Casterline v. Roberts

• Decision Date: 15 May 2012
• Docket Number: No. 41392–2–II.,41392–2–II.
• Citation: 284 P.3d 743,168 Wash.App. 376
• Parties: James C. CASTERLINE, in his capacity as Guardian/Conservator of Theresa A. Roberts, Respondents, v. Denise H. ROBERTS a/k/a Denise Wilson; and John Miller Wilson, Appellants.
• Court: Washington Court of Appeals

168 Wash.App. 376

284 P.3d 743

James C. CASTERLINE, in his capacity as Guardian/Conservator of Theresa A. Roberts, Respondents,

v.Denise H. ROBERTS a/k/a Denise Wilson; and John Miller Wilson, Appellants.

No. 41392–2–II.

Court of Appeals of Washington, Division 2.

May 15, 2012.

Darrel S. Ammons Jr., Attorney at Law PLLC, Longview, WA, for Appellants.

Michael Allen Claxton, Walstead Mertsching PS, Longview, WA, for Respondents.

ARMSTRONG, J.

[168 Wash.App. 378]¶ 1 Denise Roberts used money from her mother's trust to purchase property and build a home in Kelso for herself and her husband, John Wilson. When the court appointed a guardian to investigate her mother's assets, Denise ¹ transferred her interest in the Kelso property to Wilson without consideration; she also transferred property in California to her brother-in-law without consideration. The guardian sued to set aside the Kelso property transfer and to impose an equitable lien on the property for the money Denise took from the trust. Denise and Wilson appeal the trial court's decision in the guardian's favor, arguing that (1) the trial court erred by imposing an equitable lien on the Kelso property because Denise had discretion to use trust funds for Theresa's care, maintenance, and support; (2) the court erred in finding Denise's property transfer to be fraudulent; and (3) the homestead exemption protects their interest in the property. Finding no error, we affirm.

FACTS

¶ 2 Theresa Roberts is in her mid 80s. She has three children, John Teaman and Marta Vignola, who live in California, and Denise, who lives in Washington. Denise is married to John Wilson. Theresa formed a revocable living trust in 1995 and amended it in January 2004 to name Denise as trustee.

¶ 3 In May 2005, Denise and Wilson purchased unimproved property in Kelso on which to build a home; they testified that their intent was to have Theresa live in the home with them. They designed the home to have four bedrooms, a three-car garage, a mother-in-law unit, and four bathrooms. Denise and Wilson agreed to pay $450,203.55 for the home.

¶ 4 In April 2006, Theresa sold her home in California with net proceeds of approximately $640,000. The sale proceeds were initially put in an account in Denise's name but later transferred to Theresa's trust account. Denise took $153,000 from the trust account to pay toward the Kelso property purchase.

¶ 5 After the California property sale, Denise moved Theresa to an assisted living facility in Seaside, Oregon.² Denise did not immediately inform Teaman or Vignola of the move. Three weeks after the move, Denise e-mailed Vignola a new address for Theresa. Denise admitted, however, that she sent Vignola the wrong address.

¶ 6 On August 1, 2006, Teaman and Vignola petitioned the Clatsop County Court (Oregon) to appoint a temporary guardian for Theresa. The court appointed Nancy Sells as “visitor” for Theresa.³ RP (July 15, 2010) at 145. On August 14, Sells filed her report recommending that the court appoint a guardian because of Theresa's dementia and a conservator ⁴ to protect her assets. The court then appointed Teaman and Vignola as temporary co-guardians and temporary co-trustees.

¶ 7 On the day Sells filed her report, Denise conveyed her California condominium to her brother-in-law, Sterling Clayton Wilson, for no consideration. One day later, on August 15, she conveyed the Kelso property to her husband, again for no consideration. Approximately seven months later, Sterling reconveyed the California property to Denise for no consideration and, on the same day, Denise sold the property to another person. In November 2006, the Oregon court appointed James Casterline as conservator of Theresa's estate.

¶ 8 Casterline sued Denise and Wilson, alleging that Denise breached her fiduciary duties of loyalty, prudence, and good faith. Casterline alleged that Denise and Wilson were unjustly enriched by Denise's transfers from the trust and asked the court to impose a $153,000 equitable lien on the Kelso property.

¶ 9 The trial court found that Denise tried to hide her mother and prevent access to her. The trial court also found that the property transfers through quitclaim deeds for no consideration were fraudulent and specifically noted that (1) the transfers were to insiders; (2) the transfers constituted substantially all of Denise's assets and left her insolvent; (3) Denise continued to enjoy the use of the properties; and (4) the transferees paid no consideration. The court ruled that because Denise fraudulently transferred the Kelso property to Wilson, the homestead exemption did not apply to the property and the transfer should be set aside. The court imposed an equitable lien of $153,000 on the property.

ANALYSIS

I. Equitable Lien

¶ 10 Denise and Wilson argue that the trial court erred by ordering an equitable lien because Denise had discretion to use trust funds for Theresa's care, maintenance, and support.

¶ 11 We review a trial court's decision following a bench trial by asking whethersubstantial evidence supports the findings and whether the findings support the court's conclusions of law. Standing Rock Homeowners Ass'n v. Misich, 106 Wash.App. 231, 242–43, 23 P.3d 520 (2001). Substantial evidence is that quantity of evidence sufficient to persuade a rational fair-minded person that a finding is true. Hegwine v. Longview Fibre Co., Inc., 132 Wash.App. 546, 555–56, 132 P.3d 789 (2006). We consider unchallenged findings to be verities on appeal. Cowiche Canyon Conservancy v. Bosley, 118 Wash.2d 801, 808, 828 P.2d 549 (1992). We review questions of law de novo. Sunnyside Valley Irrigation Dist. v. Dickie, 149 Wash.2d 873, 880, 73 P.3d 369 (2003). Where the trial court mislabels a conclusion of law as a finding of fact, we review the conclusion de novo. Hegwine, 132 Wash.App. at 556, 132 P.3d 789.

¶ 12 The trial court concluded that Denise breached her fiduciary duty because she (1) lacked authority to use trust assets for herself and her husband, (2) may have intended to use the funds for Theresa's benefit but did not, and (3) failed to protect Theresa's investment in the home by granting her a security interest in the home. Denise argues that she had authority to use the trust funds for Theresa's maintenance and thus, did not breach her fiduciary duty.

¶ 13 Denise has not assigned error to any finding of fact. Generally, we treat unchallenged findings of fact as verities on appeal, not subject to review. See Cowiche Canyon, 118 Wash.2d at 808, 828 P.2d 549. Denise also has not assigned error to any of the trial court's legal conclusions. In spite of this imperfect presentation, we consider Denise's claim that “[a]s successor trustee, Denise Roberts had the unfettered discretion to use trust funds for the benefit of the Trustor.” Br. of Appellant at 8.

¶ 14 Theresa's trust authorized Denise to use the trust funds for:

Distribution of Principal for Support ... if at any time in the discretion of the Trustee the Trustor [Theresa] should be in need of funds for her proper medical care, dental care, maintenance and support, the Trustee may, in the Trustee's discretion, pay to the Trustor, or apply for her benefit, such sums from the principal of the Trust Estate as the Trustee deems necessary or advisable for such purposes....

Br. of Appellant at 7.

¶ 15 Substantial evidence supports the trial court's findings as to how Denise used Theresa's trust funds. In July 2006, Denise used $153,000 of Theresa's funds to build the home. Theresa never benefitted from the investment and Denise took no steps to protect the trust's investment in the home. Nor did Denise attempt to segregate the trust investment from her personal investment. Later, when the court-appointed visitor reported that Theresa needed a guardian and conservator, Denise conveyed all of her interest in two properties to her brother-in-law and her husband, for no consideration. We conclude that substantial evidence supports the trial court's findings.

¶ 16 Denise's argument appears to be that the trial court's findings do not support a legal conclusion that she breached her fiduciary duty as trustee. The trial court's breach of a fiduciary duty discussion is mischaracterized as a finding of fact. Findings of fact are determinations of “whether ... evidence show[s] that something occurred or existed.” Moulden & Sons, Inc. v. Osaka Landscaping & Nursery, Inc., 21 Wash.App. 194, 197, 584 P.2d 968 (1978). Conclusions of law are “determination [s] ... made by a process of legal reasoning from facts in evidence.” State v. Niedergang, 43 Wash.App. 656, 658–59, 719 P.2d 576 (1986) (citing Moulden & Sons, Inc., 21 Wash.App. at 197–98 n. 5, 584 P.2d 968). Where a conclusion of law is mislabeled as a finding of fact, we review it as a conclusion of law. Willener v. Sweeting, 107 Wash.2d 388, 394, 730 P.2d 45 (1986). Because the trial court's determination that Denise breached her fiduciary duty was legal reasoning, we treat it as a conclusion of law, which we review de novo. See Hegwine, 132 Wash.App. at 556, 132 P.3d 789.

¶ 17 A trustee owes beneficiaries the “highest degree of good faith, care, loyalty and integrity.” Esmieu v. Schrag, 88 Wash.2d 490, 498, 563 P.2d 203 (1977). “ ‘It is the duty of a trustee to administer the trust in the interest of the beneficiaries.’ ” Cook v. Brateng, 158 Wash.App. 777, 785, 262 P.3d 1228 (2010) (quoting Tucker v. Brown, 20 Wash.2d 740, 768, 150 P.2d 604 (1944)). Where the trust confers discretion on a trustee to carry out the trust, we review the trustee's actions for an abuse of discretion. Templeton v. Peoples Nat'l Bank of Wash., 106 Wash.2d 304, 309, 722 P.2d 63 (1986). Here, Denise had discretion to use trust assets to provide for Theresa as stated in the revocable living trust agreement under “Distribution of Principal for Support.” The trust's clear intent was to benefit Theresa during her life.

¶ 18 But a trustee who engages in self-dealing or who...