Aagard v. Jorgensen
339 P.3d 937
| Utah Ct. App. | 2014Background
- The Aagard family owns ~9,000 acres (the Ranch) held by an LLC (the Company) and multiple family trusts; Kim Aagard is the Company manager and sole trustee of most trusts; Diane Jorgensen is a beneficiary and originally had veto power over Company land sales.
- The Company operating agreement required written consent of both Kim and Diane to sell ranch property; the family trust documents originally contained a matching veto provision (Diane's veto was later removed from the trust documents by Welby and Opal before their deaths).
- Kim owns 100% of Company capital interests when combining his personal and trustee-owned interests, so he could unilaterally amend the Operating Agreement but sought court approval before removing Diane’s veto.
- The district court denied Kim’s petition, finding a presumption of conflict due to his individual ownership and insufficient proof he would not personally benefit, and ruled the modification would be voidable under Utah Trust Code § 75-7-802(2).
- On appeal the parties agreed § 75-7-802(8)’s presumption did not apply; the appellate question focused on whether § 75-7-802(2) (voidability for transactions affected by trustee fiduciary/personal conflicts) barred the Operating Agreement modification.
Issues
| Issue | Plaintiff's Argument (Diane) | Defendant's Argument (Kim) | Held |
|---|---|---|---|
| Applicability of § 75-7-802(8) presumption | Amendment creates a conflict because Kim acts in dual capacities | Agreed on appeal that § 802(8) presumption does not apply here | Court: Parties agree § 802(8) does not govern; not applied |
| Whether amendment is a "sale, encumbrance, or other transaction involving investment or management of trust property" under § 802(2) | Amendment is effectively an agreement to allow unrestricted sale of trust property and thus a transaction | Amendment is not a sale or encumbrance and not a transaction of the same kind as those listed | Court: Amendment is not a sale, encumbrance, or similar transaction; § 802(2) does not apply |
| Whether the amendment is "otherwise affected by a conflict" between Kim's fiduciary and personal interests under § 802(2) | Dual-capacity amendment creates potential inconsistent interests; hypothetical self-dealing scenarios show conflict | Interests of Kim and beneficiaries align; hypothetical conflicts are speculative and Trust Code permits undivided ownership in LLC interests | Court: No actual inconsistency; hypothetical conflicts insufficient; no conflict that voids the amendment |
| Remedy / standard for court approval of unilateral amendment by trustee-owner | Trustee approval should be denied because of conflict risk and lack of beneficiary protection | Court approval not required because Trust Code does not prohibit the amendment and fiduciary duties remain enforceable | Court: Reversed district court; amendment not barred by Trust Code; remanded for further proceedings |
Key Cases Cited
- Rapela v. Green (In re Estate of Kampros), 289 P.3d 428 (Utah 2012) (trustee may own undivided LLC interests alongside trust without per se breaching loyalty)
- Holmes Dev., LLC v. Cook, 48 P.3d 895 (Utah 2002) (definition and scope of an "encumbrance" under Utah law)
- Swallow v. Jessop (In re United Effort Plan Trust), 296 P.3d 742 (Utah 2013) (standard of review: deference to factual findings, review for correctness on legal questions)
- Turner v. Staker & Parson Cos., 284 P.3d 600 (Utah 2012) (application of ejusdem generis to statutory lists)