Shriners Hosps. for Children v. First N. Bank of Wyo.

• Decision Date: 18 May 2016
• Docket Number: S–15–0239.,Nos. S–15–0238,s. S–15–0238
• Citation: 2016 WY 51,373 P.3d 392
• Parties: SHRINERS HOSPITALS FOR CHILDREN, In its capacity as beneficiary of the Alfred J. and Pegge A. Cooksley Trust, Appellant (Plaintiff), v. FIRST NORTHERN BANK OF WYOMING, In its capacity as trustee of the Alfred J. and Pegge A. Cooksley Trust, Appellee (Defendant). Shriners Hospitals for Children, In its capacity as beneficiary of the Alfred J. and Pegge A. Cooksley Trust, Appellant (Plaintiff), v. First Northern Bank of Wyoming, In its capacity as trustee of the Alfred J. and Pegge A. Cooksley Trust, Appellee (Defendant).
• Court: Wyoming Supreme Court

373 P.3d 392

2016 WY 51

SHRINERS HOSPITALS FOR CHILDREN, In its capacity as beneficiary of the Alfred J. and Pegge A. Cooksley Trust, Appellant (Plaintiff)

v.FIRST NORTHERN BANK OF WYOMING, In its capacity as trustee of the Alfred J. and Pegge A. Cooksley Trust, Appellee (Defendant).

Shriners Hospitals for Children, In its capacity as beneficiary of the Alfred J. and Pegge A. Cooksley Trust, Appellant (Plaintiff)

v.First Northern Bank of Wyoming, In its capacity as trustee of the Alfred J. and Pegge A. Cooksley Trust, Appellee (Defendant).

Nos. S–15–0238

S–15–0239.

Supreme Court of Wyoming.

May 18, 2016.

Representing Appellant: Christopher C. Voigt and Timothy M. Stubson of Crowley Fleck, PLLP, Casper, WY. Argument by Mr. Voigt.

Representing Appellee: Tom C. Toner of Yonkee & Toner, Sheridan, WY; and Keith Dodson of Williams, Porter, Day & Neville, Casper, WY. Argument by Mr. Toner.

Before BURKE, C.J., and HILL, DAVIS, FOX, and KAUTZ, JJ.

HILL, Justice.

[¶ 1] Alfred “Jack” Cooksley and Pegge Cooksley placed their ranch and other property in a revocable charitable trust entitled the Alfred J. and Pegge A. Cooksley Trust (Trust). The Trust named Shriners Hospitals for Children (Shriners) and the Kalif Children's Travel Fund (Kalif) as beneficiaries, and First Northern Bank of Wyoming as the successor trustee. The Trust specified the year 2100 as its termination date, and it directed First Northern Bank to hold the ranch and other property in the Trust until that date. Upon termination of the Trust, First Northern Bank was to distribute the Trust assets to the beneficiaries, and, until then, the Bank was to distribute to the beneficiaries any Trust income not otherwise required to maintain and operate the ranch.

[¶ 2] Pegge Cooksley died in 2007, and Jack Cooksley died in 2011. After Jack Cooksley's death, Shriners filed a petition seeking termination of the Trust and an immediate distribution of the Trust assets. In a separate action, Shriners filed a complaint against First Northern Bank alleging it had breached its fiduciary duty to the Trust beneficiaries and seeking the Bank's removal as trustee, an award of damages, and a disgorgement of any fees paid to the Bank. Shriners' actions were consolidated, and following a bench trial the district court ruled against Shriners and issued a judgment denying all of its claims. The court thereafter entered an order directing Shriners to pay First Northern Bank its attorney fees and costs in the amount of $48,343.74. Shriners appeals both the judgment denying its claims and the order awarding fees and costs. We affirm both.

ISSUES

[¶ 3] Shriners presents eight issues on appeal, which we reorder and condense into the following:

1. Whether the district court erred in concluding that the Trust did not violate the rule against perpetuities.

2. Whether the district court erred in concluding there were no grounds to terminate the Trust.

3. Whether the district court erred in concluding First Northern Bank did not breach its fiduciary duties to the beneficiaries.

4. Whether the district court erred in concluding there were no grounds to remove First Northern Bank as trustee.

5. Whether the district court erred in finding that First Northern Bank's attorney acted reasonably in response to Shriners' initial challenge to the Trust.

6. Whether the district court abused its discretion in ordering Shriners to pay First Northern Bank's attorney fees and costs.

[¶ 4] First Northern Bank identifies the issues on appeal similarly and adds the additional question of whether Shriners should be required to pay First Northern Bank's attorney fees associated with this appeal.

FACTS

A. Creation of Trust

[¶ 5] On October 24, 2006, Jack and Pegge Cooksley jointly executed a Declaration of Trust, which created the Alfred J. and Pegge A. Cooksley Trust (Trust). The Trust was a revocable trust and reserved in both Jack and Pegge Cooksley the power to revoke or amend the Trust, add or remove a trustee, or add or remove any asset. The Declaration of Trust designated Jack Cooksley as the initial trustee, and upon his death, First National Bank of Buffalo (now First Northern Bank) was to serve as the successor trustee.¹ The Cooksleys placed all of their property, both real and personal, in the Trust when they created the Trust in October 2006.

[¶ 6] The principal asset of the Trust is an approximately 1,620–acre ranch that the Cooksleys purchased in 1951. The ranch is located in Sheridan County, Wyoming, about twenty-five miles southeast of Sheridan and four miles west of Ucross and is accessible by U.S. Highway 14. The ranch appraised at a value of $2,000,000.00 in 2011 and, with over a mile of frontage on Piney Creek, was described in that property appraisal as being located in “a highly sought after area situated along the year-round flowing Piney Creek.” The property appraiser observed: “The meadows/creek bottom land, located along Piney Creek, are not only highly productive (providing a good hay base for the ranching operation) but also esthetically pleasing and valued for their recreational amenities.”

[¶ 7] The Trust provided that while both Jack and Pegge Cooksley were living, the trustee was to pay the net income and principal (up to the entire amount) of the Trust to or for their benefit, in such amounts and at such times as either might direct. Upon the death of either Jack or Pegge Cooksley, the Trust directed the following disposition:

The Trustee shall collect the income from the trust, and after deducting any charges and expenses properly chargeable to income in the administration of the trust, shall pay all of the net income, at least quarter-annually, to or for the benefit of the surviving Settlor, for life. In the event any such payment of income is insufficient, in the sole opinion of the survivor of us, to provide for the health, education, maintenance and support of the survivor, the Trustee shall use from time to time so much of the principal of this Trust as the survivor of us shall direct be withdrawn and used, paid or applied for those purposes.

[¶ 8] Upon the death of the surviving Cooksley spouse, the Trust directed the following disposition of the Trust property:

2.2 Disposition After Death of Both Settlors. Upon the death of the survivor of us, the Trustee shall administer, dispose of and distribute the then remainder of this trust, including income accruing after the date of death of the survivor of us, as follows:

A. [distribution of personal property per any separate writing]

B. [distribution of rocks, minerals, and historical artifacts to Jim Gatchell Museum]

C. The Trustee may make distribution or disposition of any other tangible personal property as the Trustee, in its sole discretion, shall deem appropriate, including but not limited to private sale, auction and charitable donation. We intend that the trust continue for some years, and direct the Trustee to dispose of tangible personal property so that it is not a burden on the trust.

Notwithstanding the foregoing, the Trustee is authorized to retain such tangible personal property as it deems appropriate or necessary to the management of the ranch land, buildings and residence.

D. The Trustee shall thereafter hold, manage, invest, reinvest and distribute the remaining trust estate for the benefit of the SHRINERS HOSPITAL FOR CRIPPLED CHILDREN—INTERMOUNTAIN, or its successor, (“SHRINERS HOSPITAL ”) as follows:

(i) The Trustee shall distribute to or apply for the benefit of the SHRINERS HOSPITAL, at least semi-annually, all of the net income of the trust. We specifically direct that any and all accumulation of funds, whether from depletion, depreciation, and/or any other non-distributable source, be managed by the Trustee and used to the extent that the Trustee deems appropriate or necessary, to maintain the real property. In the event that there are insufficient funds to pay such expenses, then the Trustee is authorized to withhold so much of the net income otherwise distributable as is necessary or advisable, in the Trustee's sole discretion, to provide for such expenses.

(ii) As soon as practical after the year 2100, the Trustee shall distribute outright to the SHRINERS HOSPITAL all of the then-remaining principal together with any undistributed income, free and clear from the restrictions of these Trust provisions, and when all funds have been distributed, the Trust shall terminate.

(iii) If SHRINERS HOSPITAL shall cease to exist, without a successor qualified as an IRC Section 501(c)(3), as amended, then the Trustee shall designate one or more qualified IRC Section 501(c)(3) recipient(s), upon application to and approval of a court of competent jurisdiction, such qualified recipient(s) to be chosen according to the criteria of assisting and promoting the medical diagnosis, care and treatment of children in Wyoming and the greater intermountain region.

B. First Amendment to Trust

[¶ 9] On January 15, 2007, the Cooksleys executed the first amendment to the Trust. The first amendment revised Paragraph 2.2.D(ii) to provide for distribution of the Trust assets to Shriners as soon as practical after the year 2050 and to provide for the Trust's termination after that 2050 distribution. The first amendment also added Paragraph 2.2.E to the Trust, which provided:

E. The major asset that we have contributed to this Trust is our ranch, consisting of land, improvements and minerals. It is our intention that the Trustee continue to hold the ranch for the term of this trust, with the land remaining open and its use devoted to agriculture and/or preservation. We realize, however, that circumstances may occur that would make the continued ownership of this asset by the trust impractical or imprudent. By way of example, and by way of limitation, we list the following circumstances that would affect and possibly prohibit the continued ownership of the ranch:

(i). The need for liquidity to pay for the extended nursing or home care for either or both of us; or

(ii

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