This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.
Facts
A widow brought a derivative action against a bank, acting as trustee of a revocable trust, alleging breach of fiduciary duty for selling a trust asset below its value. The trust beneficiaries included the widow and her late husband's three adult children. The widow sought compensation for her losses, claiming the children had consented to the sale and were not entitled to any settlement proceeds (paras 2-5).
Procedural History
- District Court, June 12, 2001: The trial court ruled that the widow's suit was derivative and determined that the children were not indispensable parties. It reserved the issue of the children's entitlement to any settlement proceeds until the end of the trial (paras 4-5).
- District Court, August 2001: The trial court approved a mediated settlement between the widow and the bank, denying the children's motion to intervene as untimely and finding they had no right to the settlement proceeds (paras 6-7).
Parties' Submissions
- Appellants (Children): Argued they were entitled to object to the mediated settlement under Rule 1-023.1 without needing to intervene. They claimed the widow could not settle solely on her behalf in a derivative action, that they were entitled to 75% of the settlement under prior agreements, and that the bank breached its fiduciary duty by excluding them from the settlement (paras 7, 9, 14, 27-30).
- Respondent (Widow): Asserted the children had consented to the trustee's actions, precluding their claims. She argued the mediated settlement was fair, reasonable, and properly approved by the trial court. She also contended the children's claims under prior agreements were outside the court's jurisdiction and should be pursued in a separate action (paras 5-6, 13, 27-29).
- Respondent (Bank): Supported the mediated settlement, arguing it was reached in good faith and complied with trust law. It denied breaching its fiduciary duty to the children (paras 6, 23-24).
Legal Issues
- Was the trial court correct in treating the children's objection to the mediated settlement as a motion to intervene under Rule 1-024 and denying it as untimely?
- Did the trial court err in approving the mediated settlement as fair and reasonable?
- Were the children entitled to a share of the settlement proceeds under prior agreements with the widow?
- Did the bank breach its fiduciary duty to the children by entering into the mediated settlement?
Disposition
- The trial court's approval of the mediated settlement was affirmed (para 31).
Reasons
Per Castillo J. (Wechsler C.J. and Fry J. concurring):
The trial court did not err in treating the children's objection as a motion to intervene under Rule 1-024 and denying it as untimely. The children had ample notice of the proceedings and opportunities to intervene earlier but failed to do so. Allowing intervention at a late stage would have prejudiced the widow and disrupted the complex litigation (paras 15-19).
The mediated settlement was fair, reasonable, and free from collusion. The trial court properly considered the negotiation process, the uncertainties of trial, the benefits of immediate recovery, and the allocation of proceeds. The children received adequate notice and an opportunity to object, satisfying the procedural safeguards of Rule 1-023.1 (paras 13-25).
The trial court correctly declined to enforce the prior agreements between the widow and the children, as they were outside the scope of the derivative action and should be pursued in a separate breach of contract claim (paras 27-29).
The children's argument that the bank breached its fiduciary duty by entering into the mediated settlement was not preserved for appeal, as it was not raised before the trial court (para 30).