Nedder v. Deluca (In re Trust Agreement)

521 P.3d 1190

In the MATTER OF the Trust Agreement, 23 PARTNERS TRUST I, an Irrevocable Trust.

Michael T. Nedder ; and Douglas Deluca, Appellants/Cross-Respondent,

v.Julia Ann Deluca, Primary Beneficiary of 23 Partners Trust I; and Joanne S. Briggs, as Parent and Guardian of Alexander Ian Deluca, Primary Beneficiary of 23 Partners Trust I, Respondents/Cross-Appellants.

No. 82991

Supreme Court of Nevada.

Filed December 22, 2022

Hutchison & Steffen, PLLC, and Alexander R. Velto, Reno, and Russel J. Geist and Todd W. Prall, Las Vegas, for Appellants/Cross-Respondents.

Solomon Dwiggins Freer & Steadman, Ltd., and Alex G. LeVeque and Roberto M. Campos, Las Vegas, for Respondents/Cross-Appellants.

BEFORE THE SUPREME COURT, HARDESTY, STIGLICH, and HERNDON. JJ.

OPINION

By the Court, STIGLICH, J.:

This case involves the administration of a discretionary trust and requires us to determine what disclosures must be made by the trustees to the beneficiaries. In making that determination, we consider both what Nevada's trust statutes compel and what the trust document itself permits. The trust at issue provides the beneficiaries with discretionary distribution interests, granting the trustees sole discretion over the issuance of those distributions. While the trustees have regularly made distributions, the beneficiaries seek information concerning the trust's financial administration and a copy of the trust instrument itself.

We conclude that Nevada's trust statutes—in particular NRS 165.1207 —do not require the trustees to provide the beneficiaries with an accounting because the beneficiaries’ sole distribution interests are discretionary. However, because the beneficiaries constitute "present" and "vested" beneficiaries, as those terms are used in the trust, they may request and receive copies of certain trust instruments, may inspect the books of account and records of financial transactions, and on request, may receive an annual tax return, inventory, and accounting under the terms of the trust. In the underlying matter, the district court ordered the trustees to provide most of this information and access but concluded that the beneficiaries were not entitled to an accounting. We affirm the district court as to the materials that it ordered the trustees to deliver, but we reverse its determination that the beneficiaries were not entitled to an accounting.

The district court also ordered the trustees to provide the beneficiaries with copies of all sections of the trust document concerning the beneficiaries’ rights. We agree with the district court that neither Nevada statutes nor the trust instrument require the trustees to provide the beneficiaries with a copy of the entire trust instrument but conclude that the trustees have not shown that the district court abused its discretion in ordering them to produce sections of the trust concerning the beneficiaries’ rights. We agree with the trustees, however, that the district court abused its discretion in failing to specify which sections must be provided. We therefore remand and instruct the district court to identify which sections of the trust the trustees must provide to the beneficiaries.

BACKGROUND

Jon DeLuca and Joanne Briggs married, had two children together (Julia DeLuca and Alexander DeLuca), and later divorced. Thereafter, Jon created the 23 Partners Trust I, an irrevocable trust, for the benefit of his children. Michael Nedder is the Independent Trustee, and Jon's brother, Douglas DeLuca, is the Family Trustee (collectively, Trustees). Jon provided Joanne with information about the trust, including Jon's estate plan flowchart, a list of assets, and an audio recording of a meeting between Jon and Michael Nedder regarding Jon's estate plan and the trust. After Jon passed away, Trustees made distributions from the trust for the care and well-being of Julia and Alexander. Two years later, Julia and Alexander (collectively, Beneficiaries), through Joanne because they were minors, requested detailed information about the trust, including an accounting and a copy of the trust document, which Trustees denied.

Beneficiaries petitioned the district court to assume jurisdiction of the the trust, obtain an accounting, and obtain a copy of the trust document.¹ Trustees objected, arguing that the trust provided for completely discretionary distributions to Beneficiaries and that Beneficiaries were not entitled to receive an accounting or a copy of the trust document. The court concluded that Beneficiaries were not entitled to an accounting but ordered Trustees to provide certain financial information annually, including federal tax returns, an inventory of assets, and a summary of financial transactions. The district court also determined that Beneficiaries were not entitled to receive a copy of the entire trust document but that they were entitled to receive a copy of the specific provisions affecting their rights.² Trustees appealed, and Beneficiaries cross-appealed.

DISCUSSION

Trustees argue that neither Nevada law nor the trust instrument entitles Beneficiaries to receive an accounting or a copy of the trust document. Trustees argue that the district court thus erred in ordering them to provide certain financial information and portions of the trust document. Beneficiaries counter that they are entitled to receive not only the financial information and trust provisions the court ordered released, but also an accounting under NRS 165.180, NRS 165.1207, and the trust itself. Beneficiaries further argue that they are entitled to receive a copy of the entire trust document, rather than only select portions. In resolving the issues presented by this appeal, we look first to Nevada's statutes regarding trust accounting before examining the specific terms of the trust at issue today and the court's discretionary authority to order the trustees to provide copies of the trust document.

Nevada statutes do not entitle Beneficiaries to receive an accounting, but the terms of the trust provide for annual accountings

Nevada statutes do not require accounting to discretionary-interest beneficiaries

Beneficiaries argue that NRS 165.180 empowers the district court to order an accounting of the trust and that they are entitled to an accounting under NRS 165.1207. We disagree.

We review de novo questions of law, including statutory interpretation. In re Orpheus Tr., 124 Nev. 170, 174, 179 P.3d 562, 565 (2008). "When the language of a statute is unambiguous, courts are not permitted to look beyond the statute itself when determining its meaning." id. "Whenever possible, this court will interpret a rule or statute in harmony with other rules and statutes" and will "construe statutes such that no part of the statute is rendered nugatory or turned to mere surplusage." Albios v. Horizon Cmtys., Inc., 122 Nev. 409, 418, 132 P.3d 1022, 1028 (2006).

NRS 165.180 provides that NRS Chapter 165 "does not abridge the power of any court of competent jurisdiction to require testamentary or nontestamentary trustees to file an inventory, to account, to exhibit the trust property, or to give beneficiaries information or the privilege of inspection of trust records and papers, at times other than those prescribed" by statute. It further provides that NRS Chapter 165 does not bar a trustee from accounting voluntarily where not compelled to do so by statute or court order. Id. NRS 165.1207 addresses a trustee's duty to account and excludes discretionary-interest beneficiaries from those entitled to receive an accounting, providing that "[a] trustee is not required to provide an account to a beneficiary of an irrevocable trust while that beneficiary's only interest in the trust estate is a discretionary interest, as described in NRS 163.4185." NRS 165.1207(1)(b)(5). Under NRS 163.4185(1)(c), a distribution interest is "[a] discretionary interest if the trustee has discretion to determine whether a distribution should be made, when a distribution should be made and the amount of the distribution."

We first consider NRS 165.180. By its plain language, this statute acknowledges that NRS Chapter 165 does not exhaustively delineate how a court exorcises its powers and fulfills its duties in administering trusts. But recognizing that the chapter "does not abridge" a court's powers regarding these actions at other times does not constitute a grant of authority. Nor does it constitute an independent basis on which Beneficiaries may rely for any affirmative relief. We conclude that Beneficiaries have not shown that relief is warranted on this basis.

We next consider NRS 165.1207. All parties agree that the distributions at issue are made at Trustees’ discretion, and our review of the trust confirms this view. Accordingly, we conclude that Beneficiaries’ interest is a discretionary interest. Beneficiaries argue that this is not their only interest in the trust, relying on the definition of "[i]nterest" in NRS 132.180 to assert that they also have, for example, an interest in a power of appointment. Beneficiaries offer no support for their contention that NRS 132.180, a wills and estates statute, applies here, and their position is unpersuasive. NRS 165.1207(1)(b)(5) specifically refers to the different types of interests described in NRS 163.4185. The more reasonable interpretation of NRS 165.1207(1)(b)(5) ’s language, and that which harmonizes its meaning with that of NRS 163.4185, is that "interest in the trust estate" refers to the distribution interest, defined as either a "mandatory, support or discretionary interest." See NRS 163.4155 (defining distribution interest); NRS 163.4185(1) (providing that distribution interests may be classified as mandatory, support, or discretionary). This construction also gives meaning to the use of "only" in reference to the beneficiary's interest in the trust estate in NRS 165.1207(1)(b)(5), since NRS 163.4185 recognizes that a trust may contain a combination of types of interests and directs...