Foster v. Foster

• Decision Date: 06 March 2020
• Docket Number: 1180648
• Citation: 304 So.3d 211
• Parties: Stephen FOSTER v. Gary D. FOSTER
• Court: Alabama Supreme Court

304 So.3d 211

Stephen FOSTER

v.Gary D. FOSTER

1180648

Supreme Court of Alabama.

March 6, 2020

H. Thomas Wells III of Starnes Davis Florie LLP, Birmingham, for appellant.

Jim Pino of Jim Pino & Associates, P. C., Pelham, for appellee.

SELLERS, Justice.

Gary D. Foster and Stephen Foster are brothers who dispute the management of the "Foster Family 1989 Trust" ("the Trust"). Gary filed a "complaint" in the Shelby Circuit Court ("the trial court"), seeking an accounting and an inventory of the Trust and, subsequently, seeking to remove Stephen as the trustee of the Trust. The trial court entered a final judgment in favor of Gary and assessed damages. Stephen appeals.¹ We affirm.

I. Facts and Procedural History

In 1989, Howard E. Foster and Dorothy A. Foster (hereinafter referred to collectively as "the Fosters") executed the Trust in the State of California. In 1996, the Fosters amended the Trust to establish themselves as the trustees and their sons Gary and Stephen as successor cotrustees. Howard died in 1997, and Dorothy became the sole trustee. Dorothy thereafter executed a "Certification of Trust," naming Stephen as first successor trustee and Gary as his successor. Dorothy died in March 2013; at the time of her death she was residing in Shelby County. Upon her death, Gary and Stephen cooperated and made joint decisions as cotrustees. However, after the brothers received an opinion from an attorney that the certification of trust named Stephen the sole trustee, Stephen began acting as sole trustee; thereafter, their relationship deteriorated.²

On November 25, 2013, Gary filed his complaint, seeking a full inventory and an accounting of the Trust.³ At that time, the assets of the Trust included a 49% interest in Calvert, and Foster Investments owned the other 51% interest in Calvert. Calvert owns a commercial building in Atlanta, Georgia (hereinafter "the Calvert property"). Stephen was the managing member of Calvert; he was the sole owner of Foster Investments.

On May 14, 2014, Gary and Stephen executed a "Memorandum Agreement," which they filed with the trial court. That agreement provided, among other things, that Stephen would keep Gary apprised on a current basis of all expenses for Calvert's operation "by providing all appropriate documentation to support such expenses as they are paid."

On May 20, 2014, the trial court issued a temporary consent order ("TCO"), providing, in relevant part:

"1. That Stephen is restrained and enjoined from making any further disbursement from any trust account, whether designated for Stephen, Gary or otherwise, for personal expenses without specific agreement in writing signed by both parties or their counsel, or by further order of this court.

"2. That the Trust shall continue to be responsible for the payment of the usual and customary expenses for the operation of the Calvert property ... without necessity of prior authorization.

"3. Stephen shall keep Gary apprised on a current basis of all such usual and customary expenses [of Calvert] as they are paid."

On September 9, 2015, following a hearing, the trial court found that Stephen had violated the TCO in several respects as it related to the Calvert property. The trial court entered an order removing Stephen as trustee; appointing Gary as trustee; ordering a forensic accounting of the Trust; and enjoining Stephen from taking any further action with respect to the Trust property, including the Trust bank accounts. Stephen and Gary entered into a joint stipulation allowing the trial court to appoint Forensic Strategic Solutions ("FSS") to conduct a forensic accounting of the financial transactions of the Trust during Stephen's tenure as trustee.

On April 28, 2016, following a hearing, the trial court entered an order finding Stephen in willful contempt of the September 9, 2015, order because Stephen had, among other things, transferred Trust funds into his personal account in violation of the order.⁴ The trial court also found it necessary to expand the forensic accounting to include an examination of Calvert's financial records. Accordingly, it ordered the parties to cooperate with FSS and its staff to provide any documentation necessary to explain any questionable transactions identified by FSS.

On November 2, 2017, Gary filed a second verified motion for contempt, alleging that Stephen had continued to violate the TCO by refusing to apprise him on an ongoing basis of Calvert's expenses and further alleging that Stephen had sold the Calvert property without his knowledge. The case proceeded to a bench trial.

On January 10, 2019, the trial court entered a final judgment that, among other things, (1) ordered Stephen to pay Gary, as trustee of the Trust, $244,080.72, together with prejudgment interest at the rate of 6% from February 18, 2014; (2) ordered Stephen to pay Gary, individually, the sum of $234,465 for Gary's 24.5% interest in Calvert, together with prejudgment interest at the rate of 6% from August 21, 2015; and (3) ordered Stephen to pay Gary, as trustee of the Trust, the sum of $75,526 for attorney fees.⁵ Stephen appealed.

II. Standards of Review

"The ore tenus rule affords a presumption of correctness to a trial court's findings of fact based on ore tenus evidence, and the judgment based on those findings will not be disturbed unless those findings are clearly erroneous and against the great weight of the evidence. Reed v. Board of Trs. for Alabama State Univ., 778 So. 2d 791, 795 (Ala. 2000). It is grounded upon the principle that when a trial court hears oral testimony it has an opportunity to evaluate the demeanor and credibility of the witnesses. Hall v. Mazzone, 486 So. 2d 408, 410 (Ala. 1986). The ore tenus rule does not cloak a trial court's conclusions of law or the application of the law to the facts with a presumption of correctness. Kennedy v. Boles Invs., Inc., 53 So. 3d 60 (Ala. 2010)."

Allsopp v. Bolding, 86 So. 3d 952, 958 (Ala. 2011). "The ore tenus standard of review extends to the trial court's assessment of damages." Edwards v. Valentine, 926 So. 2d 315, 325 (Ala. 2005). The trial court's determination as to the availability of prejudgment interest is a question of law, which appellate courts review de novo. Jernigan v. Happoldt, 978 So. 2d 764, 767 (Ala. Civ. App. 2007). The existence of subject-matter jurisdiction is a question of law, which this Court reviews de novo. Ex parte Terry, 957 So. 2d 455, 457 (Ala. 2006).

III. Discussion

A. Subject-Matter Jurisdiction

Stephen asserts that the Trust is governed by California law and that California law provides only one avenue for seeking a court-ordered accounting from a trustee.⁶ Because, Stephen says, Gary did not comply with the prerequisites of the applicable California probate statute, Stephen asserts Gary lacked "standing" to file this action from the outset, thus depriving the trial court of subject-matter jurisdiction. We disagree that California law governs the Trust in all respects and, more specifically, the administration of the Trust.

Stephen represents that the Trust "explicitly states it is governed by California law." The Trust does not state that it is "governed" by California law. Rather, it states that the Trust "is to be construed according to California law." (Emphasis added.) Issues concerning the "meaning" of trust terms and the legal effects thereof are matters of construction. See Restatement (Second) Conflicts of Law § 224, comment e (1971)(noting that "construction is a process for giving meaning to an instrument in areas where the intentions of the parties would have been followed if these intentions had been made clear"). Conversely, matters pertaining to the administration of a trust include "those matters which relate to the management of the trust. Matters of administration include those relating to the duties owed by the trustee to the beneficiaries." Id. § 271, comment a. Administrative matters relating to a trust, then, are not "construed," making it unnecessary to resolve choice-of-law conflicts for ministerial issues.

In this case, although the Trust provides that it is to be construed according to California law, it does not expressly indicate the Fosters' intent regarding which state's law should apply to matters of trust administration. The use of the term "construed" in reference to the use of California law, rather than specifically referencing the administration of the Trust, indicates that the Fosters did not intend to designate that a particular state's law governed the administration of the Trust and, more specifically, an accounting of the Trust.⁷ See, e.g., Dahl v. Dahl (Aug. 27, 2015), 2015 UT 79, 459 P.3d 276 (Utah 2015) (the trust agreement provided that the "validity, construction and effect of the provisions of this Agreement in all respects shall be governed and regulated according to and by the laws of the State of Nevada. The administration of each Trust shall be governed by the laws of the state in which the Trust is being administered"); see also In re Estate of Mullin, 169 N.H. 632, 634, 155 A.3d 555, 557 (2017) (construing a trust agreement that provided that California law governed the "validity, construction, and administration of [the] Trust, except that all matters relating to real property shall be governed by the laws of the situs of that real property"). Accordingly, jurisdiction over the Trust was proper under Ala. Code 1975, § 19-3B-202, and the trial court was not required to consult California law to determine the propriety of Gary's request for an accounting.

B. Moneys Owed the Trust

The trial court ordered Stephen to repay Gary, as trustee of the Trust, $244,080.72, together with prejudgment interest at the rate of 6% from February 18, 2014. That judgment represented the net amount of personal expenses Stephen improperly paid himself while acting as trustee of the Trust. Stephen argues that the trial court erred in ordering him to repay the $244,080.72 because, he says, the...