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Schultz v. Wells Fargo Bank, N.A.

Supreme Court of Alaska

June 7, 2013

JEAN SCHULTZ, as Guardian of Dennis P. Hutchinson, Jr.; and THE TRUST ADVISORY COMMITTEE, created under THE DENNIS P. HUTCHINSON, JR. TRUST, Appellants,
v.
WELLS FARGO BANK, N.A., Appellee.

Appeal from the Superior Court of the State of Alaska, Third Judicial District, No. 3AN-10-01399 PR Anchorage, Sen K. Tan, Judge.

Russell L. W inner, W inner & Associates, P.C., Anchorage, for Appellants.

Gary A. Zipkin and Josh Van Gorkom, Guess & Rudd P.C., Anchorage, for Appellee.

Before: Fabe, Chief Justice, Winfree, Stowers, Maassen, and Bolger, Justices.

OPINION

WINFREE, Justice.

I. INTRODUCTION

A trust advisory committee spent four years seeking property insurance premium and coverage information from the trustee. The committee then petitioned the superior court for relief, contending that the trustee's failure to disclose information was a breach of fiduciary duty, requesting that the court compel the trustee to fulfill multiple information and document requests, and seeking an attorney's fees award under Alaska Civil Rule 82. The superior court granted approximately half of the committee's information and document requests and required the trustee to provide copies of the insurance policy. But the superior court found that neither party clearly prevailed and denied the committee's attorney's fees request. The committee appeals, arguing that the superior court misinterpreted Rule 82 and abused its discretion by not determining that the committee was the prevailing party entitled to a fee award. We reverse.

II. FACTS AND PROCEEDINGS

The Dennis P. Hutchinson, Jr. Trust owns two residential properties. W ells Fargo Bank, N.A., has been the trustee since 1999. Jean Schultz, the beneficiary's mother and guardian, is one of three Trust Advisory Committee members.[1] The trust agreement requires the trustee to manage trust finances, meet annually with the Committee, provide statements of trust transactions and assets, and "maintain insurance against such hazards as the [trustee] and [the Committee] shall deem appropriate."

In 2005 the Committee learned that the trust's real property insurance premiums had increased significantly. After the Committee's attorney contacted Wells Fargo, the Committee learned that the trust's real property insurance policies were not purchased through local insurance markets; rather, they were purchased through a Wells Fargo insurance program under a master policy issued to Wells Fargo. Between September 2005 and August 2009 the Committee's attorney corresponded with Wells Fargo on multiple occasions, requesting to review the insurance policy and other documents relating to the higher premiums being paid by the trust under Wells Fargo's insurance program. Unsatisfied with the responses and information received, the Committee ultimately petitioned the superior court to require Wells Fargo to provide the insurance policy, related documents, and information about Wells Fargo's insurance program and its relationship to other entities involved in the insurance program.

The Committee alleged that after repeated requests for the insurance policy and other documents and information, it learned that: (1) Wells Fargo insured all properties of trusts it managed through the master insurance policy; (2) the trust was unable to opt out of Wells Fargo's insurance program; (3) the insurance purchased for the trust's properties was purchased without the Committee's agreement; (4) the premiums paid under Wells Fargo's master policy appeared higher than standard insurance coverage; (5) the policy also protected Wells Fargo from liability with respect to the trust; (6) Wells Fargo was the insured under the policy; and (7) Wells Fargo refused to provide insurance documents relevant to the trust's interests. The Committee further alleged that after years of requests it remained "uninformed about many of the basic facts regarding the insurance that Wells Fargo obtained under the [insurance program] and is charging to the [t]rust [and has] received no underlying documents to confirm what [it has] been told by Wells Fargo."

The Committee requested an order requiring Wells Fargo to provide the master insurance policy. The Committee also sought information and documents detailing: (1) Wells Fargo's relationship to other entities involved in the insurance program; (2) individual trust property premium allocation determinations; (3) how W ells Fargo handled losses and replacement valuations; (4) the number and type of trusts held by Wells Fargo; (5) Wells Fargo's internal trust administration procedures; and (6) proposals for a new master insurance policy under the insurance program. The Committee attached a list of 14 specific requests for information and 12 specific requests for documents. Finally, the Committee requested costs and attorney's fees for having to file the petition.

Wells Fargo responded that it did not use trust assets to insure itself against potential liability to beneficiaries, it did not profit from the insurance on trust properties, and the Committee's requests for documents and information "far exceed[ed] the scope of AS 13.36.080(a), which only entitles trust beneficiaries to relevant information about the administration of the trust in question."[2] Wells Fargo did not dispute that its fiduciary duty included keeping a trust beneficiary "reasonably informed of the trust and its administration . . . [and], upon reasonable request, [to] provide . . . relevant information about the assets of the trust and the particulars relating to the administration, "[3] but asserted that it had been responsive to the Committee's requests and had never refused to provide relevant information. Wells Fargo further maintained that "AS 13.36.080 does not sanction unrestricted access to all of the trustee's internal files, processes, policies and communications, especially where the trustee is responsible for insuring over 7, 000 separate properties." (Emphasis in original.) Finally, Wells Fargo contended that the Committee's petition was more like a request for pre-suit discovery, the Committee had not followed the proper procedures for pre-suit discovery outlined in Rule 27, and the Committee was not entitled to pre-suit discovery.

Wells Fargo offered to provide the Committee the master insurance policy, but only if the policy were redacted and subject to a protective order. Wells Fargo explained that redaction was necessary because it was not authorized to disclose information about the thousands of other trust properties insured under the policy, and that the protective order was necessary because it "has a proprietary interest in maintaining the confidentiality of the terms and conditions of coverage and Wells Fargo would potentially suffer a competitive disadvantage should the Master Insurance Policy be disclosed to competitors." Wells Fargo contended ...


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