Eldridge v. Eldridge (Lawyers Weekly No. 010-044-12, 6 pp.) (Jean Hoefer Toal, Ch.J.) Appealed from Beaufort County. (Marvin H. Dukes III, Master-in-Equity) S.C. S. Ct. Click here for the full-text opinion.
Holding: Where the legal remedy in this case would require a trust to serve as both plaintiff and a source of damages, the legal remedy would be impractical.
We reverse the master-in-equity’s ruling that the defendant-widow gets to keep a Hilton Head condominium that she shared with her husband, who was also plaintiffs’ father.
Facts
Plaintiffs’ father set up a revocable trust (the R-trust), of which the father served as trustee, and he named his plaintiff-sons as beneficiaries and successor trustees.
The father also set up a qualified personal residence trust (QPRT) for his Florida condominium. Under the terms of the QPRT, if the father sold his Florida condo, he could use the proceeds (1) to buy another residence to place in the QPRT or (2) to buy an annuity for the benefit of the trust.
After the sons’ mother died, the father married defendant. He sold the Florida condo and bought a condo in Hilton Head. Rather than placing the Hilton Head condo in the QPRT, the father breached his fiduciary duty and placed the Hilton Head home in the R-trust. Later, he transferred the Hilton Head home from the R-trust to himself and defendant as joint tenants with the right of survivorship. When the father died, defendant transferred title in the Hilton Head home to herself as trustee of her own revocable trust, of which her children are the beneficiaries at her death.
Analysis
The master first ruled that the sons, in their status as contingent beneficiaries or co-successor trustees of either the R-Trust or the QPRT, had standing to sue their father during his lifetime for damages caused by the father’s breach of trust but failed to make a timely claim. Any claims made against the father during his lifetime must have been brought on behalf of the QPRT, which by its terms was governed by Florida law.
It was defendant’s burden to argue the applicable Florida law that might have barred the sons’ claim. However, defendant’s answer only generally avers, “The relief sought in Plaintiffs’ Complaint is barred by the Statutes of Limitations.” In the absence of defendant meeting her burden, the conclusion that the sons failed to make a timely claim during the father’s lifetime was error.
Once the father died, and the house vested fully with defendant, the sons’ only legal remedy was to bring action on behalf of the R-Trust against the father’s estate. However, the value of the father’s probate estate was only $54,050.
For purposes of determining the estate’s solvency, the master found that the value of the R-trust could be included, adding $407,897 to the amount of reachable assets. Because the sons brought this action as trustees of the R-trust, the action envisioned by the master — the R-trust suing the estate, but valuing the estate with the assets of the R-trust — would technically result in the R-trust suing itself for damages.
Because an action for damages against the father’s estate would require funds from the R-trust to supplement damages sought by the R-trust itself, we find that the legal remedy would not have been practical. Therefore, this matter should be decided on equitable principles.
The master made an unchallenged finding that a resulting trust arose in favor of the R-trust when the father used the proceeds of the Florida condo to buy the Hilton Head home. However, the master found the son’s claim was barred by the equitable defense of laches.
In general, one with a remainder interest in a trust is not guilty of laches if he sues promptly after his interest vests in possession, even though there was a long delay before his interest became possessory. Thus, under our jurisprudence the sons were not obligated to sue until after their interest as beneficiaries of the R-trust vested.
When the father died in 2006, the QPRT property vested in the R-Trust, and within a year the sons brought action to recover the property. To find this delay was unreasonable would be to stretch the laches doctrine beyond its ordinary bounds. Therefore, the master erred in holding that laches applied to bar the sons’ claim for a resulting trust over the Hilton Head home.
Reversed and remanded.