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W. Barber v. Fanni Barber Soine Trust (8/14/92), 837 P 2d 714
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NOTICE: This opinion is subject to
formal correction before publication in the
Pacific Reporter. Readers are requested to
bring typographical or other formal errors to
the attention of the Clerk of the Appellate
Courts, 303 K Street, Anchorage, Alaska
99501, in order that corrections may be made
prior to permanent publication.
THE SUPREME COURT OF THE STATE OF ALASKA
WILLIAM LEE BARBER, a )
contingent beneficiary, ) Supreme Court No. S-4322
)
Appellant, )
)
v. ) Superior Court No.
) 3AN-87-10650 CIVIL
WILLIAM F. BARBER SR., )
EDWARD G. BARBER JR., )
individually, and the )
FANNI BARBER SOINE TRUST, ) O P I N I O N
Edward G. Barber, Trustee, )
)
Appellees. )
______________________________) [Op. No. 3878, August 14, 1992]
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Anchorage,
Karen Hunt, Judge.
Appearances: Richard G. Haggart,
Maloney & Haggart, Anchorage, for Appellant.
Gary Foster, Call, Barrett & Burbank,
Fairbanks, for Appellees.
Before: Rabinowitz, Chief Justice,
Burke, Matthews, Compton, and Moore,
Justices.
RABINOWITZ, Chief Justice.
INTRODUCTION
William Lee Barber, a contingent beneficiary of the
Fanni Barber Soine Trust, challenges the superior court's
approval of a settlement agreement which resulted in the
termination of the trust over his objection.
FACTS AND PROCEEDINGS
Fanni Barber Soine created a family trust to benefit
her two sons, Edward G. Barber Sr. and William F. Barber Sr., and
their wives and children, on January 2, 1956. A second document,
entitled "Clarification of Intent of Creator of Intervivos Trust"
was executed in June 1967.
The trust instrument named Edward Sr. as the trustee
and indicated that upon his death his wife was to succeed him as
trustee. Upon his wife's death, trustee powers would pass in
turn to their three sons, Edward Jr., Hugh, and Richard.
Pursuant to an agreement entered by Edward Sr. and William Sr. in
1968, the trust income would go to Fanni Soine during her
lifetime. The trust instrument provided that upon Soine's death
(which occurred in 1975) the trust income, minus expenses and
trustee's fees of 20% of the trust income after expenses, was to
be divided between Edward Sr. and William Sr. In the event that
either beneficiary died, his share was to be paid to his wife and
after her death, to his surviving children.
Edward Sr. served as trustee from the trust's creation
in 1956 until his resignation in December 1979. He was succeeded
as trustee by his wife Janet. Janet resigned as trustee on July
8, 1982, two days after Edward Sr.'s death, and was succeeded by
Edward Jr. Janet died in 1985. Edward Jr. continued as trustee
until he was removed by order of the superior court on May 24,
1990.
In 1987, William Sr. brought a suit against the Trust
and his nephew Edward Jr., individually and as trustee, alleging
various breaches by Edward Jr. of his fiduciary duties. After
trial the superior court found, inter alia, that Edward Jr.
breached his duty of care and misused trust funds and that "a non-
family institutional Trustee must be appointed." The superior
court then appointed Security Pacific Bank (Bank) as the
successor trustee, effective August 7, 1990.
In the fall of 1990, the Bank sought the superior
court's approval to sell the major real property asset in the
trust corpus to Nye Frontier Toyota. Counsel for the Bank
explained "in view of the unsettled nature of the estate, we're
seeking court approval for the trustee's exercise of discretion
. . . [T]he question before the court is [whether] the trustee's
exercise of discretion [is] reasonable."
At the October 2, 1990 hearing, Hugh and Richard, as
designated successor trustees under the trust instrument and bene
ficiaries under the trust, sought to intervene in the original
suit, that resulted in the removal of Edward Jr. as trustee, to
object to the appointment of the Bank as trustee. They also
objected to the sale of property. William Sr., as party to the
original action naming the Bank as trustee objected to the inter
vention of Hugh and Richard as untimely. The superior court
denied the motions to intervene.
Interested parties began to negotiate a settlement
concerning the sale of trust real property. Income beneficiaries
William Sr., Edward Jr., Richard, and Hugh, were all present and
represented by counsel at the negotiations, as was the Bank.
Attorney Peter Ginder was present at the negotiations and
purported to represent the interests of all non-income
beneficiaries.1 On October 8, 1990, the superior court held a
hearing concerning the positions of each of the parties on the
settlement with Judge J. Justin Ripley acting as the settlement
judge. Appellant William Lee Barber (William Lee), son of
William Sr. and a non-income beneficiary of the trust, was not
present but was within the class whose interests attorney Ginder
purported to represent. The parties and Ginder all agreed to the
settlement. At the October 8 hearing, attorney Ginder indicated
to the superior court that he found that the "proposed settlement
as it comes together is fair and equitable to all concerned,
including the non-income beneficiaries." At this hearing, the
superior court approved an order allowing sale of the principal
asset of the trust property. A final hearing was scheduled for
October 24, 1990 for the purpose of placing the final settlement
stipulation on the record.
Before the final hearing, William Lee contacted
attorney Ginder and indicated his objection to the settlement.
At the October 29 hearing, attorney Ginder acting on behalf of
William Lee, withdrew his approval of the settlement agreement.
The other parties objected to attorney Ginder's withdrawal of his
approval because actions had already been taken in reliance upon
the settlement agreement, including the sale of the principal
asset in the trust and distribution of trust funds. Despite
Ginder's objections, the superior court approved the settlement
stating,
It is in the best interest of all
vested and/or contingent beneficiaries born
or unborn to settle this case and to
distribute the corpus of this trust. It is
contrary to the basic tenants [sic] of
fairness and justice to permit an alleged
remainderman or an alleged contingency
beneficiary to involve all of the vested and
the known contingent beneficiaries in his
paternity dispute with one of the vested
beneficiaries.
In this case the major asset of
this trust has been sold by order of the
Court, which is separate from this settlement
agreement. The assets that are remaining and
even the cash or the value of the sold asset
are finite. And, therefore, the only foresee
able consequence of this Court not approving
this settlement based upon the claim of the -
- of Mr. William Lee Barber or an individual
who identifies himself to this Court as such
through Counsel, is that it would further
decrease the corpus of the trust for all of
the beneficiaries, and it would increase the
costs and the fees to be charged against the
trust because it would involve the trust
itself in the issue of heir status, if any,
of what is before this Court today, merely an
alleged contingent beneficiary. And there
fore, the Court declines to grant the objec
tion as stated by Mr. Ginder and to deny
approval of the settlement on those grounds.
Subsequently, the superior court approved the
settlement and the attorneys for the parties, with the exception
of Ginder, signed the settlement agreement. William Lee now
appeals from the superior court's approval of the settlement.2
William Lee argues that the superior court erred in
approving the settlement stipulation over his objection founded
on lack of notice, in finding that his interests had been
represented by attorney Peter Ginder, and in concluding that the
settlement was in the best interest of the beneficiaries.
DID THE SUPERIOR COURT ERR IN OVERRULING WILLIAM LEE'S OBJECTION
TO THE OCTOBER 29, 1990, SETTLEMENT STIPULATION?
William Lee argues that the superior court's approval
of the stipulation for settlement deprived him of property
without due process of law and violated basic standards of
fairness. William Lee further argues that he was stripped of his
contingent beneficial interest in the trust without proper notice
and opportunity to be heard. Specifically, he asserts that he
was not notified of the appointment of attorney Peter Ginder to
represent his interests or of the settlement proceedings of
October 8, 1990. He further claims that when he learned of
attorney Ginder's approval of the settlement in his behalf he
requested that attorney Ginder withdraw his approval.3
William Sr. argues that the settlement was in the best
interests of all parties, that attorney Ginder represented
William Lee, and that attorney Ginder recognized the necessity of
stipulating to the settlement to save trust assets. He also
asserts that attorney Ginder approved the settlement on behalf of
William Lee and that the other parties relied on his approval and
acted in reliance upon it. Therefore, William Sr. contends,
"[t]his Court could hardly be presented with a more compelling
occasion for the enforcement of an on-the-record, stipulated
settlement."4
Resolution of this issue centers on the answers to two
questions: (1) Did William Lee have an interest deserving of
constitutional due process protection? and (2) Was William Lee
afforded notice and an opportunity to be heard prior to the
superior court's approval of the October 29, 1990 settlement
stipulation?
We answer the first question in the affirmative.
William Lee's interest as a contingent beneficiary was
sufficiently definite to warrant constitutional protection.5 As
to the second question, review of the record shows that William
Lee was not given notice and an opportunity to be heard prior to
the superior court's approval of the October 29, 1990 settlement
stipulation.
In regard to the superior court's jurisdiction over the
internal affairs of trusts,6 AS 13.36.060 provides in relevant
part that proceedings are initiated by filing a petition "and
giving notice under AS 13.06.110 to interested parties." AS
13.06.050(20) provides that:
'interested person' includes heirs,
devisees, children, spouses, creditors,
beneficiaries and any others having a . . .
claim against a trust estate. . . .
AS 13.06.050(2) states that:
'beneficiary' as it relates to trust
beneficiaries, includes a person who has any
present or future interest, vested or
contingent. . . .
Given the above it is clear that AS 13.36.060 required that
notice be given to William Lee as an "interested person." This
follows because an "interested person" is defined by AS
13.06.050(20) to include beneficiaries and under AS 13.06.050(2)
the term "beneficiary"includes a person who has a contingent
interest. Since William Lee was not given personal notice of the
settlement proceeding of October 8 which led to the superior
court's approval of the October 29, 1990 settlement stipulation
we hold that the superior court erred in overruling William Lee's
objection to the settlement.7
CONCLUSION
The superior court erred in overruling William Lee
Barber's objections to the settlement stipulation. REVERSED and
REMANDED for further proceedings consistent with this opinion.
_______________________________
1. Appellant William Lee Barber's beneficial interest under
the trust was contingent upon his surviving his father, William
F. Barber Sr.
2. The approval of a settlement stipulation is within the
discretion of the court. Thus, the standard of review is the
clear abuse of discretion standard. See Pavek v. Curran, 754
P.2d 1125, 1126 (Alaska 1988); see also Corkland v. Boscoe, 203
Cal. Rptr. 356, 359 (Cal. App. 1984).
The superior court's factual findings are reviewed
under the clearly erroneous standard. Parker v. Northern Mixing
Co., 756 P.2d 881, 887 n.11 (Alaska 1988).
3. The superior court approved the settlement over William
Lee's objections because it viewed the settlement as being in the
best interests of the beneficiaries and because actions had been
taken in reliance upon the stipulated settlement.
4. William Sr. cites authority for the proposition that
"[w]hen a stipulated settlement is made in open court, recognized
by the Court, and there is no dispute as to its material terms,
the stipulation is enforceable." Murphy v. Murphy, 812 P.2d 960,
965 (Alaska 1991); Kerslake v. Kerslake, 609 P.2d 559, 560
(Alaska 1980); Interior Credit Bureau, Inc. v. Bussing, 559 P.2d
104, 106 (Alaska 1977). This legal rule is inapposite where, as
in the instant case, not all the parties have agreed to the
stipulation.
5. For example William Lee's consent would be required
before a termination by consent of beneficiaries could be
effected. Section 337 Restatement (Second) of Trusts.
6. See AS 13.36.035.
7. Inherent in our holding is the conclusion that attorney
Ginder did not represent William Lee. First, William Lee had no
notice of attorney Ginder's appointment purportedly representing
his interests prior to the October 8, 1990 hearing. Ginder was
appointed in 1988 by Judge Shortell to serve as the guardian ad
litem for the unborn and unascertained heirs of Richard Barber in
a companion case concerning the inclusion of the trust assets in
the property division in the divorce of Richard and Faith Barber.
In the October 8 hearing, Ginder indicated that his
representation had been broadened,
Your Honor . . . at the time of our
last meeting asked that I assist and
participate in the settlement discussions
which you had mandated, and that I look after
the interest of the non-income beneficiaries
to the extent that their interest could be
protected. I agreed to do so.
At the October 8 hearing, upon the request of the Bank, the court
made a finding of fact that Ginder adequately represented the
interests of all non-income beneficiaries. Neither William Lee
nor his attorney was present at that hearing. Second, since
there is no indication in the record that William Lee Barber is
incompetent the superior court lacked statutory authority to
appoint a guardian ad litem to represent William Lee. In this
regard, AS 13.06.120 provides in part:
In formal proceedings involving trusts
or estates of decedents . . . and in
judicially supervised settlements. . . .
. . . .
(4) At any point in the proceeding,
a court may appoint a guardian ad litem to
represent the interest of a minor, an
incapacitated, unborn, or unascertained
person, or a person whose identity or address
is unknown, if the court determines that
representation of the interest otherwise
would be inadequate;
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