Rutanen v. Ballard

Antonia Quevillon, a 70-year-old woman in failing health, owned several apartment buildings. She hired attorney Carl Baylis (defendant) to create a trust holding the properties. Quevillon’s children (plaintiffs) were the trust’s income beneficiaries and would receive income generated by the trust for 20 years after her death. The trust would then terminate, and certain grandchildren (plaintiffs) were the remaindermen who would receive the principal. Quevillon appointed Baylis and her daughter, Estelle Ballard (defendant), as cotrustees. Baylis drafted the trust with an exculpatory clause shielding the trustees from liability except for willful misconduct or bad-faith omissions. Baylis did not advise Quevillon to have an independent attorney review the trust, and she did not do so. When Quevillon died, the trust properties were worth about $250,000. Over the next 15 years, the properties appreciated to about $1.3 million, but the trust generated an average of only around $3,000 per year in income. After the trust’s beneficiaries complained about the low return, Baylis proposed selling the properties and investing the proceeds in bonds. The trustees received purchase offers totaling $1.64 million. However, Ballard wanted to buy the properties herself. When Ballard could not obtain financing, she refused to agree to any sale. Baylis petitioned the probate court for instructions about how to proceed but never explained that Ballard was blocking the sale. Baylis also never told Ballard that her refusal to sell breached her fiduciary duty. The trust was eventually terminated, but the properties had declined in value and sold for only $1.08 million. The beneficiaries sued both trustees for breach of fiduciary duty. The probate court voided the exculpatory clause, found that both trustees had violated their fiduciary duties, and awarded damages for the lost sale proceeds. The appellate court affirmed. The state’s highest court agreed to review the matter.