STATE OF MINNESOTA

IN COURT OF APPEALS

A05-2440

Jill S. Hansen, et al.,
Appellants,

vs.

Robert J. Hansen,
Respondent.

Filed December 26, 2006

Affirmed

Minge, Judge

Ramsey County District Court

File No. C8-04-5858

Harry T. Neimeyer, Stringer & Rohleder, Ltd., 1200 Fifth Street Center, 55 East Fifth Street, St. Paul, MN 55101 (for appellants)

Timothy W. Ridley, Erica Gutmann Strohl, Meagher & Geer, P.L.L.P., 33 South Sixth Street, Suite 4400, Minneapolis, MN 55402 (for respondent)

Considered and decided by Minge, Presiding Judge; Shumaker, Judge; and Hudson, Judge.

U N P U B L I S H E D O P I N I O N

MINGE, Judge

Appellants challenges the district court’s findings that (1) appellant Bryan Hansen unduly influenced the execution of a 1993 amendment to the Hansen Family Trust; (2) Bryan unduly influenced his father’s 2000 grant of power of attorney to Bryan; and (3) Bryan breached his fiduciary duty to the Hansen Family Trust. Because the district court’s findings are not clearly erroneous, we affirm.

FACTS

This appeal arises out of an intra-family dispute between appellant Bryan Hansen, respondent Robert Hansen, and their father Richard Hansen, who is now deceased. The dispute involves three distinct but related transactions.

A. 1993 Trust Amendment

On February 19, 1985, Richard Hansen and his wife Jane executed a revocable trust agreement creating the Hansen Family Trust. They are the parents of Bryan and Robert. Bryan, a California attorney, drafted the agreement. The agreement made Richard and Jane initial co-trustees and provided that after both Richard and Jane died, the trust property would be divided between Bryan and Robert and distributed to them equally. After the trust agreement was executed, Richard and Jane transferred several properties to the trust.

Prior to January 7, 1993, Bryan prepared an amendment to the trust, and on that date it was executed. The amendment provided that upon the death of the survivor of Richard and Jane, Bryan’s one-half interest in the trust would be distributed, but that Robert’s one-half interest would remain in trust and be administered by Bryan for the benefit of Robert. The amendment also provided that if, prior to termination of the trust, Robert and his children died without issue, the remaining trust property would be distributed to Bryan and his heirs. The amendment did not include a reciprocal provision in favor of Robert. Finally, the amendment added a no-contest clause, limiting the ability of Robert and his family to challenge Bryan’s distribution of trust property.

B. Establishment of the Hansen Family Limited Partnership

On November 13, 2000, Richard granted a limited power of attorney to Bryan. It authorized Bryan, as attorney-in-fact, to create the Hansen Family Limited Partnership. On December 18, 2000, Bryan and Robert formed the partnership. The certificate of limited partnership was filed with the Minnesota Secretary of State on December 22, 2000. According to the partnership agreement, the Hansen Family Trust would transfer the trust’s interest in a Goodhue County property and a business property known as Dick & Jane’s Commercial Center to the limited partnership. At that time, Bryan and Richard were co-trustees. As of December 18, 2000, they deeded these properties to the limited partnership.

Other properties that were also supposed to be transferred to the partnership had previously been transferred to Bryan. When Robert realized that these properties were still in Bryan’s name, he asked Bryan to transfer them to the partnership. Bryan refused on the ground that such a transfer would create avoidable tax liabilities. Robert then discussed the situation with their father, Richard, who revoked the limited power of attorney he had granted to Bryan.

C. Bentley’s Grille and Pub

Late in 2001, Robert and Bryan worked to develop a business, Bentley’s Grille and Pub, on property owned by the Hansen Family Trust. Due to early difficulties with the project, Robert withdrew. Bryan continued the effort. He established a corporation, 2MH, Inc., to own and operate Bentley’s. The project included construction of a building, which Bryan financed. Bryan has been principal shareholder of 2MH. Robert has never had any ownership interest in 2MH.

2MH’s rental agreement with the Hansen Family Trust is characterized as a triple net lease. It requires that 2MH pay the trust $12,000 a month in rent, plus late payment charges, taxes, insurance, and maintenance expenses. Bryan signed the initial lease agreement on behalf of the Hansen Family Trust. At the time of trial, almost four years later, 2MH had only paid $4,000 in rent, had not paid penalties for late payments, and had not contributed its share of taxes, insurance, or maintenance expenses. At that time, 2MH owed $576,000 in overdue rent and an estimated $144,000 in taxes, insurance, and maintenance expenses. Although the record indicates 2MH has paid debt service on the building, the record does not disclose any offset against rent for payment of that indebtedness.

At trial, the district court concluded that the 1993 trust amendment and 2000 grant of power of attorney were the result of Bryan’s undue influence. The court also concluded that in operating 2MH and Bentley’s, Bryan breached his fiduciary duty as a trustee of the Hansen Family Trust. This appeal followed. Appellant’s claims on appeal are confined to the district court’s factual findings.

D E C I S I O N

This appeal is a series of challenges to the district court’s findings of fact. “Findings of fact . . . shall not be set aside unless clearly erroneous . . . .” Minn. R. Civ. P. 52.01. See also In re Estate of Olson, 357 N.W.2d 407, 411 (Minn. App. 1984), review denied (Minn. Feb. 27, 1985). “Findings of fact are clearly erroneous only if the reviewing court is left with the definite and firm conviction that a mistake has been made.” Fletcher v. St. Paul Pioneer Press, 589 N.W.2d 96, 101 (Minn. 1999) (quotation omitted). Moreover, “[i]f there is reasonable evidence to support the district court’s findings, we will not disturb them.” Rogers v. Moore, 603 N.W.2d 650, 656 (Minn. 1999). “That the record might support findings other than those made by the [district] court does not show that the . . . findings are defective.” Vangsness v. Vangsness, 607 N.W.2d 468, 474 (Minn. App. 2000). We give great deference to the factfinder’s determinations regarding weight and credibility of witness testimony. Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988).

The first issue is whether the district court clearly erred in finding that Bryan unduly influenced the execution of the 1993 amendment to the Hansen Family Trust. The existence of undue influence is a question of fact, which will not be reversed unless clearly erroneous. Balafas v. Angelos (In re Estate of Balafas), 293 Minn. 94, 96, 198 N.W.2d 260, 261 (1972).

Because the drafting of trust provisions is akin to the drafting of will provisions, we apply the standard used to determine whether a will was affected by undue influence to evaluate whether the 1993 amendment was the result of Bryan’s undue influence. See Restatement (Third) of Property: Wills & Other Donative Transfers § 8.3(a) (2003) (“A donative transfer is invalid to the extent that it was procured by undue influence . . . .”); e.g., Arneson v. Arneson, 372 N.W.2d 20, 21 (Minn. App. 1985) (considering undue influence in the context of a trust instrument), review denied (Minn. Oct. 11, 1985). To establish undue influence, a contestant must show that another person exercised influence at the time the grantor executed the transfer to the degree that the transfer reflects the other person’s intent instead of the grantor’s intent. See York v. Reay (In re Estate of Reay), 249 Minn. 123, 126, 81 N.W.2d 277, 280 (1957). Conjecture and suspicion are insufficient to prove undue influence. Id. Courts consider several factors to determine whether a grantor was unduly influenced, including: (1) the opportunity to exercise influence; (2) the existence of a confidential relationship between the grantor and the person claimed to have influenced the grantor; (3) active participation by the alleged influencer in preparing the transfer; (4) an unexpected disinheritance or an unreasonable disposition; (5) the singularity of provisions; and (6) inducement of the grantor to make the transfer. See Gustafson v. Kilgore (In re Estate of Peterson), 283 Minn. 446, 449, 168 N.W.2d 502, 504 (1969); Teschendorf v. Strangeway (In re Estate of Wilson), 223 Minn. 409, 413, 27 N.W.2d 429, 432 (1947) (applying this six-factor test in the wills context).

Here, reasonable evidence supports the district court’s conclusion. Bryan had the opportunity to exercise influence over his parents. He drafted the original 1985 trust instrument and multiple deeds transferring real property to the family trust. He regularly assisted his father with Hansen family business dealings. Most importantly, Bryan personally drafted the 1993 amendment to the Hansen Family Trust, and despite consistent testimony that Richard and Jane’s wish was to provide equally for their sons, the amendment resulted in an unequal disposition between Robert and Bryan. Under the amendment, Bryan’s share was distributed immediately after his parents’ death, but Robert’s share was to be held in continuing trust, with Bryan as trustee. Moreover, the amendment gave Robert’s share to Bryan under certain circumstances. The amendment did not contain a reciprocal provision in favor of Robert. The amendment also added a no-contest clause, and gave Bryan broad discretion to manage the continuing trust property. Together, these provisions established a disposition favoring Bryan to Robert’s detriment.

At trial, Bryan explained the continuing trust for Robert by testifying that Richard and Jane were concerned about Robert’s financial irresponsibility. Bryan attempted to explain the potentially inequitable distribution as his father’s desire. But Robert testified that his father said he would have never agreed to the amendment had he read the amendment and known of its unequal distribution. The trial court plainly gave Bryan’s testimony little credibility, calling that testimony “disingenuous” and finding that “the specifics of the amendment were never discussed with [Richard and Jane].” We defer to the district court’s credibility determinations here.

Evidence of Bryan’s opportunity to exercise influence, his active participation in drafting the amendment, and the amendment’s unequal disposition support the district court’s finding of undue influence. In light of this evidence, we conclude that the district court did not clearly err by finding the 1993 amendment was the result of Bryan’s undue influence.

II.

The next issue is whether the district court clearly erred in finding that Bryan unduly influenced his father’s grant of the power of attorney to Bryan. We have already described the standards relating to undue influence and apply those standards to this issue.

Here, there is reasonable evidence to sustain the district court’s finding. Bryan had the opportunity to exercise influence; he engaged in extended discussions with Richard about the formation of the limited partnership and grant of power of attorney. Bryan also actively participated in preparing the power of attorney and the forming of the partnership. Bryan persuaded his father to sign the power of attorney document in person and stood to gain financially from the creation of the partnership.

In addition to the opportunity to exercise influence, and participation in the transaction, testimony indicated that Richard signed the power of attorney as a result of Bryan’s threat. Both Robert and Shirley Moriarty, a family friend, testified that Bryan told them he threatened his father around the time Richard signed the power of attorney document. According to Robert, Richard told him that he did not want to grant Bryan the power of attorney but he “felt forced” to do so. When Moriarty asked Bryan how he got his father to sign the power of attorney document, Bryan told her that the two were about to “go to fisticuffs” before he signed the document. And when Moriarty asked Richard about it, Richard looked away and did not say anything. Eight months later, Richard revoked the power of attorney.

At trial, Bryan denied allegations that he threatened or coerced his father into signing the power of attorney. But this court does not make credibility determinations; that is the role of the district court. In re Estate of Anderson, 384 N.W.2d 518, 521 (Minn. App. 1986). “[W]here evidence can support a finding either way, the [district] court’s decision will not be reversed.” Id. Here, the district court did not find Bryan’s testimony credible.

Because the record contains evidence sufficient to support determinations that Bryan had the opportunity to exercise influence over his father, that he actively participated in preparing the power of attorney, and that he threatened his father to induce him to sign the power of attorney, we conclude that the district court did not clearly err by finding the grant of power of attorney was the result of Bryan’s undue influence. Because the power of attorney is invalid, we affirm the district court’s conclusion that the partnership created by using the power of attorney was also invalid and the court’s conclusion that the attempted property transfers, made with the power of attorney, were void.[1]

III.

The final issue is whether the district court clearly erred in finding that Bryan breached his fiduciary duty to the Hansen Family Trust. “[N]o rule is more fully settled than that which forbids a trustee’s dealing with himself in respect to trust property . . . no excuse can be offered by the trustee to justify such transactions.” Perl v. First Am. Nat’l Bank (In re Anneke’s Trust), 229 Minn. 60, 65, 38 N.W.2d 177, 179 (1949) (quotation omitted). A trustee’s fiduciary duty includes the “duty not to allow his interest as an individual even the opportunity of conflict with his interest as trustee.” Smith v. Tolversen, 190 Minn. 410, 413, 252 N.W. 423, 425 (1934). “[T]he burden of proving that his actions conformed to the standard of his duty falls upon the trustee and not upon the beneficiaries.” Malcolmson v. Goodhue County Nat’l Bank of Red Wing, 198 Minn. 562, 567, 272 N.W. 157, 160 (1936). Generally, whether a fiduciary has breached his or her fiduciary duty is a question of fact. Miller Waste Mills, Inc. v. Mackay, 520 N.W.2d 490, 496 (Minn. App. 1994), review denied (Minn. Oct. 14, 1994). Appellant’s challenge on appeal is limited to the district court’s factual finding that Bryan breached his fiduciary duty to the Hansen Family Trust.

The undisputed evidence at trial established that Bryan initially owned a 100% interest in the 2MH corporation, which owns and operates Bentley’s Grille and Pub, that although Bryan transferred part of his ownership interest in the corporation for services provided to the restaurant by employees, Bryan retained 50% ownership of the corporation, and that Robert has never had an ownership interest in 2MH. Bryan also personally financed the restaurant’s built-out costs. There is ample support for the district court’s finding that the restaurant was developed for Bryan’s personal benefit.

Because Bentley’s Grille and Pub is built on land owned by the Hansen Family Trust and leases the land from the trust, Bryan’s personal interest in the profitability of the restaurant is in direct conflict with his duty as trustee to profitably manage property owned by the Hansen Family Trust. The extent of this conflict is shown by the $576,000 which the district court found that 2MH owed to the Hansen Family Trust in unpaid rent and an estimated additional $144,000 for its failure to pay tax, insurance, and maintenance costs associated with the property. At trial, Bryan testified that he developed Bentley’s for the benefit of the Hansen Family Trust, but the trial court did not find Bryan’s testimony credible.

In addition to the direct conflict created by the rental agreement, 2MH, and indirectly Bryan, used additional trust property, without paying rent, for an overflow parking lot, volleyball courts, and football fields. Evidence also established that Bryan borrowed trust property to pay Bentley’s expenses but paid no interest on the unauthorized loan, that Bryan placed Bentley’s signage on trust property to the detriment of other businesses operating on that property, and that Bryan used trust assets to pay for personal expenses. All of these facts further support the district court’s finding that Bryan consistently put his personal interest in Bentley’s profitability in conflict with the interests of the Hansen Family Trust. Evidence of Robert’s initial involvement and Bryan’s claims that the project was initially developed for the benefit of the Hansen Family Trust do not relieve Bryan of his fiduciary responsibility.

Because there is reasonable evidence to support the court’s findings of fact and because credibility determinations are left to the district court, we conclude the district court’s finding that Bryan breached his fiduciary duty to the Hansen Trust was not clearly erroneous.

Affirmed.

[1] Robert also argues that because certain deeds to the limited partnership were executed and delivered prior to the date the certificate of limited partnership was filed, there was no legal entity in existence to acquire or to hold title and that those transfers were void. Given our affirmance of the district court’s determination that the power of attorney was void, and that the limited partnership was not properly created, we do not reach this question.