Van Gundy v. Van Gundy
2012 COA 194
Colo. Ct. App.2012Background
- Beneficiary created an irrevocable 2004 trust managed by Trustee (son) funded with real estate and family stock.
- Trust authorizes Trustee to hold, manage, administer, and distribute assets for beneficiary's health, maintenance, support, and comfort.
- Trust includes a spendthrift provision shielding assets from beneficiary creditors and prohibiting encumbrance.
- Section 8(d) gives Trustee broad discretionary investment authority “without regard to diversification” and in fiduciary capacity.
- Trustee invested 100% in stocks/mutual funds by 2006, including margin purchases and a Crystallex position; diversification later relaxed by trust terms.
- Beneficiary sued for breach of contract, accounting, and other claims; district court awarded damages and fees; trustee appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the prudent investor rule applies given the trust language | Van Gundy asserts prudent investor rule governs investments. | Van Gundy argues trust 8(d) eliminates/ alters prudent rule. | The plain 8(d) language disallows automatic application of the prudent investor rule. |
| Whether margin purchases breached trustee duties | Margin investments breached prudent standards under the court’s view. | Trust terms allowed investments without regard to diversification or prudent limits. | Margin purchases were not per se breaches under the trust terms; error to treat as categorical breaches. |
| Whether diversification requirements were properly applied | Diversification was needed under statute/Restatement. | Trust terms relax diversification; broad discretion permitted. | Diversification requirement could be relaxed by the trust; 7 holdings with 82% in a fund satisfied the relaxed standard. |
Key Cases Cited
- M.D.C./Wood, Inc. v. Mortimer, 866 P.2d 1380 (Colo. 1994) (standard of review for factual findings; clear error authorities)
- Page v. Clark, 197 Colo. 306, 592 P.2d 792 (Colo. 1979) (clear statements on district court fact-finding and statutory interpretation)
- Associated Governments of Northwest Colo. v. Colo. Pub. Utils. Comm'n, 2012 CO 28, 275 P.3d 646 (Colo. 2012) (statutory interpretation standards)
- Denver Foundation v. Wells Fargo Bank, 163 P.3d 1116 (Colo. 2007) (trust interpretation; guidance on interpreting trust terms)
- Casey v. Colorado Higher Educ. Ins. Benefits Alliance Trust, 2012 COA 134, 120 P.3d — (Colo. App. 2012) (interpretation of trust agreements and related duties)