Opinion
No. A05-1929.
Filed July 11, 2006.
Appeal from the District Court, Hennepin County, File No. 27-C6-91-000166, 27-C5-91-000160, 27-C9-91-000159.
Morris M. Sherman, Robert L. DeMay, Jane F. Godfrey, David R. Crosby, Leonard, Street and Deinard, P.A., (for appellants Dhm, Cwm and Acm)
Lewis A. Remele, Jr., Alan I. Silver, David A. Turner, Bassford Remele, (for respondents Jm, Kmr, Ddm, Amp, Dcm and Smk)
Thomas W. Tinkham, Christopher T. Shaheen, I. Jenny Winkler, Dorsey Whitney, L.L.P., (for Robert J. Struyk, Phillip H. Martin, and William J. Berens)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2004).
UNPUBLISHED OPINION
Appellants DHM, CWM, and ACM appeal the district court's award of attorney fees and expenses to respondents JM, KMR, DDM, AMP, DCM, and SMK, arguing that the fees and expenses were not reasonably and necessarily incurred and that the district court denied appellants due process. We affirm.
FACTS
The facts regarding the underlying litigation are set forth in In re Trusteeship of the Trust Created Under Trust Agreement Dated Dec. 31, 1974, 674 N.W.2d 222, 225-28 (Minn.App. 2004), review denied (Minn. Apr. 20, 2004). The litigation began in July 2000 when the trustees of trusts created by JHM petitioned the district court for an order determining the proper beneficiaries. The trustees moved for summary judgment declaring that only biological children of JHM were beneficiaries. The children of JHM's third wife, appellants DHM, CWM, and ACM (the younger children), who stipulated that they were not JHM's biological children, moved for summary judgment declaring them to be beneficiaries. JHM's other children, respondents JM, KMR, DDM, AMP, DCM, and SMK (the older children), filed documents in support of the trustees' position.
The district court granted the trustees' motion for summary judgment. This court reversed the district court and ordered that summary judgment be entered in favor of the younger children, concluding that Minn. Stat. § 501B.16 (2002) did not authorize the trustees to collaterally attack the younger children's previously adjudicated parentage. In re Trusteeship of the Trust Created Under Trust Agreement Dated Dec. 31, 1974, 674 N.W.2d at 233.
The younger children petitioned the district court for reimbursement from the trusts for the attorney fees and expenses that they had incurred since the trustees filed the July 2000 petition. The district court granted the petition. The older children then filed a motion seeking an award of the attorney fees and expenses that they incurred supporting the trustees' July 2000 petition and scheduled a hearing on the motion. The younger children opposed the motion and moved to reschedule the hearing, arguing that filing a motion under Minn. R. Gen. Pract. 119, rather than a petition under Minn. Stat. § 501B.16 (2004), denied the younger children the opportunity to obtain discovery or hold an evidentiary hearing to determine whether the older children's participation in the case was in good faith. A hearing was held before the referee who had presided over the case since 2000.
The district court awarded the older children their requested attorney fees and expenses, and denied the younger children's motions to reschedule the hearing, for discovery, and for an evidentiary hearing. This appeal followed. The younger children have filed a motion to supplement the record on appeal.
DECISION
The younger children argue that (1) the district court abused its discretion in awarding the older children attorney fees and expenses because the fees and expenses were not reasonably and necessarily incurred; (2) the district court violated their right to due process by denying them discovery and an evidentiary hearing on the issue of the older children's good faith; and (3) their motion to supplement the record should be granted.
I.
In the sound and cautiously exercised discretion of the court, and not as a matter of right, attorneys' fees and other expenses reasonably and necessarily incurred by all necessary parties to litigation may be allowed and properly charged to the trust estate where such litigation, with respect to substantial and material issues, is necessary in order to resolve the meaning and legal effect of ambiguous language used by the settlor in the trust instrument, if an adjudication thereof is essential to a proper administration of the trust, and if, without unnecessary expense or delay, the litigation is conducted in good faith for the primary benefit of the trust as a whole.
Atwood v. Holmes (In re Atwood's Trust), 227 Minn. 495, 501, 35 N.W.2d 736, 740 (1949). This court will not disturb a district court's award of attorney fees absent a clear abuse of discretion. Freeman v. Winkelman (In re Trust of Freeman), 247 Minn. 50, 57, 75 N.W.2d 906, 911 (1956).
The younger children argue that because the older children's participation in the litigation was duplicative of the trustees' participation, the older children were not necessary parties, and, therefore, their fees and expenses were not reasonably and necessarily incurred. The younger children also argue that the district court failed to specifically find that the older children were necessary parties and that they acted in good faith.
Litigation is necessary if a trust instrument is sufficiently ambiguous that litigation is required to establish its meaning and legal effect. In re the Trust Known as Great N. Iron Ore Props., 311 N.W.2d 488, 492 (Minn. 1981). The fact that a party to trust proceedings takes the same position as the trustees does not render the party's participation unnecessary for purposes of attorney fees. Id. at 493-94 (approving, but reducing, awards of attorney fees to parties whose interests were protected by trustees, whose position was the same as that of the trustees, and whose participation in litigation was voluntary).
Because attorney fees may only be charged to a trust if the litigation was conducted in good faith, fees will not be allowed "if the issues are immaterial or trifling or if the party bringing the proceeding unnecessarily creates expense for the estate." Freeman, 247 Minn. at 57, 75 N.W.2d at 911; see First Am. Nat'l Bank of Duluth v. Andrews (In re Comstock's Will), 219 Minn. 325, 339-40, 17 N.W.2d 656, 664 (1945) (affirming denial of attorney fees when district court found many of beneficiary's objections were without merit). Whether a party has acted in good faith is a question of fact, which the district court is in the best position to determine. Cherne Indus., Inc. v. Grounds Assocs., Inc., 278 N.W.2d 81, 97 (Minn. 1979) (applying common-law rule later codified at Minn. Stat. § 549.211). A party acts in bad faith when the party "abuse[s] the legal process to harass opponents or delay resolution of a dispute." Anderson v. Medtronic, Inc., 382 N.W.2d 512, 515 (Minn. 1986) (addressing claim for attorney fees under Minn. Stat. § 549.21 (1984)). As long as the district court does not abuse its discretion in awarding attorney fees, the decision will not be reversed on appeal even if a party in a trust case has acted in bad faith to some extent. See Great N. Iron Ore Props., 311 N.W.2d at 493-94 (approving, but reducing, award of attorney fees to beneficiaries whose participation aided the resolution of a trust issue, but needlessly protracted the litigation).
The district court did not explicitly state that the older children were necessary parties who acted in good faith. However, the district court did find that
[t]he older children were parties, and certainly had the right, if not the obligation, to present their position with the assistance of counsel. There is no rule limiting them to silence if their position was the same as that of the trustees. As the court previously found, it was necessary to determine the beneficiaries in order to appropriately administer the trusts.
The district court also found that "[t]he trustees did not breach their duty in initiating this matter, and the older children were certainly entitled to respond to the action. Their legal position was a reasonable position, although it was ultimately rejected by the appellate court," and the older children's counsel represented them "in a thoroughly professional and capable manner."
In Atwood's Trust, the supreme court recognized that in a proceeding for the construction of ambiguous trust provisions,
a bona fide clash of divergent views, coupled with the production of evidence and a presentation of oral and written argument pro and con, is of great value to any genuine adjudication and is of benefit to the entire trust, although the court may not completely adopt the views of any party.
227 Minn. at 502, 35 N.W.2d at 740-41.
The district court's findings that the older children had the right, if not the obligation, to present their position in litigation that was properly initiated by the trustees and that the older children's legal position was a reasonable position, even though it was ultimately rejected by the court, indicates that the older children played a bona fide advocacy role in a genuine adjudication to determine trust beneficiaries. Their legal position was the same as the trustees, but that does not mean that they needed to rely on the trustees to protect their interests in the clash with the divergent views of the younger children. Although the district court did not explicitly state that the older children were necessary parties, its findings demonstrate that the district court determined that the older children played a necessary role in the trust litigation, and we find no abuse of discretion in this determination.
With respect to whether the older children acted in good faith, the district court cited the requirement in Atwood's Trust that for attorney fees to be awarded, the litigation must be conducted in good faith and stated that its experience with this litigation for more than five years was "sufficient to enable [it] to determine the older children's good faith (or lack thereof) without resort to additional evidence." The district court found that the older children's legal position was reasonable and that their counsel represented them "in a thoroughly professional and capable manner," which indicates that there were no delay tactics or meritless issues that would suggest bad faith. In light of the district court's express recognition of both the good-faith requirement and the court's ability to determine the older children's good faith without additional evidence and its findings regarding the reasonableness of the older children's legal position and the competence of their representation in the litigation, we conclude that the district court determined that the older children acted in good faith, although it did not explicitly state that they acted in good faith. We find no basis for determining that the district court erred in this determination, and we conclude that the district court did not abuse its discretion in awarding the older children attorney fees and expenses.
II.
The younger children argue that the district court deprived them of due process by denying them an opportunity for discovery and a hearing on the issue of good faith. But this due-process claim was not presented to the district court. In the district court, the younger children argued that allowing the older children to proceed by motion violated due process because notice of the hearing was not provided to all beneficiaries. Because the due-process claim that the younger children raise on appeal was not presented to the district court, it will not be considered on appeal. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (stating that party may not obtain review by raising same general issue litigated below but under a different theory).
III.
Finally, the younger children have filed a motion under Minn. R. Civ. App. P. 110.05 to supplement the record on appeal with information from depositions that allegedly establishes that the older children did not provide the court with any "special insight" regarding JHM's intent when creating the trust. But the district court found that no such "insight" was considered by either the district court or this court in determining the legal issue presented in the underlying litigation. Also, the depositions were taken after the district court issued the order awarding attorney fees, and the district court could not have relied on any information in the depositions when it awarded attorney fees. The supplemental information had no bearing on the district court's decision and, therefore, is irrelevant to this appeal.