In re Becker v. Wells Fargo Bank, N.A , 2017 Colo. App. LEXIS 1078 ( 2017 )

COLORADO COURT OF APPEALS 2017COA114
Court of Appeals No. 16CA1598
Logan County District Court No. 11PR17
Honorable Carl S. McGuire, III, Judge
In the Interest of Kylee Becker, Protected Person,
and
Aaron Becker, Conservator for Kylee Becker,
Petitioner-Appellee,
v.
Wells Fargo Bank, N.A.,
Appellant.
ORDER AFFIRMED IN PART, REVERSED IN PART,
AND CASE REMANDED WITH DIRECTIONS
Division I
Opinion by JUDGE TAUBMAN
Román and Lichtenstein, JJ., concur
Announced August 24, 2017
No Appearance for Petitioner-Appellee
Brown Dunning Walker P.C., David C. Walker, Denver, Colorado, for Appellant
¶1 In this conservatorship case, appellant, Wells Fargo Bank,
N.A. (Wells Fargo), appeals the trial court’s denial of its motion for
reconsideration of the order to restore funds to a conservatorship
account. We affirm in part, reverse in part, and remand to the trial
court for further factual findings.
I. Background
¶2 In June 2011, the trial court ordered Wells Fargo to establish
a conservatorship account for the benefit of eleven-year-old Kylee
Becker (the beneficiary) to be maintained by her father, Aaron
Becker (Becker). It was intended to be a restricted account for the
beneficiary’s settlement funds obtained as a result of a personal
injury claim. In its order, the court stated that no funds could be
withdrawn from the account except by “separate certified order of
this court.” In August 2011, Wells Fargo complied with this order
and deposited funds into the account. In August 2014, Becker
reported to the trial court that the account had a balance of
$56,642.46. The court approved this report.
¶3 In May 2012, Wells Fargo allowed Becker to make
unauthorized transfers from the account until it had a negative
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balance of $11.98. Wells Fargo closed the account in November
2015.
¶4 In August 2016, the trial court issued a show cause order to
Wells Fargo and Becker related to the removal of funds without a
court order. The court required “Wells Fargo to show cause why [it]
had not opened a restricted account. . . . And for Aaron Becker to
show cause why he has not been complying with the court’s orders
of filing annual reports to account for the money to the court, and
to otherwise show he has not breached his fiduciary duty to the
ward[.]” At the show cause hearing, Becker testified that he took
funds from the account for his personal expenses, as well as to pay
rent, groceries, utilities, sports activities expenses, and other
expenses for the beneficiary. The trial court ordered Becker to file
an accounting of how the funds were used from August 2013 to the
date that the account was emptied and closed. Becker agreed.
¶5 A representative for Wells Fargo testified that Becker was able
to withdraw funds from the account without a court order because
the account was not opened as a restricted account. Instead, due
to a “coding error,” it was opened as an unrestricted fiduciary
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account. The court then ordered Wells Fargo to provide additional
bank statements from the conservatorship account.
¶6 A week after the hearing, the court ordered Becker and Wells
Fargo to restore funds taken from the depleted account and found
them jointly and severally liable for breach of fiduciary duty.
Accordingly, the court ordered Wells Fargo to restore $56,642.46,
the amount last reported to the court, to a new restricted
conservatorship account.
¶7 Wells Fargo moved to reconsider the order to restore funds,
arguing that no evidence suggested that Wells Fargo was 100%
liable, and that the trial court should have considered the
percentage of fault attributable to Wells Fargo and Becker as
required by section 13-21-111.5, C.R.S. 2016. It further requested
that the court set a hearing to determine the relative degrees of
liability between it and Becker regarding the mismanagement of the
account and that the court determine the amount of the depleted
funds actually spent for the benefit of the beneficiary so as not to
afford her a double recovery.
¶8 The trial court denied this motion, concluding that its order
was based on the court’s powers under sections 15-10-501 to -505,
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C.R.S. 2016, and that section 13-21-111.5 did not apply. The trial
court further stated that Wells Fargo had had the power to correct
the coding error, and that but for Wells Fargo’s negligence ab initio,
Becker would not have been able to drain the account. Further, it
stated that Wells Fargo could exercise its rights to seek contribution
and comparative negligence from Becker by filing a separate civil
action.
¶9 The trial court certified its order to restore funds and its order
denying Wells Fargo’s motion pursuant to C.R.C.P. 54(b) in
September 2016.
II. Section 13-21-111.5
¶ 10 Wells Fargo contends that the trial court erred when, in
denying the motion for reconsideration, it determined that section
13-21-111.5 did not apply to this proceeding and therefore did not
apportion liability between Wells Fargo and Becker. We disagree.
A. Standard of Review
¶ 11 We review questions involving statutory interpretation de novo.
Jefferson Cty. Bd. of Equalization v. Gerganoff, 241 P.3d 932, 935
(Colo. 2010).
B. Applicable Law
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¶ 12 According to the joint liability statute on which Wells Fargo
relies,
[i]n an action brought as a result of death or
injury to a person or property, no defendant
shall be liable for an amount greater than that
represented by the degree or percentage of the
negligence or fault attributable to such
defendant that produced that claimed injury,
death, damage, or loss, except as provided in
subsection (4) of this section.
§ 13-21-111.5(1). The exception states that joint liability shall be
imposed on “two or more persons who consciously conspire and
deliberately pursue a common plan or design to commit a tortious
act.” § 13-21-111.5(4). In that event, defendants will only be held
responsible for the degree or percentage of fault assessed to each of
them. See id.
¶ 13 As the trial court’s order noted, it based its order on the power
granted to trial courts to supervise fiduciary administration of
estates. See § 15-10-501. As relevant here, if a court, after a
hearing on its own motion, determines that a breach of fiduciary
duty has occurred or an exercise of power by a fiduciary has been
improper, it may order any one or more of the following: (1) a
surcharge or sanction of the fiduciary pursuant to section 15-10-
5
504; (2) the removal of a fiduciary; or (3) such further relief as the
court deems appropriate to protect the ward or protected person or
the assets of the estate. § 15-10-503(g), (h), (i).
¶ 14 The trial court may surcharge the fiduciary for any damage or
loss to the estate, beneficiaries, or interested persons. Such
damages may include compensatory damages, interest, and
attorney fees and costs. § 15-10-504(2)(a). It can also order such
other sanctions as it deems appropriate. § 15-10-504(4).
¶ 15 When interpreting statutes, we must read them as a whole to
ascertain legislative intent and to give consistent, harmonious, and
sensible effect to all their parts. See Taylor v. Taylor, 2016 COA
100, ¶ 27, 381 P.3d 428, 433. To determine legislative intent, we
first look to the words of the statute and give effect to their common
meanings. Id. If those words are clear and unambiguous, we apply
the statute as written. Id. We also must read the language at issue
in context and in the context of the entire statutory scheme.
Jefferson Cty. Bd. of Equalization, 241 P.3d at 935.
C. Analysis
¶ 16 We conclude that the trial court correctly determined that
section 13-21-111.5 does not apply in this case, based on a plain
6
reading of the statutes and their interpretation in appellate
decisions.
¶ 17 Based on a reading of the other sections surrounding the
section at issue, title 13 was intended to contemplate limitations on
damages in only those actions brought as a result of negligence or
another tort. See § 13-21-111, C.R.S. 2016 (“Negligence cases--
comparative negligence as a measure of damages”); § 13-21-111.6,
C.R.S. 2016 (“In any action by any person or his legal
representative to recover damages for a tort resulting in death or
injury to person or property . . . .”) (emphasis added); see also
Schwankl v. Davis, 85 P.3d 512, 514 (Colo. 2004) (relying on
surrounding statutes to support statutory interpretation). In this
context, the plain language of section 13-21-111.5(1) demonstrates
that it does not contemplate surcharge proceedings, since it applies
to those actions brought “as a result of a death or an injury to
person or property.”
¶ 18 Indeed, section 13-21-111.5 references “defendants” in
outlining the limitations on liability. No defendants are present in
this case, because it is a surcharge proceeding that arises from the
supervisory power of the court over parties that include, but are not
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limited to, personal representatives, special administrators,
guardians, conservators, trustees, agents under a power of
attorney, and custodians. See § 15-10-501(3).
¶ 19 On the other hand, the plain language of section 15-10-504
shows that the surcharge proceeding it creates is distinct from a
tort proceeding. Pursuant to its authority under 15-10-504, the
court initiated proceedings to evaluate the administration of the
trust by both Wells Fargo and Becker, and then surcharged, or
fined, Wells Fargo for its liability in the mismanagement of the
account. While the court determined that Becker and Wells Fargo
were jointly and severally liable for a breach of fiduciary duty, such
a determination was not made as a result of an action in tort; it was
instead an evaluation that prompted remedial measures by the
court under 15-10-504.
¶ 20 We further note that, under People v. Bagby, 734 P.2d 1059,
1061-62 (Colo. 1987), the adoption of a comprehensive regulatory
program, with detailed attention to various types of regulation for
different reasons thereof, evinces an intent on the part of the
General Assembly that, unless otherwise indicated by specific
provisions of the relevant code, regulation should be limited to
8
those specific provisions. While Bagby referred specifically to
general and specific criminal statutes, we nevertheless conclude
that the probate code, a comprehensive regulatory program with
detailed attention to the regulation of fiduciary duties and other
probate interests, was intended to preclude the application of other
regulatory schemes — in this instance, the portion of the code
dedicated to limitations on damages in tort actions.
¶ 21 Case law supports our analysis. In its determination of the
applicability of section 15-10-504 to a tort proceeding, another
division of this court has concluded that “section 15-10-504 does
not create remedies or procedures for adjudicating tort claims.
Rather, it is part of a broader section of law dealing with judicial
‘oversight’ or ‘supervision’ of fiduciaries in the administration of
estates.” Taylor, ¶ 28, 381 P.3d at 433. The division further
concluded that subsection 504(2) authorizes the court to impose
surcharges on a fiduciary after a hearing. Id. at ¶ 29, 381 P.3d at
433. The use of “surcharge” in this section “suggest[s] that it was
intended, in its verb form, to mean something like ‘([o]f a court) to
impose a fine on a fiduciary for breach of duty’ [and] does not
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purport to apply to trials resulting in jury determinations of tort
claims.” Id. (quoting Black’s Law Dictionary 1670 (10th ed. 2014)).
¶ 22 Although the division in Taylor was not examining the
applicability of section 13-21-111.5 to the case, it concluded that “a
trial on a tortious breach of fiduciary duty claim is not a ‘surcharge
proceeding’ under section 15-10-504.” Id. at ¶ 30, 381 P.3d at
433-34. As a result, remedies and procedures in tort, like those in
section 13-21-111.5 would not apply.
¶ 23 Wells Fargo nevertheless argues that judicial interpretations of
section 13-21-111.5 have concluded that the statute applies to “any
action,” including proceedings not sounding in tort. See Loughridge
v. Goodyear Tire & Rubber Co., 207 F. Supp. 2d 1187, 1191 (D.
Colo. 2002); Harvey v. Farmers Ins. Exch., 983 P.2d 34, 38 (Colo.
App. 1998), aff’d and remanded sub nom. Slack v. Farmers Ins.
Exch., 5 P.3d 280 (Colo. 2000). However, these cases refer
specifically to the application of section 13-21-111.5 to product
liability claims, which are beyond the realm of probate matters.
Wells Fargo also cites Resolution Trust Corp. v. Heiserman, 898 P.2d
1049 (Colo. 1995), as clear evidence that the supreme court has
already applied section 13-21-111.5 to cases involving a breach of
10
fiduciary duty. However, Resolution Trust is also easily
distinguishable, since the breach of fiduciary duty claim there arose
in a tort action rather than in a probate proceeding initiated by the
court to supervise fiduciary administration of a trust.
¶ 24 Accordingly, we conclude that the court did not err in
determining that section 13-21-111.5 is inapplicable to proceedings
under section 15-10-504. We thus affirm the court’s order finding
Wells Fargo jointly and severally liable for the mismanagement of
the conservatorship account.
III. Denial of Hearing to Apportion Liability
¶ 25 Wells Fargo next contends that the trial court erred by holding
it jointly and severally liable for the mismanagement of the account
without any record support for such a finding. Wells Fargo bases
this argument on the applicability of section 13-21-111.5(4) to the
matter, under which a court can hold parties jointly and severally
liable only if it finds that the parties “consciously conspire[d] and
deliberately pursue[d] a common plan or design to commit a
tortious act.” Because we have already concluded that section 13-
21-111.5 does not apply here, we need not address this issue.
IV. Denial of Hearing to Determine Benefit
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¶ 26 Wells Fargo contends that the trial court erred by ordering it
to restore the full amount of $56,642.46 to the restricted account
because, based on the evidence produced at trial, Becker withdrew
some of those funds to pay for food, schooling, and other necessities
for the beneficiary. As a result, Wells Fargo argues, requiring it to
restore 100% of the funds without any determination of the amount
actually used for the beneficiary could result in a double recovery in
her favor. We agree.
A. Standard of Review
¶ 27 As stated above, the trial court’s authority to surcharge Wells
Fargo arises from section 15-10-504(2). The proper measure of
damages involves a question of law we review de novo. See In re
Estate of Sandstead, 2016 COA 49, ¶ 31, ___ P.3d ___, ___ (cert.
granted Nov. 21, 2016). We review the trial court’s factual findings
for clear error. Van Gundy v. Van Gundy, 2012 COA 194, ¶ 12, 292
P.3d 1201, 1204.
B. Applicable Law
¶ 28 If the trial court determines that a personal representative has
breached his or her fiduciary duty or exercised his or her power
improperly, the court may surcharge the fiduciary for any damage
12
or loss to the estate, beneficiaries, or interested persons. § 15-10-
504(2)(a). In other words, the court may order a personal
representative to reimburse the estate for the losses caused by his
or her mismanagement. Sandstead, ¶ 32, ___ P.3d at ___ (citing
§§ 15-10-501(2)(c), (3), -504(2)). To justify a surcharge, the court
must find that the personal representative caused loss to the estate
and prejudice to the persons in interest. See Blanpied’s Estate v.
Robinson, 155 Colo. 133, 137-38, 393 P.2d 355, 357 (1964); In re
Estate of McKeen, 541 P.2d 101, 103 (Colo. App. 1975) (not
published pursuant to C.A.R. 35(f)).
C. Analysis
¶ 29 We agree that the court was required to make findings
regarding the amount of funds actually used for the beneficiary.
¶ 30 Wells Fargo does not dispute the court’s determination that it
was liable for the mismanagement of the account. However, at the
hearing, Becker testified that, in the course of his spending, he had
used some of the funds from the conservatorship account to pay for
the beneficiary’s schooling, food, housing, and other needs. The
trial court ordered that Becker file an accounting of his expenses to
determine the amount that actually went to the beneficiary, but
13
Becker never filed this accounting. As a result, the court could not
determine what portion of the funds were appropriately spent on
the beneficiary and what portion of the funds was misused.
Without this calculation, the court simply required Wells Fargo to
restore all the funds. As Well Fargo asserts, this may have allowed
the beneficiary an impermissible double recovery. See
Lexton-Ancira Real Estate Fund, 1972 v. Heller, 826 P.2d 819, 823
(Colo. 1992) (“Generally, a plaintiff may not receive a double
recovery for the same wrong.”).
¶ 31 Accordingly, we reverse the court’s order that Wells Fargo
restore 100% funds in the trust account. We remand the case for
the trial court to determine the amount spent for the benefit of the
beneficiary, based on the existing record and any additional
evidence received within the court’s discretion.
V. Conclusion
¶ 32 Therefore, the court’s order is affirmed in part and reversed in
part, and the case is remanded for further factual findings, and
based on those findings, entry of an order regarding the amount of
Wells Fargo’s liability, if any.
JUDGE ROMÁN and JUDGE LICHTENSTEIN concur.
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