McCoy, Matter of

• Decision Date: 23 December 1987
• Docket Number: No. 86-1381,86-1381
• Citation: 142 Wis.2d 750,419 N.W.2d 301
• Parties: In the Matter of the Revocable Trust of Elizabeth F. McCOY, Deceased. WISCONSIN ACADEMY OF SCIENCES, ARTS AND LETTERS, Petitioner-Appellant, v. FIRST WISCONSIN NATIONAL BANK OF MADISON, Respondent.
• Court: Wisconsin Court of Appeals

Page 301

419 N.W.2d 301

142 Wis.2d 750

In the Matter of the Revocable Trust of Elizabeth F. McCOY,

Deceased.

WISCONSIN ACADEMY OF SCIENCES, ARTS AND LETTERS, Petitioner-Appellant, v. FIRST WISCONSIN NATIONAL BANK OF MADISON, Respondent.

No. 86-1381.

Court of Appeals of Wisconsin.

Argued July 20, 1987.

Opinion Released Dec. 23, 1987.

Opinion Filed Dec. 23, 1987.

Review Denied.

Earl H. Munson, Madison, argued for petitioner-appellant; Howard A. Sweet and Thomas H. Taylor, and La Follette & Sinykin, Madison, on briefs.

James R. Cole, Thomas P. Solheim and Annie T. Walljasper, and Ross & Stevens, S.C., Madison, for respondent.

Before GARTZKE, P.J., and DYKMAN and SUNDBY, JJ.

DYKMAN, Judge.

The Wisconsin Academy of Sciences, Arts and Letters (Academy) appeals from a judgment dismissing its action to surcharge the First Wisconsin National Bank of Madison (Bank). The issues are: (1) Did the Bank breach its fiduciary duty to Elizabeth McCoy, the settlor of an inter vivos trust? (2) If the Bank breached this duty, can the breach be the basis for a cause of action in favor of the Academy? (3) Must the trust document be construed before a cause of action in negligence arises against the Bank? Because we conclude: (1) that the Bank breached its duty to McCoy; (2) that the Academy has a cause of action against the Bank for damages resulting from the Bank's negligence toward McCoy; and (3) that a construction of the trust is not a prerequisite to a cause of action against the Bank, we reverse.

In 1967, Elizabeth McCoy established an inter vivos trust with the Bank. The trust instrument provided that on McCoy's death, the trust corpus would go "to the Executor of [McCoy's] will or Administrator of [McCoy's] estate." On June 20, 1977, McCoy, representatives of the Bank and representatives of the Academy met at the Bank. Although there is conflicting testimony regarding what occurred, it is undisputed that McCoy told the Bank's trust officers that she wanted both the trust income during her life and the trust corpus at her death to go to the Academy. On June 23, 1977, McCoy wrote to the Academy's president as follows:

I take this way of confirming for the record the arrangements you heard at our meeting with trust officers Mark Vitense, and Jan Everson of the First Wisconsin National Bank of Madison.

The plan is for me now to turn over to the Academy the income from my personal trust, # 405563500, with the capital of that trust still to remain within my control for my lifetime. Thereafter, it is my intention to have it (or any remainder of it, if by chance I have had to use some part) given to the Academy for endowment purposes. We discussed how the bank may from this point on make certain changes in handling of the approximately $200,000 fund so as to increase income. We also agreed that $1,000 per month be paid to the Academy and payments shall be made by deposit into the Academy cash account during the last of each month. The bank indicated that such payment can begin on June 25, 1977. At the year's end any additional income will be paid to the Academy as a separate item.

The Bank received a copy of this letter in mid-July, put it in McCoy's file, and did not contact her further.

McCoy died intestate in March 1978. Her estate claimed the trust corpus pursuant to the terms of the trust instrument. The Academy, claiming that McCoy's letter gave the corpus to it, petitioned for a construction of the trust. The trial court held that the trust had not been effectively amended. The Academy appealed and we reversed and remanded for further proceedings, concluding that the trust was ambiguous. In Matter of Estate of McCoy, No. 80-458 unpublished slip op. (Wis.Ct.App. Apr. 27, 1981).

On remand, the Academy and the Estate stipulated to an equal division of the trust corpus to avoid litigation over McCoy's intent. The Bank refused to approve the stipulation. The trial court ordered the Bank to distribute the trust corpus as the parties had stipulated. The Bank did so, but appealed. We reversed, holding that the Bank, as trustee, must be a party to an agreement changing the distribution of trust assets under sec. 879.59(1), Stats. ¹ In Matter of Estate of McCoy, 118 Wis.2d 128, 345 N.W.2d 519 (Ct.App.1984). However, while the Bank's appeal was before us, the Academy and the Estate entered into another agreement in which each agreed to share equally in the trust assets, regardless of the outcome of the Bank's appeal.

On remand, the Academy abandoned its petition for construction of the trust and pursued its amended petition to surcharge the Bank for damages the Academy incurred as a result of the Bank's negligence in allowing the ambiguity regarding McCoy's intent to arise. The Academy claimed a judicial construction of the trust was not necessary for it to prevail on its petition for surcharge. The trial court disagreed and granted the Bank's motion to dismiss the Academy's petition.

A motion to dismiss ² challenging the sufficiency of the evidence should not be granted if the jury could find for the plaintiff. Prahl v. Brosamle, 98 Wis.2d 130, 133-34, 295 N.W.2d 768, 772 (Ct.App.1980). We review the evidence in the light most favorable to the plaintiff. Id. at 134, 295 N.W.2d at 772.

BREACH OF DUTY ³

The existence of a legal duty and the scope of that duty are questions of law. Ceplina v. South Milwaukee School Board, 73 Wis.2d 338, 341, 243 N.W.2d 183, 185 (1976).

A trustee occupies a position of peculiar responsibility. A trustee is selected because of confidence in his diligence, prudence, and absolute fidelity, as well as in his ability to so administer the trust as to protect those who, through infancy or other cause, are not able to protect their own interests. The performance of the duties of a trustee requires the exercise of a high degree of fidelity, vigilance, and ability. Especially is this true when the trustee is a company organized for the purpose of caring for trust estates, which holds itself out as possessing a special skill in the performance of the duties of a trustee, and which makes a charge for its services which adequately compensates it for a high degree of fidelity and ability in the administration of a trust estate.

Estate of Allis, 191 Wis. 23, 29, 209 N.W. 945, 947, reh'g denied, 210 N.W. 418 (1926). ⁴ "The responsibilities of a trustee require an administration of the trust with the sole object of serving the trust estate and guarding the interests of the beneficiaries." Estate of Allen, 218 Wis. 349, 353, 259 N.W. 848, 849 (1935). "If the trustee once accepts the appointment as trustee, [it] is under a duty to administer the trust as long as [it] continues to be trustee." IIA Scott, The Law of Trusts sec. 169, p. 310 (4th ed. 1987). ⁵

The performance of a trustee's duties requires a high degree of vigilance. Estate of Allis, 191 Wis. at 29, 209 N.W. at 947. "Vigilance" is defined as "the quality or state of being vigilant: watchfulness in respect of danger or hazard." Webster's Third New International Dictionary, 2551 (1976). ⁶ "Vigilant" is defined as "alertly or watchfully awake; esp: alert or watchful to discover and avoid danger." Id.

Given the Bank's knowledge of McCoy's apparent intent to make the Academy both the income and corpus beneficiary, as revealed at the June 20, 1977 meeting and confirmed in the June 23, 1977 letter, given the language of the trust instrument, which requires an "instrument in writing delivered to the Trustee" to amend the trust, and given the Bank's expertise in trust matters, we conclude the Bank had a duty to at least warn McCoy regarding easily identifiable impediments or pitfalls if her intent was to make the Academy the beneficiary of her trust upon her death, an intent not found in the trust document. Because the Bank did not advise or warn McCoy in this matter, it did not exhibit the degree of alertness or watchfulness it was required to provide as trustee of McCoy's trust. The Bank breached its duty of vigilance to McCoy. ⁷

ACADEMY'S CAUSE OF ACTION

A will beneficiary who suffers a loss due to a negligently drafted will may maintain a suit against the negligent attorney. Auric v. Continental Cas. Co., 111 Wis.2d 507, 509, 331 N.W.2d 325, 327 (1983). " '[P]ublic policy would seem to favor the court's extending its equitable arm to assist innocent parties seeking just damages resulting from an error committed by another and affecting their rights, which error those innocent parties were never themselves able to correct.' " Id. at 513, 331 N.W.2d at 328 (citation omitted). Factors to be balanced in deciding whether an attorney should be held accountable to a will beneficiary are: " 'the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to him, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant's conduct and the injury, and the policy of preventing future harm.' " Id. at 514, 331 N.W.2d at 329 (citation omitted).

Trusts have many of the features found in wills and perform some of the same functions as wills. We conclude that the holding in Auric should apply to trusts. Therefore the Academy has a cause of action against the Bank if: (1) the Bank was negligent in fulfilling its fiduciary duties to McCoy and (2) the Bank's negligence was a substantial factor in causing the Academy, as an intended trust beneficiary, to suffer a loss. We have already decided that the Bank was negligent in fulfilling its fiduciary duties to McCoy. Whether this negligence was a substantial factor causing a loss to the Academy is a jury question.

CONSTRUCTION NECESSARY?

In Gustavson v. O'Brien, 87 Wis.2d 193, 198, 274 N.W.2d 627, 630 (1979), the court said:

On appeal, the appellant contends that a judicial determination of whether the respondents had an insurable interest in the property is essential to a determination of whether the damages...