Lane v. Caler

Lane v. Caler, 2013 MT 108 (April 23, 2013) (5-0) (Rice, J.)

Issue: Whether the district court correctly interpreted the Maxine Lane Irrevocable Trust to require the trustee to distribute $100,000 to Maxine’s brothers when the trust property was sold during Maxine’s lifetime.

Short Answer: Yes.

Affirmed

Facts: In 2003, with her mother’s contribution of the $50,000 down payment, Maxine Lane bought a house, where she lived until it sold in July 2011. The debt was originally secured by a fixed-rate mortgage, but Maxine refinanced  with an adjustable-rate mortgage in 2004. When the interest rate spiked in 2007, Maxine could no longer make the monthly mortgage payments. Maxine’s mother paid off the $203,278 owing against the property, and Maxine transferred title to the newly created Maxine Lane Irrevocable Trust. The trust strictly prohibited any encumbrances on the property, and provided that if the property sold during Maxine’s lifetime, $50,000 was to be paid to each of Maxine’s brothers, Homer and Karl. Maxine’s daughter, Linda, was named trustee; Maxine was the sole beneficiary; the trust’s sole asset was Maxine’s house. The trust’s only source of income was rent paid by Maxine and other tenants, which income was used for repairs and maintenance.

In 2009, the house’s septic system began backing up. To permanently fix the problem, Linda suggested connecting to city sewer; however, the trust funds were depleted because Maxine had stopped paying rent and the tenants had moved out. Maxine’s other daughter, Jackie, offered to make an interest-free, unsecured loan to the trust to finance the sewer, asking only that the loan be repaid without interest when the house was sold. However, she attached two conditions for the loan — first, that Maxine comply with the city ordinance regarding the number of dogs on the property, and second, that Maxine keep no more than four dogs no matter what the city allowed. Maxine, who bred and raised long-haired Dachsunds, rejected the offer so that she could keep 8-12 dogs. No commercial lender would make an unsecured loan to pay for the sewer work.

Maxine moved out in 2011, and the house sold, resulting in $176,469 in net proceeds. Maxine wanted to use the money to buy a new house, but Linda indicated she was obligated to first pay Homer and Karl $100,000. Maxine moved into a rental unit, and the trust continues to pay her monthly rent.

Procedural Posture & Holding: Maxine filed a declaratory judgment action against Linda as trustee, asking the court to determine whether the trust required the distributions to Homer and Karl. The parties filed cross-motions for summary judgment, and the district court granted judgment to Linda. Maxine appeals, and the Supreme Court affirms.