Wells Fargo Bank, N.A. v. Orsbon & Fenninger, LLP

862 S.E.2d 407

WELLS FARGO BANK, N.A., AS TRUSTEE OF the JANE RICHARDSON MCELHANEY REVOCABLE TRUST, Wells Fargo Bank, N.A., as Trustee of the Samuel Clinton McElhaney Revocable Trust, and Wells Fargo Bank, N.A., as Executor of the Estate of Jane Richardson McElhaney, Plaintiffs,

v.ORSBON & FENNINGER, LLP, and R. Anthony Orsbon, Defendants.

No. COA20-560

Court of Appeals of North Carolina.

Filed July 6, 2021

McGuireWoods, L.L.P., Charlotte, by T. Richmond McPherson, III and Anne L. Doherty, for Plaintiffs-Appellees.

Brooks Pierce McLendon Humphrey & Leonard, L.L.P., by Gary S. Parsons, Raleigh, and Kimberly M. Marston, Greensboro, for Defendants-Appellants.

COLLINS, Judge.

¶ 1 Anthony Orsbon and his law firm, Orsbon & Fenninger, LLP, (collectively, "Defendants") appeal from an order denying their motion for summary judgment on certain defenses and granting Wells Fargo Plaintiffs’ motion for partial summary judgment. Defendants argue that the trial court erred by denying their motion for summary judgment as to the defenses of collateral estoppel and election of remedies and granting Wells Fargo Plaintiffs summary judgment on those defenses. Because Defendants have not shown sufficient grounds for immediate appellate review of the trial court's interlocutory order as to the election of remedies defense, we deny Defendants’ petition for writ of certiorari and dismiss Defendants’ arguments concerning that defense. Because Defendants cannot show that each element of collateral estoppel is satisfied, we affirm the trial court's order as to that defense.

I. Procedural History

¶ 2 The present action follows a declaratory judgment action ("Declaratory Action") brought by Wells Fargo Bank, N.A., as trustee of the Jane Richardson McElhaney Revocable Trust ("Wells Fargo as Jane's Trustee"), and a claim for reformation of that trust ("Reformation Claim") brought by Jacob and Julia McElhaney. On 7 December 2018, the Mecklenburg County Superior Court announced its ruling from the bench on a motion for summary judgment and judgment on the pleadings in those actions.

¶ 3 The same day, Wells Fargo as Jane's Trustee, along with Wells Fargo Bank, N.A., as trustee of the Samuel Clinton McElhaney Revocable Trust, and Wells Fargo Bank, N.A., as executor of the Jane Richardson McElhaney Estate (together, "Wells Fargo Plaintiffs") brought this action against Defendants alleging negligence and legal malpractice. Simultaneously, Jacob and Julia McElhaney brought an action against Defendants alleging negligence, legal malpractice, and breach of contract arising from the same set of facts. Upon consent motions in both cases, the trial court consolidated the actions for the purposes of discovery. With leave of the trial court, Defendants filed amended answers in each action. Defendants asserted as defenses that each of the plaintiffs lacked standing and that collateral estoppel and election of remedies barred each of the plaintiffs’ claims. Defendants also contended that Wells Fargo Plaintiffs’ claims were barred by contributory negligence and the equitable doctrines of estoppel and laches.

¶ 4 Defendants moved for summary judgment in both actions on their defenses of collateral estoppel and election of remedies, as well as an alleged lack of damages from some or all of Defendants’ alleged negligent acts. Defendants also moved for summary judgment against Wells Fargo Plaintiffs on the defense of lack of standing. Wells Fargo Plaintiffs moved for partial summary judgment on standing, collateral estoppel, equitable estoppel, laches, and election of remedies. Likewise, Jacob and Julia McElhaney moved for partial summary judgment on standing, collateral estoppel, and election of remedies.

¶ 5 In a consolidated order ("Order on Appeal"), the trial court granted the motions for partial summary judgment by Wells Fargo Plaintiffs and Jacob and Julia McElhaney and denied Defendants’ motions. Defendants timely appealed.

II. Factual Background

A. The Estate Planning Documents

¶ 6 In May 1996, both Samuel and Jane McElhaney established revocable trusts, Samuel's Trust and Jane's Trust, respectively. In the fall of 2010, attorney Anthony Orsbon ("Orsbon") assisted Samuel and Jane in amending these trusts and preparing other estate planning documents. On 12 October 2010, Samuel and Jane executed separate trust agreements amending and restating their trusts. As amended, both provided that the trust of the first spouse to die would be divided into a marital share and a family share, each share to be administered as a trust. During the surviving spouse's lifetime, he or she would be entitled to certain distributions from both the marital trust and the family trust.

¶ 7 Upon the surviving spouse's death, the surviving spouse's entire trust would be allocated to the family share which, along with any remains of the marital share, would be distributed to an identified set of beneficiaries ("Specific Beneficiaries"). Following amendments in 2011, Samuel's and Jane's Trusts each provided for identical bequests to identical lists of Specific Beneficiaries, comprised of relatives and private organizations.

¶ 8 Each Specific Beneficiary would receive both the bequest provided in Samuel's Trust and the bequest provided in Jane's Trust. The surviving spouse held a limited power of appointment "at any time and from time to time by and through [his or her] Last Will and Testament to reduce or decrease any or all bequest amounts bequeathed to" the Specific Beneficiaries.

¶ 9 After disbursement to the Specific Beneficiaries, any remainder would be held by the trustee "for the benefit of [Samuel and Jane's] grandchildren who are living at the Division Date." Samuel and Jane's one son, Scott McElhaney, had two children, Jacob and Julia McElhaney. Following Scott McElhaney's death in 2010, Jacob and Julia ("Residuary Beneficiaries") were the sole living descendants of Samuel and Jane. After Samuel died in August 2015, Jane consulted Orsbon concerning her estate planning documents. In October 2015, Orsbon provided drafts of updated estate documents to Jane's Wells Fargo financial advisor, Linda Montgomery. In November, Montgomery had discussions with Orsbon concerning changes Jane desired to make to the draft documents.

¶ 10 On 8 December 2015, Jane executed a new Last Will and Testament ("Jane's Will") and an Amended and Restated Trust Agreement modifying her Trust. Jane's Will disposed of certain personal property and otherwise left the remainder of her estate to her Trust via a pour-over clause. Jane's Trust, as amended in 2015, stated that "[t]he Family Share shall be administered as a Family Trust" with a changed list of specific bequests. The amendment eliminated certain Specific Beneficiaries, reduced bequests to others, and added one new Specific Beneficiary. The remainder of Jane's Trust after payment to the Specific Beneficiaries was to be divided in equal shares and held in trust for Jane's grandchildren or, if applicable, the issue of her deceased grandchildren. Jane died on 21 April 2017.

B. The Declaratory Action and Reformation Claim

¶ 11 On 3 October 2017, Wells Fargo as Jane's Trustee instituted the Declaratory Action in Mecklenburg County Superior Court. Its petition for declaratory judgment included the following allegations:

22. Specifically, as [Jane's] Trust does not provide for the creation and disposition of a Family Share or Family Trust, the reference to the Family Trust contained in [Jane's] Trust creates a latent ambiguity as to whether by making such reference Jane intended to exercise her testamentary limited power of appointment over the Family Trust created under Samuel's Revocable Trust.

23. [Jane's] Trust does not reference the testamentary limited power of appointment granted to Jane. Even if it did, the power of appointment granted to Jane was limited to the power to "reduce or decrease" the bequest of the specific beneficiaries named in Samuel's Trust, and the provision in [Jane's] Trust adds a beneficiary, Ellen McElhaney, which is not authorized by the testamentary limited power of appointment granted to Jane ....

24. [Jane's] Will does not reference the testamentary limited power of appointment granted to Jane in the Family Trust or any attempt to exercise such power of appointment.

....

35. The Trustee is not aware of any evidence that would be admissible to clarify Jane's intent in using the term "Family Share" and/or "Family Trust" in [Jane's] Trust.

¶ 12 Wells Fargo as Jane's Trustee requested the trial court to:

1. Declare that [Jane's] Will did not exercise Jane's testamentary limited power of appointment over the Family Trust.

2. Absent the admissibility of evidence to clarify the latent ambiguity in [Jane's] Trust sufficient to find that Jane exercised her testamentary limited power of appointment over the Family Trust, declare that [Jane's] Trust does not exercise Jane's testamentary limited power of appointment over the Family Trust[.]

3. Absent the admissibility of evidence to clarify the latent ambiguity in [Jane's] Trust sufficient to find that Jane exercised her testamentary limited power of appointment over the Family Trust, declare that the Trustee shall distribute the property of the Family Trust as set forth in ... Samuel's Revocable Trust.

4. Absent the admissibility of evidence to clarify the latent ambiguity in [Jane's] Trust sufficient to find that Jane exercised her testamentary limited power of appointment over the Family Trust, declare that the references to Family Share and Family Trust in [Jane's] Trust refer to all of the property of [Jane's] Trust and that the Trustee shall distribute the property of [Jane's] Trust pursuant to the provisions of ... the Trust.

¶ 13 On 19 March 2018, the Residuary Beneficiaries filed a response to the petition for declaratory judgment and asserted the Reformation Claim against Wells Fargo as Jane's Trustee and the Specific Beneficiaries. The Residuary Beneficiaries alleged that

[Jane's] Trust's

...