In Hillcrest Investment Company v. Utah Department of Transportation, 287 P.3d 427 (Utah App. 2012), the Utah court of appeals explained that a trust beneficiary can bring an action against a third party on behalf of the trust under the following circumstances: (1) where there is no trustee; (2) where the trustee fails to do so; (3) where the trustee cannot be subjected to the jurisdiction of the court; and (4) where the beneficiary’s interests are hostile to those of the trustee. The court noted that, while Rule 17 of the Utah Rules of Civil Procedure permit the trustee, as the holder of legal title to the trust assets, to bring suit without joining the trust beneficiaries, the Rule does not prevent a trust beneficiary from bringing an action under the appropriate circumstances.
The case involved a dispute over UDOT’s condemnation of real property owned by various family trusts. UDOT and the trusts entered into a contractual resolution of the dispute in 2002. In 2008, Hillcrest Investment Company filed suit alleging breach of contract by UDOT. The district court granted UDOT’s motion for summary judgment on grounds that Hillcrest lacked standing.
Hillcrest argued that, in 2006, the remaining land in the family trusts had been conveyed to Hillcrest, as a beneficiary of the trusts, and that the trust’s contract rights under the settlement were part of that conveyance.
The court of appeals reversed the district court’s summary judgment order, holding that a genuine issue of fact existed as to whether Hillcrest could enforce the trusts’ contract rights against UDOT. In addition to noting that a beneficiary of a trust can bring suit on behalf of the trust in the circumstances described above, the court also observed that where the legal title and beneficial interests become united in one person, those interests merge, the trust terminates, and the person can bring an action against a third party. The beneficiary may thus maintain a suit related to trust property against a third party if the beneficiary is entitled to immediate distribution of the property or is already in possession of the property.
For an in-depth discussion of probate and trust litigation issues in Utah, see The Utah Law of Trusts & Estates, a comprehensive online legal reference treatise that is available on this website.
Rust Tippett is the author of this blog post.
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This blog post in no way creates an attorney-client relationship between the reader and either Robert S. (Rust) Tippett or Bennett Tueller Johnson & Deere, LLC. The reader should consult with his or her own estate planning attorney regarding his or her particular circumstances.