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In re Estate of Cavin

April 15, 1999

IN RE ESTATE OF PATRICIA B. CAVIN


Before Schwelb, Farrell, and Ruiz, Associate Judges.

The opinion of the court was delivered by: Farrell, Associate Judge

Notice: This opinion is subject to formal revision before publication in the Atlantic and Maryland Reporters. Users are requested to notify the Clerk of the Court of any formal errors so that corrections may be made before the bound volumes go to press.

Appeal from the Superior Court of the District of Columbia (Hon. Wendell P. Gardner, Jr., Trial Judge)

Argued January 21, 1999

Defendants/appellants are the trustees under the will of Patricia Burwell Cavin, deceased. Plaintiffs/appellees are the primary beneficiary (Brooks Cavin) and the guardian ad litem on behalf of any residual beneficiaries under that will. This appeal is from a judgment of the trial court after a bench trial concluding, in essence, that appellants (collectively "the Trustees") had breached their fiduciary duty to the beneficiary and remaindermen of the testamentary trust by failing to sell the trust's one-quarter undivided interest in unimproved, non-income producing property in Stafford County, Virginia, by July 1990. The court found that by mid-1988 the Trustees knew or should have known that retention of the land was no longer prudent and appropriate, and that their failure to sell it within the next two years left the trust prey to "an undiversified portfolio" and "the speculative nature of the Stafford real estate market" (which took a strong downturn in the early 1990's), and ignored the "spiraling" needs of the beneficiary, thus depriving him of the "'safety net' of income" the trust was intended to provide him.

The trial court's decision rests upon three primary factual determinations, all of which we conclude are unsupported by the record. One of these relates to the sufficiency of the trust's liquid assets to meet the beneficiary's needs during the relevant period; another relates to the existence of a market for an undivided interest in real property during the same period; and the third, most importantly, is the court's finding that the Trustees exercised no actual judgment about retaining the land rather than selling it during this time, but instead merely "[went] through the motions" of re-evaluation and "mindlessly reaffirm[ed]" a decision made several years earlier to hold on to it.

Correcting for these factual errors, we conclude that the trial court failed to exercise the restraint which this court and others have required in judicial oversight of the decisions of trust administrators, especially given the contingencies of sale of an undivided interest, partition and forced sale, and conflicting interests of the beneficiary and other interest holders that mark this case. We hold that the Trustees did not breach their fiduciary duty to the beneficiary or remaindermen, and so we reverse the trial court's decision and direct entry of judgment for the defendants.

I.

Patricia Cavin, the mother of Chandler and Brooks Cavin, died testate on December 21, 1984. In her will she created a residuary trust for the benefit of her two sons. The first codicil named National Savings and Trust (which merged into and became Crestar Bank in 1985) and a longtime friend, Nancy Hirst, as the Trustees. The Trustees were instructed to "pay such portion of the income and principal [of the trust] to or for the benefit of [Mrs. Cavin's] descendants for their comfortable support and education as the Trustees, in their discretion, shall deem advisable." The trust was to terminate on Chandler's thirtieth birthday and be distributed per stirpes. The portion going to Brooks, however, was to continue to be held in trust for him by the same Trustees (hereafter "Patricia's Trust"), who were instructed to pay the income and such principal as they deemed necessary "to or for the benefit of my said son in order to provide adequately for his comfortable support and education." Brooks Cavin had suffered from mental illness which caused him, at the time of his mother's death, to be unable to care for his own funds.

Patricia's original trust for Chandler and Brooks contained an undivided one-half ownership in an undeveloped property comprised of four parcels in Stafford County, Virginia (the "Stafford" or "Cavin Property"), totaling approximately 287½ acres. *fn1 The other one-half interest in the Stafford Property was contained in a trust created by Mrs. Cavin's deceased husband ("Edward's Trust") for the benefit of Chandler and Brooks. That trust terminated in 1985 on Brooks's twenty-fifth birthday, and Chandler received his one-quarter interest outright. Between 1985 and 1987, Crestar/NS&T held Brooks's 1/4 portion in a custodian account; in 1987, at the close of a conservatorship proceeding brought by NS&T, a trust for Brooks (the "Voluntary Trust") was created holding his distributed portion of Edward's Trust. Robert Olshan was named trustee of the Voluntary Trust.

As of Chandler's thirtieth birthday in August 1988, therefore, the Stafford Property was held as follows:

* 1/4 undivided interest held by Patricia's Trust for Brooks, with Crestar and Nancy Hirst as Trustees.

* 1/4 undivided interest held in the Voluntary Trust for Brooks, with Robert Olshan as Trustee.

* 1/2 undivided interest held outright by Chandler.

In the spring of 1990 the Voluntary Trust was dissolved and Brooks took possession, in his own right, of the 1/4 ...


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