Opinion

Ryne W. Brown v. Catherine L. Brown, Trustee

Court: Court of Appeals of Tennessee
Filed: Apr 16, 2013
Status: Published
On the bench: Presiding Judge Alan E. Highers
Cited by: 0 cases
Authority: More cited than 29.1%

The opinion

IN THE COURT OF APPEALS OF TENNESSEE

AT JACKSON

February 19, 2013 Session

RYNE W. BROWN v. CATHERINE L. BROWN, Trustee, ET AL.

Direct Appeal from the Chancery Court for Shelby County

No. CH-06-1854 Walter L. Evans, Chancellor

No. W2012-02301-COA-R3-CV - Filed April 16, 2013

This case involves a trust. In a previous appeal, this Court remanded for the appointment of

a corporate co-trustee as specifically required by the terms of the trust. Thereafter, the

defendant existing trustee, who is also a beneficiary, unilaterally appointed a corporate co-

trustee and then sought to have the trial court “ratify” her appointment. The plaintiff

beneficiary challenged the appointment, claiming that the trustee was not authorized to

unilaterally appoint a corporate co-trustee and arguing that the corporate co-trustee who was

chosen did not meet the qualifications listed in the trust agreement. After hearing some

testimony about the proposed co-trustee, the trial court decided that the plaintiff beneficiary

lacked standing to participate in the selection or ratification of a corporate co-trustee. The

trial court then granted the defendant trustee’s motion to ratify her appointment of the co-

trustee. The plaintiff beneficiary appeals. We reverse and remand for further proceedings.

Tenn. R. App. P. 3; Appeal as of Right; Judgment of the Chancery Court Reversed

and Remanded

A LAN E. H IGHERS, P.J., W.S., delivered the opinion of the Court, in which D AVID R. F ARMER,

J., and J. S TEVEN S TAFFORD, J., joined.

Kevin A. Snider, Germantown, Tennessee, for the appellant, Ryne W. Brown

Lynn W. Thompson, G. Patrick Arnoult, Memphis, Tennessee, for the appellees, Catherine

L. Brown, Trustee, Catherine L. Brown, individually, Cathleen Lucille Brown Sibley,

Graham W. Sibley, Hilary E. Sibley Murphy, Aiden Patrick Murphy, a minor, Ashley Mills

Sibley, and Alexander Mills Sibley

MEMORANDUM OPINION 1

I. F ACTS & P ROCEDURAL H ISTORY

In 1992, husband and wife Roland W. and Catherine L. Brown executed and funded

the “Roland and Catherine Brown Living Trust.” The trust agreement was amendable and

revocable while both Roland and Catherine Brown were living, and the two served as joint

trustees of the trust. The trust agreement provided that, upon the death of either Trustmaker,

Roland or Catherine, the trust agreement would no longer be subject to amendment or

revocation. On February 13, 1999, Roland Brown died. Under the terms of the trust

agreement, at the death of Roland, the assets of the Roland and Catherine Brown Living

Trust were divided into two trusts: the Brown Marital Trust2 and the Brown Family Trust.

Pursuant to the trust agreement, the death of Roland activated the appointment of

Union Planters Bank (referred to hereinafter as its successor, “Regions Bank”) to serve with

Catherine Brown as co-trustees of both the Brown Marital Trust and the Brown Family Trust.

Regions Bank did not accept its designation to serve as co-trustee of either trust. Catherine

Brown continued to serve as trustee without a co-trustee for some time. The trust agreement

provided that when either Roland or Catherine was serving jointly with another trustee, either

Roland or Catherine could act for and conduct business on behalf of the trust as trustee

without the consent of any other trustee. Nevertheless, the trust also provided that if either

Trustmaker named a corporate co-trustee to serve, and the corporate co-trustee was unable

to serve for any reason, the corporate co-trustee had to be replaced with another corporate

co-trustee.

Pursuant to the terms of the trust agreement, all of the net income from the Family

Trust was to be paid to or applied for the benefit of the surviving Trustmaker, Catherine. She

also had the right to receive distributions of principal within certain calculable limits each

year. In addition, the trust agreement provided that the trustee could make distributions, to

or for the benefit of the surviving Trustmaker and the Trustmakers’ descendants, of as much

Rule 10 of the Rules of the Court of Appeals of Tennessee states:

This Court, with the concurrence of all judges participating in the case, may affirm, reverse

or modify the actions of the trial court by memorandum opinion when a formal opinion

would have no precedential value. When a case is decided by memorandum opinion it shall

be designated “MEMORANDUM OPINION”, shall not be published, and shall not be cited

or relied on for any reason in any unrelated case.

The terms of the Marital Trust are not relevant to this appeal.

-2-

of the principal of the Family Trust as the trustee, in its sole and absolute discretion,

considered necessary for their education, health, maintenance, and support.

The trust agreement provided that the Family Trust would terminate at the death of

the surviving Trustmaker. It also provided that the surviving Trustmaker had the limited

testamentary power to appoint all or any portion of the remaining principal and undistributed

net income of the Family Trust, as it existed at the surviving Trustmaker’s death, to or for the

benefit of the Trustmakers’ descendants by a will or living trust agreement. Such distribution

could be made among the Trustmakers’ descendants in equal or unequal amounts, either

outright or in trust, as the surviving Trustmaker determined. To the extent that the surviving

Trustmaker did not exercise this limited power of appointment, then upon the death of the

surviving Trustmaker, the remainder of the Family Trust would be administered as provided

in additional articles of the trust agreement. Pursuant to those provisions, the Trustmakers’

two children, Cathleen and Ryne, would each receive equal shares of the remaining trust

property, to be distributed according to a schedule set forth in the trust agreement.

In 2006, Ryne Brown, the son of Roland and Catherine Brown, filed a complaint for

declaratory judgment in the Chancery Court of Shelby County. He named as defendants

Catherine Brown, in her individual capacity and as trustee, and several other descendants of

Roland and Catherine Brown who were potential beneficiaries under the trust agreement.3

Ryne essentially contended that he was a current beneficiary of the Brown Family Trust, and,

consequently, presently entitled to income and principal distributions. He claimed a fifty

percent interest in the assets of the Family Trust. Ryne raised numerous sub-issues that all

stemmed from this contention and generally related to the management of the trust in

contradiction to his alleged status as a beneficiary. The trial court held that Ryne had no

“discernible interest” in the Family Trust until the death of his mother, and only then if any

trust property remained.

On appeal to this Court, in Ryne W. Brown v. Catherine L. Brown, Trustee, et al.,

No. W2009-02264-COA-R3-CV, 2011 WL 441266 (Tenn. Ct. App. Feb. 9, 2011), we first

addressed Ryne’s contention that he was a beneficiary presently entitled to distributions from

the trust. After quoting several relevant provisions of the trust agreement, we summarized

their effect as follows:

Pursuant to Article Ten, Section One, the surviving Trustmaker, [Catherine],

Some additional defendants were dismissed but are not at issue on appeal.

-3-

has the right to all of the net income of the Brown Family Trust. Article Ten,

Section Two gives [Catherine] the right to withdraw principal within certain

specific standards. Article Ten, Section Three provides that the Trustee may

make discretionary distributions of principal for the health, education,

maintenance, and support of [Catherine] and her descendants (including Ryne

Brown), with a preference for distributions to [Catherine]. Lastly, Article Ten,

Section Five also gives [Catherine] a limited power of appointment by which

she can distribute any remaining assets of the trust among her descendants by

testamentary instrument.

Under these provisions, Ryne Brown is not a mandatory beneficiary of

either the income or principal of the Brown Family Trust. Rather, his only

present interest is at the discretion of the Trustee (for distributions of principal

for his health, education, maintenance, and support) or the surviving

Trustmaker (as a recipient of her limited power of appointment). . . . Thus, it

is only upon the death of [Catherine], and only if any trust property remains in

the Brown Family Trust at that time, that the provisions of Article Twelve

[giving Ryne a one-half interest] come into effect. . . . [A]s the trial court

correctly noted, “[i]t is conceivable . . . that [Catherine] could, in satisfying the

requirements of Article Ten, expend and use up The Family Trust to the extent

that there would be nothing left to divide to [Ryne] and [Cathleen] under

Article Twelve.” While [Ryne] is a beneficiary under Article Twelve, that

article only comes into effect at the death of [Catherine] as a way of

distributing any remaining trust property. Thus, [Ryne]'s only present interest

in the Brown Family Trust is as a discretionary beneficiary of the principal.

This is the interpretation that the trial court gave the trust agreement, and we

affirm the trial court's judgment in this respect.

Id. at *4-5.

Next, we addressed Ryne’s assertion that the trust agreement required a corporate

trustee to serve alongside Catherine. We disagreed with the trial court’s conclusion that a

corporate co-trustee was not mandatory. The trust agreement specifically stated that “if

either Trustmaker has named [a] corporate Trustee to serve, such corporate Trustee, if unable

to serve for any reason, must be replaced with another corporate Trustee.” It was undisputed

that Regions Bank was named in the trust agreement to act as corporate trustee upon the

death of Roland Brown, and that Regions Bank did not accept its appointment and never

served as corporate trustee. Likewise, it was undisputed that, in 2008, during the trial court

proceedings, Catherine had named another entity as corporate trustee, and it no longer served

in that capacity. As a result, there was not a corporate trustee and Catherine was the sole

trustee. In short, Catherine had named a corporate trustee, and for whatever reason, such

trustee was unable to serve. Because of the plain terms of the trust agreement, we held that

-4-

a successor corporate trustee must be appointed. We went on to state:

While it is clear that the trust agreement mandates the appointment of

a replacement corporate trustee, it does not provide a procedure for doing so.

. . . The trust agreement is [] silent as to how a corporate trustee should be

appointed or who should have a role in deciding such matters. Nonetheless,

because the trust agreement clearly mandates that a corporate Trustee be

named as a replacement, we reverse this part of the trial court's judgment and

remand to the trial court for the limited purpose of appointing a corporate

trustee in a manner consistent with the terms of the trust.

Id. at *6.

Finally, we addressed numerous issues presented by Ryne in which he alleged that

Catherine breached her fiduciary duties in her role as trustee, with the following explanation:

[Ryne] also alleges that [Catherine] breached her fiduciary duties in her

role as trustee. These allegations relate to how the trust property was

distributed, the extent of notice, disclosures, and accountings, and the failure

to maintain a corporate trustee. The trial court determined that, pursuant to the

terms of the trust agreement, [Ryne] did not prove that the trustee breached any

duty that was owed to him. We agree with the trial court's assessment. We

further note that, even if [Ryne] had proven a technical violation of the terms

of the trust, because he was merely a discretionary beneficiary, he could not

prove that he suffered any loss as a result of the acts of the trustee. Thus,

where [Ryne] cannot prove any loss, we will not hold the trustee liable for an

alleged technical violation. See Oram v. Fitzpatrick, No. 85-307-II, 1986 WL

6061, at *3 (Tenn. Ct. App. May 29, 1986). This is particularly relevant

because we remand for the appointment of a corporate trustee. The trust

agreement requires that a corporate trustee be appointed, and we cannot ignore

this plain directive. However, the absence of a corporate trustee does not prove

that [Catherine] breached her fiduciary duty as trustee with regards to [Ryne].

The trust provided that, as a Trustmaker, whenever [Catherine] served jointly

with another trustee, she was entitled to act without the consent of the other

trustee. Thus, any decisions that [Catherine] made while serving as sole

trustee were within the discretion granted to her by the trust agreement.

Furthermore, because [Ryne]’s interest in the trust was discretionary only, and

could be divested at the sole discretion of [Catherine], he cannot show that he

suffered any loss as a result of her actions as trustee. See id. Consequently,

while we remand for the appointment of a corporate trustee, we affirm the trial

court's judgment that no breach of fiduciary duty occurred. All other issues are

-5-

pretermitted.

Id. (footnote omitted).

After this Court’s memorandum opinion was issued on February 9, 2011, Ryne filed

an application for permission to appeal to the Tennessee Supreme Court. The Tennessee

Supreme Court ultimately denied the application for permission to appeal on July 15, 2011.

On September 2, 2011, Catherine Brown filed, in the trial court, a “Notice of Appointment

of Corporate Co-Trustee.” According to this “Notice,” Catherine had appointed the Forgey

Private Family Trust Co., Inc. (“the Forgey Trust Company”) as corporate co-trustee of the

trust on April 13, 2011 (while the application for permission to appeal was pending). She

claimed that she made such an appointment “pursuant to” the order of the Court of Appeals

“and in accordance with” the terms of the trust agreement. The Notice further stated that the

Forgey Trust Company accepted its appointment on April 13, 2011, and had been serving as

corporate co-trustee since that date. Attached to the Notice was an “Affidavit of

Appointment” signed by Catherine, in which she stated that she understood that the Court of

Appeals had “mandated that I have a Corporate Trustee,” that she “agree[d] to the mandate,”

and that she appointed the Forgey Trust Company to serve as the corporate trustee.

In January 2012, Catherine filed a “Motion to Ratify Appointment of Corporate

Trustee,” which was joined by the other descendants of the Trustmakers who were named

as defendants in Ryne’s original complaint. The defendants asked the trial court to set a

hearing on the motion to ratify the appointment of corporate co-trustee, with notice of the

hearing provided to all parties, and to issue an order ratifying the appointment of the Forgey

Trust Company as the corporate co-trustee of the trust.

Ryne filed a response to the motion in which he objected to Catherine’s “unilateral”

appointment of a corporate co-trustee and also argued that the Forgey Trust Company was

not qualified to serve as corporate co-trustee “for a whole host of reasons.” He claimed that

the Forgey Trust Company did not meet several of the qualifications for corporate trustees

set forth in the terms of the trust itself. The trust agreement provided in Article 15, entitled

“The Resignation, Replacement, and Succession of Our Trustees,” Section 4, entitled

“Corporate Fiduciaries,” the following statement:

Any corporate fiduciary named in this trust agreement or appointed by a court

of competent jurisdiction as a Trustee must be a corporation organized under

the laws of the United States or of any state which is (1) qualified to do

business, and to exercise trust powers, in the State of Tennessee or in any other

state, (2) has an active personal trust department, and (3) has at least

$200,000,000 in trust assets over which investment authority is held. Such

Trustee may not have entered into any agreement, written or oral, express or

-6-

implied, with any of the beneficiaries of any of the trusts herein created either

as to the manner, amount, or proportion in which the Trustee after appointment

will distribute to or apply for the benefit of any such beneficiaries the income

and/or principal of any such trusts or as to the manner in which the Trustee

will administer any of such trusts. The appointment of a corporation as trustee

in which the stockholdings of any of such trusts or of any of the beneficiaries

of such trusts are significant from the viewpoint of the voting control thereof

if [sic] specifically prohibited. . . .

Ryne argued that the Forgey Trust Company did not meet these qualifications because it was

undisputed that it was not incorporated until August 30, 2011, some four months after it was

allegedly appointed by Catherine in April 2011, and it was not registered to do business in

the State of Tennessee until November 14, 2011. Ryne alleged that the defendants had failed

to provide him with “ANY information” about the Forgey Trust Company despite his

numerous requests, but he said it appeared that the Forgey Trust Company did not have

investment authority over $200 million in trust assets. Ryne further claimed that the

defendants had not produced any information about the Forgey Trust Company’s officers,

executives, and managers, and he asserted that such information should be considered by the

court in order to determine if conflicts of interest existed.

The trial court held a hearing on the parties’ motions on February 16, 2012. At the

outset, Catherine’s attorney argued that under the terms of the original trust agreement, “only

Catherine” had authority to appoint a corporate co-trustee during her lifetime. Catherine’s

attorney also argued that Ryne had no standing to participate in the proceedings for the

appointment of a co-trustee because he had “absolutely no interest” in the trust assets until

such time as Catherine died, and only then if trust assets remained. Her attorney claimed that

Ryne had “no input, none whatsoever” in the administration of the trust or the selection of

a corporate co-trustee.

Regarding Ryne’s assertion that the Forgey Trust Company failed to meet the

qualifications of Article 15 Section 4, Catherine’s attorney argued that the aforementioned

Section was inapplicable to the appointment of the Forgey Trust Company. Section 4 began

by stating, “Any corporate fiduciary named in this trust agreement or appointed by a court

of competent jurisdiction as a Trustee must be . . . ” Citing this phrase, counsel for Catherine

argued that the Forgey Trust Company was appointed by Catherine; it was not named in the

trust agreement or appointed by a court. Therefore, she argued, the $200 million asset

requirement was inapplicable.4

In response to a question by the trial judge, the attorney for Catherine estimated that the Forgey

(continued...)

-7-

Ryne’s attorney insisted that the trial court was required to appoint a corporate co-

trustee, and that it was improper for Catherine to have done so on her own. He also argued

that because Ryne was a contingent beneficiary of the trust, he had standing to participate in

the proceedings.

When William Forgey, of the Forgey Trust Company, was called to testify, counsel

for Ryne objected and argued that he should be permitted to conduct limited discovery and

depose Mr. Forgey and perhaps Catherine prior to any testimony before the court. He

specifically requested a continuance of the hearing on that basis. The trial court initially

denied the request and permitted Catherine’s attorney to question Mr. Forgey. Mr. Forgey

testified that he met with Catherine in April 2011 and agreed to work with her as co-trustee.

Mr. Forgey, individually, had many years of relevant experience dealing with trusts, and he

agreed to form a corporation for the sole purpose of serving as co-trustee of the Brown

Family Trust. Mr. Forgey testified that he currently had other clients but only in his capacity

as an individual. He testified that he and Catherine were presently meeting on a quarterly

basis and had a good working relationship. When Mr. Forgey was questioned about his

serving as co-trustee upon appointment by Catherine in April 2011, before he formed a legal

corporation, Catherine’s attorney argued that Mr. Forgey was not “officially” the co-trustee

until his corporation was registered to do business in Tennessee in November. Ryne’s

counsel attempted to question Mr. Forgey about payments that he received for his services

prior to that time, and the trial court sustained Catherine’s objection to such testimony on the

basis that Ryne had no right to such information. After some argument by the attorneys

regarding when Mr. Forgey began acting as co-trustee, the trial court stated:

Let's cut this short. The Court is going to rule that Ryne Brown does not have

standing to raise the issue regarding the conduct of the trust prior to him

having a vested interest in the trust asset. Let's move on.

The Court stated that it would allow Ryne’s attorney to continue to question Mr. Forgey in

order to “enlighten the Court as to whether or not he is competent to serve as co-trustee.”

However, such questioning would be limited to whether Mr. Forgey, or more specifically,

the Forgey Trust Company, was presently qualified to serve as co-trustee. The trial judge

expressed his opinion that the appointment of a co-trustee was not official until confirmed

by the court, and therefore, the only relevant issue was whether the Forgey Trust Company

was presently a qualified legal entity, fully capable of carrying out the duties and

responsibilities of co-trustee. Upon further questioning, the trial judge sustained another

(...continued)

Trust Company had investment authority over about $900,000 in assets. However, no evidence was

presented regarding this issue.

-8-

objection to testimony about the amount Mr. Forgey had been paid by the trust. After some

questions about the limits of Mr. Forgey’s errors and omissions insurance coverage, counsel

for Ryne asked how much money he was managing on behalf of the Family Trust. Mr.

Forgey refused to answer the question and the trial court refused to direct him to answer.

After referencing an apparent time constraint, the trial court continued the matter to another

date and commented that doing so would allow Ryne’s attorney “more time to prepare for

the hearing.” The judge indicated that Ryne’s attorney could depose Mr. Forgey and explore

subjects such as what services he anticipated rendering as co-trustee, how his fee would be

determined, and how it would be paid, but, he said that Ryne was not entitled to information

about the assets of the trust or the amounts paid into or out of the trust.

After the hearing was continued, but prior to the next hearing, the defendants filed a

motion in limine seeking an order preventing Ryne from participating in the court’s selection

or ratification of a co-trustee, for lack of standing. The defendants argued that the previous

opinion of the Court of Appeals established that because Ryne was only a discretionary

beneficiary, he could suffer no loss or injury due to Catherine’s actions. The defendants also

attached to their motion an amendment to a separate trust, the Catherine L. Brown Revocable

Living Trust, which amendment had been executed by Catherine the previous year. The

amendment stated:

I specifically exercise the limited power of appointment granted to me under

Section 5 of Article Ten of the ROLAND AND CATHERINE BROWN

LIVING TRUST dated November 25, 1992, by appointing all of the corpus

(principal plus undistributed or accrued income) contained in the designated

Brown Family Trust at the time of my death, to be distributed to Cathleen

Lucille Brown Sibley, and if Cathleen Lucille Brown Sibley should predecease

me, or die before the complete distribution of these assets, then the remaining

assets shall be distributed in trust in equal shares to the trustee of the trusts

established for the then living children of Cathleen Lucille Brown Sibley. . .

The defendants filed a supporting memorandum, arguing that because Catherine exercised

the limited power of appointment granted to her by the original trust agreement, and

appointed all assets which remained in the Brown Family Trust at the time of her death to her

daughter, then Ryne was no longer a residual beneficiary of the Brown Family Trust. Thus,

they insisted that Ryne had no standing to participate in the proceedings, and he should not

be permitted to present evidence, cross-examine witnesses, or take discovery.

Ryne argued in response that the previous opinion of the Court of Appeals did not

hold that he lacked standing to participate in the proceedings. He claimed that his interest

as a discretionary or contingent beneficiary was a sufficient basis for standing to participate

-9-

in the proceedings. Ryne also submitted his own motion to appoint a corporate co-trustee,

suggesting that the court appoint Bank of America, Charles Schwab, or USAA.

At the next hearing before the trial court, Ryne’s attorney reiterated his request to

conduct discovery and claimed that he had been prevented from deposing Mr. Forgey by the

defendants’ failure to provide dates for a deposition. Counsel for the defendants argued that

because Catherine had exercised the limited power of appointment, Ryne was no longer a

beneficiary “under any circumstance” and had “no interest in the trust whatsoever,” and

therefore he lacked standing. The trial court denied Ryne’s motions and heard no additional

evidence. It entered an order stating that it was appropriate to appoint the Forgey Trust

Company as corporate co-trustee. The trial court noted this Court’s previous holding that

Ryne was only a discretionary beneficiary whose interest could be divested by Catherine, and

therefore, the trial court found that Ryne “cannot show that he suffered a loss.” The court

further noted the fact that Catherine had exercised the limited power of appointment, so that

Ryne was no longer a residuary beneficiary under the trust, and therefore, the court held,

“Ryne Brown does not have standing to participate in the selection or ratification of a

corporate co-trustee of the Brown Family Trust.” Ryne timely filed a notice of appeal.

II. I SSUES P RESENTED

Ryne presents numerous issues and sub-issues on appeal. We have re-worded the

determinative issues, as we perceive them, as follows:

1. Whether the trial court erred by holding that Ryne had no standing to participate in

the proceedings because:

a. Ryne could not be “disinherited” from the irrevocable Brown Family Trust;

b. Ryne has a sufficient interest as a trust beneficiary; and

c. Ryne has participated in this matter since 2006 and the defendants waived the

issue of standing; and

2. Whether the trial court failed to comply with the previous directive of this Court by:

a. naming a corporate co-trustee who failed to meet the qualifications set forth

in the trust agreement;

b. ratifying Catherine’s unilateral appointment of a corporate co-trustee; and

c. failing to consider Ryne’s proposed alternative corporate trustees.

For the following reasons, we reverse and remand for further proceedings consistent with this

opinion.5

Ryne raises one additional issue on appeal regarding the effect of alleged testimony by Catherine

(continued...)

-10-

III. S TANDARD OF R EVIEW

“Trust instruments are interpreted similarly to contracts, deeds, or wills.” In re Estate

of Marks, 187 S.W.3d 21, 28 (Tenn. Ct. App. 2005) (citing Marks v. S. Trust Co., 203 Tenn.

200, 310 S.W.2d 435, 437-38 (Tenn. 1958)). Consequently, the interpretation of a trust

agreement is a question of law for the court. Holder v. First Tennessee Bank N.A.

Memphis, No. W1998-00890-COA-R3-CV, 2000 WL 349727, at *3 (Tenn. Ct. App. Mar.

31, 2000). We review a trial court’s conclusions of law under a de novo standard upon the

record with no presumption of correctness. Union Carbide Corp. v. Huddleston, 854

S.W.2d 87, 91 (Tenn. 1993) (citing Estate of Adkins v. White Consol. Indus., Inc., 788

S.W.2d 815, 817 (Tenn. Ct. App. 1989)).

IV. D ISCUSSION

A. Standing

1. Catherine’s Exercise of the Limited Power of Appointment

We will begin by considering the issue of standing. The trial court’s ruling that Ryne

lacked standing was based, at least in part, on its conclusion that Ryne was no longer a

residual beneficiary of the trust due to the fact that Catherine exercised the limited power of

appointment. Ryne argues that Catherine was not authorized to take such action.

The trust agreement provided, in pertinent part:

Section 5. Limited Power of Appointment

The surviving Trustmaker shall have the limited testamentary power to appoint

to or for the benefit of our descendants, either by a valid last will and testament

or by a valid living trust agreement executed by the surviving Trustmaker, all

or any portion of the principal and any accrued and undistributed net income

of the Family Trust as it exists at the surviving Trustmaker's death.

The surviving Trustmaker may make distributions among our descendants in

equal or unequal amounts, and on such terms and conditions, either outright

(...continued)

during a 2008 deposition which, according to Ryne, concerned her “ownership” of trust assets. He does not

point to any location in the record where he brought this deposition testimony to the trial court’s attention

or sought relief based upon it. Therefore, we find the issue waived. Moreover, as we stated in our previous

opinion, the trust agreement is not ambiguous, so we will not consider the testimony of the parties as to their

interpretation of the trust. Brown, 2011 WL 441266, at *3.

-11-

or in trust, as the surviving Trustmaker shall determine.

As this Court explained in our previous opinion in this matter, this Section of the trust

agreement gave Catherine “a limited power of appointment by which she can distribute any

remaining assets of the trust among her descendants by testamentary instrument.” Brown,

2011 WL 441266, at *4. This is precisely what Catherine did after our previous opinion was

issued. In August 2011, Catherine executed an amendment to the Catherine L. Brown

Revocable Living Trust providing that she was “specifically exercis[ing] the limited power

of appointment granted to me under Section 5 of Article Ten of the ROLAND AND

CATHERINE BROWN LIVING TRUST” and “appointing all of the corpus (principal plus

undistributed or accrued income) contained in the designated Brown Family Trust at the time

of my death, to be distributed to Cathleen[.]” The original trust agreement specifically

provided that Catherine could exercise the limited power of appointment “either by a valid

last will and testament or by a valid living trust agreement executed by the surviving

Trustmaker[.]” Ryne does not challenge the validity of the living trust agreement executed

by Catherine. He simply argues that because the original trust agreement became irrevocable

after Roland’s death, he could not be “disinherited.” We disagree. The original trust

agreement authorized Catherine to distribute any remaining assets of the trust among her

descendants, “in equal or unequal amounts, and on such terms and conditions, either outright

or in trust, as the surviving Trustmaker [Catherine] shall determine.” Catherine did not

impermissibly alter the trust agreement when she exercised a right specifically granted to her

by that agreement. This issue is without merit.

2. Ryne’s Interest as a Beneficiary

Next, we will consider whether Ryne’s interest in the trust was eliminated by

Catherine’s exercise of the limited power of appointment. As previously noted, during the

trial court proceedings, counsel for the defendants argued that once Catherine exercised the

limited power of appointment providing that Cathleen would receive any remaining trust

assets upon Catherine’s death, Ryne was no longer a beneficiary “under any circumstance”

and had “no interest in the trust whatsoever.” Therefore, defendants argued, Ryne had no

standing to participate in the proceedings. It appears that the trial court agreed with this

argument. Its order stating that Ryne had no standing referenced the fact that Catherine had

exercised the limited power of appointment and said, “as a result Ryne Brown is no longer

a residuary beneficiary of the Brown Family Trust, and [] Ryne Brown does not have

standing to participate in the selection or ratification of a corporate co-trustee of the Brown

Family Trust.”6 However, the defendants were mistaken in their assumption that Ryne had

no interest in the trust once Catherine exercised the limited power of appointment. Article

The defendants argue on appeal that the issue of whether Ryne had standing is moot because

Ryne “was permitted to fully participate in the proceedings.” The record does not support this assertion.

-12-

Ten Section Three of the trust agreement provided:

Our Trustee may also distribute to or for the benefit of the surviving

Trustmaker and our descendants as much of the principal of the Family Trust

as our Trustee, in its sole and absolute discretion, shall consider necessary or

advisable for their education, health, maintenance, and support.

As we explained in our previous opinion, this Section “provides that the Trustee may make

discretionary distributions of principal for the health, education, maintenance, and support

of Mrs. Brown and her descendants (including Ryne Brown)[.]” Brown, 2011 WL 441266,

at *4. Although Ryne “is not a mandatory beneficiary of either the income or principal of

the Brown Family Trust,” he nonetheless has a “present interest [] at the discretion of the

Trustee (for distributions of principal for his health, education, maintenance, and support)[.]”

Id. at *5. In other words, he has a “present interest in the Brown Family Trust [] as a

discretionary beneficiary of the principal.” Id. The exercise of the limited power of

appointment did nothing to alter or amend this portion of the trust agreement. We recognize

that, given the nature of these proceedings, it may be unlikely that Catherine will ever

approve any discretionary distributions of principal to Ryne. Nevertheless, he remains a

“qualified beneficiary” of the trust. See Tenn. Code Ann. § 35-15-103(13) (defining a

“Qualified beneficiary” as, among other things, “a beneficiary who, assuming the

nonexercise of all powers of appointment and the nonoccurrence of any event not reasonably

expected to occur, on the date the beneficiary's qualification is determined: (A) Is a

distributee or permissible distributee of trust income or principal”) (emphasis added).7 This

interest remains despite the exercise of the limited power of appointment.

In its discussion of the issue of standing, the trial court also referenced this Court’s

prior statement that Ryne was only a discretionary beneficiary before stating that “he cannot

show that he suffered a loss.” However, our previous opinion in this matter should not be

construed as holding that a discretionary beneficiary has no standing to participate in

proceedings to appoint a trustee. In our previous opinion, we did not hold that Ryne’s status

as a discretionary beneficiary meant that he lacked standing to participate in this matter. Our

statements, upon which the defendants rely, were made in the context of considering Ryne’s

claims against Catherine for breach of fiduciary duty. The pertinent language bears

repeating:

[Ryne] also alleges that [Catherine] breached her fiduciary duties in her

Because Ryne is a qualified beneficiary due to his present interest as a permissible distributee of

trust principal, we need not decide whether he would be a qualified beneficiary due to his original

designation as one who would receive trust assets at the death of Catherine.

-13-

role as trustee. These allegations relate to how the trust property was

distributed, the extent of notice, disclosures, and accountings, and the failure

to maintain a corporate trustee. The trial court determined that, pursuant to

the terms of the trust agreement, [Ryne] did not prove that the trustee breached

any duty that was owed to him. We agree with the trial court's assessment.

We further note that, even if [Ryne] had proven a technical violation of the

terms of the trust, because he was merely a discretionary beneficiary, he could

not prove that he suffered any loss as a result of the acts of the trustee. Thus,