424 P.3d 1131
Utah Ct. App.2018Background
- Ernest and Florence Oates created an irrevocable family trust; after several deaths and incapacity, Diane Nolen became trustee and later was accused by beneficiaries (the Cattani children) of wrongfully retaining a partnership interest and misusing trust funds.
- In 2006 the beneficiaries sued Nolen and her attorney Lyle Drake; the court ordered an accounting, removed Nolen, found she breached a duty to provide an accounting for the pre-death period, but ruled the partnership interest passed to Florence and never became a trust asset; claims against Drake for malpractice/breach were dismissed then (some claims settled), and the case was dismissed with prejudice.
- Stagg succeeded as trustee, then withdrew; Kara later became successor trustee. In 2010 the Trust (through Kara) sued Drake and Nolen’s personal lawyer Daniel Maynard, asserting malpractice, breach of fiduciary duty, unjust enrichment, constructive trust, and aiding-and-abetting claims (some claims were reincorporations of the beneficiaries’ earlier claims).
- The district court: (1) dismissed claims against Drake relating to the partnership interest as barred by collateral estoppel/privity; (2) granted summary judgment for Drake on other claims (holding Drake’s accounting advice was correct or immune, and finding insufficient proof/knowledge of alleged misuse of $200,000); and (3) granted summary judgment for Maynard on unjust enrichment/constructive trust and aiding-and-abetting claims.
- On appeal the Utah Court of Appeals affirmed dismissal of partnership-interest claims (collateral estoppel/privity), reversed summary judgment for Drake on (a) the accounting-advice issue (holding the Trust was entitled to an accounting and Drake misinterpreted the trust), and (b) factual disputes about misuse of funds/Drake’s knowledge; it affirmed summary judgment for Maynard.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether claims about the partnership interest against Drake are barred by collateral estoppel/privity | Kara/Trust: prior case didn’t resolve all issues (e.g., undue influence), trustee is not in privity with beneficiaries | Drake: prior adjudication decided the partnership interest was not a trust asset; beneficiaries and trustee are in privity; collateral estoppel bars relitigation | Affirmed: collateral estoppel applies; Trust was party/privity existed; partnership-interest claims against Drake barred |
| Whether Drake’s advice that no pre-death accounting was required breached the standard of care | Trust: Drake misinterpreted the trust and negligently advised against producing an accounting | Drake: advice was correct or protected by judgmental immunity (debatable law) | Reversed as to Drake: court found the trust required the accounting; disputed legal question of judgmental immunity not shown by Drake |
| Whether there is evidence Nolen misused trust funds and that Drake knew/participated | Trust: declarations and a preliminary accounting show misuse and create factual disputes about Drake’s knowledge/participation | Drake: no proof of misuse and no evidence he knew or actively participated | Reversed as to Drake on factual grounds: material factual disputes exist (e.g., documents, deposition testimony) precluding summary judgment |
| Whether Maynard is liable (unjust enrichment, constructive trust, aiding and abetting) | Trust: Maynard was paid from trust funds and knew/assisted Nolen’s breaches (including refusal to account) | Maynard: fee payments were for representation of Nolen; Trust’s claims were waived/released or target wrong party; no evidence Maynard knew of misappropriation or substantially assisted breaches | Affirmed as to Maynard: summary judgment for Maynard upheld (Trust failed to show unjust enrichment or knowing substantial assistance) |
Key Cases Cited
- Dickson v. Mullings, 241 P. 840 (Utah 1925) (presumption that foreign law is same as forum law absent proof otherwise)
- Searle Bros. v. Searle, 588 P.2d 689 (Utah 1978) (elements and application of collateral estoppel)
- Watkiss & Saperstein v. Williams, 931 P.2d 840 (Utah 1996) (judgmental immunity in legal malpractice; attorney may avoid liability when error stems from unsettled law)
- Jackson v. Dabney, 645 P.2d 613 (Utah 1982) (standard: breach of care ordinarily is a fact question for a jury)
- Hansen v. Bank of New York Mellon, 303 P.3d 1025 (Utah Ct. App. 2013) (privity: aligned interests of trustee and beneficiaries can support collateral estoppel)
- Mower v. Simpson, 278 P.3d 1076 (Utah Ct. App. 2012) (aiding-and-abetting breach of fiduciary duty requires knowing participation)