August 29, 2018 § Leave a comment
We visited the Ferrell v. Cole case yesterday, dealing with who is entitled to notice to close an estate. Ferrell held that only persons with a direct pecuniary interest in the estate were entitled to notice. If one is not in the class of persons entitled to notice, does one have standing to demand an accounting or to object to an accounting?
That was the question in Flowers v. Estate of Flowers, decided February 6, 2018, by the COA. At the trial level the Special Chancellor had denied the request of Claire and Jane, daughters of the decedent, for an accounting, finding that they had no current interest in their mother’s estate. Their interest was described by the COA this way:
¶4 … The will also established a trust that named D.A. [a minor] and his descendants as the income beneficiaries. The will provided for the trust’s termination either at the time of D.A.’s thirtieth birthday or his death, whichever event occurred first. The will further stated that, at the time of termination, the trust’s assets were to be divided evenly between D.A. and Knox [the decedent’s son]. The will then granted Claire and Jane a shifting executory interest by providing that, if both D.A. and Knox passed away without any descendants before the trust’s termination, the trust’s assets were to be distributed to Claire and Jane as beneficiaries, either directly or through conservatorships. While the will relieved the trustees from having to render a periodic accounting to any court, it stated that the trustees “shall . . . account fully and completely annually, throughout the term of this [t]rust, to such income and/or corpus beneficiaries as there may be or[,] in the event such beneficiary is a minor or a ward, then to such beneficiary’s guardian.”
So, in that situation, did Claire and Jane have standing to demand an accounting? Here’s how the COA dealt with the question:
¶16. On appeal, the parties disagree as to whether Claire and Jane have standing to request an accounting of their mother’s estate and testamentary trust. Since standing is a jurisdictional issue, we review it de novo. SASS Muni-V LLC v. DeSoto Cty., 170 So. 3d 441, 445 (¶12) (Miss. 2015). Standing is to be determined at the commencement of a lawsuit. In re Estate of Baumgardner, 82 So. 3d 592, 599 (¶21) (Miss. 2012). Regarding the applicable caselaw on standing, the Mississippi Supreme Court has stated the following:
To have standing to sue, a party must assert a colorable interest in the subject matter of the litigation or experience an adverse effect from the conduct of the defendant, or as otherwise authorized by law. An interest is deemed colorable if it appears to be true, valid, or right. An individual’s legal interest or entitlement to assert a claim against a defendant must be grounded in some legal right recognized by law, whether by statute or by common law. For a plaintiff to establish standing on grounds of experiencing an adverse effect from the conduct of the defendant/appellee, the adverse effect experienced must be different from the adverse effect experienced by the general public.
SASS Muni-V, 170 So. 3d at 446 (¶13) (internal citations and quotation marks omitted).
¶17. Mississippi precedent clearly establishes that vested remainder beneficiaries of a testamentary trust have standing to file suit and that holders of a shifting executory interest have some limited rights that can provide standing to file suit. See Baumgardner, 82 So. 3d at 600-01 (¶¶27-28); Hemphill, 245 Miss. at 46, 145 So. 2d at 461. [Fn 3] Claire and Jane claim they are vested remainder beneficiaries of their mother’s testamentary trust while Knox asserts his sisters have an unvested executory interest. As previously discussed, the chancellor found Claire and Jane were unvested contingent remainder beneficiaries.
[Fn 3] Cf. Cannon, 59 Miss. at 302-05 (holding that contingent remainder beneficiaries could prevent a life tenant from future waste to the detriment of the inheritance).
¶18. In applying precedent to the instant case, we find that Claire and Jane possess a shifting executory interest in their mother’s testamentary trust. A review of the will’s terms reflects that Brenda’s estate vests in D.A. and Knox, but that D.A. and Knox inherit subject to a condition of survivorship. See Hemphill, 245 Miss. at 46, 145 So. 2d at 461. D.A. and Knox may be divested if the condition of survivorship is not fulfilled. If the survivorship condition is not fulfilled, D.A. and Knox are then divested of their interests, which shift to Claire and Jane as beneficiaries. Precedent establishes that, as the owners of a shifting executory interest, Jane and Claire possess limited rights to prevent future waste. See id. See also Columbus & Greenville Ry. Co. v. City of Greenwood, 390 So. 2d 588, 592 (Miss. 1980) (applying the Hemphill holding to find that the heirs of original land grantors possessed a reversionary interest capable of evaluation). “An executory interest is a future interest, which is held by a third person, that either terminates another’s interest before its natural termination, or begins after the natural termination of a preceding estate.” K.F. Boackle, Real Property—Deeds and Conveyances, 7 Encyclopedia of Mississippi Law § 62:29 (2d. ed. Jeffrey Jackson et al. eds.). “A shifting executory interest occurs when ownership shifts from one transferee to another upon the occurrence of the subsequent event.” Scott v. Brunson,
569 S.E.2d 385, 387 (S.C. Ct. App. 2002). We now turn to a more specific review of the terms of Brenda’s will and the legal consequences of those terms.
¶19. In applying caselaw to the terms of Brenda’s will, we find the will’s terms reflect that, in creating the testamentary trust, Brenda named D.A. the income beneficiary with the principal to be placed in trust until the earliest of either D.A.’s thirtieth birthday or his death. At either D.A.’s thirtieth birthday or his death, Brenda’s will directed that the trust’s principal be evenly divided between D.A. and Knox “per stirpes to include adopted children.” The terms of the will next discussed disbursement of trust assets to beneficiaries who were under the age of twenty-one at the time of the trust’s termination, or who died before the trust’s termination. Finally, in establishing that D.A. and Knox inherit subject to a condition
subsequent of survivorship, the will stated as follows:
If there are no surviving beneficiaries, descendants of deceased former beneficiaries, former beneficiaries who are living, or descendants of deceased former beneficiaries, then his or her interest shall be distributed share and share alike to the [c]onservatorships for my two daughters[, Claire and Jane;] should either one or both of them not have a [c]onservatorship at the termination of this trust[,] then distribute their portion outright to them.
¶20. Thus, Brenda’s will established that, if D.A. and Knox failed to satisfy the condition of survivorship, they would be divested of their interests, which would then shift and be distributed to Claire and Jane. Accordingly, a review of Brenda’s will reflects that she gave Claire and Jane a shifting executory interest in the assets of the testamentary trust. [Fn 4] As stated, Mississippi precedent reflects that holders of a shifting executory interest enjoy limited rights to enjoin the possessory owner from waste of the inheritance. See Hemphill, 245 Miss. at 38, 145 So. 2d at 457. [Fn 5] We now turn to a review of applicable and instructive Mississippi precedent.
[Fn 4] See Hemphill, 145 So. 2d at 457 (finding that individuals who possessed a shifting executory interest in land taken and allegedly damaged by the Mississippi Highway Commission possessed limited compensable rights in the land); White v. Inman, 212 Miss. 237, 256, 54 So. 2d 375, 381-82 (1951) (finding the testator’s will devised to his daughter an estate in fee simple defeasible subject to an executory limitation). ).
[Fn 5] 5 Cf. Cannon, 59 Miss. at 302-05 (holding that contingent remainder beneficiaries could not recover damages from a life tenant for past waste but could enjoin the life tenant from future waste to the inheritance’s detriment
¶21. In Hemphill, the supreme court explained that an executory-interest owner’s limited right rests upon the constitutional provision for due process. Id. at 46, 145 So. 2d at 461. The Hemphill court found that Mississippi precedent and statutory law “place an independent
value and significance on future interests, whether ‘vested’ or not.” Id. at 47, 145 So. 2d at 462. The Hemphill court further explained that a contingent remainder interest “has achieved status as a protectable interest for many purposes” when the “contingent remainder is limited to an existing ascertained person[,]” like Claire and Jane in the instant case. Id. at 48, 145 So. 2d at 462. According to the Hemphill court, “[w]hen a contingent remainder is limited to an existing ascertained person[,] there is no question but that the courts will recognize the interest as having present existence.” Id.
¶22. Thus, upon review of relevant caselaw and the record before us, we find the chancellor erred in denying Claire and Jane’s request for an accounting of their mother’s estate and testamentary trust. As holders of a shifting executory interest in their mother’s estate, Claire and Jane possess limited rights to enjoin the possessory owners from future waste of the estate. See id. at 38, 145 So. 2d at 457.6 As a result, we reverse the chancellor’s judgment finding they lack standing to request an accounting, and we remand the case for further proceedings consistent with this opinion.
In all fairness, the COA did not have the benefit of the Ferrell decision when it decided Flowers. So the COA had to rely on tax-sale, eminent-domain, and property cases for the most part in reasoning through to a decision. But after all this, in light of Ferrell, did Claire and Jane have such a “direct pecuniary interest” so as to entitle them to that level of of protection? And isn’t the “colorable interest” test of Sass-Muni-V (a tax-sale case) less restrictive than the “direct pecuniary interest” of Ferrell (an estate case)?
Or are the interests of Claire and Jane so remote that they can’t be said to have that “direct interest” under Ferrell, which is estate law?
Now that the courts have Ferrell as a waypoint, I hope they can give those of us at ground level some clear, practical guidance.