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In re Second Amendment & Restatement of Pe Kuang Tseng Trust Agreement

Court of Appeals of Oregon

June 10, 2015

In the Matter of the Second Amendment and Restatement of Pe Kuang Tseng Revocable Trust Agreement, dated November 7, 2007. Michael TSENG, Richard Tseng and Dejin Tseng, Appellants,
v.
Paul C. TSENG and Peter C. Tseng, individually and as Co-Trustees of the Second Amendment and Restatement of Pe Kuang Tseng Revocable Trust Agreement dated Nov. 7, 2007, Respondents

Argued and Submitted: July 15, 2014.

Multnomah County Circuit Court. 120891165. Paula J. Kurshner, Judge.

Bruce G. Thompson filed the briefs for appellants.

Anthony J. Dal Ponte argued the cause for respondents. With him on the brief was Samuels Yoelin Kantor LLP.

Before Lagesen, Presiding Judge, and Tookey, Judge, and Edmonds, Senior Judge.

OPINION

Page 75

[271 Or.App. 659] LAGESEN, P. J.

This appeal requires us to address a question of first impression in this state: whether and to what extent, after a settlor's death, ORS 130.710(1) requires a trustee of a revocable trust to provide beneficiaries of the trust with information about the administration of the trust during the settlor's lifetime. We conclude that the statute, when construed in the context of the Oregon Uniform Trust Code (OUTC) and its legislative history, requires the trustee to provide qualified beneficiaries with, in the words of the statute, " the material facts necessary for those beneficiaries to protect their interests." ORS 130.710(1). Because the probate court concluded that the beneficiaries of a revocable trust cannot, as a matter of law, obtain any information about the trust's administration during the settlor's lifetime, we reverse and remand for further proceedings consistent with this opinion.

STATUTORY AND FACTUAL BACKGROUND

This case requires us to construe provisions of the OUTC governing revocable trusts, as well as provisions governing the rights of trust beneficiaries to obtain information about trust administration. In 2005, Oregon adopted the Uniform Trust Code with modifications. Hope Presbyterian v. Presbyterian Church (USA), 352 Or. 668, 687, 291 P.3d 711 (2012). See generally Valerie Vollmar, The Oregon Uniform Trust Code and Comments, 42 Willamette L Rev 187 (2006) (hereinafter Oregon UTC & Comments ). In addressing issues of trust law, we look both to the OUTC and to Oregon case law, because " the common law remains relevant: 'The common law of trusts and principles of equity supplement this chapter [ORS chapter 130], except to the extent modified by this chapter or other law.'" Hope Presbyterian, 352 Or. at 687 n 5 (quoting ORS 130.025).

A revocable trust is a trust over which the settlor retains complete control while alive:

Page 76

" 'Revocable trust' means a trust that can be revoked by the settlor without the consent of the trustee or a person holding an adverse interest." ORS 130.010(16). The OUTC " treats the revocable trust as the functional equivalent of a will." Oregon UTC [271 Or.App. 660] & Comments, 42 Willamette L Rev at 304. During the settlor's lifetime, the settlor retains the power to " revoke or amend the trust." ORS 130.505(1). The settlor has the power to direct the actions of the trustee, including the power to direct the trustee to take actions " contrary to the terms of the trust." ORS 130.685(1). " While the settlor of a revocable trust is alive, rights of the beneficiaries are subject to the control of the settlor, and the duties of the trustee are owed exclusively to the settlor." ORS 130.510(1). By placing control over beneficiary rights in the hands of the settlor during the settlor's lifetime, ORS 130.510 has the " effect of postponing enforcement of the rights of the beneficiaries of a revocable trust until the death of the settlor or other person holding the power to revoke the trust. This section thus recognizes that the settlor of a revocable trust is in control of the trust and should have the right to enforce the trust as long as the settlor is alive." Oregon UTC & Comments, 42 Willamette L Rev at 312.

Given that the settlor of a revocable trust retains complete control over the trust while alive, if the trustee of a revocable trust engages in conduct amounting to a breach of trust during the settlor's lifetime, and the settlor consents to that conduct, ratifies it, or releases the trustee from liability for it, that consent, ratification, or release is binding on all other beneficiaries of the trust. Oregon UTC & Comments, 42 Willamette L Rev at 392 (explaining that, as applied to a revocable trust, ORS 130.840, which authorizes a trust beneficiary to consent to or approve of conduct by the trustee that constitutes a breach of trust, means that " [a]n approval by the settlor of a revocable trust * * * binds all the beneficiaries" ). Additionally, " while the settlor of a revocable trust is alive, beneficiaries other than the settlor have no right to receive notice, information or reports" from the trustee regarding trust administration to which such beneficiaries would otherwise be entitled under ORS 130.710. ORS 130.710(9); see also 130.510(1) (explaining that while the settlor of a revocable trust is alive, " [b]eneficiaries other than the settlor have no right to receive notice, information or reports under this chapter" ). Thus, the OUTC explicitly restricts beneficiaries' access to information about the trust while the settlor is alive.

[271 Or.App. 661] When a " formerly revocable trust [becomes] irrevocable, whether by the death of the settlor or otherwise," the trustee generally must alert all " qualified beneficiaries" [1] of the existence of the trust, the identity of the settlor or settlors, and the qualified beneficiaries' right to obtain a copy of the trust document and receive annual reports regarding trust administration. ORS 130.710(2). Qualified beneficiaries also are entitled to be " reasonably informed about the administration of the trust and of the material facts necessary for those beneficiaries to protect their interests." ORS 130.710(1). Beneficiaries who are not qualified beneficiaries do not have any general entitlement to information about trust administration, although a trustee " may" respond to requests for information from such nonqualified beneficiaries. ORS 130.710(1). See generally ORS 130.710.

Petitioners Michael Tseng, Richard Tseng, and Dejin Seng are beneficiaries of a formerly revocable trust created by their father, Patrick E. Tseng. Patrick was originally from China and was married to petitioners' mother, Sunyun. Petitioners and their two other surviving siblings, Deya Tseng and Depi Tseng, were born in China to Patrick

Page 77

and Sunyun. Sometime before 1954, Patrick moved to the United States. In 1954, believing his wife and children in China to be dead, Patrick remarried. He and his second wife, Stella Tseng, had two children, Paul Tseng and Peter Tseng, the respondents in this matter. In 1979, Patrick discovered that his family in China was still alive, and he reconnected with them. Patrick subsequently created a revocable trust, naming respondents as cotrustees. Stella and all of Patrick's surviving children were the beneficiaries of that trust.

[271 Or.App. 662] Patrick died in August 2009. Based on information provided to them by respondents, petitioners learned that approximately $1.8 million had been transferred out of the trust between March 2008 and the date of Patrick's death in 2009, leaving a comparatively small amount of money in the trust. Petitioners believed that those transfers " made no sense" in the light of their understanding of Patrick's intention in establishing the trust, and requested that respondents provide them with more information about the transfers. In response, respondents, " [d]espite repeated demands, [took] the position that they have no duty to explain or to account to the petitioners or any of the beneficiaries for any actions taken prior to [Patrick's] death."

Petitioners thereafter initiated this proceeding in probate court. They alleged that " [b]ased upon the little information" that respondents had provided to petitioners, petitioners believed that withdrawal of funds from the trust was a breach of trust contrary to Patrick's estate plan. Petitioners also alleged that respondents " acted unreasonably *** in failing to cooperate and answer the reasonable questions of the Petitioners." Petitioners requested the following relief:

" 1. That respondents be removed as co ...

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