Culbertson v. McCann, No. 58770

CourtSupreme Court of Oklahoma
Writing for the CourtOPALA; BARNES
Citation1983 OK 57,664 P.2d 388
PartiesMartha Jo McDonald CULBERTSON, Mary Laundblade, William McDonald, Robert McDonald, Baylass Morris McDonald, Jr., James McDonald, George McDonald, Michael McDonald, Mary Sue Jeffries, Colleen McDonald and Brian McDonald, Plaintiffs, v. George H. McCANN and M. Kathryn Wood, Defendants.
Docket NumberNo. 58770
Decision Date17 May 1983

Page 388

664 P.2d 388
1983 OK 57
Martha Jo McDonald CULBERTSON, Mary Laundblade, William
McDonald, Robert McDonald, Baylass Morris McDonald, Jr.,
James McDonald, George McDonald, Michael McDonald, Mary Sue
Jeffries, Colleen McDonald and Brian McDonald, Plaintiffs,
v.
George H. McCANN and M. Kathryn Wood, Defendants.
No. 58770.
Supreme Court of Oklahoma.
May 17, 1983.
As Corrected May 19, 1983.

CERTIFIED QUESTIONS ANSWERED.

S. Paul Hammons, John J. Breathwit, Andrews, Davis, Legg, Bixler, Milsten & Murrah, Oklahoma City, for plaintiffs.

Robert W. Nelson, Ramey & Nelson, Yukon, for defendant, George H. McCann.

Michael C. Stewart, William J. Bergner, Stewart & Elder, Oklahoma City, for defendant, M. Kathryn Wood.

Page 389

OPALA, Justice:

Certified to us under the Uniform Certification of Questions of Law Act, 20 O.S.1981 § 1601 et seq., are the following first-impression questions:

"1. Does 58 Okla.Stat. § 496 prohibit an Executor from selling property of the estate which he represents to his sister, where the sale is otherwise not subject to objection?

2. If the answer to question 1 above is in the affirmative, would such a sale be a fraudulent sale on its face without the need for any evidence of fraud in the sale?

3. 58 Okla.Stat. § 492 provides that an Executor who fraudulently sells any real estate of a decedent is liable in '... double the value of the land sold, as liquidated damages, to be recovered in an action by the person having an estate of inheritance therein.' When a Plaintiff does not seek to set aside the sale but seeks only money damages, should the Executor be given credit for the amount of money received by the estate from such fraudulent sale?

4. May an heir of an estate who recovers 'liquidated damages' from an Executor pursuant to 58 Okla.Stat. § 492 also recover punitive damages?"

We hold (a) 58 O.S.1981 § 496 does not prohibit an executor from selling property of the estate which he represents to his sister, where the sale is otherwise not subject to objection; (b) when a plaintiff does not seek to set aside the sale but seeks only money damages, the executor should be given credit for the amount received by the estate from such fraudulent sale and (c) an heir who recovers "liquidated damages" from an executor pursuant to 58 O.S.1981 § 492 may not also recover punitive damages.

FACTS

The defendants are George H. McCann [Executor], executor of the estate of James S. McDonald [Decedent], and M. Kathryn Wood [Sister], sister of the executor. Their mother was the sister of the decedent. The dispute centers around the sale of certain real property in the estate by the executor to Claude Ellison [Ellison] who received an executor's deed. Shortly thereafter, Ellison and his wife conveyed the property to the executor's sister. 1 Plaintiffs, heirs of the decedent [Heirs], brought suit in federal court seeking money damages, including punitive damages, for fraudulent conveyance and breach of fiduciary duty.

I.

SCOPE OF § 496

There is no Oklahoma law on whether 58 O.S.1981 § 496, 2 which proscribes self-dealing by an executor, prohibits the sale by an executor to his sister where the sale is otherwise not subject to objection. The statute forbids an executor's direct or indirect acquisition of interest in the estate. The heirs argue that the statute interdicts an executor's sale to his sister. They analogize to those cases where this court had held that the statute prohibits an executor from selling to his spouse. They submit that because of the intimacy of relation between a brother and a sister, the executor-brother will presumptively be "interested" in a sale to his sister. The heirs assert that actual fraud or injury is irrelevant to violation of the statute. The statute is aimed at preserving the fiduciary's fidelity

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and therefore any transaction in which he self-deals is void. When he sells to his sister he is presumptively self-dealing. The heirs argue also that the duties of an executor are substantially similar to those of a trustee and the trust statute prohibiting self-dealing by a trustee 3 is in pari materia with the probate statute regulating self-dealing by an executor. 4 Since the trust statute specifically prohibits a trustee's sale to a sister, the heirs argue the probate statute does also.

The executor and the sister argue, on the contrary, that the standard to be applied in evaluating the fairness of the sale is whether there is a conflict between the personal interest of the executor and his fiduciary duty to the estate. They contend that the cases prohibiting a sale to a spouse are inapposite because, unlike spouses, siblings have no equitable interest in each other's property and are not forced heirs of each other. They do not share the intimate relationship enjoyed by husband and wife. They also contend that 58 O.S.1981 § 496 is clear on its face and that there is no need to resort to the trust statutes for its interpretation. Executors and trustees are two distinct legal creatures and the statutes governing each are not in pari materia.

A transaction falling under § 496 is not always void, but rather voidable at the discretion of the court if it finds the transaction is not covered by a judicial exception to § 496. 5 This case does not compel us to add another exception to § 496, though, because § 496 has no automatic application to a sale to a sibling.

Oklahoma, consistent with the general rule, prohibits an executor or guardian from selling property of the estate, either directly or indirectly, to a spouse. 6 The reason for this prohibition is two-fold. First, an executor has a pecuniary interest in a sale to a spouse. In case of death of the one, the other would inherit not less than one-third of his or her estate. 7 There is also an intimacy of relation and affection between spouses and a mutual influence and desire for their common welfare that precludes either from occupying a disinterested position in a transaction involving the other. 8

The heirs argue that the same affection and intimacy of relation exists between siblings and that therefore a sale by an executor to his sister is presumptively fraudulent. We can find no authority for such a proposition and we do not think it comports with sound policy. Unlike spouses, siblings are

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not forced heirs of one another. 9 The pecuniary interest element does not exist because their fortunes are not necessarily interdependent. There may be a relation of affection between them, but that alone does not raise a presumption of fraud. A family transaction may call for closer scrutiny, but an automatic prohibition would unduly and needlessly hamper the executor.

A survey of cases and authorities, both from other jurisdictions and from our own, indicates that when an executor sells to some close relative, other than the spouse, that circumstance does not, without more, void the transfer. 10 The majority of decisions accede to the view that the relationship is merely one factor to be considered. They hold for the fiduciary where the transaction is found to be fair 11 and against him if it is fraudulent. 12 In each of the cases, where the court struck down a transaction with a close family member, the court found that the executor or guardian personally benefited.

In Plant v. Schrock, 13 a guardian executed a deed to a "middleman" who immediately reconveyed the property to the guardian's sister-in-law. She mortgaged it to procure a loan. The court found that the middleman did not pay the purchase price for the land and that he was only acting as a pretended purchaser for the guardian. The sister-in-law also did not pay the purchase price but merely took legal title at the guardian's request. The guardian possessed the land at all times. The court found that the transactions were a result of a secret conspiracy between the guardian, the sister-in-law and the middleman and therefore declared the sale was voidable.

California's self-dealing statute is substantially the same as Oklahoma's. 14 In In Re Denlinger's Estate, 15 the executrix sold estate property at a duly noticed private sale to her daughter and son-in-law. The decedent's heir objected to the sale on the grounds that it was conducted contrary to the California self-dealing statute and voidable because of, among other things, the

Page 392

relationship of the bidders to the executrix. The heir cited Strudthoff v. Yates, 16 a case involving a prohibited sale to a spouse. 17 The trial court overruled the objection and approved the sale. The appellate court stated that Strudthoff was no authority for the heir's claim because the evidence indicated that the executrix never directly or indirectly acquired any title to the property. The court stated that "[t]he mere relationship of the bidder here involved, alone, would not necessarily, in and of itself, force a finding that the sale should be voided." 18 The court noted that "[n]ear relationship between the representative and the purchaser does not compel an inference of fraud, but is merely a circumstance to be carefully considered with the other circumstances in the case." 19

The heirs stress that the trust statutes--60 O.S.1981 § 175.11 20--and the probate statutes--58 O.S.1981 § 496 21--are in pari materia. Since the trust self-dealing statute specifically prohibits a trustee's sale to a "relative" (including sibling), the heirs argue that the probate self-dealing statute should be similarly construed.

We find this argument unpersuasive. Although trustees and executors are both fiduciaries, they are separate and distinct legal creatures, with different powers and different duties. 22 An executor's duties are limited to winding up the estate of the decedent under court supervision. They are temporary in character. 23 Many of the powers and duties which are applicable to trustees do not apply to executors. The procedures by which to enforce those duties and the nature and...

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10 practice notes
  • Tyler v. Shelter Mut. Ins. Co., No. 105,098.
    • United States
    • Supreme Court of Oklahoma
    • January 29, 2008
    ...a harmonious whole giving effect to each provision. Mustain v. Grand River Dam Auth., 2003 OK 43, ¶ 23, 68 P.3d 991; Culbertson v. McCann, 1983 OK 57, ¶ 14, 664 P.2d 388; De Graffenreid v. Iowa Land & Trust Co., 1908 OK 49, ¶ 0, 95 P. 624; 2) As to the second question, the clear, plain and ......
  • Okland Oil Co. v. Conoco Inc., Nos. 97-6004
    • United States
    • United States Courts of Appeals. United States Court of Appeals (10th Circuit)
    • May 19, 1998
    ...cited by Conoco in support of its argument are distinguishable. Thus, for example, Maxwell, 848 P.2d at 1172-73, and Culbertson v. McCann, 664 P.2d 388, 393-94 & n. 31 (Okla.1983), are cases involving other Oklahoma statutes, and stand only for the proposition that where wrongful intent is ......
  • In the Matter of JLM, No. 100111
    • United States
    • Supreme Court of Oklahoma
    • March 8, 2005
    ...Black's Law Dictionary 794 (7th ed. 1999); Mustain v. Grand River Dam Authority, 2003 OK 43, ¶23, 68 P.3d 991, 999; Culbertson v. McCann, 1983 OK 57, ¶ 14, 664 P.2d 388, 391 (citing DeGraffenreid v. Iowa Land and Title Co., 95 P. 624, 639, 20 Okl. 687 (1908)); Letteer v. Conservancy Dist. N......
  • Mahmoodjanloo v. Mahmoodjanloo, No. 101,196.
    • United States
    • Supreme Court of Oklahoma
    • May 15, 2007
    ...so as to give effect to each provision. Mustain v. Grand River Dam Authority, 2003 OK 43, ¶ 23, 68 P.3d 991, 999; Culbertson v. McCann, 1983 OK 57, ¶ 14, 664 P.2d 388, 391 (citing De Graffenreid v. Iowa Land and Trust Co., 1908 OK 49, 95 P. 624, 639, 20 Okla. 687). All legislative enactment......
  • Request a trial to view additional results
10 cases
  • Tyler v. Shelter Mut. Ins. Co., No. 105,098.
    • United States
    • Supreme Court of Oklahoma
    • January 29, 2008
    ...a harmonious whole giving effect to each provision. Mustain v. Grand River Dam Auth., 2003 OK 43, ¶ 23, 68 P.3d 991; Culbertson v. McCann, 1983 OK 57, ¶ 14, 664 P.2d 388; De Graffenreid v. Iowa Land & Trust Co., 1908 OK 49, ¶ 0, 95 P. 624; 2) As to the second question, the clear, plain and ......
  • Okland Oil Co. v. Conoco Inc., Nos. 97-6004
    • United States
    • United States Courts of Appeals. United States Court of Appeals (10th Circuit)
    • May 19, 1998
    ...cited by Conoco in support of its argument are distinguishable. Thus, for example, Maxwell, 848 P.2d at 1172-73, and Culbertson v. McCann, 664 P.2d 388, 393-94 & n. 31 (Okla.1983), are cases involving other Oklahoma statutes, and stand only for the proposition that where wrongful intent is ......
  • In the Matter of JLM, No. 100111
    • United States
    • Supreme Court of Oklahoma
    • March 8, 2005
    ...Black's Law Dictionary 794 (7th ed. 1999); Mustain v. Grand River Dam Authority, 2003 OK 43, ¶23, 68 P.3d 991, 999; Culbertson v. McCann, 1983 OK 57, ¶ 14, 664 P.2d 388, 391 (citing DeGraffenreid v. Iowa Land and Title Co., 95 P. 624, 639, 20 Okl. 687 (1908)); Letteer v. Conservancy Dist. N......
  • Mahmoodjanloo v. Mahmoodjanloo, No. 101,196.
    • United States
    • Supreme Court of Oklahoma
    • May 15, 2007
    ...so as to give effect to each provision. Mustain v. Grand River Dam Authority, 2003 OK 43, ¶ 23, 68 P.3d 991, 999; Culbertson v. McCann, 1983 OK 57, ¶ 14, 664 P.2d 388, 391 (citing De Graffenreid v. Iowa Land and Trust Co., 1908 OK 49, 95 P. 624, 639, 20 Okla. 687). All legislative enactment......
  • Request a trial to view additional results

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