911 N.W.2d 305
N.D.2018Background
- Curtiss Hogen’s 1984 will created Trust B, appointing sons Steven and Rodney co-trustees; trustee to pay surviving spouse Arline income and discretionary principal for needs, and “upon the death of the survivor” to divide the Trust into equal shares for then-living children or issue and distribute.
- Curtiss died in 1993; Arline died March 23, 2007; Arline’s will devised her property equally to Steven and Rodney and led to extensive probate litigation resolved in Estate of Hogen, 2015 ND 125.
- After Arline’s death the co-trustees continued operating the farm without dividing Trust property; Steven sought supervised administration, accounting, removal of Rodney, and recovery for alleged fiduciary breaches.
- The district court (after bench trial) found Rodney breached fiduciary duties and purloined Trust funds, assessed $305,961.65 against him, suspended him as co-trustee, authorized sale/allocation of Trust property with an offset of that amount from Rodney’s share, and later approved trustee’s final report awarding trustee and attorney fees.
- Rodney appealed, arguing immediate termination of the Trust at Arline’s death (vesting as tenants in common), statute-of-limitations/res judicata bars, lack of authority for land sale, improper fees, and judicial partiality. The Supreme Court affirmed.
Issues
| Issue | Plaintiff's Argument (Steven) | Defendant's Argument (Rodney) | Held |
|---|---|---|---|
| Whether the Trust terminated immediately at Arline’s death and title vested in the sons as tenants in common | Trust continued until trustee performed division and distribution called for by trust; trustee has broad post-death powers. | Trust terminated on spouse’s death, vesting interests immediately; trustees only had winding-up powers. | Trust did not terminate automatically; division/distribution remained trustee duties, so title did not immediately vest. |
| Whether Rodney breached fiduciary duties and amount of offset | Trustee proved systematic breaches, purloining, self-dealing; damages/offset $305,961.65. | Disputes breaches, scope limited to 2007, statute-of-limitations/res judicata bar many claims, amount erroneous. | Findings that Rodney breached duties and purloined funds are supported; damages/offset sustained and not clearly erroneous. |
| Authority and reasonableness of sale/allocation of Trust land to satisfy obligations | Court authorized commercially reasonable sale/allocation to pay mortgages, fees, and effect equal division; sale was within court authority. | Sale unnecessary if title had already vested; sale/allocation was unfair and not commercially reasonable. | Court had authority under governing statutes and trust terms; sale/allocation approved and not an abuse of discretion. |
| Award of trustee’s fees and attorney’s fees; claim of judicial partiality | Trustee entitled to compensation and reimbursement; fees awarded were reasonable. | Fees were excessive and should be denied; judge was partial due to alleged ex parte communications. | Fee awards affirmed as not abuse of discretion; allegations of ex parte contacts/bias rejected. |
Key Cases Cited
- Estate of Hogen v. Hogen, 2015 ND 125, 863 N.W.2d 876 (construing probate issues and rejecting immediate vesting argument)
- Matter of Bradley K. Brakke Trust, 2017 ND 34, 890 N.W.2d 549 (trust proceedings and court jurisdiction under Uniform Trust Code)
- In re Estate of Stensland, 1998 ND 37, 574 N.W.2d 203 (finality and appealability in supervised probates)
- Mangnall, 1997 ND 19, 559 N.W.2d 221 (trustee duties and when prior judgments are not res judicata)
- Volson v. Volson, 542 N.W.2d 754 (N.D. 1996) (characteristics of tenancy in common and unity of possession)