (4) Barlow’s interest in the trust as a remainder
beneficiary was based on the provisions in the trust benefitting Verlea and, consequently,
revocation of trust provisions related to the death of Verlea in the will served to revoke
Barlow’s interest as a beneficiary. The court then held that the will revoked the trust. And
the court appointed Olguin as successor trustee of the trust “for the purpose of transferring
all property from the [trust] to the Estate of Darrell R. Schlicht.” Barlow appealed the
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court’s November 26, 2012, order.
{8} On appeal, Barlow asserts the following points: (1) a trust the terms of which
require revocation by a written instrument executed during the settlor’s lifetime cannot be
revoked by the settlor’s will; and (2) if this Court enforces the revocation as stated in the
will, the revocation was incomplete and Barlow remains entitled to distribution of trust
property.
DISCUSSION
Standard of Review
{9} We agree with the parties that the facts are not in dispute and that the case involves
interpretation of the trust language and statutory construction, requiring our de novo review.
See Oldham v. Oldham, 2011-NMSC-007, ¶ 10, 149 N.M. 215, 247 P.3d 736 (“Statutory
construction is a matter of law we review de novo.” (internal quotation marks and citation
omitted)); Cable v. Wells Fargo Bank N.M., N.A., 2010-NMSC-017, ¶¶ 9-10, 148 N.M. 127,
231 P.3d 108 (stating that, where the facts are undisputed, we review “the interpretation of
trust language and the application of statutes to the trust and its terms” de novo).
I. Whether the Trust Was Revoked
{10} As his first point, Barlow argues that the will did not become effective until the
settlor’s death, and therefore, at the time the will was admitted to probate, the trust was
irrevocable. Thus, according to Barlow, the terms of the trust controlled the appointment
of the successor trustee and the distribution of trust property. Barlow argues that, as a
consequence, he must be appointed successor trustee and that he is entitled to distribution
of trust property.
{11} Barlow argues that the terms of revocation in the trust provided an exclusive,
meaning sole, method of revocation, that this exclusive method of revocation must be strictly
adhered to, and that the court had no statutory or other basis on which to hold that the will
revoked the trust. See Oldham, 2011-NMSC-007, ¶ 15 (stating that the appellate courts
“must honor legislative intent that wills and trusts be revoked in strict accordance with the
statutory methods and formalities established by the [Uniform Probate Code] and the
[Uniform Trust Code]” and that “[r]evocation of wills and trusts is governed by mandatory
statutes”); Gushwa v. Hunt, 2008-NMSC-064, ¶ 15, 145 N.M. 286, 197 P.3d 1 (stating that
the “Probate Code requires an exacting attention to form as well as intent to validate a
revocation”). Barlow faults the district court for determining that Section 5.1 of the trust did
not expressly state that its requirements were the exclusive means by which the trust could
be revoked and for failing to focus solely on whether the will substantially complied with
the exclusive method of revocation required by the trust.
{12} In addition, according to Barlow, under Section 5.1 of the trust, the trust “could only
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be revoked during [the settlor’s] lifetime by a duly executed instrument[,]” and the trust was
not revoked during his lifetime because the will did not become effective until his death,
after which time the trust was already irrevocable. In support of this argument, Barlow cites
New Mexico authority indicating that a will is not effective to revoke a trust upon the death
of the grantor-testator. See Oldham, 2011-NMSC-007, ¶¶ 21-22 (disagreeing with an
argument that a marital property judgment could act to revoke a will and trust posthumously
because the will and trust became irrevocable when the grantor/testator died). And he cites
foreign authorities for the proposition that if the grantor reserves a power to revoke his trust
only by a transaction inter vivos (while he is alive), such as by a notice to the trustee, he
cannot revoke the trust by his will. See In re Estate of Lindstrom, 191 Cal. App. 3d 375, 385
(Ct. App. 1987) (relying on the Restatement (Second) of Trusts § 330 cmt. j (1959) for the
proposition that when the settlor of a trust reserves a power to revoke the trust only in a
particular manner, the trust may be revoked only in that manner; thus, for example, a trust
provision permitting revocation by a transaction inter vivos, precludes a revocation by a
will); Merchants Nat’l Bank v. Weinold, 160 N.E.2d 174, 177 (Ill. App. Ct. 1959) (relying
on the Restatement (First) of Trusts § 330 cmt. j (1935) for the same); One Valley Bank, N.A.
v. Hunt, 516 S.E.2d 516, 520 (W.Va. 1999) (same); see also Brown v. Int’l Trust Co., 278
P.2d 581, 583 (Colo. 1954) (en banc) (relying on the proposition that where a trust provision
permits revocation or amendment “only during the lifetime of” the settlor, a revocation in
a will that takes effect after the settlor’s death does not revoke or amend the trust provisions
(internal quotation marks and citation omitted)).
{13} Olguin pits the critical importance of the settlor’s intent against Barlow’s arguments,
stating that the terms of the trust and later amendments indicate the settlor’s intent to revoke
the trust and to leave the trust assets to the heirs of his estate. Olguin points to Oldham’s
language that “[a] settlor can revoke or amend a revocable trust by complying with a method
of revocation provided in the terms of the trust.” 2011-NMSC-007, ¶ 18 (internal quotation
marks and citation omitted). And he draws on Cable in which our Supreme Court stated
that, under the Uniform Trust Code, “the phrase ‘terms of [a] trust’ is defined as ‘the
manifestation of the settlor’s intent regarding a trust’s provisions as expressed in the trust
instrument or as may be established by other evidence that would be admissible in a judicial
proceeding.’ ” 2010-NMSC-017, ¶ 12 (quoting NMSA 1978, § 46A-1-103(R) (2007) of the
Uniform Trust Code). Olguin also points to “the basic principle that in construing the
provisions of wills and trust instruments, the court must attempt to ascertain and give effect
to the [settlor’s] intent.” Cable, 2010-NMSC-017, ¶ 11 (alteration, internal quotation marks,
and citation omitted).
{14} In construing Section 46A-6-602(C)(2) and Section 5.1 of the trust, Olguin contends
that the settlor “was free to amend or revoke his trust at any time, by a duly executed
instrument signed by [him] and delivered to the trustee without consent of any other person”
and that the trust “does not expressly establish that this is the exclusive means by which the
trust could be revoked.” Thus, according to Olguin, a will that specifically mentions and
revokes the trust “substantially conforms to both the express method of revocation contained
in the trust document” and Section 46A-6-602(C)(2)(a)’s permitted method of “a later will
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. . . that expressly refers to the trust[.]”
{15} Olguin distinguishes Barlow’s New Mexico authority, showing that Oldham and
Gushwa are factually distinguishable, primarily because Oldham involved a divorce and its
effect on a will and trust, and Gushwa involved only revocation of a will and not a trust and
did not involve the Uniform Trust Code. As to Barlow’s foreign authority, Olguin shows
that Lindstrom and One Valley Bank were based on significantly different statutory law and
that Merchants National Bank and One Valley Bank did not involve a will that specifically
referred to revocation of a specific trust.
{16} We agree with Olguin and with the district court’s application of Section 46A-6-
602(C)(2) under these circumstances. The terms of the settlor’s trust provided a method to
revoke the trust’s provisions, but that method was not expressly stated to be the exclusive
method of revocation. Thus, under Subsections (C)(1) and (2), the settlor appropriately
revoked the trust by substantial compliance with a method provided in the terms of the trust,
by the later will that expressly referred to the trust, and also by specifically devising property
that otherwise would have passed according to the terms of the trust.
{17} Barlow’s authorities and argument to the contrary are not persuasive under the
circumstances of this case. The principle espoused in Barlow’s foreign authorities—that
where a trust provision dictates the exclusive means of amendment or revocation, no other
means will suffice to amend or revoke a trust—comports with Section 46A-6-602(C)(2). See
id. (stating that the subsection only applies where “the method provided in the terms [of the
trust] is not expressly made exclusive”). Thus, we need not look further than New Mexico
statutory law in considering this matter. Had the settlor’s trust expressly limited the means
of revocation or amendment to an inter vivos revocation, Barlow would likely have prevailed
in this matter under the theory that the settlor’s will did not become effective until the will
was probated. But the facts of this case do not warrant an application of that principle.
{18} Section 46A-6-602(C)(1) allows revocation by “substantial compliance with a
method provided in the terms of the trust[.]” Here, the will executed during the settlor’s
lifetime constituted substantial compliance with the terms of the trust. Those terms required
a duly executed instrument signed by the settlor and delivered to the trustee during the
settlor’s lifetime. Further, we do not read the exclusivity language in Section 46A-6-
602(C)(2) as rejecting compliance through a duly executed will signed by the settlor and
delivered to the trustee during the settlor’s lifetime. Additionally, the trust, specifically
Section 5.1, and the will manifest a clear intent on the settlor’s part that the trust was
revoked by the will and that Olguin take, under the will, the property formerly held in the
trust. We conclude that the district court resolved the matter correctly. See § 46A-1-103(R)
(“ ‘[T]erms of a trust’ means the manifestation of the settlor’s intent regarding a trust’s
provisions as expressed in the trust instrument or as may be established by other evidence
that would be admissible in a judicial proceeding[.]”).
II. Whether the Revocation Was Incomplete, Permitting Barlow to Claim Trust
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Property
{19} Barlow’s fall-back position, if we disagree with him in regard to whether the will was
effective to revoke the trust, is that the will only revoked trust provisions “relating to the
death of Mae Verlea Schlicht and her share in such trust agreement[,]” and thus, “[b]y its
own terms, the purported revocation only revoked provisions for the benefit of . . . Verlea.”
{20} In amendment number three to the trust, in Section 4.1.1, the settlor provided that the
remaining balance, if any, in the trust was to be distributed to Verlea. In amendment number
four, Section 4.1.2 was amended to read that if Verlea died before the complete distribution
of her share, that share or the remainder of it was to be distributed to Barlow, should Verlea
predecease the settlor. Barlow argues that because Verlea died before her share was
distributed, the revocation had no effect on the distribution of trust property and that the
alternative provision in the fourth amendment controls the distribution of trust property
favoring distinction to Barlow. That is, “[t]he purported revocation served only to
extinguish Verlea’s interests as a remainder beneficiary[,]” leaving intact Barlow’s
entitlement to distribution of trust property.
{21} We are unable to agree with Barlow. We hold that the district court properly
concluded that all provisions relating to any of Verlea’s remaining interests were revoked,
including in particular Barlow’s interest as a beneficiary. Barlow essentially conceded this
point in the district court, stating:
[I]f the provision in the will revokes the trust, then the property, as I see it,
passes through [the settlor’s] probate estate and to the Olguins. If the will
did not revoke the trust, then Mr. Barlow is the nominated successor trustee,
he is also the sole remainder beneficiary, so the property then would pass
through the trust to Mr. Barlow.
This view of the settlor’s intent in regard to the property upon revocation of the trust is
manifestly more reasonable than that now advanced by Barlow for reversal.
CONCLUSION
{22} We affirm the district court.
{23} IT IS SO ORDERED.
____________________________________
JONATHAN B. SUTIN, Judge
WE CONCUR:
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____________________________________
JAMES J. WECHSLER, Judge
____________________________________
LINDA M. VANZI, Judge
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