Court Opinion

ID: 902190
Source: CourtListenerOpinion
Date Created: 2013-06-13 01:12:40.467646+00
Date Added: 2024-06-11T09:32:09.999510
License: Public Domain

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2012 S.D. 17

                           IN THE SUPREME COURT
                                   OF THE
                          STATE OF SOUTH DAKOTA

                                   ****

                     IN THE MATTER OF THE ESTATE
                       OF BERNADINE J. MONCUR.

                                   ****

                  APPEAL FROM THE CIRCUIT COURT OF
                    THE FOURTH JUDICIAL CIRCUIT
                    BUTTE COUNTY, SOUTH DAKOTA

                                   ****

                   THE HONORABLE JOHN W. BASTIAN
                              Judge

                                   ****

CASEY N. BRIDGMAN
Wessington Springs, South Dakota           Attorney for appellant
                                           Shirley Anderson.

TIMOTHY R. JOHNS of
Johns & Kosel, Prof LLC
Lead, South Dakota                         Attorneys for appellant
                                           Janet Nelson.

WESLEY W. BUCKMASTER
Belle Fourche, South Dakota                Attorney for appellees Dianne
                                           Irene Shear and Miki Val
                                           Scheef.

                                   ****
                                           CONSIDERED ON BRIEFS
                                           ON NOVEMBER 14, 2011

                                           OPINION FILED 03/07/12
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SEVERSON, Justice

[¶1.]         Two beneficiaries of the Moncur Revokable [sic] Family Trust (Trust)

petitioned the trial court to remove the co-trustees of the Trust on the grounds that

the co-trustees violated various fiduciary duties. The trial court denied the petition.

The beneficiaries appeal, raising the following issues: (1) whether the trial court

erred in finding the co-trustees did not violate their fiduciary duties by using a

surrogate bidder to purchase Trust property at public auction; and (2) whether the

trial court erred in finding the remaining allegations that the co-trustees breached

their fiduciary duties were without merit. We affirm.

                                     Background

[¶2.]         Bernadine Moncur (Bernadine) created the Trust on December 20,

2002.1 The beneficiaries of the Trust included Bernadine’s five daughters: Lois

Marie Moncur (Lois), Dianne Irene Shear (Dianne), Miki Val Scheef (Miki), Shirley

Kay Anderson (Shirley), and Janet Leann Nelson (Janet). Under the terms of the

Trust, Bernadine served as trustee until the date of her death, at which time Miki

and Dianne were to serve as successor co-trustees.

[¶3.]         Bernadine executed her last will and testament on January 14, 2003.

Under Article II of the will, Bernadine devised and bequeathed her entire estate to

the Trust. Miki and Dianne were named as co-personal representatives. Both the

Trust document and the will document were prepared by Bernadine’s attorney,

Leroy Hill.

1.      The Trust was amended on October 14, 2004.

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[¶4.]         Bernadine died on December 25, 2007. On December 31, 2007, Miki

and Dianne accepted their appointment as co-personal representatives of the estate

and co-trustees of the Trust. In accordance with Hill’s advice, Miki and Dianne

established a single checking account for the Moncur Trust and the Moncur estate.

This was done because under Bernadine’s will, the Moncur estate was to be devised

and bequeathed to the Moncur Trust.

[¶5.]         Among the assets held in the Trust was certain real property located in

Butte County. Shirley and Janet wanted the Butte County property sold

immediately. Miki and Dianne elected not to sell the Butte County property

immediately because they believed it was prudent to delay disposition of the

property until after the period for notice to creditors expired on May 12, 2008.

[¶6.]         Miki and Dianne arranged for the Butte County property to be sold at

auction. The auction took place on November 13, 2008.2 Miki and Dianne sent a

copy of the auctioneer’s employment contract to Shirley and Janet’s attorney. An

addendum to the employment contract stated family members were permitted to

enter the bidding. At the auction, Miki and Dianne used a surrogate bidder and

purchased the Butte County real estate for $309,000.

[¶7.]         On June 5, 2009, Shirley petitioned the circuit court to remove Miki

and Dianne from their positions as co-trustees of the Trust. Janet joined the

petition. The petition alleged Miki and Dianne breached their fiduciary duties to

the beneficiaries of the Trust by using a surrogate bidder to purchase the Butte

2.      The personal property held in the Trust was sold at a separate auction that
        took place on April 5, 2008.

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County property without obtaining permission from the beneficiaries. The petition

also contained several other allegations that Miki and Dianne violated the terms of

the Trust and breached their fiduciary duties to the beneficiaries.

[¶8.]           A court trial was held on February 24, 2010 and on April 23, 2010. In

a memorandum opinion dated November 30, 2010, the trial court denied Shirley

and Janet’s petition and found Miki and Dianne did not breach any of their

fiduciary duties.

                                          Decision

[¶9.]           As a fiduciary, a trustee has a duty “to act in all things wholly for the

benefit of the trust.” Willers v. Wettestad, 510 N.W.2d 676, 680 (S.D. 1994) (citing

Schroeder v. Herbert C. Coe Trust, 437 N.W.2d 178 (S.D. 1989); Restatement

(Second) of Trusts §§ 175, 176 (1959)). SDCL 55-2-1 provides that “[i]n all matters

connected with his trust a trustee is bound to act in the highest good faith toward

his beneficiary and may not obtain any advantage therein over the latter by the

slightest misrepresentation, concealment, threat, or adverse pressure of any kind.”

In addition, we have declared that “a fiduciary must act with utmost good faith and

avoid any act of self-dealing that places his personal interest in conflict with his

obligations to the beneficiaries.” In re Estate of Stevenson, 2000 S.D. 24, ¶ 9, 605

N.W.2d 818, 821 (quoting American State Bank v. Adkins, 458 N.W.2d 807, 811

(S.D. 1990)).

[¶10.]          Whether a trustee has breached a fiduciary duty is a question of fact.

Weekley v. Prostrollo, 2010 S.D. 13, ¶ 11 n.3, 778 N.W.2d 823, 827 n.3 (citing Ward

v. Lange, 1996 S.D. 113, ¶ 12, 553 N.W.2d 246, 250). “We review questions of fact

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under the clearly erroneous standard of review.” Id. (citing In re Regennitter, 1999

S.D. 26, ¶ 11, 589 N.W.2d 920, 923). However, we review purely legal questions de

novo, giving no deference to the trial court’s findings. Estate of Stevenson, 2000

S.D. 24, ¶ 7, 605 N.W.2d at 820 (citing Lustig v. Lustig, 1997 S.D. 24, ¶ 5, 560

N.W.2d 239, 241).

[¶11.]         1.    Whether Miki and Dianne violated their duty of loyalty to the
                     beneficiaries by purchasing the Butte County property.

[¶12.]         A trustee owes a duty of loyalty to the beneficiaries of the trust.

Willers, 510 N.W.2d at 680. This duty of loyalty generally precludes a trustee from

“tak[ing] part in any transaction concerning the trust in which he or anyone for

whom he acts as agent has an interest, present or contingent, adverse to that of his

beneficiary . . . .” SDCL 55-2-3. “However, our statutes set forth specific exceptions

to this general rule.”3 Estate of Stevenson, 2000 S.D. 24, ¶ 11, 605 N.W.2d at 821.

One such exception is set forth under SDCL 55-2-3(1), which provides:

               When the beneficiary does have the capacity to contract and,
               with a full knowledge of the motives of the trustee and of all
               other facts concerning the transaction which might affect his
               own decision and without the use of any influence on the part of
               the trustee, permits the trustee to do so . . . .

3.       An exception to this rule is set forth under SDCL 55-2-3(4). This statute
         allows a trustee to “take part in any transaction concerning the trust in
         which he or anyone for whom he acts as agent has an interest, present or
         contingent, adverse to that of his beneficiary . . . [w]hen the instrument
         creating the trust expressly grants permission to the trustee to buy, sell or
         lease property for the trust from or to the trust.” SDCL 55-2-3(4). Miki and
         Dianne concede that the Trust instrument does not expressly grant
         permission for the trustees to purchase Trust property for themselves. Thus,
         SDCL 55-2-3(4) is inapplicable.

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[¶13.]       The trial court found that the elements of SDCL 55-2-3(1) were met.

Shirley and Janet contend that the trial court abused its discretion in making this

finding. Specifically, Shirley and Janet argue they did not have “full knowledge of

the motives of [Miki and Dianne]” or the facts concerning the sale of the Butte

County property. It is undisputed that both Shirley and Janet have capacity to

contract.

[¶14.]       The record shows Shirley and Janet each received written notice of the

auction. This notice listed the date of the auction, as well as the terms and

conditions of the sale of the Butte County property. In addition, Shirley and Janet

received a copy of the auctioneer’s employment contract. An addendum to the

auctioneer’s employment contract indicated family members were welcome to enter

the bidding. During the court trial, both Shirley and Janet admitted that they were

aware that Miki and Dianne were interested in purchasing the Butte County

property. They also admitted that they were aware Miki and Dianne were going to

bid on the Butte County property during the auction. Neither Shirley nor Janet

voiced any objection to Miki and Dianne bidding on the property. We thus hold the

record supports the trial court’s finding that the elements of SDCL 55-2-3(1) were

met.

[¶15.]       Shirley and Janet argue that even if Miki and Dianne satisfied the

elements of SDCL 55-2-3(1), they still failed to overcome the presumption that the

Butte County property was sold “without sufficient consideration and under undue

influence.” This presumption is set forth under SDCL 55-2-8, which “provides that

when a trustee obtains an advantage from the beneficiary, it is presumed that the

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beneficiary entered into the transaction ‘without sufficient consideration and under

undue influence . . . .’” Estate of Stevenson, 2000 S.D. 24, ¶ 19, 605 N.W.2d at 823

(quoting SDCL 55-2-8). Shirley and Janet note that the Butte County property

appraised for $490,000 in February 2008. However, at auction on November 13,

2008, the property sold for only $309,000.

[¶16.]       Prior to the auction, Bernadine had a real estate broker list the Butte

County property at $500,000 for an extended period of time. She did not receive an

offer. Miki and Dianne eventually elected to sell the property at auction. They

hired Jack Mills to be the auctioneer. Mills had thirty years of experience as an

auctioneer and realtor. Mills testified at the court trial that the auction was

competitive, and that the price was pushed higher by the use of a surrogate bidder

for Miki and Dianne. Prior to the auction, Mills estimated that the Butte County

property would bring between $275,000 and $375,000 at auction. The property sold

for an amount within this range.

[¶17.]       Mills’s testimony that the auction was competitive was corroborated by

Merlin Porterfield, who was a registered auction bidder on the Butte County

property. Porterfield testified that he bid aggressively against the surrogate bidder,

John Wolff. Porterfield also testified he did not know Wolff was acting as a

surrogate bidder for Miki and Dianne.

[¶18.]       The record supports the trial court’s finding that Miki and Dianne did

not use their influence as trustees to compel Shirley and Janet to permit them to

purchase the Butte County property at auction. Shirley and Janet admitted they

knew the terms and conditions of the sale of the Butte County property and were

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aware Miki and Dianne were planning to bid on the property. Evidence was

introduced at trial to show that the auction of the Butte County property was

competitive and Miki and Dianne’s bid was fair and reasonable. The record

supports the trial court’s finding that Miki and Dianne overcame the presumption

set forth under SDCL 55-2-8. We thus hold the trial court did not abuse its

discretion in finding Miki and Dianne did not violate their duty of loyalty to the

beneficiaries by purchasing the Butte County property.

Timing of the auction

[¶19.]       Before the auction of the Butte County property, Miki and Dianne held

an auction to dispose of personal property held in the Trust. This personal property

auction took place April 5, 2008. Shirley and Janet argue that Miki and Dianne

should have arranged to auction the Butte County property at the same time the

personal property was auctioned on April 5, 2008. Shirley and Janet allege that

Miki and Dianne used their position as trustees to delay the sale of the Butte

County property until November 13, 2008, so that they could purchase the property

at a reduced price. We find no evidence in the record to support the claim that Miki

and Dianne deliberately delayed the sale of the Butte County property in order to

reduce its price.

[¶20.]       Under the terms of the Trust, it was within Miki and Dianne’s

discretion to hold the auction of the Butte County property on November 13, 2008.

Section Fifteen, Subsection I of the Trust states, “Trustees in their discretion is [sic]

expressly authorized to hold and retain any securities, properties, or other

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investments for such length of time as Trustees deems [sic] advisable.” In addition,

SDCL 55-1A-5 provides,

               A trustee may collect, hold, and retain trust assets until, in his
               judgment, disposition of the assets should be made, without
               regard to any effect the retention may have upon the
               diversification of the trust estate. Trust property may be
               retained even though it includes an asset in which its trustee is
               personally interested.4

[¶21.]         By holding the Butte County property auction on November 13, 2008,

Miki and Dianne gave the auctioneer time to conduct advertising and prepare for

the auction. In addition, the preparation of the Butte County property for sale

involved obtaining an engineering survey to subdivide the property. Miki and

Dianne testified that they were unable to find an engineer that could conduct the

survey before the personal property sale on April 5, 2008. In light of these facts,

Miki and Dianne determined it was in the best interest of the Trust to hold the

Butte County property auction on November 13, 2008. The trial court properly

concluded Miki and Dianne did not violate their fiduciary duties by holding the

auction on this date.

[¶22.]         2.    Whether the trial court erred in finding the remaining
                     allegations that the co-trustees breached their fiduciary
                     duties were without merit.

[¶23.]         Shirley and Janet made numerous additional allegations that Miki and

Dianne breached their fiduciary duties to the beneficiaries of the Trust. The trial

4.       SDCL 55-1A-1 provides that the powers enumerated in SDCL chapter 55-1A
         “apply to any trust which is governed by South Dakota law unless the
         instrument specifically excludes any or all of the powers provided in [SDCL
         chapter 55-1A].” In this case, the Trust did not exclude the powers
         enumerated in chapter 55-1A. Therefore, SDCL 55-1A-5 applies.

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court evaluated each of these claims and determined they were without merit.

After reviewing the record in this case, we find that the trial court properly found

Shirley and Janet’s allegations were unsubstantiated by the record.

[¶24.]       Affirmed.

[¶25.]       GILBERTSON, Chief Justice, and KONENKAMP, ZINTER, and

WILBUR, Justices, concur.

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