Stephanie Mueller v. Susan Krohn
2018AP000025
Wis. Ct. App.Jul 17, 2019Background
- Decedent Victor J. Mueller created two interrelated irrevocable trusts: Trust One (farmland; Stephanie sole income beneficiary; remainder to UW Foundation) and Trust Two (other assets, specific bequests including $500,000 to Stephanie; remainder pours into Trust One after distributions and gemstone liquidation).
- Susan Krohn, Victor’s longtime employee and successor trustee for both trusts, continued farm leases and hunting arrangements Victor had in place and liquidated many Trust Two assets; she paid Stephanie $250,000 of a $500,000 bequest and reserved cash pending an estate tax audit.
- Stephanie sued seeking removal of Krohn and damages, alleging multiple breaches: failure to sell farms, refusal to turn over additional tangible property after arbitration, delayed payment of specific bequests and gemstone liquidation, improper trustee fees, and self-dealing.
- The circuit court granted summary judgment dismissing all of Stephanie’s claims and awarded attorneys’ fees to Krohn and the UW Foundation; Stephanie appealed.
- On appeal the Court of Appeals affirmed: it found the trust language displaced the prudent investor rule, upheld Krohn’s post-arbitration refusal to deliver additional items, approved Krohn’s handling of bequests and gemstone liquidation, held the trustee fee challenge time-barred, rejected self-dealing claims, and affirmed the fee award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Retention of farm properties | Krohn should have sold or diversified under the prudent investor rule because farms are underproductive | Trust One expressly displaces the prudent investor rule and allows indefinite retention; trustee must act in good faith | Court: Trust language displaces prudent investor rule; retention permitted and no bad faith shown |
| Post‑arbitration demand for additional tangible property | Stephanie sought extra items not listed in arbitration and argues trustee must turn them over | Arbitration agreement contained Stephanie’s representation she would not request more; trustee relied on that final resolution | Court: Krohn’s refusal was proper; reliance on arbitration not in bad faith |
| Payment of specific bequests & gemstone liquidation | Stephanie: sufficient cash exists; trustee must pay specific bequests and liquidate gems promptly | Trust requires payment of taxes first; trustee has discretion to liquidate and may retain assets; taxes unresolved due to audit | Court: Taxes must be resolved first; trustee’s liquidation efforts and retention fall within trust discretion |
| Trustee compensation | Stephanie: Krohn awarded fee without trying to reach agreed written fee with beneficiaries | Krohn: Notice of fee was provided in 2014; Stephanie’s counsel acknowledged fee; claim is time‑barred | Court: Statute of limitations bars claim because notice/report sufficiently disclosed potential claim |
| Self‑dealing / Employment of family & hunting leases | Stephanie: continued contracts and family employment/hunting leases are conflicts/self‑dealing | Krohn: Arrangements were disclosed and/or preexisting or authorized by trust terms | Court: Claims time‑barred where disclosed; hunting leases and farm contracts were authorized or preexisting — no breach |
| Award of attorneys’ fees to trustee and UW Foundation | Stephanie: fees unreasonable/duplicative | Krohn & UWF: submitted affidavits showing reasonableness under statutory factors | Court: Fee award upheld as a valid exercise of discretion; supported by record |
Key Cases Cited
- French v. Wachovia, 722 F.3d 1079 (7th Cir. 2013) (upholding trust language that displaces the prudent investor rule)
- Kolupar v. Wilde Pontiac Cadillac, Inc., 275 Wis. 2d 1 (Wis. 2004) (standard for appellate review of discretionary fee determinations)
- Anderson v. MSI Preferred Ins. Co., 281 Wis. 2d 66 (Wis. 2005) (appellate review: court must find logical rationale supporting discretionary decision)
- Miller v. Hanover Ins. Co., 326 Wis. 2d 640 (Wis. 2010) (appellate court may search the record for support of circuit court’s discretionary rulings)