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Walker v. Northern Trust Co.

January 22, 2008

JODI LYNN FOSTER WALKER, PLAINTIFF,
v.
THE NORTHERN TRUST COMPANY, TRUSTEE, PHYLLIS L. FOSTER, LAWRENCE T. FOSTER, ROBERT C. FOSTER, HENRY T. MATHER, JR., INDIVIDUALLY AND AS MEMBERS OF THE ADVISORY COMMITTEE OF THE JAMES R. FOSTER TRUST FOB JODI LYNN FOSTER DATED DECEMBER 26, 1978 AND JAMES R. FOSTER, DEFENDANTS.



The opinion of the court was delivered by: Charles P. Kocoras, District Judge

MEMORANDUM OPINION

This matter comes before the court on five motions for summary judgment filed by the parties. For the reasons set forth below, the motions of James R. Foster and Robert C. Foster for summary judgment are granted. The motions of the Northern Trust and the Advisory Committee members are granted in part and denied in part. The motion of Jodi Lynn Foster Walker is denied.

BACKGROUND

Plaintiff Jodi Lynn Foster Walker ("Walker") was born January 30, 1967. Her parents divorced when she was a small child. In 1978, when Walker was 11, her father James set up an irrevocable trust. Northern Trust Motion for Partial Summary Judgment ("NT 56.1"), Ex. D. The initial trust assets consisted of $50 in cash. Id. at NTC 003114. The trust contained provisions naming Walker as the beneficiary but also providing that trust assets could be expended for the benefit of her spouse, her children, and their issue. Id. at Art. II(6)(b).

The document that created the 1978 trust ("the Trust Instrument") provided that the trust would be administered by both an Advisory Committee and a Trustee. The three initial members of the Advisory Committee were Lawrence and Robert Foster, who are James's two brothers (Walker's uncles), and Henry Mather, who is a friend of James. Id. at Art. IV. Robert declined to serve as a member of the Committee and his wife, Phyllis, took his place. The original Trustee named was the Toledo Trust Company. In 1984, Defendant The Northern Trust Company was substituted for Toledo Trust, and it has served as the Trustee ever since.

The Trust Instrument divides powers and responsibilities between the Trustee and the Advisory Committee. The Trustee's powers include retention of original trust assets, dealing with trust assets, borrowing, lending, executing papers, purchasing assets from James's estate, investing, voting, allocating receipts and expenses, determining whether distributions are made in cash or in kind, settling claims, paying taxes, and keeping accounts. Id. at Art. V. In addition, the Trustee is entitled to reasonable compensation for its services and to indemnification or reimbursement for "all payments...and expenses, including attorney fees...[paid] because of any act or thing done or omitted to be done in good faith and with due care." Id. at Art. V(p). However, the Trustee's powers of sale, investment, reinvestment, and voting of shares or other trust assets are subject to the written directions of the Advisory Committee. Id. at Art. IV(1). With respect to distributions of income or principal, the Trustee's "discretionary" powers must be exercised only in accordance with the Advisory Committee's written directions, and the Trustee cannot question or override the Committee's directions. Id. at Art. II(1); IV(6).

The Trust Instrument provided that, prior to Walker's 18th birthday, the Trustee could expend trust property or income for her sole benefit, including expenditures directly to her. Id. at Art. II(3). When she turned 18, the assets of the trust vested in her and she could withdraw all or any part of the trust assets, thereby terminating the trust. Id. at Art. II(4). The Trustee was to notify her in writing of the withdrawal right, and if she neither exercised it nor waived it during the 30 days following receipt of the written notice, the withdrawal right expired. Id. If the trust continued after Walker turned 18, she became entitled to mandatory distributions of the trust income. Id. at Art. II(6)(b). Any other distributions had to be made with the consent of the Advisory Committee or the Trustee if the Advisory Committee was no longer in existence. Id. at Art. II(1). Distributions of principal were authorized "for the care, comfort, support, education or best interests of the beneficiary, and the beneficiary's spouse and children and their issue." Id. at Art. II(6)(b). Moreover, the Advisory Committee was authorized to direct distribution of one third of the trust assets to Walker when she turned 30, one half when she turned 35, and a full distribution of all assets when she reached 40, thereby terminating the trust. Id. at Art. II(6)(c). However, the Trust Instrument specified that these age-triggered distributions were discretionary and that the "Advisory Committee...shall not under any circumstances be compelled" to direct that the distributions be made. Id. If the trust was still in existence at the time of Walker's death, the principal would pass either according to appointments she made in her will to members of her family or to members of her family according to the distribution scheme set out in the trust instrument to the extent that she did not dispose of all of the trust principal by appointment. Id. at Art. II(6)(d), II(6)(e).

On Walker's 18th birthday, Northern Trust sent a two-page letter to Walker through her father. NT 56.1, Ex. O. Information regarding the trust's value was contained on the first page; in the seven years since the trust was formed, its value had grown to $618,000. Id. at 00150. According to Walker, her father provided her with only the second page, which contained a signature line. Walker signed the second page, indicating that she wished to waive her right of withdrawal. Id. at 00152.

The following December, Walker executed a power of attorney ("POA") in favor of her father, providing him with: power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes, as I might or could do if personally present, hereby ratifying and confirming that my said Attorney shall lawfully do or cause to be done by virtue of these presents.

NT 56.1, Ex. P. The document stated that it would be effective if Walker became physically or mentally disabled, during any time that her whereabouts were unknown, or during any time that it was unknown whether she was dead or alive. Though it is unclear whether any of these predicate situations came to pass, it appears that James became Walker's proxy as far as the trust was concerned as soon as she executed the POA. On August 26, 1992, Walker revoked the 1985 POA. NT 56.1, Ex. R. In December 1992, she executed a new POA in favor of her father, which remained in effect until she revoked it in August 1996. NT 56.1, Ex. S.

Walker was also a beneficiary of a different trust created by James in 1971, when Walker was four years old. Walker v. West Michigan Nat'l Bank & Trust, 324 F. Supp. 2d 529, 531 (D. Del. 2004) ("West Michigan"). By 1988, at least part of the assets of that trust was an interest in a house in Delaware. Id. Walker expressed a desire to move into the house, which at the time was occupied by her sister. Id. When she spoke with her father about her wish, he stated that he would, on behalf of her sister, buy Walker's interest in the house and then use that money toward purchasing a house for Walker. Id. In November 1988, Walker irrevocably transferred all of her interest in the 1971 Trust, which otherwise would have been distributed to her on her 21st birthday the previous January, into a new trust that included a house in which she does not live but from which she derives rental income. Id. at 531-32.

During the period of 1985 to 1996, Walker requested that the Advisory Committee authorize certain distributions from the trust to her for various reasons, including educational and medical insurance expenses. See, e.g., Advisory Committee Motion for Summary Judgment ("AC 56.1"), Ex. 23; NT 56.1, Ex. T, NTC 001372. All were denied. In 1996, the summer before Walker turned 30, her stepmother forwarded Walker a letter for her to sign. The letter was intended to be sent to Northern Trust and, in pertinent part, stated:

I request that you not send me statements on any trusts...of which I am, or children born to me may become, permissible beneficiaries. I direct that, except for distributions required for payment of my state and federal income taxes attributable to trust income taxed to me which I, my father, or my tax return preparer may from time to time request, you transfer income of [the 1978 Trust] to principal annually as of the last business day of the year.

James Foster Motion for Summary Judgment ("JF 56.1"), Ex. 5 at NTC 002147. Walker did not sign and instead submitted to Northern Trust a notarized letter containing the following language.

I request that you send me statements and all the information pertaining to any trusts...of which I am, or children born to me may become, permissible beneficiaries. From now on any documents from these trusts should be sent to [Walker's home address]. This address must not be changed unless you receive written notification from me personally. I direct that, except for distributions required for payment of my state and federal income taxes attributable to trust income taxed to me which I, or my tax return preparer may from time to time request, you disburse income of [the 1978 Trust] to me...annually as of the last business day of the year." (emphasis in original).

JF 56.1, Ex. 5 at NTC 001363. Contemporaneously, Walker revoked the POA she had granted to her ...


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