Frizzell v. Deyoung

• Decision Date: 04 April 2018
• Docket Number: Docket No. 44975
• Court: Idaho Supreme Court
• Parties: Donald Craig FRIZZELL, individually, and as a beneficiary of the Clifton and Marjorie Frizzell Family Trust, Plaintiff-Appellant, v. Edwin DEYOUNG, individually, and in his capacity as trustee of the Clifton and Marjorie Frizzell Family Trust; Darlene DeYoung, individually, and in her capacity as beneficiary of the Clifton and Marjorie Frizzell Family Trust; and on behalf of The Marital Community of Edwin DeYoung and Darlene DeYoung, husband and wife, Defendants-Respondents.

163 Idaho 473

415 P.3d 341

Donald Craig FRIZZELL, individually, and as a beneficiary of the Clifton and Marjorie Frizzell Family Trust, Plaintiff-Appellant,

v.Edwin DEYOUNG, individually, and in his capacity as trustee of the Clifton and Marjorie Frizzell Family Trust; Darlene DeYoung, individually, and in her capacity as beneficiary of the Clifton and Marjorie Frizzell Family Trust; and on behalf of The Marital Community of Edwin DeYoung and Darlene DeYoung, husband and wife, Defendants-Respondents.

Docket No. 44975

Supreme Court of Idaho, Boise, December 2017 Term.

Filed: April 4, 2018

GiantLegal, PLLC, Spokane, WA, for appellant. Robin L. Haynes argued.

Lake City Law Group, Coeur d'Alene, for respondent. Scot D. Nass argued.

BURDICK, Chief Justice.

Donald Craig Frizzell ("Frizzell") appeals the Kootenai County district court's dismissal of his complaint. Frizzell and the defendants, Edwin and Darlene DeYoung (collectively, the "DeYoungs"), were parties to an existing trust, with Edwin serving as trustee and Frizzell and Darlene as beneficiaries. The parties entered into an agreement pursuant to the Trust and Estate Dispute Resolution Act ("TEDRA agreement"). The TEDRA agreement was designed to modify the existing trust terms and also resolve issues related to Edwin's administration of the trust in his role as trustee. Two years after the TEDRA agreement was filed with the district court, Frizzell filed suit against the DeYoungs alleging Edwin was breaching the TEDRA agreement and his fiduciary duties. The district court granted the DeYoungs' motion to dismiss based on provisions in the TEDRA agreement that purported to hold Edwin harmless for any actions taken in his role as trustee. The district court also stated Frizzell was bound by the TEDRA agreement to pursue nonjudicial dispute resolution, rather than file a lawsuit for Edwin's breach of duty. Frizzell timely appealed to this Court. We reverse the district court's order dismissing Frizzell's complaint and remand for proceedings consistent with this opinion.

I. FACTUAL AND PROCEDURAL BACKGROUND

Clifton and Marjorie Frizzell created a trust ("Trust") in June of 2009 that contained the various properties and possessions the couple owned, and provided for their distribution. Both Clifton and Marjorie passed away in 2011. Haley Baker was named in the Trust as trustee, but declined the appointment. Edwin DeYoung was appointed successor trustee on October 29, 2011. In 2013, Frizzell commenced litigation regarding the administration of the Trust. Pursuant to that litigation, the parties entered into a TEDRA agreement to resolve disputes related to that administration of the Trust. The TEDRA agreement was filed in district court on October 31, 2014.

The TEDRA agreement modified certain terms of the Trust relating to what property or money different beneficiaries were to receive and when they would receive it. The agreement also contained various provisions purporting to release, indemnify, and hold Edwin harmless for all actions taken in his role as trustee. The parties disagree about whether the release, indemnity, and hold harmless provisions apply only to claims that arose prior to the TEDRA agreement, or if it releases Edwin from liability for all past and future claims.

In October of 2016, Frizzell filed a complaint in district court alleging thirteen causes of action relating to Edwin's administration of the Trust. Frizzell alleged that after the TEDRA agreement was signed and filed, Edwin did not follow through with his obligations under the TEDRA agreement and breached his fiduciary duty. This included Edwin's failure to notify Frizzell that one of the properties Frizzell thought he would be receiving as part of the TEDRA agreement actually was not a part of the Trust at all, but rather was in the Estate of Marjorie, which was managed by Edwin's wife (and Frizzell's sister) Darlene. Frizzell also claimed that Edwin failed to pay all net rental income to Frizzell, as was required under the TEDRA agreement. The rental properties generated over $130,000 during the year but Frizzell only received $6,123 from Edwin, and Edwin paid himself $49,303.

Frizzell's complaint also alleged that Edwin engaged in several other acts in breach of the TEDRA agreement and in breach of Edwin's fiduciary duties including: that Edwin directly competed with Frizzell, Edwin engaged in negligent supervision of a rental manager, Edwin failed to transfer Frizzell management of the properties, Edwin failed to protect trust property, and Edwin failed to provide an accounting or explain his excessive compensation.

The DeYoungs filed a motion to dismiss, arguing the TEDRA agreement's indemnity, release, and hold harmless provisions shielded Edwin from any and all liability for his administration of the Trust. The district court concluded that the provisions in the TEDRA agreement purporting to hold Edwin harmless were unambiguous and that the language indemnifies, releases, and holds Edwin harmless from all claims, past or future, in Edwin's role as trust administrator. The district court also concluded that the TEDRA agreement bound Frizzell to pursue nonjudicial dispute resolution, or to petition the court to enforce the TEDRA agreement, rather than file a lawsuit for breach of fiduciary duty. Accordingly, the district court granted the DeYoungs' motion to dismiss. The district court also concluded that because Frizzell was bound to pursue nonjudicial dispute resolution, his complaint was unreasonable, frivolous, and without foundation. Therefore, the district court awarded Edwin attorney fees. Frizzell timely appealed.

II. ISSUES ON APPEAL

1. Whether the district court erred in dismissing Frizzell's complaint when it found the TEDRA agreement shielded Edwin from all liability arising from his role as trustee.

2. Whether the district court erred in dismissing Frizzell's complaint when it found the TEDRA agreement bound Frizzell to pursue nonjudicial dispute resolution.

3. Whether either party is entitled to attorney fees at the district court and on appeal.

III. STANDARD OF REVIEW

When this Court reviews an order dismissing an action pursuant to I.R.C.P. 12(b)(6), we apply the same standard of review we apply to a motion for summary judgment. After viewing all facts and inferences from the record in favor of the non-moving party, the Court will ask whether a claim for relief has been stated. The issue is not whether the plaintiff will ultimately prevail, but whether the party is entitled to offer evidence to support the claims.

In addition, this Court reviews an appeal from an order of summary judgment de novo , and this Court's standard of review is the same as the standard used by the trial court in ruling on a motion for summary judgment. Ergo, a district court's dismissal of a complaint under I.R.C.P. 12(b)(6) shall be reviewed de novo .

Coal. for Agric.'s Future v. Canyon Cnty. , 160 Idaho 142, 145, 369 P.3d 920, 923 (2016) (citations omitted).

IV. ANALYSIS

A. The district court erred in dismissing Frizzell's complaint because the parties were not able to waive future claims for negligence or breach of fiduciary duty.

The district court concluded that the plain language in the TEDRA agreement unambiguously demonstrated that Frizzell agreed to hold Edwin "harmless from any claim relating to [Edwin's] administration of the Trust." Thus, the district court determined Frizzell had waived all claims against Edwin for negligence and breach of fiduciary duty regardless of when the alleged negligence or breach of fiduciary duty occurred. For the reasons discussed below, we reverse the district court's dismissal of Frizzell's complaint.

The TEDRA agreement is ambiguous because the indemnity, release, and hold harmless provisions can be interpreted in two ways. The first possible interpretation is that the TEDRA agreement was intended to settle all past claims for negligence and breach of fiduciary duty occurring prior to the execution of the agreement in 2014. The second possible interpretation is that the TEDRA agreement intended to waive all future claims for negligence and breach of fiduciary duty arising after the TEDRA agreement was executed. For the reasons discussed below, any attempt to waive all future claims for negligence and breach of fiduciary duty occurring after the agreement was executed is void as against public policy.

The relevant portions of the TEDRA agreement are as follows:

Paragraph 2 of the TEDRA agreement provides,

Nature of this Agreement. This Agreement is intended to be a binding agreement to resolve certain issues that have arisen or could arise in the future between the Parties in a manner that will avoid the necessity of further litigation or court proceedings in this matter to resolve such issues and further will serve as written documentation to third Parties of the Parties' agreement.

Paragraph 5.5 provides in pertinent part,

Full Agreement.... [Frizzell] shall indemnify, defend, and hold harmless Ed[win] as Trustee against any claims, lawsuits or other actions, including all costs of attorney fees incurred in defense of such claims, lawsuits, or other actions, arising as a result of [Frizzell]'s management of the real properties described ... above.

Paragraph 6 provides,

Donald C. Frizzell's Indemnification of Edwin J. DeYoung. [Frizzell] on behalf of himself and as custodian ... agrees to indemnify, defend, and hold Ed[win] harmless against any claims, lawsuits, or other actions ... advanced against Ed[win] by [Frizzell] or [Frizzell]'s children or heirs relating to Ed[win]'s administration of the [Trust].

Paragraph 9 provides in pertinent part,

Release and Hold Harmless. The Beneficiaries, on behalf of themselves, their heirs and successors-in-interest ... their agents and assigns ( [Releasors] ) release, discharge, and indemnify Ed[win] and Ed[win]'s heirs, successors-in-interest, agents, and assigns ( [Releasees] ), from any and all actual or potential claims or

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