Opinion
No. 51501-2-I.
Filed: May 3, 2004. UNPUBLISHED OPINION
Appeal from Superior Court of King County. Docket No: 02-4-01503-1. Judgment or order under review. Date filed: 12/04/2002. Judge signing: Hon. William L Downing.
Counsel for Appellant(s), Michael T. Schein, Maltman Reed Ahrens Malnati PS, 801 2nd Ave Ste 1415, Seattle, WA 98104-1517.
Counsel for Respondent(s), Anne Elizabeth Melley Attorney at Law, 2507 SW 169th Pl, Burien, WA 98166-3247.
Gregory Mann Miller, Attorney at Law, 505 Madison St. Ste 220, Seattle, WA 98104-1111.
David Allen Sklar, Sklar Saxion Marcott PS, 19743 1st Ave S, Normandy Park, WA 98148-2401.
In construing instruments creating trusts, our purpose is to ascertain the intent of the settlors and to effectuate that intent. We determine the intent of the settlors primarily from the terms of the trust instrument — construing all its provisions together. Here, the trust provisions regarding the disposition of the North Dakota farm property at the death of John J. Olson (`Jack'), one of the trust settlors, are ambiguous. Construing the trust instrument as a whole, we conclude that the farm property should not be distributed to his sons by a prior marriage upon his death. Rather, it should remain in trust for the benefit of Georgia E. Olson, his surviving spouse, the other settlor of the trust. Disposition of the farm property following Georgia's death shall be governed by the terms of the trust. We also conclude that the trial court properly exercised its discretion in awarding a portion of the attorney fees and the costs Georgia Olson requested. Accordingly, we affirm. Jack had two sons by his first wife. Robert Olson is one of those sons. He challenges the provisions of the trust on behalf of himself and his brother.
Old Nat'l Bank Trust Co. of Spokane v. Hughes, 16 Wn.2d 584, 587, 134 P.2d 63 (1943).
Old Nat'l Bank, 16 Wn.2d at 587.
In 1961, Jack married Georgia Olson and they lived together until Jack's death in 2001. Georgia, who was 82 years at the time of trial, is the executrix of Jack's estate and the surviving settlor and a trustee under the trust that is the subject of this action.
In 1984, Jack and Georgia executed a community property agreement that made all their current and after acquired property community property. This property included a farm in North Dakota, which previously had been Jack's separate property under the laws of this state.
In 1985, Jack was diagnosed with cancer and was scheduled for surgery. He tape recorded a meeting he had with Robert and other relatives regarding the farm and other property. The portion of the recording dealing with the farm was played during the bench trial of this action.
In 1990, after 29 years of marriage, Jack and Georgia executed the revocable living trust that is the subject of this litigation. An accountant who was trained in the law, but who was not practicing law at the time, prepared the document.
Following Jack's death in 2001, Robert Olson petitioned for an accounting, transfer of farm property, removal of the trustees, and attorney fees under the Trust Estate Dispute Resolution Act (TEDRA). Mediation, as required by TEDRA, failed and the matter was set for trial. Following a bench trial, the court entered its findings of fact and conclusions of law together with an award of attorney fees in favor of Georgia. Specifically, the court construed the trust to mean that she has an estate in the North Dakota farm and that the farm should not presently be distributed to Robert and his brother. The court further encouraged the trustees to make good faith efforts to preserve the farm for distribution to Robert and his brother upon Georgia's death. But the court also concluded that the trustees could liquidate the farm sooner if needed to support Georgia, as provided in the trust. The court also awarded Georgia a portion of her requested attorney fees and costs, and denied Robert's motion for reconsideration.
Robert Olson appeals.
SETTLORS' INTENT
Robert contends that the intent of the settlors of the trust, as shown by the language of that document, requires that the North Dakota Farm should be distributed upon Jack's death to his sons, not to other trusts for the benefit of Georgia during her life. We disagree. Our paramount duty in construing a testamentary instrument is to give effect to the maker's intent. That intent must be gathered from the instrument as a whole and specific provisions must be construed in light of the entire document. Where clear and unambiguous language is inconsistent with other provisions of an instrument, the court will apply general rules of construction to assist it in determining intent, rather than adhere rigidly to rules of construction that forbid construction of clear and unambiguous language. Where the testator's intent is clearly manifest from the whole will, and violates no rule of public policy or positive law, technical rules of construction may not be invoked to defeat such intent. If possible, this court will determine the intent at the time of the instrument's execution from the language of the instrument itself. The terms of a will or trust instrument are ambiguous if they are susceptible to more than one meaning. Whether such an ambiguity exists is a question of law. Where the intent is ambiguous, we may admit extrinsic facts and circumstances to explain the language of the instrument. We treat conclusions of law labeled as findings of fact as conclusions of law when challenged on appeal. Furthermore, the interpretation of a will or trust instrument is a question of law that we review de novo. Robert challenges the last sentence of finding 4 that states, `It is fair to say that these documents contain certain contradictions and present others.' This is a conclusion of law labeled as a finding of fact that we review de novo.
In re Riemcke's Estate, 80 Wn.2d 722, 728, 497 P.2d 1319 (1972) (citations omitted).
In re Riemcke, 80 Wn.2d at 728.
In re Riemcke, 80 Wn.2d at 728 (citation omitted).
In re Riemcke, 80 Wn.2d at 729 (citations omitted).
In re Estate of Price, 73 Wn. App. 745, 754, 871 P.2d 1079 (1994) (citing In re Estate of Bergau, 103 Wn.2d 431, 435-36, 693 P.2d 703 (1985)).
Waits v. Hamlin, 55 Wn. App. 193, 200, 776 P.2d 1003, review denied, 113 Wn.2d 1025 (1989).
Waits, 55 Wn. App. at 200.
Price, 73 Wn. App. at 754 (citing Bergau, 103 Wn.2d at 436).
Willener v. Sweeting, 107 Wn.2d 388, 394, 730 P.2d 45 (1986).
In re Estate of Curry, 98 Wn. App. 107, 112-13, 988 P.2d 505 (1999), review denied, 140 Wn.2d 1016 (2000).
In our view, there is no doubt that the instrument, when read as a whole, is ambiguous. Section 5.1 of the trust states: Division and Allocation. Upon the death of Trustor John J. Olson, Trustee shall distribute that certain real estate situated in North Dakota which is an asset of this trust to the sons of John J. Olson who survive him. Upon the death of either Trustor, Trustee shall divide the trust estate into two separate trusts, the Trust for Property of Deceased Spouse (for the benefit of the surviving spouse), Article 6, and the Trust for Property of Surviving Spouse, Article 7.
Clerk's Papers at 49 (emphasis added).
The farm described in the first sentence of the above paragraph is part of the `trust estate.' Yet the failure of the second sentence to carve out the farm from the `trust estate' or otherwise indicate that all that was to go to Georgia upon Jack's death was the `[remaining] trust estate' creates an ambiguity as to the intent of Jack and Georgia. Because there are two reasonable readings of the trust's provisions, the trust is ambiguous regarding this asset.
The first sentence of sec. 5.1 also undercuts the express intent of Georgia and Jack. The trust expressly states that the `primary trust purposes shall be to provide for [the primary beneficiaries'] health, support and maintenance in their accustomed manner.' According to an unchallenged finding, the loss of the farm income could cause the trust to be unable to provide for Georgia's health, support and maintenance. For both these reasons, we conclude there is clear support for this conclusion of law.
See Finding of Fact 9 which states: Unfortunately, medical expenses during the last 10 years of the 40 year marriage of Jack and Georgia Olson substantially depleted their marital estate and that circumstance renders the surviving spouse's financial security now less assured than it looked in 1990. Although she receives proceeds from a Boeing pension, Social Security and income from the North Dakota farm, she currently is experiencing a negative cash flow.
Robert also challenges findings 5, 7, 8, and 10, as well as conclusions 2-7. These `findings' are actually mixed findings of fact and conclusions of law that deal with the interpretation of the trust. Accordingly, we review de novo these provisions of the decision.
As to finding 7, Robert argues that when sec. 5.1 is read in conjunction with sec. 8.3.1, the trust requires distribution of the farm on Jack's death. Specifically, he states that the trial court's construction reads out of that instrument a portion of the language in sec. 8.3.1. We disagree.
Robert contends that `if it is still a trust asset' in sec. 8.3.1 means that the settlors contemplated only distributing the farm immediately upon Jack's death under sec. 5.1. sec. 8.3.1 states:
Original Division and Allocation. Trustee shall distribute any property situated in North Dakota to the surviving sons of Trustor John J. Olson if property asset is still a trust asset. The trustee shall allocate to a separate trust the property located at 911 N.E. 146th Street, Seattle, Washington, for the benefit of Michael R. Weinerth for his lifetime. The trust shall terminate at his death and be distributed to the surviving children of both Trustors'
(Emphasis added.)
But the clause contemplates two other possibilities — that the farm could be voluntarily distributed before the death of either settlor or that Georgia could retain the farm following Jack's death and dispose of it prior to her death.
Either of these two possibilities is consistent with the language on which Robert bases his argument. More importantly, the latter possibility — Georgia's disposition of the property following Jack's death — is entirely consistent with the overall purposes of the trust. The first is to provide for Georgia's needs following Jack's death. The second is to allow for potential passage of the farm to Jack's sons. Passage to the sons could occur either prior to Georgia's death or after it.
Robert also argues that extrinsic evidence cannot be used as a tool for rewriting the settlor's trust instrument. While extrinsic evidence cannot be used to rewrite an instrument, substantial authority supports consideration of such evidence to determine the intent in an ambiguous instrument.
Price, 73 Wn. App. at 755.
Bergau, 103 Wn.2d at 436 (citations omitted).
The trial court's unchallenged finding 3 deals with a tape recording, made in the presence of Robert, his brother, and their respective spouses, that expresses Jack's intent at the time of the execution of the trust. The trial court found:
[In 1985], after he had been diagnosed with cancer, Jack Olson made a tape recording in which he discussed his wishes as to the disposition of his properties. As to the North Dakota farm, it was clearly his wish at that time that it be inherited by Robert and John once his surviving widow no longer wanted or needed it. Specifically, he said to them: `eventually it will go to you two guys when both of us slip this mortal coil.' He also said `you guys will be the owners if something should happen to both Georgia and I.' So long as Georgia was alive, however, his stated wish was that she have the option of receiving the `trickle income' the farm provided.
Finding of Fact 3 (emphasis added).
Robert properly argues the intentions of the settlor are determined as of the date of the execution of the trust created in 1990. But there is no evidence that Jack changed his mind from 1985 to 1990 as to keeping the farm for Georgia's benefit during her life. This clear statement of Jack's intentions for the North Dakota property supports the trial court's construction of the trust that Jack intended the farm be available for Georgia's support.
See Bergau, 103 Wn.2d at 436.
Robert also argues that the trial court's characterization of Georgia's interest as a `life estate' limits what she can do with the property during her lifetime. Nothing in the trust so limits her ability to deal with the farm.
He cites McDowell v. Beckham for the proposition that `A purchaser from the life tenant takes no greater interest than the interest of the life tenant.' He argues that if Georgia is given a life estate in the income of the farm she is not entitled to sell the farm for her support. He contends that if the farm is not immediately distributed to him, the intent of the trust could be followed if Georgia is allowed to retain a non-transferable life estate in the farm to provide her `trickle income' during her life, with an ultimate disposition to him.
72 Wn. 224, 230, 130 P. 350 (1913).
See Conclusion of Law 3.
However, it is possible that Georgia would not only require the income from the farm, but also proceeds from the sale of the farm to support her in her advancing years. To order that she should receive only a life estate in the income of the farm blocks the primary intent of the trust, to provide support for Georgia.
In Holmes v. Holmes, a husband's will gave his wife all of his property with a remainder interest in the property going to various other remaindermen. The assets included a parcel of real property that the remaindermen sought to block the surviving wife from selling. The remaindermen argued that the surviving wife should only be allowed a life estate in the property with no right to invade the corpus of the property. Our supreme court disagreed and allowed the sale of the property. The court concluded:
65 Wn.2d 230, 234, 396 P.2d 633 (1964).
the testator, in giving his property to his wife `to use for her care and maintenance as she finds necessary' intended that she could use and consume any or all of the property and that, by doing so, it gave her the right to dispose of the property free of any remaindermen's interest.
Holmes, 65 Wn.2d at 233.
The court concluded that the language of the will gave her the right to dispose of the real estate during her lifetime in spite of a provision that read, `Upon the passing of my wife, Ellen J. Holmes, then all the balance and residue of the estate shall be divided equally between [various remaindermen].' The court determined that she need not retain the real estate for the benefit of the remaindermen. Ellen could sell the property without a showing of whether she had other independent means from which she could derive her care and maintenance.
Holmes, 65 Wn.2d at 231.
Georgia's situation is similar to that of the testator's wife in Holmes because the express intent of the Olson trust was to provide for the health, support and maintenance of the surviving spouse. The court's holding in Holmes allows Georgia possession of a `life estate' and the right to dispose of the farm free of her stepsons' remainder interests. Both parties argue that the laws of community property favor their respective interpretations of the trust. However, because the intent of the trust is that Georgia should receive a life estate in the income from the farm and the ability to sell the farm if necessary for her health, support and maintenance we need not reach these arguments.
Declaration of the John J. and Georgia E. Olson Trust, July 26, 1990, §§ 4.1, 6.2, 6.3.2(d) and 7.2 (Clerk's Papers at 48, 50-51, 53).
Robert also challenges finding 5 that deals with a portion of the trust document and the characterization of property transferred into the trust. Because our conclusion that the farm remains subject to the trust and should not presently be distributed to the sons rests on other independent grounds, we need not address this challenge.
GOOD FAITH
Robert also challenges conclusion 4, disputing that the trustees acted in good faith for refusing to distribute the farm to him immediately. This argument is not persuasive.
Good faith is the `absence of intent to defraud or to seek unconscionable advantage.' Because the trustees' interpretation of the trust's purpose and intent to primarily benefit Georgia is based on an honest belief and purpose, they have not acted in bad faith. Further, Robert fails to show how allowing the farm property to benefit Georgia evidences an intent to defraud or seek unconscionable advantage. For these reasons, we reject this argument.
Black's Law Dictionary, 701 (7th ed. 1999).
ATTORNEY FEES
Robert argues the trial court improperly awarded fees to Georgia, punishing him as an unsuccessful challenger of the trust. He further contends that if he prevails on appeal, this court should award fees and costs to him against Georgia and the other trustees. We disagree with both contentions. An award of attorney fees under RCW 11.96A.150 is discretionary. An appellate court will not interfere with the decision to allow attorney fees in a probate matter, absent a manifest abuse of discretion.
RCW 11.96A.150. Cost — Attorneys' fees
(1) Either the superior court or the court on appeal may, in its discretion, order costs, including reasonable attorneys' fees, to be awarded to any party: (a) From any party to the proceedings; (b) from the assets of the estate or trust involved in the proceedings; or (c) from any nonprobate asset that is the subject of the proceedings. The court may order the costs to be paid in such amount and in such manner as the court determines to be equitable.
(2) This section applies to proceedings involving trusts, decedent's estates and properties, and guardianship matters.
In re Estate of Black, 116 Wn. App. 476, 66 P.3d 670, review denied, 150 Wn.2d 1020 (2003).
The court relied on equitable principles, taking into account Georgia's need for income in comparison to the expense of the litigation, to award her a portion of her requested fees. This was a tenable basis for the award of attorney fees. Because Robert only contests the awardability, not the amount of fees, we do not further address the award of fees below. Georgia seeks attorney fees and costs incurred on appeal. Exercising our discretion under the same statute the trial court used, we award reasonable fees to Georgia on appeal. Georgia shall timely comply with the governing Rules of Appellate Procedure for awards of such fees. We affirm the decision of the trial court.
SCHINDLER and APPELWICK, JJ., concur.