In re:  Maria Giovanna Pieroni, Self Declaration of Trust Agreement, dated February 15, 1993.

In re:  Maria Giovanna Pieroni, Self Declaration of Trust Agreement, dated February 15, 1993. A05-508, Court of Appeals Unpublished, January 31, 2006.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2004).

 

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A05-508

 

 

In re:  Maria Giovanna Pieroni,

Self Declaration of Trust Agreement,

dated February 15, 1993.

 

 

Filed January 31, 2006

Affirmed in part and reversed in part Willis, Judge

 

Sherburne County District Court

File No. C9-03-1749

 

Rhonda J. Magnussen, Black, Moore, Bumgardner & Magnussen, Ltd., First National Financial Center, 812 Main Street, Suite 102, Elk River, MN  55330 (for appellant Anthony Pieroni)

 

Norris J. Skogerboe, Skogerboe Law Offices, P.L.L.C., Raintree Professional Center, 11937 Central Avenue Northeast, Blaine, MN  55434 (for respondent Ann Christensen, Trustee)

 

            Considered and decided by Lansing, Presiding Judge; Willis, Judge; and Hudson, Judge.

U N P U B L I S H E D   O P I N I O N

WILLIS, Judge

            This is an appeal from the district court's order approving respondent trustee's second amended final account for the trust of Maria Giovanna Pieroni and assessing attorney fees against appellant.  Because the district court did not abuse its discretion by approving the trust accounting, we affirm in part.  But because we conclude that the district court abused its discretion by assessing attorney fees against appellant, we reverse in part.

FACTS

            In February 1993, Maria Giovanna Pieroni executed a self-declaration-of-trust agreement.  At the time of her death in December 2001, the trust principal was approximately $660,000.  The terms of the trust agreement directed that upon Mrs. Pieroni's death, respondent Ann Christensen would become the trustee and would gather trust assets and distribute them equally to the trust's beneficiaries, who were Mrs. Pieroni's six children, including both appellant Anthony Pieroni ("Pieroni") and Christensen.  In April 2002, Christensen mailed to the trust's beneficiaries a proposed final account and distribution, which also listed the amount of the loan owed by each beneficiary to Mrs. Pieroni's estate.  All of the beneficiaries except Pieroni signed consents to the final account, and Christensen paid those beneficiaries their allocable portions of the trust funds, less the amounts of their outstanding loans.

            Pieroni, who lives in Illinois, sent Christensen, who lives in Minnesota, a letter stating that he did not owe the estate the $16,500 shown in Christensen's mailing.  Pieroni claimed that he paid this money to the beneficiaries' father in cash before the father died some years earlier.  Pieroni also requested documentation to support the final account.  According to Christensen, she provided Pieroni with the requested documentation in May 2002, but he continued both to dispute his alleged debt to the estate and to question the proposed final account.

            In July 2003, Pieroni filed a petition in Sherburne County, requesting that the district court (1) determine the nature and extent of his interest in the trust, (2) require Christensen to provide a trust accounting, and (3) subject the trust to continuing court supervision until the trust was dissolved.  In September 2003, at the end of a hearing on Pieroni's petition, the district court determined that the documentation of Pieroni's alleged debt was inadequate to establish that he owed $16,500 to the estate.  The district court agreed to subject the trust to the district court's ongoing supervision, and it scheduled a contested hearing on the final account for November 2003.  The district court directed the parties to attempt to resolve as many of the issues as they could and to present only "real controversies" at the contested hearing.  Subsequently, Christensen filed with the district court an amended final account, which included a newly discovered asset that she had disclosed to the district court at the September hearing and excluded Pieroni's $16,500 debt, and, later, she filed with the district court and mailed to all of the beneficiaries a second amended final account, which consolidated the previous two accounts. 

The contested hearing scheduled for November 2003 was continued, and in February 2004, Pieroni filed an objection to the second amended final account, in which he argued that Christensen's purchase of funeral flowers for Mrs. Pieroni with $175 in trust funds was inappropriate and that the claimed trustee fees and trust attorney fees were excessive and, therefore, should not be paid from the trust.  He requested that to the extent that such fees already had been paid with trust funds, Christensen should be required to reimburse the trust. 

For a variety of reasons, the contested hearing was repeatedly continued and was not held until December 2004.  At the contested hearing, the district court heard testimony and admitted evidence regarding the accuracy and reasonableness of the second amended final account.  In January 2005, the district court issued an order approving the second amended final account but disallowing the use of trust funds for the purchase of the funeral flowers and disallowing a portion of the claimed attorney fees as "unreasonable and excessive."  The district court ordered that the outstanding trustee fees in the amount of $2,490 be paid from the trust and that attorney fees in the amount of $10,887.50 be paid first from the trust and then by Pieroni to the extent that the trust funds were insufficient.  After Christensen reimbursed the trust for $175 and paid herself $2,490 for trustee fees, only $3,032.71 remained in the trust.  The district court subsequently entered a judgment against Pieroni in the amount of $7,854.79 for the remaining attorney fees. 

In February 2005, Pieroni moved for amendment of the January 2005 findings and judgment.  The district court denied Pieroni's motion and stated that its previous order for payment of attorney fees was a sanction under Minn. R. Civ. P. 26.07 for Pieroni's "unreasonable, repetitive and unnecessary discovery requests," which led to "unmeritorious" litigation involving the trust.  In addition, the district court concluded that "by exercise of its equitable powers, [it could] assess attorney fees against a beneficiary whose actions have resulted in a diminution of trust assets through baseless litigation."  This appeal follows.

D E C I S I O N

I.

Pieroni argues that the "evidence does not support the trial court's findings that [Christensen] … deserved compensation and payment of legal fees from the trust."  A district court has the discretion to award from a trust trustee fees and attorney fees related to the administration of the trust.  In re Atwood's Trust, 227 Minn. 495, 500-01, 35 N.W.2d 736, 740 (1949); see Minn. Stat. § 501B.71, subds. 1(4), 3(1) (2004).  We will not disturb a district court's decision regarding such an award of trustee fees or attorney fees absent an abuse of discretion.  In re Trust Created by Boss, 487 N.W.2d 256, 261-62 (Minn. App. 1992), review denied (Minn. Aug. 11, 1992). 

Pieroni argues that Christensen's trustee fees are excessive.  A trustee is allowed reasonable compensation for services that further the trust's interests.  In re Trusts of Dwan, 371 N.W.2d 641, 642 (Minn. App. 1985), review denied (Minn. Oct. 18, 1985).  Even when a district court "makes a finding of fraud, bad faith, or inexcusable neglect, it has the discretion to deny all fees, to allow reduced compensation, or to allow full compensation."  In re Trusteeship of Williams, 631 N.W.2d 398, 408 (Minn. App. 2001), review denied (Minn. Sept. 25, 2001).

Here, the district court found that Christensen's fees were for her services in administering the trust and that her claimed rate of $30 per hour was reasonable and was the usual and customary hourly compensation for a trustee in the Twin Cities area.  Because the district court found the $175 expenditure for funeral flowers to be an unreasonable expense, it ordered Christensen to reimburse that amount to the trust.  But the district court found that there was no evidence of "self-dealing, theft, overreaching, malfeasance or misconduct of any kind" in Christensen's administration of the trust.  The record supports the district court's findings.  See Rogers v. Moore, 603 N.W.2d 650, 656 (Minn. 1999) (stating that an appellate court will not disturb a district court's findings if there is reasonable evidence to support them).  Therefore, we conclude that the district court did not abuse its discretion by awarding Christensen the amount that she requested for trustee fees.

Pieroni next argues that Christensen's claim for trust attorney fees is excessive.  Reasonable attorney fees that are incurred by a trustee in good faith, including those incurred in defending against a beneficiary's challenge to the trust's administration, may be charged to the trust.  In re Trust Created by Hill, 499 N.W.2d 475, 494 (Minn. App. 1993), review denied (Minn. July 15, 1993).  When determining the amount of attorney fees that is reasonable, the district court may take into consideration "its knowledge of the value of legal services along with its knowledge of the character and extent of those rendered."  Butler v. Butler, 183 Minn. 218, 219-20, 235 N.W. 918, 918 (1931).  The district court found that most of the attorney fees that remained unpaid were generated to defend against Pieroni's objections to the second amended final account, all of which objections the district court found to be meritless, except for the $175 charge for funeral flowers.  After reviewing the detailed billing statements of Christensen's attorneys, the district court disallowed $4,328.50 of the attorney fees as "unreasonable and excessive," of which $3,980 was for the "preparation for a request that the court reconsider its prior ruling" that Pieroni did not owe the estate $16,500.  The district court did not abuse its discretion by concluding that the remaining attorney fees of $10,887.50 incurred by Christensen as trustee were reasonable and by ordering payment of the attorney fees from the trust.

Pieroni also argues that because Christensen had the burden of proving her second amended final account, the district court erred by placing the burden on Pieroni to prove the unreasonableness of Christensen's claimed trustee fees and attorney fees.  In an accounting action involving a trust, the trustee has the duty to keep accurate accounts and bears the burden of proving the accounts.  Plunkett v. Lampert, 231 Minn. 484, 490, 43 N.W.2d 489, 493 (1950).  Here, the district court found that the documents supporting the second amended final account were provided to Pieroni and concluded that Christensen "proved the accuracy and reasonableness of her account to the satisfaction of the Court as required by law."  The district court also concluded that Pieroni "failed to show by a preponderance of the evidence … that by allowing and paying out any [of] the challenged items including the trustee's fees and the attorney fees occasioned in the representation of the trustee, the trustee violated the Trustee Powers Act or the standards of reasonableness."

When a beneficiary claims that a trustee has mismanaged a trust, the objecting beneficiary has the burden of proving by a preponderance of the evidence that the trustee's actions were "improvident or the result of a failure to exercise reasonable discretion."  In re Trust of Ward, 360 N.W.2d 650, 653 (Minn. App. 1985), review denied (Minn. Mar. 29, 1985).  Pieroni argues that Ward does not apply because it concerns a trustee's decision to reinvest trust assets.  But Christensen had a duty to manage the trust assets prudently.  See Minn. Stat. § 501B.151, subd. 1 (2004).  To the extent that Pieroni argues that Christensen mismanaged the trust by paying excessive trustee fees and attorney fees from the trust, we conclude that the district court did not err by placing the burden on Pieroni to prove that payment of these fees from the trust constituted mismanagement.

Because the record supports the district court's conclusion that the allowed amounts of Christensen's trustee fees and attorney fees were reasonable and were incurred in the administration of the trust or in defending the trust against Pieroni's "unmeritorious objections" to the second amended final account, we conclude that the district court did not abuse its discretion by ordering the allowed amounts of trustee fees and attorney fees to be paid from the trust.

II.

            Pieroni finally argues that the district court abused its discretion by sanctioning Pieroni for discovery abuses under Minn. R. Civ. P. 26.07 by requiring him to pay the attorney fees incurred by Christensen as trustee that remained unpaid after trust funds had been depleted.  This court will not reverse a district court's decision regarding sanctions absent an abuse of discretion.  In re Trust Created by Hill, 499 N.W.2d at 495. 

Rule 26.07 of the Minnesota Rules of Civil Procedure provides that every request for discovery must be signed by the party or the party's attorney of record.  This signature certifies that the discovery request is "not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation" and is "not unreasonable or unduly burdensome or expensive, given the needs of the case."  Id.  If a party or attorney makes a certification that violates this rule, the district court "shall impose … an appropriate sanction, which may include an order to pay the amount of the reasonable expenses incurred because of the violation, including reasonable attorney fees."  Id. 

Here, the district court found that the attorney fees incurred after the September 2003 hearing were the result principally, if not solely, of Christensen "having to respond to the unreasonable, repetitive and unnecessary discovery requests submitted by [Pieroni] to support objections to the Final Account, or to attend hearings brought about by these discovery requests."  But we conclude that the discovery to which the requirements of rule 26.07 apply is that authorized by Minn. R. Civ. P. 26.01, which includes the production of documents or things.  The requirements for a request for the production of documents under the Minnesota Rules of Civil Procedure are, in turn, described in Minn. R. Civ. P. 34.  We find nothing in the record that shows that Pieroni conducted any rule 26 discovery.  The record suggests that the only "discovery requests" that Pieroni made were oral requests by his counsel for documents and a letter from his counsel to Christensen's counsel requesting copies of documents.  We conclude that counsel's signature on a letter requesting informal discovery is not a "certification" as contemplated by rule 26.07 and that, therefore, the district court abused its discretion by sanctioning Pieroni under rule 26.07.

Alternatively, the district court concluded that because it "sits as a court of equity" in a "trust accounting approval hearing," it could "assess attorney fees against a beneficiary whose actions have resulted in a diminution of trust assets through baseless litigation."  Here, the district court concluded that "[t]o insist that the Trustee's additional attorney fees be paid out of the trust estate in this case … would reward [Pieroni] for his misconduct and would be inequitable, because there is insufficient trust res remaining from which to pay the additional fees."  It is unclear from the record why Christensen distributed most of the trust principal before all objections to the final accounting were resolved in the district court.  And although reasonable attorney fees incurred by a trustee may be charged to the trust, "Minnesota follows the ‘American rule' concerning the award of attorney fees" against an opposing party, and "as the Minnesota Supreme Court … noted, it is a ‘fundamental principle of law deeply ingrained in our common law jurisprudence that each party bears his own attorney fees in the absence of a statutory or contractual exception.'"  In re Trusteeship of Williams, 631 N.W.2d at 409 (quoting Ly v. Nystrom, 615 N.W.2d 302, 314 (Minn. 2000)).  This court will not reverse a district court's award of attorney fees absent an abuse of discretion.  Id. 

Here, the district court did not rely on a statutory or contractual provision to support its assessment of attorney fees against Pieroni.  And we find no Minnesota caselaw requiring an unsuccessful objecting beneficiary to pay personally the attorney fees incurred by a trustee in responding to the objection.  The district court relies on Andrist v. First Trust Co. of St. Paul, 194 Minn. 209, 260 N.W. 229 (1935), for support.  But in Andrist, "[t]he sole question presented on appeal [was] whether the trustee [was] entitled to have allowed and charged to the trust estate attorneys' fees and expenses incurred by the trustee in the defense of an action brought by beneficiaries."  194 Minn. at 210, 260 N.W. at 229 (emphasis added).  The supreme court in Andrist authorized the trustee's attorney fees to be charged to the trust estate; Andrist does not support the district court's assessment of attorney fees against Pieroni personally.  See id. at 209-15, 260 N.W. at 229-31.  Therefore, we conclude the district court abused its discretion by assessing attorney fees against Pieroni as a form of equitable relief.  If Minnesota is to adopt for trust cases an exception to the American rule, "a clear expression of [the] change should be made by the supreme court or the legislature; it is not [this court's] role to do so."  In re Trusteeship of Williams, 631 N.W.2d at 410.

We reverse the district court's assessment of attorney fees against Pieroni.

Affirmed in part and reversed in part.