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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Marshall v. First National Bank Alaska (09/03/2004) sp-5830

Marshall v. First National Bank Alaska (09/03/2004) sp-5830

     Notice:   This opinion is subject to correction  before
     publication  in  the  Pacific  Reporter.   Readers  are
     requested to bring errors to the attention of the Clerk
     of  the  Appellate  Courts, 303  K  Street,  Anchorage,
     Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,


MARSHALL,                )    Supreme Court No. S-10989
             Appellant,            )    Superior Court No. 3AN-01-
1631 PR
     v.                       )    O P I N I O N
FIRST NATIONAL BANK      )    [No. 5830 - September 3, 2004]
ALASKA,                       )
             Appellee.             )

          Appeal  from the Superior Court of the  State
          of    Alaska,   Third   Judicial    District,
          Anchorage, Mark Rindner, Judge.

          Appearances:   Tonja Woelber, Tonja  Woelber,
          Attorney   at   Law,  P.C.,  Anchorage,   for
          Appellant.   John  R. Beard,  Anchorage,  for

          Before:   Bryner,  Chief  Justice,  Matthews,
          Eastaugh, Fabe, and Carpeneti, Justices.

          EASTAUGH, Justice.


          We  consider here a trust beneficiarys claim  that  the

superior  court should have ordered the former trustee  to  repay

fees  it  charged  the  trust  for  unsuccessfully  opposing  the

beneficiarys request for a change in trustee.  Per AS  13.36.055,

an   interested  person  may  dispute  the  reasonableness  of  a

trustees compensation and seek recovery of excessive compensation

paid  by the trust.  Because the superior courts apparent reasons

for  denying  the repayment petition were legally  erroneous,  we

remand   for  determination  of  whether  the  compensation   was

reasonable or excessive.


          Katherine  Tatiana  Marshall, born in  1976,  lives  in

Longmont,  Colorado. She is the sole beneficiary of a  trust  her

grandparents  created in Alaska in 1984; the  trust  named  First

National Bank of Anchorage, now First National Bank Alaska (First

National),  as  trustee.  Marshalls grandfather  had  worked  for

First National for many years.  The trusts stated primary purpose

is  providing  for Marshalls postsecondary education  and  making

periodic  distributions to her.  The trustors both died in  1997,

and Marshall moved from Alaska to Colorado in 1999.

          In October 2001 Marshall asked First National to resign

as  trustee in favor of Morgan Stanley Dean Witter Trust  (Morgan

Stanley),   but   First   National  refused.    After   fruitless

negotiations, Marshall on November 20, 2001 served on John Beard,

a  lawyer  whom First National had not then authorized to  accept

service,  a  proposed  petition  for  substitution  of  corporate

trustee  under  authority of AS 13.36.090; the proposed  petition

would  ask  the superior court to substitute Morgan  Stanley  for

First  National.   More unsuccessful negotiations  followed.   On

December  5 Beard, for First National, acknowledged that  service

was  effective and asked that he be notified when Marshall  filed

the petition so that First National would know when it needed  to

respond.   Marshall filed the petition with the  court  the  next

day, December 6.  She first notified First National of the filing

on December 11.  In the meantime, on December 7, Standing Probate

Master  John  E.  Duggan recommended approving  the  substitution

order  lodged  with Marshalls seemingly unopposed petition.   The

superior court signed the order three days later, on December 10.

First  National received the executed order on December  17.   It

promptly moved for relief under Alaska Civil Rule 60(b), but  the

probate master recommended that relief be denied.  First National

objected to his recommendation.  Marshall opposed First Nationals

Rule  60(b)  motion, claiming that it had been due  December  10.

She  argued that granting it would cause First National to assess

more  fees against her trust, because, she stated, the  bank  had

already  spent  eight to ten hours considering the  petition  and

would  charge  her  trust  for  its  work.   The  superior  court

disapproved  the probate masters recommendation and  granted  the

trustees  Rule  60(b)  motion, citing the  lack  of  service  and

insufficient notice that the petition had been filed.

          The probate master held a hearing on Marshalls petition

to  substitute  and reported his findings and recommendations  to

the  court in April 2002.  He recommended that Morgan Stanley  be

substituted as trustee because AS 13.36.090 directs that an adult

beneficiarys  views  should be given weight  in  determining  the

suitability  of the trustee and the place of administration,  and

Marshall wanted the trust administered from a place closer to her

residence.   He noted that AS 13.36.090 provides that  a  trustee

should efficiently administer the trust at a place appropriate to

the  trusts  purpose.   Neither  side  objected,  and  the  court

accepted  the recommendation and signed Marshalls proposed  order

substituting the corporate trustee.  On May 9, with  the  parties

agreement,   the court entered a somewhat different  substitution

order.  The differences are immaterial to this appeal.

          Morgan  Stanley requested revisions to the May 9 order,

and  on July 18 Marshall sought a corrected order appointing  the

substitute  trustee.   She stated that correction  was  necessary

partly because the legal name of the substitute trustee is Morgan

Stanley  Trust, whose corporate situs is Jersey City, New Jersey.

She  stated  that  her  contact person for  trust  matters  would

continue to be her financial advisor in Boulder, Colorado.  First

National  opposed the July 18 request, and moved for vacation  of

the  May  9  substitution  order.  It  argued  that  because  the

national  office of Morgan Stanleys trust department was  in  New

Jersey,  convenience of administration was no basis for  changing

the trustee to Morgan Stanley.

          On September 17 the probate master recommended approval

of  Marshalls  proposed  corrected order  substituting  corporate

trustee; the court entered the proposed order the next  day.   In

October  First  National transferred the trust  funds  to  Morgan

Stanley   and  sent  Morgan  Stanley  and  Marshall   its   final


          Marshall  filed a petition in January 2003  asking  the

court  to  order First National to pay the trust $15,697.18,  the

amount  First  National had charged the trust from November  2001

through October 2002 for attorneys fees and special trustee  fees

in connection with the substitution petition.  First National had

charged  the trust $1,504 for special trustee fees and  $9,905.68

for attorneys fees for the services performed before entry of the

May  9,  2002  substitution order.  It had charged the  trust  an

additional $4,287.50 for fees incurred after May 9.

          The   probate  master  recommended  denying   Marshalls

request  to  surcharge  First National.1  Although  the  superior

court  apparently  intended  to follow  that  recommendation,  on

January  31,  2003  it signed the surcharge  order  Marshall  had

submitted  with her surcharge petition.  The court clarified  its

intention on February 3 and denied Marshalls surcharge petition.

          After  Marshall  asked for findings and conclusions  to

explain  the  February 3 denial order, the probate master  issued

findings and conclusions on March 10, stating:

          The  Probate court recommended denial of  the
          surcharge petition finding that there  is  no
          statutory  provision or court rule  expressly
          authorizing  such  a  surcharge,  that  First
          National Bank did not act in bad faith in its
          opposition  to the original petition  and  to
          award  such  a  surcharge  would  set  a  bad
          precedent  and  likely have  a  chilling  and
          coercive  effect on other similarly  situated
          trustees that might have a disagreement  with
          a trust beneficiary.
          So  far  as  we  can  determine from  the  record,  the

superior  court  did not expressly approve or adopt  the  probate

          masters March 10 findings and conclusions.

          Marshall appeals from the February 3 order denying  her

surcharge petition.


     A.   Standard of Review

          We here review a decision denying a statutory repayment

request.   We  apply our independent judgment  when  reviewing  a

courts  interpretation  of statutes and other  rulings  on  legal

questions.2  When construing the meaning of a statute under  this

standard, we look to the meaning of the language, the legislative

history, and the purpose of the statute 3 and  adopt the rule  of

law  that  is most persuasive in light of precedent, reason,  and

policy.  4   We review fact findings under the clearly  erroneous

standard; a finding is clearly erroneous if it leaves us  with  a

 definite and firm conviction on the entire record that a mistake

has  been  made.  5  It appears, however, that  both  the  courts

denial  order  and  the  probate masters  findings  of  fact  and

conclusions of law explaining why he recommended denial  turn  on

legal rulings, not fact findings.

     B.   First Nationals Procedural Arguments

          We   first   consider   several  threshold   procedural

arguments  that First National advances for upholding  the  order

denying  the  surcharge petition.  We can affirm  a  judgment  on

alternative  grounds  not  relied  on  by  the  superior  court.6

Marshall  contends that First Nationals procedural arguments  are

barred  either because First National raises them for  the  first

time  on  appeal, or because they are without merit.  As we  will

see, the denial of the surcharge petition cannot be sustained for

any of the procedural reasons First National advances.

          1.   Jurisdiction

          The  Uniform  Probate  Code  (UPC),  which  Alaska  has

adopted  as  AS  13.06-13.36, gives the court  jurisdiction  over

trust   proceedings.7   First  National  argues   that   Marshall

unsuccessfully  invoked  this jurisdiction  when  she  filed  her

          petition for surcharge.  It first contends that, because she gave

no  notice  to First National or Morgan Stanley, as AS  13.06.110

requires,  when she filed the surcharge petition, she  failed  to

initiate  a  trust  proceeding.  It next argues  that  the  court

lacked  jurisdiction,  because the trust was  not  registered  in

Alaska,  had  no  assets  in Alaska,  and  was  no  longer  being

administered here.

          Even   though  First  National  did  not  raise   these

arguments  before,  we  consider them for  two  reasons.   First,

questions  of subject matter jurisdiction or plain error  can  be

raised de novo before this court.8  First National in part argues

that  the court did not have subject matter jurisdiction  of  the

surcharge  dispute.   Second, we can consider  in  defense  of  a

judgment  below any matter appearing in the record, even  if  not

passed upon by the lower court.9

          We  are  nonetheless  unpersuaded  by  First  Nationals

jurisdictional  arguments.  Alaska Statute  13.36.055  authorized

Marshall  to  file  the  surcharge petition.10   She  served  the

surcharge  petition,  as  AS  13.06.110(a)  requires,  on   First

Nationals attorney, Beard.  He had represented First National  in

the  substitution litigation.  Service of the surcharge  petition

on him was service on First National.  Marshall served no hearing

notice, but because no hearing was then scheduled, the lack of  a

hearing notice would not have required dismissal of the petition.

Marshall  did  not  serve the petition on  Morgan  Stanley.   She

should  have.11   But Morgan Stanley was her fiduciary,  and  its

interest  was presumptively the same as hers as to the  surcharge

dispute.   First National has not explained how it was harmed  by

this  failure or why Morgan Stanley was an essential participant.

It  also fails to explain how this procedural failure gives  rise

to  a  jurisdictional  defect.  If First  National  had  objected

below,   Marshall  could  have  promptly  corrected  the  service


          First   National   may  assume  that   superior   court

          jurisdiction required that Marshall commence a new proceeding.

She  filed  the  surcharge petition in the  same  superior  court

proceeding  in  which the substitution issue had been  litigated.

First  National cites no authority that precluded  Marshall  from

filing  the  petition in the existing case,  however.   Certainly

that was far more efficient than commencing a new proceeding.

          The surcharge petition was also timely.  First National

apparently  sent Marshall its final accounting in  October  2002,

and  Marshall filed the petition on January 17, 2003, within  six

months of the final account, as AS 13.36.100 requires.12

          First  National  seems to imply that it is  significant

that  the new trustee is in a different state.  That circumstance

is irrelevant here.  The surcharge petition was directed at First

National.   It is possible that the beneficiary (and  the  trust,

acting  through  the successor trustee) could not  have  obtained

jurisdiction  over  First National in any court  outside  Alaska.

Depriving Alaska courts of jurisdiction under these circumstances

might allow the former trustee to avoid a claim for repayment.

          In anticipation of equivalent jurisdictional issues, AS

13.36.045(a)(2)  provides that [t]he court  will  not,  over  the

objection  of  a party, entertain proceedings under AS  13.36.035

involving  a  trust registered or having its principal  place  of

administration  in another state, unless . . . the  interests  of

justice  otherwise would seriously be impaired.   That  provision

does  not apply here, because at all pertinent times (before  the

final  accounting  and final substitution order)  the  trust  was

situated  and  administered in Alaska  and  the  former  trustees

disputed  services were performed here.  That the savings  clause

of  subsection .045(a)(2) potentially extends Alaska jurisdiction

to  foreign trusts does, however, implicitly confirm that  Alaska

courts  must  have jurisdiction to consider a surcharge  petition

directed  at  an  Alaska  trusts former trustee  which  is  still

domiciled in Alaska.

          2.   Res judicata

          First  National  also contends that res  judicata  bars

Marshalls   surcharge  claim  as  to  those   charges,   totaling

$11,409.68,  incurred and billed before entry  on  September  18,

2002  of  the final order substituting trustees.  First  National

notes  that although Marshall had complained that First Nationals

services  were  abusive  or inefficient, she  did  not  otherwise

object  to those charges before entry of the September 18  order.

First Nationals theory is that the September 18 order was a final

judgment  that  prevents relitigation of the  charges  previously

paid and approved.

          We  assume that res judicata could apply to claims that

a trustee received excessive compensation.   We stated in DeNardo

v.  State  that res judicata precludes relitigation by  the  same

parties,  not only of claims raised in the first proceeding,  but

also of those relevant claims that could have been raised.13

          But  we  are  unconvinced by First Nationals contention

that  the  claim  is  barred either because the  fees  issue  was

actually litigated, or because it could have been litigated.

          The  propriety of the interim charges was not litigated

or  adjudicated during the substitution dispute.   The  issue  in

that  dispute  was  whether First National could  be  removed  as

trustee,  not who should pay for the cost of its opposition.  The

efficiency  of  administration, and the fact First  National  was

charging  the  trust  for  its  opposition  to  the  substitution

petition,  were  raised as additional reasons  for  substitution.

But we agree with Marshalls contention that she made it clear  in

the superior court that she did not consider the propriety of the

trustees  fees  to  be an issue in the substitution  proceedings.

The  charges were only relevant to the efficiency of  the  trusts

administration.  Whether they should have been incurred at all or

whether they were excessive was not squarely at issue.

          Nor,  as  we will see in discussing the merits  of  the

surcharge  claim, did the findings of the probate  master  during

the substitution dispute finally resolve fact disputes central to

          Marshalls surcharge petition.  Moreover, the interim charges were

incurred  during the substitution dispute, and that  dispute  was

not  finally  resolved until September 18, 2002, when  the  final

substitution order was entered.

          We are also unconvinced that the claim is barred on the

theory  Marshall could have, i.e., should have, raised the  issue

previously.   Accepting  that argument  would  encourage  interim

litigation  between trustees and beneficiaries before the  merits

of  disputes  are finally resolved.  It would unduly enlarge  the

scope  of issue preclusion in this context.  The Manual  Text  to

UPC  7-307, which corresponds to AS 13.36.100, states that

          unless otherwise barred the beneficiary  must
          initiate  a proceeding within six months  for
          anything  that  fully  appeared  on  a  final
          account that shows a termination of the trust
          relationship  between  the  trustee  and  the
          beneficiary.  There is no such limitation  on
          interim accounts, so that they may be  barred
          only by adjudication or consent.[14]
This passage tends to confirm that issue preclusion does not  bar

disputes over interim charges.

          In  McElroy v. Kennedy we stated that [w]here more than

one  claim  arises  from  the  same  transaction  or  series   of

transactions,  they  must all be prosecuted  in  a  single  legal

action or be lost.15  But the amount and propriety of the trustees

charges were not litigated here before the surcharge petition was

filed.    There  was  consequently no serial  litigation  of  the

propriety of the charges.

          Res  judicata therefore did not bar Marshalls surcharge


          3.   Marshalls  standing as to charges  incurred  after


          After  entry of the original substitution order on  May

9,  First  National incurred $4,287.50 in fees in  responding  to

Marshalls  petition seeking a corrected order;  it  charged  this

amount  to  the  trust  and reported these  charges  to  the  new

trustee, Morgan Stanley.  First National argues that this part of

          the surcharge claim is the trusts asset, that Morgan Stanley owns

this  claim,  and  that therefore only Morgan  Stanley,  and  not

Marshall, can bring this claim.

          But  AS 13.36.055 permits an interested person to  file

such  a claim.  Marshall is an interested person as that term  is

defined in AS 13.06.050(24), because she is a beneficiar[y] . . .

having  property  rights  in or claims against  a  trust  estate.

Alaska  Statute  13.36.055 therefore gave her authority  to  seek

review  of  the compensation of the trustee and the  persons  the

trustee  employed and to seek recovery, for the  trust,  of  fees

charged,  including  those charged after entry  of  the  original

substitution order.

     C.   Recovery of Trustees Fees

          Marshall contends that First National should be ordered

to  repay  the  $15,697.18 it charged the trust  in  trustee  and

attorneys  fees  as  a  result of the  substitution  dispute,  or

alternatively  that we should remand for a determination  of  the

fees  reasonableness.  First National argues that it is  entitled

to  retain all of the fees, because Marshalls surcharge claim  is

without merit.

          1.   Grounds for the denial

          As  we  noted  above  in Part II, the  superior  courts

denial  order did not explain why the court denied the  surcharge

petition.   The  court  intended to follow  the  probate  masters

recommendation  that  the  petition be  denied.   After  Marshall

requested  entry  of  findings and  conclusions  to  explain  the

denial, the probate master entered findings and conclusions about

a  month  after  the  superior court denied  the  petition.   The

probate masters findings and conclusions were apparently intended

to  explain  the  basis for his prior denial recommendation.   We

therefore assume that the courts denial is founded on the reasons

the probate master later formally entered.

          The  probate masters findings and conclusions expressed

three reasons for the recommendation that the petition be denied:

(1)  there  is  no  statutory provision or court  rule  expressly

authorizing such a surcharge; (2) the trustee did not act in  bad

faith  in opposing the substitution petition; and (3) awarding  a

surcharge  would set a bad precedent and likely have  a  chilling

and  coercive  effect on other similarly situated  trustees  that

might have a disagreement with the beneficiary.

          There  is no indication the court or the probate master

denied the surcharge petition because the charges were reasonable

or  not  excessive,  i.e., after making fact findings  about  the

trustees   compensation.   We  therefore  apply  our  independent

judgment  in  reviewing the three reasons given  for  the  denial

recommendation.  We conclude that each is legally erroneous,  and

that none justifies summary denial of the surcharge petition.

          First, contrary to the recommendations assertion, there

is statutory authority expressly authorizing such a surcharge: AS


          Second,  the  absence of bad faith on the part  of  the

trustee does not completely preclude a surcharge sought under  AS

13.36.055.   The  statute does not expressly require  bad  faith.

And  because  its  only express criteria are  reasonableness  and

excessiveness, the statute does not implicitly require bad faith,

either.   Even  charges  incurred in good faith  are  potentially

excessive or unreasonable.

          Third,  the legislature, in adopting section .055,  set

the  applicable public policy.  A trustee paid excessive fees can

be  ordered  to  repay them.   If the concerns mentioned  by  the

probate master outweighed the legislatures interest in permitting

recovery  of  excessive fees, we are obliged to assume  that  the

legislature  would  not have enacted the  statute  in  the  first


          It  was  therefore  legal error to deny  the  surcharge

petition   for   the  reasons  discussed  in  the  findings   and

conclusions.  Nonetheless, there would be no reason to remand for

consideration of the merits of the surcharge petition if it could

be  said  as  a  matter of law that the disputed  fees  were  not

excessive  and  were  reasonable.   We  must  therefore  consider

whether  there  is a genuine dispute about the propriety  of  the


          2.   The  statutory  criteria:  reasonableness  of  the
               compensation and excessive compensation
          Because  AS  13.36.055 does not give much  guidance  to

courts  considering  the merits of such a  petition,  we  briefly

address  the applicable substantive standards.  The parties  have

not  proposed a substantive standard that would resolve all  such

disputes.   We therefore limit ourselves to determining  whether,

in  this  case, the former trustees compensation was  potentially


          Alaska Statute 13.36.055 contains two general standards

applicable  here.   It  contemplates  judicial  review   of   the

reasonableness of the compensation determined by the trustee  for

the  trustees  services.  And it authorizes  orders  requiring  a

person  to  refund  to the trust excessive compensation.16   With

respect to disputes about a trustees compensation, we assume that

the  two  terms  reasonableness of the compensation and excessive

compensation    reflect  standards  that  are  exact   opposites:

reasonable   compensation   is  not   excessive   and   excessive

compensation  is  not  reasonable in the context  of  this  case.

Section  .055 does not elaborate on the meanings of those  terms.

We hereafter use the terms in this sense.

          The  statutes  terms should be given their  common  and

approved  meaning.17  The common meanings of the  terms  are  not

particularly   helpful.18   Courts  in  Alaska   have   extensive

experience   applying   the  standards  of   reasonableness   and

excessiveness to fee disputes in context of Alaska Civil Rule 82.19

But  attorneys fees cases discussing those standards rarely  deal

with trusts or fiduciaries.

          3.   Determining what is excessive

          Compensation could be unreasonable or excessive for  at

least   two   reasons:  because  the  services  themselves   were

          unreasonable or excessive, or because the fees charged were

unreasonable   or   excessive.   Marshalls   surcharge   petition

inherently  raises a question about the excessiveness,  and  even

the  propriety,  of the trustees opposition to  the  substitution

petition.  We therefore review the trust document, the applicable

statutes,  and  the common law to determine whether  they  either

approve  or  foreclose  opposition to a petition  for  change  of


           We  first  look generally at the duties of a  trustee.

The general principles of trust law are well known.  A trustee is

a  fiduciary of the highest order and is held to a high  standard

of conduct.20  A trustee must act fairly, justly, honestly, in the

utmost good faith, and with sound judgment and prudence, but  she

is not the trust propertys insurer.21  In carrying out this duty,

a  trustee shall observe the standards in dealing with the  trust

assets  that would be observed by a prudent man dealing with  the

property of another.22 A trustee has a duty to use reasonable care

and  skill to make the trust property productive,23 and to invest

and manage the funds of the trust as a prudent investor would, in

light  of  the  purposes, terms, distribution  requirements,  and

other  circumstances of the trust.24  A trustee  has  a  duty  to

invest  so  as  to obtain the largest return possible  consistent

with the principals safety.25

          Alaskas  statutes  reflect  these  general  principles.

Alaska  Statute  13.36.230  requires  the  trustee  to  act  with

reasonable  care,  skill and caution.  Alaska  Statute  13.36.070

recognizes that, absent specific provisions otherwise, a  trustee

has  the  general duty . . . to administer a trust  expeditiously

solely for the benefit of the beneficiaries.26

          Alaska     Statute     13.36.090    addresses     trust


          A  trustee  is  under  a continuing  duty  to
          administer  the trust at a place  appropriate
          to  the  purposes  of the trust  and  to  its
          sound,   efficient   management.    If    the
          principal  place  of  administration  becomes
          inappropriate for any reason, the  court  may
          enter    any   order   furthering   efficient
          administration   and   the    interests    of
          beneficiaries,  including,  if   appropriate,
          release  of  registration,  removal  of   the
          trustee  and  appointment  of  a  trustee  in
          another state.  Trust provisions relating  to
          the place of administration and to changes in
          the  place  of administration or  of  trustee
          control  unless compliance would be  contrary
          to  efficient administration or the  purposes
          of  the  trust.  Views of adult beneficiaries
          shall  be  given  weight in  determining  the
          suitability of the trustee and the  place  of
Per  this  section,  First  National had  a  continuing  duty  to

administer  the trust efficiently, wherever Marshall lived.   The

trust document is silent on the place of administration, although

it names First National as trustee.  Section .090 also imposed  a

duty  on  First National to give weight to Marshalls  request  to

have  the  trust transferred to Morgan Stanley, but  the  statute

does  not  specify  how  much weight  a  trustee  must  accord  a

beneficiarys request.

          The  statutes control trust disputes, unless the  trust

document  permissibly  deviates from the  statute.27   The  trust

document  before  us states its purposes.  It  grants  the  usual

powers to the trustee.  And, of potential interest here, it gives

the  trustee authority to [j]oin in, maintain, compromise, defend

or  otherwise dispose of, any litigation or claim in  any  manner

arising in connection with the trust property upon such terms  as

my  Trustee  may  deem  advisable.  It also authorizes  employing

attorneys  and  paying  for  their  reasonable  compensation  and

expenses.28   It  provides for reimbursing and  compensating  the


          4.   Genuine factual disputes

          Marshall  contends  that  the entire  lengthy,  costly,

legal proceeding was necessitated by [First National]s failure to

voluntarily  resign as trustee when requested by Ms. Marshall  in

September, 2001.  She argues that she had a legal right under  AS

13.36.090  to  substitute a local trustee in her  home  state  of

          Colorado because she was an adult and her views were entitled to

weight.   She  asserts  that the probate masters  addition  of  a

requirement  of bad faith to the breach of duty is not  warranted

by the statutes.

          Marshall  alternatively argues that even if  bad  faith

were  required, First National acted in bad faith.  She  contends

that  First National opposed the change of trustee in an  attempt

to  maintain control of the trust for the remaining ten years  of

its  existence; a result which would have allowed it to  continue

to   collect  its  fees  for  serving  as  trustee.   Quoting  AS

13.36.070,  Marshall  asserts that  First  Nationals  refusal  to

resign voluntarily was a breach of its duty to administer a trust

expeditiously for the benefit of the beneficiar[y].

          First  National  points  out that  Marshall  began  the

litigation and contends that it acted in good faith in  defending

the trust.

          The probate masters April 4, 2002 report found that

          no   evidence   was  presented  nor   serious
          contention  made  that  First  National  Bank
          Alaska  has  been deficient  in  any  way  in
          performing   trustee  duties  regarding   the
          subject trust.  There is no evidence of  good
          cause  for  removal  of First  National  Bank
          Alaska  for  any  failure to perform  trustee
          duties in an efficient and appropriate matter
          or for breach of fiduciary duty.
The probate master therefore apparently found that First National

performed  every  duty the statutes required it to  perform  with

regard  to  efficient administration of the trust.  Nevertheless,

the probate master relied on the last sentence of AS 13.36.090 in

recommending  substitution of Morgan Stanley for First  National.

The  probate master apparently gave more weight to Marshalls view

than   First  National  did,  although  the  statutes   lack   of

specificity  about  how much weight to accord to  Marshalls  view

means  that  First Nationals evaluation of her  request  was  not

necessarily unreasonable.  The probate master did not fault First

National and specifically stated that First National did not  act

in  bad faith in opposing the original petition.  We assume  that

the  superior court accepted these findings, because it  followed

the recommendation and ordered substitution.

          These   findings  seem  to  encompass  First  Nationals

initial response to Marshalls requests to change trustees, but it

is  not clear what bearing they should have on a repayment  claim

under  AS  13.36.055.  They do not purport to apply the standards

specified in AS 13.36.055, and they fail to address other factors

that  might be relevant.  They were made before all of  the  fees

were  incurred.   Nor is there any indication the probate  master

reviewed all the billing records and considered whether the  fees

were  specifically  or  globally reasonable.    Furthermore,  the

findings were made in context of the substitution dispute,  which

was  fully  resolved on a different ground; given the reason  for

ordering  substitution, it was not necessary  to  consider  these

alternative reasons.

          The   surcharge  petition  was  filed  only  after  the

substitution  dispute was resolved.  The issues of reasonableness

and  excessiveness  in  context of a  repayment  claim  under  AS

13.36.055  were not litigated previously, except to  the  limited

extent  they bore on the substitution petition.  And because  the

surcharge petition was denied on grounds that avoided application

of  the  statutory  standards, there is no  indication  that  the

probate  master thought his earlier findings resolved the  merits

of  the statutory surcharge petition.  We conclude that they  did

not.   We  think  that  these  findings  are  relevant,  but  not


          We  leave it to the court on remand to consider whether

prolonged  opposition  to  a  request  to  change  trustees   was

consistent with the statutes or the trust document.    We  assume

that  First  National, at least at first, had legitimate  reasons

for  opposing its removal as trustee before the court signed  the

May 9 substitution order.  Correspondence in the record indicates

that   First   National  initially  opposed  Marshalls   informal

substitution  request  because it believed  Marshall  sought  the

change so she could influence the trust investment strategy in  a

way  that  would  potentially defeat  the  trustors  purposes  as

expressed in the trust.  Cases elsewhere provide some support for

First Nationals initial opposition.30  Investment strategy remains

the  trustees  prerogative under terms of the trust.   But  First

National  only  briefly  relied on those substantive  grounds  in

opposing  Marshalls substitution petition, and its other  reasons

seem  unpersuasive.   The  probate  masters  report  recommending

substitution implicitly recognizes the frailty of First Nationals


          There is therefore an unresolved question whether First

Nationals  efforts in opposing substitution before  May  9,  2002

resulted  in excessive compensation.  We remand for determination

of   whether  the  charges  incurred  before  May  9,  2002   are


          The  court  should  consider even more  critically  the

reasons given for the services performed after May 9, 2002,  when

the initial substitution order was entered.  Marshall argues that

First National exacerbated the breach when it incurred charges of

$4,287.50 in objecting to the petition for a corrected order  and

in  pursuing  relief  under Civil Rule  60(b)  in  attempting  to

overturn  the  May 9 substitution order.  First  National  claims

that  Marshalls  July  18 petition for a corrected  order  raised

different  issues from the administration issue,  which  was  the

basis for her first petition.

          Marshalls  petition for a corrected order  stated  that

Morgan  Stanleys national corporate situs is in Jersey City,  New

Jersey,  although  Tatiana  Marshalls contact  person  for  trust

matters  is  and  will  continue to be her financial  advisor  in

Boulder, Colorado.  This petition also requested other revisions,

but  Marshall  withdrew those  requests.   It  should  have  been

reasonably  apparent when Marshall first informally  requested  a

change that the trust assets administered by Morgan Stanley would

          not be physically situated in Colorado, and that Marshalls

Colorado advisor would simply have electronic access to the trust

assets.   Because First National had already agreed to resign  as

trustee, its opposition to the petition for corrected order seems

particularly unpersuasive.

          We   are   not  in  a  position  to  determine  whether

particular services or fees in this case were excessive.  Drawing

all  reasonable inferences in favor of Marshall, we think a court

carefully   reviewing   First  Nationals  efforts   in   opposing

substitution and the fees charged could find that the efforts and

fees were excessive at least in part.

          Absence  of  bad faith will not preclude  the  recovery

claim on remand.  Alaska Statute 13.36.055 does not explicitly or

implicitly require that the trustee have acted in bad faith as  a

prerequisite  to  recovery of the litigation  costs  the  trustee

charges  the  trust  in opposing its removal  as  trustee.   Even

opposition  that was well-intended and not in bad  faith  may  be


          The   outcome  of  the  underlying  dispute  does   not

determine whether the charges were excessive.  A trustee must  be

able  to  expect  compensation  for  the  essential  service   of

determining  whether a proposed change would defeat the  trustors

expectations or the trusts terms.  But a trustee cannot expect to

be  compensated  for excessive efforts after legitimate  concerns

have been allayed.

          A trustee must, by statute, administer the trust solely

for the beneficiarys benefit.32  This requires the trustee to act

at all times in good faith with respect to the trust.  This is  a

high standard, but a trustee is a fiduciary of the highest order.33

We  therefore conclude that a trustee must incur only  reasonable

charges  and  act  in good faith with respect to  the  trust,  in

addition  to  meeting  any  other requirements  specific  to  the

particular case, if it is to be entitled to charge the trust  its

legal and other costs.

           Other factors may also be relevant on remand, such  as

the  total amount of the fees, the size of the trust relative  to

the  amount  of the fees, the merits of the parties arguments  on

the  substitution dispute, the extent to which the opposition  is

based  on the beneficiarys best interests in accordance with  the

trust document and the Alaska Statutes, and the duration, extent,

and expense of the trustees opposition.  The parties or the court

on remand may identify other relevant factors.34

          Authority elsewhere tends to support payment of fees to

the  removed trustee.  Some cases approve imposing on  the  trust

the  costs  incurred  by  a  trustee who  unsuccessfully  opposes

removal  in good faith.  Thus, in In re Weinbergers Trust  a  New

York  court  permitted the transfer of a trust to California  and

ordered  all  parties costs to be paid from the  trust  estate.35

Other cases are in accord.36

          But there is some contrary authority.  Bogerts Trusts &

Trustees states that

          [w]here the trustee unsuccessfully resists  a
          proceeding  for  his  removal,  he   may   be
          compelled to pay the costs personally.   This
          may  be regardless of the grounds upon  which
          removal  is decreed.  It may be that  he  has
          not  been  at  fault in any way,  but  simply
          become  incapable of acting  further,  as  by
          reason  of ill health.  Nevertheless,  if  he
          resists the action he may be required to  pay
          the costs.[37]
In  In  re  Gilmakers Estate the court found that a trustee  that

unsuccessfully resisted its removal was not entitled to have  the

expenses   incurred  in  defending  its  untenable  and  partisan

position paid from the trust estate.38  Although the lower  court

found  that  the trustee acted in good faith, and  the  appellate

court  did not overrule this finding, the court on appeal  stated

that  the  trustee erred in its administration of the estate  and

that it had no sound basis for its resistance to the beneficiarys

petition for its removal.39  The trustee also failed to administer

the  trust  in conformity with its terms and defended a  position

for  which  no  reasonable support can  be  found  in  the  trust

provisions and the governing law.40

          These  authorities do not convince us either  that  the

former  trustee,  as  a  matter of law, must  repay  all  of  the

disputed  fees  or that a trustees good faith opposition  to  its

substitution forecloses a surcharge claim.


          We  therefore  REMAND  this case for  determination  of

whether  the  disputed  services and fees resulted  in  excessive

compensation,  and,  if  necessary, for entry  of  an  order  for

repayment of fees.

     1     Surcharge  is  used  by the parties  to  describe  the
repayment relief Marshall sought.  We will use the term  in  this
opinion  because  the parties have used it.  Cf. AS  13.16.485(d)
(providing  that  [i]ssues of liability between  the  estate  and
personal  representative individually  may  be  determined  in  a
proceeding for accounting, surcharge, or indemnification or other
appropriate proceeding).

     2     Cook  Inlet Keeper v. State, 46 P.3d 957, 961  (Alaska
2002);  Fancyboy  v. Alaska Vill. Elec. Co-op.,  Inc.,  984  P.2d
1128, 1132 (Alaska 1999).

     3     Enders  v.  Parker,  66 P.3d 11, 13-14  (Alaska  2003)
(quoting Fancyboy, 984 P.2d at 1132).

     4    Id. at 14 (quoting Fancyboy, 984 P.2d at 1132).

     5     Dunn v. Dunn, 952 P.2d 268, 270 (Alaska 1998) (quoting
R.F. v. S.S., 928 P.2d 1194, 1196 n.2 (Alaska 1996)).

     6    State v. Pete, 420 P.2d 338, 341 (Alaska 1966).

     7    AS 13.36.035(a) states:

          The  court  has  exclusive  jurisdiction   of
          proceedings  initiated by interested  parties
          concerning  the  internal affairs  of  trusts
          .  . . . [P]roceedings that may be maintained
          under  this section are those concerning  the
          administration and distributions  of  trusts,
          the    declaration   of   rights,   and   the
          determination  of  other  matters   involving
          trustees and beneficiaries of trusts.   These
          include  proceedings to . . . review trustees
          fees  and  to  review and settle  interim  or
          final accounts.
     8     Far  N. Sanitation, Inc. v. Alaska Pub. Utils.  Commn,
825  P.2d  867, 870 (Alaska 1992); see also Am. Tissue,  Inc.  v.
Arthur  Andersen, L.L.P., 275 F. Supp. 2d 398, 403 n.5  (S.D.N.Y.
2003)  (Because the instant motion challenges the Courts  subject
matter  jurisdiction, ATIs argument that the motion  is  untimely
under  Rule  12(g) is misguided.  An objection to subject  matter
jurisdiction is always timely. (Original emphasis.)).

     9    Pete, 420 P.2d at 341.

     10    AS 13.36.055 provides:

          On  petition  of an interested person,  after
          notice  to all interested persons, the  court
          may review the propriety of employment of any
          person  by  a trustee including any attorney,
          auditor,   investment   advisor   or    other
          specialized  agent  or  assistant,  and   the
          reasonableness  of  the compensation  of  any
          person so employed, and the reasonableness of
          the  compensation determined by  the  trustee
          for  the  trustees services.  Any person  who
          has  received excessive compensation  from  a
          trust  may  be  ordered to  make  appropriate
 See infra Part III.B.3.

     11    AS 13.06.110(a).

     12    AS 13.36.100 states:

          Limitations  on proceedings against  trustees
          after   final  account.   Unless   previously
          barred    by    adjudication,   consent    or
          limitation,  any claim against a trustee  for
          breach   of  trust  is  barred  as   to   any
          beneficiary who has received a final  account
          or   other  statement  fully  disclosing  the
          matter  and showing termination of the  trust
          relationship  between  the  trustee  and  the
          beneficiary unless a proceeding to assert the
          claim  is  commenced within six months  after
          receipt  of  the final account or  statement.
          In any event and notwithstanding lack of full
          disclosure, a trustee who has issued a  final
          account   or   statement  received   by   the
          beneficiary  and has informed the beneficiary
          of  the  location and availability of records
          for   examination  by  the   beneficiary   is
          protected  after three years.  A  beneficiary
          is   considered  to  have  received  a  final
          account  or statement if, being an adult,  it
          is  received by the beneficiary personally or
          if,  being a minor or disabled person, it  is
          received by a representative as described  in
          AS 13.06.120(1) and (2).
     13    DeNardo v. State, 740 P.2d 453, 456 (Alaska 1987).

     14     2  Richard V. Wellman, Uniform Probate Code  Practice
Manual 598 (2d ed. 1977).

     15    McElroy v. Kennedy, 74 P.3d 903, 908 (Alaska 2003).

     16    AS 13.36.055.

     17    AS 01.10.040(a).

     18     Reasonableness is defined as the quality or state  of
being  reasonable.  Websters Third New  International  Dictionary
1892 (1966).  Reasonable is defined as:

          being  in  agreement with right  thinking  or
          right  judgment: not conflicting with reason:
          not  absurd: not ridiculous . .  .  being  or
          remaining  within the bounds of  reason:  not
          extreme; not excessive . . . moderate .  .  .
          not  demanding too much . . . . not expensive
          .  . . that allows a fair profit . . . having
          the  faculty  of  reason:  rational  .  .   .
          possessing   good   sound   judgment:    well
          balanced; sensible.
Id.   Excessive  is  defined as characterized by  or  present  in
excess  . . . exceeding the usual, proper, or normal . .  .  very
large,  great, or numerous: greater than usual .  .  .  given  to
excess: intemperate.  Id. at 792.

     19    Alaska R. Civ. P. 82(b)(2), (b)(3).

     20    90A C.J.S. Trusts  323 (2002).

     21    Id.

     22    2 Wellman, supra note 14, at 583.

     23    Restatement (Third) of Trusts  181 (1992).

     24    Id.  227.

     25    90A C.J.S. Trusts, supra note 20,  485.

     26     See  also  AS 13.36.245 (A trustee shall  invest  and
manage   the  trust  assets  solely  in  the  interest   of   the

     27    Matter of Will of Allister, 545 N.Y.S.2d 483, 486 (Sur.
1989)  (finding  void  clauses that  conferred  immunity  on  the
fiduciary  and  that  exculpated him  from  loss  caused  by  his
negligent conduct, because they conflicted with statute).   Trust
documents do, however, control when they authorize deviating from
a  statute restricting investment of trust funds.  E.g.,  20  Pa.
Cons.  Stat.  Ann. 7319(a) (West 2004); Plainfield Trust  Co.  v.
Hagedorn,  147  A.2d 254, 258-59 (N.J. 1958);  In  re  Estate  of
Libman, 203 N.Y.S.2d 559, 561 (Sur. 1960); Estate of McCredy, 470
A.2d  585,  594  (Pa. Super. 1983) (When the  terms  of  a  trust
instrument prescribing a trustees investment powers conflict with
the Fiduciaries Code, the trust instrument controls.).

     28    The trust gives the trustee power to:

          Employ   agents  and  attorneys,   including,
          without limitation, investment counseling  or
          management  firms  or individuals,  establish
          discretionary trading accounts with brokerage
          or other firms, and establish agency or other
          similar  accounts with banking  institutions;
          pay  reasonable compensation and expenses for
          such  agents,  attorneys or services  without
          liability  for the acts or defaults  of  such
          agents  and  attorneys,  provided  reasonable
          care  shall  have  been  exercised  in  their
          selection; to rely with acquittance on advice
          of such counsel on questions of law.
     29    The trust also provides:

               My  trustee shall be reimbursed for  any
          expenses  incurred  in  connection  with  his
          services as such and may receive compensation
          in  accordance  with its  then  existing  fee
          schedule for such trust services.
               . . . .

               Trustee shall be entitled to be paid out
               of  the assets of the trust compensation
               in  accordance with its then  prevailing
               fee    schedule   for   acceptance   and
               administration  and  for  payments   and
               distributions made by Trustee, including
               extra   compensation  for   unusual   or
               extraordinary  services   performed   by
               Trustee,  and Trustee shall be  entitled
               to  reimbursement out of the  assets  of
               each  trust  for all costs and  expenses
               reasonably incurred.
     30    See, for example,  In re Zoellner Trust, 325 N.W.2d 138
(Neb.  1982), relied upon by First National below and on  appeal.
The  Supreme Court of Nebraska there denied removing the trustee,
stating  that  [a]  place of administration  which  may  be  less
efficient,  less convenient, or less pleasant is not  necessarily
improper   or  unsuitable  unless,  in  combination  with   other
circumstances,  it  interferes with the proper administration  of
the  trust.   Id. at 141.  Zoellner is factually distinguishable,
but  First National could have relied on a case like Zoellner  in
initially resisting Marshalls petition.

     31    The probate master reported:

          The   trustee  contends  that  the  requested
          change   is   contrary   to   the   expressed
          provisions  of the trust and unauthorized  by
          the  statute.   The bank does  not  cite  any
          specific  language  in the trust  prohibiting
          substitution of a trustee or change of  venue
          but  it  emphasizes  the trustors  thirty-two
          year  employment history with  the  bank  and
          argues  that  the  trustors choice  of  First
          National  Bank  Alaska  as  trustee   was   a
          deliberate and fundamental preference of  the
          trustors evidencing their confidence  in  the
     32    AS 13.36.070, .245.

     33    90A C.J.S. Trusts, supra note 20,  323.

     34     One  such factor may be the extent to which Marshalls
failure  to  give timely notice of the petition to substitute  to
First National resulted in added legal work.

     35     In  re Weinbergers Trust, 250 N.Y.S.2d 887, 888 (App.
Div. 1964).

     36    McKennell v. Guar. Trust Co., 223 N.Y.S. 598, 598 (Sup.
1927);  In  re Pelgrams Estate, 262 N.Y.S. 848 (Sur.  1933);  see
also  Zaring  v. Zaring, 39 N.E.2d 734, 737 (Ind. 1942)  (stating
that   it  was  possible  both  sides  in  trust  dispute   could
potentially be compensated from trust).

     37    George Gleason Bogert and George Taylor Bogert, The Law
Of Trusts & Trustees  525, at 45-46 (2d ed. 1993).

     38     In re Gilmakers Estate, 38 Cal. Rptr. 270, 272 (Dist.
App. 1964).

     39    Id.

     40    Id.