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Barber v. Barber & Bank of America (5/3/96), 915 P 2d 1204
<![CDATA[
NOTICE: This opinion is subject to formal correction
before publication in the Pacific Reporter. Readers
are requested to bring errors to the attention of the
Clerk of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501; (907) 264-0607.
THE SUPREME COURT OF THE STATE OF ALASKA
WILLIAM LEE BARBER, )
a Contingent Beneficiary, ) Supreme Court No. S-6090/6550
)
Appellant and ) Superior Court No.
Cross-Appellee, ) 3AN-87-10650 CI
)
v. ) O P I N I O N
)
MARJORIE BARBER, Personal ) [No. 4345 - May 3, 1996]
Representative of the Estate )
of William F. Barber, Sr., )
)
Appellee and )
Cross-Appellant, )
)
and )
)
BANK OF AMERICA, Trustee of )
the Fanni Barber Soine Trust, )
)
Appellee. )
______________________________)
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage,
Karen L. Hunt, Judge.
Appearances: Richard G. Haggart, Maloney &
Haggart, Anchorage, and Mark R. Davis,
Anchorage, for Appellant and Cross-Appellee.
Gary Foster, Fairbanks, for Appellee and
Cross-Appellant Marjorie Barber. Robert L.
Manley, Hughes Thorsness Gantz Powell &
Brundin, Anchorage, for Appellee Bank of
America Alaska.
Before: Rabinowitz, Matthews, Compton, and
Eastaugh, Justices. [Moore, Chief Justice,
not participating.]
RABINOWITZ, Justice.
I. INTRODUCTION
In a prior decision, Barber v. Barber, 837 P.2d 714
(Alaska 1992) (Barber I), we remanded this case to the superior
court to afford William Lee Barber, a contingent beneficiary of
the Fanni Barber Soine Trust, notice of a settlement proceeding
and an opportunity to present his objections to the settlement
agreement which resulted in termination of the trust. This
appeal asks this court to determine whether William Lee was
entitled to intervene in the proceedings on remand, whether
William Lee had the right to peremptorily challenge the judge,
whether the superior court erred in failing to issue a judgment
on William Lee's appellate costs and attorney's fees, whether the
superior court erred in overruling William Lee's objections to
the settlement and in concluding that the trustee did not abuse
its discretion in terminating the trust,1 and whether certain
awards of attorney's fees and costs were proper.
II. FACTS AND PROCEEDINGS
A. Facts and Proceedings Relating to this Court's
Decision in Barber I
Fanni Barber Soine created a family trust on January 2,
1956, by executing a "Declaration of Trust." She executed a
second document entitled "Clarification of Intent of Creator of
Intervivos Trust"in June 1967. The beneficiaries were her two
sons, Edward G. Barber Sr. and William F. Barber Sr., and their
wives and children.
The trust instrument named Edward Sr. as the trustee
and indicated that upon his death his wife was to succeed him as
trustee. Upon his wife's death, trustee powers would pass in
turn to their three sons, Edward Jr., Hugh, and Richard.
Pursuant to an agreement entered into by Edward Sr. and William
Sr. in 1968, the trust income would go to Fanni Soine during her
lifetime. The trust instrument provided that upon Soine's death
(which occurred in 1975) the trust income, minus expenses and
trustee's fees, was to be divided between Edward Sr. and William
Sr. In the event that either beneficiary died, his share of the
income was to be paid to his wife and, after her death, to his
surviving children.
Edward Sr. served as trustee from the trust's creation
in 1956 until his resignation in December 1979. He was succeeded
as trustee by his wife Janet. Janet resigned as trustee on July
8, 1982, two days after Edward Sr.'s death, and was succeeded by
their son, Edward Jr. Janet died in 1985. Edward Jr. continued
as trustee until he was removed by order of the superior court on
May 24, 1990.
In 1987, William Sr. brought a suit against the Trust
and his nephew Edward Jr., individually and as trustee, alleging
various breaches by Edward Jr. of his fiduciary duties. After
trial the superior court found, inter alia, that Edward Jr.
breached his duty of care and misused trust funds and that "a non-
family institutional Trustee must be appointed." The superior
court then appointed Security Pacific Bank as the successor
trustee, effective August 7, 1990.2
In the fall of 1990, the Bank sought the superior
court's approval to sell the major real property asset in the
trust corpus. Counsel for the Bank explained "in view of the
unsettled nature of the estate, we're seeking court approval for
the trustee's exercise of discretion . . . [T]he question before
the court is [whether] the trustee's exercise of discretion [is]
reasonable."
At an October 2, 1990 hearing, Hugh Barber and Richard
Barber,3 as designated successor trustees under the trust
instrument and beneficiaries under the trust, sought to intervene
in the original suit, which had resulted in the removal of Edward
Jr. as trustee, to object to the appointment of the Bank as
trustee. They also objected to the sale of the property.
William Sr., as party to the original action naming the Bank as
trustee, objected to the intervention of Hugh and Richard as
untimely. The superior court denied the motions to intervene.
Interested parties began to negotiate a settlement
concerning the sale of trust real property. Income beneficiaries
William Sr., Edward Jr., Richard, and Hugh were all present and
represented by counsel at the negotiations, as was the Bank.
Attorney Peter Ginder was present at the negotiations and
purported to represent the interests of the non-income
beneficiaries. On October 8, 1990, the superior court held a
hearing concerning the positions of each of the parties on the
settlement with Judge J. Justin Ripley acting as the settlement
judge. Appellant William Lee Barber,4 a non-income beneficiary
of the trust, was not present but was within the class whose
interests attorney Ginder purported to represent.5 The parties
and Ginder all agreed to the settlement. At the October 8
hearing, attorney Ginder indicated to the superior court that he
found that the "proposed settlement as it comes together is fair
and equitable to all concerned, including the non-income
beneficiaries." At this hearing, the superior court approved an
order allowing sale of the property which was the principal asset
of the trust. A final hearing was scheduled for October 29, 1990
for the purpose of placing the final settlement stipulation on
the record.
Before the final hearing, William Lee contacted
attorney Ginder and indicated his objection to the settlement.
At the October 29 hearing attorney Ginder, acting on behalf of
William Lee, withdrew his approval of the settlement agreement.
The other parties objected to attorney Ginder's withdrawal of
approval because actions had already been taken in reliance upon
the settlement agreement, including the sale of the principal
asset in the trust and distribution of trust funds. Despite
Ginder's objections, Judge Karen Hunt approved the settlement,
stating as follows:
It is in the best interest of all vested
and/or contingent beneficiaries born or
unborn to settle this case and to distribute
the corpus of this trust. It is contrary to
the basic tenants [sic] of fairness and
justice to permit an alleged remainderman or
an alleged contingency beneficiary to involve
all of the vested and the known contingent
beneficiaries in his paternity dispute with
one of the vested beneficiaries.
. . . [T]he Court declines to grant the
objection as stated by Mr. Ginder and to deny
approval of the settlement on those grounds.
William Lee subsequently appealed from the superior
court's approval of the agreement. This court held that the
superior court erred in approving the settlement agreement and in
finding that William Lee's interests had been represented by
attorney Peter Ginder. We stated that "[s]ince William Lee was
not given personal notice of the settlement proceeding of October
8 which led to the superior court's approval of the October 29,
1990 settlement stipulation we hold that the superior court erred
in overruling William Lee's objection to the settlement." Barber
I, 837 P.2d at 717. We reversed the superior court's approval of
the settlement agreement and remanded the case for further
proceedings consistent with this court's opinion.6 Id. at 718.
B. Facts and Proceedings Following Remand
This court issued its decision in Barber I on August
14, 1992. Id. at 714. On October 9, this case was assigned to
Judge Brian Shortell upon remand. During a status conference,
Judge Shortell informed the parties that he would recommend that
the case be reassigned to Judge Hunt. At that time, William Lee
requested that the matter be assigned to a different judge. The
case was reassigned to Judge Hunt on November 23. William Lee
filed a Notice of Change of Judge on November 24 which was denied
as not timely. William Lee filed a motion for reconsideration
which was also denied by the superior court.
William Lee also filed a motion to intervene in the
superior court proceedings. The superior court denied the
motion.
William Lee argued at a December 15, 1992 status
conference that the trust continued to exist because the Bank had
made termination of the trust dependent upon the superior court's
approval, which had been reversed by this court. The Bank argued
that the only question on remand was whether it properly
exercised its discretion in terminating the trust in 1990. The
Bank subsequently filed a "restated petition"under AS 13.65.035
seeking court approval of the termination of the trust.
On April 12, 1993, the superior court issued a Notice
of Issues in which it noted that this court's opinion in Barber I
was concerned with William Lee's due process rights to notice and
an opportunity to be heard. To this effect, the superior court
stated that
the issue the parties should be prepared to
address at the . . . hearing is William Lee
Barber's objection to the trust settlement
stipulation, or whether the trustee of the
Fanni Barber Soine Trust reasonably exercised
discretion when it sold trust property in
October 1990, dissolved the trust, and
distributed the proceeds to the vested
beneficiaries.
In its Order and Decision, the superior court treated
the Bank's restated petition as an initial petition seeking an
order declaring that the Bank possessed the discretionary
authority to terminate the trust. The court concluded that the
trust documents gave the Bank the power to terminate the trust
any time that it was "prudent"to do so.
Thereafter, the superior court awarded $12,904.05 in
attorney's fees and $1,541.45 in costs in favor of the Bank and
against William Lee. The superior court denied William Sr.'s
request for attorney's fees.
William Lee appeals, and William Sr. cross-appeals.7
III. DISCUSSION
A. The Termination of the Trust in 1990 Was Not Set
Aside by this Court's Decision in Barber I
William Lee argues that the termination of the trust
was set aside by this court's decision in Barber I because the
trust was terminated by the superior court's order, which we
vacated, rather than by an exercise of the Bank's independent
discretion. In support, William Lee states that the Bank admitted
that it would not terminate the trust if the superior court had
concluded that termination was not a reasonable exercise of
discretion. He concludes that the trust continued in
constructive existence until he was afforded the opportunity to
be heard on remand.
William Lee's argument misconstrues the scope of the
remand. On remand, William Lee was afforded the opportunity to
be heard in order to cure the procedural deficiencies of the
proceedings leading up to Barber I. Our decision in Barber I
did not set aside the termination of the trust. The superior
court was simply instructed to hear and take into account William
Lee's objections in its review of the 1990 trust termination
proposal for an abuse of discretion by the trustee.
B. The Denial of William Lee's Notice of Change of
Judge8
The superior court denied William Lee's notice of
change of judge and motion for reconsideration for two reasons.
First, the superior court stated that William Lee was not a party
but rather an interested person, and that there is no authority
permitting an interested person to file a notice of change of
judge. Second, the superior court stated that William Lee
participated in the October 29, 1990 settlement hearing presided
over by Judge Hunt, and that he waived any right to peremptorily
challenge Judge Hunt by failing to exercise it at that time.
William Lee did not waive his right to peremptorily
challenge Judge Hunt. Civil Rule 42(c)(4) states that a party
waives the right to challenge a judge without showing cause by
"knowingly participating before that judge." Alaska R. Civ. P.
42(c)(4); see Tunley v. Municipality of Anchorage Sch. Dist., 631
P.2d 67, 72-73 (Alaska 1981). In Barber I, this court stated
that attorney Ginder did not represent William Lee at the October
8 hearing. Barber I, 837 P.2d at 717 n.7. After the October 8
hearing and before the October 29 hearing, William Lee contacted
Attorney Ginder, and indicated his dissatisfaction with the
proposed settlement. At the October 29 hearing, Ginder withdrew
consent to the settlement.
We decline to hold that a person who has not been
served notice of a proceeding waives his right to peremptorily
challenge a judge by discovering the existence of that proceeding
and expressing his dissatisfaction to one of the lawyers.
William Lee did not knowingly participate before Judge Hunt and
thus did not waive any right he had to peremptorily challenge the
judge.
The second ground provided by the superior court for
the denial of the peremptory challenge of Judge Hunt was that
William Lee was not a party, but only an interested person.
However, as the Bank itself argues, William Lee is a full
participant in the proceedings, whose interest in the trust is
the focus of the current litigation. As such, William Lee should
not have been denied the right to a peremptory challenge of the
judge because of his nominal non-party status.
William Lee had the right to one change of judge under
Civil Rule 42(c), and did not waive that right under Civil Rule
42(c)(3) or (4). Therefore, it was error to deny his notice of
change of judge.
C. The Denial of William Lee's Motion to Intervene9
The superior court denied William Lee's motion to
intervene for two reasons. First, the superior court stated that
intervention was unnecessary because William Lee's interests were
sufficiently protected by allowing him the opportunity to object
to the settlement agreement. Second, the superior court stated
that William Lee did not meet the criteria for intervention
contained in Civil Rule 24.
On remand, William Lee undertook written discovery,
took witness and record depositions, filed motions, and
participated in the evidentiary hearing on trust termination.
Though he was not granted official party status, he participated
fully in the proceedings. Thus, we hold that if any error was
committed by the superior court in denying intervention, that
error was harmless. See Alaska Christian Bible Institute v.
State, 772 P.2d 1079, 1081 (Alaska 1989); Hertz v. Cleary, 835
P.2d 438, 442 n.4 (Alaska 1992). However, when this case is
remanded to allow William Lee to exercise his right to a change
of judge, William Lee should be permitted to intervene.
D. The Superior Court's Failure to Issue William Lee
a Judgment for Appellate Attorney's Fees and Costs
This court awarded William Lee appellate attorney's
fees pursuant to Appellate Rule 508(e) and (f)(1). William Lee
apparently requested the superior court to issue a judgment for
fees and costs. However, no action was ever taken on this
motion. William Lee argues on appeal that the superior court's
failure to take action on the award of appellate fees and costs
was error.
The superior court did not err in failing to issue
judgment on the award of appellate fees and costs. This court
enters judgment on its own awards of fees and costs. Alaska R.
App. P. 508(e). Action of a judge of the superior court is
unnecessary to obtain a writ of execution from the clerk of the
trial court on this court's award of appellate costs and fees.
Alaska R. App. P. 508(h).
E. The Award to the Bank of Attorney's Fees and Costs10
The superior court awarded the Bank attorney's fees in
the amount of $12,904.05 and costs in the amount of $1,541.45
following the proceedings on remand. To this effect, the
superior court stated as follows:
[William Lee] is an "interested person"
under AS 13.06.050(20) and the Supreme Court
directed the trial court to consider his
objections to settlement proceedings which
included termination of the trust. His
objections included that [the Bank] abused
its discretion and breached its duties to
him, a contingent beneficiary. He is, by
statute, a party whose interests have been
considered as the Supreme Court ordered. He
is, however, not the prevailing party. Costs
and fees are awarded against him, therefore.
Though it is true that William Lee was not a prevailing
party, it was error to hold that the trustee Bank was. This is
not a case where the trustee was sued for breach of fiduciary
duty. Instead, the trustee was a neutral party, seeking to
establish in advance that a particular course of action was
proper and in the best interests of all the beneficiaries to the
trust.11 As such, beneficiary input regarding the proposed course
of action cannot be contrary to the trustee's interests.
Consequently, an award of fees against the beneficiary and to the
trustee is unjustified. See Bogert, Trusts & Trustees ' 559 at
170 n.42 (2d ed. 1980) (citing Old Nat'l Bank & Trust Co. v.
Hughes, 134 P.2d 63 (Wash. 1943)). This is not changed by the
fact that, because of procedural error in this case, the
distribution of trust assets was premature, and the beneficiary
input came after the distribution.
F. The Superior Court's Denial of Attorney's Fees to
William Sr.
William Sr. cross-appeals from the superior court's
denial of his motion for attorney's fees against William Lee.
Since this case is being remanded for further proceedings, that
denial is vacated.
IV. CONCLUSION
We hold there was no error by the superior court in
failing to issue a judgment on William Lee's appellate costs and
attorney's fees. However, the superior court erred in denying
William Lee the right to one change of judge. We therefore
REVERSE the denial of William Lee's notice of change of judge,
VACATE the judgment of the superior court, and REMAND for further
proceedings consistent with this opinion.
_______________________________
1 Because this case is remanded, we do not ultimately
reach this issue.
2 Bank of America (Bank) later succeeded Security Pacific
Bank as trustee.
3 Sons of Edward Sr. and Janet Barber, and brothers to
Edward Jr.
4 Son of William Sr.
5 William Lee's interest in the distribution of trust
assets upon dissolution was contingent upon his surviving his
father, William F. Barber Sr. His interest in trust income was
contingent upon his surviving his father and his father's wife,
Marjorie.
6 An order was entered awarding appellate attorney's fees
in the amount of $1,000.00 and costs to William Lee.
7 There are two appellees to William Lee's appeal, the
Bank and Marjorie Barber, the personal representative of the
Estate of William Sr. We refer to the appellees as the Bank and
William Sr. William Sr. joins the Bank's briefs with regard to
all issues but William Lee's contention that the superior court
erred in failing to issue a judgment on his appellate costs and
attorney's fees. Therefore, references to the Bank's positions
in this appeal include William Sr.
8 Whether William Lee has the right to peremptorily
challenge a judge under Civil Rule 42 raises a question of law.
This court reviews questions of law de novo. Guin v. Ha, 591
P.2d 1281, 1284 n.6 (Alaska 1979).
9 This court reviews a superior court's denial of a
motion to intervene for an abuse of discretion. State v.
Weidner, 684 P.2d 103, 113 (Alaska 1984).
10 This court reviews the superior court's determination
as to which party is the prevailing party for an abuse of
discretion. Apex Control Sys. v. Alaska Mechanical, Inc., 776
P.2d 310, 314 (Alaska 1989). However, the issue of whether a
trustee in this kind of proceeding can be considered a prevailing
party for the purposes of Civil Rule 82 is a question of law.
This court reviews questions of law on a de novo standard. Guin
v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979). Under this
standard our duty is "to adopt the rule of law that is most
persuasive in light of precedent, reason and policy." Id.
11 The nature of the proceeding initiated by the Bank is
described in Restatement (Second) Trusts '' 220 and 259 (1959).
Section 220 states: "The beneficiary may be barred by a decree of
a proper court from holding the trustee liable for a breach of
trust." Section 259 states: "The trustee is entitled to apply to
the court for instructions as to the administration of the trust
if there is reasonable doubt as to his duties or powers as
trustee."
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