In re The Robert and Irene Redland Family Trust

          Appeal from the District Court of Washakie County The Honorable Robert E. Skar, Judge

          Representing Rolly and Kendrick Redland, Roalene Redland-McCarthy, and Teresa Shelton: Steve Aron, Aron and Henning, LLP, Laramie, Wyoming; S. Joseph Darrah, Darrah Law Office, P.C., Powell, Wyoming. Argument by Mr. Aron.

          Representing Robert Redland and Lisa Kimsey: Scott W. Meier & M. Greg Weisz, Pence and MacMillan, LLC., Cheyenne, Wyoming. Argument by Mr. Meier.

          Before DAVIS, C.J., and BURKE ^[*] , FOX, BOOMGAARDEN, and HILL (RET.) JJ.

          BOOMGAARDEN, JUSTICE

         [¶1] These consolidated appeals involve the ongoing disputes with the Redland family's irrevocable trust. Appeals S-18-0091 and S-18-0092 relate to Rolly Redland's counterclaim to remove his sister, Lisa Kimsey, as co-trustee for allegedly breaching her fiduciary duties and interfering with trust administration. Appeal S-18-0093 concerns Ms. Kimsey's request to terminate the trust because she claims it is invalid and otherwise fails to achieve the settlors' intended purposes. After a five-day trial, the district court decided not to remove Ms. Kimsey as co-trustee or terminate the trust. Finding no error, we affirm.

         ISSUES

         [¶2] We state the issues as:

I. Did the district court err when it did not terminate the trust?

A. Does res judicata bar Lisa's claim that the trust is invalid?

B. Does the trust fail to achieve any material purpose?

         II. Did the district court err when it retained Lisa Kimsey as co-trustee?

         FACTS

         [¶3] We detailed the history of the Redland family's trust in Redland v. Redland, 2012 WY 148, 288 P.3d 1173 (Wyo. 2012) (Redland I) and Redland v. Redland, 2015 WY 31, 346 P.3d 857 (Wyo. 2015) (Redland II). We restate it here to the extent necessary to put the current appellate issues into context.

         [¶4] Robert Redland (Robert) and his wife, Irene Redland (Irene), created the Robert Redland and Irene Redland Family Trust dated August 10, 1989 (Redland Family Trust) to hold and manage ranch properties acquired from Robert's father and brother, along with the family's future ranch property acquisitions. Redland I, ¶ 21, 288 P.3d at 1180. Robert, Irene, and their five children^[1] each made contributions to acquire the trust property; each were named as beneficial owners; and, Robert and Irene served as the original trustees. Id. In 1995, Robert, Irene, Lisa, Kendrick, and Roalene amended the Redland Family Trust to: provide for the appointment of a successor trustee; require two trustees to serve at all times; create a marital trust for the survivor of Robert or Irene; and revise the buyout provision, inter alia (1995 Amendment).^[2] Irene passed away in 2007 and, pursuant to the 1995 Amendment, the beneficiaries appointed Rolly as co-trustee. Id. ¶¶ 36, 38, 288 P.3d at 1182-83.

         [¶5] Thereafter, a dispute arose between Robert and four of his children about Robert's failure to convey additional lands into the Redland Family Trust and about lease agreements Robert executed without approval of his co-trustee. Redland I, ¶¶ 35-39, 288 P.3d at 1182-83. Contentious litigation involving all the beneficial owners ensued with the parties asserting several causes of action. Id. ¶¶ 39-40, 288 P.3d at 1183. Among those claims, Rolly sought to recover additional trust lands and Robert sought to invalidate the trust for violating the rule against perpetuities. Id. ¶¶ 39-41, 288 P.3d at 1183. The district court entered partial summary judgment, concluding the statute of limitations and statute of frauds barred Rolly's claim to recover property, and held a lengthy trial on the parties' remaining claims. Id. ¶¶ 41, 44, 181, 288 P.3d at 1183-84, 1214. While the matter was under advisement, the parties filed a stipulation resolving several of their disputed claims (2010 Stipulation). Id. ¶ 44, 288 P.3d at 1184. Pertinent to this appeal, the 2010 Stipulation requested that the court approve a trust amendment requiring the appointment of a third (tie-breaker) trustee in the event the court determined the trust was valid. Id. The district court approved the amendment after ruling the trust did not violate the rule against perpetuities.^[3] Id. ¶ 45, 288 P.3d at 1184.

         [¶6] The parties appealed several of the district court's rulings but did not further challenge the trust's validity. Redland I, ¶¶ 4-6, 288 P.3d at 1177-78. In Redland I, we reversed the district court's summary judgment order barring the recovery of additional property and remanded the matter for trial. Id. ¶ 181, 288 P.3d at 1214. Thereafter, the district court ordered Robert to immediately transfer the disputed property to the Redland Family Trust, except it allowed the Manderson Place (Robert's residential parcel) to be transferred on his death. Redland II, ¶ 2, 346 P.3d at 859. Robert appealed. In Redland II, we affirmed the district court's decision on the merits, but we remanded the matter for an order immediately transferring the Manderson Place to the Redland Family Trust, subject to Robert's life estate. Id. ¶¶ 68-69, 346 P.3d at 880.

         [¶7] On February 13, 2013, while the second appeal was pending, Robert filed a complaint^[4] against the other co-trustees, Rolly and Larry Heiser (the present litigation). In his complaint, Robert requested temporary and permanent injunctions to preclude Mr. Heiser from acting as the third co-trustee and to prohibit further trustee meetings pending further order of the court. Robert also requested a declaratory judgment that the Redland Family Trust is dysfunctional, or alternatively, that the beneficiaries select a new trustee to replace Mr. Heiser.^[5] Rolly filed a counterclaim to remove Robert as co-trustee.

         [¶8] Robert resigned as co-trustee in September 2013, appointed Lisa as his successor, and added Lisa as a co-plaintiff in the litigation.^[6] Lisa moved to terminate the trust, claiming it was impossible to administer due to dysfunction caused by the two factions within the family-Robert and Lisa on one side, and the remaining Redland children on the other. Lisa further argued the trust could no longer achieve its purposes because the family members could not work together, and the family could not obtain preferential tax treatment for a business trust. Rolly opposed the motion, asserting res judicata barred Lisa's claim because the district court previously determined the trust, as amended, was valid. The district court reserved Lisa's motion for trial.

         [¶9] Later in the proceedings, Rolly moved to dismiss the complaint as moot; the district court partially granted Rolly's motion. With the court's permission, Robert and Lisa filed an amended complaint^[7] on May 6, 2015, which named the other beneficial owners as defendants and asserted the following causes of action: (1) Dissolution of the Trust, ^[8] (2) Injunction, ^[9] (3) Declaratory Judgment, (4) Adoption of Operating Agreement, (5) Appointment of Third Trustee, and (6) Enforcement of Trust Agreement Provision on Distribution. Rolly filed a counterclaim seeking Lisa's removal as co-trustee and attorney's fees and costs. Kendrick, Roalene, and Teresa answered separately, but did not assert a counterclaim to remove Lisa.

         [¶10] Prior to trial, Robert moved the court to compel the trustees to create and distribute funds to a marital trust as required by the amended trust. After a hearing on Robert's motion, the district court ordered the trustees to create and fund the marital trust, provide an accounting to the beneficiaries and the court from the date of Irene's death through the present, and provide transcripts of all future trustee meetings. In compliance with the court's order, Robert and Lisa filed an accounting on January 4, 2017, along with a transcript of the most recent trustees' meeting, wherein Lisa advocated to approve Robert's request for distributions to the marital trust and reimbursement for trust expenses Robert personally paid through the years. The court took no further action on Robert's motion prior to trial.

         [¶11] A five-day bench trial commenced on February 27, 2017. At the trial's conclusion, the district court requested additional briefing on the tax issues raised, whether Robert and Lisa could challenge the validity of the trust post-Redland I, and whether the Uniform Trust Code (UTC) or common law governed the trust. The parties complied and also submitted written closing arguments and extensive proposed findings of fact and conclusions of law.

         [¶12] The district court issued its decision letter on November 3, 2017. With respect to the issues on appeal, the district court did not remove Lisa as co-trustee because it determined Lisa did not violate any fiduciary duties and Rolly failed to show gross and willful misconduct to justify Lisa's removal. The district court also did not terminate the Redland Family Trust, concluding: (1) Lisa's claims that the trust is invalid should have been raised in the original trust challenge; (2) "the main and most important reason for the Trust, i.e., to keep the lands and leases together for the Redland family, has not been frustrated" regardless of any adverse tax consequences; (3) "although progress is slow in light of the positions of the Trustees, it is functional from an administration standpoint;" and (4) the trust is not "unlawful, contrary to public policy, or impossible."^[10] The district court entered an order and judgment incorporating its decision letter on December 13, 2017. This appeal followed.

         STANDARD OF REVIEW

         [¶13] After a bench trial, we review "the trial court's findings of fact for clear error and its conclusions of law de novo." Shriners Hosps. for Children v. First N. Bank of Wyoming, 2016 WY 51, ¶ 27, 373 P.3d 392, 403 (Wyo. 2016) (citation omitted). Although the trial court's factual findings are not entitled to the limited review afforded a jury verdict, such findings are presumptively correct subject to our examination of all properly admissible evidence in the record. Id. (citation omitted). We do not reweigh disputed evidence and, instead, give due regard to the trial judge who assessed the credibility of the witnesses. Id. (citation omitted). We will not set aside the trial court's findings of fact absent clear error. Id. (citation omitted). "A finding is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." Id. (citation omitted). In our review, "[w]e assume that the evidence of the prevailing party below is true and give that party every reasonable inference that can fairly and reasonably be drawn from it." Id. (citations omitted). To the extent a specific issue raised on appeal implicates additional standards governing our review, we identify those below.

         DISCUSSION

         I. Did the district court err when it did not terminate the trust?

         [¶14] Lisa claims the trust is invalid and must be terminated because it is an abusive trust as defined by federal tax regulations and, further, that the 1995 Amendment is unlawful because it attempts to modify an irrevocable trust without the consent of all beneficiaries and court approval. Separate from her validity challenge, Lisa contends the trust must be terminated because the trust fails to achieve the settlors' key material purposes to avoid or minimize federal inheritance tax to each settlor's estate, as well as to provide liability protection and include anti-transfer provisions.

         A. Validity of the Trust

         [¶15] The district court did not reach the merits of Lisa's challenge to the trust's validity. On this issue, the district court ruled:

Robert Redland and Lisa Kimsey challenged the legality and validity of the 1989 Trust in Redland 1. The Supreme Court held it to be a valid and binding Trust. Although they now attack the validity of the Trust on other grounds, it should have been done at the time of the original challenge. Each of the beneficial owners have relied on the efficacy of the Trust, have purchased their share of the Trust, and some have made other improvements to Trust property.

         (Emphasis added.) The district court's ruling implies it is based on estoppel principles, though the court did not specify whether its decision rested on res judicata (also referred to as "claim preclusion"), collateral estoppel (also referred to as "issue preclusion"), or judicial estoppel grounds. Regardless, we may affirm the district court's decision on any proper ground appearing in the record. Redland II, ¶ 17, 346 P.3d at 866 (citations omitted). Application of res judicata, collateral estoppel, or judicial estoppel is a question of law that we review de novo. Ultra Res., Inc. v. Hartman, 2015 WY 40, ¶ 58, 346 P.3d 880, 900 (Wyo. 2015) (citation omitted).

         [¶16] Res judicata bars the relitigation of claims or causes of action that were or could have been raised in the prior litigation. See, e.g., Pokorny v. Salas, 2003 WY 159, ¶ 12, 81 P.3d 171, 175 (Wyo. 2003) (citations omitted); Cermak v. Great W. Cas. Co., 2 P.3d 1047, 1054 (Wyo. 2000) (citations omitted). Res judicata serves several purposes: to promote judicial economy and finality, prevent repetitive litigation, avoid inconsistent results, and increase certainty in judgments. 46 Am. Jur. 2d Judgments § 444 (Nov. 2018 Update); Tozzi v. Moffett, 201 ...