Taylor v. Maile

Decision Date23 December 2005
Docket NumberNo. 30817.,30817.
Citation142 Idaho 253,127 P.3d 156
PartiesReed TAYLOR, Dallan Taylor and R. John Taylor, Plaintiffs-Counterdefendants-Appellants, v. Thomas MAILE, IV and Colleen Maile, husband and wife, Thomas Maile Real Estate Company and Berkshire Investments, LLC., Defendants-Counterclaimants-Respondents.
CourtIdaho Supreme Court

Clark & Feeney, Lewiston, Idaho attorneys for appellant. Paul Thomas Clark argued.

Thomas G. Maile, IV, Boise, Idaho, attorney for respondents Colleen Maile and Berkshire Investments, LLC; Gjording & Fouser, PLLC, Boise, Idaho, attorneys for respondent Thomas G. Maile, IV; Anderson, Julian & Hull, Boise, Idaho, attorneys for respondents Thomas G. Maile, IV, and Thomas Maile Real Estate Company. Phillip J. Collaer argued.

JONES, Justice.

Reed Taylor, Dallan Taylor and R. John Taylor (the Taylors) asserted various claims against Thomas G. Maile, IV, his wife Colleen Maile, Thomas Maile Real Estate Company and Berkshire Investments, LLC, (collectively, the Mailes) relating to their dealings with Theodore Johnson, deceased, and the Theodore Johnson Trust (the Trust). The district court granted a Rule 12(b)(6) motion to dismiss, holding that the Taylors lacked standing to assert their claims. We affirm in part and reverse in part.

I. FACTUAL AND PROCEDURAL BACKGROUND

Thomas G. Maile, IV, is licensed in Idaho as both an attorney and a real estate broker. He provided legal representation to Mr. Johnson for many years, including advising him on the creation and administration of the Trust. The Trust owned approximately forty acres of property near Eagle, Idaho. In May of 2002 a third party offered to buy the forty acres for approximately $400,000. Mr. Maile advised Mr. Johnson to reject this offer, and he did in fact reject it. Two months later, on July 22, Thomas and Colleen Maile submitted an earnest money agreement to purchase the property from the Trust on terms and for a price similar to the rejected offer. Mr. Johnson accepted the offer and executed the agreement on behalf of the Trust on July 25.

Mr. Johnson died before the sale transaction could be closed. Approximately a week after Mr. Johnson's death, the successor trustees, Beth Rogers and Andrew Rogers, closed the sale. The Mailes had formed Berkshire Investments, LLC, and assigned their contract rights to that entity, with the approval of Beth Rogers. The Rogers executed the warranty deed conveying the 40 acres to Berkshire over the objections of the Taylors, who are residual beneficiaries of the Trust. The record does not disclose whether the Rogers conducted any inquiry regarding the circumstances of the sale or the basis for the Taylors' objections, or whether the purchase price was at or near fair market value. The Rogers were not only co-trustees of the Trust, but also beneficiaries of the Trust. The record does not disclose whether they were income beneficiaries or residual beneficiaries. Nor does it disclose whether they sought and obtained court approval for the conveyance pursuant to I.C. § 68-108(b). The Trust took a deed of trust on the property to secure payment of the bulk of the purchase price. Berkshire paid the balance of the purchase price and obtained a release of the trust deed in January of 2004.

The Taylors instituted this action on January 23, 2004. Their complaint asserts three claims — count one alleges that Mr. Maile breached his fiduciary duty as attorney for Mr. Johnson and the Trust, count two alleges Mr. Maile breached his fiduciary duty as the real estate broker representing both parties to the transaction, and count three alleges a negligence claim against Mr. Maile in his capacities as attorney and real estate broker. The Taylors allege that Mr. Maile breached his fiduciary duty to Mr. Johnson and the Trust by, among other things, acquiring the property for less than its fair market value (the Taylors contend the property was worth three times the $400,000 purchase price), failing to disclose his conflict of interest, failing to inform them to seek independent legal counsel, and taking advantage of the fact that Mr. Johnson was of advanced age and known to have terminal cancer. The Taylors allege they were aggrieved of these actions by virtue of their status as residual beneficiaries of the Trust. Mr. Johnson's siblings would receive the income of the Trust during their lifetime and upon their death the corpus would go to the Taylors and other residual beneficiaries. The Taylors allege that the beneficiaries of the Trust were damaged by virtue of the alleged breaches of fiduciary duty and negligence. The Taylors sought compensatory damages of not less than $600,000, disgorgement of profits realized by the defendants upon their sale of the real property, rescission of the transaction, imposition of a constructive trust on the real property, and an order quieting title of the Trust in and to the real property.

In mid-March of 2004, Mr. Maile moved for an order, pursuant to I.R.C.P. 12(b)(6), "dismissing all claims of attorney malpractice" against Mr. Maile on the ground that the Taylors had failed to allege facts "that would give them standing to bring a claim of attorney malpractice against Mr. Maile, because Plaintiffs are not the real party in interest." The other defendants, although not filing a separate motion to dismiss, filed a brief in support of dismissal on standing grounds. The Taylors filed a brief in opposition to the motion, contending that they had standing as residual beneficiaries of the Trust. As authority for their position, the Taylors cited Anderson v. Dean Witter Reynolds, Inc., 841 P.2d 742 (Utah App. 1992). The Taylors highlighted the following language from that decision:

[I]t appears the beneficiary has the right to bring an action against a third party when the beneficiary's interests are hostile to those of the trustee. Salina Canyon Coal Co. v. Klemm, 76 Utah 372, 290 P. 161 (1930). Other jurisdictions also allow a beneficiary to sue third parties directly. E.g., Alioto v. United States, 593 F.Supp. 1402, 1412 (N.D.Cal.1984) (in action where beneficiary has been damaged by trustee and third party, beneficiary may bring action against third party separately); Booth v. Security Mut. Life Ins. Co., 155 F.Supp. 755, 761 (D.N.J.1957) (where trustee transfers property in breach of trust with assistance of third parties, third parties are primarily liable to the beneficiary, rather than to the trustee; the right of the beneficiary against the third party is a direct right not derived through the trustee); Hoyle v. Dickinson, 155 Ariz. 277, 279, 746 P.2d 18, 20 (Ct.App.1987) (trust beneficiary may bring action for damages against third party for breach of trust agreement); Apollinari v. Johnson, 104 Mich.App. 673, 305 N.W.2d 565, 567 (1981) (beneficiary may sue third party without joining trustee).

Id. at 745. Mr. Maile, on the other hand, contended that Harrigfeld v. Hancock, 140 Idaho 134, 90 P.3d 884 (2004), applied and precluded all of the Taylors' claims.

Oral argument on the dismissal motion was held on April 12, 2004. At the outset of the hearing, the district judge indicated his belief that Harrigfeld was controlling, that Mr. Maile, as an attorney, owed no duty to the trust beneficiaries, and that dismissal was likely warranted. Although the parties then argued certain peripheral aspects of the case, such as whether there was any proper dismissal motion before the court with respect to any defendant other than Mr. Maile in his capacity as an attorney, there was little argument submitted with regard to the merits. Much of the proceedings were devoted to the question of whether or not the trustees would be joined as parties. The parties discussed the issue of joining the Trust and how long it might take to get that accomplished. Counsel for the Taylors indicated the earliest it could be done was April 19, that it would probably take longer, and that it was outside of her control. Counsel for Mr. Maile indicated he did not know what a reasonable time was for accomplishment of the joinder. The court indicated that the Taylors had until April 19 to join the trustees and that if joinder was not accomplished by that time, the case would be dismissed on the 20th. As it turned out, the trustees were not joined by the April 19 deadline and the court entered its order dismissing the case on April 23.1 The district court ruled that the case would be dismissed in its entirety "because the residual beneficiaries of the Theodore L. Johnson Trust lack standing to pursue the causes of action against all Defendants." The court indicated that I.R.C.P. 17(a) required joinder of the trustees of the Trust. Neither in the order nor in the proceedings on April 12 did the court address the Taylors' arguments based upon the principles articulated in Anderson v. Dean Witter Reynolds, the principal case upon which they relied. After the Taylors filed a timely appeal, the district court amended its order of dismissal to retain counterclaims that the Mailes had asserted against the Taylors.

II. ANALYSIS
A. Does This Court Have Jurisdiction to Hear The Appeal?

As a preliminary matter, it is necessary to consider whether this Court has jurisdiction to consider the appeal since the counterclaims have not been resolved and are still pending. Because the order as amended by the district court did not resolve the substantive issues raised in the Mailes' counterclaims, it was not a final judgment appealable as a matter of right. Davis v. Peacock, 133 Idaho 637, 991 P.2d 362 (1999). We have previously held that an order not appealable as a matter of right can, in certain circumstances, be accepted as a permissive appeal of an interlocutory order under Idaho Appellate Rule 12. Idaho Dept. of Labor v. Sunset Marts, Inc., 140 Idaho 207, 91 P.3d 1111 (2004). As in the Sunset Marts case, the parties have briefed and argued the issues on appeal, the district court's...

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