Weekley v. Prostrollo

• Decision Date: 10 February 2010
• Docket Number: No. 24970.,24970.
• Citation: 778 N.W.2d 823,2010 SD 13
• Parties: Jeanie WEEKLEY, Plaintiff and Appellant, v. Jerry PROSTROLLO and Robert J. Wagner, Defendants and Appellees.
• Court: South Dakota Supreme Court

778 N.W.2d 823

2010 SD 13

Jeanie WEEKLEY, Plaintiff and Appellant, v. Jerry PROSTROLLO and Robert J. Wagner, Defendants and Appellees.

No. 24970.

Supreme Court of South Dakota.

Argued February 18, 2009.

Decided February 10, 2010.

Reassigned August 4, 2009.

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

James C. Roby, George J. Hawkins of Green, Roby, Oviatt, Cummings & Linngren, LLP, Watertown, South Dakota, Attorneys for defendant and appellee, Prostrollo.

James A. Power, Richard O. Gregerson of Woods, Fuller, Shultz and Smith, PC, Sioux Falls, South Dakota, Attorneys for defendant and appellee, Wagner.

KONENKAMP, Justice (on reassignment).

[¶ 1.] A beneficiary brought suit against an estate's personal representatives. She alleged breach of fiduciary duty and negligence. After a bench trial, the circuit court ruled in favor of the personal representatives. On appeal, we affirm in part, reverse in part, and remand.

Background

[¶ 2.] Walter Brownlee, Sr. died testate on August 17, 1997. His will devised all his Certificates of Deposit, his residence, and most of his personal property to his long-time companion, Jeanie Weekley. The bulk of Brownlee's estate, however, passed into a trust for the benefit of his children and grandchildren. Since Brownlee's death, his estate has been the subject of two decisions by this Court. In re Estate of Brownlee (Brownlee I), 2002 SD 142, 654 N.W.2d 206; Wagner v. Brownlee (Brownlee II), 2006 SD 38, 713 N.W.2d 592.

[¶ 3.] In Brownlee I, we examined, among other things, whether the terms of Brownlee's will and trust prescribed that federal and state taxes would be paid by the principal of the trust. Based on the language of the trust and will, we concluded that the beneficiaries were responsible for the state inheritance taxes attributable to the property they received. The federal taxes, however, were to be equitably apportioned among the beneficiaries under SDCL 29A-3-916. Brownlee I, also considered whether Brownlee's pre-death execution of a Bill of Sale to his son, Randy Brownlee, for certain construction equipment was a gift. Because Randy failed to establish all the elements of a gift, we affirmed the circuit court's conclusion that the Bill of Sale was an ineffective gift of the construction equipment. At the time of Brownlee's death, therefore, the equipment became part of the estate.

[¶ 4.] After Brownlee I, the estate initiated an action to recover the equipment and to apportion the inheritance taxes.¹ Weekley counterclaimed for interest on her unpaid devise of the certificates of deposit, as well as interest on $25,000 of personal funds that she provided to help administer the estate. She also sought an award of more than $76,000 in attorney's fees that she incurred in the estate litigation, including the prior appeal. See Brownlee II, 2006 SD 38, ¶ 7, 713 N.W.2d at 595. The circuit court granted Weekley's fees related to her efforts in setting aside the transfer of the construction equipment and denied her request for interest on her unpaid devise and the $25,000 she provided to help administer the estate.

[¶ 5.] Weekley appealed to this Court. She challenged the court's denial of her attorney's fees request for her efforts regarding the inheritance tax apportionment. In Brownlee II, we affirmed the court's denial of fees, concluding that "[b]ecause Weekley was the only beneficiary that would have avoided any tax liability under her theory, it was not an abuse of discretion for the circuit court to conclude that her efforts were primarily for her own financial gain rather than for the benefit of the estate, notwithstanding any alleged effort to effectuate the testator's intent." Id. ¶ 19. We also denied her request for appellate attorney's fees incurred in Brownlee I, as she failed to request those fees in that appeal.

[¶ 6.] As for Weekley's claim that the court erred when it denied her interest on her unpaid devise and the $25,000 contribution to the estate, we held that she indeed incurred damages by the estate's inexplicable non-action. "[N]o justification has been presented for the estate's failure to recover the equipment and pay Weekley's claims as expeditiously and efficiently as is consistent with the best interests of the estate[.]" Id. ¶ 26. Therefore, she was entitled to "interest on the amount of her unpaid devise and on the $25,000 she provided for the administration of the estate." Id. We also awarded Weekley one-half her request for appellate attorney's fees for Brownlee II.

[¶ 7.] Following Brownlee II, a judgment was entered against the estate in favor of Weekley awarding her $168,223.74, plus post-judgment interest, representing the amount she was owed for her devise, attorney's fees, appellate attorney's fees, and interest due to the delay in receiving her devise. Weekley then brought suit against Jerry Prostrollo and Robert Wagner, the past and current personal representatives, for breach of their fiduciary duties in the administration of the estate.² According to Weekley, Prostrollo and Wagner negligently handled the estate's affairs, causing her to suffer loss to her devise. See SDCL 29A-3-808(b).

[¶ 8.] Following a trial, the circuit court issued a memorandum opinion, and later, findings of fact and conclusions of law. The parties did not dispute that the estate owed Weekley $168,223.74 in interest, her unpaid devise, and attorney's fees. Nonetheless, the estate did not have sufficient money or assets to pay its obligations to Weekley. She argued that because Prostrollo and Wagner negligently handled certain affairs of the estate, breaching their fiduciary duties, they should be jointly and severally liable for the loss she suffered.

[¶ 9.] While the circuit court acknowledged that Prostrollo and Wagner owed a fiduciary duty to Weekley, it also considered the fact that in the ten years since Brownlee's passing much of the delay in the administration of the estate was caused by the hostile relationship between Randy and Weekley. As to the federal estate taxes, the court concluded that Prostrollo did not breach his fiduciary duty to Weekley: Prostrollo was justified in relying on advice of counsel. Similarly, the court held that Wagner did not breach his duty to collect Randy's portion of the federal estate tax obligation after Brownlee I. At the time of the court's decision, a suit by Wagner, against Randy, was pending, and Wagner's strategy of attempting to negotiate with Randy was deemed legitimate.

[¶ 10.] The circuit court separately considered whether Prostrollo and Wagner were negligent when they failed to take possession or preserve the construction equipment after the circuit court judicially determined the equipment to be part of the estate. Acknowledging that during Prostrollo's tenure as personal representative, he did not attempt to take possession of the equipment and failed to inventory or independently appraise the equipment, the court held that Prostrollo nonetheless did not breach his fiduciary duty to Weekley. The equipment was appraised shortly after Brownlee's death at $171,000, but the issue of ownership of the equipment was not raised until almost three years afterwards, which resulted in litigation and an appeal to this Court. Because Brownlee I was not decided until after Prostrollo's tenure, the court found no negligence.

[¶ 11.] As for the case against Wagner, the court found that his failure to inspect, inventory, collect, and manage the equipment after this Court's November 2002 Brownlee I decision constituted a breach of his fiduciary duty. But the court held that it could not reasonably calculate Weekley's damages and thus awarded her nothing. Weekley appeals asserting that the court erred when it concluded that Prostrollo did not breach his fiduciary duty and that both Prostrollo and Wagner were not responsible for her damages.³

Analysis and Decision

[¶ 12.] Under SDCL 29A-3-808(b), a personal representative may be held liable for negligent administration of an estate. Personal representatives act in a fiduciary capacity on behalf of those having an interest in the estate. Ward v. Lange, 1996 SD 113, ¶ 15, 553 N.W.2d 246, 251 (quoting Christie v. Dold, 524 N.W.2d 866, 871 (S.D.1994)). Therefore, "[i]f the exercise of power concerning the estate is improper, the personal representative is liable to interested persons for damage or loss resulting from the breach of fiduciary duty." SDCL 29A-3-712.

[¶ 13.] Weekley claims negligence in: (1) Prostrollo's duty to collect federal estate taxes, (2) Wagner's duty to collect federal estate taxes, (2) Prostrollo's duty with regard to the construction equipment, and (4) Wagner's duty with regard to the construction equipment. Weekley also asserts that the circuit court erred when it held that it could not calculate her damages to a reasonable certainty.

1. Federal Estate Taxes—Prostrollo

[¶ 14.] Weekley argues that Prostrollo breached his fiduciary duty when he failed to collect the federal estate taxes Randy owed. Prostrollo responds that he could not have determined what estate taxes Randy owed until after this Court's ruling in Brownlee I, a decision rendered after his tenure as personal representative. He further contends that he relied on advice of counsel regarding the estate tax issue. The circuit court reviewed the evidence and found that "there was a legal question involving how the federal estate tax should be apportioned between the heirs." From our review of the record, the court's finding was not clearly erroneous. The amount of federal estate taxes owed by Randy was in dispute and not resolved by the end of Prostrollo's tenure. Further, Prostrollo's reliance on advice of counsel was justified.

2. Federal Estate Taxes—Wagner

[¶ 15.] Wagner succeeded Prostrollo as personal representative in November 2002, shortly after this...