Wagner v. Brownlee, 23619.

Citation2006 SD 38,713 N.W.2d 592
Decision Date12 April 2006
Docket NumberNo. 23619.,23619.
PartiesRobert J. WAGNER, Personal Representative of the Estate of Walter L. Brownlee, Sr., Plaintiff and Appellee, v. Randy BROWNLEE, Defendant, and Jeanie Weekley, Defendant and Appellant.
CourtSupreme Court of South Dakota

Appeal from the Circuit Court of the Third Judicial Circuit, Codington County; Ronald K. Roehr Judge.

John L. Foley of Foley Law Office, Watertown, South Dakota, Attorney for plaintiff and appellee.

Gregory J. Stoltenburg, Todd D. Boyd of Gunderson, Evenson, Boyd Knight & Stoltenburg, Clear Lake, South Dakota, Attorneys for defendant and appellant.

ZINTER, Justice.

[¶ 1.] An estate beneficiary sued for interest on an unpaid devise. The beneficiary also sought attorney's fees incurred in litigating a number of estate disputes. We reverse the circuit court's denial of interest on the devise and affirm its award of partial attorney's fees.

Facts and Procedural History

[¶ 2.] This is the second time this case has been appealed to this Court. See In re Estate of Brownlee, 2002 SD 142, 654 N.W.2d 206. As we indicated in the first appeal, Walter L. Brownlee, Sr., died testate on August 17, 1997. His Last Will and Testament was filed for probate on September 3, 1997. Under the will, certificates of deposit, household goods, and other personal property were bequeathed to Jeanie Weekley, his long time companion. The remainder of his probate estate was bequeathed to his children.

[¶ 3.] Prior to his death, Brownlee created and funded a trust for the benefit of his children and grandchildren. He had also transferred several items of personal property to some of his heirs. Soon after his death, disagreements arose between Weekley and Brownlee's children. One dispute involved the validity of the inter vivos transfer of construction equipment that was purportedly given to Brownlee's son. A second disagreement involved the estate's and the trust's respective liability for the estate and the inheritance taxes.

[¶ 4.] As a result of these disputes, Weekley petitioned the circuit court to interpret Brownlee's Last Will and Testament and set aside the purported inter vivos transfer of the construction equipment. Weekley argued that the transfer was an ineffective gift, and therefore, the construction equipment should have been part of the residuary estate. Weekley also asked the court to require the trust to pay the estate and the inheritance taxes. Weekley finally requested the circuit court to determine the nature of the bequest of the certificates of deposit. She contended that her bequest was a specific devise, which would have provided her more favorable treatment in an impending abatement.1

[¶ 5.] The circuit court agreed with Weekley on two issues. It ruled that the inter vivos bill of sale to the son was an ineffective transfer of the construction equipment, and therefore, the equipment was part of the residuary estate. It also ruled that the bequest of the certificates of deposit was a specific devise. The circuit court, however, disagreed with Weekley's contention that the trust should pay all of the estate and inheritance taxes. Instead, the circuit court ordered that the federal estate tax should be paid from the residuary estate and that the state inheritance taxes should be paid by each beneficiary according to the value of the property they received.

[¶ 6.] Weekley appealed the circuit court's ruling on the taxes, and Brownlee's son appealed the circuit court's ruling disallowing the transfer of the construction equipment. This Court affirmed the circuit court's disallowance of the transfer of the construction equipment and affirmed the court's apportionment of the state inheritance taxes. However, we modified the circuit court's ruling regarding the federal estate tax. We held that the tax clause of the will was ambiguous, and therefore, the federal estate tax was to be equitably apportioned among all of the beneficiaries under SDCL 29A-3-916. Brownlee, 2002 SD 142, ¶¶ 25, 27, 34, 654 N.W.2d at 212-14.

[¶ 7.] After our decision, the estate initiated this action to recover the construction equipment and to apportion the taxes. Weekley counterclaimed for interest on her unpaid devise of the certificates of deposit.2 She also sought interest on $25,000 of personal funds that she provided to help administer the estate. She finally sought an award of more than $76,000 in attorney's fees that she incurred in the estate litigation, including the prior appeal. The circuit court heard oral arguments on these issues on February 25, 2004.

[¶ 8.] After oral arguments, but before the circuit court issued its opinion, we decided In re Estate of Holan, 2004 SD 61, 680 N.W.2d 331, and In re Estate of Siebrasse, 2004 SD 46, 678 N.W.2d 822 (Siebrasse III). Weekley claimed that these cases affected the issues that were under consideration. Therefore, she moved to reopen to present additional evidence on the attorney's fees request and to present additional written arguments on her claim for interest. The circuit court granted Weekley's motion. However, after hearing further arguments, the circuit court refused to accept additional evidence relating to the attorney's fees because the court concluded that our recent decisions did not change the law. The court ultimately awarded Weekley only the attorney's fees for setting aside the transfer of the construction equipment because it benefited the estate. The court also denied Weekley's request for interest on her unpaid devise and on the $25,000 she provided to help administer the estate. Weekley appeals, raising the following issues:

1) Whether the circuit court erred in refusing to consider additional evidence after granting Weekley's motion to reopen.

2) Whether the circuit court erred in not awarding Weekley additional attorney's fees.

3) Whether the circuit court erred in determining that Weekley was not entitled to interest on her devise and on the $25,000 of personal funds she advanced to administer the estate.

Analysis and Decision
1) Refusal to consider additional evidence after granting Weekley's motion to reopen

[¶ 9.] The circuit court has discretion to determine whether to reopen a case to permit additional evidence. Brownlee, 2002 SD 142, ¶ 37, 654 N.W.2d at 214. The circuit court's decision will not be disturbed "unless there has been an abuse of discretion." Id. (citing Hrachovec v. Kaarup, 516 N.W.2d 309, 311 (S.D.1994)).

[¶ 10.] Weekley's request to present additional evidence on attorney's fees was based primarily on our intervening decision in Siebrasse III, 2004 SD 46, 678 N.W.2d 822. Weekley argued that Siebrasse III changed the law regarding attorney's fees by adopting the two-prong test used in In re Estate of Hafferman, 442 N.W.2d 238 (S.D.1989). The circuit court, however, declined to consider new evidence because it concluded that Siebrasse III did not establish new law, and therefore, "Weekley was merely presenting evidence [that] could have been presented earlier." Thus, the circuit court denied what it described as Weekley's attempt to get "a second bite of the apple."

[¶ 11.] On appeal, Weekley contends that the two-prong test utilized in Hafferman was not the law in South Dakota during the first hearing and that the two-prong test was reestablished in Siebrasse III. However, a review of our cases and the Uniform Probate Code (UPC) reveals that the Hafferman two-prong test was not reestablished in Siebrasse III. Therefore, the law did not change between the two hearings.

[¶ 12.] The basis for the Hafferman two-prong test was this Court's decision in In re Engebretson's Estate (Engebretson I), 68 S.D. 255, 1 N.W.2d 351 (1941). Engebretson I involved a personal representative's action to recover a deficiency in a land foreclosure. Id. at 257, 1 N.W.2d at 352. Following a ruling adverse to the personal representative, the beneficiaries' attorney successfully challenged the adverse ruling and obtained a favorable recovery for the estate. Id. at 258, 1 N.W.2d at 352. In awarding attorney's fees to the beneficiaries for that recovery, this Court applied the following rule: "It has been held, as a general rule, that an allowance may be made out of the estate of a deceased person for the services of attorneys for beneficiaries where those services were beneficial to the estate." Id. at 260, 1 N.W.2d at 353 (emphasis added). However, the Court, in dicta, also quoted the Michigan Supreme Court, which applied a more limited two-prong test:

A doctrine which permits a decedent's estate to be so charged, should, however, in our opinion, be applied with caution and its operation limited to those cases in which the services performed have not only been distinctly beneficial to the estate, but became necessary either by reason of laches, negligence, or fraud of the legal representative of the estate.

Id. at 261, 1 N.W.2d at 353 (quoting Becht v. Miller, 279 Mich. 629, 638, 273 N.W. 294, 298 (1937)). Although this Court did not expressly adopt Michigan's two-prong test in Engebretson I, the test was used and modified in many of our pre-Siebrasse III cases that involved beneficiary attorney's fees, including Hafferman.3

[¶ 13.] Despite a lengthy and conflicting history regarding the applicability of the two-prong test, the South Dakota Legislature clarified the matter in 1995 when it adopted the UPC. The relevant statute governing beneficiary attorney's fees did not contain any reference to a second prong requiring laches, negligence, or fraud. See SDCL 29A-3-720. Rather, for a beneficiary to recover attorney's fees, SDCL 29A-3-720 only required that the beneficiary's services "resulted in a substantial benefit to the estate."

[¶ 14.] After the 1995 adoption of SDCL 29A-3-720, our next opportunity to address this issue came in Siebrasse III, 2004 SD 46, 678 N.W.2d 822, which Weekley relied on in her motion to reopen. In ...

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