Foiles v. Foiles, 2014 COA 104

Ruth and Clyde Foiles created separate trusts; Larry Foiles was both co‑trustee and co‑beneficiary of the Clyde Foiles Trust; Gregory Foiles is a co‑beneficiary.
Clyde's trust expressly prohibited any individual trustee from exercising powers "for his or her own benefit" and required that such decisions be made exclusively by the Bank (corporate co‑trustee).
Two 1031 exchanges occurred: a 1996 exchange (not contested on appeal) and a 2001 exchange that resulted in the Emerson (apartment) property leaving the trusts and the Hudson Farm entering the trusts.
Gregory sued, claiming the 2001 exchange breached Larry’s fiduciary duty because it indirectly benefited Larry (Larry later received Emerson and would inherit Hudson Farm at termination).
The trial court found no breach, relying principally on (1) Ruth’s approval for her trust and (2) the Bank’s after‑the‑fact approval/ratification of the 2001 exchange; the court then terminated the trusts and ordered distributions.

Issue	Plaintiff's Argument (Foiles)	Defendant's Argument (Foiles)	Held
Whether the 2001 1031 exchange breached Larry's fiduciary duty under the Clyde trust	The exchange improperly transferred non‑farm property out of the trust and benefited Larry, breaching the trust terms	The Bank and Ruth approved/ratified the transaction; no breach occurred	Reversed: trial court erred — prima facie breach shown; remand for findings on whether Larry proved the transaction was fair and reasonable
Whether a co‑trustee’s after‑the‑fact ratification (the Bank) cures a trustee’s violation of express trust terms	N/A (challenge to validity of ratification)	Ratification by the Bank precludes breach claim	Held that a co‑trustee’s ratification is insufficient where the trust forbids the acting trustee from taking such actions; only all beneficiaries, fully informed and competent, can ratify
Whether the 2001 exchange can be declared void in this proceeding	The exchange should be declared void because it violated trust terms	Trial court refused to declare it void because absent parties might be affected and were not joined	Court declined to void transaction here; treated claim as one that it is voidable and proceeded on breach theory
Whether appellate attorney fees and surcharge/fee awards should follow	Seeks fees and surcharge if breach found	Awards depend on remand findings; defends against surcharge	Deferred — remand required; trial court to decide fees/surcharge if breach is found

Heller v. First Nat'l Bank, 657 P.2d 992 (Colo. App. 1982) (a beneficiary with full capacity and knowledge who consents may not later claim breach)
Beyer v. First Nat'l Bank, 843 P.2d 58 (Colo. App. 1992) (fully informed consent by all beneficiaries to a deviation bars breach)
In re Estate of Heyn, 47 P.3d 724 (Colo. App. 2002) (establishing a fiduciary relationship plus a transfer/use of trust property raises a prima facie breach of fiduciary duty)
Mark Twain Kansas City Bank v. Kroh Bros. Dev. Co., 863 P.2d 355 (Kan. 1992) (a trustee cannot ratify an act that violates the trust agreement)