IN RE: ELEANOR PIERCE (MARSHALL) STEVENS LIVING TRUST IN RE: ELEANOR PIERCE (MARSHALL) STEVENS LIVING TRUST AND ELEANOR PIERCE STEVENS REVOCABLE GIFT TRUST
APPEAL FROM THE FOURTEENTH JUDICIAL DISTRICT COURT. PARISH OF CALCASIEU, NO. 2007-6723 C/W 2009-3827. HONORABLE G. MICHAEL CANADAY, DISTRICT JUDGE.
Daniel A. Kramer, Hunter William Lundy, T. Houston Middleton, IV, Rudie Ray Soileau, Jr., Lundy, Lundy, Soileau & South, Lake Charles, LA; Henry Camille Perret, Jr., Jude C. David, Perret, Doise L.L.C., Lafayette, LA; Kenneth Michael Wright, Attorney at Law, Lake Charles, LA, COUNSEL FOR RESPONDENT/APPELLEE: Preston Marshall, Patrick Wright.
Scott James Scofield, Phillip W. DeVilbiss, Scofield, Gerard, Pohorelsky, Gallaugher & Landry, L.L.C., Lake Charles, LA, COUNSEL FOR APPLICANT/APPELLANT: Finley Hilliard.
Court composed of John D. Saunders, Elizabeth A. Pickett, and John E. Conery, Judges.
[14-697 La.App. 3 Cir. 1]
This case is before us on appeal from three separate judgments against Finley Hilliard (hereafter " Appellant" ) relative to his status as co-trustee of the Eleanor Pierce (Marshall) Stevens Living Trust (hereafter " the Trust" ) and an application for supervisory writ relative to a denial of Appellant's motion for new trial. For the following reasons, we dismiss the appeals in part, affirm the 2013 judgment, and deny the relief sought by the writ application relative to the denial of Appellant's motion for new trial.
FACTS AND PROCEDURAL HISTORY
Eleanor Pierce (Marshall) Stevens established the Trust in 1979. In 2000, Appellant began serving as trustee. The terms of the Trust have been amended several times over the years. In 2006, the Trust was amended to appoint Preston Marshall (hereafter " Preston" ) to the office Trust Protector. In 2007, Article XI, Paragraph B of the Trust was amended to provide:
should the Trust Protector determine, in his or her sole discretion, that the individual then serving [as trustee] cannot properly represent the interest of the beneficiaries, the Trust Protector may remove the trustee, with or without cause, and designate one or more residents of the State of Louisiana to succeed to the office of trustee.
Appellant's Withdrawal as Trustee
On July 29, 2009, Appellant executed an affidavit stating, in pertinent part:
NOW THEREFORE, [Appellant] does hereby resign as Trustee of [the Trust] and the Eleanor Pierce Stevens Revocable Gift Trust effective upon the appointment and acceptance of one or more successor trustees being appointed and confirmed and taking the oath of office to serve as trustee or co-trustees of said trust in accordance with the provisions of said trust.
Thereafter, on August 5, 2009, Appellant filed a Petition for Modification of Trust. In his Petition, Appellant requested several modifications to the terms of the trust. [14-697 La.App. 3 Cir. 2] One of the requests for modification was to again modify Article XI, Paragraph B to read:
B. Successor Trustee. Following Settlor's death, should the Trustee resign or cease to serve as trustee or the office of Trustee otherwise becomes vacant for any reason whatsoever, the Trust Protector shall succeed as a co-trustee and shall designate one or more other individuals to succeed to serve as co-trustees; provided, however, that at least one of the trustees shall at all times be a resident of the State of Louisiana. Following Settlor's death, should the Trust Protector determine, in his or her sole discretion, that the individual or individuals then serving in that capacity cannot properly represent the interests
of the beneficiaries, the Trust Protector may remove the trustee or trustees, with or without cause, and designate one or more individuals to succeed to the office of trustee; provided, however, that at least one of the trustees shall be a resident of the State of Louisiana.
He further requested that the trial court:
permit and authorize the resignation of [Appellant] as trustee of [the Trust] subject to the Trust Protector, [Preston], accepting the appointment as a co-trustee and taking the oath of office and designating one or more additional co-trustees pursuant to the modification and amended provisions of [the Trust] . . . .
On the same day, judgment was rendered modifying the terms of the trust and " permitting and authorizing" the withdrawal of Appellant as trustee. Preston took the oath of office on August 28, 2009.
The Federal Litigation
J. Howard Marshall, II (" J. Howard" ) and Eleanor Pierce (Marshall) Stevens (hereafter " Stevens" ) were married from 1931 to 1960. As part of her divorce settlement with J. Howard, Stevens received shares of Marshall Petroleum, Inc. (hereafter " MPI" ) stock. In 1984, Stevens transferred all of her shares of MPI to the Trust and then into four additional trusts. In 1995, J. Howard sold his MPI stock back to the company. Because it was sold below market value, it increased the value of the other shareholders' stock. The IRS later determined the sale to be [14-697 La.App. 3 Cir. 3] an indirect gift of MPI stock to MPI's other shareholders, including Stevens and the Trust.
At the time of the stock sale, J. Howard did not pay gift taxes. He died shortly after the sale. When his estate did not pay the gift taxes, in 2010, the Government brought suit against the donees, seeking to recover the unpaid gift taxes and to collect interest from the beneficiaries. The Government also sought to recover from Appellant and E. Pierce Marshall, Jr. (hereafter " E. Pierce Jr." ), who is Appellant's brother and executor of Stevens' Estate. The Government asserted that Appellant used funds from the Trust to pay accounting and legal fees for charitable organizations other than the Trust and, with E. Pierce Jr., filed joint tax returns for the Trust and Stevens' Estate and permanently set aside $1,119,127 of the Trust's funds for charitable purposes. The Government asserted that these actions were violations of the federal priority statute, 31 U.S.C. § 3713.
On the Government's motion for summary judgment against E. Pierce Jr. and Appellant for violations of the federal priority statute, the federal district court found Appellant individually liable for paying accounting and legal services out of the Living Trust for other charitable organizations. The federal district court also found Appellant and E. Pierce Jr. jointly liable for the $1,119,127 they had set aside in the Trust for charitable purposes, for which they claimed charitable deductions.
On appeal from the federal district court, Appellant asserted that the district court erred in holding him liable under the federal priority statute, arguing that the knowledge requirement had not been proven, as the Government had not yet made an actual claim at the time the distributions and payments were made by the Trust and he had received erroneous legal advice pertaining to the distributions and payments. In its November 10, 2014 judgment, the Fifth Circuit explained: [14-697 La.App. 3 Cir. 4] " Actual knowledge is not required; '[t]he knowledge requirement of [31 U.S.C. § 3713] may be satisfied by either actual knowledge of the liability or notice of such
facts as would put a reasonably prudent person on inquiry as to the existence of the unpaid claim of the United States.'" U.S. v. Marshall, 771 F.3d 854, 875 (5th Cir. 2014) (quoting Leigh v. Comm'r, 72 T.C. 1105, 1110 (1979)). The court noted that Appellant admitted in deposition that he had knowledge of the potential claims. Thus, the federal appellate court " [held Appellant] . . . knew of the potential liability to the Government, and thus, the Federal Priority Statute applies." Id.
The Current Litigation
In a letter dated December 13, 2012, following the judgment of the federal district court against Appellant and E. Pierce Jr. becoming final, E. Pierce Jr. sent a letter to Preston and Appellant demanding that the Trust pay the bond premiums and legal fees for the appeal of the federal district court judgment. The demand letter included a request for the Trust to pay the costs of the appeal for the judgments rendered against Appellant and E. Pierce Jr., personally. By a second letter dated January 2, 2013, E. Pierce Jr. reiterated the demand for the Trust to pay the costs of the appeal of the personal judgments against Appellant and E. Pierce Jr.
On January 14, 2013, Appellant filed an ex parte petition for instructions and approval of withdrawal of the trustee's conditional resignation, containing the following:
On or about August 5, 2009, there was a further filing with this Court entitled " Petition for Modification of Trust" which was assigned to Division " E", No. 2009-3927, in which the then current trustee, [Appellant], purportedly resigned the office of Trustee by affidavit dated July 29, 2009, on the conditions that [Preston], who was the Trust Protector, succeed [Appellant] as a co-trustee, take the oath of office of co-trustee, and designate " one or more additional co-trustees pursuant to the modification and amended provisions of [the Trust]", which did require, at Article XI B., for at least one additional co-trustee to be named, and to be a Louisiana resident.[
[14-697 La.App. 3 Cir. 5] The conditions contained in the Court's Order accepting the modification and amendment of the Trust required that the then Trust Protector, [Preston], assume the office of co-trustee, and take the oath of office, and name a co-trustee who is a resident of Louisiana, but there is no indication that [Preston] has ever taken the oath of office, or named a Louisiana domiciliary to replace Trustee [Appellant], and [Appellant] has in fact acted in the capacity of Trustee on several occasions up to the date of the filing of this Motion.
[Appellant] hereby formally withdraws his resignation and will continue in the office of Trustee [.
In the petition for instructions, Appellant alleged:
[Appellant] and [E. Pierce Jr.] have sought to appeal the district court's Judgment against them in their individual and representative capacities . . . .
in accordance with the Trust's provisions, [E. Pierce Jr.] made written demand upon the Trust, by correspondence . . . to [Appellant], Trustee, and [Preston], Trust Protector/Trustee, to have the Trust pay [for] appellate counsel, and also to fund the filing and posting of supersedeas bonds in order to stave off any possible execution of the Federal Action judgment until after all appeals have been decided.
. . . .
Additionally, [Preston] has not responded to the demand of [E. Pierce Jr.] and the Estate, for the funds to pay the attorney fees and supersedeas bond premiums for the appeal . . . .
. . . .
[Appellant] thus seeks Court approval for the withdrawal of his conditional resignation, and instructions from the Court as to the authority to pay both the attorney fees to prosecute the above referenced appeal . . . and ...