Kopperud v. Reilly
| Decision Date | 27 March 1990 |
| Docket Number | No. 890182,890182 |
| Citation | 453 N.W.2d 598 |
| Parties | Eddie G. KOPPERUD, Personal Representative of the Estate of Earls Raymond Johnston, Plaintiff and Appellee, v. Lorraine E. REILLY, Conservator of the Estate of Earls Raymond Johnston, and Daniel L. Reilly, Defendants and Appellants. Civ. |
| Court | North Dakota Supreme Court |
Mack, Moosbrugger, Ohlsen, Dvorak & Carter, Richard A. Ohlsen (argued), Grand Forks, for defendants and appellants.
Depuy, Kopperud & Hall, Ltd., Nicholas B. Hall (argued), Grafton, for plaintiff and appellee.
This is an appeal by Lorraine Reilly (Lorraine) and Daniel Reilly (Daniel) from a county court judgment which rescinded a contract involving the sale of Earls Raymond Johnston's (Ray) farmland to Daniel due to the fact that as conservator of Ray's estate, Lorraine was affected by a substantial conflict of interest when she authorized the sale to her son, Daniel. We affirm.
In January of 1979, Lorraine and Nina McBride were court appointed as co-conservators of Ray's financial affairs. The conservatorship was formed because of Ray's confused mental and emotional state following a number of recent traumatic events, including three deaths in his immediate family. Eddie Kopperud, an attorney and personal representative for Ray under Ray's will, assisted Lorraine and Nina, both of whom were Ray's sisters, in obtaining the conservatorship order. 1
In the fall of 1984, Lorraine and Daniel spoke with Kopperud regarding a proposed contract for deed which would convey all of Ray's farmland, some 270 tillable acres, to Daniel. Lorraine felt this was necessary because Ray had been "... after [her] for years, wanting me to sell the land to Dan." The contract for deed called for a purchase price of $180,000 to be paid in semiannual installments over a 30-year period. After speaking with Lorraine and Daniel, Kopperud advised them that the contract's interest rate was too low and that an appraisal for the market value of the land should be obtained prior to the execution of the contract.
Subsequently, the contract was redrafted to reflect a higher interest rate and was executed on May 1, 1985. However, neither an appraisal nor any other steps to determine the market value of the land were undertaken. Ray passed away on January 18, 1986. At the time of his death, Ray's farmland was appraised at $371,250. Further, land in the immediate area surrounding Ray's farmland rented for $90 to $100 an acre. Thus, if rented out, Ray's farmland would have yielded in excess of $24,000 annual income to the conservatorship. However, assuming Daniel's compliance with his obligations under the land sale contract, the conservatorship would only receive $16,961 annually from Daniel.
After being apprised of this information, Kopperud, in his capacity as the personal representative of Ray's estate, commenced an action against Lorraine and Daniel alleging that Lorraine had acted with a conflict of interest in executing the contract to her son at an unfair price. Kopperud requested a rescission of the contract and a return to the estate of the funds necessary to make up the difference between the amount that Daniel had paid to the conservatorship and the amount that the land could have been rented out for. Naturally, Lorraine and Daniel resisted Kopperud's claim arguing, among other things, that since Lorraine did not personally benefit from the land sale, she could not have acted with a substantial conflict of interest.
On April 7, 1989, the county court ruled in favor of Kopperud and ordered the contract rescinded. Further, Daniel was ordered to reimburse Ray's estate $75,239, 2 the amount by which the estate was reduced due to the land sale contract. The court concluded that Lorraine was affected by a substantial conflict of interest and that the rescission of the contract was the proper remedy pursuant to Section 30.1-29-22, N.D.C.C. 3 Further, the court held that Daniel was not entitled to the protection afforded to a person acting in good faith. This appeal followed.
On appeal, Lorraine and Dan raise three issues. Initially, they contend that the county court lacked subject matter jurisdiction to entertain Kopperud's action. Secondly, they argue that the county court erred in denying their request for a trial by jury. Finally, they argue that there is no evidence that Lorraine exercised her duties as conservator with a conflict of interest.
Section 27-07.1-17(5), N.D.C.C., provides that the county court shall have jurisdiction in "[p]robate, guardianship, and other testamentary cases pursuant to title 30.1." Section 30.1-02-02, N.D.C.C., provides for subject matter jurisdiction of the county court as follows:
The general rule is that "a probate court has jurisdiction to exercise all incidental powers necessary for the effective adjudication of those matters within its exclusive original jurisdiction." Estate of Sorensen, 411 N.W.2d 362, 364 (N.D.1987) (citations omitted).
Lorraine and Daniel argue that the action for the rescission of the contract for deed is not a probate matter nor a conservatorship matter nor an incidental matter related thereto. We disagree. Section 30.1-02-02(1)(a), N.D.C.C., expressly confers subject matter jurisdiction to county courts regarding cases involving estates of protected persons and of decedents. We believe that Kopperud's contention that the land was sold at a grossly unfair price, thus depleting the distributable estate assets and in violation of a conservator's duty, raises issues which are incidental to the county court's jurisdiction over Ray's estate. Certainly, the determination that the estate's assets have been unfairly and inequitably distributed is well within the county court's authority.
Therefore, we conclude that the county court had authority to resolve the issue of whether Lorraine acted with a substantial conflict of interest so as to determine if rescission of the contract was necessary. Such a resolution was necessary to enable the county court to effectively determine the extent of Ray's estate and the fair value of the estate assets for purposes of liquidating the estate.
Secondly, Lorraine and Daniel contend that the county court erred in denying them a jury trial. They argue that Section 30.1-15-04, N.D.C.C., gives them the right to a jury trial. This section provides:
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