In re Estate of Berthot, 00-249.

Decision Date05 December 2002
Docket NumberNo. 00-249.,00-249.
PartiesIn the Matter of the ESTATE of Mildred I. BERTHOT, Deceased. Ellen M. Collins and Joann Barrett, Petitioners and Appellants, v. Norwest Investment Management and Trust, Respondent and Respondent.
CourtMontana Supreme Court

John Frohnmayer, Bozeman, Montana, For Appellant.

Allan Baris, Cindy Younkin, Moore, O'Connell & Refling, Bozeman, Montana, For Respondent.

Justice JAMES C. NELSON delivered the Opinion of the Court.

¶ 1 Appellants Ellen M. Collins and Joann Barrett appeal an order of the District Court for the Eighteenth Judicial District, Gallatin County, denying their petition to remove Norwest Investment Management and Trust (Norwest) as trustee of their grandmother's testamentary trust and to appoint a new trustee. We affirm in part, reverse in part and remand for further proceedings consistent with this Opinion.

¶ 2 Appellants presented two issues on appeal which we have restated for clarity as follows:

¶ 3 1. Whether the District Court had discretion to deny Appellants' request to remove Norwest, the institutional trustee of this testamentary trust, and appoint an individual trustee.

¶ 4 2. Whether the District Court erred in awarding Norwest its attorney's fees and expenses in defending this action in the trial court.

¶ 5 In addition, Norwest presented the following two issues on cross-appeal:

¶ 6 3. Whether the District Court erred in failing to allow Norwest to recover all of its attorney's fees and expenses incurred in preparing the Twenty-Ninth Accounting.

¶ 7 4. Whether Norwest is entitled to reimbursement from the trust for its attorney's fees and other expenses of this appeal.

Factual and Procedural Background

¶ 8 Appellants are the beneficiaries of a testamentary trust established by the will of their grandmother, Mildred I. Berthot. Berthot executed her will on April 6, 1953. Under the terms of the will, all of her estate, with the exception of her jewelry, household goods and personal belongings, was bequeathed to Security Bank and Trust Company of Bozeman as trustee. Security Bank and Trust was founded by Berthot's late husband.

¶ 9 The trust went into effect when Berthot's will was admitted to probate and subsequently settled on May 14, 1962. The initial income beneficiary of the trust was Bernice B. Klingensmith, Berthot's daughter and Appellants' mother. When Klingensmith died in 1994, Appellants became the income beneficiaries entitling them to receive the net income from the trust during their lifetime. Upon the death of whichever Appellant dies last, the trust will terminate and the principal will be distributed equally among Appellants' six children.

¶ 10 By order dated September 26, 1966, the District Court confirmed Norwest as successor trustee to Security Bank and Trust Company. When Norwest became the trustee in 1966, the trust held assets valued at $166,757 of which $118,834 consisted of stock in several corporations; $28,661 was a real estate contract from the sale of farm land; $17,072 was a mortgage for the sale of city lots; $400 was in an escrow account; and $1,790 was in cash. Thus, of the original portfolio, 71% was in stock and 29% was in income producing assets. In 1966, the trust had income of $4,720 annually. As of the end of 1998, the value of the trust assets was $1,393,058 with income of $28,487 annually.

¶ 11 In administering the trust, Norwest has made monthly payments of income to Appellants and has provided Appellants annually with both fiscal year itemized statements and calendar year itemized statements. These statements itemize receipts and disbursements of the trust and describe the current assets and asset values of the trust.

¶ 12 After Klingensmith's death, Appellants sent Norwest two letters in which they asked several questions concerning Norwest's management of the trust, requested information concerning past performance of the trust, and requested details of a particular bond fund in which part of the trust assets were invested. Norwest duly responded to both letters, but heard nothing more from Appellants until Norwest filed its "Petition for Settlement of its Twenty-Ninth Account of Successor Trustee" on June 4, 1998. This Twenty-Ninth Accounting covered the two-year period from October 1, 1995, to September 30, 1997, and claimed trustee fees for that period of $16,403.68 and attorney's fees of $1,800.

¶ 13 On July 29, 1998, Appellants filed an objection to the accounting requesting that the District Court postpone its ruling to allow Appellants time to gather information to support a petition. Based on this objection, the court postponed a hearing on the Twenty-Ninth Accounting.

¶ 14 On May 20, 1999, Appellants filed their "Verified Petition to Remove Trustee and Appoint New Trustee," in which they sought the replacement of Norwest and the appointment of Edwin G. Davis, a family friend, as trustee. Appellants alleged in their petition that they are dissatisfied because Norwest allowed the trust to become heavily invested in equities which do not produce maximum income for the beneficiaries and, instead, generate excessive fees for Norwest. Besides Appellants (the income beneficiaries), the petition was verified by five of the six residual beneficiaries. The sixth residual beneficiary stated that she chose to "remain neutral."

¶ 15 A hearing in this matter was held on July 2, 1999, at which time the parties appeared and presented witnesses and exhibits. On February 1, 2000, the District Court issued its Findings of Fact, Conclusions of Law and Order wherein it concluded that Appellants failed to establish that Norwest should be removed as trustee and that the individual proposed by Appellants as a substitute trustee was not qualified. The court also approved Norwest's Twenty-Ninth Accounting, including the trustee fees, but denied awarding Norwest its attorney's fees in preparing the Twenty-Ninth Accounting and in defending this action.

¶ 16 Appellants filed their notice of appeal in the District Court on February 29, 2000, arguing that the District Court erred in not removing Norwest as trustee and in approving the Twenty-Ninth Accounting. Norwest filed its notice of cross-appeal on March 13, 2000, arguing that the District Court erred in failing to award Norwest its attorney's fees and expenses in this litigation. While Norwest contended in its notice of cross-appeal that Appellant's notice of appeal was untimely because a judgment in this matter had not yet been entered, Norwest filed its notice in the event that it was ultimately determined that Appellants' notice was timely.

¶ 17 Meanwhile, on March 7, 2000, Norwest filed a motion in the District Court requesting that the court amend its order regarding reimbursement for attorney's fees and expenses in defending this action arguing that Norwest is entitled by law to reimbursement from the trust. In its motion, Norwest also sought clarification of the court's order regarding reimbursement for attorney's fees and costs in preparing the Twenty-Ninth Accounting. Appellants objected to Norwest's motion arguing that once the appeal had been filed, the District Court lost jurisdiction to consider Norwest's motion.

¶ 18 On April 21, 2000, the District Court issued a Memorandum and Order concluding that it did have jurisdiction to consider Norwest's motion because the motion was timely under Rule 52(b), M.R.Civ.P., and as such, pursuant to Rule 5, M.R.App.P., the notice of appeal would be treated as being filed after the District Court's order. In addition, the District Court denied Norwest's request to modify its previous order regarding attorney's fees and costs for preparing the Twenty-Ninth Accounting. The court did, however, determine that although Norwest was not entitled to collect attorney's fees from Appellants, it was entitled to be reimbursed by the trust for its attorney's fees and costs in defending this action. Consequently, the court amended its previous order to that affect and stated that the amount of those attorney's fees and costs would be determined at a subsequent hearing.

¶ 19 On June 5, 2000, Norwest filed a motion with this Court requesting that we remand the case to the District Court for a determination of the amount of attorney's fees and costs Norwest incurred in defending this action. Hence, by order of this Court dated June 27, 2000, the case was remanded and, on September 18, 2000, the District Court entered an order approving an award of attorney's fees to Norwest from the trust in the amount of $10,463.

¶ 20 Thereafter, Appellants filed a supplemental notice of appeal and a motion to file a supplemental brief since their original brief on appeal was filed prior to the District Court's order approving attorney's fees. On October 18, 2000, this Court granted Appellants' motion. Appellants filed their supplemental brief on November 8, 2000, in which they argued that the District Court erred in awarding attorney's fees to Norwest. Norwest duly filed its brief on appeal, including therein its arguments on cross-appeal, and Appellants replied. Norwest declined to file a reply brief on its cross-appeal issue and this case was finally submitted for review to this Court.

Standard of Review

¶ 21 We review a district court's findings of fact to determine whether they are clearly erroneous. In re Eggebrecht, 2000 MT 189, ¶ 18, 300 Mont. 409, ¶ 18, 4 P.3d 1207, ¶ 18 (citing In re Estate of Bolinger, 1998 MT 303, ¶ 29, 292 Mont. 97, ¶ 29, 971 P.2d 767, ¶ 29). We review a district court's conclusions of law to determine whether that court's interpretation of the law is correct. Eggebrecht, ¶ 18.

Issue 1.

¶ 22 Whether the District Court had discretion to deny Appellants' request to remove Norwest, the institutional trustee of this testamentary trust, and appoint an individual trustee.

¶ 23 Appellants contend that the District Court erred in failing to...

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