Guardianship & Conservatorship of Novotny
2017 SD 74
| S.D. | 2017Background
- Mary Novotny’s estate was large (~$2M). After Mary was found a person in need of protection, her co-guardians/conservators (Teresa, Paul Jr., Mark) distributed large gifts to lower estate value for tax reasons.
- Catherine, one of six children, could not be located; the co-conservators placed Catherine’s equal share into an irrevocable trust in December 2012 and named themselves trustees. The trust was said to terminate after ten years if Catherine was not found.
- The circuit court later retroactively approved the conservators’ gifting and the trust; a guardian ad litem was appointed for Catherine. Catherine learned of the trust in 2014 and petitioned to terminate it and receive the funds.
- The circuit court granted summary judgment to the trustees; this Court previously reversed an award of trustees’ attorney fees and remanded. On remand, the court again denied Catherine’s summary judgment motion; Catherine appealed.
- The Supreme Court of South Dakota considered whether the trust was ambiguous and whether it should be terminated, focused on whether the trust was intended to preserve Catherine’s share until she was located.
Issues
| Issue | Plaintiff's Argument (Catherine) | Defendant's Argument (Trustees) | Held |
|---|---|---|---|
| Whether the trust is ambiguous | Trust ambiguous; created to preserve Catherine’s share until she was found and to treat children equally | Trust language is clear: discretionary lifetime trust with only two termination events (death or ten years) | Trust is ambiguous; extrinsic evidence shows intent to preserve Catherine’s share until she was located |
| Whether the trust should be terminated | Termination authorized: trust purpose (preservation until located) fulfilled; SDCL 55-3-23(2) and 55-3-26 permit termination | Trust only terminates by its explicit terms (death or ten-year lapse); trustees retain discretion over distributions | Trust purpose fulfilled (Catherine located); court must terminate trust and distribute property to Catherine |
Key Cases Cited
- In re Sunray Holdings Tr., 841 N.W.2d 271 (S.D. 2013) (ambiguity and trust interpretation reviewed de novo; court enforces trustor intent)
- In re Florence Y. Wallbaum Revocable Living Tr., 813 N.W.2d 111 (S.D. 2012) (court enforces clear trustor intent)
- Briggs v. Briggs, 45 N.W.2d 62 (S.D. 1950) (if doubt remains, examine entire instrument and surrounding circumstances)
- In re Estate of Klauzer, 604 N.W.2d 474 (S.D. 2000) (ambiguity requires examination of language plus execution circumstances)
- In re Estate of Jetter, 570 N.W.2d 26 (S.D. 1997) (definition of ambiguity: reasonably capable of more than one meaning)
- Estate of Nelson, 250 N.W.2d 286 (S.D. 1977) (use canons of construction and circumstances where intent unclear)
- Luke v. Stevenson, 696 N.W.2d 553 (S.D. 2005) (extrinsic evidence appropriate when instrument ambiguous)
- In re Guardianship & Conservatorship of Novotny, 878 N.W.2d 627 (S.D. 2016) (prior Novotny decision reversing fee award and remanding)