M.J. v. Wisan

• Decision Date: 23 March 2016
• Docket Number: No. 20140189.,20140189.
• Citation: 371 P.3d 21,2016 UT 13
• Parties: M.J., Petitioner, v. Bruce R. WISAN, Court–Appointed Special Fiduciary of the United Effort Plan Trust, Respondent.
• Court: Utah Supreme Court

371 P.3d 21

2016 UT 13

M.J., Petitioner

v.Bruce R. WISAN, Court–Appointed Special Fiduciary of the United Effort Plan Trust, Respondent.

No. 20140189.

Supreme Court of Utah.

March 23, 2016.

Jeffery L. Shields, Michael D. Stanger, Salt Lake City, for petitioner.

Alan W. Mortensen, Lance L. Milne, Michael A. Worel, Paul M. Simmons, Salt Lake City, for respondent.

Associate Chief Justice LEE authored the opinion of the Court, in which Chief Justice DURRANT, Justice DURHAM, and Justice HIMONAS joined. Justice JOHN A. PEARCE became a member of the Court on December 17, 2015, after oral argument in this matter, and accordingly did not participate.

Associate Chief Justice LEE

, opinion of the Court:

¶ 1 In this case we consider an interlocutory appeal from the denial of a defense motion for summary judgment. The claims at issue were asserted by M.J., an individual who allegedly was required to enter into an underage marriage with Allen Steed at the direction of Warren Jeffs. At the time, Jeffs was acting as the head of the Fundamentalist Church of Jesus Christ of Latter–Day Saints and trustee of the United Effort Plan Trust (“UEP Trust” or the “Trust”). M.J. filed suit against Jeffs and against Bruce R. Wisan in his capacity as Special Fiduciary of the Trust, asserting tort claims and grounds for both direct and vicarious liability.

¶ 2 The Trust moved for summary judgment on several grounds. The district court denied the Trust's motions. We agreed to review that decision on interlocutory appeal because the Trust's motions raised a number of important legal questions on matters of first impression—as to the effect of our decision in Snow, Christensen & Martineau v. Lindberg, 2013 UT 15, 299 P.3d 1058

; the impact of M.J.'s release of claims against Allen Steed; and the viability of her claims for vicarious liability under the doctrines of respondeat superior and “reverse” veil-piercing. We affirm in large part. We uphold the district court's decisions on all issues except its determination that the Trust is subject to liability on reverse veil-piercing grounds.

I

¶ 3 In 1942, the leaders of a fundamentalist religious movement called the “Priesthood Work” formed the UEP Trust.¹ Fundamentalist Church of Jesus Christ of Latter–Day Saints v. Lindberg, 2010 UT 51, ¶ 2, 238 P.3d 1054

. The Trust's stated purpose was “charitable and philanthropic.” Id. But membership in the Trust was conditioned upon “consecration” of real and certain other property to the Trust. Id. “For this fundamentalist group—predecessor to the Fundamentalist Church of Jesus Christ of Latter–Day Saints (the ‘FLDS Church’ or ‘Church’)—consecration was an act of faith whereby members deeded their property to the UEP Trust to be managed by Church leaders.” Id. “Church leaders, who were also trustees, then used this property to minister to the needs of the members.” Id.

¶ 4 “In 1986, some Trust property residents sued the UEP trustees for breach of fiduciary duty.” Id. ¶ 3. In proceedings leading to a decision of this court, we held that the Trust was subject to suit on fiduciary duty claims by Trust beneficiaries because it was a private, and not a charitable, trust. See Jeffs v. Stubbs, 970 P.2d 1234, 1252 (Utah 1998)

. The basis for that decision was the determination that the UEP Trust was intended from its inception to benefit specified individuals—the Trust's founders. Id.

¶ 5 In response to that decision, Rulon Jeffs, the then-president of the FLDS Church and sole surviving founder of the 1942 Trust, executed an “Amended and Restated Declaration of Trust of the United Effort Plan.” Fundamentalist Church, 2010 UT 51, ¶ 4, 238 P.3d 1054

. This 1999 restatement established a charitable trust. Id. It also provided that “in the event of termination of this Trust, whether by the Board of Trustees or by reason of law, the assets of the Trust Estate at that time shall become the property of the Corporation of the President of the [FLDS Church].” Id.

¶ 6 From 1998 to 2006 the Trust was operated for the express purpose of furthering the doctrines of the FLDS Church, including the practice of plural marriage involving underage girls. Throughout this period there was no clear delineation between the FLDS Church and the Trust. Funds were comingled between the two entities, and the President of the FLDS Church had “extraordinary powers” in administering the Trust, including the power to appoint or remove trustees at will.

¶ 7 In 2004 the Trust was subjected to suit in two separate tort actions, one involving allegations of child sex abuse and the other asserting a fraud claim. Id. ¶ 5. At some point during the course of this litigation the Trust terminated its counsel. Id. And when the Trust declined to appoint substitute counsel, and trustees failed to otherwise appear, the court appointed a special fiduciary to represent the interests of the Trust until new trustees could be appointed. Id. ¶ 6. Eventually, “[t]he district court asked the special fiduciary to prepare a memorandum identifying issues the court needed to address before appointing new trustees.” Id. ¶ 7. And “the special fiduciary expressed concern in a memorandum filed with the district court that the Trust needed to be reformed if new trustees were to be appointed.” Id.

¶ 8 In response, “the district court entered an order that concluded that the Trust could be reformed so that the special fiduciary could administer the Trust to meet the 'just wants and needs' of the beneficiaries according to neutral, nonreligious principles.” Id. ¶ 8. Through further litigation—and without any participation by the FLDS Church or its leaders or trustees of the Trust, all of whom sat silent on the sidelines—the district court ultimately reformed the Trust under the doctrine of cy pres. Id.

¶ 9 In reforming the Trust the district court sought to preserve the Trust's “charitable intent” of protecting the interests of Trust beneficiaries. Yet it also concluded that “it could reform the Trust by excising the purpose of advancing the religious doctrines and goals of the FLDS Church to the degree that any of these were illegal,” including “polygamy, bigamy, [and] sexual activity between adults and minors.” Id. ¶ 12 (alteration in original). Thus, the reformation of the Trust effectively “strip[ped] the FLDS Church president of several powers under the Trust” and “remove[d] any requirement that the president of the FLDS Church approve any Board action” on behalf of the Trust. Id. ¶ 15.

¶ 10 The district court has since retained jurisdiction over the administration of the reformed Trust. As Special Fiduciary, Wisan has instituted a process allowing Trust beneficiaries to petition the Trust for benefits.

¶ 11 Further litigation has continued, however. Years after the Trust modification was complete, a group of FLDS Church members filed a petition for extraordinary writ challenging the reformation on constitutional and other grounds. We rejected that petition on equitable laches grounds in our decision in Fundamentalist Church, 2010 UT 51, 238 P.3d 1054

. In so doing, we noted that Church leaders and members had consciously determined to sit silent during the course of reformation proceedings in the district court, and that numerous claimants had relied on the finality of the court's reformation. Id. ¶¶ 33–34. For those reasons we denied the Church members' petition without reaching its merits.

¶ 12 In 2013, we also resolved a further dispute involving the Trust. In Snow, Christensen & Martineau v. Lindberg, 2013 UT 15, ¶ 56, 299 P.3d 1058

, we considered district court orders disqualifying the Trust's former counsel from representing an adverse party in subsequent litigation and requiring former counsel to provide privileged material to the Trust and to its then current counsel. In reversing those orders, a majority of this court concluded that the Trust was effectively a new entity—in the position of an asset purchaser—for purposes of the issues presented in the case. Id. ¶ 48.

¶ 13 That brings us to this case. It was filed by M.J., a former member of the FLDS Church and beneficiary of the UEP Trust. M.J. alleges that in 2001, when she was fourteen years old, she was forced to marry Allen Steed, her first cousin. The wedding was performed by Warren Jeffs, who at the time was acting president of both the FLDS Church and the Board of Trustees of the Trust.² M.J. and Steed resided on UEP Trust property provided by another one of the trustees. M.J. claims that Steed repeatedly sexually assaulted and raped her while she resided on this property. She requested a divorce from Steed on multiple occasions, but Jeffs refused to allow it. He also refused to let M.J. live on Trust property separately from her husband. M.J. also alleges that none of the other trustees objected or acted to stop the marriage.

¶ 14 M.J. filed this suit in 2007. She has asserted a variety of tort claims against both Warren Jeffs and the UEP Trust³ and advances claims for both vicarious and direct liability against the Trust. She seeks to hold Jeffs responsible, and the trust vicariously liable, for intentional infliction of emotional distress, outrage, and negligence. She also asserts claims against the UEP Trust for negligence, as well as negligent hiring, appointment, retention, and supervision.

¶ 15 M.J. advances two theories of vicarious liability. She first claims that Jeffs and other trustees were acting “in furtherance of the trust administration and within the scope of their authority,” and thus contends that the Trust should be liable under the doctrine of respondeat superior. Second, she asserts that the UEP Trust was Jeffs's “alter ego.” And on that basis she asserts a right to “reverse veil-piercing”—an equitable remedy that would treat Trust assets as if they were Jeffs's personal assets.

¶ 16 M.J. has not asserted any claims against Steed. But her complaint alleges that he was acting “at the direction and under the control of Warren Jeffs and other UEP Trust tru...