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In re Estate of Finch

Supreme Court of South Dakota

April 12, 2017

In the Matter of the Estate of FRED W. FINCH, Deceased.

          CONSIDERED ON BRIEFS ON MARCH 22, 2017

         APPEAL FROM THE CIRCUIT COURT OF THE THIRD JUDICIAL CIRCUIT MOODY COUNTY, SOUTH DAKOTA THE HONORABLE PATRICK T. PARDY Judge

          JOEL A. ARENDS Sioux Falls, South Dakota Attorney for appellant Dean Anderson.

          JOHN A. SHAEFFER of Shaeffer Law Office Flandreau, South Dakota Attorney for appellee Coral Headrick as Personal Representative.

          WILSON M. KLEIBACKER of Lammers Kleibacker, LLP Madison, South Dakota Attorneys for appellee Coral Headrick personally.

          WILBUR, Justice

         [¶1.] In this appeal from the settlement of an estate, one beneficiary challenges the award of expenses, disbursements, and attorney's fees to the personal representative. We affirm.

         Background

         [¶2.] Coral Headrick served as Fred Finch's attorney-in-fact from 2009 until Finch's death in November 2012. Headrick had been a close friend and neighbor to Finch and his now-deceased wife Reva. Finch had no children. He died when he was 91 years old. Finch's Last Will and Testament nominated Headrick as personal representative of his estate. In November 2012, the circuit court issued letters appointing Headrick as personal representative and admitted Finch's Will to informal probate. On February 22, 2013, Headrick filed an inventory for the estate, certifying the estate's assets and values of those assets. She filed a revised inventory in June 2013, which set forth the gross value of the estate at $4, 218, 449.01.

         [¶3.] Dean Anderson and Dale Anderson are Finch's nephews and beneficiaries of the estate. Sharlene Swier is Finch's niece and also a beneficiary of the estate. On November 18, 2013, Dale and Swier petitioned for supervised administration of the estate and for removal of Headrick as personal representative. They asserted that they had conducted an investigation into Headrick's use of the power of attorney "to obtain items for herself and a family member" from 2009 to 2012. The power of attorney contained no provision for gifting or self-dealing. Dale and Swier alleged that the investigation revealed that Headrick had received, via self-dealing, expensive jewelry, a quilting machine, trips to the salon, a washer and dryer, among other items. Dale and Swier claimed to have made a demand upon Headrick for repayment of the funds but could not "reach a fair agreement for repayment of the money to the Estate." Dale and Swier also challenged Headrick's payment of her personal representative fees and the payment of attorney's fees out of the estate. They asked the circuit court for a hearing.

         [¶4.] The record reveals that, in October 2013, Headrick returned $31, 491.14 to the estate. She claimed she did so because she and the estate's counsel became aware of this Court's decision in Bienash v. Moeller, 2006 S.D. 78, 721 N.W.2d 431. In Bienash, we held that, absent a specific right in the papers creating the power of attorney, an attorney-in-fact has no right to self-deal and cannot use oral extrinsic evidence to prove that the right to self-deal was intended. Id. ¶ 24. Although Headrick alleged that each gift was made at the direction or request of Finch and that, in most instances, Finch specifically told her to write the checks, she nevertheless returned a sum she believed represented self-dealing based on her and the attorney's examination of the checking account.

         [¶5.] In April 2014, Headrick filed a verified statement for informal closing of the estate. Dale and Swier objected to Headrick's verified statement and petitioned for review of compensation and attorney's fees. They acknowledged that Headrick had returned $31, 491.14 to the estate but claimed that the amount was less than she owed. Dale and Swier alleged that Headrick owed $1, 100, 000. They also disputed Headrick's payment of personal representative fees in the amount of $60, 000 because in their view it was in excess of that allowed under SDCL 29A-3-719. Dale and Swier challenged the payment of attorney's fees totaling $89, 730.86 as improper and excessive. Dean filed a motion to join Dale and Swier's petition for supervised administration and removal of personal representative. Dean also filed a separate petition for termination of Headrick as personal representative and for the appointment of a special administrator.

         [¶6.] In September 2014, Headrick replied to the petitions for her removal. She noted that in addition to the October 2013 reimbursement, she had reimbursed the estate $24, 663.70 after reviewing the debits and credits on a specific bank account. Headrick asserted that after reimbursing the estate in this amount, she owed the estate no more money. She further asserted that her fees as personal representative were warranted because she had filed returns, paid taxes, conveyed real estate, sold personal property, sold Finch's home, made sure the bequests in the Will were paid, obtained insurance proceeds, paid bills and indebtedness, in addition to other activities. Headrick argued that the amount of attorney's fees was reasonable because the attorney had spent over 165 hours working on the estate. Headrick requested that the circuit court permit her to finish her duties and deny the petitions for her removal.

         [¶7.] The circuit court held a hearing in September 2014 and, thereafter, issued an order appointing a special administrator "to investigate and return a written report within ninety (90) days[.]" The court directed the special administrator to investigate the following issues:

a. The issue of self-dealing by Coral Headrick while serving as the duly appointed ...

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