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FILED: December 14, 2011

IN THE COURT OF APPEALS OF THE STATE OF OREGON In the Matter of the Saling Family Trust, u/a/d March 19, 1996. JON FRAKES, Personal Representative of the Estate of Raymond J. Frakes, Deceased, Respondent-Appellant, v. TIM NAY, in his capacity as Successor Trustee of the Saling Family Trust; and CAROL AND VELMA SALING FOUNDATION, an Oregon charitable corporation, Petitioners-Respondents. Multnomah County Circuit Court 080190166 A140655

Katherine E. Tennyson, Judge. Argued and submitted on December 30, 2010. Andrew T. Reilly argued the cause for appellant. With him on the briefs was Black Helterline LLP. Matthew Whitman argued the cause for respondents. With him on the brief were Cartwright and Associates, Philip N. Jones, and Duffy Kekel LLP. Before Armstrong, Presiding Judge, and Wollheim, Judge, and Duncan, Judge. ARMSTRONG, P. J. Judgment modified to dismiss petitioners' interpretation and modification claims as moot; otherwise affirmed.

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ARMSTRONG, P. J. Respondent Frakes,1 a beneficiary of the Saling Family Trust (the trust), appeals the trial court's grant of summary judgment in favor of petitioners, the Carol and Velma Saling Foundation (the foundation), which is another beneficiary of the trust, and Nay, the trustee of the trust. The trial court concluded that the terms of the trust entitle respondent to receive two distributions of money from the trust, not three. It further concluded that, if the trust otherwise provides for three distributions of money to respondent, then the trust is reformed pursuant to ORS 130.220, a provision of the Uniform Trust Code (UTC), and modified pursuant to ORS 130.225, another provision of the UTC, to provide for only two distributions to respondent.2 Respondent assigns error to the court's grant of summary judgment in favor of petitioners on all of their claims and
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The respondent in the proceedings below, Raymond Frakes, died while this case was on appeal, and the personal representative of his estate, Jon Frakes, was substituted for him. For convenience, the respondent to whom we refer throughout this opinion is Raymand Frakes. As is our usual practice, we refer to the parties by their designations below.
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ORS 130.220 provides: "The court may reform the terms of a trust, even if unambiguous, to conform the terms to the settlor's intention if the person requesting reformation proves by clear and convincing evidence that both the settlor's intent and the terms of the trust were affected by a mistake of fact or law, whether in expression or inducement."

ORS 130.225 provides: "The court may modify the terms of a trust to achieve the settlor's tax objectives if the modification is not contrary to the settlor's probable intention. The court may provide that the modification has retroactive effect."

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to its failure to grant summary judgment in his favor. We conclude that the court correctly granted summary judgment in petitioners' favor on their reformation claim and modify the judgment in accordance with that conclusion. Carol and Velma Saling (the settlors) created a trust in 1990 that directed the trustee to distribute to respondent, who is Velma Saling's nephew, and several other individuals, a total of $1,150,000 upon the death of both of the settlors.3 The settlors amended the trust in 1996. The amended trust provides that the Oregon law of wills in effect when the parties created the trust governs the trust for purposes of determining the rights of the beneficiaries. Following Carol's death in 2002, the trustee divided the trust assets, as the trust directed, into two equal parts, a Survivor's Trust and a Decedent's Trust. The trust directed the trustee to distribute to the survivor as much of the income and principal of the Survivor's Trust as the survivor requested. The trust further directed the trustee to divide the assets of the Decedent's Trust into a Credit Shelter Trust and a Marital Deduction Trust and to make certain distributions from the assets allocated to the Credit Shelter Trust. Although the trustee did not form the Credit Shelter Trust as the trust directed, he did use assets of the Decedent's Trust to make the Credit Shelter Trust distributions, which included a

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The parties suggest that the 1990 version of the trust directed the trustee to distribute a total of $1,200,000 in specific cash distributions, but our reading of the original trust indicates that, following the death of the last surviving settlor, the trust would have made one distribution of $100,000, one distribution of $1,000,000, and two distributions of $25,000, for a total of $1,150,000. The trust directed the trustee to distribute the balance of the trust assets to the foundation.

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$500,000 distribution to respondent and distributions to other beneficiaries totaling $100,000. He allocated all of the remaining assets of the Decedent's Trust to the Marital Deduction Trust. The trust further directed the trustee to distribute the Marital Deduction Trust's income to the survivor and as much of its principal as the survivor requested. Following Velma's death in 2004, the trustee distributed from the assets of the Survivor's Trust, as paragraph 8.3 of the trust directed, another $500,000 to respondent and $100,000 to the other beneficiaries. That distribution occurred in February 2005. Before that second round of distributions, respondent made at least two requests to the trustee for an accounting of the trust. The trustee never provided the requested accounting, and when he made the second round of distributions, he expressly declined to provide an accounting to respondent on the ground that respondent no longer had any interest in the trust. In July 2005, respondent filed an action against the trustee, demanding an accounting of the trust and reimbursement of funds that respondent had spent on behalf of Velma. On the first day of trial in that case (the first proceeding), respondent contended for the first time that the trust required the trustee to make a third round of distributions in addition to the two that had already been made. The trustee argued that he was not on notice that respondent would make such a claim and that, if respondent prevailed on the claim, it would affect the foundation, which had not been joined as a party in the action. The trial court decided to defer ruling on the issue after petitioners agreed that, in any subsequent proceeding, they would argue the merits of the issue and would not assert any

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defense that was unavailable to them in the first proceeding. In January 2008, the trustee filed an action seeking an interpretation of the trust, which action is the subject of this appeal. The foundation joined the trustee in the action, and respondent, whom the trustee had notified of the action, opposed it and filed a counterclaim. The parties disputed the meaning and effect of paragraph 10.3.2 of the trust, which, after the death of the surviving settlor, directs the trustee to distribute the assets remaining in the Marital Deduction Trust in accordance with paragraph 8.3. Petitioners contended that the only sensible interpretation of the trust is that it provides for two rounds of specific distributions, and they asked the court to interpret the trust to so provide. They also alleged claims to (1) reform the trust, pursuant to ORS 130.220, to conform it to the settlors' intent and (2) modify the trust, pursuant to ORS 130.225, to conform it to the settlors' tax objectives. The latter two claims sought to alter paragraph 10.3.2 of the trust so that it directs the trustee to distribute the assets remaining in the Marital Deduction Trust according to paragraph 8.3.2 rather than paragraph 8.3. If the trustee distributed the remaining assets according to paragraph 8.3, then he would have to make a third round of specific monetary distributions before distributing the balance of the assets to the foundation. Conversely, if he distributed the assets according to paragraph 8.3.2, then he would distribute all of the remaining assets to the foundation. Respondent contended that the trust unambiguously required the trustee to make an additional round of specific distributions from the assets of the Marital

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Deduction Trust, and he asked the court to issue a judgment declaring the trust to so require. He further contended that petitioners were not entitled to relief on their claims to reform or modify the trust under the UTC because the trust provides that it is governed by the law of wills in effect at the time that the trust was created. According to respondent, that it would violate that provision to apply the UTC to the trust because the settlors had created the trust before Oregon adopted the applicable provisions of the UTC. Petitioners moved for summary judgment on all of their claims, and respondent filed a cross-motion for summary judgment on his counterclaim. In support of their motion for summary judgment, petitioners provided, among other evidence, two letters from the trustee to Carol discussing how the 1996 amendments to the trust would affect distributions to the trust beneficiaries; declarations of the trustee and of Jackie Appleton, a paralegal who had worked with the settlors in developing their estate plan; and an excerpt of a deposition of respondent. In one of the letters, the trustee told Carol that the 1996 changes to the trust would not affect the amount that the individual beneficiaries would receive under the trust.4 In the other letter, the trustee told Carol that the specific monetary distributions to be made pursuant to the amended trust would use up the settlors' two $600,000 unified

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We once again note (see ___ Or App ___, ___ n 2 (slip op at 2 n 2)) that we understand the 1990 trust to direct the trustee to make distributions to respondent and several other beneficiaries totaling $1,150,000. Thus, even if the amended trust directs the trustee to distribute only $1,200,000 to the individual beneficiaries, the amendments increased the amount that the trust directs the trustee to distribute to those individuals.

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federal tax credits.5 That letter listed each cash distribution that the amended trust would direct the trustee to make, including two distributions of $500,000 to respondent. In the trustee's declaration, he stated that, in the process of amending the trust, the settlors expressed to him their intention that the trust "give the total amount allowed by the unified credit to family members--including $1,000,000 total" to respondent. Appleton stated in her declaration that, in the process of drafting the 1990 trust, "Carol Saling provided us with a chart he had drawn which set forth a proposed distribution of the amount to be distributed to various family members, including a total of $1,000,000 to be distributed to [respondent]. * * * That chart reflects my understanding of the [the settlors'] intent: they wanted to pass the maximum amount of money they could tax-free to relatives, then give the entire residue of their estate to their Foundation[.]" She further declared that the settlors, in the process of amending the trust in 1996, had not changed their overall testamentary intent and that Carol specifically told her, with regard to respondent, that $1,000,000 "is enough for anybody." In the excerpt of respondent's deposition, he acknowledged that, a year before Carol died--viz., five years after the 1996 amendment of the trust--Carol told him that he would receive two $500,000 distributions, one following the death of each settlor.
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At the time that the settlors amended the trust, the Internal Revenue Code provided that an individual, through bequests at death, could distribute a total of $600,000 without incurring estate tax. IRC

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