Shiba v. Shiba, 20060560.
| Decision Date | 13 May 2008 |
| Docket Number | No. 20060560.,20060560. |
| Citation | 2008 UT 33,186 P.3d 329 |
| Parties | Masakazu SHIBA; Shizue F. Shiba; Masakazu Shiba, Trustee of the Riye Shiba Marital and Family Trust; and Masakazu Shiba, Trustee of the Masazo Shiba Marital and Family Trust, Plaintiffs and Appellants, v. Toshiro SHIBA; Jean O. Shiba; Seiji Shiba; Della Kono Shiba; Ronald Nishijima; Natsuye Nishijima; Ronald Nishijima and Natsuye Nishijima, Trustees of the Ronald and Natsuye Family Trust; Toshiro Shiba, Trustee of the Riye Shiba Marital and Family Trust; Toshiro Shiba, Trustee of the Masazo Shiba Marital and Family Trust; and Does 1-10, Defendants and Appellees. |
| Court | Utah Supreme Court |
M. James Brady, Margot Edwards, Provo, for plaintiffs.
Evan A. Schmutz, Andrew V. Wright, M. Reed Adams, Provo, David Ray Carter, Salt Lake City, for defendants.
¶ 1 Appellant Masakazu Shiba appeals the trial court's determination that Appellee Toshiro Shiba is entitled to fifty percent of the proceeds from the sale of their father's residence. Masakazu also appeals the trial court's conclusion that the distribution scheme in the family trust was never amended and, therefore, the assets were intended to remain in the estate until their father's death. We conclude that the trial court's determinations were correct and therefore affirm.
¶ 2 Appellant Masakazu Shiba ("Sok") and Appellees Toshiro Shiba ("Tosh"), Natsuye Nishijima ("Nats"), and Seiji Shiba ("Seiji") are the children of Masazo ("Mas") and Riye Shiba, both of whom are deceased. During the 1950s, Mas, Tosh, and Sok began to acquire farmland in Lehi, Utah (the "Shiba Farm"). In early 1959, Mas and Tosh acquired an additional one hundred acres of land by warranty deed, with each retaining an undivided fifty percent interest as joint tenants. Within that one hundred acres was a thirty-acre parcel that Tosh and Mas used to build their homes.
¶ 3 On December 31, 1985, Mas acted as Trustor in executing the Masazo Shiba Marital and Family Trust (the "Trust"). Tosh and Sok were named as joint trustees of the Trust. The Trust provided, among other things, that upon Mas' death, Tosh's home— including the 1.49 acre lot upon which it was built—should be distributed to Tosh and his heirs. Furthermore, the Trust provided that Mas' primary residence and lot should be distributed to Sok and his heirs. Also on December 31, 1985, Mas conveyed his right title and interest in the Shiba Farm (including the thirty-acre parcel of land where his and Tosh's homes were located) to the Trust. Tosh, however, did not convey his interest in the thirty-acre parcel to the Trust; instead, Tosh retained his fifty percent interest in both of the homes and the land upon which they were built.
¶ 4 On December 31, 1985, Mas and Riye created the Shiba Farm Limited Partnership (the "Partnership") as part of their overall estate plan. On that same day, Mas and Riye conveyed the Shiba Farm to the Partnership, and it became the Partnership's primary asset. Also on December 31, 1985, Mas and Riye transferred their interest in the Partnership to the Trust.
¶ 5 The Limited Partnership Agreement (the "LP Agreement") named Sok and Tosh as general partners and named eight limited partners.1 The LP Agreement provided, among other things, that the profits could be distributed "provided that all of the partners shall participate in any such distribution pro rata in accordance with their respective capital contributions." The LP Agreement also stated that upon dissolution, the general partners could "elect to distribute undivided interests in partnership property to the partners in kind in proportion to their capital accounts at the time of distribution." Finally, the LP Agreement could only be amended by compliance with section 15.8 of the Articles of Incorporation.2
¶ 6 On December 4, 1990, Mas executed the First Amendment to the Trust, which provided that the interest in the Partnership owned by the Trust "shall be distributed in such a way as to achieve a final percentage of ownership" of any real property held by the Trust among the Shiba children as follows: (1) Sok, 43.5%; (2) Tosh, 43.5%; (3) Nats, 6.5%; and (4) Seiji, 6.5%. (Emphasis added.) On December 27, 1990, Mas executed the Second Amendment to the Trust, which simply provided a legal description of Mas' residence. No additional amendments were made to the Trust.
¶ 7 At some point prior to 1994, Tosh and Sok became unable to cooperate and manage the Trust or the Partnership. These difficulties subsequently led to litigation. As a result of the litigation, it was decided that the Shiba Farm would be sold. After consulting a lawyer, the partners decided that in order to avoid a significant capital gains tax on the sale of the Shiba Farm, they would effect a Section 1031 "like-kind" exchange (the "Exchange Plan"), which would substitute suitable property into the Partnership to replace the Shiba Farm. The Exchange Plan proposed allocating the Partnership assets to the various children, who would each then be responsible for locating a property to "replace" their designated share. The Partnership would then sell the Shiba Farm and purchase those prospective properties with the proceeds; any income, loss, or expenses for the future properties would be attributed to the individual who located the particular asset. After further review, however, the lawyer determined that implementation of the Exchange Plan required modification of the LP Agreement to allow specific allocation of assets, income, and expenses among the various partners. The LP Agreement, however, was never modified or amended.
¶ 8 On December 3, 1994, the Shiba family met in an effort to implement the Exchange Plan. During the meeting, all of the partners executed an agreement that incorporated and specifically indicated an intent to be bound by four identified documents: (1) the "No Change Pledge to the Masazo Shiba Marital and Family Trust Agreement" (the "No Change Pledge") (2) the "Exchanging Properties From Farm Sale — December 3, 1994," (the "Exchange Document"), (3) the "Pre-Allocation Plans A & B ... December 1, 1994," and (4) the "Present Ownership Schedule ... Oct. 22, 1994" (the "P.O. Schedule"). Collectively, these four documents are referred to as the Family Agreement.
¶ 9 In order to facilitate the Exchange Plan, Mas had to amend the Trust to allow for the specific allocation of assets, income, and expenses among the various partners. Mas agreed to do this by executing the No Change Pledge.3 However, Mas never amended the Trust in the manner contemplated. Furthermore, although the fourth paragraph of the No Change Pledge gives the beneficiaries of the Trust the ability to acquire exchange properties upon the sale of the Shiba Farm using their anticipated trust inheritances, the paragraph also specifically states that "[t]he pre-allocated amount and its earnings shall remain [Mas'] property until such time of distribution from my estate." (Emphasis added.)
¶ 10 After the December 1994 meeting, each of the partners began looking for their respective "replacement" properties. Only two of the partners, however, were successful in locating any property: Nats and her husband Ron located a building lot in Farmington (the "Farmington Lot"), and Sok located a medical office building (the "Clinic"). The Shiba Farm was subsequently sold in January 1995, thus triggering the need for the exchange properties in order to avoid the capital gains taxes. Because replacement properties could not be found by all the partners, the family decided that Tosh, Sok, and the Trust would contribute funds to purchase the Clinic on the express condition that when Sok located appropriate financing, their funds would be promptly released. On July 6, 1995, the Clinic was purchased for $1,610,415.4 The warranty deed delivered in connection with the purchase of the Clinic established title to the parties in the same percentages as they had contributed to the purchase price.
¶ 11 For several years, the Partnership made tax declarations and accountings indicating that all of the Partnership properties — including the Farmington Lot,5 the Clinic, and various investment accounts — were held by the Partnership in the same percentage of ownership as the Shiba Farm had been before it was sold. Pursuant to the advice of accountants, Tosh performed re-accountings according to the pre-allocations for the tax years 1996 through 1999. The partners were not satisfied with the 1999 accounting; specifically, Sok believed he had "cashed out" the other partners and believed he now owned the Clinic outright and had no need to account. Distribution of the proceeds from the sale of the Clinic pursuant to the Trust is one of the issues Sok now disputes on appeal.
¶ 12 Some time after 1959, Mas and Tosh both built residences on the thirty-acre parcel located within the one hundred acres they had acquired by warranty deed. Title to those properties was originally placed in the name of Mas and Tosh as joint tenants. As previously discussed, Mas subsequently conveyed his interest in the parcel to the Trust by quitclaim deed, which severed the joint tenancy and created a tenancy in common. Tosh, however, retained his interest. Subsequently, when the family sold the Shiba Farm in January 1995, the Trust and Tosh also sold their interests in the thirty-acre parcel, including their interests in the two residential lots and homes. The proceeds from the sale of Mas' home and land — $142,0006 — were separated and placed in a separate Fidelity account (the "Fidelity Account").7 Sok now disputes how the Fidelity Account is to be distributed between him and Tosh.
¶ 13 In 1998, Mas died. After numerous failed attempts between Tosh and Sok to resolve...
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