Michael J. Larkin, Linda K. Larkin v. Wells Fargo Bank, N.A., Susan Schulze Hoff, Christina Larkin

• Court: Court of Appeals of Minnesota
• Decided: October 6, 2014
• Docket: A13-1839
• Status: Unpublished

Opinion

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2012).

STATE OF MINNESOTA IN COURT OF APPEALS A13-1839

Michael J. Larkin, Appellant,

Linda K. Larkin, et al., Plaintiffs,

vs.

Wells Fargo Bank, N.A., Respondent,

Susan Schulze Hoff, et al., Respondents,

Christina Larkin, Respondent

Filed October 6, 2014 Affirmed Peterson, Judge

Hennepin County District Court File No. 27-CV-10-4725

Eric Chiadikobi Anunobi, Eric Bond Law Office, PLLC, Minneapolis, Minnesota (for appellant)

Julian Cyril Zebot, Maslon Edelman Borman & Brand, LLP, Minneapolis, Minnesota (for respondent Wells Fargo Bank, N.A.)

Melanie Ann Full, Minneapolis, Minnesota (for respondents Susan Schulze Hoff, et al.)

Mark Valdemar Steffenson, Henningson & Snoxell, Ltd., Maple Grove, Minnesota (for respondent Christian Larkin) Considered and decided by Peterson, Presiding Judge; Reilly, Judge; and Reyes,

Judge.

UNPUBLISHED OPINION

PETERSON, Judge

In this trust proceeding, appellant challenges the district court’s award of attorney

fees to respondents, arguing that (1) there is no legal basis for the award; (2) it was

improper to order the fees to be paid solely from appellant’s portion of the trust proceeds;

and (3) the district court erred by failing to scrutinize the amount requested and by

modifying the award in a second order. We affirm.

FACTS

Decedent Robert Larkin established a revocable trust in 1997, which split into a

marital trust and a residuary trust at his death in 2000; both trusts are administered for the

benefit of his wife, Florence,1 during her lifetime; after her death, the residuary trust will

be administered for the benefit of the Larkin children and the marital trust will be

administered for the benefit of the Larkin grandchildren. Appellant Michael Larkin is the

son of Robert and Florence. Respondents Susan Schulze Hoff, Debra Lynn Schulze,

Nancy Schulze Tellor, Richard V. Schulze (the Schulze beneficiaries), and Christina

Larkin are some of the Larkin grandchildren.

After Robert’s death, Florence and one of the Larkin children, Patrick, served as

trustees, together with respondent Wells Fargo, N.A.(Wells Fargo),2 as corporate trustee.

1 Because several participants have the same last name, we will use first names. 2 Wells Fargo is the successor to the original corporate trustee, Norwest Bank.

2 During the course of administering the trusts, a dispute concerning the sale of Ecolab

stock arose between Wells Fargo and the beneficiaries of the trusts. Wells Fargo

recommended selling the stock to diversify the trust portfolio; most of the beneficiaries

opposed this, but Wells Fargo prevailed. After the sale, Ecolab stock posted large gains,

which left the beneficiaries dissatisfied with Wells Fargo’s performance. Following

Patrick’s death in 2008, Florence stopped communicating with Wells Fargo. Michael

informed Wells Fargo by letter on May 19, 2009, that Florence refused to act any longer

as trustee and that he would assume that role as her attorney-in-fact pursuant to a general

power of attorney executed in 2002.

Wells Fargo filed petitions to remove Florence as trustee for non-cooperation,

naming all the beneficiaries as parties. Michael, on his own behalf and as Florence’s

attorney-in-fact, sued Wells Fargo, alleging breach of fiduciary duties, negligence, and

negligent misrepresentation. The amended complaint included as plaintiffs some of the

grandchildren and Patrick Larkin’s estate. After a partial summary judgment in favor of

Wells Fargo, the district court ordered the parties to attempt to settle the remaining issues

through mediation.

As a result of mediation, all of the parties, including Michael, initialed a hand-

written settlement agreement in February 2011. The settlement agreement included the

following terms: (1) all petitions, lawsuits, and objections were dismissed with prejudice;

(2) Florence would resign as trustee; (3) a new corporate trustee would be appointed

through a request-for-proposal (RFP) process; (4) Wells Fargo would continue to act as

3 trustee until appointment of a new trustee; and (5) any disagreements would be resolved

through binding arbitration. Wells Fargo agreed to draft the formal settlement document.

The district court scheduled a status conference after several months elapsed with

no executed agreement. Shortly before the May 25, 2011 hearing, Michael circulated an

alternate settlement agreement, which included different terms. Because of the

continuing dispute, the district court ordered the parties to engage in binding arbitration.

On July 29, 2011, the arbitrator issued a binding arbitration award, which affirmed the

Wells Fargo version of the settlement agreement and ordered Michael to pay two-thirds

of Wells Fargo’s attorney fees, either personally or as a deduction from his share of the

trust. In November 2011, the district court denied Michael’s motion to vacate the

arbitration award, concluding that there was no statutory basis to vacate. Michael refused

to sign the settlement agreement and moved to be dismissed as a party to the lawsuit. In

January 2012, the district court denied this motion, removed Michael as Florence’s

attorney-in-fact for trust matters, and appointed a new attorney-in-fact for Florence.

Michael appealed to this court, which, on September 17, 2012, affirmed the district

court’s removal of Michael as Florence’s attorney-in-fact for the purpose of acting as

trustee in her place, confirmed the settlement agreement, and affirmed the denial of

Michael’s motion to be dismissed from the lawsuit, but reversed the appointment of a

professional attorney-in-fact for Florence in place of Michael. Michael’s petition for

review was untimely.

In January 2013, Wells Fargo and the other parties moved to enforce the

settlement agreement and for attorney fees and costs. The district court held a hearing on

4 the motion on February 14, 2013. The district court issued an order on May 8, 2013,

confirming the settlement agreement, directing the parties to proceed with the RFP

process to appoint a new corporate trustee, and granting attorney fees to Wells Fargo, the

Schulze beneficiaries, and Christina Larkin, to be paid from Michael’s portion of the

trust. The court ordered the parties to file “detailed billing records to support the . . . fee

awards.” Billing records were submitted by Wells Fargo on May 22, 2013, by the

Schulze beneficiaries on May 29, 2013, and by Christina Larkin on June 4, 2013. The fee

awards include legal services provided between the July 29, 2011 binding arbitration

decision and the February 2013 motion hearing.

On July 29, 2013, the district court issued an order confirming the attorney-fee

awards and modifying the amounts of the awards to reflect additional fees incurred for

the motion hearing. Michael appeals from the May 8 and July 29, 2013 orders.

DECISION

I.

Michael raises several issues that are not properly before this court on appeal.

This appeal is from two district court orders that direct the parties to proceed with

enforcement of a 2011 settlement agreement by engaging in an RFP process to select a

new corporate trustee, remove Michael and Florence from the RFP process, and grant

attorney fees to respondents. Therefore, the issue of whether Michael may act as

attorney-in-fact for Florence in trust matters is outside this court’s scope of review

because it was not before the district court at the February 2013 hearing and was

definitively determined by this court in an earlier opinion. Larkin v. Wells Fargo Bank,

5 N.A., A12-0236 (Minn. App. Sep. 17, 2012). Similarly, Michael’s objections concerning

violations of the standards required for attorney-fee awards under Minn. Stat. § 549.211

(2012) are not before this court, because the district court did not rely on this statute in

awarding attorney fees. Finally, the question of whether an order for attorney fees and

costs violates the settlor’s intent because of the trust’s spendthrift clause was not raised

below. See Michaels v. First USA Title, LLC, 844 N.W.2d 528, 532 (Minn. App. 2014)

(limiting review to legal questions that were raised in and decided by the district court).

II.

Michael raises four objections to the award of attorney fees: (1) in the absence of

a statutory or contractual right to attorney fees, trust law permits only an award of costs,

not attorney fees, and only if a party’s actions are vexatious, litigious, immaterial, or

trifling; (2) the district court improperly ordered the fees to be charged solely against

Michael’s portion of the trust; (3) the district court failed to scrutinize billing records

before issuing its May 8 order; and (4) the district court improperly modified the award in

its July 29 order.

The district court based its fee awards on trust-litigation case law: a district court,

in its “sound and cautiously exercised discretion,” may award a trustee attorney fees and

costs that have been reasonably and necessarily incurred for the benefit of a trust as a

whole. In re Atwood’s Trust, 227 Minn. 495, 501, 35 N.W.2d 736, 740 (1949). Also, the

court may award costs and attorney fees to any “necessary party who is acting primarily

for the benefit of the estate.” Id. But “[i]f the issues are immaterial or trifling, or if the

conduct of a party is vexatious and litigious, or if he raises improper points, or in any way

6 creates unnecessary delay or expense, the court will not only refuse him costs and

counsel fees but will order him to pay costs.” Id.

We review the district court’s attorney-fee award for an abuse of discretion; the

district court’s factual findings are reviewed for clear error and in the light most favorable

to the findings. In re Stisser Grantor Trust, 818 N.W.2d 495, 507 (Minn. 2012). The

reasonable value of an attorney-fee award is a question of fact. Id.

Although Atwood refers only to an award of costs for vexatious or litigious

conduct, this court has upheld an attorney-fee award granted after trust beneficiaries

engaged in “burdensome litigation.” In re Trust of Hill, 499 N.W.2d 475, 494 (Minn.

App. 1993), review denied (Jul. 15, 1993). In Trust of Hill, the trust beneficiary sought to

discharge the corporate trustee and appoint her children as trustees, despite lacking the

authority to do so under the trust terms. Id. at 481. This court concluded that it was

proper to charge the trustee’s attorney fees against the portion of the trust benefiting the

party who engaged in “burdensome, unnecessary, wasteful, and duplicative litigation”

because the trustee’s attorney fees and costs resulting from the litigation were “incurred

in the ordinary course of administration of [the] trust.” Id. at 493-94. This reasoning

provides a basis for the district court’s award of Wells Fargo’s attorney fees.

A trust beneficiary who engages in litigation that confers a benefit upon the trust

also may be entitled to reimbursement for attorney fees. In re Great N. Iron Ore Props.,

311 N.W.2d 488, 493 (Minn. 1981). A benefit is conferred on a trust when litigation aids

“the development of clear and precise answers to questions” raised by the trustee that

enable the trustee “to protect the interests of all beneficiaries.” Id. The Schulze

7 beneficiaries and Christina Larkin benefited the trust by joining with Wells Fargo to

enforce the settlement agreement and end litigation.

The district court’s decisions are also supported by other authority. “[A] trustee

who properly brings or defends a proceeding for the benefit of the trust estate may, in the

process, properly incur any reasonable expense, including that of hiring an attorney. . . .

[T]he trustee remains entitled to charge the estate with reasonable expenses, assuming the

trustee was not personally at fault in causing the litigation.” 3 Austin Scott et al., Scott

and Ascher on Trusts § 18.1.2.4, at 1283-84 (5th ed. 2007). Similarly, a beneficiary

whose efforts benefit the trust itself may be entitled to reimbursement of attorney fees in

the court’s discretion. Id. at 1292. Finally, “[i]f one beneficiary unsuccessfully tries,

through litigation, to advance his or her own beneficial interest, the trustee may properly

charge the resulting litigation expenses against the beneficiary’s share.” Id. at 1291.

The litigation here was an attempt to implement a settlement agreement that

provides for appointment of a new trustee, something desired by the trust beneficiaries,

and that will end costly litigation, thus benefiting the trust estate. The awards of fees to

Wells Fargo, as trustee, and to the Schulze beneficiaries and Larkin are supported by the

evidence, and the district court did not abuse its discretion by awarding attorney fees.

Michael argues that he was not engaging in “vexatious, litigious, immaterial or

trifling” litigation, and he points to this court’s reversal of the district court’s appointment

of a professional attorney-in-fact for Florence. But Michael’s continuing attempt to

undermine the settlement was not beneficial, particularly after the settlement agreement

was confirmed in binding arbitration, by the district court, and by this court on appeal,

8 and his alternate proposed settlement agreement was nonsensical and included ad

hominem attacks on other trust beneficiaries. The evidence supports the district court’s

finding that Michael engaged in vexatious and burdensome litigation.

Although Michael argues that the other beneficiaries supported the removal of

Wells Fargo as trustee and, therefore, the fees should not be assessed only against his

trust portion, the other beneficiaries agreed to abide by the settlement agreement and to

participate in the RFP process; Michael alone chose to challenge the settlement

agreement and continue the litigation. Under the reasoning in Trust of Hill, 499 N.W.2d

at 494, this is sufficient to assess attorney fees against his portion. The attorney fees

awarded were incurred only after a binding arbitration award was issued; none of the

other trust beneficiaries contested this binding award. The district court’s findings are

not clearly erroneous and it was not an abuse of discretion for the district court to award

attorney fees to Wells Fargo and the other beneficiaries, or to charge the fees against

Michael’s portion.

Michael also argues that the district court failed to scrutinize billing records before

issuing its May 8 order and improperly increased the attorney-fee awards in its July 29

order. While the decision to award fees is subject to an abuse-of-discretion review, the

reasonable value of the fees is a factual finding, which this court reviews for clear error.

In re Stisser Grantor Trust, 818 N.W.2d at 507. A court should consider the following

factors when awarding attorney fees: “(1) the character, ability and experience of the

attorneys; (2) the responsibilities they assumed; (3) the difficulty of the issues raised;

(4) the time, labor and skill required; (5) customary fees for similar services; (6) the

9 amount involved; and (7) the results obtained.” In re Great N. Ore Props., 311 N.W.2d

at 493.

In connection with its effort to enforce the binding arbitration award, Wells Fargo

submitted an affidavit with its motion for attorney fees that included a monthly

breakdown of fees before the February 2013 hearing. The attorneys for Christina Larkin

and the Schulze beneficiaries submitted similar affidavits. In its May 8 order, the district

court provisionally granted respondents’ attorney-fee requests but directed them to file

within 30 days “detailed records to substantiate the fee numbers provided to the Court,”

In response to the district court’s May 8 order, the parties submitted additional

billing records that included detailed descriptions of services rendered through the

February hearing. Although Michael argues that the district court should not have based

its May 8 order on the original submissions, any errors or lack of information were

corrected by the detailed billing records submitted by the parties upon which the district

court based its final July 29 order. And it is proper that respondents be awarded their

attorney fees for preparing for the hearing to enforce the settlement agreement; this

hearing would not have been necessary but for Michael’s refusal to abide by the

agreement. The district court’s findings are not clearly erroneous; there is substantial

detail in the record that supports them.

Affirmed.