Acorn v. Moncecchi

• Citation: 2016 WY 124,386 P.3d 739
• Decision Date: 22 December 2016
• Docket Number: No. S-16-0100,No. S-16-0099,No. S-16-0101,S-16-0099,S-16-0100,S-16-0101
• Parties: Tamra ACORN, Rebecca Shwen, and Federer Holding Company, LLC, a Wyoming close limited liability company, Appellants (Defendants), v. Lori MONCECCHI and Dino Moncecchi, Appellees (Plaintiffs). Rebecca Shwen and the Margie Jean Federer Revocable Trust of June 29, 1988, As Amended and Restated, Appellants (Defendants), v. Lori Moncecchi and Dino Moncecchi, Appellees (Plaintiffs). Lori Moncecchi and Dino Moncecchi, Appellants (Plaintiffs), v. Tamra Acorn, Rebecca Shwen, Federer Holding Company, LLC, a Wyoming close limited liability company, and the Margie Jean Federer Revocable Trust of June 29, 1988, As Amended and Restated, Appellees (Defendants).
• Court: Wyoming Supreme Court

386 P.3d 739

2016 WY 124

Tamra ACORN, Rebecca Shwen, and Federer Holding Company, LLC, a Wyoming close limited liability company, Appellants (Defendants),

v.Lori MONCECCHI and Dino Moncecchi, Appellees (Plaintiffs).

Rebecca Shwen and the Margie Jean Federer Revocable Trust of June 29, 1988, As Amended and Restated, Appellants (Defendants),

v.Lori Moncecchi and Dino Moncecchi, Appellees (Plaintiffs).

Lori Moncecchi and Dino Moncecchi, Appellants (Plaintiffs),

v.Tamra Acorn, Rebecca Shwen, Federer Holding Company, LLC, a Wyoming close limited liability company, and the Margie Jean Federer Revocable Trust of June 29, 1988, As Amended and Restated, Appellees (Defendants).

No. S-16-0099

No. S-16-0100

No. S-16-0101

Supreme Court of Wyoming.

December 22, 2016

Representing Tamra Acorn, Rebecca Shwen, and Federer Holding Company, LLC in Case Nos. S-16-0099 and S-16-0101: John M. Walker, Robert J. Walker, and Autumn A. Aspen of Hickey & Evans, LLP, Cheyenne, Wyoming. Argument by Mr. John Walker.

Representing Rebecca Shwen and the Margie Jean Federer Revocable Trust in Case Nos. S-16-0100 and S-16-0101: Alexander K. Davison of Patton & Davison, Cheyenne, Wyoming.

Representing Lori and Dino Moncecchi in Case Nos. S-16-0099, S-16-0100, and S-16-0101: Weston W. Reeves and Anna M. Reeves Olson of Park Street Law Office, Casper, Wyoming. Argument by Mr. Reeves.

Before BURKE, C.J., and HILL, DAVIS, FOX, and KAUTZ, JJ.

FOX, Justice.

[¶1] During the course of their marriage, M. W. "Bud" Federer (Bud) and Margie Federer (Margie) amassed a sizeable estate, predominantly comprised of apartment complexes throughout Wyoming. The Federers formed numerous entities to manage their holdings for their benefit during their lives, and for the benefit of their three daughters. As so often happens, the parents' attempt to impose harmony along with the assets they conveyed to the next generation was unsuccessful. The sisters disagreed about money, and those disagreements blossomed into accusations of misconduct and breaches of the duties that attach to their roles as trustees and LLC managers. The sisters filed claims, counterclaims, and cross-claims, which the district court sorted out after a bench trial. We affirm the district court's ruling in part, and reverse and remand in part.

ISSUES

[¶2] In addition to the question of jurisdiction, which this Court raises on its own, the parties raise numerous issues, which we consolidate and restate below.

1. Does this Court have jurisdiction to entertain the parties' appeals, or must we dismiss because the Judgment is not a final appealable order?

2. Was the district court's conclusion that Dino Moncecchi did not breach his fiduciary duties to Federer Holding Company, LLC, by not soliciting bids from competitive property management companies or by appropriating business opportunities for Spartan, clearly erroneous?

3. Was the removal of Rebecca Shwen as trustee of the Margie Jean Federer Revocable Trust based on findings that were clearly erroneous?

4. Did the district court incorrectly apply the burden of proof for establishing damages resulting from Rebecca's breach of fiduciary duty?

5. Did the district court abuse its discretion when it awarded attorney fees against Rebecca for filing a frivolous claim?

FACTS

[¶3] Bud enjoyed a successful career as a businessman in Wyoming. He and his wife, Margie, had three daughters: Rebecca, Lori, and Tamra.¹ Bud died in 2003. Margie was diagnosed with Alzheimer's disease and has not been able to manage her affairs since at least 2010. In April of 2011, Margie moved to the Aspen Wind assisted living facility where she receives round-the-clock care. During Bud's life, and after he died, the family created a number of entities to hold and manage their business interests and to pass Bud and Margie's estate to their daughters and their families. The current dispute concerns three of those entities: Spartan Management, LLC (Spartan), Federer Holding Company, LLC (FHC), and the Margie Jean Federer Revocable Trust (MJFRT). The Margie Jean Federer Marital Trust (Marital Trust) also plays a role.

I. Spartan, FHC, and the apartment complex management

[¶4] The Federer family assets include nine low-income apartment complexes located throughout Wyoming. These apartments were or are managed in accordance with the United States Department of Housing and Urban Development (HUD). Each apartment complex operates as a separate limited liability partnership and is owned by various Federer trusts and other parties and entities.

[¶5] Spartan was formed in 1972 to manage these apartment complexes. In 1993, Bud hired Dino Moncecchi to work for Spartan. Dino is married to Lori, the Federers' middle daughter. Spartan became an LLC in 1995, and Dino became its manager. Over time, Dino and Lori received Spartan ownership interests as compensation and purchased additional interests. At the time of the trial, the Moncecchis owned 65 percent of Spartan, and the Marital Trust owned the other 35 percent. The three Federer sisters are equal beneficiaries of the Marital Trust.

[¶6] FHC was created in 2006 to serve as the general partner of the partnerships owning the apartment complexes and to "provide continuity of management and liability protection," as noted by the attorney who set up FHC. FHC acquired a one percent interest in each of the apartment entities. The Moncecchis, Rebecca, and Tamra each own a one-third interest in FHC.

[¶7] Prior to 2006 (when FHC was formed), Spartan managed the apartment units pursuant to separate contracts with the various apartment entities. Because he had been managing the apartment complexes for the family as the manager of Spartan and in order to provide continuity to HUD, Dino was appointed the sole manager of FHC when it was formed and continued in that capacity until this litigation.

[¶8] After the formation of FHC and under Dino's management, Spartan continued to manage the apartment complexes as it always had. The fees charged by Spartan were established by the original HUD contracts sometime between 1972 and 1995, and have not been changed, except as required by HUD in 2000 for five of the complexes that were in its Mark-to-Market program. Dino never sought competitive bids for the management of the properties. Dino testified that a typical property manager would perform the tasks of leasing, maintenance, rent collection, and bill payment. He contrasted that service with the service that Spartan provides, which includes typical management undertakings, along with additional services such as conducting long-term needs assessments, negotiating insurance coverage and claims, reviewing audits, and other more far-reaching activities like working with governmental regulatory agencies and the legislature.

[¶9] Spartan also owns laundry facilities in each of the apartment complexes, which were installed when the properties were constructed. Spartan owns and maintains the washers and dryers but pays the apartment owners about $15,000 per year to rent the laundry facilities. Dino testified that the laundry facilities generate a total of approximately $40,000 to $50,000 in annual income for Spartan.

II. The MJFRT, loans to Tamra, her husband and their companies, the Moncecchi loan, and Rebecca's conduct as trustee

[¶10] The MJFRT is a trust established by Margie. Margie was originally the trustee, but in 2010, her three daughters, Rebecca, Lori, and Tamra, succeeded her. In December 2010, Lori and Tamra resigned as co-trustees, leaving Rebecca as the sole trustee of the MJFRT. There was extensive evidence at trial regarding Rebecca's conduct as the trustee of the MJFRT. We limit our discussion of that evidence to the facts relevant to the issues presented on appeal.

A. Loans to Tamra, her husband and their companies

[¶11] When Margie was the trustee of the MJFRT, she occasionally made loans from the trust to her children and their spouses. The trust provides that in the event such loans are not repaid, the principal outstanding will be deducted from that heir's distribution of the trust assets upon Margie's death.² From 2000 to 2005, Margie made six loans (collectively referred to as the Acorn debt) to Tamra and her husband, David (the Acorns), and entities owned by them.³ The Acorns made no payments on two of the loans and made very few payments on the other four. The last payment on two of those loans was made in 2004; on another in 2005, and on another in 2009. As of December 2010, the amount outstanding on all six loans totaled $1,202,079 ($881,360 principal and $320,719 interest).

[¶12] In November 2010, the three sisters, Dino, and their family attorney, Mr. Leonard, met to discuss the Acorn debt and the tax implications to the MJFRT of declaring the debt uncollectible.⁴ Mr. Leonard summarized their discussion in his November 12, 2010 letter:

With the significant potential for estate tax on Margie's death, we discussed the necessity of having the debts owed to Margie's trust by David and Tammy and their business entities declared uncollectible and written off to reduce the value of Margie's estate and thereby reduce the potential estate tax that could be payable upon her death.

As a result of decisions made at the meeting, the MJFRT sent demand letters to the Acorns for each loan seeking payment in full of the outstanding debt and providing that if no payment was made in response, the debt would be considered uncollectible or collateral pledged would be attached. Five of the six demand letters also informed that if the debt was declared uncollectible, "the offset of the unpaid principal" on the loans "against Tami's share of the Margie Jean Federer Revocable Trust will not be affected, and her trust share at the time for distribution will be reduced accordingly." The remaining demand letter stated that if payment was not received, Tamra's "partnership interests in T.F.S. II, L.L.C., offered as collateral for the loan, will be attached" and her "interests in the LLC valued at the...