PROBATE CORNER
UPCOMING PBCBA SOCIAL EVENTS
PROBATE CORNER
Trustee ’ s Duties Post-Termination ( Continued )
DAVID M . GARTEN
Litigation : Upon termination of the trust , does the trustee have standing to pursue / defend against claims ? That was the issue in the following cases : CH Liquidation Ass ' n Liquidation Trust v . Genesis Healthcare Sys , 2023 U . S . Dist . LEXIS 75804 ( N . D . Ohio 2023 ); Energy Conversion Devices Liquidation Trust v . Ovonyx , Inc ., 634 B . R . 537 (( Bankr . E . D . Mich . 11 / 24 / 21 ); Energy Conversion Devices Liquidation Trust v . Ovonyx , Inc ., 638 B . R . 81 ( Bankr . E . D . Mich . 3 / 14 / 22 ); Goldin v . Bartholow , 166 F . 3d 710 ( 5th Cir . 1999 ); and Krys v . Aaron , 106 F . Supp . 3d 492 ( D . N . J . 2015 ). Compare , In re Black Elk Energy Offshore Operations , LLC , 2020 Bankr . LEXIS 2248 ( S . D . Tex . 2020 ); In re Cleveland Imaging & Surgical Hosp .,
LLC , 2021 Bankr . LEXIS 2340 ( Bankr . S . D . Tex . 2021 ); and In re Jenzabar , Inc . Derivative Litig ., 2014 Del . Ch . LEXIS 138 ( Chancery Ct . Del . 2014 ).
Resolution of this issue turned on the courts ' interpretation of the wording of the trust agreement . For example , in
Ovonyx , the court found that the following language not only authorized , but required that after termination of the Trust , the Trustee continue to act as Liquidation Trustee until its duties have been fully performed , including pursing the litigation against defendants : “ After the termination of the Liquidation Trust and for the purpose of liquidating and winding up the affairs of the Liquidation Trust , the Liquidation Trustee shall continue to act as such until its duties have been fully performed .” The court reasoned :
The contrary , narrower view of Section 6.03 argued by Ovonyx and Micron [ that the termination of the Trust deprives Plaintiff of standing to continue prosecuting this case , and makes the Plaintiff ' s claims moot ] is plainly not a reasonable interpretation of Section 6.03 . It would mean that instead of winding up the liquidation of the claims in this case , the Trustee would have to immediately stop all work on the case . Here the following analogy comes to mind . In prosecuting this adversary proceeding for more than a year before the Trust terminated , the Liquidation Trustee was like the pilot of an airplane full of passengers ( the Beneficiaries ) in mid-air , flying toward a planned destination ( liquidation of the claims ). Under the Court ' s view of Trust Section 6.03 , after termination of the Trust , the pilot would complete the flight to the planned destination , and land the plane safely ( complete the liquidation of the claims ). Under the Ovonyx / Micron view of Section 6.03 , after termination of the Trust , the pilot would have to bail out of the plane in mid-air , and hope that one or more of the passengers ( the Beneficiaries ) could fly the plane to its destination and land it safely . Such a view of Section 6.03 is plainly unreasonable , and could not have been the intention behind the wording in Sections 6.01 and 6.03 of the Trust Agreement .
Termination v . Dissolution : When does dissolution of the trust occur ? Dissolution occurs at the conclusion of the winding up of the trust that follows its termination once the trustee ' s duties have been fully discharged .
Practitioner Corner : To avoid the defense of standing , you should consider adding a post-termination clause to your client ’ s trust similar to the following language contained in §§ 736.0816 ( 23 ) and ( 25 ): “ On termination of the trust , the trustee shall continue to exercise the powers appropriate to wind up the administration of the trust , including but not limited to prosecuting or defending , including appeals , an action , claim , or judicial proceeding in any jurisdiction to protect trust property or the trustee in the performance of the trustee ’ s duties , pending final dissolution of the trust .”
PBCBA BAR BULLETIN 18
UPCOMING PBCBA SOCIAL EVENTS
Wednesday , February 7 th 4:30 P . M . - 6:00 P . M . Bar Office Wine Down Wednesday
Thursday , February 8 th 5:30 P . M . - 8:00 P . M . Game of Axes - Palm Beach Gardens NCS Game of Axes Tournament
Friday , February 16 th 12:00 P . M . - 1:15 P . M . Courtroom 9D Main Courthouse - WPB ** NEW SERIES ** CourtCounsel
Monday , February 26 th 12:00 P . M . - 1:00 P . M . Live via Zoom Lawyers for Literacy ' s
Virtual Book Club - " The Measure " by Nikki Erlick
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