Estate of Thomas, Matter of

Decision Date05 June 1995
Docket NumberNos. 940212,940213,s. 940212
Citation532 N.W.2d 676
PartiesIn the Matter of the ESTATE OF Phil J. THOMAS, Deceased. Linn Patrick THOMAS, By and Through his Conservator, Ann SCHMIDT, and Mark Geiger, Successor Personal Representative of the Anthony P. Thomas Estate, Petitioners and Appellants, v. Richard C. THOMAS and Irene Thomas, as Co-personal Representatives of the Estate of Phil J. Thomas, Respondents and Appellees. In the Matter of the ESTATE OF Anthony P. THOMAS, Deceased. Linn Patrick THOMAS, By and Through his Conservator, Ann SCHMIDT, and Mark Geiger, Successor Personal Representative of the Anthony P. Thomas Estate, Petitioners and Appellants, v. Richard C. THOMAS, Respondent and Appellee. Civ.
CourtNorth Dakota Supreme Court

William C. Kelsch (argued) and Todd D. Kranda (appearance), Kelsch, Kelsch, Ruff & Austin, Mandan, for petitioners and appellants.

Richard G. Hurdelbrink (argued), Mandan, for respondent and appellee Richard C. Thomas.

David L. Peterson (argued), Peterson, Schmitz, Moench & Schmidt, Bismarck, for respondent and appellee Irene Thomas.

NEUMANN, Justice.

Linn Thomas and Mark Geiger, the successor personal representative of the Estate of Anthony Thomas, appeal from a county court judgment dismissing most of their claims in two probate proceedings. We affirm in part, reverse in part, and remand for further proceedings.

Brothers Tony and Phil Thomas operated Thomas TV and Appliance and Thomas Motors as a single partnership for more than forty years. There was no written partnership agreement, but Tony and Phil shared profits equally. In 1976 they executed a buy-sell agreement. Under that agreement, upon the death of either partner the surviving partner could buy the deceased partner's 50 percent interest in the partnership businesses and assets for $110,000. The agreement also permitted the surviving partner to purchase for $15,000 the deceased partner's interest in two quarters of land in Kidder County owned jointly by Phil and Tony. The agreement also provided the partnership would pay for life insurance on each partner's life, naming the other partner as beneficiary, to provide funds for a purchase under the agreement.

Tony died on August 26, 1988. His will named his son, Linn, as sole beneficiary. The will named Phil as personal representative, with another brother, Richard Thomas, named as an alternate.

Phil was appointed personal representative but resigned nine days later when he was advised his desire to purchase Tony's interest pursuant to the buy-sell agreement created a conflict of interest. Richard was then appointed personal representative of Tony's estate.

Phil gave notice he intended to exercise his option under the buy-sell agreement to purchase Tony's half interest in the partnership and the jointly owned land. On November 23, 1988, Phil, Richard, and Linn signed an agreement declaring the buy-sell agreement to be valid, and Phil made an $8,000 down payment on the purchase price.

In January 1989, Phil submitted a claim for $47,558.64 against Tony's estate. The accompanying cover letter from Phil's attorney, Bryan Giese, characterized the claim as "disproportionate amounts paid on behalf of [Anthony] Thomas as compared to amounts paid on behalf of Phil J. Thomas from the partnership properties."

On February 13, 1989, the parties met in the office of Lester Schirado, attorney for the estate, to finalize the buy-sell transaction. In addition to the partnership assets and jointly owned real property, Richard had agreed to sell to Phil Tony's 221 shares of stock in Thomas, Inc., at its par value of $100 per share. 1 Accordingly, the total amount due was:

Richard allowed as an offset against the purchase price Phil's claim against the estate, which Phil had amended to $49,358.64. Phil paid an additional $88,741.00 by check, for the following total:

                              Down Payment               $  8,000.00
                              Claim (Offset)               49,358.64
                              Check                        88,741.00
                                                         -----------
                                                         $146,099.64
                

Inexplicably, the parties did not notice at the time that the price tendered was $1,000.36 short. Richard subsequently conveyed Tony's interest in the partnership assets and the real estate to Phil.

While serving as personal representative, Richard used estate funds to purchase eight annuity contracts from Life Investors Insurance Company, a company for which Richard was an agent. Richard received commissions totalling $9,121.67 on these transactions. Richard was subsequently forced to withdraw funds from the annuities to pay estate bills, causing the estate to incur early withdrawal penalties of $2,041.96.

Schirado advised Richard that, as personal representative, Richard was entitled to five percent of the estate as his fee. Schirado and Richard calculated the five percent fee not only on estate assets, but also on partnership assets transferred to Phil, on property which passed by joint tenancy, and on Phil's share of certain jointly held property. As a result, Richard paid himself fees of $61,490.00 for administering the estate.

Phil died in 1991, and Phil's wife Irene and Richard were appointed co-personal representatives of his estate.

In late 1991, Linn was involuntarily committed for treatment for alcohol abuse. His mother, Ann Schmidt, was named his conservator. In early 1992, Linn through his conservator filed a claim against Phil's estate seeking to recover one-half of the value of the partnership assets. Throughout early 1992 Richard disobeyed court orders directing him to provide an inventory and accounting in Tony's estate, and on May 27, 1992, Richard was removed and Mark Geiger was appointed successor personal representative of Tony's estate. Geiger and Linn subsequently sued Richard personally for breach of fiduciary duties in his handling of Tony's estate. The two actions were consolidated for trial.

The trial court entered partial summary judgment determining funds held in joint tenancy accounts passed to Phil by right of survivorship. After a bench trial, the court found Phil had properly performed under the buy-sell agreement, and affirmed the offset against the purchase price. The court awarded Linn $1,000.36, the shortage in the purchase price. On the claim against Richard, the court substantially reduced the fees and costs received by Richard but did not find Richard had breached his fiduciary duty. Judgment was entered, and Linn and Geiger appealed. 2

The following issues are dispositive on appeal:

I. Did the trial court err in determining funds in joint tenancy bank accounts passed to Phil by right of survivorship?

II. Did the trial court err in concluding Phil's claim was properly offset against the purchase price under the buy-sell agreement?

III. Did the trial court err in determining there was no evidence that Tony's Thomas, Inc., stock was worth more than its $100 per share par value?

IV. Did the trial court err in not requiring Richard to repay to the estate commissions he received for estate transactions?

V. Did the trial court err in awarding personal representative fees and costs to Richard?

I. JOINT TENANCY ACCOUNTS

Linn asserts the trial court erred in granting a partial summary judgment concluding that funds in joint tenancy bank accounts passed to Phil by right of survivorship.

At the time of Tony's death, Tony and Phil had joint tenancy accounts and certificates of deposit at various area banks. The total amount in these accounts was $456,770.00. Each was set up as a joint tenancy account with right of survivorship.

The relevant statute in effect at the time of Tony's death, 3 Section 30.1-31-04(1), N.D.C.C. [U.P.C. Sec. 6-104], provided in pertinent part:

"30.1-31-04 (6-104). Right of survivorship.--1. Sums remaining on deposit at the death of a party to a joint account belong to the surviving party or parties as against the estate of the decedent unless there is clear and convincing evidence of a different intention at the time the account is created."

Thus, unless there is clear and convincing evidence that Tony and Phil intended otherwise at the time the various accounts were opened, the funds passed by right of survivorship to Phil upon Tony's death.

Linn asserts such clear and convincing evidence was established by Tony and Phil's individual income tax returns. While both were alive, Tony and Phil each claimed 50 percent of the interest from these accounts as income on their tax returns, with a notation "Joint Partnership Savings." Linn asserts this demonstrates the accounts were intended to be partnership property. However, while this may have been relevant evidence of the beneficial ownership of the accounts during the partners' lifetimes, it does not affect the survivorship feature of the account. We noted the distinction between beneficial ownership during lifetime and survivorship features of such accounts in In re Conservatorship of Milbrath, 508 N.W.2d 360, 362 (N.D.1993). Section 30.1-31-03(1), N.D.C.C. [U.P.C. Sec. 6-103], provided:

"30.1-31-03 (6-103). Ownership during lifetime.--1. A joint account belongs, during the lifetime of all parties, to the parties in proportion to the net contributions by each to the sums on deposit, unless there is clear and convincing evidence of a different intent."

Because Tony and Phil shared partnership profits equally, each was the beneficial owner of 50 percent of the accounts. Their treatment of the income on their tax returns is consistent with such ownership, and is not indicative of an intent contrary to the terms of the joint accounts.

Linn also asserts that Phil, while briefly serving as personal representative of Tony's estate, included these accounts under the heading "Partnership" in an informal, handwritten inventory of Tony's estate. As noted by the trial court, that inventory was prepared to assist the estate's attorney to...

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18 cases
  • Kleiman v. Wright
    • United States
    • U.S. District Court — Southern District of Florida
    • 18 Septiembre 2020
    ...a "surviving partner's fiduciary obligations extend to the deceased partner's heirs and beneficiaries." Matter of Estate of Thomas, 532 N.W.2d 676, 684 (N.D. 1995) (collecting cases). The "rationale underlying this rule is based upon the surviving partner's superior knowledge: 'A surviving ......
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    ...other, and they bear the obligation of the utmost good faith and integrity in their dealings with one another." Matter of Estate of Thomas, 532 N.W.2d 676, 683 (N.D.1995); see also NDCC 45-07-04(1) (replaced by NDCC 45-16-04, effective January 1, 1996).7 The reason for the principle that a ......
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    ...terms of the option within the specified time and upon the terms and conditions provided in the agreement. In the Matter of the Estate of Thomas, 532 N.W.2d 676, 685 (N.D.1995). "`When the optionee decides to exercise his option he must act unconditionally and precisely according to the ter......
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