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Head v. Head

Court of Appeals of Oregon

March 5, 2014

RICHARD C. HEAD, Plaintiff-Appellant,
GEORGE A. HEAD, as Successor Trustee of the Cecilia F. Head Trust, under agreement dated May 12, 1992, and as successor trustee of the Robert C. Head Trust, under agreement dated May 12, 1992, and personally; and PEGGY HEAD, Defendants-Respondents

Argued and Submitted: January 31, 2013.

Coos County Circuit Court. 10CV0371. Paula M. Bechtold, Judge.

William A. McDaniel argued the cause for appellant. With him on the briefs was Whitty, McDaniel, Bodkin & Combs, LLP.

Erin Gould argued the cause for respondents. With her on the brief were Roger W. Gould and Gould Law Firm, PC.

Before Ortega, Presiding Judge, and Sercombe, Judge, and Hadlock, Judge.


Page 506

[261 Or.App. 480] ORTEGA, P. J.

This case involves a dispute regarding the proper administration and disposition of the assets of plaintiff's mother's trust. Plaintiff brought an action for an accounting of his mother's trust, contending that the successor trustees failed to carry out the terms of the trust after her death. After a trial at which the parties disputed the effect of certain provisions in the trust instrument, the trial court modified the dispositive terms of the trust pursuant to ORS 130.205(1) and ORS 130.225. In its ruling, the court concluded that, as written, the trust instrument was consistent with plaintiff's proffered interpretation of the document. Nevertheless, the court modified the terms of the trust to meet, as determined by the court, the mother's probable intent. The court's modification of the trust's terms validated the prior actions of the successor trustees in administering and distributing the trust assets; thus, the court dismissed plaintiff's claims. On appeal, plaintiff asserts that the court erroneously modified the trust's dispositive terms. We conclude that the court acted without authority to modify the trust's terms under either cited statute, because neither party requested such relief or advanced the legal theory that the trust should be modified, and " [i]n neither law nor equity does a court's authority extend to the fashioning of remedies based on legal theories not advanced by the parties." C. A. M. Concepts, Inc. v. Gwyn, 206 Or.App. 122, 129, 136 P.3d 60 (2006). Accordingly, we reverse and remand.

We begin with some general background and the relevant text of the trust instrument. In 1992, Cecilia and Robert Head established separate, but essentially identical, revocable living trusts. Cecilia and Robert had three children: plaintiff, George, and Roderick. The Cecilia F. Head Revocable Trust of 1992 (the Cecilia Head Trust) named Cecilia as trustee and life beneficiary, and funded the trust with a number of assets, including interests in real property, stocks, bonds, and cash. The trust instrument named Robert as successor trustee upon Cecilia's death or incapacity. Two sections of the trust instrument are central to plaintiff's claims and the parties' dispute at trial. First, Section 8 set forth the powers of the trustee. Second, Section [261 Or.App. 481] 10 designated the distribution of the trust assets to be made upon Cecilia's death.

The latter section provides, as relevant:

" On my death, the following payment shall be made from the trust estate as then constituted:
" I. [Directing trustee to pay taxes and assessments].
" II. [Directing trustee to pay taxes related to settlor's death].
" III. [Directing trustee to pay funeral and trust administration expenses].
" IV. The balance of the trust estate remaining after the payments mentioned above in this section, as such balance may be augmented by any distribution from my probate estate, shall constitute the residuary trust estate. The residuary trust estate shall be held in trust for the following persons and purposes:
" A. If my Husband survives me, the residuary trust estate shall be divided into two trusts, hereinafter referred to as Trust 'A' and Trust 'B' respectively.
" 1. Trust 'A' shall consist of the maximum pecuniary amount, if any, which can pass free of federal estate tax in my trust estate by reason of the federal unified credit and state death tax credit (provided that the use of the credit does not require an increase in the state death tax paid), but no other credits allowed for federal estate tax purposes. In determining that pecuniary amount, the trustee shall take into account all deductions (other than the marital deduction) allowable in my trust estate for federal estate tax purposes, and shall further take into account the net value of all other property included in my gross estate which passes or has passed to any other person, trust or entity in which it does not qualify for the federal estate tax marital and charitable deduction.
" My trustee shall determine which assets or interests in my residuary trust estate shall be distributed in satisfaction of this bequest, and the trustee may include therein all or any part of, or an undivided ...

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