Opinion ID: 1842503
Heading Depth: 1
Heading Rank: 4

Heading: removal of mrs. dunham as executrix

Text: Katherine O. Dunham was named executrix of Ted F. Dunham, Sr.'s, estate by Ted, Sr., in his will. Richard and Ted, Jr., have sought the removal of Katherine as executrix of the estate alleging that she has mismanaged the estate and breached her fiduciary duty to the heirs. The trial court, while finding that there certainly was a conflict of interest between Katherine and the two sons, did not find that she had breached her duties as executrix, and that the conflict of interest was not sufficient to require her removal. The Court of Appeal reversed this ruling by the trial court, holding that Katherine had in fact breached her fiduciary duty as executrix, and that removal was warranted. Katherine is seeking a review of that ruling. As noted by both the trial court and Court of Appeal a mere conflict of interest between the succession representative and the heirs is not sufficient ground for removal of the succession representative. Succession of Kaffie, 273 So.2d 318 (La.App. 3d Cir. 1973), writs refused 276 So.2d 701 (La. 1973); and Succession of Favalora, 169 So.2d 197 (La.App. 4th Cir. 1964), writs refused 247 La. 355, 171 So.2d 476 (1965). For removal of the succession representative, the party seeking the removal must show more than a mere conflict of interest. The grounds for removal of a succession representative are set out in C.Civ.P. art. 3182 as follow: The court may remove any succession representative who is or has become disqualified, has become incapable of discharging the duties of his office, has mismanaged the estate, has failed to perform any duty imposed by law or by order of court, .... (emphasis provided) The duties of a succession representative are set out in C.Civ.P. art. 3191 as follow: A succession representative is a fiduciary with respect to the succession, and shall have the duty of collecting, preserving, and managing the property of the succession in accordance with law. He shall act at all times as a prudent administrator, and shall be personally responsible for all damages resulting from his failure so to act. Therefore, reading the two articles together it is clear that a succession representative cannot be removed because of a mere conflict of interest, but rather, it must be shown that he has mismanaged the estate or breached one or more of his required duties. Appellees contend that Katherine, in addition to having a conflict of interest such that it affects her daily administration of the succession, has in fact mismanaged the succession and has breached her fiduciary duty to the heirs and legatees. Appellees point to the comments to C.Civ.P. art. 3191 as providing the fiduciary standard referred to in the article. Comment (a) to C.Civ.P. art. 3191 provides in pertinent part: This article is broad in scope and states the fiduciary relationship existing between the representative and the succession... should pervade all his operations and should not be restricted to his functions in relation to the collection, preservation, and management of assets only. Appellees argue that Katherine breached her fiduciary duties when she sold 394 shares of Anderson-Dunham stock back to that corporation. The corporation, of which Katherine was a director and officer, passed a resolution in 1973 providing that the corporation would redeem any stock of a deceased shareholder that his administrator might desire to sell. It further provided that the price should be no greater than 105% of the book value in the corporation's previous certified audit. In view of this resolution, Katherine as executrix wrote the corporation on May 3, 1977, attempting to sell 394 shares of Ted, Sr.'s, separately owned stock back to the corporation. While the corporation was by the 1973 corporate resolution authorized, or perhaps required, to purchase the stock of a deceased shareholder at the prescribed minimum and maximum determinable price it was nonetheless at liberty by appropriate resolution of its Board of Directors, and with the concurrence of the deceased shareholder's succession representative as to terms, to confect a new contract for acquisition of Ted, Sr.'s, stock. However, on May 4, 1977, the corporation adopted a resolution to redeem the shares at 105% of the book value from the April 1977 audit, or $1,519.15 per share. Katherine petitioned the court to have the sale authorized at this price. Richard attempted to enjoin the sale but on August 8, 1977, the trial court denied the injunction and authorized the sale. As found by the Court of Appeal, Katherine did breach her fiduciary duty in permitting this stock redemption to take place at the above price. Katherine was very active in running the affairs of the corporation. She had knowledge of its affairs, its assets and its cash flow. There was evidence introduced that the corporation received over $500,000.00 in assets the day after the redemption took place, receipts which Katherine surely must have known were forthcoming. Yet she made no attempt to have these receipts or some of them included in an updated audit and the proper adjustment made to the value of the stock. Likewise, the West Texas property, owned by Anderson-Dunham, Inc. was valued on the corporate books at only $1,392,000.00. Nonetheless, Katherine knew the property was worth at least $5,000,000.00 and had already advertised it for sale at over $5,000,000.00. Perhaps as a corporate officer there was nothing wrong with the low valuation of the Texas property on the corporate books, but as executrix of the estate, in attempting to sell stock back to the corporation, she certainly should have insisted on a more updated valuation of the property since the sale price for the stock was in large measure being set according to the value of the corporate assets. Furthermore, appellees have produced evidence indicating that at the time of the sale, the succession debts were not as high as she had earlier alleged in getting the court approval for the sale and that the money needed to pay the debts could have been obtained from other sources without the necessity of selling this stock, or at least not as much of it, stock in Anderson-Dunham being the succession's most valuable asset. There was also admitted as evidence a board resolution which Katherine participated in having passed, in which it was provided that it is disadvantageous to this corporation, as a creditor [6] of the decedent's succession, to have any of the assets delivered to any of the beneficial interest owners or legatees of the decedent. Participation in this type of corporate activity is directly at cross purposes with Katherine's fiduciary duty to the administration of the succession, as provided in C.Civ.P. art. 3197, to close the succession as soon as advisable and clearly reflects a breach of fiduciary duty to the succession. In view of the above, we find that the Court of Appeal did not err in holding that Katherine had breached her fiduciary duty as executrix and in ordering her removed as executrix of the succession.