In re Administration of C.H. Young, 24528.

• Decision Date: 11 June 2008
• Docket Number: No. 24528.,24528.
• Citation: 2008 SD 43,751 N.W.2d 715
• Parties: In the Matter of the ADMINISTRATION OF the C.H. YOUNG REVOCABLE LIVING TRUST Agreement Dtd. 12-9-94; as Amended 12-21-94.
• Court: South Dakota Supreme Court

751 N.W.2d 715

2008 SD 43

In the Matter of the ADMINISTRATION OF the C.H. YOUNG REVOCABLE LIVING TRUST Agreement Dtd. 12-9-94; as Amended 12-21-94.

No. 24528.

Supreme Court of South Dakota.

Considered on Briefs on January 7, 2008.

Decided June 11, 2008.

James R. Davies, Alexandria, South Dakota, Attorney for appellant CorTrust Bank-Trustee for C.H. Young Revocable Trust.

E. Steeves Smith of Tinan, Smith and Bucher Mitchell, South Dakota Attorneys for appellees Estate of Alice Young and Reginald D. Young.

KONENKAMP, Justice.

[¶ 1.] A trust instrument allocated all but eighty acres of land to specific beneficiaries. One beneficiary believed that the trustor intended to assign the eighty acres to him. When a petition to modify the trust was submitted, the circuit court denied it on grounds of laches and expiration of the statute of limitations. We conclude that the doctrine of laches precludes reforming or modifying the trust instrument because the aggrieved beneficiary, while knowing of the problem, took no action to petition the court for over ten years.

Background

[¶ 2.] C.H. Young (Cy) and his wife, Alice L. Young, had five children: Robert, Reginald, Keith, William, and Linda. On December 9, 1994, Attorneys Jack Theeler and Don Peterson met with Cy, Alice, and Robert at the nursing home where Cy resided. In this meeting, Cy finalized the provisions of his C.H. Young Revocable Living Trust Agreement. These provisions were explained to Cy, and he affirmed his designation of beneficiaries. Because numerous legal descriptions were required for the properties placed in trust, a color-coded map had been prepared so that Cy could point out the property he wanted to go to each of his children. At the end of this meeting, the trust was executed. It provided that after Cy's death Alice would receive the income from the trust properties during her lifetime. Upon her death, the property would go to the specified beneficiaries. Cy was designated as the Trustee, with Robert as the successor Trustee. The trust document was later amended to make corrections not relevant to this appeal.

[¶ 3.] Cy died on July 17, 1995, and Robert became the Trustee. In January 1996, Robert learned that an eighty-acre tract of land he believed had been assigned to him was not so designated in the trust. The lawyers informed Cy's family that this tract would be distributed according to the trust's residual clause. Robert attempted, through Attorney Theeler, to have the residuary heirs quitclaim this "disputed" land to him. These efforts failed. Nevertheless, in January 1996, Robert allocated this tract to himself in the South Dakota Inheritance Tax Report and paid the inheritance tax on this property.

[¶ 4.] During the next ten years, Robert managed the trust and provided for Alice with the income from the trust properties as Cy intended. She died on July 23, 2006. Robert then petitioned for court supervision of the trust, approval of his final accounting, permission to resign, and for appointment of a successor trustee. Reginald and the Estate of Alice (Objectors) opposed Robert's petition. While the Objectors did not challenge Robert's resignation, they resisted the appointment of CorTrust Bank as the successor Trustee. They believed a conflict would exist because Robert was a member of the bank's trust committee. The court accepted Robert's final accounting, granted his request to resign, and assigned CorTrust Bank as the successor Trustee. But Robert was specifically prohibited from engaging in any administration of the trust by CorTrust Bank.

[¶ 5.] On January 3, 2007, the new Trustee petitioned to modify the terms of the trust. It asserted that Cy intended to grant Robert the disputed eighty-acre tract and that designation to Robert was inadvertently omitted. After a hearing, the circuit court ruled that the statute of limitations on the petition had expired and that the doctrine of laches applied. The Trustee appeals.

Analysis and Decision

[¶ 6.] According to the Trustee, the evidence is "clear, convincing and uncontroverted" that Cy wanted Robert to receive the disputed land, and therefore, under SDCL ch 55-3, the terms of the trust should be modified.^* A court may modify the dispositive terms of a trust under SDCL 55-3-26 "if, because of circumstances not anticipated by the trustor, modification ... of the trust would substantially further the trustor's purposes in creating the trust." Similarly, "the court may reform the terms of the trust to conform to the trustor's intention if the failure to conform was due to a mistake of fact or law and the trustor's intent can be established." SDCL 55-3-28.

[¶ 7.] The controlling question here is not what Cy intended or whether the circumstances warrant modification or reformation. Rather, we must determine whether the circuit court erred when it denied the Trustee's petition because it was filed too late, due both to laches and the expiration of the statute of limitations. We conclude that the laches question is dispositive. We review de novo the court's ruling on the question of laches. See FB & I Bldg. Products, Inc. v. Superior Truss & Components, 2007 SD 13, ¶ 12, 727 N.W.2d 474, 478 (questions of law reviewed de novo); Tovsland v. Reub, 2004 SD 93, ¶ 14, 686 N.W.2d 392, 398 (citations omitted).

[¶ 8.] In its findings of fact, the circuit court found that the "evidence was clear that Robert was put on notice early on that the trust did not do what he believed his father's intent was." Robert attempted to have the other beneficiaries agree to change the trust, but they refused. Failing that, he had the option to seek reformation by petitioning the court. Yet, this was not done until January 3, 2007, when the new Trustee was appointed. Thus, the court concluded that, in not timely petitioning for reformation, Robert disadvantaged the other beneficiaries. As the court noted, Alice, Cy's widow, had been present at times when these matters were discussed and "would have had knowledge of [Cy's] intent and also would have had the ability to provide insight in this matter." Thus, Robert's inaction "resulted in a long period of time passing without correcting" what Robert thought was "the correct distribution of the property,...