Raggio v. Second Judicial Dist. Court of Nev. (In re William J. Raggio Family Trust)

• Decision Date: 09 April 2020
• Docket Number: No. 76582,76582
• Citation: 460 P.3d 969
• Parties: In the MATTER OF the WILLIAM J. RAGGIO FAMILY TRUST. Dale Checket Raggio, Individually and as Trustee of the Marital Deduction Portion and Credit Share of the William J. Raggio Family Trust, Petitioner, v. The Second Judicial District Court of the State of Nevada, in and for the County of Washoe; and the Honorable David A. Hardy, District Judge, Respondents, and Leslie Raggio Righetti; and Tracy Raggio Chew, Co-Trustees of the William J. Raggio and Dorothy B. Raggio Trust Under Agreement Dated January 27, 1998, as Decanted and Vested Remaindermen of the Marital Deduction Trust Portion of the William J. Raggio Family Trust, Real Parties in Interest.
• Court: Nevada Supreme Court

460 P.3d 969

In the MATTER OF the WILLIAM J. RAGGIO FAMILY TRUST.Dale Checket Raggio, Individually and as Trustee of the Marital Deduction Portion and Credit Share of the William J. Raggio Family Trust, Petitioner,

v. The Second Judicial District Court of the State of Nevada, in and for the County of Washoe; and the Honorable David A. Hardy, District Judge, Respondents,andLeslie Raggio Righetti; and Tracy Raggio Chew, Co-Trustees of the William J. Raggio and Dorothy B. Raggio Trust Under Agreement Dated January 27, 1998, as Decanted and Vested Remaindermen of the Marital Deduction Trust Portion of the William J. Raggio Family Trust, Real Parties in Interest.

No. 76582

Supreme Court of Nevada.

FILED APRIL 09, 2020

OPINION

By the Court, HARDESTY, J.:

In this original writ petition, we must determine whether language in a trust instrument that allows a trustee to pay "as much of the principal of the Trust as the Trustee, in the Trustee’s discretion, shall deem necessary for the proper support, care, and maintenance" of the beneficiary imposes an obligation on the trustee to consider the beneficiary’s other assets. We hold that neither the trust instrument nor Nevada trust law requires the trustee to consider the beneficiary’s other assets before making distributions from the trust. Because discovery relating to those other assets is irrelevant to the claim that the trustee breached her fiduciary duties, we grant petitioner Dale Checket Raggio’s petition for writ relief.

FACTS AND PROCEDURAL HISTORY

In 2007, William J. Raggio created the William J. Raggio Trust (Raggio Trust). It provided that, upon his death, the Raggio Trust would split into two subtrusts, the Marital Deduction Trust (Marital Trust) and the Credit Shelter Trust. Both subtrusts would be for the benefit of his second wife, petitioner Dale Checket Raggio, and detail support for Dale that allows the trustee to pay as much of the principal of the trust "as the Trustee, in the Trustee’s discretion, shall deem necessary for the proper support, care, and maintenance" of Dale. The Raggio Trust named Dale both the trustee and life beneficiary of the subtrusts. William Raggio’s two daughters from a previous marriage, respondents Leslie Righetti and Tracy Chew (collectively, Righetti), were named as remainder beneficiaries of the Marital Trust. Dale’s grandchildren from her previous marriage are the remainder beneficiaries of the Credit Shelter Trust.

In 2015, after William Raggio had died, Righetti sued Dale for breach of trust and breach of fiduciary duties as trustee of the Marital Trust. Righetti alleged that Dale, as trustee, improperly distributed funds solely from the Marital Trust, thereby intentionally depleting Righetti’s remainder interest in the Marital Trust. Righetti argued that Dale seeks to preserve her grandchildren’s remainder interest in the Credit Shelter Trust and that she breached her fiduciary duties, particularly her duties of good faith, loyalty, and impartiality, by drawing solely from the Marital Trust. Righetti also alleged that Dale breached the Marital Trust by paying herself distributions in amounts that were more than necessary and proper for her support, care, and maintenance. Consequently, Righetti sought discovery of Dale’s accounting and distributions of the Credit Shelter Trust to prove these claims.

Dale objected to the discovery requests because they were not reasonably calculated to lead to discovery of admissible evidence and Righetti was not a beneficiary of the Credit Shelter Trust. Dale also filed a motion for partial summary judgment. She argued that the probate commissioner’s resolution of a prior petition precluded Righetti’s arguments that Dale is obligated to proportionally spend down the assets of the Credit Shelter Trust and that Righetti is entitled to an accounting of the Credit Shelter Trust. Righetti opposed summary judgment and filed a motion to compel discovery, arguing that issue and claim preclusion did not apply. Righetti further argued that the terms of the Marital Trust, particularly the language "necessary for the proper support, care, and maintenance," fell within the exception of NRS 163.4175, which meant that Dale had an obligation to consider her other sources of income and resources before making support distributions to herself. In response, Dale argued that neither NRS 163.4175 nor the trust itself requires her to consider the Credit Shelter Trust, or any of her other assets, before making distributions from the Marital Trust as trustee.

The probate commissioner recommended denying Dale’s motion for partial summary judgment because issue and claim preclusion did not apply, and the commissioner also recommended that Righetti’s motion to compel discovery be held in abeyance, pending affirmance by the district court. At a hearing on the matter, Dale’s counsel argued that while Dale owed Righetti "an accounting and a determination as to whether or not the spending of the marital trust is appropriate," Righetti was not entitled to an accounting of a trust to which she was not a beneficiary. The district court inquired into how an evaluation of Dale’s "discretionary choice to support herself from one trust ... [could] be measured without reference to how she’s also supported elsewhere." Dale’s counsel argued that the trustee’s discretion is measured by the intent of the settlor of the trust, and that because William Raggio "did not express an intent on that," there is no requirement under the trust or Nevada trust law to look at other sources of income. The district court questioned whether "one of [William Raggio’s] implicit intents was to preserve some trust corpus ... for the benefit of his two daughters and not exhaust the bypass trust in favor of preserving the credit shelter trust." Dale’s counsel denied that there was any such intent evident in the trust instrument.

The district court focused on the meaning of "necessary for the proper support, care, and maintenance," asking hypothetically, "[i]f there’s a mountain of gold behind her but we don’t get to see that mountain, how can we understand that her invasion of principal is necessary? It’s necessary only because of something." Dale’s counsel argued that whether a distribution is "necessary" depends on Dale’s standard of living when her husband was alive. Righetti’s counsel, on the other hand, argued that "necessary" refers to Dale’s other resources and assets and whether she needs the money.

Following the hearing, the district court denied Dale’s partial summary judgment request, reasoning that

[i]ntegral to the present claims is whether the trustee’s discretionary principal distributions from the marital deduction trust were "necessary" and "proper." The vested remainder beneficiaries are entitled to examine the need and propriety of the trustee’s decision to withdraw principal from the marital deduction trust by reference to other trust and non-trust resources available for the trustee’s necessary and proper support. It appears possible this [c]ourt cannot determine what is necessary and proper without a complete understanding of the trustee’s circumstances, to include standard of living and supportive resources beyond the marital deduction trust.

Shortly thereafter, the district court granted Righetti's renewed motion to compel discovery of the accounting and distributions of the Credit Shelter Trust, finding that the requested discovery was relevant to the subject matter and reasonably calculated to lead to the discovery of admissible evidence.

Dale filed the instant petition seeking a writ of prohibition or, alternatively, mandamus. Dale argues that the district court’s discovery order was improper as a matter of law and asks us to vacate the district court’s order compelling discovery.

DISCUSSION

We exercise our discretion to entertain Dale’s petition for a writ of prohibition

Writ relief is an extraordinary remedy that is only available if a petitioner does not have "a plain, speedy and adequate remedy in the ordinary course of law." NRS 34.330 ; see Club Vista Fin. Servs., LLC v. Eighth Judicial Dist. Court, 128 Nev. 224, 228, 276 P.3d 246, 249 (2012). "[T]he issuance of a writ of mandamus or prohibition is purely discretionary with this court." Wynn Resorts, Ltd. v. Eighth Judicial Dist. Court, 133 Nev. 369, 373, 399 P.3d 334, 340-41 (2017) (alteration in original) (internal quotation marks omitted). A writ of prohibition is the proper remedy to prohibit the district court from compelling a party to disclose privileged or irrelevant discovery. See id. at 374, 399 P.3d at 341 ; see also NRS 34.320 ; Toll v. Wilson, 135 Nev. ––––, ––––, 453 P.3d 1215, 1217 n.1 (2019) ("A writ of prohibition is appropriate when the relief is to arrest the proceedings and prohibit some exercise of judicial function." (internal quotation marks omitted)).²

Although we generally decline to review a discovery order through a petition for extraordinary relief, we may exercise our discretion to do so if the challenged discovery order is likely to cause irreparable harm and a later appeal would not effectively remedy an improper disclosure of information. Club Vista , 128 Nev. at 228, 276 P.3d at 249. Here, the discovery order implicates Dale’s privacy interests as the district court concluded it needed to review her "standard of living and supportive resources beyond the marital deduction trust" to determine if the distributions were necessary and proper. If the discovery permitted by the district court is legally irrelevant, a later appeal would not remedy the improper disclosure of the information. See Schlatter v. Eighth Judicial Dist. Court, 93 Nev. 189, 192, 561 P.2d 1342, 1344 (1977) (finding that it was an irreparable "invasion into a litigant’s private affairs" to order discovery of information without regard to relevancy). We thus exercise our discretion to entertain this petition.

The terms "necessary" and "proper" do not sufficiently trigger the...