Lohse's Estate, In re

• Decision Date: 10 April 1971
• Docket Number: No. 45919,45919
• Citation: 207 Kan. 36,483 P.2d 1048
• Parties: In the Matter of the ESTATE of Michial Wayne LOHSE, Deceased. Maria MARTINEZ and Vernon Lohse, Appellants, v. John C. RUBOW, Administrator, Appellee.
• Court: Kansas Supreme Court

Page 1048

483 P.2d 1048

207 Kan. 36

In the Matter of the ESTATE of Michial Wayne LOHSE, Deceased.

Maria MARTINEZ and Vernon Lohse, Appellants, v. John C. RUBOW, Administrator, Appellee.

No. 45919.

Supreme Court of Kansas.

April 10, 1971.

Syllabus by the Court

1. An administrator or an estate acts in a fiduciary capacity, and has a duty to exercise the utmost good faith in all of his transactions affecting the estate.

2. In attempting to settle unliquidated claims against an estate partially protected by liability insurance, the administrator's duty to exercise the utmost good faith implies honesty, fair dealing and adequate information with the ultimate object of his acting in the best interests of the estate.

3. The record is examined in an appeal from the denial of a petition to remove the administrator of an estate, and it is held: the trial court's findings are supported by substantial, competent evidence, and the court properly concluded there were insufficient grounds to order the administrator's removal.

Charles F. Forsyth, Erie, argued the cause, and Clark M. Fleming, Erie, was with him on the brief for the appellants.

Richard C. Hite, of Kahrs, Nelson, Fanning, Hite & Kellogg, Wichita, argued the cause and was on the brief for the appellee.

O'CONNOR, Justice:

This is an appeal from the denial of a petition to remove John C. Rubow as administrator of the estate of Michial Wayne Lohse, deceased.

On June 3, 1967, Lohse was the driver of an automobile which collided with another driven by Horace Martinez. Both drivers and two passengers in the Martinez vehicle were killed. A third passenger with Martinez received serious injuries in the accident.

Lohse had an automobile insurance policy issued by Western Indemnity Co. of Fort Scott. The policy provided liability coverage for bodily injuries and death with limits of $10,000 per person and $20,000 per accident. The insurance company petitioned the probate court of Neosho county for appointment of an administrator of the Lohse estate, and John C. Rubow, a Chanute attorney, was appointed September 28, 1967, when Lohse's parents refused to serve. At all times thereafter, Rubow acted as both administrator and attorney for the estate.

On October 19, Jesse Martinez, the injured survivor, filed a claim against the estate for damages in the amount of $22,861.36. Another claim for $35,876.85 was filed November 10 by the mother of Horace Martinez for the wrongful death of her son. On Rubow's demand, the insurance company, through its attorney, Mr. Charles Henshall, undertook defense of the aforesaid claims pursuant to the terms of the policy. An extensive investigation of the accident was conducted by the insurance company, Henshall, and Rubow. Finally, the insurance company acceded to Rubow's demand that the personal injury claim of Jesse Martinez be settled within policy limits for $9,500. The wrongful death claim for Horace Martinez could also have been settled for $9,500, but Rubow refused to demand settlement thereof because his investigation had revealed some evidence that Martinez may have been contributorily negligent. The insurance company's offer to settle for $2,000 was rejected by Martinez' mother. Thereupon, the claim was transferred to district court, and on May 20, 1968, a jury returned a verdict against the Lohse estate for $24,584.85.

On April 15, and on June 26, 1968, two more claims were filed against the estate for the wrongful deaths of the other passengers in the Martinez automobile-one for $25,000, the other for $35,700. The disposition of these claims is not shown by the record.

The insurance company subsequently paid its per person policy limits of $10,000 in partial satisfaction of the judgment in the Horace Martinez case. The attorney for the judgment creditor requested Rubow to sue the insurance company in an effort to recover the balance of the judgment in excess of policy limits. Rubow refused on the basis that there would be no merit in such an action.

The judgment creditor and the parents of Lohse then filed a petition in probate court for appointment of a special administrator of the estate for the express purpose of instituting suit against Rubow and the insurance company to recover an excess judgment. The petition was denied and a purported appeal was dismissed by the district court under authority of K.S.A. 59-2401.

Subsequently, the judgment creditor and the surviving parent of Lohse (hereinafter referred to as petitioners or appellants) filed the present petition in probate court to remove Rubow as administrator of the estate. The petition alleged that the insurance company had procured Rubow's appointment as administrator, and he was serving as its employee; that notwithstanding the judgment creditor's willingness to settle the Martinez claim within policy limits, Rubow, in violation of his fiduciary duties and contrary to the best interests of the estate, refused to demand settlement within those limits; that through his negligence and bad faith, Rubow failed to protect the estate; that he refused to file suit against the insurance company to recover a judgment in excess of policy limits; and that he had failed to marshal all the assets of the estate and should be removed as administrator.

After a hearing in probate court, the petition was denied on the ground it was barred by the doctrine of res judicata because of the earlier adverse determination of the petition for appointment of a special administrator. Petitioners appealed to the district court where the court declined to apply the doctrine of res judicata and heard the matter de novo on the merits. At the close of the evidence, the court made findings of fact, and concluded in substance that Rubow had fulfilled his duties and obligations as administrator, and had acted in good faith. Judgment was entered accordingly, and this appeal followed.

K.S.A.1967 (now 1970) Supp. 59-1711 provides in part:

'* * * Whenever a fiduciary fails or refuses to perform any of the duties imposed upon him by law or by any lawful order of the court, he may be removed and his compensation may be reduced or forfeited, in the discretion of the court.'

The law is clear that an administrator of an estate acts in a fiduciary capacity, and has a duty to exercise the utmost good faith in all his transactions affecting the estate. (Stump v. Flint, 195 Kan. 2, 402 P.2d 794; In re Estate of Anderson, 175 Kan. 18, 259 P.2d 180.) As in the case of any attorney-client relationship, the attorney for an administrator is also cast in the role of a fiduciary and binds himself to the highest degree of fidelity and the most scrupulous good faith. (See, Kirwin v. McIntosh, 153 Kan. 395, 110 P.2d 735; Haverty v. Haverty, 35 Kan. 438, 11 P. 364.)

The import of the district court's findings is that Rubow was not guilty of any misconduct warranting his removal as administrator. These findings, if supported by substantial, competent evidence, will not be disturbed on appellate review. (Jensen v. Jensen, 205 Kan. 465, 470 P.2d 829; In re Estate of Bernatzki, 204 Kan. 131, 460 P.2d 527.)

Appellants first assail the district court's finding that Rubow fulfilled his obligation to protect the estate on the ground that he failed to demand settlement of the Horace Martinez claim by the insurance company within policy limits.

The parties concede that the duty of the insurer to settle within...