Friday, August 26, 2011

Summary 2011 WY 124

Summary of Decision August 26, 2011

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Summaries are prepared by Law Librarians and are not official statements of the Wyoming Supreme Court

Case Name: Purcella v. Purcella

Citation: 2011 WY 124

Docket Number: S-10-0266


Appeal from the District Court of Sheridan County, Honorable John G. Fenn, Judge

Representing Appellant (Plaintiffs): Timothy S. Tarver, Sheridan, Wyoming.

Representing Appellee (Defendant): H.W. Rasmussen, Sheridan, Wyoming.

Date of Decision: August 26, 2011

Facts: Burt A. Purcella established a trust into which he transferred his assets, including his fifty percent ownership in a self storage business. He acted as trustee but named his wife, Cynthia Purcella (Appellee), and his adult children from a prior marriage, Brandon Purcella and Millicent Julynn Jones (Appellants), as successor trustees. Upon Mr. Purcella’s death, the successor trustees were to divide the remaining trust assets between two separate trusts, the Purcella Family Trust (Family Trust) and the Purcella Marital Trust (Marital Trust). Appellee is the income beneficiary of the Marital Trust. Appellants are the beneficiaries of the Family Trust and remainder beneficiaries of the Marital Trust.

After Mr. Purcella’s death, differences arose between the parties. They entered into an agreement to resolve those differences. Problems continued and Appellants filed an action against Appellee, claiming she breached her fiduciary obligations as trustee by depositing funds the Marital Trust received from the business into her personal account.

Both parties moved for summary judgment and, after a hearing, the district court entered summary judgment enjoining Appellee from depositing funds from the business into her personal account, holding her responsible for any tax consequences or expenses resulting from the deposit and finding the parties had agreed that 87.05% of “all income” received from the business would be allocated to the Marital Trust and distributed to Appellee.

Appellants appeal, claiming the intent of the initial trust and their subsequent agreement was that only “net income,” rather than “all income,” received from the business would be distributed to Wife from the Marital Trust.

Issues: Whether the district court correctly held that Appellee was entitled to distribution of “all income” the Marital Trust received from the business.

Holdings: In ruling that Appellee is entitled to “all income” received by the Marital Trust from the business, the district court focused on Appellant’s claim that the trusts were potentially responsible for certain expenses incurred by the business, such as depreciation and security deposit refunds. In rejecting the claim, the district court stated: “The business is a separate corporate entity and retained security deposits or retained earnings for capital improvements is the responsibility of the management of the corporation not the Marital Trust.” This holding is affirmed. Potential business expenses are not attributable to the marital estate and the trustees are not entitled to deduct them from Marital Trust income.

However, the district court did not address Appellant’s claim that any costs of administering the Marital Trust should be deducted from trust income before disbursements are made to Appellee. The term “net income” is used repeatedly in the original trust. This repeated use with regard to distributions to the trust beneficiaries clearly indicates that typical trust expenses would be deducted prior to distribution.

The district court’s ruling that the business’s expenses are not attributable to the Marital Trust and have no bearing on distributions Appellee is entitled to from the Marital Trust is affirmed. The district court’s decision that Appellee is entitled “all income’ the Marital trust receives is reversed. Appellee is entitled to payment of the income received from the business less any trust administration expenses.

J. Kite delivered the opinion for the court.

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