Opinion
No. C2-00-1204.
Filed April 17, 2001.
Appeal from the District Court, Blue Earth County, File No. CX99866.
P. Arthur Moe, (for appellants Carolyn Lee House and Brenda Ann Stusse)
Randy J. Zellmer, Johnson, Anderson Zellmer, P.L.L.P., (for respondents Clayton L. Johnson and Julee Johnson, Trustees)
Considered and decided by Lansing, Presiding Judge, Anderson, Judge, and Halbrooks, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).
UNPUBLISHED OPINION
In this trust-accounting dispute, appellants allege that the district court erred in finding that respondents provided an adequate accounting and, therefore, have not violated an accounting order. Appellants also challenge the district court's refusal to award them attorney fees. Because we find the district court did not err in finding the accounting to be adequate or in refusing to award attorney fees, we affirm.
FACTS
On May 31, 1995, Samuel Baker, then age 69, created the Samuel Baker Trust Agreement. Baker and respondents Clayton and Julee Johnson were the trustees. Upon Baker's death, all assets of the trust were to be distributed to respondents, except for the 7,304 shares of Hickory Tech stock in the trust. This stock was to be distributed to 26 individuals and the Mankato Humane Society. Two of the beneficiaries of Hickory Tech stock distribution are appellants Carolyn Lee House and Brenda Ann Stusse. Baker was Clayton's uncle, and appellants are Clayton's sisters.
On November 15, 1995, after a minor amendment to the first trust, all of the assets of the Samuel Baker Trust Agreement, except for 1,000 shares of the Hickory Tech stock, were transferred by bill of sale to respondents. The Samuel Baker Trust Agreement was not revoked. On the same day, respondents created the Baker Revocable Trust with the assets they had been given from Baker by the bill of sale. Respondents were the settlors and trustees of the Baker Revocable Trust. The purpose of this trust was to divest Baker of his assets and make him eligible for Medicare. Baker lived in an assisted-care facility for the last 3 1/2 years of his life.
Baker died on April 3, 1998. Following his death, respondents sent a letter to the beneficiaries explaining that the trust lacked the stock shares necessary to fully satisfy the trust amounts and, therefore, the beneficiaries would receive a proportionally decreased quantity pursuant to the trust agreement. Respondents estimated that Baker's expenses exceeded his income by $2,000 per month. Respondents told the beneficiaries that portions of the stock had been sold to cover these expenses, support Baker, and pay for his healthcare expenses. Based on the amount of stock remaining, each beneficiary received 61.66% of his or her designated share.
In August 1998, appellants petitioned the district court to request an accounting of Baker's assets. The court did not take action on the petition but suggested that appellants petition for proceedings to appoint a personal representative. Appellants then petitioned and were appointed as special administrators of the Samuel Baker estate for 60 days beginning on October 23, 1998.
Appellants investigated the accounts of the Baker Revocable Trust by contacting banks, stock brokers, and other entities. Respondents provided appellants with ledgers showing accounts payable and receivable.
On April 16, 1999, appellants petitioned the court, pursuant to Minn. Stat. § 501B.16 (1998), and requested an order to include (1) an accounting of Baker's assets and debts, (2) a determination of the validity of the trust agreements, (3) court supervision of the trust, (4) disgorging respondents of any benefit gained from a breach of their fiduciary duties, (5) attorney fees, and (6) the transfer of assets to the beneficiaries.
On June 18, 1999, the court ordered respondents to prepare a complete accounting of the assets obtained by the Samuel Baker Trust, and the transfers from the Samuel Baker Trust to the Baker Revocable Trust or other transfers; and a complete accounting of the assets of the Baker Revocable Trust; such accounting to include canceled checks, and showing an appropriate fiduciary handling of the assets.
Respondents subsequently provided appellants with Baker's 1995, 1996, and 1997 tax records; bank statements for the trust assets from November 1, 1995 through March 30, 1998; cancelled checks from the trust checking account from June 1, 1995 through January 7, 1998; a summary of Baker's 1996 income and expenses; month-by-month accounting of the stock disposition and trust expenditures from November 1995 through April 1998; and compilation of all stock and expenditures in the Baker Revocable Trust.
Appellants petitioned for an order to show cause. At the first hearing, on November 12, 1999, appellants claimed the accounting was deficient because they received no documentation regarding the Hickory Tech stock transactions and that the accounting was otherwise inadequate as a matter of law. Throughout this process, appellants never served formal discovery, relying instead on letter requests. After the initial hearing, appellants requested specific financial information and respondents sent a reply. Between December 1999 and March 2000, respondents' counsel wrote appellants' counsel asking what, if any, additional information was needed. Appellants' counsel never responded. On May 3, 2000, a second hearing was held in the matter.
On May 15, 2000, the court filed an order declaring that the accounting was satisfactory except for the 231 shares of Hickory Tech stock. The court ordered respondents to file an affidavit regarding the status of the 231 shares. The court denied appellants' request for attorney fees. On June 15, 2000, respondent Clayton Johnson filed an affidavit stating that 231 shares of Hickory Tech stock remain in Baker's name.
This appeal follows.
DECISION I
As a preliminary matter, respondents argue that the district court did not have jurisdiction over the trustees based on the terms of the trust and because appellants are contingent beneficiaries. But the jurisdictional arguments are waived because respondents submitted to court jurisdiction when they failed to appeal the order for an accounting. Yeldell v. Tutt, 913 F.2d 533, 539 (8th Cir. 1990) (holding that despite including lack of personal jurisdiction in their answer, defendants waived defense by not asserting it until appeal); see also Patterson v. Wu Family Corp., 608 N.W.2d 863, 868 (Minn. 2000) (holding that Minn.R.Civ.P. 12.08 "does not preclude waiver [of personal jurisdiction] by implication" (quotation omitted)).
II
Appellants argue that the district court erred in finding that respondents satisfied the June 18, 1999 order for an accounting of the Samuel Baker Trust and the Baker Revocable Trust. Appellants contend that the accounting was insufficient as a matter of law and the district court erred in failing to find respondents in contempt of the court order.
Public policy favors permitting beneficiaries to challenge the questionable use of trust assets. In re Great Northern Iron Ore Properties, 311 N.W.2d 488, 493 (Minn. 1981). It is the trustee's duty to disclose to the beneficiaries fully, frankly, and without reservation all facts pertaining to the trust. In re Trusteeship Under Will of Rosenfeldt, 185 Minn. 425, 430, 241 N.W. 573, 575 (1932). The trustee's duty in accounting proceedings is "to make the fullest measure of disclosure." In re Trust of Enger, 225 Minn. 229, 239, 30 N.W.2d 694, 701 (1948); see also Black's Law Dictionary 19 (7th ed. 1999) (stating an accounting "frequently refers to the report of all items of property, income, and expenses prepared by a personal representative [or] trustee * * * and given to heirs, beneficiaries, and the probate court"). The burden of proving the accuracy of the accounting is on the trustees. Malcolmson v. Goodhue County Nat'l Bank, 198 Minn. 562, 567, 272 N.W. 157, 160 (1936).
The district court in its May 15, 2000 order found that the accounting provided by respondents was adequate. Whether the trustee's bookkeeping fulfills the duty of disclosure is ordinarily a question of fact for the district court. In re Bailey's Trust, 241 Minn. 143, 149, 62 N.W.2d 829, 833-34 (1954). We will give a district court's findings of fact great deference and will not set them aside unless they are clearly erroneous. Minn.R.Civ.P. 52.01. Reasonable evidence will suffice to support the district court's findings of fact. Rogers v. Moore, 603 N.W.2d 650, 656 (Minn. 1999). Because there is evidence in the record to support the district's court findings, we affirm.
Appellants are concerned with the lack of documentation regarding the sale of the Hickory Tech stock. Respondents provided no documents that corroborate the date of sale or sale price of the stock. But respondents did outline what expenses the stock was sold to cover. In addition, some of the documents provided by respondents indicate that stock shares were sold to pay for attorney and management fees. Respondents are entitled to collect management fees under their agreement with Baker. In addition, the trust allows respondents to employ agents, such as attorneys, and pay them reasonable compensation. Appellants further argue the accounting is incomplete because respondents did not provide invoices to support the trust expenses. But the order for an accounting required only canceled checks, and respondents provided most of the cancelled checks of the account. The record supports the district court's findings.
We note that appellants' counsel never undertook formal discovery or served respondents with interrogatories. Regardless, when appellants' noted specific information lapses, respondents appear to have supplied additional information.
III
Within their argument on the accounting, appellants raise an additional issue. Appellants assert that respondents breached their fiduciary duty to the beneficiaries by self-dealing. A trustee is forbidden from purchasing or dealing "in the trust property for his own benefit or on his own behalf, either directly or indirectly." Malcolmson, 198 Minn. at 567, 272 N.W. at 160 (citations omitted). But this issue was not considered by the district court and, thus, is not before this court. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (stating appellate court generally will not consider matters not argued to, and considered by, district court).
IV
In their motion to show cause, appellants moved for attorney fees under Minn.R.Gen.Pract. 119.01. Appellants contend that the district court erred in denying an award of attorney fees.
"On review, this court will not reverse a trial court's award or denial of attorney fees absent an abuse of discretion." Becker v. Alloy Hardfacing Eng'g Co., 401 N.W.2d 655, 661 (Minn. 1987). Here, the court held in favor of respondents, finding that they satisfied the accounting. Because we affirm the district court's order and because there is nothing in the record that demonstrates an abuse of discretion, we affirm the denial of attorney fees.