Reproduced with permission of Trusts & Estates magazine (April 2007).
In the context of an invalid appointment of a successor trustee, the Oregon appellate court in Allen Trust Co. v. Cowlitz Bank, 152 P.3d 974 (Or. Ct. App. 2007) recently grappled with the question of what it means to be a "trustee de facto" ó and what kinds of fees and attorney expenses such a trustee might demand.
In this case, Ronald and Jean Harriman established a trust in 1995 as part of their divorce proceedings. The trust, which was for their benefit, allowed the acting trustee to name successor trustees if the acting trustee was unable to serve. After the original trustee died without naming a successor, Ronald and Jean agreed to the appointment of a man named Arlie Hutchins as the trustee. After Hutchins accepted the office, he designated a person ó whom the court simply identifies as "Wilkins" ó as successor trustee, and designated one of Ronald and Jean's daughters, Valerie, as the next successor trustee if Wilkins were unable to service.
Hutchins later resigned and in his resignation revoked Wilkins' trustee designation, intending that Ronald and Jean would name a successor.
Harboring the belief that Hutchins' resignation left her as the successor trustee, Valerie, who did not want to serve because of family reasons, sought an alternative trustee. After learning that Allen Trust Company would agree to act as trustee, Valerie accepted the position of successor trustee in order to appoint Allen Trust as her successor. After making the appointment, Valerie resigned as trustee.
Allen Trust accepted the office of trustee, believing that Valerie's appointment was valid. Jean approved the appointment of Allen Trust, but Ronald objected to it. Because of Ronald's objections, Allen Trust petitioned the trial court to confirm its appointment. The trial court denied the appointment of Allen Trust, finding that Valerie had never become a trustee. According to the court, it wasn't that Wilkins had been unable to serve as trustee, but rather that Hutchins had revoked Wilkins' appointment. As a result, the contingency that would have made Valerie the trustee never occurred. Therefore, Valerie was never the trustee and her appointment of Allen Trust as successor trustee was invalid.
During the period between Valerie's attempted appointment of Allen Trust as trustee and the trial court's ruling, Allen Trust acted as trustee and received a trustee's fee for its services. Allen...