In re Reese Trust

• Decision Date: 22 December 2009
• Docket Number: No. 25223.,25223.
• Parties: In the Matter of the Eunice Thomas REESE TRUST, Trust Agreement dated 02/23/93, as Amended by and between Eunice Thomas Reese, as Grantor and Eunice Thomas Reese, as Trustee, and Marquette Bank, of South Dakota, N.A., as Successor Trustee. Enchanted World Doll Museum, as a former beneficiary of the Eunice Thomas Reese Trust and an Interested Party, Appellant, v. CorTrust Bank, N.A., Trustee of the Eunice Thomas Reese Trust, Appellee.
• Court: South Dakota Supreme Court

776 N.W.2d 832

2009 SD 111

In the Matter of the Eunice Thomas REESE TRUST, Trust Agreement dated 02/23/93, as Amended by and between Eunice Thomas Reese, as Grantor and Eunice Thomas Reese, as Trustee, and Marquette Bank, of South Dakota, N.A., as Successor Trustee.

Enchanted World Doll Museum, as a former beneficiary of the Eunice Thomas Reese Trust and an Interested Party, Appellant, v. CorTrust Bank, N.A., Trustee of the Eunice Thomas Reese Trust, Appellee.

No. 25223.

Supreme Court of South Dakota.

Argued November 18, 2009.

Decided December 22, 2009.

Dennis R. Padrnos, Mitchell, South Dakota, Attorney for appellant Enchanted World Doll Museum.

Trudy A. Morgan, Morgan, Theeler LLP, Mitchell, South Dakota, Attorney for appellee CorTrust Bank.

KONENKAMP, Justice.

[¶ 1.] Trustee CorTrust Bank moves to dismiss Enchanted World Doll Museum's appeal of the circuit court's order assuming court supervision of a trust, reforming the trust, and distributing trust assets to a new beneficiary. The motion is granted and the appeal is dismissed.

Background

[¶ 2.] In 1993, Eunice Thomas Reese established a trust to benefit and provide income to the Enchanted World Doll Museum in Mitchell, South Dakota. A contingency of the trust was that Enchanted World become a qualified charitable organization. Enchanted World did so and began to receive income from the trust.

[¶ 3.] Reese died in December 1993. CorTrust Bank eventually became a successor trustee of the Reese Trust. Before the circuit court's action in this matter, the Board of Directors of Enchanted World determined that the museum would cease operations. The board began to sell the museum's assets and to wind up its affairs. As a result, CorTrust filed a petition requesting that the court: assume supervision of the Reese Trust; determine the initial purpose of the trust had become impossible to fulfill; terminate the trust; and distribute the trust assets in accord with the cy pres doctrine and SDCL 55-9-4.¹ As part of its petition, CorTrust requested that the court distribute the trust assets to the Mitchell Area Charitable Foundation² (the foundation) as a community chest type of organization mentioned as an alternative beneficiary under the terms of the trust. Enchanted World objected, arguing that the purpose and mission of the foundation differed from those of the museum. Enchanted World requested that the trust assets be distributed instead to the United Federation of Doll Clubs, Inc. of Kansas City, Missouri.³

[¶ 4.] A hearing on CorTrust's petition was held on January 26, 2009. The circuit court subsequently entered findings of fact, conclusions of law, and an order that the trust assets be distributed to the foundation to make income distributions to qualified charitable entities for the purposes of establishing and operating a museum for the display of dolls having historical, artistic, or other value. Enchanted World filed a notice of appeal of the circuit court's order but failed to serve the foundation with its notice. CorTrust moved to dismiss the appeal because of the failure to serve the foundation. This Court held the appeal in abeyance and directed further briefing and oral argument on CorTrust's motion to dismiss.

Analysis and Decision

[¶ 5.] The question we must decide is whether the Mitchell Area Charitable Foundation was a party that Enchanted World Doll Museum was required to serve with its notice of appeal. SDCL 15-26A-4 sets forth the steps for taking an appeal to this Court. SDCL 15-26A-4(3) provides in pertinent part: "The appellant, or his or her counsel, shall serve the notice of appeal and docketing statement on counsel of record of each party other than appellant, or, if a party is not represented by counsel, on the party at his or her last known address." (Emphasis added). Failure to timely serve and file a notice of appeal is jurisdictionally fatal to the appeal. Hardy v. W. Cent. Sch. Dist., 478 N.W.2d 832, 834 (S.D.1991) (citing W. States Land & Cattle Co., Inc. v. Lexington Ins. Co., 459 N.W.2d 429, 432 (S.D.1990)).

[¶ 6.] Typically, the parties to a case can be identified by referring to the parties named in the captions on the pleadings and other formal legal documents filed in the proceeding. This is not necessarily true, however, in a case such as this captioned, "`In the Matter of,' rather than `John Doe v. Frank Roe.'" See Reliance Ins. Co. v. Public Service Commission, 250 N.W.2d 918, 926 (N.D.1977) (recognizing that identifying the named parties to a proceeding can be difficult where the proceeding is entitled "In the Matter of"). In this case, therefore, the substantive law on parties in trust proceedings must be consulted to identify the parties that Enchanted World was required to serve with its notice of appeal.

[¶ 7.] This was a cy pres proceeding.

Roughly speaking, [cy pres] is the doctrine that equity will, when a charity is originally or later becomes impossible or impracticable of fulfillment, substitute another charitable object which is believed to approach the original purpose as closely as possible. It is the theory that equity has the power to revise a charitable trust where the settlor had a general charitable intent in order to meet unexpected emergencies or changes in conditions which threaten its existence.

Ronald Chester, George Gleason Bogert & George Taylor Bogert, The Law of Trusts and Trustees § 431 (3d ed. 2005).

[¶ 8.] With regard to parties in a cy pres proceeding:

Notice of the pendency of a cy pres application should be and customarily is given to the general public, inviting suggestions as to a substitute plan, and institutions or persons seeking to secure benefits from the application are heard and sometimes permitted to intervene. If the settlor is living, he should be consulted and his suggestions considered. Unsuccessful claimants of the fund should not be allowed to appeal from a decree exercising the cy pres power. The court allows costs and counsel fees in its discretion.

A suit to secure the application of cy pres may be brought by the trustee or a sub-trustee, or by the Attorney General or other public official authorized to represent the public, in his own name or on the relation of interested persons. In a few cases, individuals or institutions which hoped to get benefits from the alteration and enforcement of the trust have been allowed to sue, but these cases are still regarded as somewhat abnormal and in some instances were based on the lack of any objection to the parties plaintiff....

* * *

If the suit for cy pres application is brought by the Attorney General, the trustee will be a necessary party defendant; and if the trustee is the plaintiff, the Attorney General should be joined as a defendant. Sometimes the settlor, if living, or those succeeding to his property interests on his death, are named as defendants in order to prevent them from claiming that they have resulting trust interests on failure of the trust and to bind them by decree, although they may not be necessary parties.

Possible future beneficiaries of the charity need not be named as defendants, since they are represented by the Attorney General. Likewise, prospective new trustees or possible new absolute holders of the property are not necessary defendants in a cy pres application.

Id. at § 441 (emphasis added).

[¶ 9.] Under these general principles, the foundation was not a party to CorTrust's cy pres proceeding that Enchanted World was required to serve with its notice of appeal. Enchanted World also was not a party entitled to file a notice of appeal since it was merely a representative of an unsuccessful claimant of the fund or of a possible future beneficiary of the fund.

[¶ 10.] We do not resolve this case under general principles, however, because South Dakota law on the cy pres doctrine has been codified at SDCL 55-9-4.⁴ See id. at § 433, n 6 (citing SDCL 55-9-4 and South Dakota as a jurisdiction where the legislature has reduced the cy pres principle to statutory form). SDCL 55-9-4 provides:

Whenever it shall appear to the circuit court for the proper county that the purpose and object of such charity is imperfectly expressed, or the method of administration is not indicated or is incomplete or imperfect, or that the fulfillment of the special purpose expressed in a trust for charitable or public purpose is or becomes impracticable, impossible, inexpedient or unlawful, such court shall upon the application of any trustee of the trust, or any interested party or the attorney general of this state, and upon such notice as said court may direct, make an order directing that such trust shall be administered or expended in such manner as in the judgment of said court will, as nearly as can be, accomplish the general purposes of the instrument and the object and intention of the donor without regard to, and free from any, specific restriction, limitation or direction contained therein, provided, however, that no such order shall be made without the consent of the donor of said trust if he is then living and mentally competent.

[¶ 11.] SDCL 55-9-4 appears in SDCL chapter 55-9 on charitable trusts. SDCL chapter 21-22 sets forth the procedures for administration of trust estates. The chapter applies to "all trusts if any part of the trust estate has its situs within this state or if the trustee or a beneficiary resides in this state...." SDCL 21-22-2. The circuit court here specifically found that the situs of the trust estate was in Davison County, South Dakota.

[¶ 12.] SDCL 21-22-13 provides that a trustee may petition a court for action on any matter on which courts of equity previously exercised jurisdiction over trustees. This encompasses an equitable action such as a cy pres proceeding. Upon the filing of a petition for such a proceeding, a court must fix a time and place for hearing and cause notice to be given as required within the chapter. SDCL 21-22-13. SDCL 21-22-17 similarly...