IN RE: Deborah Dereede Living Trust dated December 18, 2013, Hugh Dereede and Tyre Dealer Network Consultants, Inc., Respondents,
Courtney Feeley Karp, Individually and As Trustee of the Deborah Dereede Living Trust dated December 18, 2013 and Michael Fehily, as a qualified beneficiary of the Deborah Dereede Living Trust dated December 18, 2013, Defendants, Of whom Courtney Feeley Karp, Individually and As Trustee of the Deborah Dereede Living Trust dated December 18, 2013, is the Appellant. Appellate Case No. 2016-001921
December 6, 2018
From York County S. Jackson Kimball, III, Special Circuit
Ballard and Harvey M. Watson, III, both of Ballard &
Watson, Attorneys at Law, of West Columbia; and Peter John
Nosal and Thomas Carroll Jeter, III, both of Nosal &
Jeter, LLP, of Fort Mill, all for Appellant.
P. Gettys, Jr. and Daniel Joseph Ballou, both of Morton &
Gettys, LLC, of Rock Hill, for Respondents.
bench trial, the trial court ruled that Courtney Feely Karp
breached her fiduciary duty as Trustee of a trust created by
her late mother by not timely distributing certain trust
proceeds to Hugh Dereede (Hugh), Karp's stepfather, and
to Tyre Dealer Network Consultants, Inc. (Tyre), Hugh's
company. The trial court also awarded Hugh attorney's
fees and held Karp personally liable for the verdict. Karp
appeals these rulings, which we now affirm.
eight months before her death, Deborah Dereede (Deborah),
Karp's mother, executed a revocable trust. She named
herself trustee and designated Karp as successor trustee. The
only asset in the trust was a home located in Lake Wylie,
South Carolina, which Deborah put on the market for sale a
few months later. Several months after Deborah's death,
Karp sold the house, netting $356, 242.86.
appeal turns on the following trust provision:
As soon as practicable following my death, my Trustee shall
sell the house and lot located at 131 WHISPERING PINES DR.,
LAKE WYLIE, SC 29710. The sales proceeds shall be used first
to pay off any mortgage against the property, and second to
pay off that certain promissory note given by me to TYRE
DEALER NETWORK CONSULTANTS, INC. Said promissory note, at the
time of the execution of my Trust, is in the amount of
$250, 000.00, but in no event shall the amount due
exceed one-half of the sales price of the property. After
payoff of said mortgage and said note, my Trustee shall then
distribute one-half of the remaining net sales proceeds to
HUGH DEREEDE, outright and free of trust. The other one-half
of the remaining net sales proceeds shall be distributed in
accordance with the Articles that follow.
the sale of the house closed, Hugh demanded immediate payment
of his and Tyre's share of the proceeds. Karp, who was
also the personal representative of Deborah's estate,
believed she could not distribute the proceeds until she was
certain of the net assets of the trust and the estate, and
the time for creditor's claims had expired. Hugh would
not be delayed, however, and filed this action in the probate
court seeking a declaratory judgment for immediate payment.
After procedural sparring, Karp removed the case to circuit
court. She continued to refuse Hugh's distribution
request but now also claimed that, by suing her, Hugh and
Tyre had triggered the trust's no-contest clause thereby
forfeiting their right to the proceeds. In the event of such
a forfeiture, the disputed monies would go to Karp and her
siblings as remainder beneficiaries.
months into the litigation, Karp appointed, with Hugh's
consent, Catherine H. Kennedy as trust protector as
contemplated by the trust. Kennedy filed a report concluding
Karp was justified in waiting on any creditor's claims to
clear before making any trust distributions and that the
issues of whether Karp exercised good faith in invoking the
no contest clause and whether probable cause supported Hugh
and Tyre's claims should be decided by the court.
and Hugh testified at the bench trial. Karp called Kennedy as
a witness, while Hugh presented S. Alan Medlin as his expert.
The trial court ruled (1) Karp breached her fiduciary duty by
not timely distributing the house sale proceeds to Tyre and
Hugh; (2) Hugh had probable cause to bring this action, and
therefore the no contest clause did not apply; (3) because
Tyre was a creditor, the no contest clause was inapplicable
to it; and (4) Tyre and Hugh were entitled to attorney's
fees and costs from Karp.
a breach of fiduciary duty claim can be legal or equitable,
see Verenes v. Alvanos, 387 S.C. 11, 17, 690 S.E.2d
771, 773 (2010) (stating "an action alleging a breach of
fiduciary duty is an action at law," but also that
"a breach of fiduciary duty may sound in equity if the
relief sought is equitable"), we look to the main
purpose of the action to define our scope of review.
Id. at 16, 690 S.E.2d at 773 ("Characterization
of an action as equitable or legal depends on the . . . main
purpose in bringing the action." (internal quotation and
citations omitted)). Here, the main purpose is to enforce an
alleged unconditional duty to pay a beneficiary. Actions
involving trusts are almost always equitable, but there is an
exception that applies here: an action against a trustee
under an alleged immediate and unconditional obligation to
pay money to a beneficiary is a legal action. 4 Scott &
Ascher on Trusts § 24.2.1 at 1660 (5th ed. 2007);
Restatement (Second) of Trusts § 198(1) (Am. Law Inst.
1959); see also S.C. Code Ann. § 62-7-1001 cmt.
(Supp. 2018) (noting only traditional remedy at law for
breach of trust was limited to suits to enforce obligations
to pay money and deliver chattels, otherwise, remedies for
breach of trust were "exclusively equitable"). ...