Phillips v. Bank of Utah (In re John Edward Phillips Family Living Trust)
| Decision Date | 27 January 2022 |
| Docket Number | 20200381-CA |
| Citation | 505 P.3d 1127 |
| Parties | In the MATTER OF the JOHN EDWARD PHILLIPS FAMILY LIVING TRUST. Peter O. Phillips, Appellant, v. Bank of Utah, et al., Appellees. |
| Court | Utah Court of Appeals |
Adam S. Affleck, Salt Lake City, UT, Attorney for Appellant
Brett N. Anderson, Salt Lake City, UT, and Scott R. Taylor, Attorneys for Appellee Bank of Utah
James K. Tracy, Salt Lake City, UT, Robert S. Tippett, James C. Dunkelberger, and Hyrum Jacob Bosserman, Salt Lake City, UT, Attorneys for Appellee Rachel Phillips Selby
Fred D. Essig and Troy L. Booher, Salt Lake City, UT, Attorneys for Appellees Shaun Phillips, Michelle Mittleman, Doris Rubio, and Charlene Phillips
1
Opinion
¶1 This case concerns the administration of the testamentary trust of John Edward Phillips (the JEP Trust). The terms of the JEP Trust provided that upon the death of John Edward Phillips (John),2 the trust assets were to be divided in three shares among John's three sons. The shares of two of the sons, James E. Phillips and Peter O. Phillips, were to be held in separate trusts for their respective benefit. The third son, John C. Phillips (Johnny), was named trustee of the JEP Trust and of his brothers’ subtrusts.
¶2 After Johnny died, Bank of Utah (the Bank) became the successor trustee of the JEP Trust and Peter's daughter, Rachel Phillips Selby, was appointed successor trustee of the Peter O. Phillips subtrust (POP Trust). The Bank distributed by selling a valuable trust asset, a farm property, to the highest bidder, which was Johnny's estate (the JCP Estate).
¶3 Peter, the main beneficiary of the POP Trust, took issue with the Bank's sale of the farm property to the JCP Estate. Peter filed a petition seeking to have the farm property returned to the JEP Trust and to remove the Bank as its successor trustee.
¶4 The Bank moved to dismiss Peter's petition on the ground that Peter lacked standing to challenge the distribution by sale of the farm property and its role as trustee because Peter was not a beneficiary of the JEP Trust. The district court agreed but did not dismiss the petition. Instead, it substituted Selby as the petitioner because, as the trustee of the POP Trust, she was the real party in interest and therefore was the one with standing to pursue the claims.
¶5 Selby and the other parties eventually executed an agreement in which they settled all claims in the lawsuit. The parties then submitted the signed agreement to the court for approval. After this, Peter filed a motion to intervene. The court denied Peter's motion as untimely and approved the settlement agreement.
¶6 Peter now challenges the district court's decisions to (1) dismiss him for lack of standing and substitute Selby as the real party in interest and (2) deny his motion to intervene. We affirm.
¶7 John created the JEP Trust through a restated trust agreement and three amendments. The terms of the final JEP Trust provided that the relevant JEP Trust assets were to be divided into three shares for his sons: 45% to Johnny; 30% to James; and 25% to Peter.3 The manner of distribution for each share was also provided. Per the terms of the original JEP Trust document, James's share was to "be held in a separate Trust for the benefit of James E. Phillips and his issue," with Johnny as trustee. And under the terms of the third amendment to the JEP Trust, Peter's share should be "distributed in the identical manner" as that of James's; that is, through a subtrust.
¶8 John died in May of 2014, triggering the distribution of the JEP Trust assets. In accordance with the second amendment to the JEP Trust, Johnny became sole trustee of the JEP Trust.
¶9 Shortly after John's death, Peter filed a petition in the district court asking to (1) invalidate the second and third amendments to the JEP Trust, (2) remove Johnny as trustee of the JEP Trust and appoint a successor trustee, (3) order Johnny to provide an accounting for the JEP Trust, and (4) declare that Peter's share of the JEP Trust would not be held in a separate trust.
¶10 Peter, Johnny, and James signed a stipulation that resolved all these issues except the accounting issue. As relevant here, the stipulation (1) declared the second and third amendments to the JEP Trust to be valid; (2) kept Johnny as trustee of the JEP Trust but named Peter's daughter, Rachel Phillips Selby, as successor trustee of the POP Trust; and (3) declared that Peter's share of the JEP Trust would be paid to the POP Trust, not to Peter. With regard to the accounting issue, the stipulation provided that Peter would retain his claims "related to the accounting of and the distribution of the assets of the JEP Trust."
¶11 In 2015, while serving as trustee of the JEP Trust, Johnny died. Johnny's undistributed share of the JEP Trust passed to the JCP Estate. The Bank was appointed as the successor trustee of the JEP Trust.
¶12 In 2017, the Bank, as trustee, began to market approximately 47.75 acres of farm property held by the JEP Trust. After weeks of formal listing, the Bank received multiple offers from third parties to purchase the farm property. The "highest and best offer" received was an offer of $2,350,000 from a local homebuilder. The Bank disclosed these offers to the JEP Trust beneficiaries and other members of the Phillips family and invited them to submit competing offers to purchase the farm property; offers could include "a credit against the beneficiary's anticipated distribution."
¶13 Thereafter, Charlene Phillips, Johnny's estranged wife, made an initial offer (the JCP Offer) to purchase the farm property for a credit against her share of the JEP Trust on terms equal to the net value of the highest third-party offer.4 The JCP Offer was then modified a number of times to ensure that the purchase price was equal to or greater than the third-party offer. In the end, the Bank accepted the modified JCP Offer, netting an increase to the POP Trust of $1,179 over the highest third-party offer, and conveyed the farm property to the JCP Estate.5
¶14 Unhappy with the transaction, Peter filed a petition in the district court seeking relief on three claims related to the Bank's distribution of the farm property. First, Peter sought a declaration that Johnny's share of the JEP Trust should have been distributed to Johnny's children instead of to the JCP Estate. Second, Peter sought to remove the Bank as trustee of the JEP Trust. Third, Peter sought to set aside the Bank's transfer of the farm property to the JCP Estate.
¶15 The Bank moved to dismiss Peter's petition for lack of standing. The Bank argued that Peter lacked "standing to assert the subject claims and [was] not the real party in interest" because he was "not a beneficiary of the JEP Trust, but [was] instead the beneficiary of" the POP Trust. Shortly thereafter, Selby filed a motion to be joined as a petitioner in the matter, asserting that any beneficial interest Peter would receive from the JEP Trust was to be paid to the POP Trust, and she, as trustee of the POP Trust, held any claims related to Peter's share of the JEP Trust. Accordingly, Selby argued she was "the real party in interest" with standing to assert the claims brought by Peter.
¶16 The district court issued a memorandum decision addressing both motions in which it agreed with the Bank that Peter lacked standing to bring claims against the JEP Trust or the Bank as successor trustee. The court reasoned that under Utah law, Peter was not a beneficiary6 of the JEP Trust and, even if he qualified as a beneficiary somehow, he had failed to meet any of the "limited instances" where a beneficiary, rather than the trustee, may bring suit against the trust. The court also noted it had "place[d] great weight" on the stipulation in which Peter acknowledged the validity of the JEP Trust and "in accordance with the JEP Trust, any and all beneficial interest that Peter would receive from the JEP Trust shall be paid over and distributed to" the POP Trust. (Quotation simplified.) Nevertheless, the court declined to dismiss the petition, finding it appropriate to substitute Selby, in her capacity as trustee of the POP Trust, as the sole petitioner.
¶17 After Selby replaced Peter as petitioner, she filed a new petition with the district court, seeking an order to set aside the transfer of the farm property from the JEP Trust to the JCP Estate or, alternatively, for payment of damages by the Bank or the JCP Estate for the wrongful distribution of the farm property. Selby's petition did not include Peter's claims for declaratory relief, nor did she seek to remove the Bank as trustee of the JEP Trust.
¶18 While Selby's petition was still pending in the district court, Selby entered into a global settlement agreement with all parties in the case regarding the distribution of the farm property. The agreement, which resolved all remaining issues, was expressly conditioned on the court's approval. It included a request that the court order "that the distribution of the Farm Property by the JEP Trust to the JCP Estate was proper." It also provided the POP Trust would receive a cash payment of $30,000 from the JCP Estate in exchange for an agreement that the JCP Estate would retain the farm property. Finally, upon approval by the court, the terms of the settlement would be final and not subject to appeal and the parties would be barred from bringing any new claims relating to the farm property. The settlement agreement was filed in court for approval through a stipulated motion.
¶19 On November 7, 2019, seven days after Selby filed a motion to approve the settlement agreement, Peter, along with several other family members, filed motions to intervene. Peter argued Selby lacked standing and authority to act as trustee of the POP Trust because she was not...
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