In Re The Guardianship Of: James P. Halligan ( 2016 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
In re the Guardianship of:
DIVISION ONE
JAMES P. HALLIGAN,
No. 73314-1-1
An Incapacitated Person,
VICTORIA E. HALLIGAN,
UNPUBLISHED OPINION
Appellant,
v.
CJ".
NORTHERN TRUST COMPANY and
DAVID N. DEL SESTO,
Respondents. FILED: May 23, 2016
Dwyer, J. — Under applicable guardianship law, when a court-appointed
guardian petitions the court for relief on behalf of the ward—such as permission
to change an acting trustee pursuant to a trust—the requested relief must be in
the ward's "best interest."1 The final decision of whether such relief is in the
ward's best interest rests with the "court making the appointment."2 In this way,
the court maintains its role as "'the superior guardian of the ward.'"3 In this case,
Victoria Halligan, as the court-appointed guardian of her father James, petitioned
the superior court seeking permission to remove the acting co-trustees of the
Halligan Trust, Northern Trust Company (Northern), and David N. Del Sesto, and
1 RCW 11 92.043(4V In re Guardianship of Lamb. 173Wn.2d 173, 191, 265 P.3d 876
(2011).
2 RCW 11.92.010.
3 Lamb, 173 Wash. 2d at 190 (quoting Seattle-First Nat'l Bank v. Brommers, 89 Wash. 2d 190,
200, 570P.2d 1035(1977)).
No. 73314-1-1/2
replace them with Whittier Trust Company (Whittier), asserting that this change
was in James's best interest. Given that the superior court was presented with a
range of evidence concerning whether such a change was proved to be in
James's best interest, and given that the superior court made a choice among
the alternatives that was both within this range of evidence and supported by
substantial evidence, there was no abuse of judicial discretion. Accordingly, we
affirm both the superior court's denial of Victoria's initial petition and her
subsequent motion for reconsideration.
I
James P. Halligan and Marcia S. Halligan were husband and wife.
Together they had three children: Victoria E. Halligan, Denisia K. Halligan, and
Christopher M. Halligan.4 All of these children are now adults.
On April 29, 1996, James and Marcia created two revocable living trusts—
the Halligan Trust and the Marcia S. Halligan Trust (the Trusts)—to hold,
administer, and eventually distribute their assets.5 James and Marcia transferred
substantially all of their assets to the Trusts, including two residential properties,
promissory notes, cash, securities, and fractional interests in limited partnerships,
limited liability companies, and a corporation.
By the end of 2008, James was diagnosed with dementia.6 In September
of that year, James and Marcia simultaneous amended and reinstated the
4 For clarity, we refer to all of the Halligans by first name.
5 Unless otherwise noted, we refer to the trusts collectively.
6We are informed of this fact from a medical report in the record that was once sealed.
Both parties have referenced the contents of the report in their briefor argument and, each party
concedes, we may publicly reference the contents of the report in our resolution of this dispute.
No. 73314-1-1/3
Trusts.7 The amended Halligan Trust provided that James and Marcia were the
primary income and principal beneficiaries of the Halligan Trust during each of
their lifetimes, with their children named as the primary remainder beneficiaries.
Additionally, James and Marcia appointed themselves as co
trustees of the Halligan Trust and provided that, in the event that they both
became unable to serve as co-trustees, Del Sesto and Northern would be
appointed to serve as successor co-trustees. The Halligan Trust included
a provision that set forth the order of succession:
APPOINTMENT OF SUCCESSOR TRUSTEE
A. JAMES P. HALLIGAN and MARCIA S. HALLIGAN are
appointed as Co-Trustees. In the event of the death, disability,
refusal to serve, or resignation of either JAMES P. HALLIGAN or
MARCIA S. HALLIGAN, then the remaining person is appointed as
sole Trustee. In the event of the death, disability, refusal to serve,
or resignation of both JAMES P. HALLIGAN and MARCIA S.
HALLIGAN, then DAVID N. DEL SESTO and NORTHERN TRUST
are appointed as Co-Trustees. In the event of the death, disability,
refusal to serve, or resignation of DAVID N. DEL SESTO, then
NORTHERN TRUST is appointed as sole Trustee. At any time that
a corporate fiduciary is serving as Trustee hereof, DAVID N. DEL
SESTO shall have the right to remove the corporate fiduciary as
Trustee hereof and appoint in writing another corporate fiduciary
with funds under management of not less than eighty percent
(80.0%) of the funds under management of the current corporate
fiduciary as of the date of the change of corporate fiduciary.
Article VIII, Paragraph A.
7The Marcia S. Halligan Trust was simultaneously amended and reinstated on
September 12. The Halligan Trust was simultaneously amended and reinstated on September
26.
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No. 73314-1-1/4
Notwithstanding this order of succession, James and Marcia also reserved
in the Halligan Trust—for the surviving trustor—an unfettered power to remove
an acting trustee and to appoint a successor trustee. Article VIII, Paragraph B.
On August 10, 2014, Marcia died. The Halligan Trust provided that, upon
the death of the first trustor—in this case, Marcia—the Trust assets would be
divided into three separate trusts: (1) Survivor, (2) Decedent, and (3) Marital. As
the surviving trustor, James became the sole income and principal beneficiary of
the Trusts.8
On August 28, Del Sesto and Northern assumed their role as successor
co-trustees of the Trusts.
On December 23, Victoria was appointed guardian of James, as to both
his person and estate.
On January 7, 2015, Victoria, as James's court-appointed guardian, filed a
petition seeking the superior court's permission to remove Del Sesto and
Northern as acting co-trustees, and to appointWhittier as successor trustee of
the Trusts.9 In so petitioning, Victoria asserted her beliefthat removing Del Sesto
and Northern as acting co-trustees, and replacing them with Whittier, was in
James's best interest given the cost savings to the Trusts that would result from
such a replacement.
8As a result of Marcia's death, the assets that were held in the Marcia S. Halligan Trust
were distributed into the Halligan Trust to be administered under the terms of the Halligan Trust.
9According to a declaration provided by Charles Adams III, the senior vice president and
manager ofWhittier's real estate department in South Pasadena, California, Whittier is a
company that "oversee[s] the daily and long term management of properties in client accounts
and perform[s] services that include leasing, property management, and oversight ofthird party
property managers, maintenance, capital improvement, financing, acquisition, and disposition."
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No. 73314-1-1/5
Del Sesto and Northern opposed Victoria's petition. In doing so, Del
Sesto and Northern pointed the superior court to the following evidence in
support of their assertion that removing them as acting co-trustees was not in
James's best interest.
First, testimony from Del Sesto, Mark A. Hardtke, a senior vice president
at Northern, and Victoria's sister Denisia, indicated that James and Marcia did
not want their children—particularly Victoria—having any control over the Trusts.
Del Sesto testified that, "I was told clearly (and observed) that the Halligan
children did not have knowledge or experience about the holdings and that Mr.
and Mrs. Halligan did not have confidence that they could work together to
manage the assets, either during Mr. and Mrs. Halligan's lifetime, or after either
or both of their deaths." Consistent with Del Sesto's testimony, Hardtke testified
that, "I clearly understood that the Halligans did not want any of their children
exercising any control over their assets or choosing any different trustee other
than Mr. Del Sesto." Concerning Victoria in particular, Denisia testified that,
"Victoria has never been involved in any of our parents' business affairs" and that
"[c]hanging trustees now, to someone selected by Victoria, will increase her
ability to attempt [to have] control over the Trusts, which my parents were
vehemently opposed to."
Second, testimony from Del Sesto and Susan J. Merritt, a senior vice
president at Northern, indicated both that James and Marcia were aware ofthe
fees that would be charged at the time that they selected Del Sesto and Northern
as co-trustees and that the fees that were charged in 2014—the first year of
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No. 73314-1-1/6
service—were actually less than the amount that was originally quoted to James
and Marcia. Del Sesto testified both that "Northern Trust provided a fee schedule
to the Halligans when Northern Trust was interviewed," and that "the cost of
services was clearly explained to Mr. and Mrs. Halligan when they selected
Northern Trust and me as their successor co-trustees." Regarding the fees that
were actually charged in 2014, Merritt testified that, "the fee that Northern Trust is
charging for the first year of services is significantly lower than the fee that would
have been charged under the standard fee schedules," and that "the annual fee
for trustee services and asset management will be reviewed after the first year."
Merritt also testified that Del Sesto and Northern will charge a one-time estate
settlement fee which is set at a "significantly lower" rate than the rate set forth in
the standard fee schedule.10
Third, testimony from Del Sesto, Hardtke, Merritt, and Denisia detailed
both Del Sesto's competence in managing the assets held in the Trusts and
James's and Marcia's expressed desire for him to serve as a co-trustee. Del
Sesto testified that, "I have a long-standing relationship with the family and
intimate knowledge of the family and its holdings, having managed the assets of
the Trusts for nearly 20 years." Hardtke attested that, "[i]t was clear that Mr. Del
Sesto[ ] knew more about the ins and outs and day to day management of the
various entities and properties than anyone and that the Halligans had the utmost
confidence in Mr. Del Sesto. They took great comfort in knowing that Mr. Del
10 Merritt further testified that this estate settlement fee will be paid entirely from Marcia's
portion of the Trusts, meaning that itwill not diminish the assets that are held in James's survivor
trust.
No. 73314-1-1/7
Sesto was handling everything and that he would continue to do so beyond their
own involvement." Consistent with Hardtke's testimony, Merritt testified that, "Mr.
Halligan's beneficial interest in the Trusts is best served by the historical
knowledge, experience, and skills of Mr. Del Sesto as co-trustee." Finally,
Denisia attested that, "David Del Sesto has always managed the real estate,
quite profitably for the family, and my parents trusted him implicitly."
Fourth, testimony from Del Sesto and Hardtke detailed both Northern's
competence in managing the assets held in the Trusts and James's and Marcia's
expressed desire for the company to serve as a co-trustee. Del Sesto testified
that, "Northern Trust was selected by Mr. and Mrs. Halligan to serve with me as
co-trustee after Mr. and Mrs. Halligan had interviewed and considered several
corporate fiduciaries in their search for the appropriate co-trustee to serve with
me." Regarding the specific reasons why Northern was chosen, Hardtke attested
that, "I understood that, for a number of reasons, including our size, stability and
geographic footprint, Northern Trust was Mr. and Mrs. Halligan's preferred choice
for serving as corporate trustee with Mr. Del Sesto." Hardtke also spoke to
Northern's competence, stating that, "Northern Trust has spent weeks/months
doing its due diligence and working to fully understand all aspects of the ongoing
trust administration."
Fifth, testimony from Del Sesto and Merritt detailed the complex nature of
the assets held in the Trusts. Del Sesto testified that, "[t]he assets owned by
these Trusts are complex and include fractional interests in limited partnerships,
limited liability companies, a corporation, promissory notes, cash and securities.
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No. 73314-1-1/8
Several of the entities are parties to joint venture agreements with outside, non-
family members. The entities whose interests are held in the Trusts own
commercial real estate, a strip center, an industrial building, two large shopping
centers, several ground leases with national tenants, and some unimproved
land." Consistent with Del Sesto's testimony, Merritt testified that, "[t]he
ownership structure of the business entities, along with the assets held inside the
entities is very complex."
Sixth, testimony from Merritt and Hardtke detailed the difficulty in replacing
the current co-trustees given the time-sensitive nature of certain obligations
under the Trusts. Merritt testified to the need to pay or refinance outstanding
debts, prepare and file tax returns, respond to third party interest in acquisition of
certain assets held in the Trusts, and complete a liquidity analysis of the assets
held in the Trusts. Merritt further testified that replacement of the co-trustees
would "place at risk the Trusts' ability to obtain sufficient liquidity to address the
Trusts['] liabilities in a timely and prudent manner." Consistent with Merritt's
testimony, Hardtke opined that, "[replacing both Northern Trust and Mr. Del
Sesto concurrently would be tantamount to starting back at square one for any
successor and the likely result would be additional delays, cost and perhaps
detrimental outcomes for the trust beneficiaries."
Seventh, the plain language of Article VIII, Paragraph A of the Halligan
Trust, evidences James's and Marcia's intent to have Del Sesto and Northern
serve as co-trustees. In this provision, James and Marcia set forth that "[i]n the
event of the death, disability, refusal to serve, or resignation of both JAMES P.
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No. 73314-1-1/9
HALLIGAN and MARCIA S. HALLIGAN, then DAVID N. DEL SESTO and
NORTHERN TRUST are appointed as Co-Trustees." Del Sesto and Northern
asserted their belief to the superior court that James's and Marcia's specific
selection of them as co-trustees within the Halligan Trust itself evidenced
James's and Marcia's intent to have these parties, together, manage the assets
held within the Trusts.
On January 26, 2015, the superior court heard argument on Victoria's
petition. After hearing the argument of counsel, and considering the documents
that the parties submitted in support of their positions, the superior court denied
the petition.
On February 5, Victoria filed a motion for reconsideration. Therein, she
reiterated her belief that removal of Del Sesto and Northern would be in James's
best interest and asserted—for the first time—that James, in 2008, had lacked
the mental capacity to choose Del Sesto and Northern as successor co-trustees.
On February 23, the superior court heard argument on Victoria's motion
for reconsideration. After hearing the argument of counsel, the superior court
denied Victoria's motion. She now appeals.
II
Victoria first contends that the superior court erred by denying her initial
petition to authorize a change of trustee. Specifically, she asserts that the
superior court erred by concluding that removing Del Sesto and Northern as co
trustees, and replacing them with Whittier, was not proved to be in James's best
interest. We disagree.
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No. 73314-1-1/10
"The management of a guardianship by the superior court is reviewed for
abuse of discretion." In re Guardianship of Cornelius, 181 Wash. App. 513, 528,
326 P.3d 718 (2014). A trial court abuses its discretion when its decision is
based on untenable grounds or reasons. In re Guardianship of Johnson, 112
Wash. App. 384, 388, 48 P.3d 1029 (2002). But a trial court does not abuse its
discretion when its decision is within the range of acceptable choices, given the
facts and the applicable legal standard. In re Marriage of Horner, 151 Wash. 2d
884, 894, 93 P.3d 124(2004).
The parties agree that Victoria has standing to petition the superior court
for the relief sought. The question before us is whether the superior court,
having identified the applicable legal standard, abused its discretion by
concluding that removing Del Sesto and Northern as acting co-trustees, and
replacing them with Whittier, was not proved to be in James's best interest.
A guardian is charged with the duty to, among other obligations, "assert
the incapacitated person's rights and best interests." RCW 11.92.043(4). When
exercising this duty, a "guardian[ ] must work for the individualized best interests
of each ward." In re Guardianship of Lamb, 173Wn.2d 173, 191, 265 P.3d 876
(2011). This means that "a guardian must make decisions 'on a case-by-case
basis with particularized consideration of the best interests and rights of the
specific individual:" Lamb, 173 Wash. 2d at 191 (quoting In re Guardianship of
Hamlin, 102 Wash. 2d 810, 815, 689 P.2d 1372 (1984)).
10
No. 73314-1-1/11
Courts ensure that the best interest of the ward is upheld by requiring that
a court-appointed guardian "shall at all times be under the general direction and
control of the court making the appointment." RCW 11.92.010. In fact,
[t]he guardian's opinion as to the ward's best interest is not
dispositive—where there is a conflict... the superior court must
resolve the conflict. Hamlin, 102 Wash. 2d at 820-21; see also In re
Guardianship of Ingram. 102 Wash. 2d 827, 842, 689 P.2d 1363
(1984) ("[T]he court need not place on any party any particular
burden of proof or persuasion, nor give any presumption of validity
to the petition of the guardian or guardian ad litem."). Thus, while
the guardian has the authority to "assert the incapacitated person's
rights and best interests," RCW 11.92.043(4), it remains at all times
the responsibility of the court to make the decision as to the ward's
best interest. Ingram, 102 Wash. 2d at 842. The goal of a
guardianship is to do what the ward would do, if the ward were
competent to make the decision in question. Id. at 838.
Lamb, 173 Wash. 2d at 191 n.13. In this regard, "'[t]he court having jurisdiction of a
guardianship matter is said to be the superior guardian of the ward, while the
person appointed guardian is deemed to be an officer of the court.'" Lamb, 173
Wash. 2d at 190 (quoting Seattle-First Nat'l Bank v. Brommers, 89 Wash. 2d 190, 200,
570 P.2d 1035 (1977)); see also In re Guardianship of Hallauer, 44 Wash. App.
795, 797, 723 P.2d 1161 (1986) ("Although governed by statute, guardianships
are equitable creations of the courts and it is the court that retains ultimate
responsibility for protecting the ward's person and estate."); In re Guardianship of
Gaddis, 12Wn.2d 114, 123, 120 P.2d 849 (1942) ("The guardian, in so far as
matters pertaining to his trust are concerned, is directly responsible only to the
court of his appointment. The guardian is in effect an agent of the court, and
through him the court seeks to protect the ward's interest." (citation omitted)).
Here, the superior court considered the range of evidence that was
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No. 73314-1-1/12
presented regarding whether a change of trustee was proved to be in James's
best interest. It made a choice, among the alternatives, that was within that
range of evidence. This choice was supported by substantial evidence. Thus,
the superior court did not abuse its discretion by concluding that removing Del
Sesto and Northern as acting co-trustees, and replacing them with Whittier, was
not proved to be in James's best interest.11
Ill
Victoria next contends that the superior court erred by denying her motion
for reconsideration. This is so, she asserts, both because she maintains that
removing Del Sesto and Northern as acting co-trustees, and replacing them with
Whittier, was proved to be in James's best interest, and because James, in 2008,
lacked the mental capacity to choose Del Sesto and Northern as co-trustees.
Both of these assertions are unavailing.
First, Victoria's argument on reconsideration regarding James's best
interest was the same argument that she asserted in her initial petition. It fails for
the reasons previously set forth.
Second, Victoria's argument regarding James's alleged mental incapacity
was a new theory that she was not permitted to raise on reconsideration. See
Wilcox v. Lexington Eve Inst.. 130 Wash. App. 234, 241, 122 P.3d 729 (2005) ("CR
11 Victoria also contends that the superior court erred both by "preventing [Victoria] from
fulfilling herduty to protect the ward's estate from diminishing unnecessarily as the result of
excessive trustee fees," and by"substituting its judgment" for her judgment as James's guardian.
Opening Br. of Appellant at 2.
Victoria's contention is inconsistent with the superior court's role as "'the superior
guardian ofthe ward.'" Lamb. 173 Wash. 2d at 190 (quoting Brommers. 89Wn.2d at 200).
Victoria's grandiose self-appraisal of her role is unsupported in the law.
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No. 73314-1-1/13
59 does not permit a plaintiff to propose new theories of the case that could have
been raised before entry of an adverse decision.").
In addition to the fact that Victoria improperly raised this new theory on
reconsideration, the medical report to which she cited does not support her
assertion that James, in 2008, lacked the mental capacity to choose Del Sesto
and Northern as successor co-trustees.12 The 2014 medical report sets forth
James's medical condition in 2014. The doctor who authored this report
diagnosed James, in 2014, with "severe frontal lobe dementia." At that time, the
doctor opined that James's diagnosed condition had been "present since at least
2008," but that it was characterized by a "slowly progressive inexorable decline."
The report nowhere states that James's condition in 2014 was the same as it
was in 2008. Indeed, it supports the contrary conclusion. Thus, the medical
report does not support the assertion that James lacked the capacity, in 2008, to
choose Del Sesto and Northern as successor co-trustees. The superior court
was not obligated to rule in reliance on this evidence and did not err by declining
to do so.
Affirmed.
We concur:
%SLrA\M0"r
12 In her briefing in support of her motion for reconsideration, Victoria asserted that the
dementia diagnosis was made in 2005 but cites to the 2014 medical report as support for this
contention. The 2014 report does not support this assertion.
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