Opinion
No. 27438-1-III.
October 15, 2009.
Appeal from the Superior Court, Spokane County, No. 03-4-00809-7, Robert D. Austin, J., entered August 29, 2008.
Affirmed in part and remanded by unpublished opinion per Brown, J., concurred in by Kulik, A.C.J., and Korsmo, J.
Clarence C. Argyle and Opal V. Argyle married in 1975. The Argyles had children from previous marriages. In 1995, the Argyles established a living trust as co-trustees, with their children and grandchildren as residual beneficiaries. The question here is whether the trust terms gave the surviving trustee the discretion to fund the decedent's trust apart from the survivor's trust. After Mrs. Argyle died, Mr. Argyle petitioned the trial court to construe his discretionary power not to fund the decedent's trust. Mrs. Argyle's children, Val Holstrom, Fred Holstrom, Ben Holstrom, and Renee Jordan, and the grandchildren of Mrs. Argyle (collectively "the Holstroms"), counter-petitioned to establish the decedent's trust. The trial court granted summary judgment to Mr. Argyle, but declined to rule on his attorney fees and cost requests. Both parties appealed. Because the trust terms unambiguously give Mr. Argyle discretion to fund the decedent's trust, we affirm the trial court and remand for the trial court to determine attorney fees and costs.
FACTS
Mr. and Mrs. Argyle married in 1975. Mr. Argyle had five children from a previous marriage, and Mrs. Argyle had four children from a previous marriage. In 1995, Mr. and Mrs. Argyle established a living trust. The trust designated Mr. and Mrs. Argyle as co-trustees, and provided that when one died the other could serve as sole trustee. Section 3.01 of the trust document partly provides:
On the death of either Trustor, leaving a Surviving Trustor . . . [t]he Trust Estate shall be divided into two or more separate trusts to be designated as the "Survivor's Trust" and the "Decedent's Trust."
Clerk's Papers (CP) at 142. Trust Section 3.02 governs the Survivor's Trust:
The principal or Trust Estate of the Survivor's Trust shall consist of all the interest in each and every asset held by the Trustee pursuant to this Declaration on or by reason of the death of the deceased Trustor, not allocated or disclaimed to the principal or Trust Estate of the Decedent's Trust pursuant to Section 3.03 of this Declaration.
CP at 142. Trust Section 3.03 governs the Decedent's Trust:
The principal or Trust Estate of the Decedent's Trust will consist of all of the separate property of the Deceased Trustor, and any additional property disclaimed by the Surviving Trustor, but no more than an amount equal in value up to the maximum amount, if any, that can pass free of federal estate tax by reason of the unified credit available to the estate of the Deceased Trustor, after considering any adjusted taxable gifts and bequests by will or other disposition which do not qualify for the marital deduction made by the Deceased Trustor, and all charges to the principal of the estate which are not deducted in computation of the federal estate tax of the estate of the first Trustor to die. Provided, however, that the allocation to the Decedent's Trust shall be satisfied with assets valued as of the date of allocation or disclaimer; provided further that any assets in the Trust Estate which do not qualify for the federal estate tax marital deduction shall be first disclaimed to the Decedent's Trust.
CP at 144 (emphasis added). Trust Section 4.01 gave the second trustor to die a power of appointment:
Upon the death of the second Trustor to die, called "Surviving Trustor," the principal of the Survivor's Trust, and any accrued or undistributed net income from the principal of the Survivor's Trust, shall be distributed by the Trustee in such a manner and to such persons, including the estate, the creditors, or the creditors of the estate of the Surviving Trustor, as the Surviving Trustor shall appoint and direct by specific reference to this power of appointment, in his or her last Will admitted to probate by a court of competent jurisdiction.
CP at 146. Trust Section 4.04 previously governed distribution of the trust income and principal:
Upon the death of the surviving Trustor, unless stated otherwise, the Trustee shall apply and distribute the net income and principal of each of the shares of the resulting Trust Estate (consisting separately of the Decedent's Trust and Survivor's Trust(s) . . .) set aside for the benefit of the Trustor's named beneficiaries.
CP at 146.
The nine named beneficiaries were Mr. Argyle's five children and Mrs. Argyle's four children. Mr. and Mrs. Argyle amended the trust twice. Section 4.04(b) requires the trustee to "apply and distribute the net income and principal of each of the shares of the resulting Trust Estate set aside for the benefit of the Trustors' named beneficiaries" by dividing the resulting trust estate into ninths. CP at 165. When the surviving co-trustee died, assets remaining in the survivor's trust and the decedent's trust, if any, were to be divided among the named beneficiaries.
Mrs. Argyle died on September 24, 2001. She left no separate property, and Mr. Argyle made no disclaimer of assets to the decedent's trust.
In 2003, Mr. Argyle petitioned for authority to construe and reform the trust. He argued "the directions on division of the trust after the death of the first trustor are faulty, so in actuality, the survivor's trust is the decedent's trust." CP at 2. He further argued:
Since the decedent [Mrs.] Argyle had no separate property within the trust and the surviving trustor, the Petitioner [Mr.] Argyle, did not disclaim any of the trust property, there is no survivor's trust after the death of [Mrs.] Argyle.
Thus, the instrument is deficient in providing a means to identify [Mr.] Argyle's one-half community property interest in the trust estate after the division of the trust following the death of [Mrs.] Argyle.
Since there is no survivor's trust as that term is used, some mechanism must be established to segregate the Petitioner [Mr.] Argyle's one-half community property interest in the entire trust.
CP at 3-4. Accordingly, Mr. Argyle requested sections 3.01, 3.02, 3.03, and 3.05 of the trust document be deleted and re-written. The Holstroms counter-petitioned, requesting reformation and amendment of the trust document, and removal of Mr. Argyle as trustee, for breaching his fiduciary duties to them as beneficiaries. Later, Mr. Argyle filed an amended petition for authority to construe and reform the trust. He argued:
Pursuant to the 1995 Trust, the decedent's trust was to receive the separate property of the first to die of the Trustors and any additional property disclaimed by the surviving Trustor. The survivor's trust was to consist of the remaining assets of the Trust Estate which were not disclaimed by the surviving Trustor or were not the separate property of the first to die of the Trustors.
CP at 46. Mr. Argyle further argued:
The surviving Trustor, [Mr.] Argyle, did not execute a disclaimer within nine months from the date of death of [Mrs.] Argyle in conformity with the provision of Chapter 11.86 RCW. Accordingly, by the terms of the 1995 Trust, the decedent's trust was not funded by any of [Mr.] and [Mrs.] Argyle's community property.
CP at 46. Accordingly, Mr. Argyle partly requested:
[] That the court determine that the decedent's trust as established in the 1995 Trust was never funded by a disclaimer of the surviving Trustor, [Mr.] Argyle, executed in conformity with the provisions of Chapter 11.86 RCW; and
[] That all assets of the 1995 trust are in the survivor's trust as that term is used in the 1995 Trust.
CP at 47. The Holstroms asked in their answer to Mr. Argyle's second amended petition for "[t]he establishment of the Decedent's Trust containing one-half (1/2) of the Decedent's community property at the time of her death, together with appreciation associated with all such assets, with [Mrs. Argyle's] children as sole remainder beneficiaries." CP at 64.
Mr. Argyle moved for partial summary judgment, "establishing that the Trust Agreement is enforceable according to its terms and not subject to the reformation sought by Respondents." CP at 89. Mr. Argyle partly offered deposition excerpts from attorney James Parsons, who drafted the trust document. Mr. Parsons deposed:
And I specifically remember [Mrs. Argyle] talking about the fact that they both wanted to have the surviving spouse have some flexibility after the first one passed away. . . . I always at that point explain to both spouses that if the surviving spouse is given discretion there are risks involved, for instance the ability to potentially cut out one or more of the first spouse to die's children. . . .
And I always say if you want to make sure, for instance, that your children are going to receive something, you want to make sure you don't give the surviving spouse the discretion.
I do recall again [Mrs. Argyle] explaining to me that she trusted her husband just as he trusted her and she believed he would take care of her children.
CP at 120.
He further deposed "[t]he instructions I received from both [Mr. and Mrs. Argyle] were to make a discretionary funding of the decedent's trust." CP at 123. Additionally:
I specifically discussed with [Mr. and Mrs. Argyle] when I met with them the possibility of disinheriting the other spouse's children. . . .
I believe they understood that the surviving spouse could make changes to the trust that would be detrimental to the first spouse's children. And it was my practice at the time to say if you want to insure that your children receive something you need to make sure that the decedent's trust is automatically funded, as opposed to having a disclaimer.
CP at 125-26.
In response to Mr. Argyle's motion, the Holstroms argued, "[t]he decedent's trust was to be funded after the death of the first Trustor with his or her separate property as well as 1/2 of the community assets and in addition any assets disclaimed by the Survivor." CP at 354-55. They further argued, "that the Living Trust Agreement, through the ineptitude of the scrivener, does not properly reflect the intention of Trustor, [Mrs.] Argyle." CP at 377.
In support of this response, the Holstroms offered affidavits from Mrs. Argyle's three sons, Val Holstrom, Fred Holstrom, and Ben Holstrom. Both Val Holstrom and Fred Holstrom recounted how the Argyles gave equalized gifts. Fred Holstrom stated that the gift giving statements from Mr. Argyle convinced him that the Argyles intended to leave their respective estates to their children to treat "everyone fairly." CP at 389. Val Holstrom, Fred Holstrom, and Ben Holstrom each requested "that the Court construe the Trust Agreement in accordance with past practices between [Mrs. Argyle] and [Mr.] Argyle . . . with one-half (1/2) of the total estate going to me and my siblings and the other one-half (1/2) going to Mr. Argyle's children." CP at 384-85, 390, 394.
The Holstroms offered excerpts from Mr. Parsons' deposition:
[Question:] So you're clear that after you met with Mr. and Mrs. Argyle that it was Mrs. Argyle's clear intent that she wanted her children to be taken care of?
[Answer:] I believe so. And I believe that Mrs. Argyle never — in my conversations with her she believed that [Mr. Argyle] would not disinherit her children.
[Question:] In any way take advantage of them?
[Answer:] I believe she didn't think that he would in fact disinherit them.
She trusted him not to do that. I will say that I do believe that because of her concerns with one or more of her children that she wanted him to have flexibility to deal with those children, her children, after her death, in her mind. But she did know he could disinherit her children.
CP at 425.
The trial court granted Mr. Argyle's partial summary judgment motion and denied reconsideration. After the Holstroms were denied discretionary review in this court, Mr. Argyle moved for final judgment and attorney fees and costs. The trial court granted Mr. Argyle's request for entry of a final judgment, but did not rule on his request for attorney fees and costs. The Holstroms appealed before attorney fees and costs were decided and when the matter came on for hearing, the trial court ordered, "attorney fees and costs if any shall abide the decision of the Court of Appeals to sustain or reverse the grant of Summary Judgment." CP at 1374. Mr. Argyle then cross-appealed on the issue of attorney fees and costs.
ANALYSIS A. Summary Judgment
The issue is whether the trial court erred in deciding no material facts exist and summarily granting judgment for Mr. Argyle.
We review a summary judgment grant de novo, engaging in the same inquiry as the trial court. Lybbert v. Grant County, 141 Wn.2d 29, 34, 1 P.3d 1124 (2000). Summary judgment is proper if no genuine issue of material fact remains and the moving party is entitled to judgment as a matter of law. CR 56(c). "A material fact is one that affects the outcome of the litigation." Owen v. Burlington N. Santa Fe R.R., 153 Wn.2d 780, 789, 108 P.3d 1220 (2005). When considering a summary judgment motion, the court must construe all facts and reasonable inferences in the light most favorable to the nonmoving party. Lybbert, 141 Wn.2d at 34. "[T]he moving party bears the burden of showing the absence of a material issue of fact." Swinehart v. City of Spokane, 145 Wn. App. 836, 844, 187 P.3d 345 (2008) (citing Redding v. Virginia Mason Med. Ctr., 75 Wn. App. 424, 426, 878 P.2d 483 (1994)). Further, "[q]uestions of fact may be determined on summary judgment as a matter of law where reasonable minds could reach but one conclusion." Id. (citing Alexander v. County of Walla Walla, 84 Wn. App. 687, 692, 929 P.2d 1182 (1997)).
Mr. Argyle disputes the Holstroms' failure to assign error to any of the trial court's rulings. A party is required to assign error to each error the party believes the trial court committed. RAP 10.3(a)(4). But the failure to file an assignment of error is not necessarily fatal to a party's case: "[t]he appellate court will only review a claimed error which is included in an assignment of error or clearly disclosed in the associated issue pertaining thereto." RAP 10.3(g) (emphasis added). The Holstroms' statement of the issues presented for review clearly identifies they are challenging the trial court's order granting partial summary judgment. Therefore, we consider their appeal.
The Holstroms first contend material issues of fact remain (1) regarding Mr. Argyle's conflicts of interest, where he breached his fiduciary duty to fund the decedent's trust; (2) regarding the basis of removal of Mr. Argyle as trustee; and (3) regarding Mr. Argyle's abuse of discretion.
"'A trustee owes the beneficiaries of the trust the highest degree of good faith, care, loyalty and integrity.'" Bartlett v. Betlach, 136 Wn. App. 8, 19-20, 146 P.3d 1235 (2006) (internal quotation marks omitted) (quoting In re Marriage of Petrie, 105 Wn. App. 268, 275, 19 P.3d 443 (2001)). Further, beneficiaries may remove a trustee for "reasonable cause." Id. at 20 (citing RCW 11.98.039(4); RCW 11.96A.020(1)(b)). "Reasonable cause has generally been construed as requiring a breach of fiduciary duty, a conflict of interest, or bad will generated by litigation." Id. (citing In re Estate of Ehlers, 80 Wn. App. 751, 761, 911 P.2d 1017 (1996)).
Mr. Argyle argues the Holstroms cannot raise these issues on appeal, because they did not raise them below in response to his motion for partial summary judgment. "On review of an order granting or denying a motion for summary judgment the appellate court will consider only evidence and issues called to the attention of the trial court." RAP 9.12; see also, e.g., McClarty v. Totem Elec., 119 Wn. App. 453, 460-61, 81 P.3d 901 (2003) (applying this rule), rev'd on other grounds, 157 Wn.2d 214, 137 P.3d 844 (2006). The Holstroms counter-petitioned for Mr. Argyle's removal as trustee for breaching his fiduciary duties to them as beneficiaries. The Holstroms first mentioned Mr. Argyle's removal in their reconsideration memorandum.
Under CR 59 reconsideration rules, a plaintiff may not propose new case theories that could have been raised before entry of an adverse decision. JDFJ Corp. v. Int'l Raceway, Inc., 97 Wn. App. 1, 7, 970 P.2d 343 (1999). Our record does not show the trial court considered the issue of removal of Mr. Argyle as trustee while considering Mr. Argyle's summary judgment motion. And, the Holstroms do not dispute we are considering a final judgment or assert that the removal issues precluded the entry of a partial summary judgment. Considering all, we decline to consider the new matters here. See RAP 9.12.
The Holstroms next contend the trust is ambiguous, and the extrinsic evidence establishes that Mrs. Argyle intended to provide for her children.
"We determine a settlor's intent in a trust document by construing the document as a whole." Bartlett, 136 Wn. App. at 19 (citing Old Nat'l Bank Union Trust Co. v. Hughes, 16 Wn.2d 584, 587, 134 P.2d 63 (1943)). "Where the meaning of an instrument evidencing a trust is unambiguous, the instrument is not one requiring judicial construction or interpretation." Templeton v. Peoples Nat'l Bank of Wash., 106 Wn.2d 304, 309, 722 P.2d 63 (1986). "A trust is ambiguous if it is susceptible of more than one meaning; ambiguity is a question of law." Waits v. Hamlin, 55 Wn. App. 193, 200, 776 P.2d 1003 (1989) (citing Millican of Wash., Inc. v. Wienker Carpet Serv., Inc., 44 Wn. App. 409, 415-16, 722 P.2d 861 (1986)). Further, "if the intention may be gathered from [the trust] language without reference to rules of construction, there is no occasion to use such rules, and the actual intent may not be changed by construction." Templeton, 106 Wn.2d at 309. Accordingly, extrinsic evidence should not be considered where "intent can be derived solely from the four corners of the trust document." Id.
Here, the trust document provides, upon the death of either trustor, for two separate trusts, the survivor's trust and the decedent's trust. Section 3.02 provides:
The principal or Trust Estate of the Survivor's Trust shall consist of all the interest in each and every asset held by the Trustee pursuant to this Declaration on or by reason of the death of the deceased Trustor, not allocated or disclaimed to the principal or Trust Estate of the Decedent's Trust pursuant to Section 3.03 of this Declaration.
CP at 142 (emphasis added). And, the challenged part of section 3.03, provides: "[t]he principal or Trust Estate of the Decedent's Trust will consist of all of the separate property of the Deceased Trustor, and any additional property disclaimed by the Surviving Trustor." CP at 144 (emphasis added).
The challenged language unambiguously provides that the decedent's trust would be funded by the deceased trustor's separate property, along with property the surviving trustor chose to disclaim. Construing the trust as a whole, Mr. and Mrs. Argyle clearly stated an intent to create two trusts, with the survivor's trust to consist of the assets of the trust not disclaimed to the decedent's trust under section 3.03.
Even if we found the challenged language ambiguous, "[i]n construing a will or trust, testamentary intent controls." Eisenbach v. Schneider, 140 Wn. App. 641, 651, 166 P.3d 858 (2007) (citing In re Estate of Griffen, 86 Wn.2d 223, 226, 543 P.2d 245 (1975)). "Testamentary intent is a question of fact." Id. (citing In re Estate of Soesbe, 58 Wn.2d 634, 636, 364 P.2d 507 (1961)). Considering Mr. Parsons' extrinsic evidence, reasonable minds could reach but one conclusion: that Mrs. Argyle intended to put the disclaimer in the trust document. Mr. Parsons related that, apprised of the risks, Mrs. Argyle trusted Mr. Argyle to care for her children and, like Mr. Argyle, she instructed Mr. Parsons "to make a discretionary funding of the decedent's trust." CP at 123. Therefore, while the trust language unambiguously granted the surviving trustee discretion to fund the decedent's trust, if considered ambiguous, the extrinsic evidence supports the same conclusion that summary judgment was proper for Mr. Argyle.
B. Attorney Fees and Costs
Both Mr. Argyle and the Holstroms request attorney fees and costs on appeal, under RCW 11.96A.150(1). RCW 11.96A.150(1) grants broad discretion to trial and appellate courts to order costs and attorney fees from a party or out of the trust estate. "In exercising its discretion under this section, the court may consider any and all factors that it deems to be relevant and appropriate, which factors may but need not include whether the litigation benefits the estate or trust involved." RCW 11.96A.150(1) (emphasis added). Generally, attorney fees may be awarded against a trust "only where the litigation results in a substantial benefit to the trust." Bartlett, 136 Wn. App. at 22 (citing In re Estate of Niehenke, 117 Wn.2d 631, 648, 818 P.2d 1324 (1991)). Here, however, neither the Holstroms nor Mr. Argyle request an award of fees from the trust.
The Holstroms argue for attorney fees and costs because they were subjected to unnecessary legal fees and costs in responding to Mr. Argyle's suit. Mr. Argyle argues attorney fees and costs should be awarded to him because of the extensive work he had to do to respond to the Holstroms' claims, including responding to the Holstroms' request for discretionary review in this court. Considering all, we decline to exercise our broad discretion to award fees on appeal pursuant to RCW 11.96A.150(1).
Mr. Argyle also requests attorney fees and costs, pursuant to RCW 11.96A.150(1), at the trial court level. Attorney fee awards are reviewed for an abuse of discretion. Wachovia SBA Lending v. Kraft, 138 Wn. App. 854, 858-59, 158 P.3d 1271 (2007). As noted, RCW 11.96A.150(1) gives the trial court broad discretion to award fees. However, "[f]ailure to exercise discretion is an abuse of discretion." Brunson v. Pierce County, 149 Wn. App. 855, 861, 205 P.3d 963 (2009) (citing State v. Pettitt, 93 Wn.2d 288, 295-96, 609 P.2d 1364 (1980)).
Here, the trial court did not rule on Mr. Argyle's request for attorney fees and costs, abusing its discretion. We remand for the trial court to consider the merits of Mr. Argyle's request at the trial level.
Affirmed, and remanded for the trial court to consider Mr. Argyle's request for attorney fees and costs.
A majority of the panel has determined this opinion will not be printed in the Washington Appellate Reports, but it will be filed for public record pursuant to RCW 2.06.040.
KULIK, A.C.J. and KORSMO, J., concur.