In re Estate of Olson
| Decision Date | 23 December 2008 |
| Docket Number | No. 24898.,24898. |
| Citation | 2008 SD 126,759 N.W.2d 315 |
| Parties | In Matter Of ESTATE OF Glenn E. OLSON, Deceased. |
| Court | South Dakota Supreme Court |
Thomas E. Alberts, Avon, South Dakota, Attorney for appellants James W. Olson and Gary E. Olson.
Craig K. Thompson, Vermillion, South Dakota, Attorney for appellees Estate of Glenn E. Olson and Wayne A. Olson, as Personal Representative.
Sheila S. Woodward Steven K. Huff of Johnson, Miner, Marlow, Woodward & Huff, L.L.P., Yankton, South Dakota, Attorneys for appellees Jared and Luke Muhlbauer.
[¶ 1.] Over the objection of the personal representative,1 two specific devisees in the Estate of Glenn Olson (the Estate) moved to intervene in an Estate proceeding. The proceeding involved a third party claim to real property the devisees stood to inherit under the will. The devisees appeal the denial of their motion to intervene. Under the unusual circumstances of this case, we reverse.
[¶ 2.] In In re Estate of Olson, 2008 SD 4, 744 N.W.2d 555 (Olson I), a majority of this Court held that the personal representative had no authority to sell specifically devised real property, and therefore, the personal representative's sale to Jerad and Luke Muhlbauer (Muhlbauers) was void. The Court then remanded the matter to the circuit court to allow the Muhlbauers to intervene and protect their interests. Following remand, Muhlbauers intervened and filed a claim against the Estate seeking to confirm the sale that this Court had previously voided. In the alternative, Muhlbauers asserted a damage claim that they contended would arise if the sale were not confirmed. Muhlbauers' claims were based on their contention that they were good faith purchasers for value who were protected as if the personal representative had been properly authorized to sell the property. See SDCL 29A-3-714.2
[¶ 3.] Over the personal representative's objection, James W. Olson (James) and Gary E. Olson (Gary), beneficiaries of the estate, moved to intervene in the proceedings involving Muhlbauers' claims. James and Gary, who were entitled to the property as specific devisees under the will, objected to the personal representative's legal position that the sale of the property to Muhlbauers should again be confirmed. The circuit court denied James and Gary's motion to intervene, concluding that the personal representative was deemed to adequately represent the interests of all beneficiaries of the Estate. See SDCL 29A-3-715(22). James and Gary appeal contending that the circuit court erred in denying their motion to intervene as a matter of right under SDCL 15-6-24(a), or as a matter of discretion under SDCL 15-6-24(b).
[¶ 4.] We generally review a circuit court's decision denying a motion to intervene under the abuse of discretion standard of review. Baker, et al. v. Atkinson, et al., 2001 SD 49, ¶ 12, 625 N.W.2d 265, 269-70 (citations omitted). This case, however, presents a question of first impression in this jurisdiction regarding intervention in representative litigation under SDCL 15-6-24. The circuit court applied the general rule precluding intervention in such cases. We must decide whether an exception should be adopted. We consider that question of law de novo.
[¶ 5.] "South Dakota's court rule SDCL 15-6-24(a)(2) is almost identical to Federal Rule of Civil Procedure 24(a)(2)." In re D.M., 2006 SD 15, ¶ 5, 710 N.W.2d 441, 443-44. SDCL 15-6-24(a)(2) governs intervention as a matter of right and provides, in relevant part:
Upon timely application anyone shall be permitted to intervene in an action:
...
(2) When the applicant claims an interest relating to the property or transaction which is the subject of the action and he is so situated that the disposition of the action may as a practical matter impair or impede his ability to protect that interest, unless the applicant's interest is adequately represented by existing parties.
The purpose of this rule is "to obviate delay and multiplicity of suits by creating an opportunity to persons directly interested in the subject matter to join in an action or proceeding already instituted." In re D.M., 2006 SD 15, ¶ 4, 710 N.W.2d at 443 . Intervention is strictly procedural and "intervention standards are flexible, allowing for some tailoring of decisions to the facts of each case." Id. (quoting Southard v. Hansen, 342 N.W.2d 231, 233-34 (S.D. 1984)). "Rule 24 is construed liberally, and we resolve all doubts in favor of the proposed intervenors." United States v. Union Elec. Co., 64 F.3d 1152, 1158 (8th Cir.1995) (citing Kansas Pub. Employees Retirement Sys. v. Reimer Koger Assocs., Inc., 60 F.3d 1304, 1307 (8th Cir.1995)). In applying this rule, this Court utilizes the following tripartite test:
1) the party must have a recognized interest in the subject matter of the litigation; 2) that interest must be one that might be impaired by the disposition of the litigation; and 3) the interest must not be adequately protected by the existing parties.
D.M., 2006 SD 15, ¶ 5, 710 N.W.2d at 444.
[¶ 6.] "Upon the death of a person, that person's real and personal property devolves to the persons to whom it is devised by will...." SDCL 29A-3-101. "This statute makes it clear that Glenn's real property vested in James and the other six nieces and nephews [(Gary)] at the time of Glenn's death, subject only to the probate of the estate." Olson I, 2008 SD 4, ¶ 15, 744 N.W.2d at 560 (). Because the real property at issue vested in James and Gary subject only to administration of the estate, they had a recognized interest in the property that was the subject matter of this litigation.
[¶ 7.] Muhlbauers' primary claim against the Estate is to "award or otherwise confirm the original sale from the Estate to the Muhlbauers." Complaint, ¶ 10. The Estate's personal representative, Wayne A. Olson (Wayne), agreed with the position of these claimants against the Estate. In his answer to Muhlbauers' complaint, Wayne admitted "that part of paragraph 10 [of Muhlbauers' complaint] that the court should confirm the sale." Estate's Answer to Muhlbauers' Complaint, ¶ 6. See also infra ¶ 10. Similarly, with respect to Muhlbauers' alternative claim for damages, Wayne asserted that confirmation of the sale was the Estate's proposed resolution of Muhlbauers' claim for damages. Wayne stated:
[James and Gary's] claim that Wayne's `activities have resulted in a claim for damages to be submitted' by the [Muhlbauers]. This claim, however, has not come to fruition nor is it likely ever to do so. The [Muhlbauers] will likely invoke SDCL [] 29A-3-714[,] which protects bona fide purchasers for value. This will permit the [Muhlbauers] to retain the land without loss to Glenn's Estate.
Estate's Response to James and Gary's Petition for Removal and Restraining Order, ¶ 9 (emphasis added). Thus, if the personal representative's position were adopted by the circuit court, James and Gary would be divested of their specific devise, and their dispositional interest in that property would be impaired by the outcome of this litigation.
[¶ 8.] The only dispute in this case is whether the personal representative would adequately represent James's and Gary's interests. At the conclusion of the hearing, the circuit court denied intervention reasoning that James's and Gary's interests would be adequately represented by the personal representative. The court reasoned:
I think there's particularly a reason to deny the intervention in this case when ... the proposed intervenors have no interests that are in any way different from the other heirs', no reason why the personal representative would not—in defending himself, would not—or defending the estate, would not represent all of the heirs who have the same interests. These proposed intervenors have no interest any different than any of the other heirs.
The personal representative, however, aligned the Estate with the Muhlbauers' claim against the Estate by agreeing that the original property sale to Muhlbauers should be confirmed. This position was directly at odds with James's and Gary's interests.
[¶ 9.] Although we have not had occasion to consider such conflicts, the issue of a beneficiary's right to intervene when the beneficiary's interests are adverse to those of the personal representative has been considered in both Colorado and Montana under similar versions of Rule 24. Those courts apply the rule adopted by the circuit court that, generally, in representative litigation, the personal representative is entitled to represent the estate without intervention by beneficiaries even if the beneficiaries have some disagreement with the personal representative's decisions. Those courts, however, also recognize an exception. Both courts explained that on some occasions, compelling circumstances may make representative litigation by the personal representative inadequate to represent the interests of all beneficiaries. The Montana Supreme Court, referring to a Colorado case, identified the circumstances under which the general rule and the exception apply:
This ... problem was addressed in the recent Colorado case of In the Matter of the Estate of Scott. There, heirs of the decedent attempted to intervene, in order to appeal from an adverse ruling on a claim defended by the administrator. In denying intervention, the Colorado Court said:
We noted ... that there are substantial problems with basing the right to intervene upon various questions as to how or in...
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