GAYLE BJORN-ROLI, PER ERIK BJORN-ROLI, MAIKEN ERICKSON, and KJERSTI WALKER, Appellants,
PATRICIA MULLIGAN, Appellee.
from the Superior Court No. 3AN-14-04427 CI of the State of
Alaska, Third Judicial District, Anchorage, Eric A. Aarseth,
von Gemmingen, Law Offices of Brett von Gemmingen, LLC,
Anchorage, for Appellants.
M. Gorski, Hughes White Colbo Wilcox & Tervooren, LLC,
Anchorage, for Appellee.
Before: Bolger, Chief Justice, Winfree, Stowers, Maassen, and
sisters were beneficiaries of their late parents' trusts.
One sister was trustee of the trusts and president of the
family corporation. The other sister, a shareholder of the
family corporation, disputed proposed trust distributions and
various aspects of the family corporation; she and her
children sued the trustee for breach of fiduciary duty in
both trustee and corporate capacities. The litigation
resulted in two appeals, which we consolidated for oral
argument and decision.
largely affirm the superior court's decisions because
they were discretionary and, under the applicable standard of
review, we cannot say they were unreasonable given the
court's factual findings; but we remand for
reconsideration of certain trust property valuations, which
may require minor distribution adjustments.
FACTS AND PROCEEDINGS
The Rude family and estate plan
O. (known as Olin) and Edna L. Rude had two daughters, Gayle
Bjorn-Roli and Patricia Mulligan. Gayle has three children:
Per Erik Bjorn-Roli, Maiken Erickson, and Kjersti Walker.
Patricia has two children: Patrick Mulligan and Erin Barber.
and Edna executed declarations of trust in 2000 (the KOR and
ELR trusts). The trusts were nearly identical, providing that
upon the first spouse's death, that spouse's assets
would be split into new trusts: a marital trust for the
lifetime benefit of the surviving spouse and a family trust.
Upon the second spouse's death, the trusts' assets
would be reduced by specific gifts and the remaining assets
distributed evenly between individual trusts for Gayle and
and ELR trusts designated Olin and Edna as successor trustees
for the other's trust, and Gayle and Patricia as
successor trustees if the trustee predeceased the
grantor-spouse or became incapacitated. Gayle and Patricia
were to be successor trustees "for only as long as it
takes to liquidate trust assets and divide and distribute the
trust estate"; Gayle and Patricia each would be sole
trustee of their individual trusts after distribution of the
family trusts. The KOR and ELR trusts also instructed that
"all non-liquid trust assets be sold as soon as
reasonably possible after Grantor's death" and that
"there be no common ownership of assets between the
trusts created for" Gayle and Patricia.
and Edna amended their trusts a few days later. The
amendments added property near Lake Louise as a specific gift
to Patricia and allowed her to elect to take property at
Bootlegger's Cove as part of her trust share. The
amendments also made Patricia sole successor trustee of the
KOR and ELR trusts upon the surviving spouse's death. The
amendments further removed Gayle as trustee of her individual
trust and substituted a bank. The amendments lastly made a
trustee removable "only ... in accordance with the
provisions of the laws of the State of Alaska."
amended the KOR trust a final time in 2007, a few months
after Edna's death. The amendment made Patricia
co-trustee of the KOR trust with Olin during his lifetime.
The amendment also removed the provision instructing that all
assets be liquidated, instead granting Patricia "full
and sole authority and power to determine what assets of the
trust are to be retained and what assets are to be
and Edna were among Rumac, Inc.' s original shareholders.
Rumac's principal asset is an ownership interest in land
beneath an Anchorage hotel. The hotel leases the land and
makes monthly payments to Rumac. Patricia was secretary and
treasurer before Olin died; she then became president and
Gayle became secretary.
Olin's death some Rumac shares were distributed evenly
between Patricia's and Gayle's families. Patricia
also held some shares in trust for her and Gayle in the KOR
and ELR trusts. Section 9.03 of the KOR and ELR trusts gave
Patricia sole voting power over Rumac stock held in any trust
created by Olin or Edna. This provision apparently was
intended to prevent a voting deadlock between Gayle's and
Patricia's families; a conflict between this provision
and the KOR and ELR trusts' appointments of the bank as
the sole trustee of Gayle's individual trust would become
Patricia's first proposed distribution
Edna's and Olin's deaths, Patricia became sole
trustee of the KOR and ELR trusts in 2010, responsible for
distributing the remaining trust assets into two new trusts
for her and Gayle. In March 2011 Patricia proposed
distributing the trust assets - cash, investments, real
property, notes receivable, and equal shares of Rumac stock.
Each individual trust would receive nearly $1.7 million in
addition to the money already distributed. Gayle would
receive an investment property at Stuckagain Heights,
half-owned by the Rudes, with her share valued at $250, 000.
Patricia would receive the Bootlegger's Cove property, to
which she was given election rights in the KOR and ELR
trusts, valued at $625, 000. Patricia also would be assigned
two creditor claims against her daughter Erin arising from
loans Olin had made: the "Barber Note," a deed of
trust note with a balance of about $170, 000, and the
"Barber car loan," a vehicle loan with a balance of
objected to this proposed distribution. She contested the
real estate valuations and suggested appraising the
properties. Patricia responded that Gayle could obtain
appraisals at her own expense but that Patricia preferred
using real estate broker opinions of value because of
appraisers' poor performance during the latest real
estate bubble. Patricia refused to consider any appraisals
not supported by historical sales figures from the previous
two years. Patricia later rejected Gayle's suggestion
that they sell the Stuckagain Heights property and split the
proceeds, noting that keeping the trusts active until sale
would incur unnecessary expense and be contrary to the
Rudes' estate plan.
an appraiser Patricia hired said that an interested buyer
would pay $95, 000 for the remaining value of the Barber
Note. Gayle obtained appraisals on the real property, valuing
the Bootlegger's Cove property at $675, 000 and the
Stuckagain Heights property at $ 170, 000. Patricia
reiterated that appraisals were unreliable and that relying
on them instead of real estate brokers would be a breach of
her fiduciary duty. She kept the Bootlegger's Cove
property at $625, 000 and reduced the value of the Stuckagain
Heights property to $225, 000.
December Gayle provided notice that she wanted Patricia to
liquidate the Stuckagain Heights property and distribute the
remaining assets immediately. Gayle stated that she thought
distributing the property without a liquidation cost
adjustment and at a value above its appraised value would be
a breach of Patricia's fiduciary duties. Gayle did not
want a distribution until the disagreement was settled.
accepted Gayle's terms "strictly for purposes of
resolving this dispute" and to "bring this unhappy
situation to an end and hopefully salvage some type of
relationship with Gayle" and Gayle's children.
Patricia explained that she would liquidate the non-liquid
ELR trust assets, add liquidation costs to the properties,
and adopt Gayle's appraisal values, changing the value of
the Stuckagain Heights property from $225, 000 to $170, 000
and the Bootlegger's Cove property from $625, 000 to
Patricia's second proposed distribution and stock
January 2012 Patricia sent Gayle a second proposed
distribution. Patricia interpreted Gayle's demand to
liquidate the Stuckagain Heights property as a demand to
liquidate all illiquid ELR trust assets, including the Rumac
stock Gayle would receive. Patricia's proposed
distribution included: redeeming the Rumac stock in
Gayle's ELR trust for cash; adding to Gayle's trust a
$35, 000 promissory note from Gayle's daughter Maiken to
Olin called the "Erickson Note"; combining the
Barber Note and Barber car loan values totaling $96, 900;
changing the Bootlegger's Cove and Stuckagain Heights
property values to their appraised values; adding the
properties' liquidation costs; and moving both properties
into Patricia's trust. The changes would leave
Gayle's trust with no relevant illiquid assets except for
the Rumac stock from the KOR trust and the Erickson Note.
Patricia's equalization payment to Gayle would increase
from over $82, 000 to over $ 141, 000. Patricia also claimed
about $70, 000 from the trusts as trustee fees.
days later Patricia, as Rumac president, signed a
"Memorandum of Action" announcing that she was
redeeming half of the ELR trust's Rumac stock for $275
per share, a price based on a 2007 stock redemption agreement
between Rumac shareholders. The Memorandum did not
acknowledge a 2011 stock redemption agreement valuing Rumac
stock at $3 50 per share. Patricia then canceled the ELR
trust's stock certificate for the total shares and
prepared a new certificate for the remaining half. Patricia
deleted Gayle's name and signature line from the
certificate and signed only Patricia's own.
days after Patricia redeemed Gayle's ELR trust stock,
Gayle objected to Patricia redeeming any Rumac stock. The
parties began protracted negotiations.
Patricia's third proposed distribution
rescinded the stock redemption in January 2014. Gayle and her
children filed suit against Patricia that same day, but
Patricia was not made aware of the suit until October.
Meanwhile Patricia sent Gayle a third proposed distribution
in February. The new proposed distribution reflected a
rescission of the stock redemption so the sisters would have
equal Rumac shares. It also included the Erickson and Barber
Notes, retained liquidation costs for the real estate, and
restyled previous distributions as "cash advances."
Patricia subtracted Gayle's "cash advance" from
the new equalization payment, reducing the equalization
payment by almost $100, 000.
Gayle's first amended complaint; Patricia's
and her children filed their amended and operative complaint
in October. Gayle alleged that Patricia breached her
fiduciary duties as trustee and as a director and officer of
Rumac, that she committed fraud, and that she could not
validly exercise voting rights over Gayle's stock. Gayle
sought the following relief: (1) removing Patricia as a
director and officer of Rumac; (2) removing Patricia as
trustee of the KOR and ELR trusts; (3) removing
Patricia's voting power over Gayle's Rumac stock; and
(4) compensatory and punitive damages.
denied all claims. She counterclaimed for judicial approval
of her trust administration and proposed final distribution.
Patricia's proposed final distribution retained the
existing valuations for the Erickson and Barber Notes but no
longer included liquidation costs for the real estate. The
final distribution thus would result in Gayle receiving cash,
an equalization payment, and the Erickson Note. Patricia
would receive both real properties, the Barber Note, and the
Barber car loan. The sisters would retain equal shares of
Rumac stock. In total each would receive over $1.5 million,
including the stock value.
Gayle's motion for summary judgment; the superior
court's reformation of the Rude trusts
trial Gayle and Patricia cross-moved for summary judgment on
the dispute over Gayle's stock-voting rights. Gayle
argued that Section 9.03 of the KOR and ELR trusts - giving
Patricia voting rights in any Rumac stock in Gayle's
trust - was illegal. Patricia argued that the section's
language and intent were clear and unambiguous and that there
were a number of ways the trusts could be reformed to
correspond to the Rudes' intent.
superior court denied Gayle's motion and granted
Patricia's in part. The court found that Section 9.03 of
the KOR and ELR trusts established that the Rudes intended
Patricia to have voting power over Rumac stock in Gayle's
trust during Patricia's lifetime. But because Patricia
was not a trustee of Gayle's trust, she lacked power to
vote Gayle's Rumac stock. And Patricia could not create a
separate trust solely for the Rumac stock without violating
the Rumac stock redemption agreement. The court therefore
reformed the trusts under AS 13.36.350(a) to make Patricia
co-trustee of Gayle's resulting trust, with the sole duty
of voting any Rumac stock held in that trust. All other
duties remained with the bank.
case proceeded to a bench trial on Gayle's three
Bench trial; the superior court's rejection ...