Hansen v. Rozgay

KIMBERLY A. HANSEN, as her separate estate,formerly known as KIMBERLY ROZGAY, Appellant, v. MARK A. ROZGAY, individuallyand in his capacity as Personal Representative Estate of BARBARA ROZGAY,Trustee of the CORDES TRUST, ROZGAY FAMILY INVESTMENTS, LLC,a Washington Limited Liability Company and the marital community of MARK ROZGAYAND BABBIE ROZGAY, Husband and Wife, Respondents.

No. 74636-7-I

COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION ONE

September 11, 2017

UNPUBLISHED OPINION

MANN, J. — Appellant Kim Hansen (Hansen) and Respondent Mark Rozgay (Rozgay) are two of four children adopted by Clarence and Barbara Rozgay. In December 2010, Rozgay assisted his parents in finding an estate planning lawyer who prepared a series of estate documents including a revocable trust and irrevocable trust. One effect of the 2010 estate plan was to disinherit Hansen from her parents' estate.

After her mother's death, Hansen brought this action seeking to invalidate several of the estate documents on the grounds that her parents' lack of capacity and Rozgay's undue influence. The trial court dismissed Hansen's action on summary judgment.

We affirm in part and reverse in part. We also vacate the trial court's award of attorney fees.

FACTS

A. Cordes Trust

Barbara Rozgay's parents, Herman and Harriet Cordes, established the "Cordes Living Trust of 1979" (Cordes trust). The Cordes trust was established to meet Barbara's¹ expenses for life, then, upon her death, the assets were to be distributed to Barbara and Clarence's four children as residual beneficiaries. The Cordeses originally conveyed their Hood Canal waterfront home to the Cordes trust. In 1991, however, the Hood Canal home was conveyed to Barbara as her separate property. In 2004, Barbara's son Rozgay became the trustee of the Cordes trust. Rozgay and Hansen, along with their two siblings Michael and Lisa, remain the residual beneficiaries of the Cordes trust.

B. 2010 Estate Planning

In 2010, Clarence and Barbara updated their estate planning. In October 2010, Rozgay took Barbara to meet with the Cordes trust accountants to discuss tax planning, the Hood Canal home, and a community property collection of art. The accountantsrecommended Rozgay obtain an appraisal for the Hood Canal house, which he subsequently did. Rozgay then contacted an estate planning attorney, Kanoa Ostrem, based on a referral from a business associate. On December 21, 2010, Rozgay accompanied Clarence and Barbara to meet with Ostrem and a financial planner.

Following the December meeting, Ostrem sent an e-mail to Rozgay with an outline and budget for an estate plan that included a transfer of the Hood Canal house. One of the items left unresolved in the outline was that "Mr. and Mrs. Rozgay must decide about Kim's share." Ostrem explained that he could complete "the Hood Canal portion this year and the remaining planning shortly after Mr. and Mrs. Rozgay make a decision about Kim's share." The next morning, Rozgay responded by e-mail telling Ostrem to "please move forward on all of this."

Ostrem ultimately prepared 24 estate planning documents for Barbara and Clarence. The documents included the last will and testaments for Barbara and Clarence, a community property agreement, general durable powers of attorney, and medical powers of attorney. The documents also established the Rozgay Family Living Trust (Living Trust), the Rozgay Irrevocable Trust (Irrevocable Trust), and the Rozgay Family Investments, LLC (LLC).

Ostrem e-mailed the documents to Rozgay on December 23, 2010. According to Ostrem's e-mail, "your parents need to make a decision about Kim's share. That is the only blank in the documents." Ostrem testified that he met alone with Clarence and Barbara on December 23 or 24, 2010, but did not have records of the meeting. Detailed daily journals by Barbara and Clarence's full-time caregivers do not reference any meetings between December 22 and December 26, 2010.

Rozgay, Clarence, and Barbara next met with Ostrem on December 27, 2010, at Clarence and Barbara's home. Clarence and Barbara executed the 24 documents creating a comprehensive estate plan. By way of summary, the estate planning documents resulted in the following actions:

First, Clarence and Barbara entered a community property agreement that irrevocably transferred Barbara's separate property Hood Canal house and her investment portfolios to the marital community.

Second, Clarence and Barbara created the LLC. They were each originally 50-50 members in the LLC. Rozgay was named as the LLC manager. Clarence and Barbara then deeded the Hood Canal house to the newly created LLC in exchange for membership units.

Third, Clarence and Barbara created the Irrevocable Trust. Clarence and Barbara were named as trustors and Rozgay was named as the Trustee. Under the terms of the Irrevocable Trust, during Clarence and Barbara's lifetime, the Trustee (Rozgay) was to distribute net income as necessary to support Rozgay, his brother Michael, and their families. Upon Clarence and Barbara's deaths, the Irrevocable Trust was to be divided between Rozgay, his brother Michael, and their families. The Irrevocable Trust made no provision for Hansen or her sister Lisa.

With the Irrevocable Trust established, Clarence and Barbara both signed three assignments conveying the majority of their individual membership units in the LLC to the Rozgay Irrevocable Trust. The rest of their individual units were conveyed to the Irrevocable Trust through a signed purchase and sale agreement. The end result was that the Rozgay Irrevocable Trust became the sole member of the LLC. Clarence andBarbara received a promissory note in payment for their units from the Irrevocable trust.²

Fourth, Clarence and Barbara created the Living Trust and transferred their remaining community property into it. Clarence and Barbara then deeded their Medina home to the Living Trust. The Living Trust was established to pay Clarence and Barbara's expenses while there were alive, and then be distributed to Rozgay, his brother Michael, and their families, after Clarence and Barbara's death. The Living Trust expressly made no provision for Hansen or Lisa.

Fifth, Clarence and Barbara signed their wills. The wills made provisions to transfer tangible personal property to the surviving spouse, or if the spouse was deceased, to Rozgay, his brother Michael, and their families. The wills expressly made no provision for Hansen or Lisa. Any residual property was to be distributed to the Living Trust.

Finally, Rozgay was made the attorney-in-fact for both Clarence and Barbara, under a durable power of attorney and a medical power of attorney.

C. Post Estate Plan

Beginning in 2009 or early 2010, Clarence and Barbara had full-time live-in caretakers. In February 2011, Clarence and Barbara were institutionalized in the Memory Loss Care Unit of Overlake Terrace. At the time he checked them in, Michael informed the Memory Loss Care Unit that Clarence and Barbara both were incontinent,had dementia, and had CPAP machines. Barbara had a feeding tube. Barbara died in September 2011. Rozgay became her personal representative.

After Barbara's death, Hansen received notice of Barbara's probate and learned she had been disinherited. Hansen sent Rozgay an e-mail questioning whether Rozgay had been involved in the decision to disinherit her. Rozgay responded that he had not told Barbara and Clarence who to include in their will, however, he had told them to include himself and Michael in the inheritance of the Hood Canal house, because "no one had heard from" Hansen. Hansen became suspicious of Rozgay's involvement in the estate plan and requested an accounting from Rozgay, as the trustee of the Cordes trust. Rozgay provided Hansen with a formal accounting of the Cordes trust.

Hansen then filed this action before the King County Superior Court. The complaint sought, in part, to (1) terminate the power of attorney appointing Rozgay as attorney-in-fact for Clarence,³ (2) to invalidate the Irrevocable Trust, Livable Trust, and LLC, and restore the probate estate of Barbara for Clarence, and (3) an order quieting title to the Hood Canal house distributing 50 percent to Clarence and 50 percent for the benefit of all four of the Rozgay children as intestate heirs, and (5) damages.

On January 4, 2015, the trial court granted Rozgay's motion for summary judgment dismissing all of Hansen's claims. The trial court subsequently granted Rozgay's motion for attorney fees pursuant to the Trust Estate Dispute Resolution Act, Ch. 11.96A (TEDRA), RCW 11.94.120, and RCW 11.24.050. The trial court awardedRozgay $174,603.50 for attorney fees and $16,329.66 for costs against Hansen's marital community. Hansen appeals.

ANALYSIS

Exclusion of Testimony

Before reaching the merits of the substantive arguments, we must resolve an evidentiary issue. In response to Rozgay's motion for summary judgment, Hansen offered a declaration from her expert Jullie M. Gray, MSW, a licensed independent clinical social worker. Based on her knowledge, skill, experience, training, and education, combined with her review of medical records, deposition transcripts, and journal entries from Clarence and Barbara's full-time caregivers, Gray opined that by December 2010, Clarence and Barbara had very serious cognitive problems and "could not possibly have read or understood the contents of the documents presented for their signature on December 27, 2010." Gray further opined that Clarence and Barbara were "particularly vulnerable to undue influence over the conduct of their personal affairs, including financial affairs."

In response to Rozgay's motion, the trial court struck Gray's declaration, stating "the testimony of expert witness Jullie Gray is stricken and not considered because she is not qualified to render medical opinions and Plaintiff failed to timely disclose her opinion." Hansen argues that the trial court erred in striking the declaration...