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Lee v. Sheldon

Supreme Court of Alaska

August 31, 2018

HOLLY SHELDON LEE and SHELDON AIR SERVICE, LLC, Appellants and Cross-Appellees,
ROBERT DONALD SHELDON, individually and as Trustee of the Roberta Reeve Sheldon 2014 Grantor Controlled Revocable Trust, Appellee and Cross-Appellant.

          Appeal from the Superior Court No. 3 AN- 15-05117 CI of the State of Alaska, Third Judicial District, Anchorage, Pamela Scott Washington, Judge pro tem, and William F. Morse, Judge.

          Robert John, Law Office of Robert John, Fairbanks, for Appellants and Cross-Appellees.

          Kevin G. Clarkson and Matthew C. Clarkson, Brena, Bell & Clarkson, P.C., Anchorage, for Appellee and Cross-Appellant.

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


          BOLGER, Justice.


         Following mediation, a trust beneficiary and a trustee signed a document purporting to settle bitter family litigation and referring future disputes to the mediator for resolution. The beneficiary subsequently denied that she had settled and asked the mediator to resolve the issue, and the mediator concluded that the parties had reached a binding settlement. The beneficiary tried to resurrect this issue in the superior court, but the court concluded that the mediator's decision was within the scope of the authority conferred by the parties. We conclude that the superior court did not err by confirming the mediator's decision. We also conclude that the court did not err by denying the beneficiary's petition to review the trustee's compensation, or by awarding Alaska Civil Rule 82 attorney's fees to the trustee. We therefore affirm the superior court's judgment.


         A. Creation Of Mountain House, LLC And Roberta Sheldon's Trust

         In the 1960s, famed Alaska bush pilot Don Sheldon built a cabin-known as the Mountain House - at the head of Ruth Glacier in Mount McKinley National Park (now Denali National Park). Following Don's death in 1975, his wife Roberta Sheldon assumed control of the Mountain House. In 2006 Roberta created Mountain House, LLC to own and manage the cabin.

         In early 2014 Roberta conveyed Mountain House, LLC and other assets into a newly created revocable trust. The trust names the Sheldons' three children Holly, Robert, and Kate[1] as beneficiaries and designates Robert as successor trustee. It establishes procedures for distribution of real and personal property among the beneficiaries. It also includes a penalty clause designed to dissuade the beneficiaries from contesting the trust's terms. The clause provides that persons who contest the trust or its provisions "shall not benefit in any way under this Trust... and shall not receive any distribution whatsoever."

         Following Roberta's death in June 2014, Robert became trustee. Holly requested an accounting of trust assets in September, and Robert provided a list of assets the following month. In December, Robert-acting in his capacity as trustee-drafted an operating agreement appointing himself as manager of Mountain House, LLC. The agreement provided that membership shares in the LLC would be distributed equally among Holly, Robert, and Kate "[a]t such time as the Trustee deems suitable for both this LLC and the Trust."

         B. Initial Litigation

         Over the following months, disagreements arose between Holly and Robert concerning his administration of the trust. Holly claimed that Robert had failed to adequately respond to her request for an accounting and that he also had failed to distribute trust assets that she had requested and that he had stated he would provide.

         In February 2015 Holly and her company, Sheldon Air Service, LLC (SAS), [2] filed a lawsuit against Robert individually and in his capacity as trustee. Holly argued that Robert had "unlawfully detained . . . Trust assets without regard to the beneficiaries' distribution rights" and that he had breached his fiduciary duties "[b]y refusing to timely distribute Mountain House, LLC to the beneficiaries."[3] She moved for summary judgment, asking the superior court to rule that Robert was required "to immediately distribute the Mountain House, LLC, to its three, equal owners." Robert brought a cross-motion for summary judgment, arguing that Holly had "no right to distribution, immediate or otherwise, of an in-kind membership in the Mountain House, LLC" and that Holly's complaint and litigation violated the trust's penalty clause.

         In November 2015 the superior court ruled that under the terms of the trust, Robert was entitled to determine which children would receive membership interests in Mountain House, LLC. It also found that Robert was not obligated to immediately distribute Mountain House, LLC. However, the court rejected Robert's argument that Holly's litigation had triggered the trust's penalty clause. Noting that attempts to enforce rights or "secure an interpretation of [an] instrument" generally do not trigger penalty clauses, the court held that Holly had "advanced a reasonable interpretation of the trust in light of an ambiguity." Though the court "[found] her interpretation unsupported," it concluded that Holly had merely sought to "clarify and enforce the trust," not void it, nullify it, or set it aside.

         C. Mediation And Subsequent Disputes

         Robert and Holly participated in mediation conducted by retired superior court judge Eric Sanders in December 2015. Following the mediation, the parties signed a document titled "Mediator's Proposal" (Proposal). Under the terms of the Proposal, Holly would pay $25, 000 into Mountain House, LLC. She would receive a one-third, non-voting interest in the LLC as well as various personal effects from the trust's corpus, and she would be granted periodic access to the Mountain House. The Proposal stated that the parties had "reached an agreement to the settlement of all claims of all parties" and would "execute a Settlement Agreement and Mutual Release of All Claims between the parties as a result of the full and complete settlement reached." Lastly, paragraph 11 of the Proposal provided that "[a]ny disputes concerning [the Proposal's] terms or the execution of these terms and the Settlement and Release shall be resolved finally and completely by Eric Sanders."

         Per the Proposal's terms, Robert sent Holly a draft settlement agreement to review. In response Holly sent a "Response Regarding Term Sheet" (Response) to Sanders arguing that the Proposal had not settled her claims against Robert. She argued that at the time she signed the Proposal, she "believed [the] document was merely a proposal... and that her signature would not result in a binding agreement." She also claimed that she "lacked sufficient information concerning the assets and liabilities of the Trust" to make an informed decision during the mediation and that Robert's failure to provide this information "vitiate[d] [her] consent" to any settlement. Lastly, she argued that even if she and Robert had reached a settlement, SAS had separate claims that had not yet been resolved. Holly "requested that the mediation be reconvened to address all disputes." She also indicated that her Response was "submitted within the context of mediation" and that she "reserve[d] all rights as to whether the issues raised herein are subject to arbitration."

         In response Robert submitted an "Arbitration Memorandum Regarding Settlement Existence, Scope, Noncompliance, and Enforcement" (Arbitration Memorandum) to both Holly and Sanders. Robert argued that the parties had agreed to a settlement when they signed the Proposal, that Holly had all the information she needed to make an informed decision regarding settlement, and that SAS's claims against Robert, the trust, and Mountain House, LLC had been resolved. Robert attached an accounting, which disclosed payments made for repair and renovation of the Mountain House and legal fees related to the ongoing litigation.

         After both documents had been submitted to Sanders, the parties exchanged a series of emails discussing the nature of their dispute. Robert sought to clarify that "this is an arbitration at this point" and that the parties were no longer "mediating at this time." Holly stated that she did "not agree with Robert's position but would like to see all issues resolved to avoid further litigation expense" and that the parties would "have to agree to disagree on this point." In response to a question about subpoenas, Robert stated that he was "under the impression that [the parties were] waiting for ... Sanders to issue a decision as an arbitrator under paragraph 11 of the Mediator's Proposal." Holly replied that she wanted to take Robert's deposition, stating, "I do not have any objection to rescheduling the depo until after [Sanders] has reviewed the matter." In response Robert again noted, "We are awaiting ... [Sanders's] decision regarding the existence and scope of the settlement that was reached at the December 1, 2015, mediation." And Holly again confirmed that she was anticipating that Sanders would issue a decision on the issues she had raised: "[P]lease confirm whether Robert is willing to agree to reschedule the deposition until after [Sanders] has issued his decision."

         Sanders issued a decision in February 2016. He stated that the parties had identified disputes to be resolved "[p]ursuant to paragraph 11" of the Proposal. He concluded that Holly had settled her claims against Robert when she had executed the Proposal and that she "must comply with [its] terms and conditions." He further concluded that the Proposal had settled SAS's claims against Robert but not its claims against Mountain House, LLC. Sanders directed the parties to "execute a mutual release which is consistent with this decision."

         D. Motions To Continue And Enforce

         In March 2016 Holly filed a motion to continue the trial scheduled in the superior court. She again contended that the December 2015 mediation had not resulted in a binding settlement; in the alternative, she argued that fraud and fiduciary misconduct on Robert's part vitiated her consent to any settlement that may have occurred. Holly denied that the parties had already submitted these issues to arbitration, characterizing her earlier Response as a request for "assistance" presented to Sanders "in the context of the mediation." She sought a continuance to investigate "facts surrounding the Trustee's various breaches of fiduciary duty." In response Robert filed a motion to enforce, arguing that the parties had already submitted these issues to arbitration and that Sanders's decision directing Holly to comply with the terms of the Proposal constituted a binding arbitration award. In the alternative, he argued that the court should enforce the terms of the Proposal even if it concluded that Sanders's decision was not the product of arbitration. Robert also argued that Holly had violated the trust's penalty clause by filing her motion to continue.

         The superior court issued an order denying Holly's motion to continue and granting in part Robert's motion to enforce. The court explained that Holly had asked Sanders to determine whether the Proposal constituted a binding settlement agreement and that she now sought to overturn both Sanders's arbitration decision and the underlying settlement agreement. The court concluded that the Proposal was "not a proposal" but rather a settlement agreement; the court reasoned that "given the wording of the document, the presence of Holly's attorney, and her signature," it was a "near certainty" that Holly understood she was settling her claims. The court further concluded that Holly's reliance on Robert's diligence in reporting trust costs was not "justifiable": Holly "knew the trust had costs, knew that she did not know the precise value of the costs, and knew Robert had a duty to disclose the costs but had not done so." Therefore, Holly's fraud claim could not vitiate her consent to the terms of the Proposal - including paragraph 11, the provision providing for arbitration of subsequent disputes.

         In light of these conclusions, the court denied Holly's motion to continue and granted Robert's motion to enforce "in so far as it [sought] enforcement of the arbitration decision." The court noted, however, that "the remedy sought in Holly's motion" was "a new trial date and further discovery" rather than nullification of any trust provisions. Accordingly, the court denied Robert's motion as it related to the penalty clause. Having concluded that the parties had settled all claims, the court entered final judgment.

         E. Post-Judgment Motions And ...

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