Floyd v. Floyd
| Decision Date | 13 June 2005 |
| Docket Number | No. 3997.,3997. |
| Citation | 615 S.E.2d 465 |
| Parties | Anne H. FLOYD, Respondent, v. Laurens W. FLOYD, Jr., individually and as Trustee of the Laurens Floyd Trust and the Charitable Remainder Trust of Laurens W. Floyd and Anne H. Floyd; Daniel D. Bozard as cotrustee of the Laurens Floyd Trust and the Charitable Remainder Trust of Laurens W. Floyd and Anne H. Floyd; Julia M. Floyd; and Robert H. Floyd, Individually, of whom Laurens Floyd, Jr., individually and as Trustee of the Laurens Floyd Trust and the Charitable Remainder Trust of Laurens W. Floyd and Anne H. Floyd; Daniel Bozard as cotrustee of the Laurens Floyd Trust and the Charitable Remainder Trust of Laurens W. Floyd are the, Appellants. |
| Court | South Carolina Supreme Court |
M.M. Weinberg, Jr., of Sumter, for Appellants.
Clarke W. DuBose, and Sarah P. Spruill, both of Columbia, for Respondent.
Laurens Floyd, Jr. (Laurens) appeals a trial judge's order awarding Anne Floyd (Anne) approximately $40,000 in attorney's fees and removing him as trustee of a charitable remainder trust. We affirm.1
On December 1, 1999, Laurens W. Floyd, Sr. (Floyd Sr.) executed an amended and restated trust agreement establishing several trusts, including Trust A for the benefit of his wife, Anne. Trust A is a qualified terminable interest property trust, known as a Q-Tip trust. According to the trust agreement, Floyd Sr.'s houses and lots in Pawley's Island, South Carolina and his stock in the Dillon Provision Company, Inc. (or the proceeds from the sale of such stock) were to fund Trust A. Trust A was to be administered as follows:
1. Commencing with the date of the Settlor's death, the Trustee shall pay to or for the benefit of the Settlor's wife, Anne H. Floyd, all of the net income from Trust A in convenient installments, but not less frequently than quarter-annually. Any accrued and undistributed income at the death of the Settlor's wife shall be paid to her personal representatives and administrators.
2. In addition, the Trustee may pay to or apply for the benefit of the Settlor's wife such sums from the principal of Trust A as in the Trustee's sole discretion shall be necessary or advisable from time to time for the medical care, education, support and maintenance in reasonable comfort of the Settlor's wife, taking into consideration to the extent the Trustee deems advisable any other income or resources of the Settlor's wife known to the Trustee.
The trust agreement directed the remainder interest go to Floyd Sr.'s children upon Anne's death.
Floyd Sr. was the original trustee of the trusts. Floyd Sr.'s son, Laurens, and his (Floyd Sr.'s) business associate, Bozard, were nominated to serve as co-trustees upon his death. In addition, the trust agreement provided upon the death or resignation of both Laurens and Bozard, First Citizen Bank and Trust Company of South Carolina (First Citizen's) was to serve as trustee.
Floyd Sr. created a separate charitable remainder trust, under which Anne was a lifetime income beneficiary, with the remainder interest passing to several charities. The charitable remainder trust document is not part of the record on appeal. However, it appears from the pleadings, correspondence, and trial testimony that the trust was established March 13, 1996. As the lifetime beneficiary, Anne was to receive 8% of the value of the trust each year. Although the case caption suggests otherwise, Bozard did not serve with Laurens as trustee for the charitable remainder trust. Laurens was the sole trustee.
In February 2000, Floyd Sr. died, and Laurens and Bozard began serving as trustees of Trust A. Trust A was funded with the two Pawley's Island homes and the Dillon Provision Company stock. Anne began residing in one of the Pawley's Island homes. The trust rented the other home for $400 per month.
Approximately a year after Floyd Sr.'s death, Laurens sent a letter to Anne, his stepmother, explaining the administration of Trust A. Laurens wrote:
Dear Anne:
. . . .
To facilitate the handling of the trust assets, a money market account will be opened with Edward Jones. The income from the assets, currently rent from the rental house, will be deposited into this account. On a quarterly basis, we will issue you a check of the accrued income from the QTIP Trust. Expenses incurred by the real property of the trust such as property taxes; property casulty [sic], liability, and flood insurance; upkeep and maintenance, etc., you will then be expected to pay for. Any of the above expenses which exceed the income generated by the assets of the QTIP trust are, according to the terms of the QTIP Trust, your personal responsibility.
Anne disagreed with Laurens' interpretation of the trust agreement and sought assistance from attorney Donnie Dial. Dial wrote letters to Charles Curry, the attorney for Floyd's estate, asserting the trust was responsible for expenses relating to trust property. Anne and Laurens engaged in several disagreements as to who was responsible for payment of various expenses related to the trust properties, including repairs to the roof of the rental house, replacement of the heat pump in Anne's house, payment of flood insurance and general property insurance, and payment of property taxes. Laurens took the position that the trust was not responsible for the payment of these expenses.
In October 2001, Anne brought an action in probate court against Laurens and Bozard individually and as co-trustees. Anne sought an accounting of both Trust A and the charitable remainder trust, and a declaratory judgment requiring the trustees to (1) repay any advances Anne paid on behalf of Trust A, (2) reinstate flood insurance on the properties, and (3) sell the Dillon Provision Company stock and reinvest the proceeds. In addition, Anne petitioned for the removal of Laurens and Bozard as co-trustees of Trust A and Laurens as trustee of the charitable remainder trust.
The case was removed to the circuit court. The trial judge issued an interim order, which stated:
[C]ounsel for petitioner brought to the Court's attention that the trustees are failing to pay expenses of the Trust, including but not limited to real property taxes, flood insurance, and capital improvements such as a new roof for the rental house owned by the Trust and a new heat pump for the home owned by the Trust and occupied by Mrs. Floyd.
Although he was not prepared to rule on the interpretation of the trust provisions, the trial judge indicated his concern about the preservation of the trust property. Thus, he ordered:
[T]he Trust shall pay for all costs of upkeep, repair, and protection of the Trust assets, including but not limited to the taxes, insurance, repairs, and upkeep on the two Pawley's Island houses, and that such expenses are to be paid by the trustees first out of Trust income and then, if necessary, out of Trust principal.
After the trial judge issued this order, First Citizen's filed a motion to intervene as an interested party, which was granted.2
Subsequently, Anne filed a motion for a rule to show cause based on the trustees' failure to comply with the trial judge's interim order. Anne argued the trust failed to pay for the installation of a new heat pump in the house in which she resides, as required by the interim order. The trial judge held a hearing on this motion, found Laurens in contempt of court, and ordered him to pay attorney's fees incurred by Anne in enforcing the order. In addition, the trial judge addressed Laurens' argument that the trust was not responsible for the payment of the heat pump because of the provision in the trust agreement giving the trustee the discretionary power to invade the trust principal. The trial judge determined that provision did not pertain to the expenditures for maintenance of trust property. After this order, the trial judge issued another order reflecting Laurens' and Bozard's decisions to voluntarily withdraw as trustees of Trust A.
Ultimately, the trial judge held a hearing on the merits of Anne's complaint. At the hearing, Laurens objected to the admission of several letters written by Dial on behalf of Anne and letters authored by Curry. Laurens argued all of the letters were written by out-of-court declarants and, therefore, constituted inadmissible hearsay. In addition, he maintained the letters from Curry to Laurens were protected by the attorney-client privilege and thus were not admissible. The trial judge did not rule on the admissibility of the letters, but asked the parties to submit briefs supporting their positions. After the parties submitted their briefs, the trial judge ruled the Dial letters were not admitted to show the truth of the matter asserted, but "to show that the co-trustees were placed on notice as to [Anne's] position and to show her efforts to resolve this matter without litigation." The judge noted Dial's opinions contained in the letters were cumulative because the court already had interpreted the trust as requiring the trustees to protect the trust property. Additionally, the trial judge found the letters written by Curry to Laurens were not privileged because "the advice of an attorney to the trustee is not privileged from the trust beneficiaries." Furthermore, the trial judge stated Laurens waived the privilege by producing the letters in discovery, and opened the door to admission of the letters by claiming he followed the advice of counsel.
The trial judge issued a final order finding Laurens acted in bad faith and breached his fiduciary duties to Anne by (1) failing to pay the expenses of Trust A, (2) not making timely distributions of Trust A income to Anne, (3) neglecting to provide Anne an accounting of both trusts, (4) misstating the terms of Trust A, (5) managing Trust A property solely for the...
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