Lagae v. Lackner

• Decision Date: 27 March 2000
• Docket Number: No. 98SC593.,98SC593.
• Parties: Ina M. LAGAE, Petitioner, v. Edward J. LACKNER, individually; Doris K. Lackner, individually; and Richard I. Kornfeld, individually, Respondents.
• Court: Colorado Supreme Court

996 P.2d 1281

Ina M. LAGAE, Petitioner, v. Edward J. LACKNER, individually; Doris K. Lackner, individually; and Richard I. Kornfeld, individually, Respondents.

No. 98SC593.

Supreme Court of Colorado, En Banc.

March 27, 2000.

Rothgerber Johnson & Lyons, LLP, James R. Walker, Justin D. Cumming, Denver, Colorado Attorneys for Petitioner.

Preeo, Silverman & Green, P.C., Jersey M. Green, Denver, Colorado Attorney for Respondents.

Justice HOBBS delivered the Opinion of the Court.

We granted certiorari to review the court of appeals opinion in Lackner v. King, 972 P.2d 690 (Colo.App.1998).¹ This appeal arises out of the attempted seizure of trust property to satisfy a co-trustee's individual debts. Judgment creditors sought satisfaction of their judgments based on a personal representative's deed to the co-trustee "as trustee" that did not identify the beneficiaries of the trust or reference a document of record containing such information, as provided by section 38-30-108, 10 C.R.S. (1999). We hold that this statutory section does not allow judgment creditors to satisfy their judgments from trust property when they did not rely on the non-conforming personal representative's deed in extending credit to the individual serving as trustee. Thus, we reverse the judgment of the court of appeals and uphold the trial court's refusal to enforce the creditors' notices of levy and seizure, although for different reasons than those provided by the trial court.

I.

On April 10, 1987, James Yves Adolph Marie Lagae (J.Y. Lagae) executed a trust agreement establishing the J.Y. Lagae Revocable Trust. The trust agreement named Paul W. King (King) and Darrell Beck, Jr. (Beck) as trustees. It also provided that J.Y. Lagae's wife, Ina May Crafton Lagae (Ina Lagae), would be the sole beneficiary of the trust during her lifetime.

Upon his death, J.Y. Lagae's will contained a pour-over provision directing the residuary of his estate to be transferred to the J.Y. Lagae Revocable Trust. On December 31, 1993, Ina Lagae, as Personal Representative of J.Y. Lagae's estate, transferred the disputed property, a ranch consisting of three parcels of real property located in Douglas County, to the trust. Ina Lagae executed a personal representative's deed identifying "Paul W. King and Darrell Beck, Jr., Trustees of the J.Y. Lagae Revocable Trust," as grantees. The deed also identified the case number for J.Y. Lagae's probate case pending in Douglas County. In addition, the deed stated that it was for "probate purposes." The deed did not identify, on its face, the beneficiaries of the trust or reference a document of record containing such information.

On January 5, 1995, Ina Lagae recorded the personal representative's deed with the Clerk and Recorder of Douglas County. In addition to recording the deed, Ina Lagae also filed a Trust Registration Statement² and an Affidavit of Trust³ with the Clerk of the District Court of Douglas County on March 6, 1995.

In May of 1995, Edward J. Lackner, Doris K. Lackner and Richard I. Kornfeld (collectively, "the creditors") filed a complaint against King, alleging that King had defaulted on six unsecured promissory notes executed between him and the creditors during the period of March 1, 1994 to October 12, 1994. The district court entered default judgments in July and August, 1995, after King failed to answer the complaints. The judgments entered against King totaled $324,990.86, exclusive of attorney's fees, accrued interest, and costs.

On December 23, 1995, the judgment creditors served King with notices of levy or seizure of the trust property. Ina Lagae intervened in the suit and moved to set aside the notices on the basis that the property was held in trust and she was the sole beneficiary during her lifetime. She claimed that King had no equitable title to the property and, thus, the creditors could not satisfy their judgments from it.

The trial court ruled that (1) the notices of levy or seizure must be set aside; and (2) the judgment lien had not attached to the property. The trial court observed that the personal representative's deed did not comply with section 38-30-108 because it did not identify the beneficiaries of the trust. It found, however, that the affidavit of trust constituted prima facie evidence of the facts contained within it and gave notice to the world that the property described in the deed was part of the trust, thus satisfying the requirements of section 38-30-108. Because King had no ownership in the trust property and held it in his fiduciary capacity, the trial court concluded that the creditors could not seize the property in satisfaction of their judgments against King in his personal capacity.

The creditors appealed. The court of appeals held that the trial court erred in concluding that the affidavit of trust cured the failure of the personal representative's deed to identify the beneficiaries of the trust. It ruled that section 38-30-108 specifically required either the beneficiaries to be named in the personal representative's deed or the deed to reference another recorded document which would provide such information. Because the personal representative's deed failed to meet these requirements, the court of appeals held that the creditors could reach the trust property to satisfy the personal judgments against King.

We reverse the judgment of the court of appeals and uphold the trial court's refusal to enforce the creditors' notices of levy or seizure.

II.

We hold that the failure of a personal representative's deed to list the beneficiaries of a trust or reference a document of record providing such information, pursuant to section 38-30-108, does not render trust property available to satisfy personal judgments against a trustee when the creditors placed no reliance on the non-conforming personal representative's deed in extending the credit.⁴

A. Intent and Purpose of Section 38-30-108

A fundamental tenet of trust law is the protection of the trust estate from a trustee's personal creditors. See George Gleason Bogert & George Taylor Bogert, The Law of Trusts and Trustees § 146, at 54 (2d rev. ed.1993). The creditors here do not argue that they are creditors of the J.Y. Lagae Trust; rather, they are judgment creditors of King as an individual.

In interpreting a statute, we must give effect to the intent of the legislature. See AviComm, Inc. v. Colorado Pub. Util. Comm'n, 955 P.2d 1023, 1031 (Colo.1998). In doing so, we presume that the General Assembly intended a just and reasonable result. See id.; § 2-4-201(1)(d), 1 C.R.S. (1999). We construe the various parts of a statute to give consistent, harmonious, and sensible effect to the statute as a whole. See Cooper v. People, 973 P.2d 1234, 1239 (Colo.1999). Thus, we will not adopt a statutory interpretation that defeats legislative intent. See AviComm, 955 P.2d at 1031. Although we must give effect to the statute's plain and ordinary meaning, the General Assembly's intent and purpose must prevail over a literalist interpretation that leads to an absurd result. See id.

Section 38-30-108 sets the guidelines for conveying property, including trust property, to a party in a representative capacity. It provides:

All instruments conveying real estate, or interests therein, in which the grantee is described as trustee, agent, conservator, executor, administrator, or attorney-in-fact, or in any other representative capacity, said instruments shall also name the beneficiary so represented and define the trust or other agreement under which the grantee is acting, or refer, by proper description to book, page, document number, or file to an instrument, order, decree, or other writing which is of public record in the county in which the land so conveyed is located in which such matters appear; otherwise the description of a grantee in any such representative capacity in such instruments of conveyance shall be considered and held a description of the person only and shall not be notice of a trust or other representative capacity of such grantee.

§ 38-30-108 (emphasis added).

Here, the personal representative's deed named King and Beck as co-trustees of the J.Y. Lagae Revocable Trust, but the deed did not list the beneficiaries of the trust. The trial court, determining that the beneficiaries were not listed, then looked to the public record to ascertain whether the deed otherwise complied with section 38-30-108. It found that the affidavit of trust sufficiently met the requirements of section 38-30-108 because it provided notice that the property described was part of the trust. The court of appeals disagreed with this reasoning. Because the deed did not reference the affidavit of trust, the court of appeals determined the deed to be non-compliant with section 38-30-108's requirement that the conveying instrument "refer by proper description to book, page, document number, or file" to an instrument of public record.⁵ Thus, it concluded that the unsecured creditors of King in his personal capacity should be allowed to levy upon and seize the trust property.

We determine that the court of appeals' reading of section 38-30-108 leads to a result not intended by the General Assembly. The legislature's intent in enacting this section was to give credence to actions of a trustee in selling, pledging as collateral, or otherwise dealing with trust property. Many states enacted statutes similar to section 38-30-108 to counteract the tendency of property to be considered inalienable when it had an "as trustee" grantee in its chain of title. Under the common law, when a conveyance of land was made to a person as trustee and there was nothing further to indicate the existence of a trust, the form of the instrument was held sufficient to indicate that the land was or may be held in trust. See Austin Wakeman Scott & William Franklin Fratcher, The Law of Trusts § 297.3, at 118 (4th ed.1989). In Colorado, for example,...