In re Estate of Pritchard

• Decision Date: 02 March 2007
• Docket Number: No. 94,645.,94,645.
• Citation: 154 P.3d 24
• Parties: In the Matter of the ESTATE OF Donald E. PRITCHARD, Deceased.
• Court: Kansas Court of Appeals

154 P.3d 24

In the Matter of the ESTATE OF Donald E. PRITCHARD, Deceased.

No. 94,645.

Court of Appeals of Kansas.

March 2, 2007.

Allan E. Coon and L. Franklin Taylor, of Norton, Hubbard, Ruzicka & Kreamer, L.C., of Olathe, for appellant Thomas G. Neff.

Michael S. Martin, of Westwood, for appellant Ronald Schulteis.

Eric Kjorlie, of Topeka, for appellee Margaret Pritchard.

J. David Farris, of J. David Farris Law Offices, of Atchison, for appellee Special Administrator of the Estate of Donald E. Pritchard.

Before GREENE, P.J., CAPLINGER, J., and LARSON, S.J.

LARSON, S.J.

In this appeal, we consider numerous rulings involving the administration of the estate of Donald E. Pritchard.

The administrator of the estate, Ronald Schulteis, and his attorney, Thomas Neff, appeal the district court's decision affirming the magistrate judge's ruling granting a money judgment and attorney fees against them to the surviving wife, Margaret Pritchard, based on the administrator's and attorney's failure in to provide notice to her of her right to claim property as her homestead before it was sold.

The numerous issues on appeal require that we set forth the proceedings and testimony in considerable detail.

FACTUAL AND PROCEDURAL BACKGROUND

Donald died intestate on September 17, 2001, survived by Margaret, his wife of almost 20 years and four adult children from a previous marriage. At the time of his death, Donald owned a house in McLouth, Kansas ("the McLouth property") titled in his name only. Donald and Margaret had moved earlier that month from the McLouth property to a bed and breakfast owned by Margaret's daughter in Meriden, Kansas. Five days prior to Donald's death, he and Margaret had executed a listing agreement with a realtor for the sale of the McLouth property.

Ronald Schulteis, a licensed certified public accountant and the husband of one of Donald's children, had assisted Donald during his lifetime and was requested by the heirs to file a petition for issuance of letters of administration. Both Schulteis' petition and Margaret's entry of appearance and waiver of notice of the hearing on the petition, filed 2 weeks after Donald's death, identified Margaret's address as the bed and breakfast. The district court appointed Schulteis administrator of Donald's estate. Schulteis filed an inventory and valuation of Donald's estate, which consisted of the McLouth property and tangible personal property located therein.

Subsequently, on October 25, 2001, Schulteis filed a petition for sale of the McLouth property. The petition specifically alleged the McLouth property was not a homestead and, further, that sale of the property was necessary in order to pay Donald's debts and funeral and estate administration expenses. Margaret again entered an appearance and waived notice of the hearing on the petition for sale. The document indicated her "address and residence" was in Meriden, not McLouth. Finding the allegations of the petition to be true, the district court issued an order on October 26, 2001, for sale of the McLouth property at private sale. See K.S.A. 59-2401(a)(6) (permitting appeal of an order of sale within 30 days of entry of the order).

The McLouth property sold in March 2002, prompting Schulteis to petition the district court for confirmation of the sale on April 22, 2002. Schulteis sent Margaret a copy of the petition and notice of the scheduled hearing thereon which was set for May 14, 2002. The district court held a hearing on Schulteis' petition, at which only Schulteis and his attorney, Neff, appeared. Finding that all interested parties received notice of the hearing, the court issued an order on May 14, 2002, confirming the sale. Again, no appeal from this order was taken. See K.S.A. 59-2401(a)(6) (permitting appeal of an order confirming sale within 30 days of entry of the order).

Five months later on October 4, 2002, Margaret filed a petition, claiming spousal survivor benefits pursuant to K.S.A. 59-403, K.S.A 59-505, and K.S.A. 59-6a207 and seeking an order prohibiting the payment of any funds from the estate. In her petition, Margaret challenged payments made by Schulteis from the estate and alleged she was entitled to one-half of the real property and one-half of the proceeds from the sale of the real property. Further, Margaret claimed neither Schulteis nor Neff had informed her of her statutory rights and, therefore, she had been unaware of her rights under Kansas law. Margaret's petition referenced a proposed family settlement agreement and objected to the administrator's and his attorney's fees provided for therein. Margaret subsequently amended her petition to claim she was entitled to all of the real property and all of the proceeds therefrom. Neither the original nor amended petition sought a personal judgment against Schulteis and/or Neff.

Schulteis filed written defenses to Margaret's amended petition, specifically denying her claim to the real property or its proceeds. Additionally, Schulteis claimed all the heirs to Donald's estate agreed to disposition of the assets in accordance with a family settlement agreement that provided for the sale of the real property, payment of Donald's and Margaret's debts, and distribution of the balance equally to the heirs. Finally, Schulteis claimed Margaret was not only aware of Schulteis' payment of her and Donald's debts but actually directed the payment of such in accordance with the family settlement agreement.

The parties tried the matter before a district magistrate judge. At the conclusion of testimony, Margaret submitted a trial brief in which she claimed Schulteis converted funds from the estate and requested that the magistrate find Schulteis liable for double the value of his allegedly unauthorized distribution. See K.S.A. 59-1704 (prescribing liability for conversion). She made no mention of any claim for damages against Neff. Subsequently, Margaret submitted proposed findings of fact and conclusions of law, claiming Schulteis and Neff should be held jointly and severally liable in damages for the difference between the sale price of the McLouth property ($68,000) and the amount remaining in the estate ($37,551.80), as well as for her attorney fees due to their failure to inform her of her statutory homestead rights.

The magistrate found Donald and Margaret had determined prior to Donald's death to sell the McLouth property and had signed a listing agreement for purposes of selling the house. The magistrate ruled that the property nonetheless qualified as a homestead for purposes of K.S.A. 59-401 and was, therefore, exempt from distribution. In doing so, the magistrate reasoned that Donald and Margaret occupied the homestead but were receiving health care assistance in Margaret's daughter's house at the time of Donald's death. The magistrate ruled that Schulteis perpetrated a fraud against Margaret by failing to inform her of her statutory homestead rights and, further, that Neff failed to perform his duty as an officer of the court to advise Margaret of her rights, thereby reinforcing the fraud committed against her. Accordingly, the magistrate entered judgment against Schulteis and Neff, jointly and severally, for the amount of $68,000, less the funds remaining in the estate plus attorney fees of $3,400. The magistrate also revoked Schulteis' authority as administrator and ordered that neither he nor Neff receive any fees for their services concerning the estate.

Schulteis and Neff appealed the magistrate's decision to the district court. See K.S.A. 59-2408 (allowing appeal from magistrate's decision to be taken to district court; district court determines issues de novo). Although three of Donald's children also appealed the decision, they are not parties to the present appeal. Neff moved for an order in limine prohibiting Margaret from asserting any claims against him and from proffering any evidence of his alleged liability. Alternatively, Neff sought dismissal of all claims purportedly raised against him by Margaret. To the extent any such claims could not be dismissed outright, Neff requested the court enter summary judgment in his favor. The district court denied Neff's motion in its entirety.

During the bench trial before the district court judge, Schulteis testified he was not familiar with the Probate Code and although he was aware of the existence of spousal exemptions in estate tax law, he was not an expert in estate taxes. Schulteis conceded he never informed Margaret of such exemptions or that she might have a spousal interest in the McLouth property. Schulteis testified he did not recognize that Margaret had a spousal interest in the McLouth property at the time of Donald's death because Donald was the sole owner of the property. Further, Schulteis testified he never directed Neff to investigate if spousal exemptions might apply to Margaret or to discuss such exemptions with Margaret. Conversely, Schulteis testified Neff never informed him of the need to investigate Margaret's spousal exemptions.

Schulteis testified he knew Donald and Margaret had moved out of the McLouth property and into her daughter's bed and breakfast for medical purposes before Donald's death. Schulteis testified furnishings remained in the McLouth property but that Margaret told family members they were moving from the McLouth property and selling the house. Schulteis testified that he understood Donald and Margaret's move to the bed and breakfast to be permanent, with Donald having indicated that he intended to live at the bed and breakfast "until his final days." Schulteis acknowledged that Margaret moved back to the McLouth property at some point after Donald's death, but Schulteis did not know when this happened. Schulteis testified Margaret remained in the McLouth property until the new buyers took possession and that Margaret took the furnishings when she moved out.

Regarding the sale of the McLouth property, Schulteis...