Brown v. Brown

• Decision Date: 07 June 2006
• Docket Number: P0103-42; A120468.
• Citation: 136 P.3d 745,206 Or. App. 239
• Parties: In the Matter of the Estate of Dalton Brown, Deceased. Jennifer BROWN, Personal Representative of the Estate of Dalton Brown, Deceased, Appellant, v. Lois I. BROWN, Susan Brown, Prudence Diem, Thomas Brown, and Robin Mulkey, Respondents.
• Court: Oregon Court of Appeals

Page 745

136 P.3d 745

206 Or. App. 239

In the Matter of the Estate of Dalton Brown, Deceased Jennifer BROWN, Personal Representative of the Estate of Dalton Brown, Deceased, Appellant, v. Lois I. BROWN, Susan Brown, Prudence Diem, Thomas Brown, and Robin Mulkey, Respondents.

P0103-42; A120468.

Court of Appeals of Oregon.

Argued and Submitted December 20, 2004.

Decided June 7, 2006.

Thomas W. Sondag, Portland, argued the cause for appellant. With him on the briefs was Lane Powell Spears Lubersky LLP.

Brooks F. Cooper argued the cause for respondents. With him on the brief were Susan A. Miller and James R. Cartwright, Portland.

Before HASELTON, Presiding Judge, and BREWER, Chief Judge,^* and DEITS, Judge pro tempore.

BREWER, C.J.

This is an appeal from a judgment awarding petitioners declaratory relief in a probate case against respondent Jennifer Brown, the personal representative of decedent Dalton Brown's estate. The trial court declared that shares of stock in a closely held corporation were not assets of decedent's estate but, rather, were the property of an express trust created in a dissolution judgment for the benefit of petitioners, who are decedent's children and his former spouse, Lois Brown. The trial court ordered respondent to deliver those shares to the trust's trustee, whom petitioners would select. Respondent appeals from that judgment¹ and, on de novo review, we reverse. ORS 19.415(3).

On December 15, 1969, Lois and Dalton Brown dissolved their marriage pursuant to a divorce decree entered in Multnomah County Circuit Court. The decree stated, in part:

"THIS MATTER having come on regularly for trial on the 25th day of November, 1969, before the undersigned Judge of the above entitled Court * * *.

"[Lois Brown] was sworn and testified for and on behalf of her Amended Complaint and thereafter rested. [Decedent] was sworn, but did not offer any evidence in his behalf, and the matter was then submitted to the Court for final determination and approval of the Property Settlement Agreement between the parties, and the Court being fully advised in the premises;

"NOW, THEREFORE, IT IS HEREBY ORDERED, ADJUDGED AND DECREED that:

"* * * * * "19. The stock owned by [Lois Brown] and [decedent] or [decedent] said stock of the Marley Brown Lumber Co. be placed in trust as follows:

"A. All of the said stock shall go to the United States National Bank of Oregon as Trustee for the benefit of the children. Said stock shall remain with the said Trustee for so long as both [Lois Brown] and [decedent] are living.

"B. [Decedent] is awarded the voting rights of said stock, and in the event of a dividen[d] or earnings from the proceeds of sale of the stock, [decedent] shall be entitled thereto to the exclusion of [Lois Brown] or the minor children herein.

"C. [Decedent] shall continue to maintain, `Buy and Sell' insurance coverage so that in the event of [his] death, said Trustee will be paid the sum equal to the amount provided for in the Buy and Sell Agreement.

"D. In the event of [decedent's] death, and if [Lois Brown] is unmarried, then [Lois Brown] shall be entitled to alimony as above set forth from the principal of the trust.

"E. In the event that it becomes necessary for [Lois Brown] to require extraordinary expenses, then in that event, and if [she] is still single, said extraordinary expenses to be in addition to the alimony hereto provided for, and said extraordinary expenses to come from the principal of said trust.

"F. [Lois Brown] shall be entitled to the sum of Two Hundred Fifty ($250.00) Dollars per month commencing at age sixty, in the event that she is unmarried, and shall in addition thereto be entitled to extraordinary expenses that might be incurred.

"20. A copy of the Trust Agreement shall be made a part of this Decree, attached hereto and enforceable as a part of the Decree."

When the decree was entered, no trust agreement was attached to it. Nor was there any evidence that a separate trust agreement was ever executed. Soon after the decree was entered, decedent consulted with a representative of the United States National Bank of Oregon regarding the trust, but the bank representative informed him that the bank could not be the trustee of any such trust. Decedent did nothing further with regard to establishing the trust or designating a trustee.

The disputed shares of stock were held in Marley Brown Lumber Service Co. (MBLS), a closely held family lumber business. On December 17, 1969, two days after the decree was entered, decedent entered into a stock purchase agreement (SPA) with the other shareholders and with MBLS. The SPA provided that, upon decedent's death, the corporation would repurchase his shares. The purchase price for each share was to be its pro rata proportion of the net fair market value of the corporation's assets. The agreement further provided that the corporation would maintain life insurance on each of the shareholders and that, on the death of any shareholder, the corporation would apply the insurance proceeds toward the purchase price of the deceased shareholder's shares. Any portion of the purchase price that exceeded available life insurance proceeds was to be paid in future installments by MBLS. The agreement also permitted a shareholder to sell his shares but gave the corporation the right of first refusal with regard to any sale. Over a period of several years after the divorce decree was entered, decedent sold some of his shares back to the corporation.

Decedent died in March 2001, and, pursuant to his will, respondent (decedent's second wife, from whom he was also divorced) was appointed personal representative of decedent's estate. Among the provisions of his will, decedent included the following devise:

"7.2 I currently own shares in Marley Brown Lumber Service, an Oregon corporation, which are subject to [a] stock purchase agreement. I hereby give and devise the proceeds from the redemption or purchase of my share ownership as follows:

"7.2.1 I give the value of my share ownership as of December 31, 1969 to my four (4) children with a share by right of representation for any surviving children of a deceased child of mine. If a child of mine is not survived by children, his or her share shall pass to my remaining children in equal shares. This gift is meant to comply with the provisions of my Decree of Divorce dated December 15, 1969 and matches the intent of the parties at the time of the execution of the Decree of Divorce.

"7.2.2 I give the balance of the proceeds to [respondent] with a share by right of representation for any surviving children of [respondent] in the event she does not survive me."

In their amended petition for declaratory judgment, petitioners relied on paragraphs 19 and 20 of the divorce decree and alleged that those provisions had the following effects:

"4.

"Lois I. Brown and [decedent] had agreed and contemplated that [decedent] would thereafter contact United States National Bank of Oregon for the purpose of memorializing the terms of the trust to which they had agreed, obtaining the consent of United States National Bank of Oregon to serve as trustee, and placing the above-referenced shares of stock in trust in accordance with the terms of the Decree.

"5.

"[Decedent] subsequently contacted United States National Bank of Oregon, which then declined to serve as trustee. Thereafter, [decedent] failed to memorialize the terms of the trust to which he and Lois I. Brown had agreed, failed to obtain the consent [of] United States National Bank of Oregon or any other corporate fiduciary to serve as trustee, failed to place the above-referenced shares of stock in trust in accordance with the terms of the Decree, and failed to notify, advise, or inform Lois I. Brown that he had not taken those actions. * * *

"* * * * *

"9.

"Petitioners contend that 173 shares of stock in Marley Brown Lumber Service Co. are subject to the terms of paragraphs 19 and 20[of] the Decree; that these shares of stock should be placed in trust for the benefit of [petitioners] pursuant to paragraphs 19 and 20 of the Decree; and, that [respondent], in her capacity as personal representative, presently holds these shares of stock in constructive trust for the benefit of petitioners pursuant to paragraphs 19 and 20 of the Decree. * * *

"10.

"Respondent Marley Brown Lumber Service Co. contends that it purchased a total of 83 shares of stock from [decedent] in a series of transactions between 1989 and 2000. Petitioners contend that any attempt by [decedent] to redeem shares after November 26, 1969 was null and void and without any effect whatsoever because he was no longer the equitable or beneficial owner of the shares but instead held those shares in constructive trust for petitioners pursuant to paragraphs 19 and 20 of the Decree."

Petitioners also alleged that, in October 2000, Lois Brown discovered that decedent "had not taken the actions referenced [in the divorce decree regarding the trust.]" Petitioners further alleged that decedent refused to take the actions "required of him in accordance with the Decree." In the prayer of the amended petition, petitioners asked the court to declare that respondent held the shares of stock "in constructive trust for the benefit of [petitioners.]"

Decedent's sworn statement was taken before his death to perpetuate his testimony. In his statement, decedent testified that he understood that he retained the right to sell his shares of MBLS stock during his lifetime and that, under the decree, the children were only entitled to receive the value of the shares at the time the decree was entered. According to decedent, that value was $90,000, the same amount as the life insurance proceeds available under the SPA for the repurchase of his stock by the corporation on his death. Lois Brown, on the other hand, testified that she understood that "dividends" would be paid to decedent during his lifetime, but...