Helgason v. Merriman, S-9665.
| Decision Date | 07 December 2001 |
| Docket Number | No. S-9665.,S-9665. |
| Citation | 36 P.3d 703 |
| Parties | Leonard HELGASON and Kenneth Wood, Appellants, v. Thomas MERRIMAN, Appellee. |
| Court | Alaska Supreme Court |
James W. Hill, Jr., Alaska Law Center, Anchorage, for Appellants.
Melvin M. Stephens, II, Kodiak, for Appellee.
Before FABE, Chief Justice, MATTHEWS, EASTAUGH, and BRYNER, Justices.
Clara Helgason died testate in 1998. Her will named Thomas Merriman as the personal representative, and the superior court appointed him as such. Helgason's heirs, her sons Leonard Helgason and Ken Wood, sought removal of Merriman as the personal representative, citing alleged conflicts of interest and undue influence. The superior court held a hearing and issued a ruling denying the request for removal. Helgason's sons appeal this ruling.
Clara Helgason died in Kodiak on September 20, 1998, at the age of ninety, leaving two heirs, her sons Leonard Helgason and Ken Wood. Clara Helgason left a series of wills, and the last of these, dated November 5, 1996, was apparently admitted into probate in the superior court. In that will, Clara Helgason nominated a friend, Thomas Merriman, as the personal representative of her estate.
Clara Helgason and Thomas Merriman had a friendship that began in July 1989, when Merriman flew with his wife and some friends to Terror Bay, where Clara Helgason lived at the time. Merriman and Helgason thereafter maintained a personal friendship. The Merrimans ran errands for Helgason and socialized with her from 1989 until her death.
In 1989 or 1990 Helgason sold her hunting lodge and residence at Terror Bay, and moved into a house that she owned in Kodiak. Soon after this sale, Merriman introduced her to Ken Horwitz, an executive with Paine Webber, and Helgason subsequently entrusted her assets to Horwitz's management. Merriman discussed with Helgason her plans for writing a will before the first of her four wills was executed in February 1992. Merriman agreed to serve as the trustee of the trusts created in that will, but he testified that he "did not suggest provisions... or attempt to influence Clara's wishes."1
Also sometime after Helgason sold the lodge and moved to Kodiak, Helgason apparently formed the desire to give a gift of money to the Merrimans, as a token of friendship and appreciation. Helgason spoke with Ken Horwitz about this and Horwitz counseled her to structure her gift as a loan to avoid gift and estate tax problems and to protect the estate for her heirs. On December 27, 1993, Helgason executed a promissory note with the Merrimans in the amount of $100,000, on terms somewhat favorable to the Merrimans — at an interest rate of six percent, due "upon maturity," with no collateral agreement.2 The Merrimans repaid approximately half of the principal and some of the interest before Helgason forgave the remainder of the debt on June 4, 1998, a few months before her death.
Beginning with her second will, Helgason discussed with attorney Matt Jamin the possibility of including a specific devise in the will for Thomas and Cheryl Merriman. The gift of $50,000 was included in her second will, but this was subsequently reduced to $15,000 in the third and fourth wills.
Helgason's final will also grants substantial powers to Thomas Merriman, as it names him personal representative and trustee of two trusts created by the will. The will distributes the bulk of the estate to two spendthrift trusts for the benefit of Helgason's sons and grandson. The distribution of proceeds from these trusts is entirely within the discretion of the trustee, Merriman.3 The beneficiaries of these trusts are not entitled to the corpus, which is to be donated to charity upon the deaths of the beneficiaries.
After Clara Helgason's death, her final will from November 5, 1996 was apparently admitted into probate in the superior court, and Thomas Merriman was appointed as the personal representative of the estate, as the will dictated. On December 14, 1998, the plaintiffs, Helgason's sons Ken Wood and Leonard Helgason, filed a motion to revoke the will and remove Merriman as the personal representative. Later, on June 16, 1999, the plaintiffs withdrew their motion to revoke the will; however, the plaintiffs did not abandon their motion to remove Merriman as the personal representative.
On October 13, 1999, a hearing on this issue was held before Standing Master Anna Moran. On February 25, 2000, the master issued recommendations and a proposed order denying the plaintiffs' motion. On March 24, 2000, the superior court accepted these findings. The plaintiffs appeal this decision.
We have never before reviewed the denial of a motion to remove a personal representative under AS 13.16.295. We will apply the abuse of discretion standard here, since we apply this standard to review similar disputes in the probate context, such as the reasonableness of attorney's fees and of the personal representative's fees,4 and in the child welfare context, such as the appointment of a guardian ad litem.5 We will only overturn the superior court's findings of fact if they are clearly erroneous.6
The only dispute in this appeal is whether Thomas Merriman should remain as the personal representative. No other probate issues, such as the validity of the will, are before us.
Alaska Statute 13.16.295 states that "[c]ause for removal exists when removal would be in the best interests of the estate." The statute also states that removal is proper under other circumstances that are not relevant to this appeal.7
The plaintiffs claim that Merriman should be removed as the personal representative because his removal is in the "best interests" of the Helgason estate. They present essentially two arguments to support this conclusion: There is a conflict of interest that requires removal, and hostility between Merriman and the plaintiffs justifies removal.
The plaintiffs claim that Merriman has one or more conflicts of interest that render him unfit to serve as the personal representative of Clara Helgason's estate. We must first determine what standard to use to decide if a conflict of interest is an event that warrants removal of the personal representative. Then we apply the proper standard to determine if the alleged conflicts of interest warrant removal.
Because we have never before addressed AS 13.16.295, we must articulate a standard to determine how serious a conflict of interest must be, and how much proof of that conflict is required, to warrant removal of a personal representative.
The parties in this appeal ask us to adopt a standard used by other jurisdictions. Under this standard, removal is required if the plaintiffs present evidence that raises a "real issue" as to whether there is a substantial conflict of interest. There is such a real issue when the evidence indicates that the personal representative is potentially liable to the estate because of the existence of some cause of action against the personal representative.
This standard was articulated clearly by an Oregon appellate court in Wharff v. Rohrback.8 In Wharff, the court held that a showing of a "substantial and bona fide" conflict of interest will be enough to require the removal of a personal representative; such a showing is made when there is "sufficient evidence to create a real issue" as to whether there is a substantial conflict of interest.9 In In re Estate of Peterson, the Montana Supreme Court implied that a conflict of interest required removal when there was a potential claim that could be brought against the representative, since in that case a conflict was "likely to arise."10 These two cases together support the proposition that removal is required if there is sufficient evidence, such as a potential claim against the representative, that creates a "real issue" of whether or not there is a substantial conflict of interest. We adopt this standard where a party seeks removal of the personal representative because of a conflict of interest. Once a "real issue" of a substantial conflict of interest is raised, removal of the personal representative is mandatory and it is an abuse of discretion to deny removal.11
We also note that under the standard that we adopt here the plaintiffs need only present some evidence of a substantial conflict of interest to raise a "real issue" requiring removal of the personal representative. However, a mere allegation of a conflict of interest is not sufficient.12
The superior court implicitly applied this standard by rejecting the notion that a "mere allegation" of a conflict of interest could be enough to require removal of the personal representative, and by noting that the plaintiffs "have not presented any evidence of wrong doing or undue influence which would warrant removing Merriman as personal representative."
The plaintiffs argue that there is a real issue of whether there is a conflict of interest because Clara Helgason's estate may have one or more causes of action against Merriman; therefore, they contend, Merriman has a conflict of interest because his personal interests are at odds with the estate's interests. Wharff v. Rohrback supports the proposition that there is a real issue of a conflict if the estate has a viable claim against the personal representative for money damages. In Wharff, the representative was involved in the same car accident that killed the decedent; she was driving the car carrying the decedent.13 Because of the circumstances of the accident, the estate had a potential wrongful death claim...
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