Marriage of Jones, In re, P-20702

Decision Date13 January 1999
Docket NumberP-20702
Citation158 Or.App. 41,973 P.2d 361
PartiesIn re MARRIAGE OF Linda Jean JONES, Respondent, and Thomas Douglas Jones, Appellant, and Thomas Douglas Jones, Trustee of the Anna Mae and David H. Jones Testamentary Trust B and the Thomas and Linda Jones Revocable Family Trust, Third-Party Respondent-Appellant, and Esther Mae Jones, a child attending school, ORS 107.108(4), Respondent. 94; CA A92957.
CourtOregon Court of Appeals

J. Michael Alexander and Burt, Swanson, Lathen, Alexander, McCann & Smith, P.C., Salem, filed the briefs for appellant and third-party respondent-appellant.

Russell Lipetzky and Saucy & Lipetzky, P.C., Salem, filed the brief for respondent Linda Jean Jones.

No appearance for respondent Esther Mae Jones.

Before HASELTON, Presiding Judge, and DEITS, Chief Judge, and LINDER, Judge.

DEITS, C.J.

Husband appeals from the judgment in this dissolution action. His only contentions on appeal concern the trial court's disposition of certain assets of a trust that was established by husband's deceased parents and of which husband is the trustee. 1 On de novo review, we modify the judgment.

The parties were married in 1973. Husband was 73 and wife 54 at the time the dissolution judgment was entered. The parties had one child, Esther. Husband had three children by a prior marriage; wife had one child by an earlier marriage, whom husband adopted. All of the children are adults.

The trust was created in 1974. Its income was to be used primarily for the benefit of husband's parents during their lifetimes. Upon the survivor's death, certain cash distributions were to be made from the trust principal, including $10,000 to each of three designated educational institutions. The remaining trust assets were to be distributed in shares of 80 percent to husband, five percent each to Esther and two of the other children, and five percent to wife on the condition that she was still married to husband. Husband's father and mother died in 1980 and 1981, respectively. However, no distribution of the trust occurred. Instead, husband continued to use the income it generated as the primary source of meeting family needs. At some point before the dissolution, husband purported to purchase the distributive shares of the two beneficiary children other than Esther. Esther was joined as a party to the dissolution proceeding, as was husband in his capacity as trustee of the trust, as well as individually. The three educational institutions were not joined.

After the hearing, the trial court prepared two opinion letters. In the first, dated February 22, 1996, after outlining the foregoing factual background, the court stated that husband had breached his fiduciary duty as trustee by failing to make the required distributions and by continuing to use the trust income for his and his immediate family's benefit. The letter also noted that the trust had been the main source of the family's income during most of the marriage; that wife had participated extensively in the care of her parents-in-law before their deaths and that husband had not rebutted the presumption of equal contribution by wife to the trust as an asset; and that:

"The entire value of the trust is therefore to be included in the valuation and distribution of assets in this case. To fail to acknowledge the trust as an asset would be to ignore the reliance of the parties on this asset during the term of the relationship."

The court proceeded to value the trust. After discounting the distributions due to the educational entities and taking account of "the forfeiture of [wife's] interest" due to the dissolution of the marriage, the court placed a value of $1,293,500 on husband's distributive share. It then required husband either to make an "in-kind" distribution to wife of two pieces of real property owned by the trust, or to pay her a so-called equalizing judgment of $550,000. The court allowed husband 30 days within which to complete performance under the in-kind distribution option. Finally, the court stated that husband was to pay wife spousal support of $4,000 monthly until the in-kind distribution of the trust property or the full payment of the equalizing amount was completed.

The court entered a temporary order embodying the above holdings. Thereafter, however, a number of problems arose. Consequently, the court altered certain aspects of its disposition, as summarized in a follow-up letter opinion of April 2, 1996: 2

"The last issue is the form of Decree, particularly the matter of a money judgment or the conveyance of certain realty. I had, in my original letter opinion, allowed Respondent the option of causing a conveyance of the real property or having the judgment and spousal support provisions become effective. I am satisfied that Respondent intends to do whatever he can to attempt to avoid the provisions of this Court's judgment in regard to the trust asset matters. If I were to simply order the money judgment and support, Respondent could claim that I allowed the trust to remain as a separate entity whose assets are not reachable by Petitioner to satisfy the [judgment] granted here. Respondent could maintain insufficient other assets to satisfy Petitioner's [judgment], while enjoying the $100,000.00 annual proceeds from the trust during his [lifetime]. Upon his death, the claim would be that the beneficial interest in the trust passed outside Respondent's estate by designation. Given Respondent's age, actions and obvious intentions, this scenario is quite likely. I [cannot] allow Respondent to attempt to frustrate this Court's decision in such a fashion.

"Respondent failed to act within the time frames I had provided and refuses to indicate how he would intend to proceed. I have therefore determined that the most fair and equitable approach is to order the trust dissolved and order that the service station and bare land real property be transferred to Petitioner * * *. That is this Court's order."

Consistent with the second letter, paragraph 4 of the dissolution judgment orders:

"Husband, in his capacity as trustee for Third-Party Respondent Anna Mae and David H. Jones Testamentary Trust B, shall immediately transfer title to the properties described in paragraphs 4.1 and 4.2 hereof from the Anna Mae and David H. Jones Testamentary Trust B by warranty deed to Husband (as an individual). Husband (as an individual) shall then immediately transfer fee simple title to said properties to Wife."

Relatedly, the judgment awards no spousal support, and it provides that the trust "shall be deemed revoked effective 30 days after the date of this judgment."

Husband makes one assignment of error, which is directed in the main against paragraph 4 of the judgment. However, he includes four "sub-assignments" within his assignment, asserting respectively: (1) that the trial court had no authority to direct the disposition it made of the trust and trust assets in this dissolution proceeding; (2) that it could not take actions concerning the trust without joining all beneficiaries as parties; (3) that California law rather than Oregon law applies to the "disposition of trust assets"; and (4) that the court erred in finding that wife had "contributed equally" to the trust, or was entitled to the amount the court awarded her on the basis of the court's valuation of the trust assets. 3 For the reasons discussed below, we agree with husband's first argument. His second and third arguments are therefore academic, and we reject his fourth without discussion.

In Melkonian and Melkonian, 55 Or.App. 586, 639 P.2d 662 (1982), the daughter of the parties to the dissolution was the beneficiary of a trust, consisting of corporate securities, that was established by the child's grandmother before the dissolution. The husband served as trustee and had acquired certain real property with the trust income. In its dissolution judgment, the trial court purported to designate the wife as trustee with respect to the real property, while husband remained trustee of the original trust. The appeal arose from a modification order, in which the court directed the husband to pay the taxes on the real property out of the proceeds of the securities trust. We agreed with the husband that the trial court lacked the authority to do so, notwithstanding its "general equitable powers" under the dissolution statutes. We explained:

"Neither did the trial court obtain jurisdiction under the full equity powers of ORS 107.405. The securities were placed in trust, not by the dissolution court, but by the husband's mother for the benefit of the parties' daughter. The securities and the accumulated dividends, either in the bank or reinvested in the real property next door to the parties' former family home, are the daughter's property and were her property prior to the decree of dissolution of her parents' marriage. Even assuming that the dissolution court in 1977 had jurisdiction to designate wife the 'primary trustee' of the real property adjacent to the former family home, the court cannot use its jurisdiction pursuant to the dissolution statutes to order particular conduct of husband as trustee of the daughter's property, when the property belonged to the daughter prior to the dissolution.2" Melkonian, 55 Or.App. at 589-90, 639 P.2d 662 (emphasis in original).

In the footnote to that passage, we proceeded to question even that assumption, although the original dissolution judgment was not directly before us. We said:

"It is questionable whether the court had authority to designate wife as trustee of the unimproved lot. The lot was purchased with trust funds and became a part of the trust corpus. The decree in essence modified a trust created by the child's grandmother. In a dissolution proceeding, the court has authority to distribute only the property of the parties. ORS 107.105(1)(e); 107.105(1)(f)(A)." Id....

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    • United States
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