Court Opinion

ID: 3206034
Source: CourtListenerOpinion
Date Created: 2016-05-23 22:16:05.091045+00
Date Added: 2024-06-11T14:27:04.094282
License: Public Domain

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

In re the Guardianship of:
                                                        DIVISION ONE
JAMES P. HALLIGAN,
                                                        No. 73314-1-1
                 An Incapacitated Person,

VICTORIA E. HALLIGAN,
                                                        UNPUBLISHED OPINION
                          Appellant,

                     v.
                                                                                              CJ".

NORTHERN TRUST COMPANY and
DAVID N. DEL SESTO,

                          Respondents.                  FILED: May 23, 2016

          Dwyer, J. — Under applicable guardianship law, when a court-appointed

guardian petitions the court for relief on behalf of the ward—such as permission

to change an acting trustee pursuant to a trust—the requested relief must be in

the ward's "best interest."1 The final decision of whether such relief is in the

ward's best interest rests with the "court making the appointment."2 In this way,

the court maintains its role as "'the superior guardian of the ward.'"3 In this case,

Victoria Halligan, as the court-appointed guardian of her father James, petitioned

the superior court seeking permission to remove the acting co-trustees of the

Halligan Trust, Northern Trust Company (Northern), and David N. Del Sesto, and

          1 RCW 11 92.043(4V In re Guardianship of Lamb. 173Wn.2d 173, 191, 265 P.3d 876
(2011).
          2 RCW 11.92.010.
          3 Lamb, 173 Wash. 2d at 190 (quoting Seattle-First Nat'l Bank v. Brommers, 89 Wash. 2d 190,
200, 570P.2d 1035(1977)).
No. 73314-1-1/2

replace them with Whittier Trust Company (Whittier), asserting that this change

was in James's best interest. Given that the superior court was presented with a

range of evidence concerning whether such a change was proved to be in

James's best interest, and given that the superior court made a choice among

the alternatives that was both within this range of evidence and supported by

substantial evidence, there was no abuse of judicial discretion. Accordingly, we

affirm both the superior court's denial of Victoria's initial petition and her

subsequent motion for reconsideration.

                                                    I

       James P. Halligan and Marcia S. Halligan were husband and wife.

Together they had three children: Victoria E. Halligan, Denisia K. Halligan, and

Christopher M. Halligan.4 All of these children are now adults.

        On April 29, 1996, James and Marcia created two revocable living trusts—

the Halligan Trust and the Marcia S. Halligan Trust (the Trusts)—to hold,

administer, and eventually distribute their assets.5 James and Marcia transferred

substantially all of their assets to the Trusts, including two residential properties,

promissory notes, cash, securities, and fractional interests in limited partnerships,

limited liability companies, and a corporation.

        By the end of 2008, James was diagnosed with dementia.6 In September

of that year, James and Marcia simultaneous amended and reinstated the

        4 For clarity, we refer to all of the Halligans by first name.
        5 Unless otherwise noted, we refer to the trusts collectively.
        6We are informed of this fact from a medical report in the record that was once sealed.
Both parties have referenced the contents of the report in their briefor argument and, each party
concedes, we may publicly reference the contents of the report in our resolution of this dispute.
No. 73314-1-1/3

Trusts.7 The amended Halligan Trust provided that James and Marcia were the

primary income and principal beneficiaries of the Halligan Trust during each of

their lifetimes, with their children named as the primary remainder beneficiaries.

      Additionally, James and Marcia appointed themselves as co

trustees of the Halligan Trust and provided that, in the event that they both

became unable to serve as co-trustees, Del Sesto and Northern would be

appointed to serve as successor co-trustees. The Halligan Trust included

a provision that set forth the order of succession:

                  APPOINTMENT OF SUCCESSOR TRUSTEE

              A. JAMES P. HALLIGAN and MARCIA S. HALLIGAN are
       appointed as Co-Trustees. In the event of the death, disability,
       refusal to serve, or resignation of either JAMES P. HALLIGAN or
       MARCIA S. HALLIGAN, then the remaining person is appointed as
       sole Trustee. In the event of the death, disability, refusal to serve,
       or resignation of both JAMES P. HALLIGAN and MARCIA S.
       HALLIGAN, then DAVID N. DEL SESTO and NORTHERN TRUST
       are appointed as Co-Trustees. In the event of the death, disability,
       refusal to serve, or resignation of DAVID N. DEL SESTO, then
       NORTHERN TRUST is appointed as sole Trustee. At any time that
       a corporate fiduciary is serving as Trustee hereof, DAVID N. DEL
       SESTO shall have the right to remove the corporate fiduciary as
       Trustee hereof and appoint in writing another corporate fiduciary
       with funds under management of not less than eighty percent
       (80.0%) of the funds under management of the current corporate
       fiduciary as of the date of the change of corporate fiduciary.

Article VIII, Paragraph A.

       7The Marcia S. Halligan Trust was simultaneously amended and reinstated on
September 12. The Halligan Trust was simultaneously amended and reinstated on September
26.

                                           -3-
No. 73314-1-1/4

       Notwithstanding this order of succession, James and Marcia also reserved

in the Halligan Trust—for the surviving trustor—an unfettered power to remove

an acting trustee and to appoint a successor trustee. Article VIII, Paragraph B.

       On August 10, 2014, Marcia died. The Halligan Trust provided that, upon

the death of the first trustor—in this case, Marcia—the Trust assets would be

divided into three separate trusts: (1) Survivor, (2) Decedent, and (3) Marital. As

the surviving trustor, James became the sole income and principal beneficiary of

the Trusts.8

       On August 28, Del Sesto and Northern assumed their role as successor

co-trustees of the Trusts.

       On December 23, Victoria was appointed guardian of James, as to both

his person and estate.

        On January 7, 2015, Victoria, as James's court-appointed guardian, filed a

petition seeking the superior court's permission to remove Del Sesto and

Northern as acting co-trustees, and to appointWhittier as successor trustee of

the Trusts.9 In so petitioning, Victoria asserted her beliefthat removing Del Sesto

and Northern as acting co-trustees, and replacing them with Whittier, was in

James's best interest given the cost savings to the Trusts that would result from

such a replacement.

        8As a result of Marcia's death, the assets that were held in the Marcia S. Halligan Trust
were distributed into the Halligan Trust to be administered under the terms of the Halligan Trust.
        9According to a declaration provided by Charles Adams III, the senior vice president and
manager ofWhittier's real estate department in South Pasadena, California, Whittier is a
company that "oversee[s] the daily and long term management of properties in client accounts
and perform[s] services that include leasing, property management, and oversight ofthird party
property managers, maintenance, capital improvement, financing, acquisition, and disposition."

                                               -4-
No. 73314-1-1/5

      Del Sesto and Northern opposed Victoria's petition. In doing so, Del

Sesto and Northern pointed the superior court to the following evidence in

support of their assertion that removing them as acting co-trustees was not in

James's best interest.

       First, testimony from Del Sesto, Mark A. Hardtke, a senior vice president

at Northern, and Victoria's sister Denisia, indicated that James and Marcia did

not want their children—particularly Victoria—having any control over the Trusts.

Del Sesto testified that, "I was told clearly (and observed) that the Halligan

children did not have knowledge or experience about the holdings and that Mr.

and Mrs. Halligan did not have confidence that they could work together to

manage the assets, either during Mr. and Mrs. Halligan's lifetime, or after either

or both of their deaths." Consistent with Del Sesto's testimony, Hardtke testified

that, "I clearly understood that the Halligans did not want any of their children

exercising any control over their assets or choosing any different trustee other

than Mr. Del Sesto." Concerning Victoria in particular, Denisia testified that,

"Victoria has never been involved in any of our parents' business affairs" and that

"[c]hanging trustees now, to someone selected by Victoria, will increase her

ability to attempt [to have] control over the Trusts, which my parents were

vehemently opposed to."

       Second, testimony from Del Sesto and Susan J. Merritt, a senior vice

president at Northern, indicated both that James and Marcia were aware ofthe
fees that would be charged at the time that they selected Del Sesto and Northern

as co-trustees and that the fees that were charged in 2014—the first year of

                                         -5-
No. 73314-1-1/6

service—were actually less than the amount that was originally quoted to James

and Marcia. Del Sesto testified both that "Northern Trust provided a fee schedule

to the Halligans when Northern Trust was interviewed," and that "the cost of

services was clearly explained to Mr. and Mrs. Halligan when they selected

Northern Trust and me as their successor co-trustees." Regarding the fees that

were actually charged in 2014, Merritt testified that, "the fee that Northern Trust is

charging for the first year of services is significantly lower than the fee that would

have been charged under the standard fee schedules," and that "the annual fee

for trustee services and asset management will be reviewed after the first year."

Merritt also testified that Del Sesto and Northern will charge a one-time estate

settlement fee which is set at a "significantly lower" rate than the rate set forth in

the standard fee schedule.10

         Third, testimony from Del Sesto, Hardtke, Merritt, and Denisia detailed

both Del Sesto's competence in managing the assets held in the Trusts and

James's and Marcia's expressed desire for him to serve as a co-trustee. Del

Sesto testified that, "I have a long-standing relationship with the family and

intimate knowledge of the family and its holdings, having managed the assets of

the Trusts for nearly 20 years." Hardtke attested that, "[i]t was clear that Mr. Del

Sesto[ ] knew more about the ins and outs and day to day management of the

various entities and properties than anyone and that the Halligans had the utmost

confidence in Mr. Del Sesto. They took great comfort in knowing that Mr. Del

         10 Merritt further testified that this estate settlement fee will be paid entirely from Marcia's
portion of the Trusts, meaning that itwill not diminish the assets that are held in James's survivor
trust.
No. 73314-1-1/7

Sesto was handling everything and that he would continue to do so beyond their

own involvement." Consistent with Hardtke's testimony, Merritt testified that, "Mr.

Halligan's beneficial interest in the Trusts is best served by the historical

knowledge, experience, and skills of Mr. Del Sesto as co-trustee." Finally,

Denisia attested that, "David Del Sesto has always managed the real estate,

quite profitably for the family, and my parents trusted him implicitly."

       Fourth, testimony from Del Sesto and Hardtke detailed both Northern's

competence in managing the assets held in the Trusts and James's and Marcia's

expressed desire for the company to serve as a co-trustee. Del Sesto testified

that, "Northern Trust was selected by Mr. and Mrs. Halligan to serve with me as

co-trustee after Mr. and Mrs. Halligan had interviewed and considered several

corporate fiduciaries in their search for the appropriate co-trustee to serve with

me." Regarding the specific reasons why Northern was chosen, Hardtke attested
that, "I understood that, for a number of reasons, including our size, stability and

geographic footprint, Northern Trust was Mr. and Mrs. Halligan's preferred choice
for serving as corporate trustee with Mr. Del Sesto." Hardtke also spoke to

Northern's competence, stating that, "Northern Trust has spent weeks/months

doing its due diligence and working to fully understand all aspects of the ongoing

trust administration."

       Fifth, testimony from Del Sesto and Merritt detailed the complex nature of
the assets held in the Trusts. Del Sesto testified that, "[t]he assets owned by

these Trusts are complex and include fractional interests in limited partnerships,

limited liability companies, a corporation, promissory notes, cash and securities.

                                         -7-
No. 73314-1-1/8

Several of the entities are parties to joint venture agreements with outside, non-

family members. The entities whose interests are held in the Trusts own

commercial real estate, a strip center, an industrial building, two large shopping

centers, several ground leases with national tenants, and some unimproved

land." Consistent with Del Sesto's testimony, Merritt testified that, "[t]he

ownership structure of the business entities, along with the assets held inside the

entities is very complex."

       Sixth, testimony from Merritt and Hardtke detailed the difficulty in replacing

the current co-trustees given the time-sensitive nature of certain obligations

under the Trusts. Merritt testified to the need to pay or refinance outstanding

debts, prepare and file tax returns, respond to third party interest in acquisition of

certain assets held in the Trusts, and complete a liquidity analysis of the assets

held in the Trusts. Merritt further testified that replacement of the co-trustees

would "place at risk the Trusts' ability to obtain sufficient liquidity to address the

Trusts['] liabilities in a timely and prudent manner." Consistent with Merritt's

testimony, Hardtke opined that, "[replacing both Northern Trust and Mr. Del

Sesto concurrently would be tantamount to starting back at square one for any

successor and the likely result would be additional delays, cost and perhaps

detrimental outcomes for the trust beneficiaries."

       Seventh, the plain language of Article VIII, Paragraph A of the Halligan

Trust, evidences James's and Marcia's intent to have Del Sesto and Northern

serve as co-trustees. In this provision, James and Marcia set forth that "[i]n the

event of the death, disability, refusal to serve, or resignation of both JAMES P.

                                          -8-
No. 73314-1-1/9

HALLIGAN and MARCIA S. HALLIGAN, then DAVID N. DEL SESTO and

NORTHERN TRUST are appointed as Co-Trustees." Del Sesto and Northern

asserted their belief to the superior court that James's and Marcia's specific

selection of them as co-trustees within the Halligan Trust itself evidenced

James's and Marcia's intent to have these parties, together, manage the assets

held within the Trusts.

       On January 26, 2015, the superior court heard argument on Victoria's

petition. After hearing the argument of counsel, and considering the documents

that the parties submitted in support of their positions, the superior court denied

the petition.

       On February 5, Victoria filed a motion for reconsideration. Therein, she

reiterated her belief that removal of Del Sesto and Northern would be in James's

best interest and asserted—for the first time—that James, in 2008, had lacked

the mental capacity to choose Del Sesto and Northern as successor co-trustees.

       On February 23, the superior court heard argument on Victoria's motion

for reconsideration. After hearing the argument of counsel, the superior court

denied Victoria's motion. She now appeals.

                                          II

       Victoria first contends that the superior court erred by denying her initial

petition to authorize a change of trustee. Specifically, she asserts that the

superior court erred by concluding that removing Del Sesto and Northern as co

trustees, and replacing them with Whittier, was not proved to be in James's best

interest. We disagree.

                                         -9-
No. 73314-1-1/10

      "The management of a guardianship by the superior court is reviewed for

abuse of discretion." In re Guardianship of Cornelius, 181 Wash. App. 513, 528,

326 P.3d 718 (2014). A trial court abuses its discretion when its decision is

based on untenable grounds or reasons. In re Guardianship of Johnson, 112
Wash. App. 384, 388, 48 P.3d 1029 (2002). But a trial court does not abuse its

discretion when its decision is within the range of acceptable choices, given the

facts and the applicable legal standard. In re Marriage of Horner, 151 Wash. 2d
884, 894, 93 P.3d 124(2004).

      The parties agree that Victoria has standing to petition the superior court

for the relief sought. The question before us is whether the superior court,

having identified the applicable legal standard, abused its discretion by
concluding that removing Del Sesto and Northern as acting co-trustees, and

replacing them with Whittier, was not proved to be in James's best interest.
       A guardian is charged with the duty to, among other obligations, "assert

the incapacitated person's rights and best interests." RCW 11.92.043(4). When
exercising this duty, a "guardian[ ] must work for the individualized best interests

of each ward." In re Guardianship of Lamb, 173Wn.2d 173, 191, 265 P.3d 876

(2011). This means that "a guardian must make decisions 'on a case-by-case
basis with particularized consideration of the best interests and rights of the
specific individual:" Lamb, 173 Wash. 2d at 191 (quoting In re Guardianship of
Hamlin, 102 Wash. 2d 810, 815, 689 P.2d 1372 (1984)).

                                         10
No. 73314-1-1/11

       Courts ensure that the best interest of the ward is upheld by requiring that

a court-appointed guardian "shall at all times be under the general direction and

control of the court making the appointment." RCW 11.92.010. In fact,

       [t]he guardian's opinion as to the ward's best interest is not
       dispositive—where there is a conflict... the superior court must
       resolve the conflict. Hamlin, 102 Wash. 2d at 820-21; see also In re
       Guardianship of Ingram. 102 Wash. 2d 827, 842, 689 P.2d 1363
       (1984) ("[T]he court need not place on any party any particular
       burden of proof or persuasion, nor give any presumption of validity
       to the petition of the guardian or guardian ad litem."). Thus, while
       the guardian has the authority to "assert the incapacitated person's
       rights and best interests," RCW 11.92.043(4), it remains at all times
       the responsibility of the court to make the decision as to the ward's
       best interest. Ingram, 102 Wash. 2d at 842. The goal of a
       guardianship is to do what the ward would do, if the ward were
       competent to make the decision in question. Id. at 838.

Lamb, 173 Wash. 2d at 191 n.13. In this regard, "'[t]he court having jurisdiction of a

guardianship matter is said to be the superior guardian of the ward, while the

person appointed guardian is deemed to be an officer of the court.'" Lamb, 173
Wash. 2d at 190 (quoting Seattle-First Nat'l Bank v. Brommers, 89 Wash. 2d 190, 200,

570 P.2d 1035 (1977)); see also In re Guardianship of Hallauer, 44 Wash. App.
795, 797, 723 P.2d 1161 (1986) ("Although governed by statute, guardianships

are equitable creations of the courts and it is the court that retains ultimate

responsibility for protecting the ward's person and estate."); In re Guardianship of

Gaddis, 12Wn.2d 114, 123, 120 P.2d 849 (1942) ("The guardian, in so far as

matters pertaining to his trust are concerned, is directly responsible only to the

court of his appointment. The guardian is in effect an agent of the court, and

through him the court seeks to protect the ward's interest." (citation omitted)).

       Here, the superior court considered the range of evidence that was

                                        -11 -
No. 73314-1-1/12

presented regarding whether a change of trustee was proved to be in James's

best interest. It made a choice, among the alternatives, that was within that

range of evidence. This choice was supported by substantial evidence. Thus,

the superior court did not abuse its discretion by concluding that removing Del

Sesto and Northern as acting co-trustees, and replacing them with Whittier, was

not proved to be in James's best interest.11

                                                 Ill

        Victoria next contends that the superior court erred by denying her motion

for reconsideration. This is so, she asserts, both because she maintains that

removing Del Sesto and Northern as acting co-trustees, and replacing them with

Whittier, was proved to be in James's best interest, and because James, in 2008,

lacked the mental capacity to choose Del Sesto and Northern as co-trustees.

Both of these assertions are unavailing.

        First, Victoria's argument on reconsideration regarding James's best

interest was the same argument that she asserted in her initial petition. It fails for

the reasons previously set forth.

        Second, Victoria's argument regarding James's alleged mental incapacity

was a new theory that she was not permitted to raise on reconsideration. See

Wilcox v. Lexington Eve Inst.. 130 Wash. App. 234, 241, 122 P.3d 729 (2005) ("CR

        11 Victoria also contends that the superior court erred both by "preventing [Victoria] from
fulfilling herduty to protect the ward's estate from diminishing unnecessarily as the result of
excessive trustee fees," and by"substituting its judgment" for her judgment as James's guardian.
Opening Br. of Appellant at 2.
       Victoria's contention is inconsistent with the superior court's role as "'the superior
guardian ofthe ward.'" Lamb. 173 Wash. 2d at 190 (quoting Brommers. 89Wn.2d at 200).
Victoria's grandiose self-appraisal of her role is unsupported in the law.

                                               -12-
No. 73314-1-1/13

59 does not permit a plaintiff to propose new theories of the case that could have

been raised before entry of an adverse decision.").

       In addition to the fact that Victoria improperly raised this new theory on

reconsideration, the medical report to which she cited does not support her

assertion that James, in 2008, lacked the mental capacity to choose Del Sesto

and Northern as successor co-trustees.12 The 2014 medical report sets forth

James's medical condition in 2014. The doctor who authored this report

diagnosed James, in 2014, with "severe frontal lobe dementia." At that time, the

doctor opined that James's diagnosed condition had been "present since at least

2008," but that it was characterized by a "slowly progressive inexorable decline."

The report nowhere states that James's condition in 2014 was the same as it

was in 2008. Indeed, it supports the contrary conclusion. Thus, the medical

report does not support the assertion that James lacked the capacity, in 2008, to

choose Del Sesto and Northern as successor co-trustees. The superior court

was not obligated to rule in reliance on this evidence and did not err by declining

to do so.

        Affirmed.

We concur:

%SLrA\M0^^r
       12 In her briefing in support of her motion for reconsideration, Victoria asserted that the
dementia diagnosis was made in 2005 but cites to the 2014 medical report as support for this
contention. The 2014 report does not support this assertion.

                                               -13-