Howard Marshall Charitable Remainder Annuity Trust, In re
| Decision Date | 04 March 1998 |
| Citation | 709 So.2d 662 |
| Parties | 97-1718 La |
| Court | Louisiana Supreme Court |
William E. Shaddock, Henry A. McCall, Herman A. White, III, Lake Charles, for Applicant George School.
A.J. Gray, III, and Leslie Q. Knox, Lake Charles, for The Corporation of Haverford College.
Russell J. Stutes, Jr., Lake Charles, for Yale Law School.
Edwin K. Hunter, Richard D. Moreno, and Timothy O'Dowd, Lake Charles, for Finley L. Hilliard, Trustee of the Howard Marshall Charitable Remainder Annuity Trust.
Kenneth M. Wright, Lake Charles, and Mack E. Barham and Robert E. Arceneaux New Orleans, for Respondent E. Pierce Marshall, Executor of the Succession of J. Howard Marshall, II.
[97-1718 La. 1] KNOLL, Justice. *
We granted writs in the instant case to determine whether Louisiana has jurisdiction over the succession of a Texas domiciliary, whose only property at the time of his death consisted of undisbursed income from two Louisiana inter vivos trusts. For the following reasons, we determine that Louisiana does not have jurisdiction over the succession of J. Howard Marshall, II.
FACTS AND PROCEDURAL HISTORY
Decedent, J. Howard Marshall, II, (Mr. Marshall) was an extremely wealthy attorney and businessman who was domiciled in Houston, Texas. He died on August 4, 1995. In the years preceding his death, Mr. Marshall transferred all of his personal assets into a series of inter vivos trusts in an attempt to avoid the necessity for probate. The vast majority of Mr. Marshall's assets were transferred to the J. Howard Marshall, II, Living Trust (Living Trust). In addition, Mr. Marshall created a second [97-1718 La. 2] trust, the Howard Marshall Charitable Remainder Annuity Trust (Charitable Trust) to fund his charitable pledges and donations. The Charitable Trust was funded by an interest bearing note in the amount of $2,950,000, payable to J. Howard Marshall, II, by his son, E. Pierce Marshall.
Mr. Marshall was an income beneficiary under the terms of both trust agreements. The Living Trust provided: "During and throughout [Mr. Marshall's] lifetime, Trustee shall pay over to [Mr. Marshall] sufficient income to maintain [Mr. Marshall's] standard of living." The Charitable Trust states:
The Trustee shall pay to J. Howard Marshall, II (sometimes referred to as the Recipient ) in each taxable year of the Trust during the Recipient's life an annuity in the amount of One Hundred Ninety-four Thousand Seven Hundred Dollars ($194,700).
Both trusts contained a provision authorizing the trustee to invade the corpus or principal of the trust if necessary to maintain the income streams provided for in the trusts.
The instant dispute concerns the distribution of the principal of the Charitable Trust. By the terms of the trust agreement, following the death of Mr. Marshall the principal was to be distributed as follows:
Pennsylvania, and Yale University, New Haven, Connecticut (hereinafter
referred to as the Charitable Organizations ) in the following proportions:
Haverford College 40.678%
George School 25.424%
Yale University 33.898%
Provided, however, that if any charitable pledge from the Donor exists to any
of the Charitable Organizations, the Trustee shall make the distribution in
such a manner to satisfy that pledge or pledges with the balance distributed
in the proportions specified.
Following Mr. Marshall's death, the trustee of the Charitable Trust, Finley L. Hilliard, a resident of Lake Charles, Louisiana, took preliminary measures to distribute the corpus of the trust to the Charitable Organizations. Mr. Hilliard contacted the Charitable Organizations in an attempt to determine the extent of outstanding pledges, if any, which were due each organization by Mr. Marshall. George School responded that Mr. Marshall owed pledges in excess of $1.1 million dollars at the time of his death, and Haverford College reported between $3.8 and $5.3 million in outstanding pledges. Yale University responded that Mr. Marshall owed no outstanding pledges to that organization. The combined pledges of George School and Haverford College easily exceed the corpus of the charitable trust.
Mr. Hilliard then filed a "Petition for Instructions" in the 14 th Judicial District Court in Calcasieu Parish, denying that the Charitable Trust was legally bound to George School and Haverford College for the claimed pledges. In his petition, Mr. Hilliard requested that the corpus of the Charitable Trust be distributed in accordance with the stated percentages without any privilege to the alleged pledges made by Mr. Marshall to Haverford College and George School. Mr. Hilliard further stated that it was Mr. Marshall's intention that the corpus of the trust would fully extinguish any and all pledges he had made to the Charitable Organizations.
George School, Haverford College, and Yale University responded to Mr. Finley's petition. Haverford College asserted that its pledges were valid, and further responded that under the provisions of the trust, the outstanding pledges should be paid first, with only the remainder, if any, to be distributed according to the percentages. Haverford College further expressly reserved the right to enforce any pledges not extinguished by payment against Mr. Marshall's estate. Similarly, [97-1718 La. 4] George School responded by averring the validity of its pledges, and by reserving the right to pursue the unpaid balance of remaining pledges against Mr. Marshall's estate. George School and Yale University did not oppose the distribution of the trust corpus in accordance with the percentages provided in the Charitable Trust.
In addition to the Charitable Organizations, Mr. Hilliard had named as a party defendant "The Succession of J. Howard Marshall, II, a succession being administered in Calcasieu Parish Louisiana in the 14 th Judicial District Court docket number 32,699." (Louisiana Succession). 1 The Louisiana Succession had been opened when E. Pierce Marshall and Finley L. Hilliard, co-executors, filed a "Petition for Probate of Foreign Testament and Codicil" on August 8, 1995. 2 The executors averred that Mr. Marshall owned property in Calcasieu Parish at the time of his death, and that the 14 th Judicial District Court therefore had jurisdiction to open Mr. Marshall's succession under La.Code Civ.P. art. 2811. The executors filed a detailed descriptive list of the property owned by Mr. Marshall at the time of his death. Because Mr. Marshall had allegedly transferred all of his property to his inter vivos trusts, the descriptive list stated that the only property in Mr. Marshall's estate consisted of the following income earned by the trusts, but undisbursed at the time of his death:
The Louisiana Succession responded to Mr. Hilliard's petition for instructions, supporting the position taken by Mr. Hilliard and denying any liability to the Charitable Organizations for outstanding pledges. The Louisiana Succession further asserted that, in the event that J. Howard Marshall, II, made any charitable pledges to the Charitable Organizations, such pledges were solely to be discharged by the assets of the Charitable Trust, and were not liabilities of the Louisiana Succession. The Louisiana Succession then prayed for declaratory relief, requesting that the court issue a judgment specifically enumerating the rights of George School and Haverford College with respect to both the Charitable Trust and the Louisiana Succession.
Both Haverford College and George School responded to the answer of the Louisiana Succession by filing, among other exceptions, a declinatory exception of lack of jurisdiction, asserting that Louisiana had no jurisdiction to open the succession of J. Howard Marshall, II, a Texas domiciliary. The exception to jurisdiction was denied by the trial court and the Third Circuit Court of Appeal denied writs. This Court granted the George School's application for supervisory writs and remanded to the Third Circuit for briefing and opinion on the issue of jurisdiction. In re: Howard Marshall Charitable Remainder Annuity Trust, 96-CC-2372 (La.12/06/96), 684 So.2d 404.
In an unpublished opinion, the Third Circuit affirmed the trial court's denial of the exception of jurisdiction, and held that jurisdiction was proper under La.Code Civ.P. art. 2811. From this judgment, George School applied for writ of certiorari which was granted by this Court. In re: Howard Marshall Charitable Remainder Annuity Trust, 97-CC-1718 (La.10/17/97), 701 So.2d 1349.
[97-1718 La. 6] LAW & ANALYSIS
Jurisdiction is the legal power and authority of a court to hear and determine an action or proceeding involving the legal relations of the parties, and to grant the relief to which they are entitled. La.Code Civ.P. art. 2811 provides for jurisdiction in succession proceedings as follows:
A proceeding to open a succession shall be brought in the district court of the parish where the deceased was domiciled at the time of his death.
If the deceased was not domiciled in this state at the time of his death, his succession may be opened in the district court of any parish where:
(1) Immovable property of the deceased is situated; or,
(2) Movable property of the deceased is situated, if he owned no immovable property in the state at the time of his death.
It is undisputed that Mr. Marshall was a domiciliary of Harris County, Texas at the time of his...
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