Matter of Osorio Irrevocable Trust ( 2014 )

October 28 2014
DA 14-0043
IN THE SUPREME COURT OF THE STATE OF MONTANA
2014 MT 286
IN THE MATTER OF THE OSORIO
IRREVOCABLE TRUST,
KARLENE A. KHOR,
Petitioner and Appellant,
v.
LINDA ST. PETER,
Respondent and Appellee.
APPEAL FROM: District Court of the Fourth Judicial District,
In and For the County of Missoula, Cause No. DP 13-195
Honorable Edward P. McLean, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
John Michael Myers; Myers Law, PLLC; Whitefish, Montana
For Appellee:
Richard A. Reep; Reep, Bell, Laird & Simpson, PC; Missoula, Montana
Submitted on Briefs: October 8, 2014
Decided: October 28, 2014
Filed:
Clerk
Justice Beth Baker delivered the Opinion of the Court.
¶1 Karlene A. Khor appeals the Fourth Judicial District Court’s order dissolving a
temporary injunction. The injunction had been ordered to prevent Linda St. Peter, acting
in her capacity as the trustee of the Osorio Irrevocable Trust, from selling a property held
by the Trust. The sole issue raised on appeal is whether the District Court manifestly
abused its discretion when it dissolved the temporary injunction. We do not address the
merits of that issue, however, because the property in question has been sold and we
conclude that the issue is moot.
PROCEDURAL AND FACTUAL BACKGROUND
¶2 Linda and Karlene are two of the children of Herbert and Betty Lou Osorio.
Betty, now deceased, and Herbert allegedly created the Osorio Irrevocable Trust in May
2012. At that time, they conveyed a piece of real property and a home (Kalispell
Property) to the Trust and designated Linda as the trustee. Karlene filed an action
challenging the existence of the Trust based on an allegedly forged signature on the Trust
Agreement and allegations of duress and undue influence.
¶3 Karlene received notice that Linda, acting on behalf of the Trust, planned to sell
the Kalispell Property. Karlene became concerned that the sale would negatively impact
Herbert’s ability to obtain veteran’s benefits because the sale could create income that
might count against his eligibility. She filed a motion requesting a temporary injunction
against the sale of the Kalispell Property. The District Court entered the temporary
injunction on November 15, 2013.
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¶4 On November 20, 2013, Linda filed a motion for relief from the temporary
injunction. The court held a hearing on December 11, 2013. At that time, Linda testified
that, under the current circumstances, Herbert was not eligible for a veteran’s pension or
medical benefits. Her inquiry indicated that he could be eligible for benefits in 2014, but
only if the income from the sale of the house was not reported in that year. She had
entered into a purchase and sale agreement with the closing date in 2013, but the sale had
been postponed by the temporary injunction. Karlene testified that she also had
researched Herbert’s eligibility for benefits. Although she acknowledged that Herbert
had not yet applied for benefits, she estimated that Herbert could receive approximately
$1,700 monthly if he were eligible. Neither party had been able to secure a witness from
the Veteran’s Administration to testify at the hearing about Herbert’s eligibility.
¶5 At the conclusion of the hearing, the District Court determined that it was in
Herbert’s best interest to sell the property. The court dissolved the temporary injunction
and its written order followed on January 2, 2014. The court found that Linda was a
credible witness, and it expressed concern that delaying the sale of the Kalispell property
could negatively impact Herbert’s ability to qualify for benefits. Karlene did not seek a
stay of execution. The Kalispell Property was sold to a third party on December 20,
2013, and the proceeds were deposited into a trust account according to the District
Court’s instructions.
¶6 Karlene appeals the decision to dissolve the injunction.
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DISCUSSION
¶7 “The judicial power of the courts of Montana is limited to justiciable
controversies.” Greater Missoula Area Fedn. of Early Childhood Educators v. Child
Start, Inc., 2009 MT 362, ¶ 22, 353 Mont. 201, 219 P.3d 881. Mootness is “one of
several central concepts of justiciability.” Sudan Drilling, Inc. v. Anacker, 2014 MT 72,
¶ 8, 374 Mont. 272, 320 P.3d 977. Mootness is “a threshold issue which must be
resolved before addressing the substantive merits of a dispute.” Mt. W. Bank, N.A. v.
Cherrad, LLC, 2013 MT 99, ¶ 30, 369 Mont. 492, 301 P.3d 796 (citing Progressive
Direct Ins. Co. v. Stuivenga, 2012 MT 75, ¶ 17, 364 Mont. 390, 276 P.3d 867).
¶8 An issue becomes moot when the circumstances present at the outset of the action
have ceased to exist, or if the court is unable to grant effective relief or to restore the
parties to their original positions due to an intervening event or change in circumstances.
Sudan Drilling, ¶ 8 (citing Child Start, ¶ 23). “[C]ourts lack jurisdiction to decide moot
issues insofar as an actual ‘case or controversy’ no longer exists.” Child Start, ¶ 23. “In
deciding whether a matter is moot, we determine whether the court can grant effective
appellate relief.” Mt. W. Bank, ¶ 30.
¶9 The case comes to this Court for the sole purpose of reviewing the District Court’s
order dissolving the temporary injunction. M. R. App. P. 6(3)(e). Linda argues that the
issue is moot. Karlene did not obtain a stay of execution of the court’s order and the
Kalispell property has been sold to a third party. We have warned that effective relief
may be impossible to achieve where an underlying property is sold to a third party during
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the pendency of an appeal. Sudan Drilling, ¶ 10. Even if this Court were to reverse the
District Court’s order dissolving the temporary injunction, the injunction preventing the
sale to a third party would no longer serve any purpose because the event that the
injunction was designed to prevent already has occurred. Because Karlene seeks to
prevent a sale that already has happened, the circumstances present at the outset of the
action have ceased to exist.
¶10 Karlene argues that her appeal is not moot because Linda should be liable for,
among other things, “restitution of any military benefits lost to Herbert as a result of the
sale . . . .” Even if a party cannot be restored to its original pre-judgment position, “other
possibilities such as restitution may be appropriate.” Sudan Drilling, ¶ 11. But
reinstating the temporary injunction in this appeal is not the remedy for redressing the
improprieties Karlene alleges. Other potential remedies exist if Karlene is correct in
asserting that the sale of the Kalispell Property deprives Herbert of eligibility for benefits.
Sections 72-38-1001 and 1002, MCA, provide remedies and damages for a breach of
trust by a trustee. A court may compel the trustee to “redress a breach of trust by paying
money, restoring property, or other means.” Section 72-38-1001(2)(c), MCA.
¶11 “Whether a case has become moot will depend on the relief sought [emphasis
added] and the specific factual and procedural circumstances of the particular case.”
Sudan Drilling, ¶ 11 (citing Stuivenga, ¶ 43). Karlene has failed to establish how the
relief sought in this appeal—reinstatement of the temporary injunction—entitles her to
restitution. This appeal involves only the District Court’s decision to allow the sale of the
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property to go forward, and we need not consider Karlene’s other potential claims at this
time. The property has been sold and we conclude that the issue is moot.
¶12 Linda requests attorney’s fees on appeal pursuant to § 72-38-1004, MCA. That
section provides: “In a judicial proceeding involving the administration of a trust, the
court, as justice and equity may require, may award costs and expenses, including
reasonable attorney fees, to any party, to be paid by another party or from the trust that is
the subject of the controversy.” Section 72-38-1004, MCA. Karlene argues that she has
legitimate grounds for appeal and that her appeal is not frivolous, unreasonable, or
without foundation. The statute, however, imposes no such standard. We conclude that
an award is appropriate under the facts of this case where, as we have determined, the
sale of the property following the lifting of the injunction clearly has rendered moot the
relief sought on appeal. Further, the record shows that the award will serve to protect
trust assets from being depleted by the litigation. The affidavit Linda submitted to the
District Court states that the trust is without an adequate corpus; she estimates that “the
Trust will run out of funds to support Herbert within 2 to 3 months without liquidation of
the home.” Under these circumstances, the equities tip in favor of an award.
Accordingly, we award costs and expenses incurred in this appeal, including reasonable
attorney’s fees, to Linda St. Peter in her capacity as the trustee of the Osorio Irrevocable
Trust.
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CONCLUSION
¶13 The District Court’s January 2, 2014 order is affirmed. The case is remanded for
determination of fees and costs on appeal and for further proceedings.
/S/ BETH BAKER
We concur:
/S/ MIKE McGRATH
/S/ LAURIE McKINNON
/S/ JAMES JEREMIAH SHEA
/S/ JIM RICE
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