Brody v. Deutchman (In re Rhea Brody Living Trust)

325 Mich.App. 476

925 N.W.2d 921

IN RE RHEA BRODY LIVING TRUST, DATED JANUARY 17, 1978, as amended.

Robert Brody, Intervenor–Appellant/Cross Appellee,

v.Cathy B. Deutchman, Petitioner–Appellee/Cross AppelleeandMichael Barton, Special Fiduciary, Intervenor,

and

Jay Brody, Intervenor–Appellee/Cross Appellant.

No. 330871

Court of Appeals of Michigan.

Submitted July 2, 2018, at Lansing.

Decided August 7, 2018, 9:00 a.m.

Hertz Schram PC (by Kenneth F. Silver and Daniel W. Rucker ) for Cathy B. Deutchman.

Giarmarco, Mullins & Horton, PC (by William H. Horton and Christopher J. Ryan ) for Robert Brody.

Kemp Klein Law Firm (by Alan A. May, Joseph P. Buttiglieri, and Richard Bisio ) for Jay Brody.

Amicus Curiae: Warner Norcross & Judd LLP (by David L. J. M. Skidmore and Conor B. Dugan ) for the Probate & Estate Planning Section of the State Bar of Michigan.

Before: O'Brien, P.J., Murray, C.J., and Jansen, J.

ON REMAND

Per Curiam.

In an order dated June 8, 2018, the Michigan Supreme Court vacated Part II of this Court’s prior opinion in this case, In re Brody Living Trust , 321 Mich. App. 304, 910 N.W.2d 348 (2017) ( Brody I ), and remanded this case to this Court for reconsideration "of its standing analysis." In re Brody Living Trust , 501 Mich. 1094, 912 N.W.2d 175 (2018) ( Brody II ). Our Supreme Court directed this Court to "consider whether the terms ‘child’ and ‘beneficiary’ in MCL 700.1105 are modified by the phrase ‘and any other person that has a property right in or claim against a trust estate.’ If so, then [this Court] shall consider whether Cathy Deutchman is an ‘interested person’ under this reading of the statute." Brody II , 501 Mich. at 1094, 912 N.W.2d at 175. Additionally, our Supreme Court instructed that this Court may consider the arguments made in the Supreme Court by the Probate and Estate Planning Section of the State Bar of Michigan regarding whether Cathy has standing "in light of MCR 5.125(C)(33)(g) and MCL 700.7603(2) and is a present (not contingent) beneficiary of the trust." Id . We again affirm our prior conclusion that the trial court did not err by concluding that Cathy had standing as a petitioner in this action.

This case arose out of a family dispute involving the Rhea Brody Living Trust. Rhea’s husband, Robert Brody, originally appealed the order granting partial summary disposition in favor of Rhea and Robert’s daughter, Cathy. As this Court originally articulated in Brody I , "the order resolved claims relating to two family businesses, Brody Realty No I, LLC, and Macomb Corporation, declared Rhea Brody disabled pursuant to the terms of the trust, and removed Robert as successor trustee of the trust." Brody I , 321 Mich. App. at 308, 910 N.W.2d 348. The convoluted factual background of this case can best be boiled down to the fact that Rhea became mentally incapacitated as a result of dementia, and Robert, who is also a beneficiary of the trust, began acting as successor trustee. Allegations were made that Robert took actions that were detrimental to the trust, contrary to Rhea’s intent, and favored Jay Brody and his heirs¹ to the detriment of Cathy and her heirs.

In their original appeal to this Court, Robert and Jay argued that Cathy "did not have standing (i.e., she was not a proper party) to request adjudication of the issues in her petition, including Robert’s removal as trustee of the Rhea Trust and reversal of actions taken by Robert as trustee." Id. at 314, 910 N.W.2d 348. Previously, we concluded that Cathy did have standing under MCL 700.7201 as an "interested person," which is defined in MCL 700.1105(c), because,

[t]here is no dispute that Cathy is Rhea’s child. In addition, Cathy is a "beneficiary." Under MCL 700.1103(d)(i), a beneficiary includes a "trust beneficiary," defined in MCL 700.1103(d)(i) as a person with "a present or future beneficial interest in a trust, vested or contingent." The term "beneficial interest" is defines as follows: "A right or expectancy in something (such as a trust or an estate), as opposed to legal title to that thing. For example, a person with a beneficial interest in a trust receives income from the trust but does not hold legal title to the trust property." Black’s Law Dictionary (10th ed.), p. 934. The plain language of the trust indicates that Cathy has a future (upon Rhea’s death), contingent (assuming no revocation or amendment) interest in the trust property. See Restatement Trusts, 1st, § 56, illustration 7, p. 172 (an intervivos trust in which the death of a settlor is a condition precedent establishes a "contingent equitable interest in remainder"). Specifically, Cathy will receive Rhea’s clothing and jewelry. In addition, if Robert predeceases Rhea, then a subtrust composed of 50% of the Rhea Trust’s remaining assets is created for Cathy. If Rhea predeceases Robert, then a marital trust and a family trust are created, and under the marital trust, Rhea’s descendants are each entitled to net income distributions and any principal necessary for education, health, support, and maintenance. [ Brody I , 321 Mich. App. at 317-318, 910 N.W.2d 348.]

We have been directed by our Supreme Court to reexamine our original standing analysis. In particular, our Supreme Court indicated that this Court "should consider whether the terms ‘child’ and ‘beneficiary’ in MCL 700.1105 [ (c) ] are modified by the phrase ‘and any other person that has a property right in or claim against a trust estate.’ " Brody II , 501 Mich. at 1094, 912 N.W.2d at 175. Our Supreme Court further instructed that if this Court answers that question in the affirmative, this Court should then consider whether Cathy qualifies as an "interested person" under such an interpretation of MCL 700.1105(c). Id . Finally, our Supreme Court noted that this Court "may also consider" the arguments in an amicus curiae brief submitted in our Supreme Court by the Probate and Estate Planning Section (the Probate Section) of the State Bar of Michigan. Because we find the Probate Section’s arguments persuasive, we will consider them first, in the interest of clarity.

Given the broad scope of the Estates and Protected Individuals Code (EPIC), MCL 700.1101 et seq. , which codifies several complex areas of law, the act contains many statutory definitions. Such definitions are not consolidated in any one portion of EPIC, are not universally applicable, sometimes overlap or supersede other definitions within the act, and often contain terms or phrases that are also statutorily defined. See, e.g., MCL 700.1102 ("The definitions contained in this part apply throughout this act unless the context requires otherwise or unless a term defined elsewhere in this act is applicable to a specific article, part, or section."). Accordingly, as a foundational matter, several relevant statutory definitions must be set forth before approaching the principal analysis.

Under MCL 700.7103(l )(i), the term "trust beneficiary" is defined, in relevant part, as a person who "has a present or future beneficial interest in a trust, vested or contingent." On the other hand, the phrase "qualified trust beneficiary" is defined under MCL 700.7103(g), in pertinent part, as:

a trust beneficiary to whom 1 or more of the following apply on the date the trust beneficiary’s qualification is determined:

(i ) The trust beneficiary is a distributee or permissible distributee of trust income or principal.

* * *

(iii ) The trust beneficiary would be a distributee or permissible distributee of trust income or principal if the trust terminated on that date. [Emphasis added.]

In turn, "distributee" is defined at MCL 700.1103(o), in relevant part, as "a person that receives ... trust property from the trustee other than as a creditor or purchaser."

The phrase "permissible distributee" is not defined within EPIC, and we are unable to locate any previous authority construing that term. However, in context, the plain meaning seems apparent without resorting to dictionary definitions. See Bloomfield Twp. v. Kane , 302 Mich. App. 170, 175, 839 N.W.2d 505 (2013) ("[R]ecourse to dictionary definitions is unnecessary when the Legislature’s intent can be determined from reading the statute itself.") (quotation marks and citation omitted).

We conclude that the plain meaning expressed is that a "permissible distributee" is a person who is permitted , not entitled, to receive trust property from the trustee other than as a creditor or purchaser.

In its brief, the Probate Section posits that this Court reached the correct outcome concerning standing in Brody I but did so for the wrong reasons.² Specifically, the Probate Section contends that this Court

made the following errors:

• Disregard[ed] the second sentence of MCL 700.1105(c) and its reference to the importance of considering both "the particular purposes of, and matter[s] involved in, [the] proceeding" and the "supreme court rules."

• Overlooking MCR 5.125 entirely.

• Overlook[ed] MCL 700.7603(1) and (2) entirely.

• Fail[ed] to consider whether Cathy was "a person entitled to be reasonably informed, as referred to in MCL 700.7603(2)," for purposes of MCR 5.125(C)(33).

• Determin[ed] that Cathy was an "interested person" based solely on the fact that she qualified for two of the categories included in the first sentence of MCL 700.1105(c) ("child" and "beneficiary")[.]

The Probate Section also argues that Brody I will have unintended downstream consequences. According to the Probate Section, this Court’s

determination that a "child" or a "beneficiary" is always an interested person with standing to commence trust proceedings before the probate court is an erroneous construction of EPIC and the Michigan Trust Code that can be expected to interfere seriously with the administration of private citizens' estate planning and trust administration. In light of this published decision, "children" and "beneficiaries" (who would not otherwise qualify as "interested persons" under MCL 700.1105(c), MCR 5.125, and MCL 700.7603(2) )

...