Can trustee be forced to forclose on self

[stan_the_man]

I am one of several beneficiaries named in a trust. The grantor's residence was part of the initial trust. The sole trustee administering the trust is also named as a beneficiary. The trust allowed the trustee to purchase said residense from the trust via a land contract which the trustee did. The trustee made one initial monthly payment to the trust per the land contract, but she is now behind on the payments (i.e. she satisfies the land contract's definition of being in default). The trust stipulates that the remaining beneficiaries are to receive the income generated by the payments from the land contract. Can one or more of the remaining beneficiaries of the trust pursue foreclosure (and/or other remedies against default) directly in the courts or is it possible to force the trustee to effectively pursue foreclosure on herself?

 

[army judge]

The trustees can't foreclose.

They can, however, initiate a lawsuit seeking foreclosure on the one failing to pay their debt.

I suggest you and your collective discuss your potential legal remedies with an attorney in your area.

 

[stan_the_man]

There is only one trustee and she is also a beneficiary who is failing to pay her debt to the trust. So wouldn't it be her duty as the trustee to act in the best interests of the other beneficiaries and to carry out the wishes of the grantor? In order to do that she would have to seek legal remedies for default of the land contract against herself or stop defaulting on the land contract. If she does not do that couldn't that be considered breach of trust on her part? Couldn't a court either compel her to act or remove her as the trustee?

 

[army judge]

Yes, those are possibilities.

But, the court doesn't seek out problems to solve or matters to adjudicate.

If she's a thief, she's certainly not going to rat out herself.

Therefore, someone (maybe you) has to bring this matter to the court's attention.

There is only one trustee and she is also a beneficiary who is failing to pay her debt to the trust. So wouldn't it be her duty as the trustee to act in the best interests of the other beneficiaries and to carry out the wishes of the grantor? In order to do that she would have to seek legal remedies for default of the land contract against herself or stop defaulting on the land contract. If she does not do that couldn't that be considered breach of trust on her part? Couldn't a court either compel her to act or remove her as the trustee?

 

[stan_the_man]

Yes, those are possibilities.

But, the court doesn't seek out problems to solve or matters to adjudicate.

If she's a thief, she's certainly not going to rat out herself.

Therefore, someone (maybe you) has to bring this matter to the court's attention.

Yes, of course it would be up to the beneficiaries to petition the court to recognize breach of trust. But the interesting point here is the circular reference. To act in the best interest of the trust the trustee must act against herself. The question then becomes: "do the beneficiaries have the legal standing to pursue remedies against the land contract default directly?" In other words, would they be prevented from initiating a lawsuit seeking foreclosure or forfiture because they are not directly named in the land contract? If the beneficaries lack legal standing to directly deal with the land contract default, then their only recourse would be to pursue breach of trust. Taking the breach of trust approach adds a level of indirection to the process and would complicate matters from the point of view of the beneficiaries.

 

[army judge]

What you've described is the dilemma most people face before initiating a lawsuit.

Allow me to draw your attention to Mr. Bernie Madoff, and those similarly distressed because of Bernie's illegal behavior.

Yes, OP, it seems your trustee has backed her victims into this legal dilemma.

As courts don't act until matters are brought before them, it would appear your only solution to the matter at hand.

Perhaps, a discussion could be held with your wrongdoer, thereby prompting her to correct her transgressions?

Otherwise, failure to take legal action could cause the innocent beneficiaries further financial ruin!!!

Yes, of course it would be up to the beneficiaries to petition the court to recognize breach of trust. But the interesting point here is the circular reference. To act in the best interest of the trust the trustee must act against herself. The question then becomes: "do the beneficiaries have the legal standing to pursue remedies against the land contract default directly?" In other words, would they be prevented from initiating a lawsuit seeking foreclosure or forfiture because they are not directly named in the land contract? If the beneficaries lack legal standing to directly deal with the land contract default, then their only recourse would be to pursue breach of trust. Taking the breach of trust approach adds a level of indirection to the process and would complicate matters from the point of view of the beneficiaries.