Court Opinion

ID: 9404481
Source: CourtListenerOpinion
Date Created: 2023-06-23 05:07:09.964814+00
Date Added: 2024-06-11T17:20:14.757175
License: Public Domain

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
                  revision until final publication in the Michigan Appeals Reports.

                            STATE OF MICHIGAN

                              COURT OF APPEALS

RONALD SCHADDELEE, JR., as Cotrustee of the                            UNPUBLISHED
RONALD SCHADDELEE IRREVOCABLE                                          June 22, 2023
TRUST,

               Appellant,

v                                                                      No. 362521
                                                                       Ottawa Probate Court
MARIA DELEON, as Cotrustee of the RONALD                               LC No. 21-067858-TV
SCHADDELEE IRREVOCABLE TRUST,

               Appellee,

and

JAMES SCHADDELEE,

               Other Party.

Before: GLEICHER, C.J., and RICK and MALDONADO, JJ.

PER CURIAM.

        A trust agreement is a document separate and distinct from a declaration of trust ownership.
The first is a contract creating a trust and setting forth its terms. The second is a list of assets or
potential assets that will flow into the trust. The probate court correctly determined that the
declaration of trust ownership was not a contract and a cotrustee did not breach her fiduciary duty
by allegedly violating a provision of that declaration. We affirm.

                                        I. BACKGROUND

        On February 18, 2021, Ronald Schaddelee, Sr. executed a trust agreement and named two
of his children—Maria DeLeon and Ronald Schaddelee, Jr.—as cotrustees. The trust agreement
provided that the trust was “irrevocable and may not be altered, amended, or modified in whole or
in part in any way.” Ronald Sr. “reserve[d] the right to add property to the trust.” Upon Ronald

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Sr.’s death, the cotrustees were directed to “divide the remaining trust property, including additions
from any sources, into separate shares” among the trust beneficiaries.

        On the same day, Ronald Sr. signed a declaration of trust ownership, stating, in relevant
part:

                 I declare, as Settlor of the Ronald Schaddelee Irrevocable Trust (trust), an
        irrevocable trust existing under a trust agreement executed by me on February 18,
        2021 that, by this declaration, I transfer and convey to the Co-Trustees, Maria
        DeLeon and Ronald Schaddelee, Jr., solely and exclusively for and in behalf of the
        trust, all property, whether owned or later acquired, regardless of the means by
        which acquired, including, without limitation, the following:

              bank accounts, including but not limited to checking accounts, savings
               accounts, and certificates of deposit

              mutual and money market funds of all kinds

              securities, including but not limited to stocks, bonds, treasury instruments,
               and notes receivable

              agency and custody accounts, including but not limited to those at banks or
               brokerage firms

                                               * * *

              any property that now or at any time after the date of this declaration is held
               in my name or any variation of my name, but excluding any interest in
               property owned by me with another person as joint owners or as tenants by
               the entireties

The declaration continued that Ronald Sr. and the cotrustees “affirm[ed] and declare[d]”:

              I will hold all property described above solely and exclusively for and on
               behalf of the trust as trust owner, subject to any and all instructions from
               the acting trustee.

              Except to the extent of beneficial interests provided to me under the terms
               and provisions of the trust agreement, as now written and as may be
               amended in the future, I have and shall have no personal interests in any of
               the properties described above.

        Several years before executing his trust, Ronald Sr. opened an investment account through
Infinex Investments with Macatawa Bank. Ronald Sr. designated Maria as the sole beneficiary of
that account. Ronald Sr. never amended the beneficiary designation.

      Ronald Sr. passed away in March 2021. In September 2021, Ronald Jr. filed a petition to
remove Maria as cotrustee because Maria had refused to transfer the investment account proceeds

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into the trust. Ronald Jr. contended that this violated the declaration of trust ownership and Maria’s
fiduciary duties. Maria responded that as the investment account had a separate beneficiary
designation, the proceeds flowed to the named beneficiary and not to the trust.

       Ronald Jr. eventually sought partial summary disposition pursuant to MCR 2.116(C)(9)
and (10), contending that Maria had promised by express agreement in the declaration of trust
ownership to hold no personal interest in property intended to be transferred into the trust. Maria
responded that the investment account beneficiary designation was an express contract that
overrode the trust and declaration of trust ownership. As there was a separate, preexisting
beneficiary designation, Maria contended that the investment account was not part of the trust.

       At the close of the summary disposition hearing, the probate court noted that this was not
a breach of contract case.

       It’s called a Declaration of Trust Ownership. It is in fact a declaration, a statement,
       a representation. It is not a contract; it is not an agreement. It doesn’t say it is the
       terms of the title, and in the terms of the content of the document it doesn’t say that
       it’s a contract or an agreement. It’s simply Ronald Sr. saying: This is my
       understanding of the kinds of assets that should go into my trust. And it’s his
       children saying: We agree with that, and we agree with our father’s representation,
       and we’ll agree to abide by that.

The court continued that a settlor can list anything in his or her declaration of trust ownership, but
can only pass property he or she actually owns into the trust.1

               The declaration of trust ownership is a statement, a representation that he’s
       making, saying this is what I think I own. But such declarations can be wrong and
       have been wrong many times in the past. And this is why every good estate
       planning attorney, upon the completion of the estate planning and creation of the
       trust, will tell their clients: Now you need to go out and fund your trust. And one
       way you fund your trust is to change the beneficiary designations on all of your
       accounts, naming the trust as the beneficiary. And I don’t know what advice the
       attorney gave Mr. Schaddelee, but for whatever reason Mr. Schaddelee never did
       that, and Maria DeLeon remained the beneficiary. And so, in my opinion, this
       account is not part of the trust. Why? Because Maria DeLeon owned it at the time
       immediately upon the death of Ronald Sr., and therefore Ronald Sr. had no ability
       to include it within his trust by making this declaration of trust ownership.

               I find that that document is not a contract with mutual rights and obligations
       as between Maria DeLeon and Ronald Jr. It is merely a declaration, a statement by
       the settlor of the trust and agreed to by his children that this is what we think Dad
       owns, but it isn’t an iron-clad guarantee that Dad owns that. And if he leaves an

1
  The court used as an example that a settlor could list the Brooklyn Bridge in his or her declaration
of trust ownership. Obviously, the settlor did not own that property and its title could not pass into
the trust upon the settlor’s death.

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        account with a beneficiary designating the money to go somewhere else, then he
        doesn’t own it and it doesn’t go into his trust.

        The probate court issued an order denying Ronald Jr.’s motion for partial summary
disposition and instead ruled in Maria’s favor. The court reiterated that the declaration of trust
ownership was not a binding agreement; it was a statement of the assets that Ronald Sr. believed
he owned and intended to flow into the trust. The investment account was not a part of the trust
because it flowed directly to Maria through the beneficiary designation.

        Ronald Jr. now appeals.

                                             II. ANALYSIS

         We review de novo a lower court’s resolution of a summary disposition motion. Barnard
Mfg Co, Inc v Gates Performance Engineering, Inc, 285 Mich App 362, 369; 775 NW2d 618
(2009). Summary disposition is warranted under MCR 2.116(C)(9) when “[t]he opposing party
has failed to state a valid defense to the claim asserted against him or her.” This review is made
based on the pleadings alone and summary disposition must be granted “[i]f the defenses are so
clearly untenable as a matter of law that no factual development could possibly deny plaintiff’s
right to recovery.” Village of Dimondale v Grable, 240 Mich App 553, 564; 618 NW2d 23 (2000)
(quotation marks and citation omitted). Summary disposition is supported under MCR
2.116(C)(10), on the other hand, when viewing the evidence presented in the light most favorable
to the nonmoving party, there is no genuine issue of material fact and the moving party is entitled
to judgment as a matter of law. Zaher v Miotke, 300 Mich App 132, 139; 832 NW2d 266 (2013).

        Underlying the court’s decision was its determination that the declaration of trust
ownership was not a contract. Rather, it was a document pertaining to the trust created by the
contractual trust agreement and outlining general categories of theoretical property that would flow
into the trust. We review this legal conclusion de novo. Kloian v Domino’s Pizza, LLC, 273 Mich
App 449, 452; 733 NW2d 766 (2006).

          “[A] contract is an agreement between parties for the doing or not doing of some particular
thing and derives its binding force from the meeting of the minds of the parties.” In re Mardigian
Estate, 312 Mich App 553, 562; 879 NW2d 313 (2015) (quotation marks and citation omitted),
aff’d 502 Mich 154 (2018). As described by the Estates and Protected Individuals Code (EPIC),
a trust may be created by the owner of property (the settlor) declaring that he or she “holds
identifiable property as a trustee.” MCL 700.7401(1)(b). “This section does not require a separate
registration or retitling of property.” Martin & Harder, Estates and Protected Individuals Code
with Reporter’s Commentary (ICLE, February 2023 Update), p 575. The trust is created when the
settlor “executes an agreement or instrument establishing the terms of the trust.” Id. The trust is
funded by separately “attach[ing] a schedule of property held subject to the trust as its initial corpus
or . . . concurrently sign[ing] a separate declaration of trust or bill of sale declaring identifiable
property . . . held subject to the terms of the trust established by the agreement or instrument.” Id.

        The distinction between the trust agreement and the declaration of trust ownership is further
supported by caselaw. “ ‘It is a general principle of trust law that a trust is created only if the
settlor manifests an intention to create a trust, and it is essential that there be an explicit declaration

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of trust accompanied by a transfer of property to one for the benefit of another.’ ” Le Gassick v
Univ of Mich Regents, 330 Mich App 487, 497; 948 NW2d 452 (2019), quoting Osius v Dingell,
375 Mich 605, 613; 134 NW2d 657 (1965). Although it is essential that property be transferred
into the trust through a declaration of trust, the declaration is not the document that creates the
trust or dictates the trust terms.

        Here, Ronald Sr. executed a trust agreement outlining the terms of the trust, his duties, and
the duties of the cotrustees. That document was a contract creating a trust. In a separate document
signed on the same day—the declaration of trust ownership—Ronald Sr. provided a schedule of
general property categories that he might own and that he expected to flow into the trust. This
separate declaration of trust ownership is not part of the agreement creating the trust. The probate
court correctly described that the declaration of trust ownership served a different purpose.
Accordingly, the probate court properly granted summary disposition in Maria’s favor in this
regard.

       The probate court proceeded to consider the parties’ arguments about whether the
investment account flowed directly to Maria or the trust after Ronald Sr.’s death, and ruled in
Maria’s favor. Ronald Jr. does not challenge that conclusion on appeal.

     We affirm. Maria DeLeon, having prevailed in full, is entitled to tax her costs pursuant to
MCR 7.219(A).

                                                              /s/ Elizabeth L. Gleicher
                                                              /s/ Michelle M. Rick
                                                              /s/ Allie Greenleaf Maldonado

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