Estate v. Johnson (In re Revocable Family Trust of Michael S. Cornell)
| Decision Date | 26 February 2016 |
| Docket Number | No. 42822.,42822. |
| Citation | 159 Idaho 778,367 P.3d 173 |
| Court | Idaho Supreme Court |
| Parties | In the Matter of the Revocable Family Trust of Michael S. Cornell and Arlie M. Cornell. The ESTATE OF John Henry CORNELL, acting through its personal representative, Kareen Cornell, Petitioner–Appellant, v. Toni C. JOHNSON, Respondent. |
Creason, Moore, Dokken & Geidl PLLC, Lewiston, for appellant. Samuel T. Creason argued.
Jones, Brower & Callery, PLLC, Lewiston, for respondent. Karin Seubert argued.
This is an appeal from the Clearwater County district court's decision affirming the magistrate court's summary dismissal of the Estate of John Cornell's claims involving the administration of a trust. John and his sister, Toni Johnson, were beneficiaries of their parents' trust. When the time came to distribute the assets, Johnson apparently refused, which led John to file a petition for the administration of the trust and removal of Johnson as trustee. Shortly after filing the petition, John committed suicide. Consequently, the magistrate court granted Johnson's motion to dismiss John's petition. Kareen Cornell, John's surviving spouse, subsequently petitioned the magistrate court for administration of the trust and to remove Johnson as trustee. The magistrate court once again granted Johnson's motion to dismiss, basing its decision on the trust distribution survivorship clause and on abatement of the claims. John's Estate appealed, and the district court affirmed. On appeal to this Court, the Estate argues that its claims survived John's death. We agree.
Michael S. Cornell and Arlie M. Cornell established a revocable family trust on November 1, 1996, naming their two children, Toni C. Johnson and John H. Cornell, as joint trustees and beneficiaries of the trust. The trust stated that "[o]n the death of the surviving Trustor, the Trust shall terminate and the Trustee shall, as soon as reasonably possible, divide the net income and principal remaining in the Trust into two (2) equal shares and distribute them to the following beneficiaries: Toni C. Johnson and John H. Cornell."
Arlie M. Cornell passed away on November 9, 2008. On August 6, 2009, Michael S. Cornell amended the trust to name Johnson as the sole trustee. Michael S. Cornell passed away on December 15, 2009.
Following his father's death, John contacted Johnson regarding the status of the trust but Johnson refused to speak to him. John wrote several letters and made several phone calls to the attorney for the Estate requesting information as to the status of the trust without any response. In the nearly three years from the last trustor's death to John's death, Johnson refused and failed to distribute any of the trust to John. During that time, Johnson lived rent-free in the home that was included in the trust and apparently paid all her living expenses with trust funds. At one point, John received $3,000 as the beneficiary of his father's life insurance policy, which Johnson demanded he turn over to her. Upon that demand, John sent a check for $2,500 to Johnson, retaining $500 for his own living expenses.
On July 11, 2012, John filed a petition for supervised administration and removal of trustee. In that petition, John alleged that Johnson breached her fiduciary duty as trustee of the trust by failing to provide an inventory of trust assets upon request, using trust assets for personal expenses, and for failing to distribute the trust assets within a reasonable time.
On August 20, 2012, John committed suicide. In the case of the death of one of the beneficiaries, the trust provided:
If any child, for whom a share of the Trust Estate has been set aside, should die prior to the above distribution, then the Trustee shall distribute all of such deceased child's share of the Trust Estate to his or her surviving issue in equal shares ... If there is no surviving issue, then all of the deceased child's share of the Trust Estate shall be added to the shares set aside for the benefit of the Trustor's other living child....
Although John's wife survived him, John left no issue.
Shortly after John's death, Johnson moved the court to dismiss John's pending petition for administration and removal of trustee. Johnson argued that John's claim was extinguished by his death and that by the trust's express terms, all net income and principal remaining in the trust Estate vested in Johnson when John died without issue. The magistrate court granted Johnson's motion to dismiss1 on February 15, 2013, on the basis that John's claims did not survive his death under common law, state law, or the trust.
On February 26, 2013, Kareen Cornell, John's surviving spouse, in her personal capacity and as the personal representative of John's Estate, filed a petition for supervised administration and court ordered distribution. In that petition, the Estate alleged that Johnson breached her fiduciary duty by, among other things, failing to provide an accounting of trust assets, failing to distribute trust assets, and engaging in self-dealing.
On March 4, 2013, Johnson filed a second motion to dismiss on the basis that the Estate's claims abated. On June 21, 2013, the magistrate court dismissed the Estate's petition on the basis of abatement. The Estate appealed that decision to the district court, which remanded the case back to the magistrate court for further ruling on the request to remove Johnson as trustee. On remand, the magistrate court denied the request to remove Johnson as trustee and reaffirmed its prior dismissal on grounds of abatement. The Estate once again appealed to the district court, which affirmed. The Estate then timely appealed to this Court.
When this Court reviews the decision of a district court sitting in its appellate capacity, the standard of review is as follows:
The Supreme Court reviews the trial court (magistrate) record to determine whether there is substantial and competent evidence to support the magistrate's findings of fact and whether the magistrate's conclusions of law follow from those findings. If those findings are so supported and the conclusions follow therefrom and if the district court affirmed the magistrate's decision, we affirm the district court's decision as a matter of procedure. Pelayo v. Pelayo, 154 Idaho 855, 858, 303 P.3d 214, 217 (2013) (quoting Bailey v. Bailey, 153 Idaho 526, 529, 284 P.3d 970, 973 (2012) ). Thus, this Court does not review the magistrate court's decision directly. Id. at 859, 303 P.3d at 218. Instead, we are procedurally bound to affirm or reverse the district court's decision. Id. This Court exercises free review over questions of law. In re Estate of Peterson, 157 Idaho 827, 830, 340 P.3d 1143, 1146 (2014).
The sole issue on appeal is whether John's claims survived his death. The Estate makes two main arguments in this regard. First, the Estate argues that John's claims fall under a common law exception to the rule of abatement. Second, the Estate argues that even if its claims abated, they fall under Idaho Code section 5–327(2) as an exception to abatement.
The Estate's petition alleged a breach of fiduciary duty claim, as well as claims for conversion, unjust enrichment, and constructive trust. The magistrate court concluded that all of the Estate's claims were in the nature of torts and consequently, they abated upon John's death. In so holding, the magistrate court relied on this Court's decision in Bishop v. Owens, 152 Idaho 616, 272 P.3d 1247 (2012).
In Bishop, this Court recognized that "[t]he abatement rule holds that in the absence of a legislative enactment addressing the survivability of a claim, the common law rules govern." 152 Idaho at 619, 272 P.3d at 1250. Under common law, claims arising out of contracts generally survive the claimant's death, while those sounding in pure tort abate. Id. The magistrate court in this case found the following excerpt from Bishop instructive for determining whether a case sounds in contract or tort:
As this Court previously recognized, "[l]egal malpractice actions are an amalgam of tort and contract theories." See Johnson v. Jones, 103 Idaho 702, 706, 652 P.2d 650, 654 (1982). The tort basis of legal malpractice actions flows from the elements of legal malpractice: "(a) the existence of an attorney-client relationship; (b) the existence of a duty on the part of the lawyer; (c) failure to perform the duty; and (d) the negligence of the lawyer must have been a proximate cause of the damage to the client...." Id. (quoting Sherry v. Diercks, 29 Wash.App. 433, 437, 628 P.2d 1336, 1338 (1981) ). "The scope of an attorney's contractual duty to a client is defined by the purposes for which the attorney is retained." Johnson, 103 Idaho at 704, 652 P.2d at 652 ; Fuller, 119 Idaho at 425, 807 P.2d at 643 (). Breach of an attorney's duty in negligence is a tort. See Harrigfeld v. Hancock, 140 Idaho 134, 136, 90 P.3d 884, 886 (2004) ; Johnson, 103 Idaho at 704, 706–07, 652 P.2d at 652, 654–55. The contract basis of legal malpractice actions is the failure to perform obligations directly specified in the written contract. See Johnson, 103 Idaho at 704, 706–07, 652 P.2d at 652, 654–55 (). Thus, under the abatement rule, breach of duty is an action in tort, not contract; that is, unless an attorney foolhardily contracts with his client guaranteeing a specific outcome in the litigation or provides for a higher standard of care in the contract, he is held to the standard of care expected of an attorney. Breach of that duty is a tort.
Id. at 620, 272 P.3d at 1251. The magistrate court relied on the foregoing analysis to conclude that the claims,...
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