Kendall v. Utah Estate Planners PLLC

534 P.3d 1140

Jill H. KENDALL and Robert G. Harding, Appellants,

v.UTAH ESTATE PLANNERS PLLC and Pattie S. Christensen, Appellees.

No. 20210786-CA

Court of Appeals of Utah.

Filed August 3, 2023

Steven H. Bergman, Salt Lake City, Attorney for Appellant Jill H. Kendall

Jared W. Moss, Salt Lake City, Attorney for Appellant Robert G. Harding

Patrick C. Burt, Attorney for Appellees

Judge Ryan M. Harris authored this Opinion, in which Judges John D. Luthy and Amy J. Oliver concurred.

Opinion

HARRIS, Judge:

¶1 Jill Kendall and Robert Harding (collectively, Trustees), acting as co-trustees of a family trust (Trust), appeal the dismissal of legal malpractice claims they filed against the Trust's former attorney. The district court dismissed the claims because Trustees failed to designate an expert witness to testify that the attorney had breached the standard of care. Trustees challenge that ruling, asserting that, for various reasons, they were not required to retain an expert witness. We disagree, and therefore affirm.

BACKGROUND¹

¶2 In 1994, as part of a broader effort to manage his assets and plan his estate, Dean Harding created the Trust. The beneficiaries of the Trust were Dean's spouse and Dean's three children from a previous marriage (Robert, Jill, and Jeana).² Dean's spouse—if she survived him—was to have the use of certain Trust assets during her lifetime, and then after her death the Trust assets were to be distributed to Dean's three children "in equal shares."

¶3 Under the terms of the Trust, upon Dean's death "all property subject to [the Trust] shall be divided into two parts known as the marital share and the family share." Income from both parts of the Trust was to be paid to Dean's spouse. But Trust principal was, in the main, to pass to Dean's three children: the Trust document allowed the trustee, under certain circumstances and after making specific determinations, to distribute principal from the family share to Dean's spouse during her lifetime, but principal from the marital share was not to be distributed to Dean's spouse under any circumstance.

¶4 Dean's will—created contemporaneously with the Trust—contained a "spendthrift clause" that was apparently incorporated into the Trust. This provision mandated, in relevant part, that no "interest of any beneficiary" in the Trust "be liable ... for the debts, contracts, liabilities, engagements, obligations or torts of such beneficiary."

¶5 Dean passed away in January 2004. When he created the Trust, Dean had named himself as trustee, and had named an accountant (Accountant) as the successor trustee. Upon Dean's death, Accountant began managing the Trust, and separated its assets into the marital and family shares. Among the assets Accountant put into the marital share of the trust were certain individual retirement accounts (the IRAs) that Dean owned prior to his death. Accountant also retained Pattie Christensen, a trusts and estates attorney working for Utah Estate Planners PLLC,³ to "review the trust documents," "assist [Accountant] ... with some titling," and provide help "as he requested assistance."

¶6 Not long after his appointment, Accountant resigned as trustee due to "growing contention" in the family regarding the Trust assets. Dean's spouse then appointed her son from another marriage, Rickie Taylor—who was not a Trust beneficiary—as the new trustee. Around the same time Taylor was appointed as trustee, he also obtained power of attorney over his mother's personal finances. As trustee, Taylor continued to periodically utilize Christensen's services on behalf of the Trust and would contact Christensen for legal advice approximately every two to four months, though the actual scope of Christensen's representation is disputed.

¶7 In addition to consulting with Christensen periodically, Taylor also retained the services of another attorney (Second Attorney) to assist with Trust administration. At one point, Second Attorney contacted a local law professor for guidance regarding application of the Utah Principal and Income Act (the UPIA)⁴ to certain minimum distributions (RMDs) that she understood the Trust was required to make from the IRAs. The professor informed Second Attorney that only income (but not any principal) from the IRAs was supposed to be paid to Dean's spouse; this was contrary to what Taylor had been doing up to that point, namely, paying the entire RMDs to Dean's spouse without regard for whether those payments included some Trust principal. Second Attorney claims that she communicated this information to both Christensen and Taylor. Not long after, Second Attorney stopped working for the Trust; she testified that she made the decision to quit because Taylor, even after learning that he was not legally allowed to pay the entire RMDs to his mother, was not taking "the law seriously at all" and was "not going to stop" making the payments to his mother.

¶8 For her part, Christensen testified that she made "consistent and unwavering" statements to Taylor "not to spend principal of the marital" share of the Trust. She sent several letters—in 2005, 2006, and 2009, each either addressed directly to Taylor or copied to Taylor—that clearly indicated that Taylor was not allowed to distribute principal from the marital share, stating in one of them that the Trust "requires principal payments to come from the family share rather than the marital share." Trustees initially attempted to dispute the fact that Christensen communicated this advice to Taylor, but during oral argument on Christensen's summary judgment motion, Trustees’ counsel acknowledged that Christensen had sent documents to Taylor "saying you cannot distribute principal from the marital trust." In any event, Taylor continued to distribute the full RMD amount to his mother, without regard to whether those payments included marital share principal. Christensen did not, however, follow up with Taylor or with the Trust's financial advisers to ensure that her advice was being followed.

¶9 While Taylor was acting as trustee, Robert's ex-wife served a writ of garnishment on the Trust, seeking to collect a debt Robert apparently owed her in their divorce case. Christensen accepted service of this writ on behalf of the Trust. Ultimately, Taylor authorized payment to Robert's ex-wife, out of Trust assets, of about $250,000. The parties dispute the amount of Christensen's involvement in the decision to make the payment: Christensen claims that Taylor hired another attorney to advise him on the garnishment issue, but Taylor claims that Christensen advised him to make this payment.

¶10 Dean's spouse passed away in 2015, and Taylor was appointed as personal representative of her estate. Not long after, Robert filed a lawsuit against Taylor, the Trust, and others in which he asserted that Taylor had made improper distributions from the Trust and in which he sought a full accounting of Trust assets as well as damages. An appeal from the court's rulings in that lawsuit is the subject of our opinion in In re Harding Trust , 2023 UT App 81, ––– P.3d ––––.

¶11 About two years after Robert initiated the Harding lawsuit, Taylor (acting as trustee of the Trust) filed this lawsuit, alleging that Christensen and Utah Estate Planners⁵ had committed legal malpractice related to the advice they had given (or failed to give) to the Trust. In his complaint, as amended, Taylor acknowledged that, under the UPIA and the terms of the Trust, he was supposed to distribute only about 4% of the RMDs from the IRAs to Dean's spouse, but alleged that he relied "on the advice of the various professional advisors" in distributing the entire amount. The complaint alleged that Christensen advised Taylor that he could occasionally make distributions from the marital share, that Christensen never advised Taylor about the provisions of the UPIA governing the RMDs, and that Christensen never advised Taylor that he could be subject to liability for his actions. The complaint also alleged that Christensen advised Taylor to make the writ of garnishment payment to Robert's ex-wife. The complaint did not contain any allegations of malpractice related to any conflicts of interest. And the complaint did not allege that Christensen had committed legal malpractice by failing to follow up with Taylor or the Trust to make sure her advice was followed.

¶12 As the case proceeded toward trial, Taylor moved to consolidate it with the Harding lawsuit. That request was denied, but the court did stay this case until the Harding court resolved the issue of who the proper trustee was, and then extended the stay until after the Harding lawsuit was fully resolved. The court in the Harding lawsuit removed Taylor as trustee and replaced him with Robert and Jill, who later elected to continue prosecuting this lawsuit. And the Harding lawsuit was eventually resolved largely in favor of Robert and against Taylor; the court in that case found that Taylor, while serving as trustee of the Trust, had breached his fiduciary duties in various ways, including by making improper distributions of Trust principal and engaging in numerous acts of self-dealing. In addition, the court found that Taylor had conflicts of interest due to his various roles as trustee of the Trust, as holder of power of attorney over his mother's finances, as a beneficiary of his mother's estate, and as personal representative of his mother's estate.

¶13 After the court in the Harding lawsuit made its ruling, the stay in this case was lifted. The parties stipulated to a pretrial scheduling order that was signed by the court and included a deadline for expert disclosures. Within that deadline, Trustees submitted their expert disclosures and identified a forensic accountant to provide testimony on "the excess distributions made by the [Trust]," "the administration of the Trust," and "the administration and distribution of [Trust] assets." They did not, however, designate any expert to opine on...