UNREPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND. No September Term, 2012
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1 UNREPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No September Term, 2012 RICHARD BARRY REFF, IN HIS CAPACITY AS GUARDIAN FOR BARBARA JOY REFF v. MARVIN LEVINE, IN HIS CAPACITY AS TRUSTEE FOR THE HARRIET M. REFF LIVING TRUST, ET AL. Meredith, Berger, Eyler, James R. (Retired, Specially Assigned), JJ. Opinion by Berger, J. Filed: December 16, 2013
2 Richard Barry Reff ( Richard ) is the father and guardian of Barbara Joy Reff ( Barbara ), an adult female with disabilities and special needs. Marvin Levine, Alan Rodbell, and Ivan Rodbell are the trustees ( the Trustees ) of the Harriet M. Reff Living Trust. ( the Reff Trust ). Richard filed suit against the trustees, alleging that the trustees repeatedly refused to pay for all of Barbara s special needs without contribution from another trust, the Sarah Maisel Trust ( Maisel Trust ). The Trustees moved for summary judgment, asserting that it was within the discretion of the Trustees to withhold distributions. The circuit court determined that the Trustees have the discretion, but are not required, to make distributions of principal for payment and/or reimbursement for [s]pecial needs of Barbara. The circuit court granted the Trustees motion for summary judgment and entered an order declaring that there are no arrearages owed to [Richard]. This appeal followed. Richard presents three issues for our review, which we have rephrased as two issues: 1 I. Whether the circuit court erred in granting the Trustees motion for summary judgment based on the discretion afforded to the Trustees. 1 The issues as presented by Richard are: 1. Is a trustee s discretion to make or withhold payment in a special needs trust absolute and not subject to the Court s review for abuse of discretion? 2. Can a beneficiary of a special needs trust bring a court action to enforce the terms of the trust? 3. Did the trial court err by way of summary judgment ruling in granting a reverse declaratory judgment?
3 II. Whether the circuit court erred in entering a declaratory judgment regarding arrearages. For the reasons discussed below, we affirm the judgment of the Circuit Court for Montgomery County. FACTS AND PROCEEDINGS Richard is the father and guardian of Barbara, an adult woman with disabilities and special needs who was thirty-eight years old at the time the present complaint was filed. Barbara s mother, Harriet Reff ( Harriet ), died on February 12, Prior to her death, Harriet executed the Reff Trust. The Reff Trust was amended by a Second Amendment on July 28, 2000, which provided that certain trust property be distributed in trust to Barbara as a special needs trust. Regarding the distribution of principal, the Reff Trust provides: 2. Distributions of Principal My Trustee may distribute discretionary amounts of principal for special needs not otherwise provided by governmental financial assistance and benefits, or by the providers of services. Special needs refer to the requisites for maintaining the good health, safety, and welfare of BARBARA JOY REFF when, in the discretion of my Trustee, such requisites are not being provided by any public agency, office, or department of any state or of the United States. Special needs shall also include but not be limited to, medical and dental expenses, annual independent checkups, clothing and equipment, programs of training, education, treatment and rehabilitation, private residential care, transportation (including vehicle purchase), maintenance, insurance, and essential dietary needs. Special needs may include spending money; additional food; clothing; electronic equipment such as radios, record 2
4 players, television sets, computer equipment; camping; vacations; athletic contests; movies; trips; and money to purchase appropriate gifts for relatives and friends. My Trustee shall have no obligation to expend trust assets for such needs, but if my Trustee, in its sole discretion, decides to expend trust assets, under no circumstances should any amounts be paid to, or reimbursed to, the federal government, any state, or any governmental agency for any purpose, including for the care, support, and maintenance of BARBARA JOY REFF. ***... In addition, in making distributions for the special needs of BARBARA JOY REFF, my Trustee shall take into consideration the applicable resource limitations of the public assistance programs for which BARBARA JOY REFF is eligible. No part of the trust share set aside for BARBARA JOY REFF shall be used to supplant or replace public assistance benefits of any state or federal agency which has a legal responsibility to serve persons with illnesses or handicaps which are the same as or similar to the disorders of BARBARA JOY REFF. ***... BARBARA JOY REFF is specifically prohibited from any right to receive, demand, secure, give, assign, transfer, mortgage, borrow against, or will any trust assets or income. In addition to being a beneficiary of the Reff Trust, Barbara is also a beneficiary of the Maisel Trust. Richard is both a trustee and a fifty-percent remainder beneficiary of the Maisel Trust. Between April 2010 and November 2012, the Trustees made distributions exceeding $200,000 for the benefit of Barbara, which were made payable to Richard, as Barbara s 3
5 guardian. The Trustees also made payments directly to Barbara s caregiver, as well as payments of fifteen months rent to Barbara s landlord. Richard sought additional distributions as reimbursement for additional special needs expenses for Barbara. Specifically, Richard requested a distribution of $87,400 to reimburse him for Barbara s apartment expenses between 2005 and 2009, as well as reimbursement for health insurance costs and payment for Barbara s aides. Richard acknowledged that, for some portion of the expenses for which he sought reimbursement from the Reff Trust, he had already been reimbursed by the Maisel Trust. In his deposition, Richard testified that he intended to reimburse the Maisel Trust for expenses it had incurred after he received reimbursement from the Reff Trust. The Trustees approved a distribution of $37,400 for apartment expenses, but declined to disburse the remaining funds requested [u]nless and until we can meet with the trustees 2 of the Sarah Maisel Trust. In a letter responding to Richard s reimbursement request, Trustee Michael Levine explained: [W]e are enclosing a check made payable to you as Barbara s guardian, a check in the amount of $79, which represents the reimbursement to you for the benefit of Barbara of the following: 2 This letter was not dated. 4
6 Healthcare insurance $14, Employment of aides 28, A portion of the cost of the apartment 37, $79, As I ve tried to explain to you in the past, the Trustees of the Harriet[] Reff Trust have discretion as to the disbursement of principal and income. We have a fiduciary duty and obligation not only to Barbara, but also to the other named beneficiaries in that trust. Thus, we again request that the Reff and Maisel Trusts Trustees need to develop an on-going plan for the support of Barbara. The Trustees repeatedly requested a meeting with the Maisel Trust s trustees, but Richard declined to participate. The Trustees also requested documentation from Richard regarding any government assistance Barbara was receiving. Michael Levine requested such documentation, and again asked Richard to participate in a meeting with the Trustees, in a letter dated October 26, 2010: At each of our meetings and in my correspondence with you, I have asked that you please set up a meeting with the cotrustees of the Harriet[] Reff Trust and the co-trustees of the reformed Sarah Maisel Trust. Given the terms of these respective trusts, it is absolutely essential that we meet and come up with a long range plan to fund Barbara s needs. Under the terms of Harriet[] s trust, the trustees are authorized, in their discretion, to pay to or for the benefit of Barbara that amount of net income which will not cause [Barbara] to be ineligible for governmental financial assistance benefits, in the event Barbara Joy Reff is receiving such benefits. 5
7 Obviously, based on the foregoing directive, we must be informed as to what governmental financial assistance benefits Barbara is receiving. The trustees of the Harriet[] Reff Trust are also authorized to make discretionary payments of principal for special needs that are not otherwise provided by governmental financial assistance or impliedly other sources of support for Barbara. *** Unless and until the trustees of the Harriet[] Reff Trust have received the information as to sources of support for Barbara, including all public and private sources of support, and a coordinated and cooperative plan for her support is put in place[,] the Trustees of the Harriet[] Reff Trust can make no further distributions to you for the benefit of Barbara. I, once again, urge you to facilitate a meeting of the trustees of both trusts so that a sound and comprehensive plan for support for Barbara can be formulated and put in place. It s absolutely essential that we have this plan in place no later than January 1, Please remember we re all working for Barbara s best interest and we re all obligated to operate in that regard in accordance with the directives provided in the governing instruments of the two respective trusts. Richard acknowledged that he did not provide all of the documentation requested, explaining that he would not provide documentation of private sources of funds because [p]rivate funds are not part of the Harriet Reff Trust[ s] concern. Richard filed suit on April 18, 2012, alleging that the Trustees repeatedly refused to pay for Barbara s special needs without contribution from the Maisel Trust. Richard argued 6
8 that because the Reff Trust makes no reference to consideration of private funding sources, the Trustees consideration of private sources was improper. The Trustees moved for summary judgment, asserting that they acted within their discretion when declining to make distributions. The circuit court granted the Trustees motion for summary judgment, finding that the trust was discretionary. The circuit court further declared that the Reff Trust owed no arrearages to Richard. STANDARD OF REVIEW We review a circuit court s entry of summary judgment de novo. Rodriguez v. Clarke, 400 Md. 39, 70 (2007). If no material facts are in dispute, we must determine whether summary judgment was correctly entered as a matter of law. Id. (quoting Property and Casualty Insurance Guaranty Corp. v. Yanni, 397 Md. 474, (2007)). When reviewing the record to determine whether a genuine dispute of material fact exists, we construe the facts properly before the court, and any reasonable inferences that may be drawn from them, in the light most favorable to the non-moving party. Appiah v. Hall, 416 Md. 533, 546 (2010) (internal quotation omitted). DISCUSSION I. The Reff Trust explicitly vests discretion in the Trustees. The trust provides that the Trustees may distribute discretionary amounts of principal for special needs. It further provides that the Trustees shall have no obligation to expend trust assets for such needs, 7
9 but may do so in the Trustees sole discretion. Regarding the creation of discretionary trusts, the Court of Appeals has explained that if, by direction of the settlor, all or any part of the trust assets can be totally withheld from the beneficiary by the trustees then, to the extent it can be so retained, a discretionary trust would be created. First Nat l Bank of Maryland v. Dep t of Health and Mental Hygiene, 284 Md. 720, 725 (1979). We have explained that trustees of discretionary trusts have wide discretion: When a discretionary power is lodged in a trustee, the courts are loathe to interfere with the exercise of that discretion.... As the Court of Appeals explained in Waesche [v. Rizzuto, 224 Md. 573 (1961)]: A court of equity will not interfere in the exercise of the discretionary power conferred on the trustees provided that this power was honestly and reasonably exercised. However, it must appear that the trustees acted in good faith, having a proper regard to the wishes of the testator and to the nature and character of the trust reposed in them. Waesche, 224 Md. at 587 (emphasis added). When a trustee is given discretion to invade the principal and make principal distributions to an income beneficiary, the trustee's failure to exercise its judgment regarding that discretion will constitute an abuse of discretion. Jacob v. Davis, 128 Md. App. 433, 461 (1999). We will not interfere with a trustee s exercise of discretionary power absent an abuse of discretion. Offutt v. Offutt, 204 Md. 101, 109 (1954). The Court of Appeals described the standard for reviewing a trustee s discretion as follows: 8
10 The principle that the exercise by a trustee of a personal discretion conferred upon him is not subject to control by the court, except to prevent an abuse of discretion remains applicable even when the court has assumed jurisdiction... [W]here a personal power of discretion is vested in the trustees, the [Court], even after an assumption of jurisdiction, will require a showing of abuse of discretion before substituting his judgment for that of the trustees.... If the settlor manifests an intention that the discretion of the trustee shall be uncontrolled, the beneficiary cannot compel the trustee to make any payment to him or application for his benefit, if the trustee does not act dishonestly or from an improper motive. Id. at Richard asserts that the Trustees abused their discretion by considering benefits that other outside sources -- in particular, the Maisel Trust -- conferred upon Barbara. Richard argues that the express terms of the Reff Trust do not allow the Trustees to consider funds available to Barbara from a private source. As a comparison, Richard points to the Maisel Trust, which explicitly provides that private sources of funding may be considered. Richard did not, however, point to any language in the Reff Trust that explicitly prohibited the Trustees from considering private funding sources. Offutt is directly on point. In Offutt, the Court of Appeals held that trustees did not abuse their discretion when considering a beneficiary s other income in determining the amount of the monthly allowance paid to the beneficiary. Id. at 112. Rather, the Court held that the trustees exercised their powers in accordance with the intention manifested by the settlor. Id. The trust at issue in Offutt included language giving the trustees absolute power and discretion, but was silent as to whether the trustees were permitted to consider 9
11 the beneficiary s outside income. Id. at 111. Because the settlor vested absolute discretion in the trustees, the Court of Appeals determined that the trustees were free to view all circumstances that relate to need and desirability, including the beneficiary s other income. Id. at 112. Similarly, the Reff Trust granted absolute discretion in the Trustees. That discretion includes, as in Offutt, the discretion to consider all circumstances relating to need and desirability when making distribution determinations, including other private sources of funding. See id. Richard presented no evidence that the Trustees acted with dishonesty or improper motive. See id. at 110. Accordingly, we hold that the Trustees did not abuse their discretion by considering potential benefits conferred upon Barbara by the Maisel Trust. II. Richard s second contention is that the circuit court erred by entering a reverse 3 declaratory judgment in favor of the Trustees. When deciding matters of law by summary judgment, the trial court must still declare the rights of the parties. Phillips v. Allstate Indemn. Co., 156 Md. App. 729, 739 (2004) (internal quotation omitted). In Phillips, the circuit court entered summary judgment but did not enter a declaratory judgment. We remanded the case to the circuit court to enter a judgment declaring the rights of the parties 3 Richard points to no authority in support of his assertion that the declaratory judgment was improper. 10
12 not inconsistent with our opinion, explaining the necessity of a declaratory judgment as follows: This Court has reiterated time after time that, when a declaratory judgment action is brought, and the controversy is appropriate for resolution by declaratory judgment, the trial court must render a declaratory judgment. [W]here a party requests a declaratory judgment, it is error for a trial court to dispose of the case simply with oral rulings and a grant of... judgment in favor of the prevailing party. The fact that the side which requested the declaratory judgment did not prevail in the circuit court does not render a written declaration of the parties' rights unnecessary. As this Court stated many years ago, whether a declaratory judgment action is decided for or against the plaintiff, there should be a declaration in the judgment or decree defining the rights of the parties under the issues made. Id. (quoting Harford Mut. Ins. Co. v. Woodfin Equities Corp., 344 Md. 399, 414 (1997) (internal quotations and citations omitted)). In his Amended Complaint to Enforce Trust Provisions and for Declaratory Judgment, Richard explicitly asked the circuit court to [d]etermine the propriety of [the Trustees ] failure to pay for the necessary care of Barbara and to determine the amount of arrearages owed to [Richard] from the [Reff Trust] for the care of Barbara. After determining that the Trustees acted within the scope of their discretion, the circuit court entered an order declaring, inter alia, that the Trustees were not required to reimburse Richard for the expenditures raised in his complaint, and that there were no arrearages owed 11
13 to Richard from the Trust. The circuit court s order was proper under Phillips, supra, 156 Md. App Accordingly, for the reasons set forth above, we affirm the judgment of the Circuit Court for Montgomery County. JUDGMENT OF THE CIRCUIT COURT FOR MONTGOMERY COUNTY AFFIRMED. COSTS TO BE PAID BY APPELLANT. 12
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