K&W Children's Tr. v. Estate of Fay
| Decision Date | 08 February 2022 |
| Docket Number | 38055-6-III |
| Court | Washington Court of Appeals |
| Parties | K&W CHILDREN'S TRUST, Appellant, v. ESTATE OF WILLIAM FAY, and Krystal J FAY, Respondents. |
We rule that plaintiff K&W Children's Trust never existed because an agreement to create a trust in the future does not create a trust. We also hold that, in an action wherein the court may award reasonable attorney fees against a "party," a "party" includes the moving personality behind an ersatz plaintiff. Therefore, we affirm the superior court's dismissal of this action and award of reasonable attorney fees to both defendants against Kasi Fay, the settlor of the nonexistent trust.
This appeal concerns (1) Kasi Fay, the first wife of decedent William Fay, (2) a trust purportedly established for Kasi and William's two minor children, and (3) Kristal Fay, the wife of William at the time of his premature death and the personal representative of his intestate estate. Kasi created the trust, named the K&W Children's Trust (children's trust), after William's death because of an unfulfilled promise by William to create the trust and place forty acres of land therein.
During their marriage, Kasi and William Fay parented two children. On July 6, 2012, Kasi and William executed a separation agreement attendant to a dissolution of marriage action. The agreement awarded William forty acres located at the corner of Wallbridge and Hattery-Owens Roads in Stevens County. The agreement further expressed:
Wife and husband will set up a trust naming their minor children beneficiaries of said trust, which will include the 40 acres at the corner of Wallbridge and Hattery-Owen[s] awarded herein to husband and which shall also include any future and subsequent real property that in which respondent acquires ownership interest.
Clerk's Papers (CP) at 22. Neither party explains why the agreement first awarded the forty acres to William Fay instead of commanding the direct transfer of both spouse's interest in the land to a trust.
After consummation of the separation agreement, Kasi Fay transferred her interest in the forty acres to William. The parties have not shown this court the deed between Kasi and William. Kasi does not claim that she transferred the property to William in trust for the two children. Neither William nor Kasi took steps to create the contemplated trust. William divided the forty acres into four separate parcels. William married Kristal Fay, and they parented a child.
On March 31, 2018, William Fay died unexpectedly. He died intestate. Kristal filed a probate action, and the superior court granted her letters of administration as personal representative of the William's estate. She listed the four parcels at Wallbridge and Hattery-Owens Roads for sale.
In December 2018, the superior court appointed a guardian ad litem to represent William and Kasi Fay's two children because of their underage status. Kristal Fay thereafter sold two of the four parcels in the forty acres.
On May 1, 2019, Kasi Fay as trustor executed the K&W Fay Children's Trust. The irrevocable trust named her two children as beneficiaries and John McIntyre as trustee. According to the trust instrument, the trustor placed, in the trust, the forty acres at Wallbridge and Hattery-Owens Road:
The original trust estate shall include certain property and gifts made to the beneficiaries, including any rights to property or proceeds therefrom intended for the beneficiarys [sic] subsequent to the separation of Kasi Fay and William Fay. Trustors/Settlers [sic] may add other property or rights to the property at their discretion.
CP at 131. Kasi had no ownership interest over the forty acres at that time.
On May 10, 2019, K&W Children's Trust filed suit against Kristal Fay and the estate of William Fay, under Washington's Trust and Estates Dispute Resolution Act (TEDRA), chapter 11.96A RCW. The children's trust alleged fraud, conversion of proceeds from fraudulent sale of trust property, conversion of proceeds from sale of William Fay's separate property, tortious interference with expectancy of inheritance or gift, and breach of legal and ethical fiduciary duties by the personal representative of the estate. The complaint indicated that Kasi Fay had provided funding to the trust sufficient to commence the civil action. John Pierce, attorney for the trust, placed under his signature on the declarations of service for the summons and complaint, the title "Attorney for Kasi Fay Party of Interest." CP at 3, 18.
On May 23, 2019, Kristal Fay, both on her own behalf and as the personal representative of the estate of William Fay, moved to dismiss the children's trust's complaint under CR 12(b)(6). Under his signature on the declaration of service of the children's trust's response to the motion to dismiss, John Pierce listed himself as "Attorney for Kasi Fay, Party of Interest." CP at 54.
On June 25, 2019, parties to the estate of William Fay probate engaged in mediation. Kasi Fay and her counsel initially participated in the mediation, but departed early and did not sign the resulting agreement. Other parties, including William and Kasi Fay's two children through their guardian ad litem, and Kristal Fay entered a TEDRA agreement at mediation. The agreement read, in part:
Mutual Release. In consideration of the mutual undertakings set forth in this Agreement, the Parties agree that they shall each mutually release, acquit and forever discharge each other and each of their current or former agents, employees, representatives, attorneys, successors, heirs, executors, administrators, assigns, affiliates, and successors in interest from any and all claims, demands, damages, costs, or causes of action that they may have now, known or unknown against the other. The Agreement shall not release or discharge the Parties from their performance of the terms of this Agreement or the Trust terms not amended herein.
On February 5, 2020, Kasi Fay petitioned the superior court, under RCW 11.96A.250, to appoint John Pierce as the special representative for her two children in this pending TEDRA action. In the pleadings, Kasi referred to herself as the petitioner. The superior court so ordered.
On February 11, 2020, the children's trust filed a motion to confirm the validity of the trust. John Pierce listed himself as "Attorney for Kasi Fay, Party of Interest." CP at 128.
On the same day, Kristal Fay submitted a declaration and memorandum in support of a motion for summary judgment. She only filed a motion to dismiss, however. The memorandum in support of summary judgment argued:
The Estate has filed a Motion to Dismiss based upon CR 12b(6) [sic]. Evidence other than the pleadings on file has been presented in support of the motion to dismiss. This effectively converts the pending motion into a motion for summary judgment.
CP at 98. The memorandum asked for dismissal of the children's trust's lawsuit and for an award of reasonable attorney fees against Kasi Fay under a TEDRA statute, RCW 11.96A.150.
Also on February 11, 2020, K&W Children's Trust moved to revoke Kristal Fay's nonintervention powers over William Fay's estate and for an order confirming the validity of the children's trust. Under the signature lines on the motions' declarations of service, attorney John Pierce listed himself as "Attorney for Kasi Fay, Party of Interest." CP at 112, 128. The children's trust subsequently filed a response to Kristal Fay's motion for summary judgment. The signature line on the declaration of service again listed Pierce as "Attorney for Kasi Fay, Party of Interest." CP at 149.
After hearing argument, the superior court granted summary judgment dismissing the action. The superior court noted that Kasi Fay could have, but failed, to establish the trust before William Fay's death. The trust currently held no property. The summary judgment order granted Kristal Fay and the estate of William Fay reasonable attorney fees and costs in an amount to be determined in a future hearing. The court later awarded fees and costs of $58, 632.77 against Kasi Fay and the children's trust jointly.
On appeal, the K&W Children's Trust asks this court to declare the trust to exist as of the time of the separation agreement. In turn, the trust requests a remedy against Kristal Fay and the estate of William Fay for the wrongful disposition of trust assets.
The children's trust also requests that this court order the superior court to revoke the nonintervention powers of Kristal Fay in the estate of William Fay. The children's trust asks this court to direct the superior court to comply with the ninety-day ruling rule under RCW 2.08.240. Finally the children's trust seeks an award of fees and costs on appeal. Kasi Fay asks that we reverse the judgment against her for reasonable attorney fees since she was not a party to this suit.
In addition to resisting the rulings sought by the children's trust and Kasi Fay, defendants Kristal Fay and the estate of William Fay argue that the statute of limitations bars this suit. Kristal and the estate deny that the trust holds standing to bring this suit. Kristal and the estate also contend William and Kasi Fay's two children released any claims in the TEDRA mediation agreement and, since the children are the only beneficiaries of the trust, the release bars the claims asserted in this suit. Kristal and the estate seek an award of reasonable attorney fees on appeal against Kristal Fay.
We first resolve an existential question about K&W Children's Trust. If the children's trust does not exist, then the lawsuit may not proceed because its only plaintiff does not exist. This...
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