in Re Mulloy Family Trust ( 2019 )

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
revision until final publication in the Michigan Appeals Reports.
STATE OF MICHIGAN
COURT OF APPEALS
In re MULLOY FAMILY TRUST and THE
ALTHEA H. MULLOY TRUST.
JOHN MULLOY, UNPUBLISHED
February 19, 2019
Petitioner-Appellant,
v No. 342526
Midland Probate Court
KERRY MULLOY, MICHAEL MULLOY, and LC No. 17-008885-TV
PATRICK MULLOY,
Respondent-Appellees,
and
ALTHEA H. MULLOY,
Appellee
Before: M. J. KELLY, P.J., and SERVITTO and BOONSTRA, JJ.
PER CURIAM.
Petitioner John Mulloy appeals by right the order of the probate court finding his petition
frivolous and awarding $37,583.80 in attorney fees and costs to respondents Kerry Mulloy,
Michael Mulloy, and Patrick Mulloy (collectively, “respondents”).1 We affirm.
1
Because of the identical surnames of the parties, when speaking of them individually we will
generally refer to them by their first names.
I. PERTINENT FACTS AND PROCEDURAL HISTORY
In 1990, Althea Mulloy and her now-deceased husband John B. Mulloy created the
Mulloy Loving Trust. After John’s death in 1995, the Mulloy Loving Trust became an
irrevocable trust known as the Mulloy Family Trust (hereinafter “the Family Trust”). In 1996,
Althea created a revocable living trust, the Althea H. Mulloy Trust (hereinafter “the Althea
Trust”). Althea, Kerry and Michael are co-trustees of the Family Trust. Althea was the sole
trustee of the Althea Trust until 2014, when she amended the trust to name herself, petitioner,
and Michael as co-trustees.
In 2016, respondents signed a document purporting to remove petitioner as a co-trustee of
the Althea Trust pursuant to the trust language, and to appoint Kerry as a co-trustee. In 2017,
petitioner filed a petition with the probate court seeking removal of all trustees from both trusts
and the appointment of an independent trustee to administer both trusts. The petition alleged in
relevant part as follows:
7. ALTHEA H. MULLOY presently resides in assisted living and
suffers from a progressive dementia condition although she has not been legally
or medically determined to be incompetent at this time.
8. None of the parties in this matter have fiduciary or trustee
experience outside the realm of their current appointments under these Trusts.
9. ALTHEA H. MULLOY’s children are disparate [sic] in terms of
location, values and interests particularly when it comes to their Mother and the
management of her financial affairs which [sic] are primarily comprised of the
Trust assets.
10. The Petitioner submits than an independent Trustee is needed
under both Trusts at this time in order to protect ALTHEA H. MULLOY and
obtain the intended benefits for her during her lifetime for the following reasons:
a. The Respondents KERRY, MICHAEL and PATRICK have
improperly attempted to terminate JOHN as a Trustee of the Althea H. Mulloy
Trust, having failed to establish the prerequisites of ALTHEA’S incompetence or
cause of Petitioner’s removal as required by the Trust . . . .
b. The strained relations between the Petitioner and his Brother-
Respondents evidence by a general lack of communications, transparency and
trust.
c. The Respondents have stated concerns about preserving the assets
of the Trust for themselves rather than expending or preserving the same for their
mother’s benefit.
d. The refusal to sell along with the continuing retention and the
attendant maintenance, tax and insurance cost of a cottage property that goes
virtually unused.
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e. The current freeze on investment activity imposed by the account
custodians due to the uncertainty of their authority under the prevailing
circumstances.
f. There is presently a complete breakdown in trust and cooperation
between Respondents and Petitioner and under the circumstances neither the
Respondents nor the Petitioner will be able to meet their fiduciary duties as
Trustees.
The petition requested that the probate court appoint an independent trustee and order all current
trustees to resign their positions and present final accountings.
The parties conducted discovery. In August of 2017, Althea filed a motion for summary
disposition,2 arguing that the petition had failed to allege that she was incompetent or otherwise
incapacitated, or to otherwise allege any basis for her removal as trustee or for the removal of
Kerry and Michael in contravention of her wishes as settlor of both trusts, current co-trustee, and
current sole beneficiary of both trusts. Respondents also filed a joint motion for summary
disposition in August 2017, arguing that the petition had failed to allege, and petitioner had
failed to prove, any grounds for the removal of any trustees or any actual damages arising from
the actions of the current co-trustees, noting that the petition made reference to assets that were
not a part of either trust. They also argued that the petition was frivolous.
After a hearing, the probate court granted both motions, holding that the petition had
failed to state a claim on which relief could be granted and that there was no genuine issue of
material fact, such that respondents were entitled to summary disposition. The probate court
noted that it lacked the power to remove Althea and appoint an independent trustee as long as
she was alive, competent, and had not resigned as trustee, and that nothing in the petition
challenged Althea’s competency. The probate court noted that respondents had argued that they
were entitled to attorney fees and costs, but it reserved that issue for a separate hearing.
Respondents subsequently moved the trial court to impose sanctions on petitioner for a frivolous
filing and to award respondents attorney fees and costs, for having to defend the petition, as a
sanction, as reimbursement from the trust, or as a combination of the two.
After a hearing on respondents’ motion for reimbursement of attorney fees and sanctions,
the probate court issued a written opinion and order finding petitioner’s initial petition frivolous
because “there was no reasonable basis to believe that the facts underlying [petitioner’s] legal
position were in fact true.” The probate court awarded respondents $37,583.80 in attorney fees
and costs, of which $10,000 was to be paid by petitioner individually, while the remaining
$27,583.80 was to be paid from the trusts “in proportions as recommended by the trustees.” The
court further ordered that if the trust assets were insufficient to pay these fees, the amount “shall
be paid by the individuals pursuant to their own attorney-client contracts.”
2
It is not clear whether the petition named Althea as a respondent, but in any event as a co-
trustee, settlor, and sole beneficiary of both trusts she possessed the right to participate in the
action as an interested person. See MCR 5.125(C)(32),(33).
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The probate court later denied reconsideration of its order granting the motions for
summary disposition. This appeal followed. On appeal, petitioner does not challenge the
underlying order granting the motions for summary disposition, but only the order awarding
attorney fees and costs.
II. FINDING OF FRIVOLOUSNESS
Petitioner argues that the probate court erred by finding his initial petition frivolous. We
disagree. We review for clear error a trial court’s finding that an action is frivolous. See Kitchen
v Kitchen, 465 Mich. 654, 661; 641 NW2d 245 (2002). “A decision is clearly erroneous where,
although there is evidence to support it, the reviewing court is left with a definite and firm
conviction that a mistake has been made.” Id. We review trust language de novo as a question
of a law. In re Estate of Reisman, 266 Mich. App. 522, 526; 702 NW2d 658 (2005).
At the outset, we note that we agree with respondents that the $27,583.80 ordered to be
paid to respondents from the trusts was not a sanction, but instead was reimbursement to the
trustees3 for expenses incurred in defending the petition. The Althea Trust and Family Trust
both contain language providing for the reimbursement of expenses incurred by trustees in
administering the trust. MCL 700.7904(2) provides that a trustee who “participates in a civil
action or proceeding in good faith” is entitled to receive “all expenses and disbursements
including reasonable attorney fees that the trustee incurs in connection with its participation.”
Counsel for respondents noted at the hearing that “Kerry Mulloy [and] Michael Mulloy are both
trustees . . . and therefore entitled to reimbursement from the trust” and that respondents were
seeking “both sanctions from the petitioner and reimbursement of any fees that are not
sanctioned.” The probate court’s award, while not explicitly labeling the two awards as either
sanctions or reimbursement, does make it clear that the $27,583.80 is to be paid from trust assets
and that, if those assets are insufficient, respondents then are responsible for any remaining
portion of that amount. Therefore, petitioner’s argument concerning the probate court’s finding
of frivolousness only impacts the probate court’s order that petitioner is personally responsible
for payment of $10,000 in attorney fees to respondents.
MCR 2.625(A)(2) provides that a trial court may impose sanctions on a party if it finds
that “an action or defense was frivolous,” and award costs as provided by MCL 600.2591.
MCL 600.2591(2) provides that such costs “shall include all reasonable costs actually incurred
by the prevailing party and any costs allowed by law or by court rule, including court costs and
reasonable attorney fees.” An action is frivolous if “[t]he party had no reasonable basis to
believe that the facts underlying the party’s legal position were in fact true” or “[t]he party’s
legal position was devoid of arguable legal merit.” MCL 600.2591(3)(a)(ii), (iii).
Nothing in the initial petition alleged that Althea had died, resigned, or was incapacitated.
Although the petition stated that Althea suffered “a progressive dementia condition,” it went on
3
Although Patrick was not a co-trustee, none of the attorney fees submitted were for legal work
performed solely on his behalf; rather, he appears to have benefited from work done on behalf of
the trustee respondents in responding to the petition.
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to assure the court that “she has not been legally or medically determined to be incompetent at
this time.” In fact, the petition later asserted that the other trustees had “failed to establish the
prerequisites of ALTHEA’s incompetence or cause for Petitioner’s removal” in their attempts to
remove him as co-trustee of the Althea Trust. The language of the Althea Trust permits Althea
to direct the use of all trust assets and income as she sees fit as long as she is alive and not
incapacitated. Article 10 of the Althea Trust permits Althea to remove any trustee during her
lifetime, without cause, notice, or any reason. Article 8 permits “the person or persons with the
power to remove a trustee under Article 10” to appoint successor trustees in the event of a
vacancy. And Article 2 of the Althea Trust permits Althea to amend or revoke the trust.
Althea’s power over the trust does not depend on her being a trustee, but only on her being alive
and not determined to have been incapacitated. In short, without a determination of Althea’s
incapacity, any action the probate court may have taken to remove respondents as trustees would
have usurped Althea’s absolute rights under the trust. Yet petitioner did not even allege that
Althea was, or may have been, incapacitated. With regard to the Althea Trust, petitioner’s
attempt to remove respondents as trustees without addressing the issue of Althea’s capacity
lacked legal merit. MCL 600.2591(3)(a)(iii).
With regard to the Family Trust, the petition did not explain the basis, either in trust
language or in statute, for petitioner’s request to remove the trustees and replace them with an
independent trustee. Although petitioner asserted that there were “strained relations” and “a
complete breakdown in trust and cooperation between Respondents and Petitioner,” petitioner
was never a trustee for the Family Trust. Although on appeal petitioner cites
MCL 700.7706(2)(b) as a statutory basis for his seeking the removal of the trustees of the Family
Trust, that statute permits a probate court to remove a trustee if “lack of cooperation among
cotrustees substantially impairs the administration of the trust.” (Emphasis added). The petition
did not allege any of the other grounds for removal of a trustee found in MCL 700.7706. See
MCL 700.7706(2)(a), (c)-(d). Instead the petition merely alleged that petitioner and respondents
disagreed over the administration of both trusts. Moreover, the documents attached to the
petition indicated that Althea was a co-trustee of the Family Trust and possessed the power to
amend that trust.4 Again, without addressing Althea’s capacity or other reasons why she should
be removed as trustee for the Family Trust, petitioner’s claim for the appointment of an
independent trustee was devoid of legal merit. MCL 600.2591(3)(a)(iii).
Petitioner argues that the probate court erred by relying on a statement he made at his
deposition, describing Althea as “a pretty savvy business woman,” to conclude that petitioner
4
Subsequent filings of the complete trust documents by respondents reveal that they provide that
after one of the settlors dies or becomes disabled, the other settlor may remove any trustee, and
only after the death or incapacity of both John and Althea may a “majority of beneficiaries”
remove a trustee. Petitioner asserted at the time he filed the petition that he had been denied the
complete trust documents by respondents. Because the probate court was required to evaluate
petitioner’s claims at the time they were made when determining whether to apply sanctions, see
In re Costs & Attorney Fees, 250 Mich. App. 89, 94-95; 645 NW2d 697 (2002), we do not base
our opinion on the portions of the Family Trust documents that, taking petitioner at his word,
were not made available to him until after the petition was filed.
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had admitted to Althea’s capacity. Although the probate court did make reference to petitioner’s
statement, it does not appear that it relied on that statement in making its ruling; rather, it merely
“highlighted” that statement in its opinion when discussing the complete lack of allegations
regarding Althea’s capacity. We do not find clear error in the trial court’s reference to this
statement or in its finding that the initial petition was frivolous.5 See Kitchen, 465 Mich. at 661.
III. REASONABLE ATTORNEY FEES
Petitioner also argues that the trial court erred by determining that the fees imposed were
reasonable, without referring to the factors enumerated in Smith v Khouri, 481 Mich. 519, 528-
529; 751 NW2d 472 (2008). We disagree. We generally review for an abuse of discretion a
probate court’s determination that attorney fees are reasonable. See Smith; 481 Mich. at 526; see
also In re Temple Marital Trust, 278 Mich. App. 122, 128; 748 NW2d 265 (2008). However,
petitioner did not challenge in the probate court the reasonableness of the fees requested by
respondents. We need not consider a challenge to the reasonableness of an attorney fee award
raised for the first time on appeal. Milligan v Milligan, 197 Mich. App. 665, 671; 496 NW2d 394
(1992). In any event, petitioner does not actually contest the reasonableness of the fees awarded,
but only faults the probate court for failing to conduct a full analysis of the reasonableness of the
fees using the Smith factors. The probate court was only required to engage in such an analysis
if the reasonableness of the fees was contested. See Reed v Reed, 265 Mich. App. 131, 166; 693
NW2d 825 (2005); see also Head v Phillips Camper Sales & Rental, Inc, 234 Mich. App. 94, 113;
593 NW2d 595 (1999) (stating that “[t]he trial court should normally hold an evidentiary hearing
when the opposing party challenges the reasonableness of a fee request”). Because petitioner
admits that he never contested the reasonableness of the fees, the probate court did not abuse its
discretion by failing to conduct such an analysis on the record. Smith; 481 Mich. at 526.
Affirmed.
/s/ Michael J. Kelly
/s/ Deborah A. Servitto
/s/ Mark T. Boonstra
5
Although the probate court’s order described the petition a lacking a “reasonable basis to
believe that the facts underlying [petitioner’s] legal position were in fact true,” the frivolous
nature of the initial petition is, in our opinion, better described as being devoid of legal merit.
Although petitioner did indeed file documents with the probate court in support of his damages
claim, and those documents contained incorrect information about funds and property that were
not trust assets, the probate court specifically found that the initial petition was a frivolous filing.
The faults in the initial petition were based on petitioner’s failure to allege any legally
meritorious basis for the removal of trustees from either trust. The probate court was required to
evaluate the petition at the time it was filed. Costs & Attorney Fees, 250 Mich. App. at 94-95.
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