In the Matter of the Trust of Robert W Moreland a/k/a Robert William Moreland.
A22-0144
STATE OF MINNESOTA IN SUPREME COURT
July 12, 2023
Chutich, J.
Court of Appeals. Filed: July 12, 2023. Office of Appellate Courts.
Paul D. Funke, Funke Law, PLLC, Saint Paul, Minnesota; and Michael Kemp, Aaron Ferguson Law, Roseville, Minnesota, for respondent.
S Y L L A B U S
- The court of appeals did not err when it determined that the second trust amendment substantially complied with the method of amendment provided by the terms of the original trust.
- The district court acted within its equitable powers and the common law to strike the penalty provision of the second trust amendment and uphold the remaining provisions of that amendment.
Affirmed.
O P I N I O N
CHUTICH, Justice.
This appeal concerns the interpretation and construction of two amendments to the revocable trust of grantor Robert W. Moreland (Grantor). Grantor validly executed the trust, which was properly witnessed and notarized in 2002. Grantor executed amendments to the trust in 2016 (first trust amendment) and in 2019 (second trust amendment) that greatly increased the amount that one of Grantor‘s sons, respondent Robert S. Moreland (Robert), would inherit. After Grantor died in 2020, appellant Dean W. Moreland (Dean), Robert‘s brother, moved to invalidate the two amendments.1 The district court ultimately struck a portion of the second trust amendment as ambiguous, but held that the remaining terms of the amendment—including the greatly increased amount inherited by Robert—would govern the distribution of assets.
On appeal, the court of appeals determined that the two amendments were validly executed, and that the district court had properly reformed the trust under
Dean petitioned for review, which we granted. He contends that the court of appeals made improper findings of fact relating to the validity of the second trust amendment and
FACTS
After a court trial and a post-trial hearing on a motion for partial amended findings, the district court made the following findings of fact. Grantor executed a revocable trust in 2002 that all parties agreed was validly executed. The trust was witnessed by two nonbeneficiaries and notarized by a third person. Grantor had seven children, and named one of his sons, Robert, trustee. Article II of the trust stated that the trust was amendable by delivering a written instrument signed by Grantor to the trustee.2 The trust also provided
Upon Grantor‘s death, the trust assets were to be distributed among the trust beneficiaries according to “schedule A.” In addition to containing a specific devise to a church, schedule A stated that the remainder of the trust assets were to be allocated to Grantor‘s seven children unequally in the following percentages:
| Jon Robert Moreland | 12% |
| Dean William Moreland | 16% |
| Scott Allan Moreland | 13% |
| Robert Scott Moreland | 16% |
| William Brian Moreland | 14% |
| Michael John Moreland | 14% |
| Cheryl Ann Moreland | 15% |
In 2016, Grantor amended the trust. Robert testified that Grantor wanted to amend the trust because Grantor, at age 88, was going to have surgery. Concerning his children, Grantor increased Robert‘s share to 31 percent and reduced the other siblings’ shares from between 12 and 16 percent to either 10 or 13 percent. Grantor signed this first trust amendment and delivered it to Robert. The amendment was not witnessed or notarized.
On July 23, 2019, when Grantor was 91 years old, he executed a second trust amendment. The amendment was again not witnessed or notarized but was signed by
| Jon Robert Moreland | 1% or $5,000.00 |
| Dean William Moreland | 1% or $5,000.00 |
| Scott Allan Moreland | 1% or $5,000.00 |
| Robert Scott Moreland | 94% |
| William Brian Moreland | 1% or $5,000.00 |
| Michael John Moreland | 1% or $5,000.00 |
| Cheryl Ann Moreland | 1% or $5,000.00 |
The above percentages will only be paid out if they start acting [like] family again to my son Robert Scott Moreland. Failure to accomplish this, will result in the dollar amounts listed next to the percentages being paid.
We refer to these last two sentences as the “penalty provision.” Robert testified that Grantor left it up to him to decide whether his siblings treated him like “family again,” and would therefore be entitled to receive 1 percent of the estate instead of $5,000.
Grantor died a year later in 2020. Dean petitioned the district court to invalidate the first and second trust amendments because they were not witnessed or notarized and to remove Robert as trustee.3 He also asked the district court to invalidate the trust amendments because of undue influence, fraud, and Grantor lacking testamentary capacity.
At the court trial, Robert and Dean testified about their relationship with Grantor and the broader family dynamics. Robert lived with Grantor beginning in 2015 and was his primary caregiver in the last 5 years of Grantor‘s life, including driving him to medical appointments and maintaining Grantor‘s home. Grantor also gave Robert power of
In its initial findings of fact and order on the matter, the district court found, first, that Dean did not present evidence of undue influence, fraud, or a lack of capacity “during the execution of either amendments to the trust.” Accordingly, the district court focused its analysis on the validity of the two trust amendments.
The district court found that under the plain language of
Turning to the second trust amendment, the district court found that the trust language was “too ambiguous to enforce.” The court stated that the penalty provision was unenforceable because, given the complex family dynamic and estrangement, it was impossible to decipher what acting “like family again” meant or what Grantor‘s intent was.
Robert moved for partial amended findings, arguing that only the penalty provision of the second trust amendment should be vacated because the rest of the amendment was unambiguous. The district court agreed and found that “Minnesota case law require[d]” it to “reform” the second trust amendment to effectuate the intent of Grantor, issuing an order granting Robert‘s motion for amended findings. In its amended order and findings of fact, the district court again concluded that the penalty provision was ambiguous, but that the distribution language was clear and enforceable. The district court “reformed” the trust by striking the penalty provision but enforcing the remainder of the second trust amendment, including the charitable devises, a 94 percent distribution to Robert, and 1 percent distributions to the other six siblings.
Dean appealed, and the court of appeals affirmed. In re Tr. of Robert W. Moreland, No. A22-0144, 2022 WL 4074797 (Minn. App. Sept. 6, 2022). The court agreed with the district court that under
Lastly, the court of appeals concluded that the district court was permitted to strike the penalty provision and reform the trust under
We granted in part Dean‘s petition for review5 and now affirm the decision of the court of appeals as modified.
ANALYSIS
In determining the validity and interpretation of the second trust amendment, we apply the following principles. We review a district court‘s interpretation of a trust de novo. In re Tr. of Lawrence B. Schwagerl Tr. Under Agreement Dated Apr. 9, 1999, 965 N.W.2d 772, 779 (Minn. 2021).
In addition, Minnesota enacted its updated trust code, chapter 501C, in 2015, adopting many of the provisions of the Uniform Trust Code.
Having these applicable legal principles of trust construction in mind, we turn to Dean‘s primary arguments. First, he contends that the court of appeals erred when it concluded that the district court implicitly rejected his argument that the second trust amendment was not validly executed. Second, he asserts that the court of appeals erred
I.
Dean argues that the court of appeals erred in holding that the second trust amendment was validly executed without the district court explicitly saying so. We disagree. Although the district court failed to make a similar explicit finding concerning the second trust amendment‘s compliance with the 2002 trust, it rejected Dean‘s identical arguments challenging the validity of the first amendment‘s formalities. Equally important, the district court made several findings of fact showing that the second trust amendment complied with governing trust law and the method of amendment set out in the original trust.
The 2002 trust states that it is governed by Minnesota law. Minnesota law is clear that a revocable trust can be amended “by substantial compliance with a method provided in the terms of the trust.”
Regarding the first requirement of a written instrument signed by Grantor, the court of appeals determined that a document was not required to be witnessed or notarized to qualify as an amendment under the terms of the trust. In re Tr. of Moreland, 2022 WL 4074797, at *6. The second trust amendment was a similar, typed document to the first amendment, which the district court found was valid. Additionally, the district court specifically found that the written second trust amendment was signed by Grantor.
Likewise, sufficient findings showed that the second requirement was met: that the trust amendment was delivered to the trustee, Robert. Robert had the second trust amendment in his possession at the time of Grantor‘s death.
Although it would have been preferable for the district court to have included an explicit statement that its analysis of the validity of the second trust amendment‘s execution was the same as the first, the district court‘s clear findings of fact show that the second trust amendment substantially complied with the terms of the 2002 trust. Given these factual findings and the district court‘s explicit rejection of Dean‘s identical objections to the first amendment, the court of appeals did not err in concluding that the district court properly determined that the second trust amendment was validly executed.
II.
The second issue raised by Dean concerns the district court‘s decision to strike the penalty provision but enforce the remainder of the second trust amendment. Dean asserts that any reformation of the trust under
Specifically, the court of appeals concluded that a mistake of law was present because Grantor believed the penalty provision to be enforceable when it was not. In re Tr. of Moreland, 2022 WL 4074797, at *9. Dean again argues that the court of appeals erred by making factual findings, specifically that a mistake of law occurred that warranted reforming the trust under
A.
We first examine
The court may reform the terms of a trust, even if unambiguous, to conform the terms to the settlor‘s intention if it is proved by clear and convincing evidence what the settlor‘s intention was and that the terms of the trust were affected by a mistake of fact or law, whether in expression or inducement.
Minnesota statutes do not define “mistake of law.” But Black‘s Law Dictionary defines “mistake of law” as “[a] mistake about the legal effect of a known fact or situation.” Black‘s Law Dictionary 1200 (11th ed. 2019). Examples of mistakes of law in cases from other jurisdictions involving comparable provisions to
Equating an ambiguous trust provision to a mistake of law is not supported by pertinent precedent or statute. Importantly, the comment to the Uniform Trust Code, section 415, makes a distinction between a mistake of law and ambiguity, stating that “[r]eformation is different from resolving an ambiguity.”6 Unif. Tr. Code § 415 cmt.
Notably, in the amended findings, the district court stated that it was unable to interpret Grantor‘s intent regarding the penalty provision because the provision was “far too ambiguous” and subjective. The district court struck the provision not because clear and convincing evidence existed that Grantor would have intended that result if the provision was unenforceable, but rather because the district court was “unable to determine” what Grantor intended. The court of appeals concluded that a mistake of law, the second condition for reformation, was present because the trust provision was not legally enforceable when Grantor thought it was. Unlike the cases cited above, the court of appeals did not point to a specific law about which Grantor was mistaken or determine that Grantor was confused about the effect of a particular term used in the trust.
Accordingly, we conclude that
B.
Our analysis does not end here, however, because the district court‘s order is unclear as to whether the court actually relied upon
Minnesota common law supports the equitable remedy of striking a provision that is unenforceable but upholding otherwise clear language in an instrument, as the district court did here. In Sabledowsky v. Arbuckle, 52 N.W. 920, 920–21 (Minn. 1892), for example, we struck an ambiguous trust provision that would benefit people who took “good, kind, and considerate care” of the grantor‘s son, but still upheld the rest of the instrument. And we have held in the context of interpreting a will that an unenforceable provision will only result in the voiding of the entire instrument if the valid and invalid provisions are so intertwined that the intent of the grantor would be defeated if the unenforceable trust provisions are excised. In re Hartz‘s Est., 54 N.W.2d 784, 790 (Minn. 1952).7 Indeed, “[t]he primary function of the court in exercising jurisdiction over trusts is to preserve them and to secure their administration according to their terms.” In re Campbell‘s Trusts, 258 N.W.2d 856, 868 (Minn. 1977); see also Restatement (Third) of Prop.: Wills and Donative Transfers § 11.2(f) (Am. L. Inst. 2003) (“In rare cases of ambiguity, the evidence does not fully establish the donor‘s intention. In the absence of an applicable constructional preference or rule of construction . . . the document, in such cases, may be construed to carry out the donor‘s intention to the extent possible.“).
These common law principles of equity have continued vitality. “The common law of trusts and principles of equity supplement” the Minnesota Trust Code, “except to the extent modified by [the Minnesota Trust Code] or another law of this state.”
As noted,
Here, the district court struck the unenforceable penalty provision, and no extrinsic evidence was needed to interpret the remaining, unambiguous trust language. The penalty provision was not so intertwined with the rest of the trust or amendment provisions that it could not be severed. Indeed, the district court specifically found that the distribution language could be enforced, pursuant to Grantor‘s intent, without the penalty provision: “Nothing is ambiguous regarding the reduction in the distribution percentages to all of grantor‘s children except Robert . . . [who was] the only child who had remained in constant contact with the grantor into his old age.” We hold that reformation under
CONCLUSION
For the foregoing reasons, we affirm the decision of the court of appeals, but we do so on different grounds.
Notes
Article II of the 2002 trust provides in full:
The Grantor reserves and shall have the exclusive right any time and from time to time during its lifetime by instrument in writing signed by the Grantor and delivered to the Trustee to modify or alter this Agreement, in whole or in part, without the consent of the Trustee or any beneficiary provided that the duties, powers and liabilities of the Trustee shall not be changed without its consent; and the Grantor reserves and shall have the right during its lifetime, by instrument in writing, signed by the Grantor and delivered to the Trustee, to cancel and annul this Agreement without the consent of the Trustee or any beneficiary hereof. Grantor expressly reserves the right to appoint successor trustees, replace present trustees and change the beneficiaries or the rights to property due any beneficiary.