Lemp v. Keto

• Court: D.C. Court of Appeals
• Writing for the Court: Nicholas D. Ward, for appellant James F. Lemp in Nos. 93-PR-135 & 94-PR-1282
• Citation: Lemp v. Keto, 678 A.2d 1010 (D.C. 1996)
• Decision Date: 12 June 1996
• Docket Number: No. 93-PR-135,94-PR-1282.,93-PR-151,93-PR-135
• Parties: James F. LEMP, and Helena M. Duggan, et al., Appellants, v. George John KETO, et al., Co-Personal Representatives of the Estate of Mary Eileen S. Lemp, Appellees.

678 A.2d 1010

James F. LEMP, and Helena M. Duggan, et al., Appellants, v. George John KETO, et al., Co-Personal Representatives of the Estate of Mary Eileen S. Lemp, Appellees.

Nos. 93-PR-135, 93-PR-151, 94-PR-1282.

District of Columbia Court of Appeals.

Argued May 6, 1996.

Decided June 12, 1996.

Edward Greensfelder, Jr., for appellants Helena M. Duggan, John Lemp, Jr., and James F. Lemp in No. 93-PR-151.

Nicholas D. Ward, for appellant James F. Lemp in Nos. 93-PR-135 & 94-PR-1282.

Thomas B. Carr, with whom Barry J. Pollack was on the brief, for appellees.

Before FERREN, STEADMAN, and FARRELL, Associate Judges.

FERREN, Associate Judge:

This appeal consolidates two cases arising out of the administration of the estate of Mary Eileen Lemp. In the first case, John Lemp, Jr., Helena Lemp Duggan, and James F. Lemp, as specific legatees of the Lemp estate, contend the trial court erred in charging them with (1) $29,695.73 in preservation and maintenance expenses attributable to their specifically devised property, (2) $10,541.72 in interest for the use of the estate's residuary funds to pay for the preservation and maintenance expenses prior to distribution of that property, and (3) $9,429.00 in income taxes on the interest earned on the proceeds of the sale of two specifically devised cooperative apartments. In the second case, James F. Lemp, as a former co-personal representative of the Lemp estate, claims the trial court erred in failing to make adequate findings of fact justifying rejection of his request for compensation. In the first case, we reverse on the first two claims of error and affirm on the third. In the second case we affirm.

I.

Mary Eileen Lemp died on October 1, 1981, leaving an estate valued at $1,128,673.11. To her stepchildren, Helena Lemp Duggan, James F. Lemp, and John Lemp, Jr. (the Lemps), Mary Lemp devised property with a total value of $208,000 that included real estate in Maryland, Pennsylvania, and Virginia, and two cooperative apartments in the District of Columbia. The rest of Mary Lemp's assets were left to her brother, W.J. Stroman, and to her sister, Gusta Mae Brewton. Mary Lemp specifically devised to Stroman and Brewton a ranch that she owned in Texas valued at $282,876. Mary Lemp bequeathed the remainder of her estate, consisting of cash and securities valued at approximately $650,000, to Stroman, the sole residuary legatee under the will.

The portion of Mary Lemp's will pertaining to the property specifically devised to her stepchildren provided:

(C) I give, devise, bequeath and appoint all right, title and interest of whatsoever kind I may have at the time of my death in my cooperative apartments¹ located in Washington, D.C. and in any real property located outside the State of Texas, in equal shares to the three children of my deceased husband, Helena Lemp Duggan, John Lemp, Jr., and James F. Lemp, outright, as tenants in common, or in equal shares, outright, to the survivor or survivors of them who survive me. If all of my deceased husband's children predecease me, I direct that this devise shall lapse and become part of my residuary estate.

At the time of Mary Lemp's death, the Maryland, Pennsylvania and Virginia properties were free of encumbrances; the cooperative apartments had an outstanding mortgage debt of $2,515.37. Neither the real property nor the apartments was producing income for the estate.

Mary Lemp named in her will her stepson, James F. Lemp, and her attorney, George John Keto, co-personal representatives of the estate legally responsible for its preservation and maintenance during its administration. Before the various estate assets could be distributed, however, the Lemps brought suit against the estate on July 1, 1982, alleging that Mary Lemp's will was invalid. According to the Lemp complaint, Mary Lemp had violated a reciprocal will agreement that she had made with their deceased father before his death. Pursuant to their statutory obligations, the co-personal representatives continued to retain control over the estate's assets while the litigation proceeded.

On August 17, 1982, while the Lemp lawsuit was still in its early stages, the co-personal representative not involved in the lawsuit, George John Keto, petitioned the trial court for replacement of James Lemp as the estate's co-personal representative on the ground that Lemp's role in the litigation had created a conflict of interest with his position as co-personal representative. On January 3, 1983, Judge Barnes approved James Lemp's removal, and on November 16, 1983, Lemp relinquished his role as co-personal representative. Control over the estate subsequently became vested in Keto and, to a lesser extent, in Alan Angerio, James Lemp's successor.²

At about this time, Keto initiated the sale of the two specifically devised cooperative properties pursuant to a request from each of the Lemps in 1982. On June 23, 1983, the estate sold one cooperative apartment for $115,000 ($29,017.66 net cash and a thirty-year note payable monthly at 11% interest). On December 5, 1984, the estate sold the second cooperative apartment for $52,000 ($20,000.00 net cash and a thirty-year note payable monthly at 11% interest). The total gross sales price of the two apartments, therefore, was $167,000, and the sales generated two monthly payments of $395.22 and $809.49.

After the sale of the first cooperative apartment, Keto established an escrow account at the Guaranty Bank and Trust Company in Merrifield, Virginia for the initial and monthly cash payments from the sale of the cooperative apartments, pending distribution of those assets to the Lemps. In order to pay the federal and state income taxes on the interest income from the notes and on the interest produced by the Guaranty Bank account, Keto used the estate's general account at First Union Bank. This account was the same one that Keto used to pay the mounting expenses associated with preserving and maintaining the estate properties, including the Lemps' properties in Maryland, Virginia, and Pennsylvania.

In August 1984, counsel for the estate learned during discovery proceedings that James Lemp had taken certain estate assets while serving as co-personal representative of the Mary Lemp estate. Hours after Mary Lemp's death, James Lemp had removed bearer bonds worth $55,000 from a safe deposit box he had jointly held with her. As a result of this discovery, Judge Barnes permitted the estate to bring a counterclaim against James Lemp for unlawfully converting estate assets. On September 6, 1985, the judge granted summary judgment for the estate both as to the Lemps' claim against the estate based on the alleged reciprocal will agreement and as to the estate's claim against James Lemp. These rulings were affirmed on appeal on February 28, 1989, in Duggan v. Keto, 554 A.2d 1126 (D.C.1989).

By early 1990, the estate's assets still remained undistributed, under the control of the co-personal representatives. The estate had continued to pay from its general account the preservation and maintenance expenses arising out of the Lemps' specifically devised properties, as well as the annual federal and state income taxes generated by the sale of the two cooperative apartments. These payments, which continued to be made out of the estate's First Union account, eventually totalled approximately $30,000 for preservation and maintenance and $9,000 for income taxes.

Finally, on September 28, 1990, Judge Haywood directed the estate to distribute its assets to the beneficiaries of Mary Lemp's will. After considering objections by W.J. Stroman to the fourth through the ninth accounts of the estate, however, the judge authorized the Mary Lemp estate to withhold from distribution to the Lemps the total amount spent maintaining and preserving their specifically devised property. On November 28, 1990, Judge Barnes entered an order refusing to reconsider the September 28 order and further ruling that the Lemps were responsible for $9,429.00 in income taxes paid by the estate on the earnings from the sale of the cooperative apartments.

On January 11, 1993, Judge Lopez considered additional objections to the twelfth and final account of the Mary Lemp estate. After reaffirming as "law of the case" the earlier rulings of Judge Haywood imposing on the Lemps both the maintenance and preservation costs of the specifically devised property and the federal and state taxes from the sale of the cooperative apartments, Judge Lopez permitted the estate to charge the Lemps interest for the use of the estate's residuary funds to pay for the costs associated with the specifically devised properties before distribution. The estate computed that interest at $10,541.72, based on an interest rate the estate had obtained for its other deposited funds.

In his order, Judge Lopez also denied James Lemp's belated request for $28,450 in compensation for services allegedly provided as co-personal representative of the estate. Both the estate and Stroman previously had objected to that request, in part, because of Lemp's illegal conversion of estate assets and his alleged "breach of fiduciary duty and dishonesty with respect to handling of the assets" of the Lemp estate. Relying on the equitable doctrine of "unclean hands," Judge Lopez held James Lemp disqualified from receiving any compensation for services he may have provided to the estate. The judge denied James Lemp's motion for reconsideration on November 12, 1993.

The estate ultimately distributed to John Lemp and Helena Lemp Duggan the notes received from the sales of the two cooperative apartments (with purchase price balances of $80,856.29 and $40,028.08), the real property in Maryland, Pennsylvania, and Virginia, and the assets contained in a Riggs (formerly the Guaranty) bank account.³ In accordance with the various trial court rulings, however, the estate withheld $29,695.73 for the costs of preserving and maintaining the...