In the Matter of the Trust Agreement of Eugene L. Johnson u/t/a dated December 22, 2008.

• Court: Court of Appeals of Minnesota
• Decided: August 10, 2015
• Docket: A14-2110
• Status: Unpublished

Opinion

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2014).

STATE OF MINNESOTA IN COURT OF APPEALS A14-2110

In the Matter of the Trust Agreement of Eugene L. Johnson u/t/a dated December 22, 2008.

Filed August 10, 2015 Affirmed Halbrooks, Judge

Hennepin County District Court File No. 27-TR-CV-12-73

James F. Baldwin, Peter A. Koller, Moss & Barnett, P.A., Minneapolis, Minnesota (for appellants Donna Mae Johnson, Peggy J. Bleskacek, Rodney D. Johnson, and James G. Johnson)

Rodney J. Mason, Rodney J. Mason, Ltd., St. Paul, Minnesota (pro se respondent attorney)

Eric J. Skonnord, Inrelex Law Group, PLLC, St. Paul, Minnesota (pro se respondent attorney)

Bradley C. Johnson, Chanhassen, Minnesota (pro se respondent)

Considered and decided by Hooten, Presiding Judge; Halbrooks, Judge; and

Toussaint, Judge.

 Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10. UNPUBLISHED OPINION

HALBROOKS, Judge

Appellants Donna Mae Johnson, Peggy J. Bleskacek, Rodney D. Johnson, and

James G. Johnson challenge two orders granting in part a petition for attorney fees and

awarding attorney fees to respondents Rodney J. Mason and Eric J. Skonnord, counsel for

Bradley Johnson in the district court action. Appellants argue that the district court

(1) abused its discretion by awarding attorney fees, (2) erred by applying an incorrect

standard for awarding attorney fees to be paid out of a trust, and (3) erred by finding that

respondents’ petition for attorney fees is not barred by res judicata and collateral

estoppel. In their related appeal, respondents assert that the district court abused its

discretion by not awarding attorney fees to them for representing Bradley Johnson in

probate proceedings related to Eugene L. Johnson’s estate. We affirm.

FACTS

This appeal arises from a trust dispute in which the district court granted summary

judgment to appellants and awarded attorney fees in part to respondents. The underlying

facts are as follows.

Appellant Donna Mae Johnson and settlor Eugene L. Johnson were married for 58

years and had four children: Bradley Johnson, and appellants Peggy Bleskacek, Rodney

Johnson, and James Johnson. Donna Mae and Eugene owned property as joint tenants

with rights of survivorship. As part of their estate plan, Donna Mae and Eugene

established the Eugene L. Johnson Revocable Trust. Donna Mae and Eugene drafted two

quit-claim deeds that stated that an undivided one-half interest in the property would be

2 conveyed to the trust. The deeds were executed in October 2010 and January 2011, but

they were not recorded with the Hennepin County recorder, and they remained in the

possession of Donna Mae’s and Eugene’s attorney. Eugene died in May 2011 before

Donna Mae and Eugene finalized their estate plan.

Donna Mae and the four children were beneficiaries of the trust, and the four

children were appointed successor trustees. Three of the trustees agreed that Donna Mae

and Eugene had not delivered the quit-claim deeds. These three trustees—appellants

Peggy Bleskacek, Rodney Johnson, and James Johnson—executed a trustee deed that

quit claimed any purported trust interest in the property. Bradley Johnson did not execute

a trustee deed.

Bradley Johnson retained respondents Rodney Mason and Eric Skonnord to

represent him and to file a petition for instructions on the trust property interests. In the

petition, Bradley Johnson requested that the district court determine that the quit-claim

deeds severed Donna Mae’s joint tenancy to the property and order that his attorney fees

be paid out of the trust. He also recorded notices of lis pendens with the office of the

Hennepin County recorder. Appellants objected to the petition for instructions, moved

for summary judgment on the petition, and moved to discharge the notices of lis pendens.

Bradley Johnson moved to compel appellants to provide complete responses to discovery

requests.

The district court granted summary judgment to appellants, discharged the notices

of lis pendens, and denied Bradley Johnson’s motion to compel. The district court found

that Donna Mae and Eugene did not intend to deliver the quit-claim deeds and that

3 Bradley Johnson “raised no genuine issue of material fact as to whether there was

effective delivery of the deeds to the Trust and severance of joint tenancy between Settlor

and Donna Mae.” The district court also found that the trust agreement unambiguously

distributed any trust ownership interest in the property to Donna Mae.

Respondents filed a petition for attorney fees. Appellants argued that claim

preclusion and issue preclusion barred respondents’ petition. The district court found that

the petition was not precluded because the district court had to consider new evidence,

the issues were not identical to the issues decided at summary judgment, and the issues

were not specifically determined in the summary-judgment order. The district court

concluded that the trust agreement was “not sufficiently ambiguous to require litigation”

but found that the petition for instructions was not brought in bad faith and that the

litigation benefited the trust. The district court granted in part and denied in part

respondents’ petition for attorney fees, denying the attorney fees incurred while

representing Bradley Johnson in separate probate proceedings. The district court ordered

respondents to submit revised billing statements that reflected “only the work conducted

for Bradley Johnson as co-trustee” and not “their representation of Bradley Johnson in his

individual capacity.”

The district court awarded attorney fees in the amount of $49,577.68 to respondent

Rodney Mason and $13,819.74 to respondent Eric Skonnord. This appeal and related

appeal follow.

4 DECISION

I.

The first issue is whether the district court applied the correct legal standard to its

attorney-fees determination. “Whether the district court applied the correct legal standard

presents a question of law, which we review de novo.” Am. Bank of St. Paul v. City of

Minneapolis, 802 N.W.2d 781, 785 (Minn. App. 2011).

The district court found that the trust language was unambiguous but that

respondents’ petition for attorney fees was not automatically denied on that basis.

Appellants rely on In re Atwood’s Trust to argue that the correct legal standard is that

attorney fees may be awarded to a trustee instigating litigation if there is “reasonable

doubt” about the terms of the trust and if the trustee shows that the litigation is necessary

to clarify ambiguous trust-instrument language. 227 Minn. 495, 500-01, 35 N.W.2d 736,

739-40 (1949). Respondents contend that the correct standard is whether the trustee

properly brought the petition for instructions.

Atwood’s Trust addressed whether a non-trustee beneficiary could receive attorney

fees paid out of the trust. Id. at 497, 35 N.W.2d at 738. With regard to the standard for

when attorney fees should be paid out of the trust, the supreme court stated, “It is well

established that when trustees are in reasonable doubt as to their official duties or powers,

they are entitled to instructions of the court . . . . Costs and reasonable counsel fees may

be allowed to the trustees where instructions have been properly sought.” Id. at 500, 35

N.W.2d at 739-40. The supreme court further stated, “It is also recognized that costs and

attorneys’ fees may be allowed out of the trust estate to any necessary party who is acting

5 primarily for the benefit of the estate in securing a clarification of ambiguous trust-

instrument language where a reasonable doubt as to its meaning exists.” Id. at 500, 35

N.W.2d at 740.

The supreme court recognized two distinct standards for determining whether

attorney fees should be paid out of a trust—one standard for attorney fees incurred by

trustees and another standard for fees incurred by non-trustees. Compare In re

Freeman’s Trust, 247 Minn. 50, 56, 75 N.W.2d 906, 910 (1956) (stating that there is

“little dispute in the applicable law” regarding attorney fees for trustees and that the

standard is that “[a] trustee is entitled to reasonable attorneys’ fees, to be paid out of the

trust estate, incurred in good faith in defending his administration of the trust”), with In re

Campbell’s Trusts, 258 N.W.2d 856, 868 (Minn. 1977) (stating that non-trustee

beneficiaries should be awarded attorney fees out of the trust when “the trust instruments

in dispute [are] sufficiently ambiguous to require litigation to establish their meaning and

effect”). The “ambiguous” trust language standard only applies to non-trustees. See

Campbell’s Trusts, 258 N.W.2d at 868.

In its attorney-fees award, the district court properly considered whether

(1) Bradley Johnson brought the petition in good faith, (2) the petition benefited the trust,

and (3) the trust language was ambiguous. The district court also addressed whether

Bradley Johnson had “reasonable doubt” as to his official trustee duties or powers in its

discussion of whether Bradley Johnson brought the petition in good faith. Because

caselaw requires “sufficiently ambiguous” trust language only when addressing attorney

fees incurred by non-trustees, we conclude that the district court applied the correct legal

6 standard by determining that the trust’s unambiguous terms did not alone warrant a denial

of the petition for attorney fees on behalf of trustee Bradley Johnson.

II.

We next consider whether the district court acted within its discretion by finding

that Bradley Johnson (1) properly brought the petition because there was reasonable

doubt as to his trustee duties, (2) brought the petition in good faith, and (3) brought it for

the protection or benefit of the trust. See Freeman’s Trust, 247 Minn. at 56, 75 N.W.2d

at 910; In re Margolis Revocable Trust, 765 N.W.2d 919, 928 (Minn. App. 2009); In re

Trust Created by Hill, 499 N.W.2d 475, 494 (Minn. App. 1993), review denied (Minn.

July 15, 1993). “The determination of whether attorney fees will be chargeable to the

trust is in the sound discretion of the district court.” In re Trusteeship of Williams, 591

N.W.2d 743, 748 (Minn. App. 1999).

The district court found that Bradley Johnson properly brought the petition for

instructions because he had “an honest belief and difference of opinion” as to whether the

trust had an interest in the property. This finding is supported by caselaw. See In re

Great N. Iron Ore Props., 311 N.W.2d 488, 492 (Minn. 1981) (stating that “[n]othing in

the record persuades us that the contrary positions of the [parties] were not the result of

an honest difference of opinion” and that “[t]heir opposing contentions produced a

reasonable doubt regarding the legal effect of the trust instrument and presented an issue

that . . . demanded expeditious resolution”).

The district court also found that Bradley Johnson provided documentation of the

signed quit-claim deeds and consistently maintained that Donna Mae and Eugene

7 intended to deliver the deeds. The district court concluded that an order was necessary

“to resolve factual and legal disputes.” Because manifestation of intent to deliver a deed

is usually a question of fact, Graves v. Wayman, 859 N.W.2d 791, 814 (Minn. 2015), and

because the record supports Bradley Johnson’s assertion that Donna Mae and Eugene

executed quit-claim deeds conveying property interest to the trust, we conclude that the

district court did not abuse its discretion by finding that the petition for instructions was

properly brought. Based on its determination that Bradley Johnson properly brought the

petition for instructions, the district court made the additional finding that Bradley

Johnson did not instigate the litigation in bad faith.

The district court determined that the trust benefited from the litigation because

the summary-judgment order clarified disputed trust language. The executed quit-claim

deeds state that they convey an undivided one-half interest in the property to the trust. At

a minimum, the petition for instructions and the summary-judgment order on that petition

clarified that the deeds had not been delivered and established that the trust agreement

unambiguously conveyed any property interest to Donna Mae. Therefore, the record

supports the district court’s conclusion that the petition benefited the trust overall.

Because the record supports the district court’s findings, we conclude that the

district court acted within its discretion by awarding in part respondents’ attorney fees to

be paid out of the trust.

8 III.

Appellants argue that the district court erred by concluding that respondents’

petition for attorney fees is not barred by res judicata or collateral estoppel. Res judicata,

also known as claim preclusion,

operates as an absolute bar to a subsequent claim when: (1) the earlier claim involved the same claim for relief; (2) the earlier claim involved the same parties or their privies; (3) there was a final judgment on the merits; and (4) the estopped party had a full and fair opportunity to litigate the matter.

State v. Joseph, 636 N.W.2d 322, 327 (Minn. 2001) (footnote omitted). Collateral

estoppel, also known as issue preclusion, “applies to specific legal issues that have been

adjudicated.” Hauschildt v. Beckingham, 686 N.W.2d 829, 837 (Minn. 2004). The

requirements of issue preclusion are:

(1) the issue must be identical to one in a prior adjudication; (2) there was a final judgment on the merits; (3) the estopped party was a party or was in privity with a party to the prior adjudication; and (4) the estopped party was given a full and fair opportunity to be heard on the adjudicated issue.

Id.

Although the doctrines “are sometimes used interchangeably, each doctrine is

distinct in its effect.”1 Id. “Fundamental to both doctrines is that a right, question or fact

distinctly put in issue and directly determined by a court of competent jurisdiction cannot

be disputed in a subsequent suit between the same parties or their privies.” Id.

1 Historically, appellate courts “referred to res judicata as an umbrella doctrine encompassing the principles of” claim preclusion and issue preclusion, but our supreme court has recognized that res judicata “specifically refers to claim preclusion.” Joseph, 636 N.W.2d at 326 n.1.

9 (alterations omitted) (quotations omitted). We review de novo a district court’s

determination regarding both claim preclusion and issue preclusion. Rucker v. Schmidt,

768 N.W.2d 408, 411 (Minn. App. 2009) (res judicata), aff’d, 794 N.W.2d 114 (Minn.

2011); Barth v. Stenwick, 761 N.W.2d 502, 507 (Minn. App. 2009) (collateral estoppel).

In the petition for instructions, Bradley Johnson requested that the district court

award attorney fees to be paid out of the trust. In their objection to the petition,

appellants asserted that the petition was without merit and that the request for attorney

fees did not conform to the requirements of Minn. Gen. R. Pract. 119. Appellants moved

for summary judgment and did not directly mention attorney fees in their summary-

judgment motion. In its summary-judgment order, the district court did not address

attorney fees. In response to respondents’ subsequent petition for attorney fees,

appellants asserted that respondents could not request reimbursement of attorney fees a

second time because the earlier claim for attorney fees involved the same facts and

parties, final judgment was entered on the earlier claim, and respondents had a full and

fair opportunity to litigate the matter in the earlier claim. The district court ruled that it

was not barred by either claim preclusion or issue preclusion.

The first prong of the claim-preclusion test is whether the earlier claim involved

the same claim for relief. Joseph, 636 N.W.2d at 327. When addressing this prong, we

look to whether the two claims arose from the same set of factual circumstances. Hauser

v. Mealey, 263 N.W.2d 803, 807 (Minn. 1978). Here, the district court had to analyze

new facts and evidence concerning the reasonableness of respondents’ billing statements,

Bradley Johnson’s authority to hire respondents, and whether the petition was properly

10 brought in good faith and benefited the trust. Therefore, we conclude that appellants’

claim-preclusion argument fails on the first prong.

The first prong of the issue-preclusion test is whether the issues are identical.

Hauschildt, 686 N.W.2d at 837. Although the petition for instructions requested that the

district court order “that Petitioner’s attorney’s fees, costs and disbursements be paid out

of the Eugene L. Johnson Trust,” the district court listed the issues as (1) whether the

trust acquired an interest in the property through delivery of the quit-claim deeds,

(2) whether it should discharge the notices of lis pendens, and (3) whether it should grant

Bradley Johnson’s motion to compel discovery. In its order, the district court addressed

the issues of (1) whether the claim is barred and (2) whether respondents are entitled to

attorney fees. Because the issues are not identical, we conclude that appellants’ issue-

preclusion argument fails on the first prong.

IV.

In their related appeal, respondents argue that the district court abused its

discretion by determining that they should not be compensated by the trust for

representing Bradley Johnson in probate proceedings concerning Eugene Johnson’s

estate. “It is within the sound and cautiously exercised discretion of the district court

whether to award attorney fees and costs from a trust.” In re Trusts Created by Hormel,

504 N.W.2d 505, 513 (Minn. App. 1993) (quotation omitted), review denied (Minn. Oct.

19, 1993). A “trustee may prosecute or defend actions, claims, or proceedings for the

protection of trust assets and of the trustee in the performance of duties.” Minn. Stat.

§ 501B.81, subd. 28 (2014). “[A] trustee may recover attorney[] fees only where those

11 fees are incurred in rendering a benefit to the trust estate.” Kronzer v. First Nat’l Bank of

Minneapolis, 305 Minn. 415, 430, 235 N.W.2d 187, 196 (1975).

Respondents assert that Bradley Johnson petitioned the probate court for relief in

compliance with his trustee duties because Eugene had a pour-over will and the trust was

the devisee of the estate’s assets. Without citing to any evidence in the record,

respondents allege that Donna Mae was disposing of estate assets and that Bradley

Johnson filed a petition for formal probate of will to preserve trust assets. But the record

demonstrates that the probate estate primarily consisted of five promissory notes that

listed Bradley Johnson as the borrower and Eugene Johnson as the lender. These

promissory notes were also the subject of a lawsuit between Bradley Johnson and Donna

Mae. Based on this evidence, the district court’s conclusion that Bradley Johnson’s

probate petition was for his personal benefit and not to protect trust assets is supported by

the record.

Because respondents have failed to provide any evidence in the record that

demonstrates that Donna Mae was disposing of trust assets or that the probate

proceedings were for the benefit of the trust and because the limited record supports the

district court’s findings, we conclude that the district court acted within its discretion by

denying respondents’ request for attorney fees incurred through the probate proceedings.

Affirmed.