In re Donald C. Taylor and Margaret Ann Taylor Trust
381 P.3d 428
| Colo. Ct. App. | 2016Background
- Donald and Margaret Ann Taylor created a joint revocable trust to benefit the surviving spouse, with remaining assets split between Donald’s and Margaret Ann’s children after the survivor’s death. Separate investment accounts were payable-on-death to each spouse’s children.
- After Donald died, Benjamin Taylor (defendant), Donald’s son, became co-trustee with Margaret Ann (who was terminally ill) and gave her financial advice; he signed documents for her on occasions and urged her to transfer funds from her separate POD accounts into the joint trust.
- The transfers caused funds Margaret Ann had intended solely for her children to become part of the trust, reducing the share that would pass solely to her children.
- After Margaret Ann’s death, defendant filed a probate petition; plaintiffs (Margaret Ann’s children) filed a civil action alleging defendant breached fiduciary duties by unduly influencing Margaret Ann to transfer those funds into the trust. The civil action was consolidated with the probate case; defendant demanded a jury trial.
- The jury found defendant breached a fiduciary duty and awarded $65,000 to each plaintiff. The trial court also awarded $40,000 in attorney fees to each plaintiff under section 15‑10‑504(2). Defendant appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held | |
|---|---|---|---|---|
| Standing to recover for breach of fiduciary duty owed to the settlor | Plaintiffs (Margaret Ann’s children) argued they were harmed by the breach and can sue even though the duty was owed to the settlor | Defendant argued plaintiffs cannot recover because the fiduciary duty was owed only to Margaret Ann (the settlor), not to them | Court: Plaintiffs had standing; beneficiaries may pursue claims for breaches to settlor’s fiduciary duty when beneficiaries’ interests were harmed (adopts reasoning like Estate of Giraldin) | |
| Sufficiency of evidence of breach | Plaintiffs relied on undue influence, signature irregularities, and transfers caused by defendant’s influence | Defendant contended there was no breach or no harm to Margaret Ann/trust and thus no basis for plaintiffs’ recovery | Court declined to decide defendant’s new sufficiency argument on appeal (not preserved); affirmed jury verdict | |
| Availability of attorney fees under § 15‑10‑504(2) after a jury trial | Plaintiffs sought fees under § 15‑10‑504(2)(a) for surcharge authority and alternatively under breach-of-trust exception to American Rule | Defendant argued § 15‑10‑504(2) applies only to court surcharge proceedings (hearing), not jury trials on tort claims, so fees under that statute are unavailable | Court: Fees are not available under § 15‑10‑504(2) for a jury-tried tort claim, but plaintiff/intervenor may recover fees under the breach-of-trust exception to the American Rule because the action involved a trust, a trustee, and a breach affecting trust assets | |
| Appellate attorney fees | Plaintiffs sought appellate fees under § 15‑10‑504(2) or § 13‑17‑102 | Plaintiffs argued prevailing party status and statutory fee bases | Defendant argued appeal not frivolous | Court: Denied appellate fees — plaintiffs did not preserve request under C.A.R. 39.5 for breach‑of‑trust exception; appeal not frivolous so § 13‑17‑102 fees denied |
Key Cases Cited
- Graphic Directions, Inc. v. Bush, 862 P.2d 1020 (Colo. App. 1993) (stated elements for breach of fiduciary duty but did not address third‑party beneficiary standing)
- Estate of Giraldin, 55 Cal.4th 1068 (Cal. 2012) (beneficiaries may challenge trustee’s breach of fiduciary duty owed to settlor when breach harmed beneficiaries)
- Ainscough v. Owens, 90 P.3d 851 (Colo. 2004) (standing requires injury‑in‑fact to a legally protected interest)
- Heller v. First Nat’l Bank, N.A., 657 P.2d 992 (Colo. App. 1982) (breach‑of‑trust exception to the American Rule can support attorney‑fee awards in trust‑related litigation)
- Brundage v. Bank of Am., 996 So.2d 877 (Fla. Dist. Ct. App. 2008) (after settlor’s death, beneficiary may sue for trustee’s breaches during settlor’s lifetime that affect beneficiary’s vested interest)
- Siegel v. Novak, 920 So.2d 89 (Fla. Dist. Ct. App. 2006) (denying third‑party standing would reward concealed wrongdoing; beneficiaries may pursue remedies for trustee breaches affecting their interests)