Allard v. Pacific National Bank
99 Was.2d 394, 663 P.2d 104 (1983)

  • The Stones’ created testamentary trusts for their children, Evelyn and Freeman. The money was placed in the Pacific Bank and the kids were life income beneficiaries.
    • Then Evelyn and Freeman died, the trust was to pay income to their kids, and when their kids reached 21, the trust assets would be evenly distributed to them.
  • The sole asset of the trust was a building that was being leased out to another bank (Credit Union). Pacific Bank sold the building to Credit Union for $200k.
    • Pacific Bank did not have the property appraised, not did they place it on the market. They simply agreed to an offer made by Credit Union.
  • Evelyn and Freeman sued Pacific National for breach of fiduciary duty.
  • The Trial Court found for Pacific Bank. The kids appealed.
    • The Trial Court found that the trust gave Pacific Bank full power to manage trust assets.
  • The Washington Supreme Court reversed and remanded to the Trial Court to determine damages.
    • The Washington Supreme Court found that Pacific Bank had a duty to inform the beneficiaries that it was about to sell the property.
      • Even though Credit Union had the right of first refusal to buy the property, the beneficiaries could have theoretically outbid Credit Union, but they could only do that if they knew the property was being sold.
      • “A trustee must inform beneficiaries of all material facts in connection with a nonroutine transaction which significantly affects the trust estate and the interests of the beneficiaries prior to the transaction taking place.”
    • The Washington Supreme Court found that Pacific Bank had breached its fiduciary duty to act as a prudent investor by failing to have the property appraised before sale.
      • The Court found that a trustee has an obligation to obtain the maximum possible price when selling trust assets.
    • The amount of damages that the kids suffered was a question of fact, to the Washington Supreme Court remanded it back to the Trial Court for a determination.
    • The Washington Supreme Court reversed the Trial Court’s decision to award Pacific Bank attorney’s fees out of the trust assets.
      • Attorney’s fees are not awarded when the litigation is necessitated by the inexcusable conduct of the trustee.