Frakes v. Nay

• Decision Date: 19 December 2012
• Docket Number: 050707686,A138032.
• Citation: 295 P.3d 94,254 Or.App. 236
• Parties: Jon FRAKES, Personal Representative of the Estate of Raymond J. Frakes, Deceased, Plaintiff–Respondent, Cross–Appellant, v. Tim NAY, in his capacity as successor trustee of the Saling Family Revocable Trust, and individually, Defendant–Appellant, Cross–Respondent.
• Court: Oregon Court of Appeals

254 Or.App. 236

295 P.3d 94

Jon FRAKES, Personal Representative of the Estate of Raymond J. Frakes, Deceased, Plaintiff–Respondent, Cross–Appellant,

v.Tim NAY, in his capacity as successor trustee of the Saling Family Revocable Trust, and individually, Defendant–Appellant, Cross–Respondent.

050707686; A138032.

Court of Appeals of Oregon.

Argued and Submitted June 12, 2012.

Decided Dec. 19, 2012.

Matthew Whitman argued the cause for appellant Tim Nay in his capacity as successor trustee of the Saling Family Revocable Living Trust. With him on the brief were James R. Cartwright and Cartwright and Associates.

Lee Aronson, Portland, argued the cause for cross-respondent Tim Nay individually. With him on the brief were Michael J. Fearl, and Schulte, Anderson, Downes, Aronson, & Bittner, P.C. With them on the reply brief were Matthew Whitman and Cartwright, Whitman, Baer, P.C.

Andrew T. Reilly, Portland, argued the cause for respondent-cross-appellant. With him on the briefs were Alexander A. Wheatley and Black Helterline LLP.

Before SCHUMAN, Presiding Judge, and WOLLHEIM, Judge, and NAKAMOTO, Judge.

SCHUMAN, P.J.

This case arises from estate planning that Nay, an attorney, performed for Carol and Velma Saling, and from the administration of the resulting Saling Family Trust. After the Salings died, Raymond Frakes, one of the beneficiaries of the trust, filed an action against Nay, who also served as trustee, for inspection of Nay's estate-planning files, for an accounting, and for reimbursement of expenses that Frakes had incurred on behalf of Velma Saling. Frakes eventually added claims against Nay individually based on his conduct as an attorney, including a breach of contract claim, a malpractice claim, and a claim for intentional interference with Frakes's expectancy interest.

Nay, in his capacity as trustee, filed a counterclaim against Frakes by which he sought to strip Frakes of his status as a beneficiary of the trust. Nay alleged that Frakes, by asserting breach of contract and tort claims against him individually, had violateda “no-contest” clause of the trust. As a consequence, Nay argued, Frakes was no longer a beneficiary of the trust under its terms and should be required to repay $500,000 that had been distributed to him as a beneficiary, plus interest on that amount, and forfeit the remaining $500,000 that he was otherwise owed.

Generally speaking, Frakes prevailed on claims against Nay as trustee but not as to claims against him individually. Frakes's claims against Nay as trustee were tried to the court, and the trial court ruled that Frakes was entitled to inspect Nay's estate-planning file and to an accounting of trust assets, which Nay was required to prepare. The court also ruled that Frakes's claims against Nay as an attorney had not triggered the no-contest clause, and those claims were tried to a jury. The jury found that Velma Saling had testamentary capacity when she amended the trust in 1996 and was not unduly influenced by Carol Saling or Nay, and so returned a verdict in favor of Nay on each of the claims against him individually. The court then entered judgment accordingly, against Nay as the trustee but in his favor as an individual.

Nay now appears in dual roles on appeal as well: As the trustee (“Nay-as-trustee”), he is the appellant, challenging the trial court's rulings on Frakes's claims for inspection of the estate-planning file, an accounting, and reimbursement and on his counterclaim based on the no-contest provision of the trust. As an individual (“Nay-as-attorney”), he is the cross-respondent, seeking to uphold the judgment in his favor on Frakes's breach of contract and tort claims. For the reasons that follow, we affirm on appeal and reverse and remand on cross-appeal.

I. BACKGROUND

In 1990, Nay prepared a revocable living trust for Velma Saling and her husband, Carol. In 1996, Nay prepared an Amended and Restated Trust. The 1996 trust designated various beneficiaries who would receive distributions upon the death of the first spouse and then again upon the death of the second spouse, with the residue of the trust assets distributed to the Saling Family Foundation, a charitable foundation established by Carol. Raymond Frakes, who was Velma's nephew, was one of the beneficiaries of the 1996 trust.

In October 2002, Carol died and Frakes traveled to Portland for the funeral. Frakes stayed at the Saling home, where he had spent his childhood, and on October 30, 2002, an attorney from Nay's office hand-delivered to Frakes copies of Carol's estate-planning documents. Frakes hired his own attorney at that point, and he gave his attorney copies of the estate-planning documents that he had received from Nay's office, as well as other estate-planning documents that Frakes had taken from the Saling home after Carol's death.

Velma died in 2004, and thereafter Frakes requested an accounting from Nay, who was serving as successor trustee of the 1996 trust. Frakes also wanted to inspect Nay's estate-planning file for the Salings. Nay ultimately refused to provide either the accounting or an opportunity to review the estate-planning file. As for the file, Nay objected on the basis of attorney-client privilege. With regard to the request for an accounting, Nay instead tendered a final distribution of the trust assets and took the position that, after the distribution, Frakes would be fully satisfied as a beneficiary.

Frakes refused to accept the conditions of the tender and, in 2005, initiated this action against Nay-as-trustee. Frakes initially brought two claims, one seeking disclosure of Nay's estate-planning file and the other requesting reimbursement of certain expenses that Frakes claimed to have incurred while acting as Velma's health care agent. After various pleading motions and related efforts to replead, Frakes filed his Fifth Amended Complaint and Petition, which included six claims for relief: (1) a reimbursement claim for “$12,728.62 in expenses advanced and incurred by [Frakes] during the last year or so of Velma Saling's life”; (2) a petition for an itemization of trust assets pursuant to formerORS 128.125 (2003), repealed by Or. Laws 2005, ch. 348, § 128; ¹ (3) a claim for equitable relief under formerORS 128.135 (2003), repealed by Or. Laws 2005, ch. 348, § 128, seeking production of estate-planning materials in Nay's possession, preparation of an accounting of trust assets, and removal of Nay as trustee; (4) a breach of contract claim against Nay individually, on the theory that Frakes was an intended beneficiary of the legal work that Nay performed for the Salings; (5) a “misconduct/malpractice” claim against Nay individually, based on a similar theory; and (6) a claim against Nay individually for intentional interference with Frakes's prospective inheritance.

In his individual capacity, Nay simply filed an answer to the breach of contract and tort claims against him. As trustee, however, Nay not only answered but also asserted counterclaims against Frakes. In one of those counterclaims, Nay-as-trustee alleged that “the Saling Family Trust contains an in terrorem provision [also known as a no-contest provision], by which any beneficiary seeking a court adjudication with respect to the validity of the Trust forfeits his distributive share under the Trust.” He further alleged that Frakes,

“in this lawsuit, has sought to have the court accept and act on his allegations that Velma Saling did not sign the 1996 Restatement of the Trust, and that neither Velma nor Carol Saling knowingly signed a document containing an in terrorem clause. Any of these statements constitute challenges to the validity of the Trust. His entire distributive share is therefore forfeit pursuant to the terms of the in terrorem clause.”

Nay-as-trustee asked the court to declare that Frakes had violated the no-contest clause; to order Frakes to disgorge $500,000, plus interest, that Frakes had received upon the death of Carol; and to return an additional $500,000 deposit, representing the final distribution to Frakes, which Nay-as-trustee had paid into court pending resolution of the case.

One of the most contentious pretrial issues, which arose in motions to strike, in motions for partial summary judgment, and in the context of a discovery dispute, was whether Nay was required to produce his estate-planning file for Frakes's inspection. As previously described, one of Frakes's claims against Nay-as-trustee sought that relief—production of any estate-planning documents in Nay's possession. During discovery, Frakes also sought the estate-planning file as part of a request for the production of documents. Nay, in his capacities as trustee and as attorney, repeatedly argued that the estate-planning file was subject to the attorney-client privilege, and that Nay, in his capacity as attorney, was entitled to assert that privilege on behalf of his deceased clients, the Salings. The trial court disagreed, however, and granted Frakes's motion to compel Nay to produce the estate-planning file during discovery.

Another significant point of dispute was whether, for purposes of submission to the jury, Frakes's claims against Nay-as-attorney were best characterized as undue influence claims and challenges to Velma's testamentary capacity. Nay, both individually and as trustee, argued (consistently with his theory that Frakes was contesting the validity of the trust itself) that Frakes's breach of contract and tort claims hinged on whether Velma lacked testamentary capacity and whether Nay and Carol had unduly influenced Velma. Frakes, meanwhile, argued that his claims were solely directed at Nay's conduct as an attorney, that he was not required to prove either undue influence or Velma's lack of testamentary capacity to prevail on his claims, and that the trial court should not inject those questions into the instructions and verdict form. The trial court, however, agreed with Nay's...