Estate of John H. Cornell v. Toni C. Johnson , 159 Idaho 778 ( 2016 )

IN THE SUPREME COURT OF THE STATE OF IDAHO
Docket No. 42822
IN THE MATTER OF THE REVOCABLE )
FAMILY TRUST OF MICHAEL S. )
CORNELL AND ARLIE M. CORNELL. )
-------------------------------------------------------- )
THE ESTATE OF JOHN HENRY )
Boise, December 2015 Term
CORNELL, acting through its personal )
representative, KAREEN CORNELL, )
2016 Opinion No. 18
)
Petitioner-Appellant, )
Filed: February 26, 2016
)
v. )
Stephen W. Kenyon, Clerk
)
TONI C. JOHNSON, )
)
Respondent. )
)
Appeal from the District Court of the Second Judicial District, State of Idaho,
Clearwater County. Hon. Michael James Griffin, District Judge, Hon. Randall W.
Robinson, Magistrate Judge.
District court decision affirming magistrate’s summary dismissal of
administration of a trust, reversed and remanded.
Creason, Moore, Dokken & Geidl PLLC, Lewiston, for appellant. Samuel T.
Creason argued.
Jones, Brower & Callery, PLLC, Lewiston, for respondent. Karin Seubert argued.
_________________________________
BURDICK, Justice
This is an appeal from the Clearwater County district court’s decision affirming the
magistrate court’s summary dismissal of the Estate of John Cornell’s claims involving the
administration of a trust. John and his sister, Toni Johnson, were beneficiaries of their parents’
trust. When the time came to distribute the assets, Johnson apparently refused, which led John to
file a petition for the administration of the trust and removal of Johnson as trustee. Shortly after
filing the petition, John committed suicide. Consequently, the magistrate court granted Johnson’s
motion to dismiss John’s petition. Kareen Cornell, John’s surviving spouse, subsequently
petitioned the magistrate court for administration of the trust and to remove Johnson as trustee.
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The magistrate court once again granted Johnson’s motion to dismiss, basing its decision on the
trust distribution survivorship clause and on abatement of the claims. John’s Estate appealed, and
the district court affirmed. On appeal to this Court, the Estate argues that its claims survived
John’s death. We agree.
I. FACTUAL AND PROCEDURAL BACKGROUND
Michael S. Cornell and Arlie M. Cornell established a revocable family trust on
November 1, 1996, naming their two children, Toni C. Johnson and John H. Cornell, as joint
trustees and beneficiaries of the trust. The trust stated that “[o]n the death of the surviving
Trustor, the Trust shall terminate and the Trustee shall, as soon as reasonably possible, divide the
net income and principal remaining in the Trust into two (2) equal shares and distribute them to
the following beneficiaries: Toni C. Johnson and John H. Cornell.”
Arlie M. Cornell passed away on November 9, 2008. On August 6, 2009, Michael S.
Cornell amended the trust to name Johnson as the sole trustee. Michael S. Cornell passed away
on December 15, 2009.
Following his father’s death, John contacted Johnson regarding the status of the trust but
Johnson refused to speak to him. John wrote several letters and made several phone calls to the
attorney for the Estate requesting information as to the status of the trust without any response.
In the nearly three years from the last trustor’s death to John’s death, Johnson refused and failed
to distribute any of the trust to John. During that time, Johnson lived rent-free in the home that
was included in the trust and apparently paid all her living expenses with trust funds. At one
point, John received $3,000 as the beneficiary of his father’s life insurance policy, which
Johnson demanded he turn over to her. Upon that demand, John sent a check for $2,500 to
Johnson, retaining $500 for his own living expenses.
On July 11, 2012, John filed a petition for supervised administration and removal of
trustee. In that petition, John alleged that Johnson breached her fiduciary duty as trustee of the
trust by failing to provide an inventory of trust assets upon request, using trust assets for personal
expenses, and for failing to distribute the trust assets within a reasonable time.
On August 20, 2012, John committed suicide. In the case of the death of one of the
beneficiaries, the trust provided:
If any child, for whom a share of the Trust Estate has been set aside, should die
prior to the above distribution, then the Trustee shall distribute all of such
deceased child’s share of the Trust Estate to his or her surviving issue in equal
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shares . . . If there is no surviving issue, then all of the deceased child’s share of
the Trust Estate shall be added to the shares set aside for the benefit of the
Trustor’s other living child . . . .
Although John’s wife survived him, John left no issue.
Shortly after John’s death, Johnson moved the court to dismiss John’s pending petition
for administration and removal of trustee. Johnson argued that John’s claim was extinguished by
his death and that by the trust’s express terms, all net income and principal remaining in the trust
Estate vested in Johnson when John died without issue. The magistrate court granted Johnson’s
motion to dismiss1 on February 15, 2013, on the basis that John’s claims did not survive his
death under common law, state law, or the trust.
On February 26, 2013, Kareen Cornell, John’s surviving spouse, in her personal capacity
and as the personal representative of John’s Estate, filed a petition for supervised administration
and court ordered distribution. In that petition, the Estate alleged that Johnson breached her
fiduciary duty by, among other things, failing to provide an accounting of trust assets, failing to
distribute trust assets, and engaging in self-dealing.
On March 4, 2013, Johnson filed a second motion to dismiss on the basis that the Estate’s
claims abated. On June 21, 2013, the magistrate court dismissed the Estate’s petition on the basis
of abatement. The Estate appealed that decision to the district court, which remanded the case
back to the magistrate court for further ruling on the request to remove Johnson as trustee. On
remand, the magistrate court denied the request to remove Johnson as trustee and reaffirmed its
prior dismissal on grounds of abatement. The Estate once again appealed to the district court,
which affirmed. The Estate then timely appealed to this Court.
II. STANDARD OF REVIEW
When this Court reviews the decision of a district court sitting in its appellate capacity,
the standard of review is as follows:
The Supreme Court reviews the trial court (magistrate) record to determine
whether there is substantial and competent evidence to support the magistrate’s
findings of fact and whether the magistrate’s conclusions of law follow from
those findings. If those findings are so supported and the conclusions follow
therefrom and if the district court affirmed the magistrate’s decision, we affirm
the district court’s decision as a matter of procedure.
1
The court converted the motion to dismiss into a motion for summary judgment because the parties filed, and the
court considered, affidavits on the matter.
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Pelayo v. Pelayo, 154 Idaho 855, 858, 303 P.3d 214, 217 (2013) (quoting Bailey v. Bailey, 153
Idaho 526, 529, 284 P.3d 970, 973 (2012)). Thus, this Court does not review the magistrate
court’s decision directly. Id. at 859, 303 P.3d at 218. Instead, we are procedurally bound to
affirm or reverse the district court’s decision. Id. This Court exercises free review over questions
of law. In re Estate of Peterson, 157 Idaho 827, 830, 340 P.3d 1143, 1146 (2014).
III. ANALYSIS
The sole issue on appeal is whether John’s claims survived his death. The Estate makes
two main arguments in this regard. First, the Estate argues that John’s claims fall under a
common law exception to the rule of abatement. Second, the Estate argues that even if its claims
abated, they fall under Idaho Code section 5-327(2) as an exception to abatement.
The Estate’s petition alleged a breach of fiduciary duty claim, as well as claims for
conversion, unjust enrichment, and constructive trust. The magistrate court concluded that all of
the Estate’s claims were in the nature of torts and consequently, they abated upon John’s death.
In so holding, the magistrate court relied on this Court’s decision in Bishop v. Owens, 152 Idaho
616, 272 P.3d 1247 (2012).
In Bishop, this Court recognized that “[t]he abatement rule holds that in the absence of a
legislative enactment addressing the survivability of a claim, the common law rules govern.” 152
Idaho at 619, 272 P.3d at 1250. Under common law, claims arising out of contracts generally
survive the claimant’s death, while those sounding in pure tort abate. Id. The magistrate court in
this case found the following excerpt from Bishop instructive for determining whether a case
sounds in contract or tort:
As this Court previously recognized, “[l]egal malpractice actions are an
amalgam of tort and contract theories.” See Johnson v. Jones, 103 Idaho 702, 706,
652 P.2d 650, 654 (1982). The tort basis of legal malpractice actions flows from
the elements of legal malpractice: “(a) the existence of an attorney-client
relationship; (b) the existence of a duty on the part of the lawyer; (c) failure to
perform the duty; and (d) the negligence of the lawyer must have been a
proximate cause of the damage to the client. . . . ” Id. (quoting Sherry v. Diercks,
29 Wash. App. 433, 437, 628 P.2d 1336, 1338 (1981)). “The scope of an
attorney’s contractual duty to a client is defined by the purposes for which the
attorney is retained.” Johnson, 103 Idaho at 704, 652 P.2d at 652; Fuller, 119
Idaho at 425, 807 P.2d at 643 (holding that the tort of legal malpractice is also a
breach of the attorney-client relationship). Breach of an attorney’s duty in
negligence is a tort. See Harrigfeld v. Hancock, 140 Idaho 134, 136, 90 P.3d 884,
886 (2004); Johnson, 103 Idaho at 704, 706–07, 652 P.2d at 652, 654–55. The
contract basis of legal malpractice actions is the failure to perform obligations
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directly specified in the written contract. See Johnson, 103 Idaho at 704, 706–07,
652 P.2d at 652, 654–55 (holding that a breach of contract claim would arise if
the attorney did not do what he promised to do in the contract, e.g., failing to draw
up a contract of sale). Thus, under the abatement rule, breach of duty is an action
in tort, not contract; that is, unless an attorney foolhardily contracts with his client
guaranteeing a specific outcome in the litigation or provides for a higher standard
of care in the contract, he is held to the standard of care expected of an attorney.
Breach of that duty is a tort.
Id. at 620, 272 P.3d at 1251. The magistrate court relied on the foregoing analysis to conclude
that the claims, including the equitable claims, sounded in tort and were therefore abated.
We agree with the district court that the thrust of the Estate’s claims were torts in that
they focused on Johnson’s alleged breach of fiduciary duty and the damages that allegedly
resulted from that breach. See Rockefeller v. Grabow, 136 Idaho 637, 646, 39 P.3d 577, 586
(2001) (“Where the gravamen of the claim is for damages arising out of the breach of a fiduciary
duty, an award of attorney fees is not proper under I.C. § 12-120(3) because the action sounds in
tort.” (citing Property Management West, Inc. v. Hunt, 126 Idaho 897, 899–900, 894 P.2d 130,
132–33 (1995) (emphasis added))); see also Profits Plus Capital Mgmt., LLC v. Podesta, 156
Idaho 873, 892, 332 P.3d 785, 804 (2014) (recognizing that a breach of fiduciary duty is a tort
claim); Jones v. Runft, Leroy, Coffin & Matthews, Chartered, 125 Idaho 607, 614, 873 P.2d 861,
868 (1994) (“A claim for a breach of a fiduciary duty is a negligence action in which the duty to
act is created by the relationship between the parties.”).
However, the common law rule that tort claims abate is not an absolute rule and is subject
to exceptions. Claims alleging an injury that lessens the injured party’s estate are one such
exception. Recently, this Court explained:
Some cases have held that an injury suffered by fraud, false
representations, or deceit, is of such personal nature, does not survive, and is not
assignable. [ ] The later, and to me the better considered, cases have tended
toward, and many of them have reached, the conclusion that the injuries of a
personal nature which do not survive are such as injury to person, malicious
prosecution, false imprisonment, libel, slander, and the like; and that an injury
which lessens the estate of the injured party does survive, and thus is assignable.
St. Luke’s Magic Valley Reg’l Med. Ctr. v. Luciani, 154 Idaho 37, 41, 293 P.3d 661, 665 (2013)
(quoting MacLeod v. Stelle, 43 Idaho 64, 75, 249 P. 254, 257 (1926)). Thus, torts that are not
purely personal, but rather lessen the injured party’s estate, survive death. The survivability of
claims that arise from injuries that affect property and property rights was explained in American
Jurisprudence as follows:
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At common law survivable actions are those in which the wrong
complained of affects primarily property and property rights, and in which any
injury to the person is incidental, while nonsurvivable actions are those in which
the injury complained of is to the person and any effect on property or property
rights is incidental. The reason for the common law rule was that the need to
redress purely personal wrongs ceases to exist either when the person injured
cannot be benefited by a recovery or when the person inflicting the injury cannot
be punished, while, since the property or estate of the injured person passes to his
or her personal representatives, a cause of action for injury done to the property or
estate can achieve its purpose as well after the death of the owner as before. . . .
The general rule is that, in addition to the causes of action arising out of contract
recognized at common law, causes of action arising from torts to real and personal
property survive and pass to the personal representative of the decedent, while
purely personal torts do not survive in the absence of statutory provision.
1 Am. Jur. 2d Abatement, Survival, and Revival § 51.
The injury complained of in this case was not purely personal, but rather an injury that
allegedly lessened John’s estate. Indeed, John alleged a breach of fiduciary duty due to Johnson’s
delay in distributing the trust assets, which not only affected John personally, but also affected
his estate by potentially diminishing it during his lifetime and at death. Johnson argues that John
did not suffer an injury to property because he had no right to the trust assets unless he survived
distribution. This Court has recognized that “[a] trust creates a fiduciary relationship in which the
trustee is the holder of legal title to the property subject to the beneficial interest of the
beneficiary.” DBSI/TRI V v. Bender, 130 Idaho 796, 808, 948 P.2d 151, 163 (1997).
Accordingly, a beneficiary has a property interest in the trust res that is enforceable either in law
or in equity. See generally, Restatement (2d) of Trusts, §§ 198–99 (1959); see also Hayden Lake
Fire Prot. Dist. v. Alcorn, 141 Idaho 388, 401, 111 P.3d 73, 86 (2005) overruled on other
grounds by Farber v. Idaho State Ins. Fund, 152 Idaho 495, 272 P.3d 467 (2012) (implicitly
recognizing that a trust creates property rights in its beneficiaries). As John had a property
interest in the trust res, Johnson’s alleged unreasonable delay in distributing the trust affected
that property interest and potentially diminished his estate. Moreover, as discussed below, John’s
interest in the trust may have vested prior to his death.
The Estate argues that Johnson was required to distribute the trust assets within a
reasonable time after the surviving parent’s death. The Estate contends that Johnson
unreasonably delayed in distributing the trust assets and urges this Court to adopt a rule where a
beneficiary’s interest vests upon a trustee’s unreasonable delay in distributing a trust.
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Although this Court has yet to address the precise issue, the California Supreme Court
has confronted the issue. In In re Estate of Taylor, the testatrix died September 14, 1963, and her
will provided that one-third of the residue of her estate should go to Ellen Glasky if she survived
distribution of the estate. 428 P.2d 301, 302 (Cal. 1967). If Glasky predeceased distribution, her
one-third share was to go in equal shares to two other individuals, one of whom was the executor
of the estate. Id. The will was admitted to probate on November 26, 1963, and letters
testamentary were issued to the executor on December 2, 1963. Id. However, the petition for
final distribution was not filed until March 4, 1965, which requested that one-third of the residue
of the estate be distributed to Glasky. Id. Hearing on the petition was set for March 29, 1965, but
Glasky died on March 15, 1965. Id. The executor then filed another petition for final distribution
requesting that the one-third share bequeathed to Glasky be distributed to him and the other
contingent beneficiary. Id. The administratrix of Glasky’s will objected to the petition, and the
trial court sustained the objections to the petition and decreed that Glasky’s interest vested in her
before her death. Id. The court found that the estate could have been distributed in September of
1964 and should have been distributed before Glasky’s death. Id. It subsequently ordered
distribution of Glasky’s share to the administratrix of Glasky’s estate. Id.
On appeal, the California Supreme Court affirmed, noting that the evidence supported a
finding of undue delay on the part of the executor. Id. The court recognized that to date, no
California case had adopted the rule that vesting cannot be postponed by unreasonable delay in
distributing an estate and that when there is such delay, contingent interests vest at the time
distribution should have been made. Id. However, the court went on to adopt the rule and
concluded that “unreasonable delay cannot defeat the beneficiary’s interest.” Id. at 303. The
court reasoned that “this conclusion promotes the established policy favoring prompt distribution
of estates and carries out the presumed intent of the testatrix,” which absent any indication to the
contrary, is prompt distribution. Id. (internal citations omitted).2
2
The California Supreme Court’s decision is in line with the rule followed in other states. For instance, in Forman
v. Brent, 218 S.W.2d 655 (Ky. Ct. App. 1948), the Kentucky Court of Appeals construed a testator’s will provision
to mean that the beneficiaries’ interests vested upon the testator’s wife’s death. The provision in the will stated that
upon the death of the testator’s wife, the property that was held in trust was to be sold and proceeds divided amongst
the testator’s four children or their descendants. Id. at 656. The testator’s wife died in 1929, but the property was not
sold until March 15, 1947. Id. The Kentucky Court of Appeals, based on the language of the will, held that the rights
in the property or its proceeds became finally and irrevocably vested in the persons designated by the will—the
testator’s children and the descendants of any deceased children—on the date of the death of the testator’s widow.
Id. at 657. The court reasoned that “[b]y procrastination they could not defeat or impair the rights created by the
will.” Id. The court went on to state that “[e]quity considers done what should have been done, and the fact that a
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This Court has cited In re Estate of Taylor with approval but has never been confronted
with facts that suggested unreasonable delay in distribution and therefore did not have occasion
to formally adopt the rule expressed above. See Allen v. Shea, 105 Idaho 31, 34–35, 665 P.2d
1041, 1044–45 (1983) (finding “substantial and competent evidence to support the magistrate’s
finding that [there was no unreasonable delay]”); Hintze v. Black, 125 Idaho 655, 659, 873 P.2d
909, 913 (Ct. App. 1994) (“[T]he authority on which the personal representatives rely for this
policy argument, [In re Estate of Taylor] involved unreasonable delay by the administratrix in
distributing the estate, a factor clearly not present here.”). We now take occasion to formally
adopt the rule expressed in In re Estate of Taylor: a beneficiary’s interest will be deemed to vest
where there was unreasonable delay in distribution. To be clear, this rule applies to situations
where no time has been specified for distribution. Under such circumstances, distribution must
be made within a reasonable amount of time. What constitutes a reasonable time is a question of
fact for the trial court or jury to determine. If it is established that the trustee or personal
representative unreasonably delayed distribution, the court will deem the beneficiary’s interest to
have vested at a time when reasonable distribution should have occurred. With these principles
in mind, we turn to the facts of this case.
In this case, there was a trust provision stating that the trustee “shall, as soon as
reasonably possible, divide the net income and principal remaining in the trust into two (2) equal
shares and distribute them to the following beneficiaries: TONI C. JOHNSON and JOHN H.
CORNELL.” This Court has held that “unless contrary to settled principles of law, the intentions
of a trust’s settlors must control in actions involving the trust.” Carl H. Christensen Family Trust
v. Christensen, 133 Idaho 866, 873, 993 P.2d 1197, 1204 (1999). The trust reflects the settlors’
intent to have distribution made “as soon as reasonably possible.” However, the facts before this
Court indicate that Johnson delayed for nearly three years to account for or distribute the trust
assets, which appears to us to be unreasonable. However, whether Johnson unreasonably delayed
distribution of the estate is ultimately a question of fact that must be determined on remand.
sale was not immediately effected cannot divest the beneficiaries of their interests which became absolute upon the
death of the life tenant.” Id. See also In re Greene’s Will, 3 N.W.2d 704 (Wis. 1942) (holding that a beneficiary’s
right to receive a share of an estate was not divested by delay); Biles v. Webb, 161 N.E. 49 (Ohio 1928) (holding that
a trustee who is also a beneficiary under a trust is charged with the duty of paying off mortgages on real property at
the earliest possible date and distributing the estate to the beneficiaries, cannot defeat the right of the beneficiaries to
their share of the estate by postponing distribution through failing to pay off the mortgages when there is sufficient
income to do so).
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Because the tort claims in this case alleged injuries that may have lessened John’s Estate,
we hold that they did not abate under common law. On remand, the trial court must determine
not only whether waste has occurred, but also whether Johnson unreasonably delayed
distribution of the trust assets. If the finder of fact concludes that Johnson unreasonably delayed,
then as a matter of law, John’s interest in the trust assets vested at a time when distribution
should have occurred, assuming John survived through the time reasonably necessary to make
distribution. Because we hold that the Estate’s claims did not abate under the common law, we
do not reach the Estate’s second argument under Idaho Code section 5-327(2).
IV. CONCLUSION
We reverse the district court’s decision affirming the magistrate court’s grants of
summary judgment in favor of Johnson. We remand to the district court for proceedings
consistent with this opinion. Costs to the Estate.
Chief Justice J. JONES and Justices EISMANN, W. JONES and HORTON, CONCUR.
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