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Cattani v. Drake

Court of Appeals of Utah

April 26, 2018

Kara Cattani, as Trustee of the Oates Family Trust, Appellant,
Lyle Drake, Durham Jones & Pinegar PC, Daniel Maynard, and Maynard Cronin Erickson Curran & Sparks PLC, Appellees.

          Fifth District Court, St. George Department The Honorable Pamela G. Heffernan No. 110500394

          Grant M. Sumsion, Jason S. Crandall, Daniel L. Steele, and John J. Egbert, Attorneys for Appellant

          Matthew L. Lalli and Jeremy J. Stewart, Attorneys for Appellees Lyle Drake and Durham Jones & Pinegar PC

          John A. Snow and Alex B. Leeman, Attorneys for Appellees Daniel Maynard and Maynard Cronin Erickson Curran & Sparks PLC

          Judge David N. Mortensen authored this Opinion, in which Judges Michele M. Christiansen and Jill M. Pohlman concurred.


         ¶1 A dispute amongst beneficiaries of a trust has resulted in two lawsuits, the second of which comes before us on appeal. Kara Cattani, as the current successor trustee of the Oates Family Trust (the Trust), appeals the district court's dismissal of some of the Trust's claims and the court's grant of summary judgment in favor of defendants Lyle Drake, Durham Jones & Pinegar PC, Daniel Maynard, and Maynard Cronin Erickson Curran & Sparks PLC. We affirm as to Maynard and Maynard Cronin Erickson Curran & Sparks, but we reverse in part on claims against Drake and Durham Jones & Pinegar and remand.


         ¶2 In 1971, Ernest and Florence Oates created the Trust to help ensure they were properly cared for during their lifetimes.[1]Upon the death of either settlor, the Trust was to become irrevocable. Ernest[2] died in 1996. The Oateses named their four children-Ernest Donald Oates (Oates), Caroline Woolley, Irene Cattani, and Diane Nolen-remainder beneficiaries of the Trust. Oates and Woolley died in a car accident, and Irene Cattani later suffered an unrelated injury that left her disabled and unable to manage her affairs. Irene Cattani has five children who are also involved in this case: Kara, Kent, Keith, Kathleen, and Kyle (the Cattani children). Nolen, the only remaining child capable of doing so, served as co-trustee with Florence following Ernest's, Oates's, and Woolley's deaths.[3] Nolen became the sole trustee in 2005 when Florence died.

         ¶3 Ernest owned a ten-percent interest in a Colorado limited partnership prior to his death. The Cattani children contend that Ernest had informed them that the partnership interest would become Trust property upon his death. But in 1999, after Ernest's death, Florence signed a document purporting to transfer the partnership interest to Nolen as a joint tenant with Florence. When the Cattani children learned of the transfer after Florence's death, they were concerned. In 2006, Kara requested an explanation of the transfer from Nolen; Kent wrote to Lyle Drake, an attorney representing Nolen as trustee, requesting copies of all trust documents.

         ¶4 Drake had been retained by Florence in 2001 to assist with trust and estate matters. At that time, Florence requested that Drake prepare a document that would "transfer the Partnership Interest to Florence and Nolen as joint tenants, " "apparently forgetting about the 1999 Assignment." Drake was convinced that Florence had not been unduly influenced in her decision to make the transfer and prepared the document. Florence executed the assignment, although, as Drake explained, ultimately it "was inoperative and redundant due to Florence's prior execution of the 1999 Assignment" to Nolen as joint tenants.

         ¶5 Following Kara and Kent's requests for information in 2006, Drake advised Nolen that she had a duty to provide a trust accounting as of the date of Florence's death, but not for "the period prior to Florence's death." Drake then sent a letter to all the beneficiaries of the Trust and Florence's estate-including Nolen and the Cattani children-taking the position that any "request of past accountings is silly."

         ¶6 During this same time, Nolen retained an attorney, Daniel Maynard, to represent her personally. Maynard's initial focus was on the issue of ownership of the partnership interest; he did not advise Nolen regarding her duties as trustee of the Trust. Because of "stress she was experiencing" in her role as trustee, Maynard advised her to resign, but Nolen declined this advice. Nolen used the Trust to pay for her personal legal fees.

         ¶7 In 2006, Irene and the Cattani children sued Nolen and Drake (the 2006 case).[4] They sought to have Nolen removed as trustee, to obtain an accounting, and to have the partnership interest transferred to the Trust. They also asserted claims against Drake for legal malpractice, breach of fiduciary duty, and aiding and abetting Nolen in her breach of fiduciary duty. The district court ordered the accounting; replaced Nolen as trustee with a third-party successor trustee, Stagg Eldercare Services (Stagg); and found that Nolen "had breached her fiduciary duty to provide an accounting of the Trust for the period prior to Florence's death" when Nolen had been co-trustee. It dismissed the claims against Drake for legal malpractice and breach of fiduciary duty because he did not have an attorney-client relationship with the beneficiaries and owed them no duty.

         ¶8 The district court also found that because the partnership interest passed to Florence upon Ernest's death, it never became a trust asset. The court further granted summary judgment in favor of Nolen for all claims resting on the allegedly unlawful transfer of the partnership interest, and on the one remaining claim against Drake-aiding and abetting Nolen's breach of her fiduciary duty in refusing to provide the accounting.

         ¶9 Stagg, having become successor trustee and substituted as plaintiff, thereafter amended the complaint against Drake and Nolen.[5] Stagg and Nolen settled the additional claims raised against Nolen, and the 2006 case was dismissed with prejudice in December 2011. No appeal followed the dismissal. Around that same time, Stagg withdrew as trustee and Kara became successor trustee.

         ¶10 After the 2006 case settled, the Cattani children asserted claims against the Trust seeking reimbursement of their costs and legal fees in bringing suit against Nolen and Drake. The Trust settled these claims and agreed to reimburse the Cattani children with the Trust's funds.

         ¶11 In January 2010, Stagg, as trustee, sued Drake on behalf of the Trust (the 2010 case). The 2010 case also included Maynard as a defendant.[6] Stagg asserted claims for malpractice, breach of contract, constructive trust, unjust enrichment, and breach of fiduciary duty. It also alleged that Maynard was liable for aiding and abetting Nolen's alleged breach of her fiduciary duties.

         ¶12 Drake moved to dismiss under rule 12(b)(6) of the Utah Rules of Civil Procedure, arguing that the 2006 case foreclosed the claims against him. The district court granted the motion in part, concluding that the 2006 case precluded any claims dealing with the partnership interest, but allowed the 2010 case to proceed, provided the "claims going forward be based solely on other allegations of wrongdoing not related to the Partnership Interest."

         ¶13 In November 2012, Kara, as successor trustee, filed an amended complaint.[7] Drake eventually moved for summary judgment, as did Maynard. The court granted the motions, and Kara, on behalf of the Trust, appeals.


         ¶14 The Trust first argues that the district court erred by dismissing its claims against Drake regarding the advice he provided Nolen about the partnership interest. The Trust next argues that the district court erroneously granted summary judgment on the remaining claims against Drake. Finally, the Trust argues that the district court erred in granting summary judgment on its claims against Maynard. "A district court's ruling on either a motion to dismiss or a motion for summary judgment is a legal question which we review for correctness[.]" Commonwealth Prop. Advocates, LLC v. Mortgage Elec. Registration System, Inc., 2011 UT App 232, ¶ 6, 263 P.3d 397.


         I. Motion to Dismiss

         ¶15 The Trust urges us to reverse the district court's dismissal of claims against Drake that are related to the partnership interest "and any issues that flow from it, including [the Trust's] claims against [Drake] regarding conflicts of interest or breaches of fiduciary duty that are based upon the transfer of the Partnership Interest to Diane Nolen and the efforts of Ms. Nolen to retain that Partnership Interest." The district court's reasoning was that the court in the 2006 case had already determined Nolen could not have breached any fiduciary duties by acquiring the partnership interest because that interest was not a trust asset. Thus, there was no breach relating to the advice given by Drake concerning that interest. The district court particularly decided that it would not retry this issue because there was "sufficient privity between the beneficiaries who were plaintiffs in [the 2006 case] and the Trustee who is Plaintiff in this case that they should be considered the same for purposes of collateral estoppel."

         ¶16 Collateral estoppel bars relitigation of "facts and issues in [a] second suit that were fully litigated in the first suit." Searle Bros. v. Searle, 588 P.2d 689, 690 (Utah 1978). To establish that collateral estoppel applies, a party must meet a four-part test asking whether (1) the issue decided in the prior adjudication was identical to the one presented in the action in question, (2) there was a final judgment on the merits, (3) the issue was "competently, fully, and fairly litigated in the previous action, " and (4) the party against whom collateral estoppel is asserted was a party or in privity with a party in the prior adjudication. See Tangren Family Trust v. Tangren, 2016 UT App 163, ¶ 16, 381 P.3d 1152 (cleaned up). There is little dispute that the district court in the 2006 case directly ruled that the partnership interest passed to Florence Oates individually and was never part of the Trust. That ruling ultimately resulted in a final order when the then-existing parties settled the 2006 case.

         ¶17 The focus of the appeal of Drake's motion to dismiss is the district court's determination regarding the final prong of the four-part test-that Kara, the trustee plaintiff in the 2010 case, was in privity with the beneficiary plaintiffs, the Cattani children, in the 2006 case. The Trust challenges that determination, arguing that "the plaintiffs in the prior action had a very different relationship to the subject matter of the litigation against Drake than the Trustee has in this case."[8] We disagree with the Trust for several reasons. First, as the district court determined, the beneficiaries in the 2006 case and the Trust in the 2010 case have aligned interests, which is sufficient privity. Second, while not articulated by the district court, we determine that it is apparent on the record here that collateral estoppel applies because the Trust is a party in both cases.

         ¶18 As to privity, our supreme court has clarified, "This means that the plea of collateral estoppel can be asserted only against a party in the subsequent suit who was also a party or in privity with a party in the prior suit." Searle Bros., 588 P.2d at 690-91. "The legal definition of a person in privity with another, is a person so identified in interest with another that he represents the same legal right. Thus, privity depends mostly on the parties' relationship to the subject matter of the litigation." Press Publ'g, Ltd. v. Matol Botanical Int'l, Ltd., 2001 UT 106, ¶ 20, 37 P.3d 1121 (cleaned up). For example, in Hansen v. Bank of New York Mellon, 2013 UT App 132, 303 P.3d 1025, this court determined that a bank as a beneficiary under Hansen's trust deed represented the same legal interests in a state court action as did the trustee under the trust deed in a prior federal suit. Id. ¶¶ 7-10. Hansen had sued the bank in federal court to prevent a foreclosure on his property on the basis that the bank did not own a legal interest in the property. Id. ¶ 3. The federal suit was dismissed with prejudice. Id. Hansen had simultaneously filed an action in state court asserting a claim against the trustee on the trust deed. Id. ¶ 4. The state court dismissed Hansen's claims regarding the foreclosure proceedings on the basis that they had already been decided in the federal court case. Id. Hansen argued on appeal that only the beneficiaries had been parties in the federal suit and that the trustee's interest was "substantively different from that of a beneficiary." Id. ¶ 9. This court disagreed and looked at the remedy Hansen sought-preventing foreclosure-and whether the interests of the trustee and the beneficiaries were aligned on this issue, ultimately determining that the beneficiaries and the trustee were in privity. Id. ¶ 10.

         ¶19 That same principle applies here. In the 2006 case, before it was fully resolved by settlement, the district court directly ruled that the partnership interest was never part of the Trust. The Cattani children, including Kara, vigorously opposed that determination. The identical legal issue was in question in the 2010 case: whether the partnership interest was part of the Trust. There, the Trust-through its trustee, Kara-argued that the partnership interest was never part of the Trust. Because the interests of the Cattani children and the Trust were aligned on this issue, and because the court previously ruled on the issue in the 2006 case, the district court in the 2010 case was correct in determining that sufficient privity existed and collateral estoppel applied.

         ¶20 But of equal importance is the fact that, after Nolen was removed as trustee in the 2006 case, Stagg substituted as trustee for the Trust. Stagg, on behalf of the Trust, filed an amended complaint and reasserted all claims for the purpose of avoiding any argument that the claims had been abandoned and expressly to preserve all claims for appeal. Thus, the Trust was an actual party to the 2006 case where the issue of whether the partnership interest was part of the Trust was fully litigated. Therefore, it is unnecessary to even reach the issue of privity given that the Trust was a party in both cases. Although this argument was not raised by the parties in their briefs, it is clearly apparent in the record. "It is well established that an appellate court may affirm a judgment if it is sustainable on any legal ground or theory apparent on the record, even though such ground or theory differs from that stated by the [district] court to be the basis of its ruling or action." Scott v. Scott, 2017 UT 66, ¶ 18 (cleaned up).

         ¶21 The Trust also asserts that collateral estoppel cannot apply because the issues in the 2006 case and the 2010 case are not identical. Specifically, the Trust contends that because the 2006 case did not address the issue of whether Nolen unduly influenced Florence to persuade her to transfer the partnership interest to Nolen, the issue presented in the current case was never decided. We reject this assertion. The discrete issues in the 2006 case were (1) whether the partnership interest should have passed to the Trust as a matter of law and (2) whether Nolen breached her fiduciary duty by accepting ownership of the partnership interest. The claim at issue in the present case is whether Drake is liable for advice he purportedly gave or did not give Nolen regarding retention of the partnership interest. While at first blush this issue might appear distinct from the two issues ...

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