In re Estate of Finch

• Decision Date: 12 April 2017
• Docket Number: 27906
• Citation: 893 N.W.2d 783
• Court: South Dakota Supreme Court
• Parties: In the MATTER OF the ESTATE OF Fred W. FINCH, Deceased.

893 N.W.2d 783

In the MATTER OF the ESTATE OF Fred W. FINCH, Deceased.

27906

Supreme Court of South Dakota.

CONSIDERED ON BRIEFS ON MARCH 22, 2017

OPINION FILED April 12, 2017

JOEL A. ARENDS, Sioux Falls, South Dakota, Attorney for appellant Dean Anderson.

JOHN A. SHAEFFER of Shaeffer Law Office, Flandreau, South Dakota, Attorney for appellee Coral Headrick as Personal Representative.

WILSON M. KLEIBACKER of Lammers Kleibacker, LLP, Madison, South Dakota, Attorneys for appellee Coral Headrick personally.

WILBUR, Justice

[¶1.] In this appeal from the settlement of an estate, one beneficiary challenges the award of expenses, disbursements, and attorney's fees to the personal representative. We affirm.

Background

[¶2.] Coral Headrick served as Fred Finch's attorney-in-fact from 2009 until Finch's death in November 2012. Headrick had been a close friend and neighbor to Finch and his now-deceased wife Reva. Finch had no children. He died when he was 91 years old. Finch's Last Will and Testament nominated Headrick as personal representative of his estate. In November 2012, the circuit court issued letters appointing Headrick as personal representative and admitted Finch's Will to informal probate. On February 22, 2013, Headrick filed an inventory for the estate, certifying the estate's assets and values of those assets. She filed a revised inventory in June 2013, which set forth the gross value of the estate at $4,218,449.01.

[¶3.] Dean Anderson and Dale Anderson are Finch's nephews and beneficiaries of the estate. Sharlene Swier is Finch's niece and also a beneficiary of the estate. On November 18, 2013, Dale and Swier petitioned for supervised administration of the estate and for removal of Headrick as personal representative. They asserted that they had conducted an investigation into Headrick's use of the power of attorney "to obtain items for herself and a family member" from 2009 to 2012. The power of attorney contained no provision for gifting or self-dealing. Dale and Swier alleged that the investigation revealed that Headrick had received, via self-dealing, expensive jewelry, a quilting machine, trips to the salon, a washer and dryer, among other items. Dale and Swier claimed to have made a demand upon Headrick for repayment of the funds but could not "reach a fair agreement for repayment of the money to the Estate." Dale and Swier also challenged Headrick's payment of her personal representative fees and the payment of attorney's fees out of the estate. They asked the circuit court for a hearing.

[¶4.] The record reveals that, in October 2013, Headrick returned $31,491.14 to the estate. She claimed she did so because she and the estate's counsel became aware of this Court's decision in Bienash v. Moller , 2006 S.D. 78, 721 N.W.2d 431. In Bienash , we held that, absent a specific right in the papers creating the power of attorney, an attorney-in-fact has no right to self-deal and cannot use oral extrinsic evidence to prove that the right to self-deal was intended. Id. ¶ 24. Although Headrick alleged that each gift was made at the direction or request of Finch and that, in most instances, Finch specifically told her to write the checks, she nevertheless returned a sum she believed represented self-dealing based on her and the attorney's examination of the checking account.

[¶5.] In April 2014, Headrick filed a verified statement for informal closing of the estate. Dale and Swier objected to Headrick's verified statement and petitioned for review of compensation and attorney's fees. They acknowledged that Headrick had returned $31,491.14 to the estate but claimed that the amount was less than she owed. Dale and Swier alleged that Headrick owed $1,100,000. They also disputed Headrick's payment of personal representative fees in the amount of $60,000 because in their view it was in excess of that allowed under SDCL 29A–3–719. Dale and Swier challenged the payment of attorney's fees totaling $89,730.86 as improper and excessive. Dean filed a motion to join Dale and Swier's petition for supervised administration and removal of personal representative. Dean also filed a separate petition for termination of Headrick as personal representative and for the appointment of a special administrator.

[¶6.] In September 2014, Headrick replied to the petitions for her removal. She noted that in addition to the October 2013 reimbursement, she had reimbursed the estate $24,663.70 after reviewing the debits and credits on a specific bank account. Headrick asserted that after reimbursing the estate in this amount, she owed the estate no more money. She further asserted that her fees as personal representative were warranted because she had filed returns, paid taxes, conveyed real estate, sold personal property, sold Finch's home, made sure the bequests in the Will were paid, obtained insurance proceeds, paid bills and indebtedness, in addition to other activities. Headrick argued that the amount of attorney's fees was reasonable because the attorney had spent over 165 hours working on the estate. Headrick requested that the circuit court permit her to finish her duties and deny the petitions for her removal.

[¶7.] The circuit court held a hearing in September 2014 and, thereafter, issued an order appointing a special administrator "to investigate and return a written report within ninety (90) days[.]" The court directed the special administrator to investigate the following issues:

a. The issue of self-dealing by Coral Headrick while serving as the duly appointed attorney-in-fact for Fred Finch.

b. The issue concerning the personal representative fees charged to the Estate by Coral Headrick and the amount of requested reimbursement for the attorney's fees of John Shaeffer while serving as the attorney for the personal representative.

c. Whether the beneficiaries should be compensated for their attorney's fees pursuant to SDCL 29A–3–720, for any benefit provided to the Estate.

d. Whether there are any claims that may be pursued by the Estate against Coral Headrick for undue influence as to any matters including any non-probate transfers and any testamentary dispositions.

e. Whether the Estate is entitled to any statutory interest and/or punitive damages for claims of the Estate against Coral Headrick.

The court postponed ruling on Headrick's removal as personal representative.

[¶8.] On January 16, 2015, the special administrator filed its report with the circuit court. The report identified that the special administrator spoke with counsel and with the parties. The special administrator also spoke with Finch's physician, with a number of Finch's friends, and with the individuals primarily responsible for Finch's banking activities. The special administrator reviewed Headrick's deposition taken in 2014. In its report, the special administrator first separately addressed each issue listed by the circuit court and then provided a fourteen-page summary of the "Investigation Information Background" supporting the special administrator's answers to the court's questions. We address only those issues relevant on appeal.

[¶9.] In regard to Headrick's self-dealing, the special administrator found that self-dealing occurred. The special administrator noted that Headrick reported that virtually all gifting was done at Finch's request. The special administrator concluded:

The amounts involved in the self-dealing appear to be with the knowledge and acquiescence of Fred Finch. None of them involve self-dealing with the investment accounts at the bank where Coral Headrick was jointly named on some of them, but virtually all of them involved the writing of checks when Mr. Finch was along or at his direction.

[¶10.] On the issue of Headrick's fees as personal representative and Attorney Shaeffer's attorney's fees, the special administrator noted that both Headrick and Shaeffer claimed that Finch wanted them to be paid a special rate. They asserted that Finch told them Headrick was to be paid at 2.5% of the value of the estate and Shaeffer at 3% because Finch felt that the handling of his estate would not be easy. The special administrator concluded that "[t]here exists a question" whether Headrick would be entitled to any more than authorized by SDCL 29A–3–719(c) because Finch did not reduce his wishes to writing. The special administrator, however, found that Headrick's time spent on the estate was "more work than would be present in your normal estate." The special administrator recommended excluding Headrick's time spent on the issue of self-dealing but recommended awarding her compensation for her other time because "numerous requests, by counsel, not relative to self-dealing would arguably be compensable."

[¶11.] Although the issue whether Headrick unduly influenced Finch is not challenged on appeal, we note that the special administrator concluded that the facts did "not disclose the utilization of any undue influence of Coral Headrick as to Fred Finch." The special administrator reported that the witnesses indicated "that, even prior to Reva Finch, Fred Finch's wife's death that Coral did everything she could to assist the Finches and subsequent to Reva's death to Fred Finch." The special administrator found that "this devotion is a primary reason for the gifts and bequests. There is no evidence that any of the transfers by Mr. Finch to Coral Headrick were at her request."

[¶12.] At the conclusion of the report, the special administrator provided a summary:

Most of the evidence I secured is not controverted. There is no question that Coral Headrick wrote out some checks or used a debit card for her personal benefit. The evidence would indicate that this was done with Mr. Finch's knowledge and at his request. Regardless of that fact the Bienash decision would appear to be quite clear without something in writing that this should not have been done.....

It appears that Coral Headrick was basically a significant caretaker for both Mr. and Mrs. Finch up until her

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