Gowdy v. Cook

455 P.3d 1201

Gerald E. GOWDY, beneficiary of the Marian Louise Jackson Living Trust, Appellant (Plaintiff),

v.Dennis C. COOK, Craig C. Cook and Cook and Associates, P.C. Appellees (Defendants).

S-19-0005

Supreme Court of Wyoming.

January 8, 2020

Representing Appellant: Erik J. Oblasser and Frank R. Nelson of Corthell and King Law Office, P.C., Laramie, Wyoming. Argument by Mr. Oblasser.

Representing Appellees: Julie N. Tiedeken of McKellar, Tiedeken & Scoggin, LLC, Cheyenne, Wyoming.

Before DAVIS, C.J., and FOX, KAUTZ, BOOMGAARDEN, and GRAY, JJ.

KAUTZ, Justice.

[¶1] Appellant Gerald E. Gowdy was a beneficiary of the Marian Louise Jackson Living Trust. Mr. Gowdy sued Appellees Dennis C. Cook, Craig C. Cook and Cook and Associates, P.C. (collectively referred to herein as "the Cooks"), claiming they violated various duties when drafting and administering the trust and preparing certain estate planning documents for him. The district court granted summary judgment in favor of the Cooks. We affirm.

ISSUES

[¶2] The dispositive issues in this case are:

1. Did the district court err when it found Mr. Gowdy failed to establish a material issue of fact showing the Cooks’ actions damaged him?

2. Did the district court abuse its discretion by denying Mr. Gowdy leave to file a second amended complaint?

3. Did the district court err by concluding, as a matter of law, Mr. Gowdy violated the no-contest provision of the trust by bringing an action to void, nullify or set aside a provision of the trust?

FACTS

[¶3] The underlying facts of this case are essentially undisputed. Dennis C. Cook and Craig C. Cook¹ are law partners in Cook and Associates, P.C. Marian Louise Jackson retained Dennis in 1996 to prepare the initial version of her revocable living trust. Ms. Jackson restated her trust in January 2015, and she executed trust amendments in April and June of 2015. Dennis drafted all of these documents. In general terms, Mr. Gowdy was to be the primary beneficiary of the trust after Ms. Jackson’s death. Upon his death, Ms. Jackson’s children would receive part of the trust assets and Mr. Gowdy’s heirs would receive other trust assets, provided he exercised the power of appointment granted to him under the trust.

[¶4] Ms. Jackson acted as trustee during her lifetime and appointed Dennis as her successor trustee and Craig as her trust protector. The trust further stated that, after Ms. Jackson’s death, "Cook and Associates, P.C. or its designated successor in interest may remove a [t]rust [p]rotector of any trust at any time, with or without cause" and appoint a successor trust protector.

[¶5] The trust protector or a majority of the income beneficiaries could remove a serving trustee and appoint a successor trustee. A successor trustee could be an individual or a corporate fiduciary. Section 3.06 of the trust set out qualifications for a corporate trustee:

Any corporate fiduciary serving under this agreement as a [t]rustee must be a bank, trust company, or public charity that is qualified to act as a fiduciary under applicable federal and state law and that is not related or subordinate to any beneficiary within the meaning of Section 672(c) of the Internal Revenue Code.

Such corporate fiduciary must:

Have a combined capital and surplus of at least One Hundred Million Dollars; or

Maintain in force a policy of insurance with policy limits of not less than One Hundred Million Dollars covering the errors and omissions of my [t]rustee with a solvent insurance carrier licensed to do business in the state in which my [t]rustee has its corporate headquarters; or

Have at least One Hundred Million Dollars in assets under management.

[¶6] Under § 11.08 of the trust, an individual trustee was entitled to "fair and reasonable compensation for the services provided as a fiduciary" and could "charge additional fees for services provided that are beyond the ordinary scope of duties, such as fees for legal services[.]" Similarly, under § 3.10, the trust protector was entitled to reasonable compensation and could charge "typical fees for professional services."

[¶7] Sections 11.06 and 11.07 exonerated the trustee for any "error of judgment, mistake of law, or action or inaction of any kind in connection with the administration" of the trust unless there was clear and convincing evidence the trustee had acted in bad faith. The trust protector was also exonerated for any action taken in good faith. Further, a trustee was entitled to "expend any portion of the trust assets to defend any claim brought against the [t]rustee, even if the [t]rustee’s defense costs would exhaust the trust’s value, unless the [t]rustee is shown to have acted in bad faith by clear and convincing evidence." The trust protector was also entitled to reimbursement from the trust for costs incurred in defending any claim unless the trust protector had an actual intent to harm the beneficiaries of the trust or was self-dealing.

[¶8] Ms. Jackson’s trust also included the following no-contest provision which became important in this case:

The right of a beneficiary to take any interest given to him or her under this trust or any trust created under this trust instrument will be determined as if the beneficiary predeceased [Ms. Jackson] without leaving any surviving descendants if that beneficiary, alone or in conjunction with any other person, engages in any of these actions:

...

seeks to obtain adjudication in any court proceeding that [the trust] or any of its provisions is void, or otherwise seeks to void, nullify, or set aside [the trust] or any of its provisions[.]

...

My [t]rustee may defend any violation of this [s]ection at the expense of the trust estate.

[¶9] Dennis prepared durable powers of attorney for health care and living wills for Ms. Jackson and Mr. Gowdy, in which they named each other as their agents. On other occasions, he prepared deeds for Ms. Jackson and Mr. Gowdy for their jointly-owned property.

[¶10] Ms. Jackson passed away on July 2, 2015, and the trust became irrevocable. At that point, Dennis became acting trustee and Craig began serving as trust protector. Dennis prepared a will, a general power of attorney, a power of attorney for health care, and living will for Mr. Gowdy. Dennis did not charge Mr. Gowdy for those services.

[¶11] In August or September of 2016, Mr. Gowdy complained the trust was being mismanaged and asked Dennis to resign as trustee. In the alternative, he asked Craig, as trust protector, to replace Dennis with another trustee. Mr. Gowdy also claimed that the Cooks had conflicts of interest regarding their management of the trust and Dennis’s representation of him. Craig resigned as trust protector and appointed another estate-planning colleague, William Winter, in his place. Dennis refused to resign as trustee.

[¶12] Mr. Gowdy filed a complaint on July 31, 2017, and an amended complaint on January 8, 2018. He stated causes of action against the Cooks for malpractice, breach of fiduciary duties, breach of the duty of good faith and fair dealing, and negligence. His causes of action overlapped and relied on many of the same facts. In general, Mr. Gowdy complained about the no-contest and trustee exculpatory provisions in Ms. Jackson’s trust. He also claimed the compensation provisions allowed Dennis and Craig to double-bill the trust for services provided as trustee and trust protector and for their legal services. Additionally, Mr. Gowdy asserted Dennis was negligent in drafting Mr. Gowdy’s estate planning documents without asking about his goals or recognizing there were potential conflicts of interest between Mr. Gowdy, Ms. Jackson and Dennis (in his capacity as trustee).

[¶13] Mr. Gowdy claimed Dennis improperly managed the trust by paying bills late and remitting the wrong amounts, charging the trust too much for his services, failing to have a fee agreement with the trust, allowing Craig and another attorney at Cook and Associates to serve as trustee in his absence, and providing private information about Mr. Gowdy to the residuary beneficiaries. Mr. Gowdy also complained that Dennis improperly exercised his sole and absolute discretion when he denied Mr. Gowdy’s request for a trust distribution to pay attorney fees he incurred when another law firm drafted an estate plan for him.

[¶14] Mr. Gowdy claimed Dennis violated the conflict-of-interest provisions of the Wyoming Rules of Professional Responsibility by simultaneously representing him and Ms. Jackson before her death and representing him while acting as trustee after Ms. Jackson’s death. He also claimed the Cooks improperly solicited Ms. Jackson to appoint them to various roles in the trust administration and those roles resulted in improper conflicts of interest. Mr. Gowdy asserted that Craig, while acting as trust protector, failed to properly supervise Dennis’s actions as trustee and improperly appointed Mr. Winter as replacement trust protector.

[¶15] Mr. Gowdy also sought a declaratory judgment prohibiting the Cooks from utilizing trust resources to defend the action. In his prayer for relief, Mr. Gowdy asked the district court to: remove Dennis as trustee; award monetary damages, including attorney fees, to him and the trust; require the Cooks to provide a trust accounting; enter the declaratory judgment referenced above; and enter a "decanted trust," which he attached to the complaint, to "repair issues" due to Dennis’s drafting errors.² Mr. Gowdy proposed in his decanted trust to remove the requirement that a corporate trustee have assets or insurance coverage of at least one hundred million dollars.

[¶16] The Cooks filed an answer, and Dennis (as trustee) counterclaimed for a declaratory judgment ruling that Mr. Gowdy had, under the no-contest provision of the trust, forfeited his rights as a beneficiary by seeking to void, nullify or set aside a provision of the trust and Dennis and Craig may use trust resources to defend the action.³

[¶17] The Cooks filed a motion for summary judgment...