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COURT OF APPEALS DECISION DATED AND RELEASED NOVEMBER 14, 1995 |
NOTICE |
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A party may file with the
Supreme Court a petition to review an adverse decision by the Court of Appeals. See § 808.10 and Rule 809.62, Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No. 95-0715
STATE
OF WISCONSIN IN COURT OF
APPEALS
DISTRICT III
IN RE THE ESTATE OF
MARILYN J. KANESHIRO:
DALE W. JOHNSON,
Appellant,
v.
ESTATE OF MARILYN J.
KANESHIRO
and WESTERN SURETY
COMPANY,
Respondents.
APPEAL from a judgment
of the circuit court for Washburn County:
WARREN WINTON, Judge. Affirmed.
Before Cane, P.J.,
LaRocque and Myse, JJ.
PER CURIAM. Dale Johnson appeals a judgment against him
for $85,988.10 arising out of neglect and bad faith as personal representative
of the estate of Marilyn Kaneshiro.
Johnson argues that the trial court (1) erroneously found that he acted
in bad faith and failed to keep proper accounts and (2) erroneously calculated
the amount of surcharge due. Because
the record supports the trial court's findings, we affirm.
Kaneshiro died on
December 24, 1989. Her will named her
two daughters, ages seventeen and nineteen, and Johnson, her companion, as
heirs. Her will left Johnson a life
estate in her home and the balance of her estate in trust to her daughters
until the age of twenty-five, at which time the remaining trust assets would be
distributed to them. She named Dale Johnson as personal representative and
trustee.
On February 16, 1990,
application for informal administration initiated probate proceedings. After Johnson was appointed personal representative,
he filed an inventory indicating $186,111.59 of property subject to
administration and $7,877.11 not subject to division. Johnson retained attorney Thomas Kissack to assist his
administration of the estate.
At trial, Johnson
testified that he received $12,263.45 as proceeds from an auction of
Kaneshiro's personal property that was not reflected on the inventory. He also testified that he received
$50,849.08 from Allstate Insurance Co., and $5,340 from Banker's Life Insurance
Co., payable to the estate, and neither sum was reflected on the probate
inventory. Johnson further testified
that he received a check for $34,484.74 from Benson-Thompson, Inc.,
representing proceeds from the sale of estate property. Johnson admitted that he endorsed the check
and deposited it into his personal checking account. Johnson further testified that he received various other checks
from Kissack's office amounting to $119,392.03.
In June 1990, Johnson
took $110,500 from the estate, paid for real estate in Florida, titling the
property in his name.[1] On October 5, 1990, Dale W. Johnson &
Associates, by Johnson, owner, loaned itself $33,884.74 of estate funds, and
executed a five-year promissory note at 7.5% annual interest to repay the
estate. On September 12, 1991, Johnson
loaned himself $5,000 and executed a five-year $5,000 note to the estate, with
annual interest at 7.5%. Johnson
testified that he credited himself $24,441.62, the value of his life estate,
which he released with the sale of Kaneshiro's home.
In 1990 Johnson retained
an attorney to represent him in adoption proceedings of Kaneshiro's two
daughters. The estate was presented the
bill for services that included adoption proceedings. Johnson testified he charged the estate for the children's living
expenses until they moved out. One
married and moved out in August 1991 and the other moved out in January of
1992. Johnson testified that his
distributions to the two girls amounted to $46,230. Johnson conceded that at all times he acted solely as personal
representative of the estate and at no time assumed the role as trustee for the
trust the will provided for Kaneshiro's daughters.
On February 24, 1995,
the account filed by attorney Eugene Harrington, Kissack's successor appointed
to close the estate, showed assets in the sum of $20,828.49. The trial court concluded that Johnson
exercised bad faith as personal representative
in
buying real estate in Florida and putting title in his own name; in making
loans to himself from estate funds without Court approval; in omitting
substantial sums from his inventory and placing some of those funds in his
personal accounts; in failing to communicate with his attorney or timely answer
the attorney's inquires and in so doing causing the Court to appoint another
attorney and auditor; and in wrongfully supporting himself and the daughters of
the decedent from estate funds and without properly accounting for such
expenditures.
Johnson challenges the
trial court's findings and argues that the trial court erroneously found that
he acted in bad faith. We disagree. Bad faith in discharge of one's duties is a
tort generally confined to circumstances where one acts in a fiduciary
capacity. See Ford Motor
Co. v. Lyons, 137 Wis.2d 397, 423, 405 N.W.2d 354, 365 (Ct. App.
1987). In probate proceedings, a
personal representative acts as a fiduciary in managing another's assets. In re Estate of Scheibe, 30
Wis.2d 116, 118, 140 N.W.2d 196, 198 (1966).
A personal representative must exercise good faith. Id. Where a fiduciary fails to perform its duty to manage the assets
for the benefit of the beneficiary and applies the assets to personal benefit
to the detriment of the beneficiary, the action demonstrates bad faith. See In re Estate of Becker,
56 Wis.2d 356, 366-67, 202 N.W.2d 681, 686-87 (1972). "If an administrator breaches the duty to make the estate
productive, the trial court may, in its discretion, assess a surcharge against
the administrator to compensate the estate for interest it could have earned
had the duty been fulfilled." In
re Estate of Kugler, 117 Wis.2d 314, 322, 344 N.W.2d 160, 164-65
(1984).
A trial court's findings
of fact will not be disturbed on appeal unless they are clearly erroneous. Section 805.17(2), Stats. We defer to
the trial court's assessment of the weight and credibility of testimony. Id.
Johnson argues that
buying real estate in Florida and putting title in his own name was done with
the advice of legal counsel and, "because Mr. Johnson's acts were
consistent with the legal advice given him by two attorneys, he cannot
be held in bad faith." (Emphasis
in the original.) We reject this
argument. Johnson fails to cite any
authority that acting on private legal advice abrogates the tort of bad
faith. Because this argument is
unsupported by legal authority, we do not consider it further. State v. Shaffer, 96 Wis.2d
531, 545-46, 292 N.W.2d 370, 378 (Ct. App. 1980).
Next, Johnson argues
that he did not omit substantial sums from his inventory and did not deposit
the sums in his personal account because bank deposit slips are not contained
in the trial record. Johnson's own
testimony directly refutes his argument.
Johnson testified that he omitted from the inventory estate funds
received from Allstate and Bankers' Life.
He also testified that he deposited funds received from the sale of
estate property into his personal account.
Deposit slips are not required to support the trial court's findings.
Next, Johnson argues
that he properly accounted for expenditures used for living expenses. We are unpersuaded. As a personal representative, the use of the
estate's assets for personal living expenses is evidence of bad faith. Cf. State v. Hartman,
54 Wis.2d 47, 56, 194 N.W.2d 653, 657 (1972) (A general authority to deal with
assets is not sufficient to exculpate the executor of an estate from charges of
self-dealing.). This is particularly
true when Johnson conceded that he was not acting as trustee. Johnson contends that the use of estate
funds to support the decedent's two daughters is consistent with the intent of
the will. We disagree. The intent of the will was to set up a trust
for the daughters' benefit. If the
estate's funds are used before a trust is set up, the will's intent is
thwarted. Johnson's account fails to
demonstrate that the funds advanced were necessary for the daughters'
support. Moreover, the will does not
evince an intent to support Johnson, yet he admitted using the estate's funds
for his own support.
Next, Johnson argues
that he did not fail to communicate with his attorney or fail to answer
inquiries. Johnson's own testimony
refutes this argument. Johnson
testified that Kissack "had been asking me for an accounting for sometime
(sic)." "At least half a
dozen times, mostly by telephone."
Kissack also testified that he "did not get the documents and
answers to the questions for the final account." The record supports the
court's findings.
Next, Johnson argues
that making loans to himself from estate funds evidenced by a note at a fair
interest rate was consistent with authority granted in the will. We disagree. The will permits the personal representative to lend or borrow
money. The court found, however, that
the loans were invested in real estate that now is of little value. We conclude that making an unsecured loan to
himself without a showing of any ability to repay the loan contravenes the
will's intent.
Finally, Johnson argues
that the trial court miscalculated the surcharge owed.[2] We are not persuaded. Johnson contends that because the
accountant's final account included the value of Johnson's life estate, it was
not double counted and should not be included as part of the surcharge. Johnson mischaracterizes the court's
order. The court surcharged Johnson
$45,883.22 for the misapplication of the value of the life estate, but credited
Johnson with $37,475.40 as the value of the life estate in the real estate and
contents of the house that were sold at auction.
The record supports the
imposition of the surcharge. See
Kugler, 117 Wis.2d at 322, 344 N.W.2d at 164. Johnson's exhibit 6, page 5, discloses that
on May 10, 1990, he distributed $24,441.60 to himself, representing the value
of his life estate in the realty. The
same exhibit, page 8, discloses that on October 5, 1990, Johnson loaned himself
$33,884.74, evidenced by a note, but entered the debit as $9,443.14, indicating
that sum as the amount due, less the value of his life estate. The trial court's mathematical
inconsistency, if any, benefits Johnson.
See § 805.18, Stats.
Johnson
also contends that the trial court erroneously surcharged $1,212 for attorney
fees. Because the bill indicated that
Johnson's real estate services and adoption proceedings were included, the court was entitled to find that the fee did
not represent a reasonable and necessary charge for the estate.
Johnson also challenges
the trial court's $3,584.54 surtax for professional fees. Johnson argues that the record indicates
that any delay in the estate's administration was not his but the estate's
attorneys and that he performed his services within the bounds of law and
consistent with the will. For the
reasons stated above, the trial court found otherwise and the record supports
its decision.[3]
By the Court.—Judgment
affirmed.
This opinion will not be
published. Rule 809.23(1)(b)5, Stats.
[1] Johnson signed the offer to purchase December 5, 1989. On December 15, 1989, Johnson submitted a financial statement in connection with a loan application showing his net worth to be $2,000.
[2]
The trial court surcharged Johnson as follows:
For loans to himself--------------------------- $ 38,884.74
For his compensation and
misapplication
of
the value of his life estate in his
accounting-------------------------------------- $ 45,883.22
For
his claim of expenditures for the
support
of Susan and Carol where his
living
expenses and those of the daughters
were
commingled and then assessed to him
and
to Susan and Carol on the basis of
one-third
to each------------------------------ $
33,899.00
For
attorney's fees paid his attorney in
Florida
but not clearly shown to be for
estate
purposes but for fees in connection
with
his purchase of the house and
placing
title in his own name, for
adoption
proceedings and for unexplained
estate
purposes-------------------------------- $ 1,212.00
For
attorney's fees of $2,584.54 and fee
of
auditor of $1,000.00 appointed by
the
Court to replace Mr. Kissack who
withdrew
as attorney due to the
intransigence
of Johnson--------------------- $ 3,584.54
Total
sur-charge due:------------------------- $123,463.50
Against
these sur-charges Johnson is due as
a
set-off the value of his life estate in the
real
estate in Vale St., Spooner, Wisconsin,
sold
for $38,000.00 and his life estate in
the
contents which were sold at auction for
$20,264.00
or a total of $58,264.00 X .64320
based
on Johnson's age of 53 at Marilyn
Kaneshiro's death------------------------------ $ 37,475.40