Family Trust v. Christensen

• Decision Date: 10 December 1999
• Docket Number: No. 24948.,24948.
• Citation: 133 Idaho 866,993 P.2d 1197
• Parties: CARL H. CHRISTENSEN FAMILY TRUST, by Lenna B. Christensen, Trustee, and Lyle Christensen, Vance Christensen, Raeone C. Steuart, and Danita C. Wilcox, third-party beneficiaries, Plaintiffs-Appellants, v. Forrest CHRISTENSEN and Larae Christensen, husband and wife, Byron Kelley and Luann H. Kelley, husband and wife, Defendants-Respondents.
• Court: Idaho Supreme Court

993 P.2d 1197

133 Idaho 866

CARL H. CHRISTENSEN FAMILY TRUST, by Lenna B. Christensen, Trustee, and Lyle Christensen, Vance Christensen, Raeone C. Steuart, and Danita C. Wilcox, third-party beneficiaries, Plaintiffs-Appellants, v. Forrest CHRISTENSEN and Larae Christensen, husband and wife, Byron Kelley and Luann H. Kelley, husband and wife, Defendants-Respondents.

No. 24948.

Supreme Court of Idaho, Pocatello, August 1999 Term.

December 10, 1999.

Lyon & Lyon, Pocatello, for appellants. Kenneth E. Lyon, Jr. argued.

Kent A. Higgins, Fort Hall, for respondents Forrest & Larae Christensen.

Jay R. McKenzie, Preston, for respondents Byron & Luann Kelley.

KIDWELL, Justice.

The plaintiffs appeal from the district court's grant of summary judgment for the defendants in an action to rescind a sale of real estate. The plaintiffs (a trustee acting for a family trust and four of her children) contend that the sale was illegal. They assert that one co-trustee lacked the capacity to consent to the sale and that the other co-trustee could not act alone to bind the trust. The plaintiffs also contend that the buyers misrepresented that the real estate would stay within the family, thus inducing the seller to part with the real estate for a reduced price. We affirm in part, vacate in part, and remand.

I. FACTS AND PROCEDURAL BACKGROUND

In May 1993, Carl H. and Lenna B. Christensen placed most of their community property into the Carl H. Christensen Family Trust (Family Trust). The trust corpus included a substantial amount of real property as well as Carl and Lenna's bank accounts, farm equipment, livestock, and personal effects.

The Family Trust was a revocable living trust. As drafted by attorney Steve Fuller, it specified that Carl and Lenna were "Trustee" of the Family Trust. When referring to Carl and Lenna in any other capacity, the trust referred to them as "Grantors." Two of their children, Carl Vance Christensen (Vance) and Danita C. Wilcox, were designated as "Successor Trustees" for "[w]hen both Grantors resign or cease to act as Trustee." During the life of the Grantors, the Trustee was to pay the income of the trust estate to Carl and Lenna. After the death of either Grantor, the Family Trust would become irrevocable and the Trustee was to manage the trust to benefit the surviving spouse. After the deaths of both Carl and Lenna, the Family Trust would terminate. Its remaining assets would be distributed, with the first $100,000 going to a Missionary Trust for Carl and Lenna's descendants. Any residue would be divided among Carl and Lenna's seven children: Danita, Vance, Lyle B. Christensen, Raeone C. Steuart, Vachele C. Higbee, Forrest B. Christensen, and La Moyne C. Jeppson.

After the Family Trust was created, Carl and Lenna (as Trustee) sold several pieces of trust property to sons Forrest and Vance. Lenna testified that she preferred selling land to the children rather than to strangers even though "you sell cheaper to your kids." In each instance, the purchasing son initiated the transaction and set the price for the parcel.

Sometime in 1995, Forrest approached Lenna¹ about buying the 900+ acre family farm, which included Carl and Lenna's residence. In a family gathering, Carl and Lenna's children had previously discussed buying the farm in whole or in part. Vance stated that the children had tentatively agreed on a "family value" of $250,000. However, Forrest was the first child to actually discuss a price for the farm with Lenna. None of the other children knew that Forrest was trying to buy the farm.

Forrest set his own price, valuing the farm at $120,000 and the house (in which Carl and Lenna would retain a life estate) at $80,000. Lenna knew this valuation was low, because she had previously received offers of $400,000 and $250,000, both with a reserved life estate. Lenna could not remember telling Forrest about these offers, but she testified that she was sure he knew about them.

Byron Kelley was the Christensens' family dentist. For years, Byron had tried to convince Carl and Lenna to sell him a small parcel of the farm property for a cabin site. According to Lenna, Forrest told her that Byron was going to help him finance the purchase of the farm. Several weeks before the closing, Lenna talked with Byron after a dental appointment. At this time, she expressed her understanding that Byron would merely assist Forrest by financing the purchase, that Forrest would get the entire farm, and that Byron's payment for his help would be the acreage that he wanted for a cabin site.

By April 1996, Carl was gravely afflicted with Alzheimer's disease. However, family members did not initiate any judicial proceeding to have him declared incompetent. The Family Trust provided a non-judicial mechanism for determining that the Grantors were incapacitated for purposes of the trust, but this procedure was not followed to have Carl determined incapacitated.

Closing on the family farm was held on April 19, 1996. Carl and Lenna, Forrest and his wife (collectively, Forrest), Byron and his wife (collectively, Byron), and attorney Fuller were present. Fuller, in consultation with Forrest and Byron, had drawn up the contract of sale, a real estate mortgage, and two deeds. One deed transferred the bulk of the farm from Lenna and Carl as "Trustees" to Forrest and Byron, who each received an undivided one-half interest in the property. The other deed conveyed a five-acre parcel with the residence to Forrest, reserving a life estate for Carl and Lenna. The contract provided for attorney fees in the event that either party was required to employ an attorney to enforce the agreement.

Lenna testified that she did not realize that Fuller was supposedly representing her until the closing, because Fuller never asked Lenna her opinion about the sale or told her about the terms until the closing. She testified that she didn't realize until the closing that Byron was receiving a 50% interest in the farm or that farm equipment was included in the sale. Because she learned this only at the closing, she testified, she did not have an opportunity to adjust the sale price. Despite her reservations, Lenna signed the closing documents, as did Carl. Lenna testified that she thought that Carl did not understand everything that was going on at the closing, but she never expressed this to anyone at the time.

Several days after the closing, when the Christensens received the down payment check, Lenna told Fuller that she was unhappy with the deal. However, she accepted the check and placed it in a savings account. Lenna also testified that she learned from Forrest only after the closing that she was responsible for insurance, maintenance, and taxes on the life estate. The other children learned of the sale to Forrest and Byron only after the closing.

In November 1996, Lenna, as trustee of the Family Trust, filed a complaint against Forrest and Byron. Five of the children (co-plaintiffs) were co-plaintiffs as "third party beneficiaries" of the Family Trust.² Alleging that Carl was incapable of rationally giving an intelligent assent to the transaction, the plaintiffs sought to rescind the contract.

The district court initially entered a default judgment for the plaintiffs. It set aside the judgment, however, after the defendants answered and set September 22, 1997 as the date for a bench trial.

On July 11, 1997, Forrest moved to dismiss the co-plaintiffs. In August, Forrest moved for summary judgment. On September 12, the plaintiffs filed motions to appoint Vance as guardian for Carl and to amend their pleadings.

On September 15, 1997, Byron's attorney drafted a stipulation and proposed order. The stipulation canceled the September 22 trial setting, extended the time for filing motions until October 3, and scheduled the motion hearing for October 10. Evidently the stipulation was not filed with the district court. However, the September trial setting was canceled and the district court held hearings on the summary judgment motions on October 10.

On September 24, 1997, Forrest filed an amended motion for summary judgment. On October 1, the plaintiffs filed an amended complaint, which alleged fraud and added Carl as a party. On the same date, the plaintiffs moved to appoint Vance as guardian ad litem of Carl for purposes of the lawsuit.

After a hearing on October 10, 1997, the district court issued judgment on March 10, 1998. It denied the plaintiffs' motion to amend their complaint and granted Forrest's motion to dismiss the co-plaintiffs. Without deciding whether Carl was competent as trustee to bind the trust, the district court concluded that Lenna could perform the duties of a trustee by herself, and that therefore the contract and deeds were valid. On this basis, the district court granted summary judgment for the defendants. After the district court denied the plaintiffs' motion to alter or amend summary judgment, the plaintiffs filed a timely notice of appeal.

II. STANDARD OF REVIEW

When this Court reviews a district court's grant of summary judgment, it uses the same standard properly employed by the district court originally ruling on the motion. McKay v. Owens, 130 Idaho 148, 152, 937 P.2d 1222, 1226 (1997). Summary judgment is proper "if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." I.R.C.P. 56(c). The record is construed in the light most favorable to the non-moving party, and all reasonable inferences are drawn in favor of that party. Brooks v. Logan, 130 Idaho 574, 576, 944 P.2d 709, 711 (1997). If reasonable minds might come to different conclusions, summary judgment is inappropriate. Id. On appeal, this Court exercises free review. Id.

III. ANALYSIS

A. The Co-Plaintiffs Are Not Real Parties in Interest.

The district court...