Hennepin County District Court File Nos. 27-TR-CV-04-125; 27-TR-CV-04-126; 27-TR-CV-04-127; 27-P9-03-001223; 27-P9-97-001678.
Where the testamentary documents are unambiguous, there is no authority for the state courts to reform a will.
The opinion of the court was delivered by: Randall, Judge
Affirmed in part, reversed in part, and remanded
Considered and decided by Randall, Presiding Judge, Willis, Judge, and Parker, Judge.*fn1
On appeal from an order reforming Vera Lyon's will and revocable trust agreement that was based on a determination that Vera Lyons improperly exercised a special power of appointment over her deceased husband's family trust in favor of her revocable trust, appellants argue that the district court erred by reforming the trust. Because the district court correctly held that Vera Lyon's exercise of her special power of appointment was an invalid appointment, we affirm on that issue. But because the testamentary documents are unambiguous, the district court had no authority to reform the will, and, therefore, we reverse and remand on that issue.
This case arises out of a dispute concerning the estates of M. Arnold Lyons (hereinafter Arnold) and his wife Vera Lyons (hereinafter Vera). Arnold and Vera's marriage produced three children, Lisa Lyons, David Lyons, and respondent Barbara Hobbs (hereinafter respondent) all of whom survive. Appellants Andrew Buirge and William Buirge (hereinafter appellants) are adult sons of respondent and grandchildren of Arnold and Vera.
In October 1985, approximately two years prior to his death, Arnold executed a will that distributed the assets of his estate into two trusts, the martial trust and the family trust. The marital trust was created solely for the benefit of Arnold's wife, Vera, and contains a general testamentary power of appointment exercisable by Vera with no limitation upon possible beneficiaries. Arnold's will also granted Vera a special testamentary power of appointment over the family trust, which power is exercisable in favor of his children or their issue. The will provided that the family trust is not exercisable in favor of Vera, her estate, or her creditors. The will also defined Arnold's "children" as "DAVID LYONS and LISA LYONS and shall not mean [respondent]." The will further stated that:
[respondent] is specifically excluded from the provisions of this will. All references in this will to "issue" of my children shall include the issue of DAVID LYONS and LISA LYONS but shall not include any issue of [respondent] except [appellants] and their issue for whom I have specifically provided in this will. In May 1988, shortly after Arnold's death, Vera executed a revocable trust agreement. Vera's trust provided that upon her death, the balance of the trust estate "shall be divided by the Trustees into as many separate shares, as nearly equal in value as possible, as there are children of the Grantor then living . . . ." Also in May 1988, Vera executed a will that devised the residue of her probate estate to Vera's trust. At about the same time, Vera exercised her special power of appointment under the family trust and the general power of appointment under the marital trust to distribute the assets of these trusts to Vera's trust. Vera's exercise of her powers of appointment effectively mandated that the assets of the family trust and the marital trust be divided equally among her three children.
After Vera's death in 2003, the trustees of the family trust, marital trust, and Vera's trust petitioned for an order instructing them relating to the proper administration and distribution of the trusts and discharge of their duties. The trustees' petition alleged that it was their belief that Vera's exercise of the special power of appointment over Arnold's family trust was invalid because it would ultimately result in the transfer of a beneficial interest in the family trust to respondent, a prohibited beneficiary. The trustees' petition also alleged that it was their belief that a proper interpretation of the Arnold family trust would be to distribute the balance thereof as follows: one-third to Lisa Lyons, one-third to David Lyons, and one-third to appellants respectively. The petition further alleged the trustees' belief that Vera's revocable trust and Arnold's marital trust should be distributed to Lisa Lyons, David Lyons, and respondent in equal shares in accordance with Vera's testamentary plan.
In response to the trustees' petition, respondent asked the district court to reform Vera's will and trust to correct her invalid exercise of the special power of appointment and effectuate Vera's clear intent to benefit all three of her children equally. The trustees took no position on the reformation issue, and during an October 2004 pretrial conference, the parties agreed that the matter could be submitted to the court for a decision on the merits based upon written submissions and arguments of the parties.
On December 7, 2004, respondent filed her memorandum in objection to the trustees' petition. The matter was heard before a referee who subsequently submitted his recommended findings and order to the district court. The district court adopted the findings and issued an order reforming Vera's will and Vera's revocable trust. The district court found that there was "clear and convincing" evidence from Vera's testamentary instruments that she intended to benefit all three of her children equally. The district court also found that Vera did not intend to exercise ineffectively her special power of appointment, and, thus, there was also a clear mistake of law. The district court concluded that because these two conditions had been satisfied, the court had the authority under Minnesota law and the various Restatements of the Law to ...