Court Opinion

ID: 4395668
Source: CourtListenerOpinion
Date Created: 2019-05-10 09:05:51.182483+00
Date Added: 2024-06-11T08:48:04.978713
License: Public Domain

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
                    revision until final publication in the Michigan Appeals Reports.

                              STATE OF MICHIGAN

                              COURT OF APPEALS

In re MARGARET E. WHITE TRUST.

GREGORY L. WHITE, Individually and as                                  UNPUBLISHED
Trustee of MARGARET E. WHITE TRUST,                                    May 9, 2019

                 Appellant,

v                                                                      No. 344361
                                                                       Shiawassee Probate Court
RENATA L. WHITE,                                                       LC No. 15-036678-TT

                 Appellee.

Before: BOONSTRA, P.J., and METER and FORT HOOD, JJ.

PER CURIAM.

       Appellant, Gregory L. White, individually and as trustee of the Margaret E. White Trust
(the Margaret Trust), appeals as of right the probate court’s May 30, 2018 judgment in favor of
appellee, Renata L. White, following her claims of breach of trust regarding the Margaret Trust
and the Renata L. White Discretionary Trust (the Discretionary Trust).1 We affirm the probate
court’s judgment in all respects except for the portion requiring Gregory to pay Renata
$117,728.93 in attorney fees. Instead, we vacate the attorney fee award and remand for the
probate court to (1) articulate the authority pursuant to which it awarded the attorney fees and (2)
consider the reasonableness of the claimed attorney fees in accordance with Michigan law.

                                   I. FACTUAL BACKGROUND

      Margaret E. White was the settlor of the Margaret Trust and she died on January 28,
2012. Margaret’s children were Gregory, Monica M. White, and Renata. The Margaret Trust
named Gregory as the first successor trustee. After specific bequests were provided for, the

1
    Throughout this opinion we will refer to the parties by their first names.

                                                   -1-
Margaret Trust provided that its residue was to be distributed with 40% to Gregory, 40% to
Monica, and 20% to Renata to be held in a discretionary trust as directed by the terms of the
Margaret Trust.

        In March 2015, Renata filed an amended petition for the enforcement of the Margaret
Trust. In Count I of the amended petition, Renata asserted that Gregory had defrauded the
Margaret Trust and in Count II, Renata claimed that Gregory had abused his powers as trustee of
the Discretionary Trust. Gregory moved for summary disposition on the basis that the statute of
limitations precluded Renata’s claims, and while the probate court denied summary disposition,
the circuit court, on appeal, later granted summary disposition of Count I of Renata’s 2015
amended petition, holding that Renata had asserted a breach-of-trust claim which was subject to
the applicable statute of limitations. In 2017, Renata filed a petition asserting that Gregory had
breached his duties as trustee of the Discretionary Trust, including by failing to distribute and
prudently invest funds and by charging attorney fees to the Discretionary Trust.

        Following a three-day bench trial, the probate court found that Gregory had breached his
fiduciary duties to both the Margaret Trust and the Discretionary Trust for his personal gain, had
engaged in self-dealing, and had converted money from the Discretionary Trust to pay for his
own attorney fees, significantly depleting the Discretionary Trust, without authorization of the
probate court. It found that the initial value of Margaret’s residence that was part of the
Margaret Trust was appraised at $165,000, but Gregory sold it to himself for $137,000.
Ultimately, the probate court concluded that the Discretionary Trust for Renata should have been
funded at $57,933.12, representing Renata’s 20% share of the Margaret Trust after the residence
was properly valued at $160,000 and Gregory had repaid fiduciary fees of $9,918 to the
Margaret Trust. The probate court also awarded Renata $117,728.93 in attorney fees against
Gregory individually.

                    II. RES JUDICATA AND COLLATERAL ESTOPPEL

        On appeal, Gregory argues that the probate court should not have ruled on the breach of
trust claims that Renata alleged in her 2017 petition because res judicata or collateral estoppel
barred these claims. We disagree.

        This Court reviews de novo the application of the doctrine of collateral estoppel. Holton
v Ward, 303 Mich. App. 718, 731; 847 NW2d 1 (2014). This Court also reviews de novo whether
the doctrine of res judicata is applicable to a particular case. Pierson Sand & Gravel, Inc v
Keeler Brass Co, 460 Mich. 372, 379; 596 NW2d 153 (1999). To the extent this appeal involves
the interpretation of court rules, our review is de novo. Dextrom v Wexford Co, 287 Mich. App.
406, 416; 789 NW2d 211 (2010).

        Res judicata precludes a “second, subsequent action” where “(1) the prior action was
decided on the merits, (2) both actions involve the same parties or their privies, and (3) the
matter in the second case was, or could have been, resolved in the first.” Adair v State, 470 Mich.
105, 121; 680 NW2d 386 (2004). Collateral estoppel is implicated under the following
circumstances:

                                               -2-
       Generally, for collateral estoppel to apply three elements must be satisfied: (1) a
       question of fact essential to the judgment must have been actually litigated and
       determined by a valid and final judgment; (2) the same parties must have had a
       full and fair opportunity to litigate the issue; and (3) there must be mutuality of
       estoppel. [William Beaumont Hosp v Wass, 315 Mich. 392, 398; 889 NW2d 745
       (2016) (citation and quotation marks omitted).]

        As an initial matter, we disagree with Gregory’s contention that the doctrines of res
judicata and collateral estoppel are applicable to this case given that the petitions filed in 2015
and the petition filed in 2017 involve the same proceeding in the probate court, that being Case
No. 15-036678-TT. Our review of the applicable court rules confirms this conclusion. For
example, MCR 5.101(A) provides that in the probate court, there are “two forms of action, a
‘proceeding’ and a ‘civil action.’” MCR 5.101(B) specifies that “[a] proceeding is commenced
by filing an application or a petition with the court.” Additionally, MCR 5.119 governs
“Additional Petitions; Objections; [and] Hearing Practices.” This court rule provides, in
pertinent part:

       (A) Right to Hearing, New Matter. An interested person may, within the
       period allowed by law or these rules, file a petition and obtain a hearing with
       respect to the petition.

Specifically regarding trust proceedings, MCR 5.501(C) provides, in pertinent part:

       Commencement of Trust Proceedings. A proceeding concerning a trust is
       commenced by filing a petition in the court. Registration of the trust is not
       required for filing a petition.

        In this case, the proceeding in the probate court was first initiated when Renata filed a
petition on March 26, 2015 “for the enforcement of trustee duties and responsibilities” pursuant
to the Michigan Trust Code, MCL 700.7101 et seq. While Renata filed an amended petition on
August 28, 2015, and an additional petition on July 13, 2017, these petitions concerned
additional matters arising from the same proceeding, and new proceedings were not originated
with the filing of the additional petitions. Under such procedural circumstances, we disagree
with Gregory that the doctrines of res judicata and collateral estoppel apply to bar the claims
Renata alleged in her 2017 petition, as separate causes of action are simply not implicated. In
any event, our review of the record confirms that the factual allegations raised in Renata’s 2017
petition were substantially different from those raised in Count I of her 2015 amended petition
which the circuit court dismissed on the basis of the statute of limitations.

        For example, Count I of Renata’s 2015 amended petition essentially alleged that Gregory
had engaged in a breach of trust in his fiduciary duties as trustee of the Margaret Trust with
respect to the maintenance, improvement and sale of Margaret’s residence, as well as with
expenditures related to the residence. Renata also questioned several disbursements from the
Margaret Trust that Gregory had submitted to Renata in an accounting. Count II of the amended
petition requested that Gregory be removed as trustee of the Discretionary Trust and that the
Discretionary Trust be closed. The circuit court dismissed Count I of the amended petition on
the basis of the statute of limitations. In Renata’s 2017 petition, she asserted claims against

                                                -3-
Gregory on the basis of his failure to perform his duties as trustee of the Margaret Trust and the
Discretionary Trust. For example, she alleged that Gregory had not prepared an inventory of the
Margaret Trust and she questioned the manner in which funds held in the Discretionary Trust
were being invested. Specifically, Renata alleged that Gregory “has totally neglected his
responsibilities and also totally abused his authority in the handling and conversion of the
[Discretionary Trust] funds[.]”         Renata also challenged Gregory’s accounting for the
Discretionary Trust, and alleged numerical inaccuracies pertaining to both the Discretionary
Trust and the Margaret Trust. Renata also alleged that “[the Discretionary Trust] has been totally
depleted by paying the personal bills incurred by [Gregory]” and that the funds in the
Discretionary Trust were not handled for Renata’s benefit. While Renata highlighted details of
Gregory’s handling of the appraisal and sale of Margaret’s residence in her July 13, 2017
petition, she clearly did so as part of her claim that Gregory should produce “corrected
accountings and records” with respect to the Margaret Trust.2 Therefore, a review of the record
confirms that the thrust of the allegations advanced in the 2017 petition pertained to inaccuracies
in the accounting records of the Margaret Trust and challenges to how the funds in the
Discretionary Trust were invested and handled. We therefore disagree with Gregory’s assertion
in his brief on appeal that “[t]he . . . claims in Count I of the Amended 2015 Petition arise from
the same facts as the . . . claims in the 2017 Petition.” Accordingly, because we are satisfied that
the allegations in the 2017 petition were significantly different from those alleged in Count I of
the 2015 amended petition and dismissed by the circuit court, we agree with Renata that the
probate court properly tried and ruled on these allegations and concomitant issues.3

                                     III. ATTORNEY FEES

        On appeal, Gregory advances a two-pronged argument with respect to attorney fees and
his trustee fees. First, he claims that the probate court erred in awarding Renata’s share of the
Margaret Trust that funded the Discretionary Trust without reducing the amount for his trustee
fees in the amount of $9,918 and attorney fees in the amount of $47,318.61. We disagree.

        Because our review of the probate court’s ruling requires that we interpret the statutory
language of pertinent portions of the Estates and Protected Individuals Code (EPIC), MCL
700.1101 et seq., our review of this issue is de novo. Dextrom, 287 Mich. App. at 416. We
construe a statute by “considering the plain language” to discern its meaning. Patel v Patel, 324
Mich. App. 631, 639-640; 922 NW2d 647 (2018). If the statutory language is clear, we enforce
the statute as written. Id. at 640. To the extent our analysis of these issues requires us to

2
  The accounting of funds held by the Margaret Trust was relevant to the Discretionary Trust as
the terms of the Margaret Trust dictated that a Discretionary Trust be established for Renata and
that it be funded by the assets in the Margaret Trust.
3
  We also disagree with Gregory that the law of the case doctrine precluded the probate court
from ruling on the issues raised in the 2017 petition. The law of the case doctrine only applies to
issues that are actually decided in a prior appeal. Cadwell v Highland Park, 324 Mich. 642, 650
n 1; 922 NW2d 639 (2018). In this case the circuit court did not actually decide the issues that
were presented in Renata’s 2017 petition.

                                                -4-
consider the probate court’s factual findings following trial, our review is for clear error. In re
Koehler Estate, 314 Mich. App. 667, 673-674; 888 NW2d 432 (2016).

        In its written opinion, the probate court expressed grave concern with the actions of both
Gregory and his attorneys with respect to Gregory’s attorney fees throughout the pendency of the
lower court proceedings. Specifically, the probate court stated that “[Gregory’s attorneys
knowingly] used the entirety of Renata’s share of the Trust to pay themselves for . . . attorney
fees.” The probate court also expressed its concern that counsel for Gregory relied on MCL
700.7817 as authority for unilaterally charging attorney fees to the Discretionary Trust, knowing
that the Trust was being depleted. The probate court also noted that when Renata contacted the
law firm representing Gregory to ascertain what her Discretionary Trust had been charged for the
law firm’s services, she was told that the information was subject to the attorney-client privilege
and that she was not entitled to that information. On appeal, Gregory concedes that the attorney
fees at issue were incurred with respect to this lawsuit regarding Gregory’s administration of the
Margaret Trust and the Discretionary Trust.

       MCL 700.7817 provides, in pertinent part:

       Without limiting the authority conferred by [MCL 700.7816] a trustee has all of
       the following powers:

       (w) To employ an attorney to perform necessary legal services or to advise or
       assist the trustee in the performance of the trustee’s administrative duties, even if
       the attorney is associated with the trustee, and to act without independent
       investigation upon the attorney’s recommendation. An attorney employed under
       this subdivision shall receive reasonable compensation for his or her employment.

       (x) To prosecute, defend, arbitrate, settle, release, compromise, or agree to
       indemnify an action, claim, or proceeding in any jurisdiction or under an
       alternative dispute resolution procedure. The trustee may act under this
       subdivision for the trustee’s protection in the performance of the trustee’s duties.
       [Emphasis supplied.]4

See also In re Temple Marital Trust, 278 Mich. App. 122, 132; 748 NW2d 265 (2008) (observing
that “provided a trustee acts as a reasonable and prudent person with respect to the trust,” he or
she may retain attorneys to provide advice or assistance with respect to the administration of the
trust or to defend a lawsuit involving the trust).

4
  Section 9.26 of the Margaret Trust provides that the trustee may “employ an attorney to
perform necessary legal services or to advise or assist the Trustee in the performance of the
Trustee’s administrative duties. An attorney employed under this subdivision shall receive
reasonable compensation for that employment.”

                                                -5-
        MCL 700.7817 is found in Part 8 of the Michigan Trust Code,5 and details the specific
powers that trustees possess as they administer a trust. For example, MCL 700.7801 provides
that, “[u]pon acceptance of a trusteeship, the trust shall administer the trust in good faith,
expeditiously, in accordance with its terms and purposes, for the benefit of the trust beneficiaries,
and in accordance with this article.” MCL 700.7802 imposes on a trustee the duty to “act as
would a prudent person in dealing with the property of another, including following the
standards of the Michigan prudent investor rule.” The trustee is also required to “take reasonable
steps to take control of and protect the trust property.” MCL 700.7810. Likewise, the trustee
bears responsibility to “enforce claims of the trust and to defend claims against the trust.” MCL
700.7812. While we recognize that MCL 700.7817(w) allows a trustee to employ counsel “to
perform necessary legal services or to assist the trustee in the performance of the trustee’s
administrative duties,” the attorney fees at issue in this case, as Gregory acknowledges on
appeal, were incurred in defending Renata’s allegations of breach of trust. Part 9 of the
Michigan Trust Code contains a statutory provision that is directly on point with respect to the
award of attorney fees in the context of proceedings where a breach of trust is alleged.

        MCL 700.7901(1) provides that “[a] violation by a trustee of a duty the trustee owes to a
trust beneficiary is a breach of trust.” Similarly, MCL 700.7904 provides, in pertinent part:

         (1) In a proceeding involving the administration of a trust, the court, as justice and
         equity require, may award costs and expenses, including reasonable attorney fees,
         to any party who enhances, preserves, or protects trust property, to be paid from
         the trust that is the subject of the proceeding.

         (2) Subject to subsection (3), if a trustee participates in a civil action or
         proceeding in good faith, whether successful or not, the trustee is entitled to
         receive from trust property all expenses and disbursements including reasonable
         attorney fees that the trustee incurs in connection with its participation.

         (3) A court may reduce or deny a trustee’s claim for compensation, expenses, or
         disbursements with respect to a breach of trust. [Emphasis added.]

        A review of the probate court’s thorough and well-reasoned written ruling following
three days of trial demonstrates that the probate court concluded that Gregory engaged in a
continuous and repeated breach of trust with respect to his fiduciary duties pertaining to the
administration of the Margaret Trust, independent of the sale and valuation of Margaret’s
residence, and that he also breached his fiduciary duties in the administration of the
Discretionary Trust. As an initial matter, the probate court’s written ruling reflects that the court
was well-aware that Gregory’s dispositive motion had resulted in the dismissal of Count I of the
amended 2015 petition. However, the probate court recognized that “since the value of the
Renata White Discretionary Trust is based on the value of the Margaret E. White Trust,
[Gregory’s] actions relative to that trust are subject to review.” Reviewing Gregory’s actions as
trustee, the probate court observed that Gregory “was in no hurry to be forthright with his sister

5
    The Michigan Trust Code is Article VII of EPIC.

                                                  -6-
about the state of the Trust funds and to what she was entitled.” The probate court was also
justifiably concerned that every time Renata contacted Gregory to inquire about the
administration of the Margaret and Discretionary Trusts, Gregory would consult with his
attorneys and the significant legal fees would be billed to and deplete Renata’s share of the
funds. The probate court also noted that Gregory abdicated his duty to ensure that Renata
received timely disbursements from the Discretionary Trust, and that he did not invest the funds
in the Discretionary Trust in a manner that would have benefitted Renata as a beneficiary. The
probate court also noted that Gregory “through self-dealing, converted the money from the
Renata White Discretionary Trust for his own benefit.” Given that Gregory’s actions were “so
tainted by his misdeeds and self-dealing,” the probate court concluded that Gregory must repay
his trustee fees to the Margaret Trust. The probate court’s ruling in this regard is in accordance
with MCL 700.7901, which provides, in pertinent part:

       (1) A violation by a trustee of a duty the trustee owes to a trust beneficiary is a
       breach of trust.

       (2) To remedy a breach of trust that has occurred . . . the court may do any of the
       following:

                                             * * *

       (c) Compel the trustee to redress a breach of trust by paying money, restoring
       property, or other means.

                                             * * *

       (h) Reduce or deny compensation to the trustee.

        Overall, in the probate court’s estimation, because of the egregious breaches of trust that
Gregory engaged in throughout his tenure as trustee, he was not entitled to use the proceeds of
the Discretionary Trust to pay for his attorney fees or his trustee fees. Indeed, rather than
enhancing, preserving or protecting the trust property, MCL 700.7904(1), it is clear that the
probate court took umbrage with Gregory’s actions, motivated by his own self-gain, in depleting
the Discretionary Trust that was rightfully Renata’s, to pay for his significant attorney fees
without first seeking approval of the probate court. Specifically, in its written opinion and order
following trial, the probate court characterized Gregory’s testimony at trial as “deceptive,
underhanded and deliberately vague.” The probate court further observed that Gregory “abused
and dissipated” funds that their mother intended for Renata. The present case is thus
distinguishable from authority of this Court where attorney fee payments were approved in
actions alleging misconduct against the trustee of a trust because the trustee was not found to
have engaged in any wrongdoing. Cf. In re Temple Marital Trust, 278 Mich. App. at 135, 136-
137 (observing that when attorney fees are incurred by a trustee in defending an action alleging
misconduct, fees are properly charged to the estate if no wrongdoing is established). Under the
circumstances of this case, we agree with the probate court’s decision to not reduce Renata’s
share of the Margaret Trust, which in turn funded the Discretionary Trust, to account for
Gregory’s attorney fees and trustee fees.

                                                -7-
       Next, Gregory argues that the probate court’s award of attorney fees to Renata must be
vacated because (1) the probate court did not articulate its authority for awarding the attorney
fees and (2) did not consider whether the claimed attorney fees were reasonable. We agree.

         This Court reviews the probate court’s underlying findings of fact regarding attorney fees
for clear error and reviews its decision to award fees and the reasonableness of the fees for an
abuse of discretion. In re Temple Marital Trust, 278 Mich. App. at 128. The probate court abuses
its discretion when its decision falls outside the range of reasonable and principled outcomes. Id.
The payment of attorney fees and costs is generally precluded in the absence of a statute, court
rule, or judicial exception. Id. at 129.

       In this case, the probate court awarded Renata $117,728.93 in attorney fees against
Gregory. However, the probate court did not state its legal authority for holding Gregory
responsible for Renata’s fees. We acknowledge that MCL 700.7901 provides, in pertinent part:

       (1) A violation by a trustee of a duty the trustee owes to a trust beneficiary is a
       breach of trust.

       (2) To remedy a breach of trust that has occurred or may occur, the court may do
       any of the following:

                                              * * *

       (c) compel the trustee to redress a breach of trust by paying money, restoring
       property, or other means.

                                              * * *

       (j) Order any other appropriate relief. [Emphasis added.]

        While Renata argues that she would be entitled to attorney fees under MCL 700.7904,
this statute does not support the probate court’s specific award in this case. MCL 700.7904
provides that “[i]n a proceeding involving the administration of a trust, the court, as justice and
equity require, may award costs and expenses, including reasonable attorney fees, to any party
who enhances, preserves, or protects trust property, to be paid from the trust that is the subject of
the proceeding.” (Emphasis added.) The probate court ordered Gregory to personally pay
Renata’s attorney fees. Accordingly, we are not persuaded that MCL 700.7904 is applicable.

       Accordingly, we vacate the probate court’s attorney fee award in favor of Renata and
remand for the court to state the legal authority for the award of attorney fees. Additionally, on
remand, if the probate court determines that it has a legal basis under which to award Renata
attorney fees, it must undertake an inquiry and make a determination regarding the
reasonableness of the claimed attorney fees. Smith v Khouri, 481 Mich. 519, 528-530; 751
NW2d 472 (2008) (opinion by TAYLOR, C.J.); Pirgu v United Servs Auto Ass’n, 499 Mich. 269,
275, 281-282; 884 NW2d 257 (2016).

                                       IV. CONCLUSION

                                                -8-
        We affirm the probate court’s May 30, 2018 judgment in all respects except for the
portion awarding $117,728.93 in attorney fees to Renata. We remand to allow the probate court
to (1) articulate the legal authority substantiating its award of attorney fees to Renata and (2)
consider the reasonableness of the fees. We do not retain jurisdiction.

                                                           /s/ Mark T. Boonstra
                                                           /s/ Patrick M. Meter
                                                           /s/ Karen M. Fort Hood

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