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Trust Agreement

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  • Jack Archer
    Back to Rossmoor affairs -- I hope to comment occasionally on some of the work I have done studying governance issues -- mainly simply trying to make sense of
    Message 1 of 1 , Jan 5, 2013
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      Back to Rossmoor affairs -- I hope to comment occasionally on some of the work I have done studying governance issues -- mainly simply trying to make sense of them.

      I'll start with the 1964 Trust Agreement (TA), which is a source of much confusion and consternation to residents, and the effort by the GRF and its Trust Agreement Review and Revision Committee (TARRC) to re-write the TA.

      I know that the GRF says that the TARRC is not its committee, but it is the case that the GRF Board authorized the TARRC and approved its charter.  It is clear that the TARRC operates under GRF auspices, has a budget authorized and provided by the GRF, and is staffed by the GRF counsel.  I don't know how much closer the TARRC could possibly be to the GRF than it is.

      As it is presently constituted, the TARRC includes current and former officers of mutuals, an officer of the GRF, and no residents/members of mutuals and the GRF.  I know that residents/members are not parties to the TA -- that is a significant deficiency of the TA.  Nevertheless, it is a serious defect in the TA review and revision process that residents/members are not members of the TARRC.  I think that they would have much to contribute.

      The 1964 TA is not a document that one may digest in a quick read-through.  The original yellowing, fading TA is posted on the Rossmoor website, under Rossmoor Documents (seek, and ye shall find, probably).  It is, however, a scanned copy of the barely readable original that can not be easily downloaded and cannot be copied.  Nor is the original TA contained in one document, because there are amendments to the original TA that must be found in another document, "Exhibit B".  You may overcome this barrier if you are diligent, but a barrier to understanding the TA review and revision process it is.

      It would have been very helpful, as a first step by the TARRC, to have posted a clean, readable copy of the 1964 TA and Exhibit B, eliminating all provisions of the latter that are no longer effective and are only an obstacle to residents who want to understand the 1964 TA in its entirety.  It isn't too late to do so; it could be done easily.

      I assume that many participants in this chat group are aware of the draft revisions that have been prepared by the TARRC and the GRF counsel over the past two years.  At some point, residents/members may wish to get down into the weeds, so to speak, and confront the details of the original TA and the proposed changes.  No?  If not, then you will have to get by with someone else's interpretations and comments.  What follow are mine and mine alone.

      I start with a more general review of certain major issues.

      First, why is it necessary to change the 1964 TA now?

      At the beginning of this process, it was said by the TARRC and GRF that the TA would expire in 2024, which will be upon us any day, right? so we must amend and extend the original now.  Sounds reasonable, perhaps, but it isn't correct, which the GRF and the TARRC have acknowledged, in part.

      It is correct that an expiration date of 1964 is stated in the TA, but another uncertain date is also stated, one that would be determined by the length of the life of the survivor of the individuals (all children in 1964) named in the TA, plus 21 years.  Let's leave aside questions re why this peculiar way of determining how long a trust shall endure.  Briefly, it has to do with an ancient principle of trust and property law which sought to prevent creating perpetual trusts to deny beneficiaries the use of their property.   Suffice to say, this is a perfectly workable legal principle, and one that in fact determines how long the 1964 TA will last.  The lives of children were chosen to prolong the life of the TA.

      When GRF belatedly acknowledged that 1964 may not be the expiration date of the TA, it stated a new position:

      "Currently, the Trust is presumed to terminate on April 1, 2024, since GRF has not conclusively located any of the six named individuals."

      I am not aware that GRF has done much of anything to locate these six named individuals, despite declaring last year that it was a major GRF Board goal to do so.  Would that be because it would prefer that the TA's expiration date be 2024 and not some later date?  One may ask.

      Months ago, I did a quick internet search and quickly located one of the individuals named in the 1964 TA, beyond any reasonable doubt, I think.  Further, I believe that I established the link between this individual and Rossmoor, because he is the relative of another individual whose name and signature appear on two of Rossmoor's founding documents: the 1964 TA itself and GRF's Articles of Incorporation.

      This individual is now approx. 50 years old.  If he were the survivor of the six children named in the TA, and died tomorrow, the TA would last until 2034 (2013 plus 21 years).  Realistically, we may assume that there are others among the six children named in the 1964 TA still living.  Happily they will live into their 80's or 90's.  We may assume further that the current Rossmoor TA will not expire before the late 2050's or 2060's.  How urgent does it seem now to re-write the TA?

      I shared the results of my internet search with the GRF and wrote a couple of notes and letters at the time describing them.   I am certain that due diligence on GRF's part would quickly locate most if not all of the children named in the TA.

      Second, why re-write the 1964 TA at all?

      The GRF and the TARRC claim that they are simply clarifying the 1964 TA and that no changes will be made in the original TA.  I agree that the document could be stated in more accessible, more readily understandable English.   Even that task, however, is fraught with more than a few difficulties.

      Despite the claims by the TARRC and the GRF, IRV has identified a number of substantial changes to the 1964 TA -- changes that go well beyond merely clarifying/restating the original TA, and are all, surprisingly, to GRF's benefit.

      I refer readers to IRV for a copy of its comments, and will not discuss them here, other than to say that I helped identify these substantial changes and believe them to be so.  I will point to one possibly very significant result of completely re-writing the 1964 TA not included in IRV's document.

      The GRF takes the position that the 1964 TA:

      "is a three-party contract entered into among the Mutuals (as trustors) and GRF (as trustee) for the purpose of having GRF manage the recreational facilities within Rossmoor for the benefit of the Mutuals (as beneficiary), thus enabling the Mutuals to provide access to the recreational facilities to their members."

      What happens if all the mutuals, as beneficiaries, want to modify the TA to impose limitations on the GRF, limitations that are permissible under California law? Limitations that the GRF doesn't particularly like, for example?  Does the GRF and the TARRC believe that the GRF, as trustee, has the power to "veto" such changes to the TA proposed by all the beneficiaries?  California Probate law states that the trustee may "accept" the changes agreed to by the beneficiaries.  It may also not accept the changes and resign as trustee.

      The question I pose is, does the GRF claim the power to block any change to the TA it doesn't like?  Are the proposed revisions to the TA intended to support a claim by the GRF that it may block unilaterally any change the beneficiaries want?  So it seems.  Hench the emphasis upon the GRF's role as a contracting party to the TA, equal to the trustors/beneficiaries -- the mutuals -- and not merely a trustee, serving the beneficiaries' interests, rather than its own.

      A Historical Note

      You may know that the mutuals at Rossmoor used to run the GRF, by electing its directors.  The 1964 TA still contains language to the effect that the "voting control of the [GRF] is vested in [the mutuals]".  That provision of the TA was contravened in the early 1970s by amendments to the GRF Bylaws that provided for the current arrangement by which directors are elected from nine districts.  I mention this because the Rossmoor GRF, unlike the other Corteze retirement communities in California and Maryland, claims to be entirely independent of the mutuals.  In the other communities, the mutual still effectively run their GRFs, establish all its policies and make all management decisions.  Is that better or worse?  We may debate the question.

      Where are Residents in All This? 

      Left out in the cold, with the mutuals, practically speaking, that is.  Yes, the mutuals may choose to amend the TA and impose restrictions upon the GRF, but how likely is this?

      If the mutuals and the GRF believed that it would be in the general interest of the Rossmoor community to change the 1964 TA to include a proper role for residents/members of the mutuals and the GRF, they could do so. 

      Frankly, if the choice now is between adopting the proposed revisions to the 1964 TA or keeping the document the way it is, yellowing, unreadable copy and all, I would choose the latter.

      There are other, more specific issues, but these will do for now.

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