Anderson v. Dussault ( 2014 )

/ F I L:'E ~.,.
IN CLERKS OFFICE
llJfiRBE COURT, 8TATE OF WASitNGTCN
DATE SEP 0 4 2014
~0.9.
CHIEF TICE ;
IN THE SUPREME COURT OF THE STATE OF WASHINGTON
RACHEL MARGUERITE ANDERSON )
(formerly RACHEL M. RODGERS), ) No. 89788-3
)
Petitioner, )
)
v. )
)
WILLIAM L.E. DUSSAULT and JANE DOE )
DUSSAULT, husband and wife, and the )
marital community composed thereof; )
BARBARA J. BYRAM and JOHN DOE )
BYRAM, wife and husband, and the marital ) EnBanc
community composed thereof; )
YEVGENY JACK BERNER and JANE DOE )
BERNER, husband and wife, and the )
marital community composed thereof; )
WILLIAM L.E. DUSSAULT, PS, a )
Washington professional services corporation; )
the DUSSAULT LAW GROUP, a Washington )
corporation; RICHARD MICHAEL )
McMENAMIN and SHARI L. McMENAMIN, )
husband and wife, and the martial community )
composed thereof; McMENAMIN & )
McMENAMIN PS, a Washington professional )
service corporation; ANDREA DAVEY (fka )
ANDREA RODGERS) and JOHN DOE )
DAVEY, wife and husband, and the marital )
community composed thereof; and WELLS )
FARGO BANK, NA, a foreign corporation, )
)
Respondents. ) Filed SEP 0 4 2014
No. 89788-3
MADSEN, C.J.-At issue is whether the superior court's approval of annual
accountings of petitioner's special needs trust under the Trustees Accounting Act (TAA),
chapter 11.106 RCW, bars petitioner's current suit, which is timely under the Trust and
Estate Dispute Resolution Act (TEDRA), chapter 11.96A RCW. We review a published
Court of Appeals decision affirming the summary dismissal of petitioner Rachel
Anderson's breach of trust action against the trustee and two members of a committee
charged with making trust disbursements, and her malpractice action against the attorney
hired to file annual trust accountings with the superior court. We hold that because
Rachel was not represented by a guardian ad litem when the court approved the trust's
annual accountings, she did not have notice of these proceedings and accordingly can
now bring a breach of trust action under TEDRA. We reverse the Court of Appeals,
vacate its award of attorney's fees, and remand for further proceedings.
FACTS AND PROCEDURE
When Rachel Anderson (formerly Rachel Rodgers) was six years old, a horse
kicked her in the face and she sustained serious injuries. Her many fractures and
lacerations required multiple surgeries and she suffered severe cognitive and emotional
trauma. Rachel's family hired respondent Richard McMenamin to pursue a personal
injury action against the owner of the horse. Br. of Appellant Rachel Marguerite
Anderson at 4.
2
No. 89788-3
On August 25, 1997, the Clallam Cmmty Superior Court approved a personal
injury settlement of $3 00,000.00 and the creation of the "Rachel Marguerite Rodgers
Trust." McMenamin hired respondent attorney William Dussault to draw up the trust
agreement. After attorney's fees and other costs, a net amount of$187,160.66 entered
the trust. As outlined in the trust agreement, respondent Wells Fargo Bank, NA served as
trustee. The agreement also created a trust advisory committee (T AC) composed of
petitioner's mother, Andrea Davey (formerly Andrea Rodgers); and respondent
McMenamin, who were tasked with making distribution decisions for Rachel's benefit.
The trust agreement identifies the trust as a special needs trust intended to help
Rachel cope with her severe disabilities stemming from the accident. The trust
agreement declares that
it is the purpose of this Trust to provide extra and supplemental medical,
health, and nursing care, dental care, developmental services, support,
maintenance, education, rehabilitation, therapies, devices, recreation, social
opportunities, assistive devices, advocacy, legal services, respite care,
personal attendant care, income and other tax liabilities, and consultant
services for RACHEL MARGUERITE RODGERS over and above the
benefits she otherwise receives.
Clerk's Papers at 296. Moreover, the trust agreement declares an intention that the funds
be used for purposes specific to Rachel's injuries and disabilities and beyond basic
parental support obligations. 1 The TAC is charged with making distribution decisions
"Further, it is not the intent of this Court that the funds provided by this settlement be
used to excuse the obligations of her natural parents to provide for RACHEL MARGUERITE
RODGERS's continuing maintenance and basic support in accordance with their natural support
obligations for minor children under the laws of the State ofWashington. Payments from this
Trust shall be supplemental to such support obligations and shall not supplant the basic support
3
No. 89788-3
and is given "absolute and unfettered discretion to determine when and if RACHEL
needs regular and extra supportive services as referred to in the paragraphs above." !d. at
297.
The agreement requires the trustee (Wells Fargo) to deliver an annual statement of
the tmst's financial and investment activity to Rachel, any court appointed personal
representative, and the TAC members. Additionally, the trust agreement requires that
this annual statement be filed with the court for approval.
The trust also contains a section governing major purchases like real estate. This
section provides that the title to or ownership of an asset like a house must be maintained
with the trust unless the trustee and the TAC agree otherwise. Additionally, the trustee
has discretion to allow the beneficiary to reside in the house rent-free, but only if advised
by the TAC that the beneficiary is not eligible for any public rent assistance due to her
disability.
Rachel takes issue with how her trust has been administered, alleging breach of
fiduciary duties and legal malpractice. First, she challenges the trust's purchase of a
minivan and subsequent operating and insurance costs, claiming that the car was never
used for its claimed purpose oftaldng her to far-off doctor's appointments. Rachel also
challenges the trust's purchase of computers and related software. She argues that these
computers and software were used by the entire family and as such were a natural
parental expense not at all related to her disability. Next, Rachel contests the procedures
obligation ofthe natural parents as determined by the laws of the State ofWashington." Clerk's
Papers at 295.
4
No. 89788-3
the trust used to purchase a house in the name of her mother's then boyfriend. She argues
that the process surrounding the purchase of the house violated express provisions for
"major purchases" contained in the trust agreement. Rachel also challenges the use of
trust money to purchase birthday gifts that Rachel contends was actually used for new
carpeting and a swimming pool. Finally, Rachel contends that the trustee and legal fees
charged to the trust were excessive and at above market rates. Br. of Appellant Rachel
Marguerite Anderson at 8-12.
As required by the terms of the trust, the trustee made annual filings with the court
detailing all financial and investment activity of the trust during the prior year. The
trustee, Wells Fargo, hired respondent attorney Dussault to prepare the annual reports for
court approval. The trust filed seven different accountings from 2000-2009 and the court
approved each one in a succinct order. The form and effect of these accountings was
governed by the TAA, chapter 11.106 RCW.
Rachel filed her complaint on July 22, 2011 in Clallam County Superior Court
against Andrea Davey, McMenamin, Wells Fargo, and Dussault, alleging breach of
fiduciary duties and malpractice. Motions for summary judgment were filed by Dussault,
McMenamin, and Wells Fargo. The court granted summary judgment to McMenamin,
Dussault, and Wells Fargo. The superior court then dismissed all of Rachel's claims,
including her claim against her mother, Andrea. Rachel appealed as to McMenamin,
Dussault, and Wells Fargo, but chose not to appeal her claim against Andrea.
5
No. 89788~3
On appeal, Division Two affirmed in a published decision. Anderson v. Dussault,
177 Wn. App. 79, 310 P.3d 854 (2013). The court reasoned that Rachel's claims were
barred by RCW 11.106.080, a provision of the TAA that makes court approval of an
accounting final and binding on all parties, even incompetent beneficiaries. Because the
superior court had approved all the accountings and Rachel never appealed those
approvals, she could not now pursue breach of trust claims based on conduct disclosed in
those accountings. Division Two also ordered Rachel to pay Dussault's and Wells
Fargo's attorney's fees, citing RCW 11.96A.150.
This court accepted review on April2, 2014.
DISCUSSION
A. The Trustees' Accounting Act
Passed in 1951, the TAA outlines procedures for the discretionary and mandatory
review of accountings of the receipts and disbursements of trusts. The TAA requires
trustees to deliver an annual statement to each adult income trust beneficiary detailing all
receipts and disbursements of the trust during that year. RCW 11.106.020. In addition to
that required annual statement, the TAA allows trustees to file intermediate accountings
in superior court and likewise allows beneficiaries to petition the court to direct the
trustee to file an interim accounting. RCW 11.106.030, .040.
Whenever a trustee files an accounting, whether at its own election or the court's
mandate, the court must issue a detailed notice and ask for objections to be filed before a
certain date ("the return date"). RCW 11.106.050. In order to facilitate this objection
6
No. 89788-3
process, the TAA provides that "[t]he court shall appoint guardians ad litem as provided
in RCW 11.96A.160." RCW 11.106.060. Further, RCW 11.96A.l60 is a TEDRA
provision that outlines procedures for the discretionary appointment of guardians ad
litem. Once the return date has passed, the court assesses the "correctness of the account
and the validity and propriety of all actions of the trustee" and issues a decree approving
or rejecting the accounting and "surcharging the trustee or trustees for all losses, if any,
caused by negligent or wilful breaches of trust." RCW 11.106.070. The decree
approving or rejecting the accounting, furthermore, "shall be deemed final, conclusive,
and binding upon all the parties interested including all incompetent, unborn, and
unascertained beneficiaries of the trust subject only to the right of appeal under RCW
11.106.090." RCW 11.106.080.
B. TEDRA
The legislature passed TEDRA in 1999 to "set forth generally applicable statutory
provisions for the resolution of disputes and other matters involving trusts and estates in a
single chapter under Title 11 RCW." RCW 11.96A.010. TEDRA also creates methods
for nonjudicial resolution of trust disputes. !d.
TEDRA is an extensive statute, but most pertinent here is its provision for a statute
of limitations for breach of trust actions. TEDRA provides a three-year statute of
limitations for beneficiaries to bring actions for breach of trust. RCW 11.96A.070.
Under this provision, the beneficiary has three years from the date she or her personal
representative was sent a report that adequately discloses the potential for a breach of
7
No. 89788-3
trust claim. TEDRA details the information that must be included in this report in order
to impute notice of a potential claim to the beneficiary. One piece of required
information is a statement explaining to the beneficiary that she has a right under the
TAA to request that an accounting be filed with the superior court. RCW
ll.96A.070(l)(b)(vii). This statute of limitations will be tolled, and notice will not be
imputed to the beneficiary, if the beneficiary is a minor without a guardian ad litem.
RCW 11.96A.070(4). As explained above, the court retains discretion to appoint or not
appoint guardians ad litem under TEDRA. RCW 11.96A.160.
C. The TAA does not bar petitioner's TEDRA claim
Petitioner contends that the TAA does not bar her breach of trust claim because
RCW 11.106.060 of the TAA requires appointment of a guardian ad litem and she never
received a guardian appointment. Petitioner focuses on the TAA's requirement that
"[t]he court shall appoint guardians ad litem." RCW 11.106.060 (emphasis added).
Respondents contend that the plain language of RCW 11.106.060 requires
guardians to be appointed "as provided in RCW 11.96A.160," a provision ofTEDRA that
creates a discretionary appointment procedure. So the appointment of guardians under
the TAA is likewise a discretionary determination, and the court's failure to appoint one
here was not error.
Statutory construction is an issue of law that we review de novo. State v. JP., 149
Wn.2d 444,449-50,69 P.3d 318 (2003). In conducting this review, our primary purpose
is to ascertain and effectuate the intent of the legislature. I d. Further, "it is the duty of
8
No. 89788-3
this court to construe two statutes dealing with the same subject matter so that the
integrity of both will be maintained." Gilbert v. Sacred Heart Med. Ctr., 127 Wn.2d 370,
375, 900 P.2d 552 (1995).
Petitioner mistakenly focuses on whether appointment of guardians is
discretionary or mandatory. The plain language of the TAA is unambiguous and requires
that appointment of guardians under the TAA be governed by TEDRA's procedures.
Because TEDRA makes appointment of guardians discretionary, so too must
appointment of guardians be discretionary under the TAA. See In re Estate of Jones, 152
Wn.2d 1, 10-11, 93 P.3d 147 (2004) (holding that one provision's permission for removal
only for '"reasons specified'" in a second provision incorporated the second provision's
catchall phrase '"for any other cause or reason which to the court appears necessary'").
In any event, the parties focus on the wrong question. Though the superior court
did not err by failing to appoint a guardian for Rachel when it considered her trust
accountings, a question remains whether a breach of trust claim that would be timely
brought under TEDRA is barred by the TAA provision establishing the finality of
accountings filed with the court.
To answer this question, our analysis must begin with the plain language of the
TAA and TEDRA. !d. at 11 ("Where a statute is unambiguous, the court assumes the
legislature means what it says and will not engage in statutory construction past the plain
meaning of the words."). Read together, the plain language of the TAA and TEDRA
9
No. 89788-3
reveal a legislative intent that minor beneficiaries have notice only where the court
appoints a guardian ad litem or they have a valid virtual representative.
As outlined above, TEDRA provides a three-year statute of limitations for breach
of trust actions calculated from the time that the beneficiary receives notice of the
potentiality of a claim. RCW 11.96A.070. Notice of the potentiality of a claim is
accomplished by the trustee sending the beneficiary or her representative a report
containing specified information. Among other things, the report must contain a
statement that the beneficiary has the right to demand an accounting with the court under
the TAA. RCW 11.96A.070(1)(b)(vii). But this statute of limitations is tolled, and
notice is therefore not imputed, where the beneficiary is a minor without an appointed
guardian. RCW 11.96A.070(4). Accordingly, notice of a potential claim, which by
definition requires notice of the ability to demand a TAA accounting, is not imputed to
the beneficiary until she reaches the age of majority or has a guardian appointed. Here,
because the court never appointed Rachel a guardian, she did not receive legal notice of
her potential breach of trust claim, or her right to demand an accounting under the TAA,
until she turned 18. At that point the three-year statute of limitations began to run, and
she properly initiated this action within three years of that time, when she was 20 years
old.
Just as minors without guardians will not receive legal notice of the potentiality of
a breach of trust claim without notice of their ability to demand a T AA accounting, the
TAA notice provisions lead to the conclusion that minors without guardians will not
10
No. 89788-3
receive legal notice of an ongoing accounting initiated by the trustee. When any TAA
accounting is filed, the court is required to issue a detailed notice. This notice must
specify the time and place for the return date, include the names of the trustee, and ask
that any objections be filed by the return date. RCW 11.106.050. Additionally, the
notice must be personally served on all parties or their virtual representatives. !d.; RCW
11.96A.ll 0. Meanwhile, a related provision ofTEDRA defines "virtual representation"
to include both guardians and parents, but the statute specifically provides that a conflict
of interest defeats virtual representation. 2 Immediately after detailing the procedures for
notice, the TAA outlines procedures for appointing guardians and representatives in order
to facilitate the beneficiary's ability to respond to the accounting before the court rules on
it. RCW 11.106.060. Here, Rachel did not have a guardian ad litem and never
personally received notice of any of the accountings that occurred during her minority.
Her mother's notice of the accountings cannot qualify as virtual representation because of
the existing conflict of interest between Rachel and her mother. Accordingly, Rachel
never received proper notice of the ongoing accountings. Though respondents are correct
that the appointment of guardians is discretionary under both the TAA and TEDRA, there
must be a consequence for initiating an accounting proceeding without one. Just as a
minor does not have notice of her ability to bring a TEDRA breach of trust claim if she
2
"To the extent there is no conflict of interest between the representative and the person
represented ... (b) A guardian of the person may represent and bind the incapacitated person [or]
(f) A parent may represent and bind the parent's minor or unborn child or children if a guardian
for the child or children has not been appointed." RCW 11.96A.l20(4).
11
No. 89788-3
does not have a guardian, we hold that minors without an appointed guardian or other
valid virtual representative lack notice of any ongoing accounting proceedings.
This analysis is consistent with cannons of statutory construction adopted by this
court. In cases of statutory inconsistencies, the later and more specific statute controls
over the earlier and more general one. Diaz v. State, 175 Wn.2d 457, 470, 285 P.3d 873(2012); MICHAEL SINCLAIR, A GUIDE TO STATUTORY INTERPRETATION 138 (2000).
Thus, even if one concludes that the plain language of TEDRA and the T AA cannot be
squared, TEDRA, as the later statute more specific to Rachel's breach of trust action,
would control. And TEDRA explicitly tolls the statute of limitations during minority
where no guardian has been appointed.
Respondents' argument to the contrary lacks support. Respondents hinge their
argument on the language of finality contained in the TAA and the interpretation of this
language in a Court of Appeals case, In re Testamentary Trusts for Barovic, 128 Wn.
App. 196, 114 P.3d 1230 (2005). But Barovic, while recognizing that a TAA accounting
cannot be revised once approved by the court, in fact supports the allowance of an
independent cause of action for breach of trust. Though the Barovic court did hold that
Barovic relinquished his right to recover sums that should have been reported on past
accounting statements because the TAA accountings were final and Barovic never
appealed, the court also noted that Barovic did not file an action for breach of fiduciary
duty under TEDRA. !d. at 202 n.7 ("Barovic claims that Pemberton breached her
fiduciary duty. But he never filed an action for breach of fiduciary duty -:-See RCW
12
No. 89788-3
11.96A.070(1)(a) (actions for breach of fiduciary duty have three-year statutes of
limitation)."). Barovic supports our reading of the statutes.
D. Additional Arguments
Respondent Dussault also argues that the doctrine of judicial estoppel blocks
Rachel's suit. He contends that Rachel accepted the benefits of the trust distributions,
which were approved and finalized by the court, and that she cannot now complain after
the fact that those benefits were improperly administered. Resp't Dussault's Suppl. Br. at
13-14. But judicial estoppel requires a party to take inconsistent positions at two judicial
proceedings. See Arkison v. Ethan Allen, Inc., 160 Wn.2d 535, 538-39, 160 P.3d 13(2007). Rachel has never taken a position in court inconsistent with the one she asserts
here. She was not a party to any of the approved accountings because she was a minor
and no guardian ad litem had been appointed. Judicial estoppel does not apply.
Additionally, Dussault and Wells Fargo contend that collateral estoppel and res
judicata block this action because Rachel chose not to appeal the superior court's
summary dismissal of her claim against her mother, instead focusing her appellate efforts
on her claims against respondents. Resp't Dussault's Answer to Pet. for Review at 14-
16; Wells Fargo Bank, NA's Resp. to Pet. for Review at 11-12. Neither collateral
estoppel nor res judicata apply because here the issues and claims are not being
relitigated, but rather were appealed first to the Court of Appeals and are now on review
in this court. An appeal is not a second adjudication for collateral estoppel or res judicata
purposes. See Fred Hutchinson Cancer Research Ctr. v. Holman, 107 Wn.2d 693, 708,
13
No. 89788-3
732 P .2d 97 4 (1987) (rejecting the argument that the release of a cotrustee compromises
an appeal as to the remaining trustee); Miller v. St. Regis Paper Co., 60 Wn.2d 484,485,
3 74 P .2d 67 5 ( 1962) ("[T]he rejection of an industrial insurance claim on the ground that
the workman was not in the course of his employment,from which no appeal is taken, is
res judicata against the employer in a subsequent action by the workman." (emphasis
added)). Rachel, and all appellants, are free to challenge on appeal all or some of the
claims and issues decided by the trial court. Her appeal as to respondents cannot be
barred simply because she did not appeal as to Andrea. Preclusion does not apply.
Finally, at oral argument, respondents suggested that because McMenamin acted
as Rachel's personal injury attorney and oversaw the creation of her special needs trust,
he stepped into the shoes of a guardian, though he was never formally designated as such.
We decline to reach this argument raised for the first time at oral argument and
unaddressed in the parties' briefing. RAP 12 .1. Moreover, there is no evidence in the
record that McMenamin served in this role.
CONCLUSION
We hold that the TAA does not bar Rachel's claims. Because she did not have a
guardian ad litem when her trust accountings were filed with and approved by the court,
she did not have the required notice of those proceedings and so cannot now be barred by
them. TEDRA's three-year statute of limitations is tolled for minors without guardians,
and Rachel's claims are timely under this provision. In addition to the issues of judicial
estoppel and preclusion addressed above, respondents urge us to decide several other
14
No. 89788-3
contingent arguments raised, but not decided, at the Court of Appeals? Though this court
may review de novo all trial court errors of law, here the trial court's summary judgment
hearing and order suggest it thought Rachel's claim was barred by the TAA. Rather than
addressing undeveloped arguments with little briefing and no clear trial court
consideration, we leave it to the trial court on remand to evaluate the merits of these
contingent claims. Accordingly, we reverse the Court of Appeals, vacate its award of
attorney fees, and remand for further proceedings.
3
In particular, respondents argue that the terms of the trust agreement bar Rachel's suit, that
Dussault did not owe Rachel a duty and therefore cannot be sued for malpractice, and that no
breach of duty occurred.
15
No. 89788-3
WE CONCUR:
::t-M/1 lwrN.-t .g .
S~4·
16