Trusts & Estates – Successor Trustee Election – Non-Family Positions

Yost v. Yost (Lawyers Weekly No. 11-07-0730, 19 pp.) (Rick Elmore, J.) Appealed from Buncombe County Superior Court. (Laura J. Bridges, J.) N.C. App. Click here for the full-text opinion.

Holding: Since the terms of the non-family member trustees have all expired, the successor trustees for these positions are to be elected by the three family member trustees. The board of trustees can stagger the non-family member trustees’ terms or the trust protectors can amend the trust to prevent this situation from recurring.

The trial court’s ruling is affirmed except for its statement that only family member trustees can ever elect successor trustees for the non-family member positions.

Where intervenor plaintiff Dynamic Systems, Inc. is not a trust beneficiary, it lacks standing to sue to enforce the trust.

One co-trustee has standing to sue another co-trustee to compel him to perform his duties under the trust, or to enjoin him from committing a breach of trust, or to compel him to redress a breach of trust committed by him.

Even though the non-family member trustees’ terms automatically terminated in March 2008, the issue of whether the defendant-family member trustees wrongfully prevented the plaintiff-non-family member trustees from renewing their trusteeships is part of the current controversy. Holding that these plaintiffs lack standing because their terms ended in March 2008 presumes the answer to the question before us on appeal. Thus, we conclude that plaintiffs Caldwell, King and Kulba have standing to maintain this appeal.

The section of the Research Center Trust agreement at issue, V.C., states, “Successor Trustees shall be nominated by any then-serving Trustee, and must be approved by at least two-thirds of the then-serving Trustees (excluding any Trustees who are then-serving but whose terms will be ending and whose successors are being selected).”

Plaintiffs argue that this language means that trustees whose terms are expiring participate in the approval of successor trustees for every open trustee position except their own. In other words, if there are nine trustees and six of their terms are expiring, two-thirds of eight of the trustees must approve the successor trustee for the ninth trustee’s position.

The trial court’s interpretation, however, is that all trustees whose terms are expiring cannot participate in the approval of successor trustees. In the scenario above, only two-thirds of the three trustees whose terms are not expiring need to approve each successor trustee.

The plain language of this section supports the trial court’s interpretation. The use of the plural “Trustees” rather than the singular “Trustee” in the parenthetical encompasses all trustees whose terms are ending, not just one trustee whose term is ending and whose successor is being voted on.

The practical effect of our interpretation of Section V.C. is that only the three family member trustees can approve successor trustees.

Plaintiffs argue that giving the family members so much control over the trust violates trust grantor Charles Yost’s intent, but it is apparent to us that Charles Yost intended to keep his family deeply involved with the trust.

With one caveat, we agree with the trial court’s interpretation of the trust agreement. That caveat is the trial court’s statement that Sandra, Robin, and Susan Yost “were the only trustees who were intended to ever be able to approve successor trustees.” This statement reaches too far and is not supported by the trust agreement.

Charles Yost specifically intended the trust to survive his wife and children, and declaring that his wife and children are “the only trustees who were intended to ever be able to approve successor trustees” is not consistent with this specific intention. Moreover, it is possible for other trustees to approve successor trustees by staggering terms or amending the trust agreement or when replacing a trustee who departs before the end of his or her term.

Affirmed in part, reversed and remanded in part.