In the Matter of the CLEOPATRA CAMERON GIFT TRUST, Dated May 26, 1998, and the CAMERON FAMILY EXEMPT GST TRUST FBO CLEOPATRA CAMERON, created under the CAMERON FAMILY TRUST, dated December 20, 1996, as amended.
ON NOVEMBER 13, 2018
FROM THE CIRCUIT COURT OF THE SECOND JUDICIAL CIRCUIT LINCOLN
COUNTY, SOUTH DAKOTA THE HONORABLE NATALIE DAMGAARD Judge.
DUNCAN AMANDA W. ENGEL of The Duncan Law Firm, LLP Sioux
Falls, South Dakota Attorneys for appellant Christopher
THOMAS DENEVAN of Boyce Law Firm, LLP Sioux Falls, South
Dakota Attorneys for appellee Trident Trust Company.
REBECCA L. WILSON of Myers Billion, LLP Sioux Falls, South
Dakota Guardian Ad Litem for appellee minor children
C.S.C.-P. and T.C.C.-P.
M. VOSS BOBBI L. THURY of Legacy Law Firm, P.C. Sioux Falls,
South Dakota Attorneys for appellee Cleopatra Cameron.
Trust beneficiary Cleopatra Cameron filed a petition in the
circuit court requesting a determination of whether the
trust's spendthrift provision prohibits direct payments
of her child support obligation to her ex-husband,
Christopher Pallanck. A California family court previously
ordered the direct payments as part of the couple's
divorce, citing a particular feature of California trust law.
The circuit court concluded the direct payment order was a
method of enforcing Cleopatra's child support obligation
to be determined under local law and, therefore, not entitled
to full faith and credit. The court further determined that
South Dakota law recognizes the validity of spendthrift
clauses and their prohibition upon compulsory direct payments
to a beneficiary's creditors, like Christopher, who now
appeals. We affirm.
Cleopatra's father, Arthur A. Cameron Jr., established
the Cameron Family Trust for his own benefit during his life.
He also established the Cleopatra Cameron Irrevocable Gift
Trust, under which Cleopatra was the primary beneficiary.
Arthur died on September 2, 2001, and the Family Trust was
partitioned into individual shares for each of his three
children, including a share for Cleopatra. This share was
further divided into the GST Exempt Trust and the Non-GST
Exempt Trust. Spendthrift provisions in the Gift Trust,
Non-GST Exempt Trust, and GST Exempt Trust (collectively the
Trust) prohibit the trustee from making direct payments to
Cleopatra's creditors and grant the trustee the sole
discretion to make distributions.
Cleopatra and Christopher were married in 2005 and lived in
California with their two young children. Christopher
commenced a divorce action in January 2009 in Santa Barbara
County, California. During the pendency of the divorce, the
California family law court (the family court) entered
interim orders granting Christopher sole custody of the
children, as well as establishing temporary child support and
spousal support obligations for Cleopatra. At the time,
Cleopatra received Trust distributions of $40, 000 per month
which, when considered with Christopher's relatively
modest income from part-time employment, yielded a monthly
child support obligation for Cleopatra of $8, 863. In
addition, the court ordered Cleopatra to pay Christopher
interim spousal support of $14, 761 per month and interim
attorney's fees of $50, 000.
The family court joined the Trust in the divorce action on
February 3, 2009, to facilitate regular payment of the
interim financial obligations it had imposed upon Cleopatra.
The family court later confirmed that its intent was to
utilize a particular feature of California trust law to
require the Trust to directly fund Cleopatra's child
On March 10, 2009, the family court conducted a hearing on
Christopher's motion to show cause to determine whether
Cleopatra and Wells Fargo, who were co-trustees at the time,
should be held in contempt for failing to pay temporary child
support. The court found that Cleopatra and Wells Fargo acted
in bad faith and abused their discretion when they failed to
satisfy the child support obligation and issued the following
The [c]ourt will order the Bank, and its successor, and
Mother to pay child support, spousal support, and attorney
fees from Mother's Trust including any other ordered
awards in this action until further order of the [c]ourt.
Wells Fargo Bank and any successor are joined in this action
until further order of [c]ourt.
Wells Fargo objected on the basis that the family court had
no authority to order direct payments from a spendthrift
trust to a creditor or child support obligee. However, it
ultimately complied with the March 10, 2009, order, made the
payments directly to Christopher, and did not seek
interlocutory appellate review.
Around the time the divorce action was beginning, Cleopatra
and Wells Fargo requested approval from a different
California judge sitting as a probate court to resign their
positions as co-trustees. The probate court granted the
request and approved the appointment of BNY Mellon (BNY) as
the sole successor trustee in April 2009, after BNY agreed to
be bound by the family court's March 10 child support and
spousal support order.
At this juncture, it seems helpful to explain the provisions
of California trust law which are at the heart of this
appeal. Where, as here, child support obligors are trust
beneficiaries who do not have the ability to compel
distributions, California's probate code, nevertheless,
allows a court to "order the trustee to satisfy . . .
[a] support judgment out of . . . future payments that the
trustee, pursuant to the exercise of the
trustee's discretion, determines to make to or for
the benefit of the beneficiary." Cal. Prob. Code §
15305(c) (West 2019) (emphasis added). A California Court of
Appeal panel has interpreted this text to authorize an order
compelling a trustee to satisfy an unpaid support obligation
where the trial court finds the trustee has exercised its
discretion in bad faith to deny a request for a distribution.
Ventura Cty. Dep't of Child Support Servs. v.
Brown, 11 Cal.Rptr.3d 489, 498 (Cal.Ct.App. 2004).
Relying upon the fact that the trustee had not exercised its
discretion to satisfy a child support obligation, the
Ventura County court concluded:
[A] court may overcome the trustee's discretion under the
narrow circumstances present here: when there is an
enforceable child support judgment that the trustee refuses
to satisfy. Under these circumstances, the trial court may
order the trustee to ...