Jill Barnhill v. Lynn H. Wood

NOT FOR PUBLICATION

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

08-1179

JILL BARNHILL

VERSUS

LYNN H. WOOD, ET AL.

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APPEAL
FROM THE
15TH JUDICIAL DISTRICT COURT
PARISH OF LAFAYETTE, C-20061179
HONORABLE DURWOOD CONQUE, PRESIDING
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SYLVIA R. COOKS
JUDGE

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Court composed of Sylvia R. Cooks, J. David Painter, and
Shannon J. Gremilion, Judges.
REVERSED AND REMANDED

EDWIN DUNAHOE (Bar # 05164)
DUNAHOE LAW FIRM
402 Second Street
P.O. Box 607
Natchitoches, LA 71457
Tel. (318) 352-1999
Fax. (318) 352-5222
Counsel for Plaintiff-Apellant: Jill Barnhill

GEORGE D. FAGAN (Bar # 14260)
PATRICK WARTELLE (Bar # 14484)
CATHERINE L. DAVIDSON (Bar # 27792)
Leake & Anderson, L.L.P.
1100 Poydras Street
New Orleans, LA 70163
Tel. (504) 585-7500
Fax (504) 585-7775
Defendants-Appellees: Lynn H. Wood, et al.

COOKS, Judge.

FACTS AND PROCEDURAL HISTORY

Plaintiff’s mother and father established a revocable inter vivos trust entitled

“The Rodgers Living Trust of 1993” which instrument was signed and executed on

September 27, 1993. The instrument was an authentic act, signed by Mr. and Mrs.

Rodgers specifically as “trustees” and “settlors” in the presence of a notary and two

witnesses. Both parties agree that this Trust was a valid Louisiana Trust established

in conformity with the provisions of the Louisiana Trust Code, LA. R.S. 9:1721, et

seq. Included in the provisions of the 1993 Trust were provisions for the

establishment of two trusts in the event of the death of the first Settlor, identified as

the Rodgers Trust “A” and the Rodgers Trust “B.” On the same date the 1993 trust

was established, Plaintiff’s mother executed a Power of Attorney appointing her

husband as her agent with authority to transfer property into the trust. Under the

authority of the Power of Attorney, and in his own right, Mr. Rodgers signed an IRA

Adoption Agreement on November 30, 1999, affecting the couples’ entire interest

in his IRA bearing number 321-739473. Mr. Rodgers listed he and his wife as

Trustees of the Rodgers Living Trust of 1993 as the primary beneficiaries of the

entire IRA account and listed his children, Mrs. Jill Barnhill and Mr. Richard D.

Rodgers, Contingent Beneficiaries.

Plaintiff’s father, Mr. Billy Howard Rodgers, passed away on July 13, 2003.

At the time of Mr. Rodgers’ death, Plaintiff’s mother, Mrs. Frances Smith Rodgers,

was mentally incapacitated due to Alzheimers Disease. Mrs. Rodgers passed away

a few months later on December 4, 2003. Subsequent to Mrs. Rodgers’ death, in

March, 2004, Plaintiff and her brother contacted Defendant Wood concerning the

investment of the assets held in trust. The parties agree that Plaintiff and her brother

wanted the IRA funds to be handled in a tax deferred manner in what is known as a

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Beneficiary IRA. Eventually, Plaintiff received notification from Defendant Wood

that the IRA funds had been distributed in such a fashion as to create a taxable event.

Plaintiff claims this distribution caused she and her brother a loss of at least

$141,000.00. Issues concerning the propriety of Woods decision to place the funds

in an Individual IRA rather than in a Beneficiary IRA, and other actions, are not

before this court on this appeal and therefore will not be addressed.

Subsequent to Plaintiff filing her Petition, the trial court issued an Order

granting the parties’ Joint Motion For Stay of the proceedings in recognition of an

arbitration agreement binding on the parties. Defendants filed a Motion For

Declaratory Judgment, and both parties filed a Joint Motion To Partially Lift Stay so

as to allow the trial court to hear the Motion For Declaratory Judgment. Following

a hearing on the Motion, the trial court entered a declaratory judgment finding that

only one trust had been created, namely the Rodgers Living Trust of 1993. The trial

court ruled that Rodgers Trust “A” and Rodgers Trust “B” were not created. Plaintiff

appeals the declaratory judgment.

ANALYSIS

The trial court erred as a matter of law. The instrument signed by Mr. and Mrs.

Rodgers in 1993 established both a valid inter vivos trust and valid testamentary

trusts. The Trust Code defines a trust as: “[t]he relationship resulting from the

transfer of title to property to a person to be administered by him as a fiduciary for the

benefit of another.” La. R.S. 9:1731. The Trust Code further distinguishes

testamentary trusts and inter vivos trusts as follows: “A trust is testamentary when it

is created by donation mortis causa,” La. R.S. 9: 1733, and “All Trusts not

testamentary are considered inter vivos, regardless of the time of creation.” La. R.S.

9: 1734. As to the form of trusts, the Code provides that an inter vivos trust can be

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created by authentic act, as was the Rodgers Living Trust of 1993. See La. R.S. 9:

1752. Additionally, the Code provides: “No particular language is required to create

a trust, but it must clearly appear that the creation of a trust is intended. A trust

instrument shall be given an interpretation that will sustain the effectiveness of its

provisions if the trust instrument is susceptible of such an interpretation.” La. R.S.

9:1753. See also St. Charles Land Trust v. St. Amant, 217 So.2d 385, (La.1968).

The Trustee(s) may, as Mr. and Mrs. Rodgers did in the instrument at issue herein,

accept the trust in the trust instrument itself. La. R.S. 9:1755.

There can be no doubt that the instrument signed by the Rodgers in 1993

clearly expressed the intent to create an inter vivos trust, effective immediately, and

two testamentary trusts which would take effect upon the death of the first Settlor

(Mr. or Mrs. Rodgers). The Rodgers placed property in the living trust at its

inception and thereafter placed additional property, the IRA, into the trust. Under the

express provisions of the Louisiana Trust Code, the testamentary trust, properly made

by the authentic act of the Rodgers, was created automatically by operation of law

“at the moment of the settlor’s death, without awaiting the trustee’s acceptance of the

trust.” La. R.S. 9:1821. Thus, contrary to the Defendants’ argument and the trial

court’s ruling, the Trustee (or co-trustees due to the Trustee’s incapacity) did not have

to do anything after Mr. Rodgers’ death for the testamentary trusts to be created. As

noted in Grant v. Grant, 35-635 (2/27/02), 810 So.2d 1226, writ denied, 02-1046 (La.

6/14/02), 817 So.2d 1158:

“The trust instrument is not required to contain specific language of
conveyance provided it is clear that title is being transferred to the
trustee, because the creation of a trust automatically and by definition
effects a transfer of title to the trust property pursuant to LSA - R.S.
9:1731. The trust instrument must identify the property being
transferred in trust either specially, as in a description of land, or
generally, as under a universal legacy. 11 Leonard Oppenheim & Sidney
Ingram, Louisiana Civil Law Treatise, trusts Sect. 102 (1977).” Grant,

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Supra. at 1229.

In Grant, the trust instrument identified specific immovable property and

generally identified all other property owned by the Grants. In the case sub judice the

trust instrument identified the trust property as “$100.00 cash and all of Settlors’

personal possessions, wherever located, together with such other property as may be

added by Settlors or by third persons. Settlors hereby convey, to Trustee in trust all

of their rights, title, and interest in that property.” After creation of the 1993 Trust,

Mr. Rodgers later transferred his IRA into the trust by appropriate legal means.

Further, the trust instrument provided that the property comprising the two

testamentary trusts would be the corpus of the 1993 trust. The instrument recites at

Paragraph 3.3 and 3.4 that Rodgers Trust “A” and Rodgers Trust “B” would consist

of the property in the Rodgers Living Trust of 1993, and further accorded the

surviving Settlor, or in his/her incapacity, the co-trustees, the right to select which

property to place in the revocable Trust “A” and which to place in the irrevocable

Trust “B”.

Mrs. Rodgers signed the original trust instrument in 1993 both as Trustee and

Settlor, and as such did not have to do anything in writing to accept the testamentary

trusts after the death of Mr. Rodgers. See La. R.S. 9:1824. The 1993 trust instrument

specifically named Mrs. Barnhill and her brother Mr. Rodgers as alternate co-trustees

in the event of the death or physical/mental disability of the original trustees. No

action was required to create the testamentary trusts. The co-trustees could thereafter

seek financial advice, as they did, to determine how to handle assets subject to

placement at their discretion into Trust “A” or Trust “B”.

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DECREE

The judgment of the trial court is reversed and the case is remanded for further

proceedings in accordance herewith, and all costs of this appeal are assessed against

the Defendants.

REVERSED AND REMANDED.

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