In re Estate of Reilly

• Decision Date: 11 October 2007
• Docket Number: No. 06-PR-320.,06-PR-320.
• Citation: 933 A.2d 830
• Parties: In re ESTATE OF Dorothy O. REILLY; Robert W. Alvord, Appellant.
• Court: D.C. Court of Appeals

933 A.2d 830

In re ESTATE OF Dorothy O. REILLY; Robert W. Alvord, Appellant.

No. 06-PR-320.

District of Columbia Court of Appeals.

Argued February 6, 2007.

Decided October 11, 2007.

Stephen M. Truitt, with whom Edward M. Andries, Washington, DC, was on the brief, for appellant.

Kenneth G. Stallard, with whom Nicholas D. Ward and Julian E. Markham, Washington, DC, were on the brief, for appellees.

Before GLICKMAN and KRAMER, Associate Judges, and KING, Senior Judge.

KRAMER, Associate Judge:

Appellant Robert Alvord is the personal representative of the estate of Dorothy Reilly and trustee of the Residence Trust, a part of that estate. Appellees John Reilly and Margaret Reilly Heffern have sued Mr. Alvord in his capacities as representative of the estate and trustee of the Residence Trust, as well as in his individual capacity, claiming the right to the Residence Trust. The trial court granted a preliminary injunction, restraining Mr. Alvord from drawing on funds in the Residence Trust to pay for the costs of litigation. Mr. Alvord filed this interlocutory appeal, arguing that the Reillys failed to establish the threat of irreparable injury, a substantial probability of success on the merits, or that the balance of harms supported granting the injunction. We disagree and affirm.

I. Background

The appellees are the children of Gerard Reilly, a former Chief Judge of this court, and his first wife Eleanor, who died in 1980. Dorothy Reilly, was Gerard Reilly's second wife. When Eleanor died, Gerard Reilly became the owner of their residence located at 3515 Lowell Street, Northwest. Upon his death in 1995, one half interest in this residence was devised to Dorothy, and the other half was devised to the appellees in equal shares, with the restriction that the right of partition could not be exercised against Dorothy for one year.

In 1998, Dorothy created two trusts: the Residence Trust and the Revocable Trust. The Residence Trust consisted entirely of Dorothy's one-half interest in the Lowell Street property, and the appellees were its beneficiaries. The Revocable Trust was funded by Dorothy's personal property, and its ten beneficiaries are her family members living in Minnesota, Wisconsin, Colorado, and Maine. The Revocable Trust's purpose is to assist its beneficiaries with their educational expenses.

Dorothy revised the Residence Trust in 1999, removing the appellees as beneficiaries and replacing them with the Revocable Trust, effectively directing all of the property to her own relatives. Dorothy died in 2002. Mr. Alvord, who drew the wills of both Gerard and Dorothy Reilly, and who was a co-trustee of both the Residence and Revocable Trusts, was appointed executor of Dorothy's estate.

In 2003, the appellees filed suit against the Estate, alleging breach of contract to devise real estate. Count I of their Complaint alleged that there existed an oral agreement between Gerard and Dorothy Reilly by which Gerard Reilly agreed to convey one-half interest in the residence to Dorothy in consideration for her promise to devise her interest to his children. Count II of the Complaint was for recovery of fair rental value of the property; Count III alleged intentional interference with inheritance; and Count IV sought partition of the property. Mr. Alvord answered with a counterclaim for abuse of process. Count IV became moot when the appellees agreed to the sale of the property, with half of the proceeds going to the appellees and the other half going to the disputed Residence Trust. The appellees subsequently filed a separate action against Mr. Alvord in his personal capacity alleging malpractice and breach of fiduciary duty.

Thereafter, Mr. Alvord moved for summary judgment on Counts I and III of the complaint against the estate. The trial court granted the motion with respect to Count III, holding that the District of Columbia does not recognize the tort of intentional interference with inheritance. It denied the motion, however, with respect to Count I, the claim based upon breach of the oral agreement. The court held that the Statute of Limitations did not dictate summary judgment on this claim because (1) an ambiguity in the language of a tolling agreement between the parties made summary judgment inappropriate, and (2) the court construed the appellees' claim as seeking the imposition of a constructive trust, which exempts the claim from the Statute of Limitations. Dealing next with Mr. Alvord's Statute of Frauds defense to Count I, the court held the defense failed because there was part performance by Dorothy, and also because the Statute of Frauds does not apply to a constructive trust.

Thereafter, appellees filed a motion for a protective order to freeze the assets within the Residence Trust and to compel Mr. Alvord to return monies already withdrawn for litigation expenses. At the time the parties submitted their briefs, the Residence Trust held $882,284, and the Revocable Trust held $72,741. The court treated the motion as one for a preliminary injunction. It granted it in part, and denied it in part, holding that assets already paid out in attorneys' fees could not be recovered, but enjoining any further dissipation of Residence Trust funds for litigation expenses. This appeal followed.

II. Discussion

There are four criteria to be considered by a trial court when granting a preliminary injunction.

A proper exercise of discretion requires the trial court to consider whether the moving party has clearly demonstrated (1) that there is a substantial likelihood he [or she] will prevail on the merits; (2) that he [or she] is in danger of suffering irreparable harm during the pendency of the action; (3) that more harm will result to him [or her] from the denial of the injunction than will result to the defendant from its grant; and, in appropriate cases, (4) that the public interest will not be disserved by the issuance of the requested order.

Feaster v. Vance, 832 A.2d 1277, 1287 (D.C.2003) (quoting District of Columbia v. Group Ins. Admin., 633 A.2d 2, 21 (D.C. 1993)) (alterations in Feaster). In our review of an order granting a preliminary injunction,

it is not our task to resolve the overall merits of the dispute between the parties. . . . Rather, our role is confined to (1) examining the trial court's findings and conclusions to see if they are sufficiently supported by the record; (2) assuring that the trial court's analysis reflects a resolution of all the issues which necessarily underlie the issuance of an injunction; and (3) inquiring into any other claims of an abuse of discretion by the trial court.

Zirkle v. District of Columbia, 830 A.2d 1250, 1256 (D.C.2003) (quoting Wieck v. Sterenbuch, 350 A.2d 384, 387 (D.C.1976)). If, however, the trial court's decision "`turns on a question of law or statutory interpretation, we may reach the merits of the controversy.'" Id. at 1256 n. 5 (quoting Don't Tear It Down, Inc. v. District of Columbia, 395 A.2d 388, 391 (D.C.1978)).

A. Irreparable Harm

Mr. Alvord argues that the trial court erred in finding that the appellees were in danger of suffering irreparable harm in the absence of the injunction. He bases this argument (1) on the fact that attorneys fees are expressly authorized by the trust, (2) on the "American Rule," by which each party is responsible for its own attorneys fees, and (3) on the fact that the appellees are pursuing a separate remedy at law capable of redressing their wrong, that is, the suit against Mr. Alvord for malpractice and breach of fiduciary duty. We address these arguments seriatim.

The fact that attorneys' fees are expressly authorized by the trust is of no help to Mr. Alvord. Indeed, the law is clear that a trustee may use funds from the trust to defend it in litigation, regardless of the outcome. See, e.g., RESTATEMENT (THIRD) OF TRUSTS § 88 cmt. d (2005) ("The right of indemnification applies even though the trustee is unsuccessful in the action, as long as the trustee's conduct was not imprudent or otherwise in violation of a fiduciary duty."). The potential harm is irreparable precisely because Mr. Alvord had the legal right to use trust assets to pay attorneys fees. If it were improper for Mr. Alvord to use the funds to defend against a successful claim, then he would be liable to the appellees for any improper withdrawals, and there would be no need for an injunction. In this case, the legality of the act is what requires the court to prevent it. Furthermore, we have previously upheld the imposition of a preliminary injunction preventing a party from engaging in acts that were otherwise perfectly legal, absent the injunction. See, e.g., Simpson v. Lee, 499 A.2d 889 (D.C. 1985) (affirming an injunction against leasing out or otherwise occupying property whose ownership was not in question); see also Ellipso, Inc. v. Mann, 375 U.S.App. D.C. 270, 276-77, 480 F.3d 1153, 1159-60 (2007) (affirming an injunction against selling shares in a case based on fraudulent inducement to contract, where those shares were the only known asset from which judgment could be satisfied).

Mr. Alvord also makes the argument that the injunction runs afoul of the "American Rule" governing attorneys' fees. "Under the so-called American Rule, `a prevailing litigant ordinarily may not recover attorneys' fees from the defeated party when a case is concluded' unless that party acted in bad faith." Lowrey v. Glassman, 908 A.2d 30, 37 n. 9 (D.C.2006) (quoting Jung v. Jung, 844 A.2d 1099, 1107 (D.C.2004)). But the rule as applied here results in exactly the relief ordered below. Under the injunction, Dorothy Reilly's estate, through the Revocable Trust, can pay for the legal fees accumulated in defense of the Residence Trust, and the appellees will pay their own fees in prosecuting the lawsuit. The prevailing party will then have the full value of the Residence Trust to offset litigation expenses. As we understand it, even without any...