Khalsa v. Puri, 32,600.

• Decision Date: 19 November 2014
• Docket Number: 32,600.,No. 35,043.,35,043.
• Citation: 344 P.3d 1036
• Parties: Sopurkh Kaur KHALSA, Shakti Parwha Kaur Khalsa, and Ek Ong Kar Kaur Khalsa, Trustees of the Yogi Bhajan Administrative Trust, Plaintiffs/Counter–Defendants–Appellees, v. Inderjit Kaur PURI, Defendant/Counter–Plaintiff–Appellant.
• Court: Court of Appeals of New Mexico

344 P.3d 1036

Sopurkh Kaur KHALSA, Shakti Parwha Kaur Khalsa, and Ek Ong Kar Kaur Khalsa, Trustees of the Yogi Bhajan Administrative Trust, Plaintiffs/Counter–Defendants–Appellees

v.Inderjit Kaur PURI, Defendant/Counter–Plaintiff–Appellant.

32,600.

No. 35,043.

Court of Appeals of New Mexico.

Nov. 19, 2014.

Certiorari Denied, Jan. 14, 2015,

Sanders & Westbrook, P.C., Maureen A. Sanders, Albuquerque, NM, Wray & Girard, P.C., Jane Katherine Girard, Katherine Wray, Albuquerque, NM, for Appellees.

Modrall, Sperling, Roehl, Harris & Sisk, P.A., Emil J. Kiehne, Albuquerque, NM, The Soni Law Firm, Surjit P. Soni, Pasadena, CA, for Appellant.

OPINION

FRY, Judge.

{1} This case involves a dispute over the division of the community estate of Harbhajan Singh Khalsa Yogiji, more commonly known as Yogi Bhajan, deceased, and his wife, Defendant Inderjit Kaur Puri, whom the parties refer to as Bibiji. Yogi Bhajan was a spiritual and religious leader of the Sikh religion in the United States. Before Yogi Bhajan's death, the spouses' assets were titled in a trust for the benefit of both spouses. When Yogi Bhajan died, Plaintiffs Sopurkh Kaur Khalsa, Shakti Parwha Kaur Khalsa, and Ek Ong Kar Kaur Khalsa¹ ultimately became trustees of two successor trusts—one for the distribution of Bibiji's half of the community estate and one for the distribution of Yogi Bhajan's half. Bibiji claimed that the trustees breached their fiduciary duties to her in a number of ways such that she was entitled to a reallocation of part of Yogi Bhajan's half of the community estate. Following years of litigation and a five-day trial, the district court rejected Bibiji's claims and concluded that the trustees had not breached any duties owed to Bibiji. For the reasons that follow, we affirm.

BACKGROUND

The Estate Plan

{2} The present controversy springs from the estate plan developed for Yogi Bhajan and Bibiji by attorney Kate Freeland in 1979 or 1980. For this estate plan, Freeland prepared wills for each spouse and a living trust. After the tax laws changed in 1986, Freeland prepared an amendment and restatement of the initial living trust, and the spouses executed that document in 1987. We refer to this document as the Living Trust.

{3} Under the Living Trust, Yogi Bhajan and Bibiji were the trustors, and Yogi Bhajan was the sole trustee. The Living Trust gave Yogi Bhajan broad powers as trustee, including the power, within his discretion, to invest or reinvest the properties comprising the trust estate; to make loans; to sell, lease, exchange, or make contracts concerning real or personal property; to develop real estate; to “continue to hold, operate, sell or liquidate any business enterprise”; and to “borrow money and to encumber or hypothecate trust property.”

{4} The Living Trust provided for a plan of distribution upon the death of either trustor. If Yogi Bhajan predeceased Bibiji, Bibiji's community property interest in cash or cash equivalents would be held in a separate trust for her benefit, which we call the Survivor's Trust. In addition, the Living Trust's interest in certain real properties would continue to be held in trust (the Property Trust) for Bibiji during her lifetime, and the Living Trust's interest in two other real properties would be distributed to Siri Singh Sahib of Sikh Dharma Brotherhood. The remaining Living Trust assets would first be used to pay taxes and the expenses associated with Yogi Bhajan's last illness and funeral and then to fund a trust to be paid to Yogi Bhajan's assistants designated in a separate written instrument.

The 2004 Amendment to the Living Trust

{5} In 2004, at Freeland's urging, the spouses amended the Living Trust in three ways pertinent to this appeal. First, the amendment changed the disposition of real property such that, if Yogi Bhajan predeceased Bibiji, (a) the Living Trust's interest in real property in India and Los Angeles, California, would go to Bibiji's share of the trust; (b) real property in Espanola, New Mexico, had “already been donated to charity, subject to the right of [Bibiji] and Yogi Bhajan to live there for their lives”; and (c) as a result of the preceding, there would be no Property Trust. Freeland testified that the Los Angeles property was part of the community estate and that she believed the property in India was Yogi Bhajan's separate property. Thus, the amendment provided that, if Yogi Bhajan predeceased Bibiji, Bibiji would receive not only her half interest in the Los Angeles community real property but also Yogi Bhajan's half interest in that property, and she would receive Yogi Bhajan's interest in his separate real property in India.

{6} Second, the amendment provided that “[Bibiji's] community property interest in royalties, royalty agreements, patents, licenses, and other intellectual properties” would be treated the same as cash or cash equivalents. In other words, if Yogi Bhajan predeceased Bibiji, Bibiji would receive her one-half community property interest in these intellectual properties. The previous version of the Living Trust had not made any provision for Bibiji to receive her community property interest in royalty payments, which had increased dramatically after the Living Trust was first amended.

{7} Third, the amendment stated that Yogi Bhajan and Bibiji agreed that upon Yogi Bhajan's death, his community interest in the trust assets (apart from the real property in Los Angeles and India, which would go to Bibiji) would be distributed as he would direct in a separate written document. Yogi Bhajan and Bibiji further agreed that the successor co-trustees, upon the death of either spouse, would be Shakti, Sopurkh, and Kamaljit Kur Kohli. Shakti and Sopurkh worked as Yogi Bhajan's assistants for many years. Kamaljit is the daughter of Yogi Bhajan and Bibiji.

{8} Several months after executing the 2004 amendment, Yogi Bhajan executed a written document entitled “Direction for Distribution of Yogi Bhajan's Share of Trust,” which provided that, upon Yogi Bhajan's death, all of his interest in YB Teachings, LLC, would be donated to the non-profit Kundalini Research Institute, and that all of his remaining interest in the Living Trust's assets (apart from the Los Angeles and India properties) would be distributed as follows: (1) to make up the difference between $125,000 and what Yogi Bhajan had already gifted to an education savings plan for a young child, Dharam Dev Kaur Khalsa; and (2) to an LLC organized for the purpose of distributing specified income percentages to fifteen named individuals, including Shakti and Sopurkh. The fifteen individuals would be members of the LLC and would be required to maintain a lifestyle consistent with Yogi Bhajan's teachings and values. Upon the death of a member, the member's share would be paid to the Legacy of Yogiji Foundation. The LLC contemplated by this document (the Staff LLC) was created in the fall of 2004. The parties refer to this trust, created to benefit Yogi Bhajan's staff, as the Administrative Trust.

Events Following Yogi Bhajan's Death

{9} Yogi Bhajan died on October 6, 2004. Harijot Kaur Khalsa, the bookkeeper for the Living Trust since its inception, immediately closed down the bank accounts and opened two new accounts—one for the Survivor's Trust and one for the Administrative Trust. Freeland, who had been hired as legal counsel by the successor trustees, and the trustees met with members of Yogi Bhajan's family and members of the Staff LLC to discuss distribution of the Living Trust's assets. Relying on the records Harijot had kept for the previous twenty to thirty years, the trustees assembled the assets and distributed Bibiji's interest to the Survivor's Trust. Most of the assets had been distributed either to Bibiji or to the Administrative Trust by the end of 2004.

{10} In May 2005, Bibiji's attorney wrote to Freeland and asserted that Yogi Bhajan had made charitable contributions from 1996 to 2004 without Bibiji's knowledge or consent. The letter went on to request a credit in half the amount of these contributions and asked for information regarding charitable contributions made prior to 1996 and regarding intellectual property owned by the Living Trust. In light of Bibiji's claims, Freeland and Bibiji's attorney agreed that it would be inappropriate for Bibiji's daughter, Kamaljit, to remain as a trustee of the Administrative Trust and for Shakti and Sopurkh to continue as trustees of the Survivor's Trust. Kamaljit was replaced by Ek Ong Kar Kaur as the third trustee of the Administrative Trust. Shakti and Sopurkh resigned as trustees for the Survivor's Trust. We refer to Shakti, Sopurkh, and Ek Ong Kar Kaur as the Trustees.

Initiation of Litigation

{11} Freeland, on behalf of the Trustees, requested backup information for Bibiji's claims. In the ensuing months, the Trustees continued to request explanations for and details of Bibiji's claims, but they did not receive any. The Trustees made no further distributions of estate assets in light of Bibiji's claims. The Trustees ultimately filed the present action seeking a judgment declaring what, if anything, was owed to Bibiji beyond what had already been distributed to her. Bibiji filed a counterclaim seeking an accounting, removal of certain Trustees, and damages for breach of the trust and breach of fiduciary duties. After nearly two years of litigation, the district court dismissed the Trustees' complaint for declaratory relief due to lack of controversy. The case then proceeded to trial on Bibiji's counterclaim.

{12} The district court heard five days of testimony and received over 500 exhibits. Bibiji did not testify. After taking the matter under advisement, the district court found in favor of the Trustees on all claims and dismissed “all claims which have been or could have been brought by [Bibiji] in this case.” It further found that “[j]ustice and equity require that [Bibiji] pay the reasonable attorney fees incurred by [the Trustees].” The amount of...