Hein v. Hein, Docket No. 162284

• Decision Date: 21 November 1995
• Docket Number: Docket No. 162284
• Citation: 214 Mich.App. 356,543 N.W.2d 19
• Parties: Edmund HEIN, Petitioner-Appellee, v. Herbert HEIN, Trustee, Respondent-Appellant.
• Court: Court of Appeal of Michigan — District of US

Page 19

543 N.W.2d 19

214 Mich.App. 356

Edmund HEIN, Petitioner-Appellee, v. Herbert HEIN, Trustee, Respondent-Appellant.

Docket No. 162284.

Court of Appeals of Michigan.

Submitted Aug. 8, 1995, at Lansing.

Decided Nov. 21, 1995, at 9:10 a.m.

Released for Publication Feb. 7, 1996.

Maddin, Hauser, Wartell, Roth, Heller & Pesses, P.C. by Richard J. Maddin and Paul P. Asker, Southfield, for the petitioner.

Cline, Cline & Griffin by Timothy H. Knecht and John H. Cline, Flint, for the respondent.

Before MARILYN J. KELLY, P.J., and CORRIGAN and STEPHENS, ^* JJ.

CORRIGAN, Judge.

Respondent Herbert Hein, trustee, appeals as of right an order denying his petition to set aside a judgment terminating the trust of which he was trustee and a residual beneficiary. We affirm.

The trust in question was an irrevocable spendthrift trust. The settlors and lifetime beneficiaries were Edmund and Else Hein, and the residual beneficiaries were their children. Respondent, the settlors' son, was both the trustee and a residual beneficiary of the trust. All the concerned parties are living, and none are incapacitated.

Edmund Hein petitioned to terminate the trust, delete specific property from the trust, remove the trustee, or compel the trustee to pay restitution to the trust and settlors. The petition alleges that respondent did not fulfill his duties as trustee, specifically, that he misused a power of attorney, exerted undue influence over petitioner, commingled funds, misappropriated trust funds, took unreasonable compensation, and failed to make regular accountings.

The parties, working with a mediator, drafted a settlement agreement that they later presented to the court. The settlement agreement proposed to terminate the trust in exchange for dismissing all issues raised in the lawsuit except the failure to account. At the hearing on the settlement agreement, respondent's attorney was present, but respondent was not. Respondent's attorney informed the probate court that he had the authority to bind respondent. Respondent's counsel also stated that respondent wanted to be released from all his duties as trustee, including his accounting duties, in exchange for terminating the trust. However, counsel conceded that the probate court could not abdicate its jurisdiction over accountings, and thus consented to the settlement agreement. Accordingly, the probate court entered a consent judgment on the record that reflected the parties' settlement agreement.

Respondent contends that the probate court erred in terminating the irrevocable spendthrift trust. He asserts that all interested parties did not agree to terminate the trust because he did not consent to its termination. A review of the record indicates that respondent consented to the termination of the trust in his capacity as beneficiary. Respondent's objections, if any, were made in his capacity as trustee. Respondent's attorney stated that his client conditioned his consent to the settlement agreement on a complete resolution of the lawsuit. He objected because the settlement agreement required respondent to render accountings. The duty to account is a duty imposed on trustees, not beneficiaries. Therefore, any objections to the settlement were made only in respondent's capacity as trustee.

Thus, the issue becomes whether the consent of the trustee is required before a court may terminate an irrevocable spendthrift trust when the settlor and all the beneficiaries consent to its termination. This is an issue of first impression in Michigan. Most jurisdictions hold that when the settlor and beneficiaries act in concert, they may modify or terminate a trust. See, e.g., Musick v. Reynolds, 798 S.W.2d 626 (Tex.App.1990); Preston v. City Nat'l Bank of Miami, 294 So.2d 11 (Fla.App.1974); St. Louis Union Trust Co. v. Conant, 499 S.W.2d 761 (Mo.1973); Connecticut Bank & Trust Co. v. Hurlbutt, 157 Conn. 315, 254 A.2d 460 (1968); In re Zinke's Trust, 83 N.Y.S.2d 813 (Sup.Ct.1948); Fowler v. Lanpher, 193 Wash. 308, 75 P.2d 132 (1938); Botzum v. Havana Nat'l Bank, 367 Ill. 539, 12 N.E.2d 203 (1937); Ludlow's Trustee v. Ludlow, 249 Ky. 396, 60 S.W.2d 965 (1933).

2 Restatement Trusts, 2d, § 338(1), p. 167, also recognizes:

If the settlor and all of the beneficiaries of a trust consent and none of them is under an incapacity, they can compel the termination or modification of the trust, although the purposes of the trust have not been accomplished.

Comments a and d to § 338, pp. 167-169, indicate that even an irrevocable spendthrift trust may be terminated when the settlor and the beneficiaries consent.

A trustee is not considered a beneficiary of a trust. 1 Restatement Trusts, 2d, § 126, comment c, p. 271; 2 Restatement Trusts, 2d, § 337, comment b, ...