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Helgason et al. v Merriman (12/07/2001) sp-5510
Helgason et al. v Merriman (12/07/2001) sp-5510
Notice: This opinion is subject to correction before publication in
the Pacific Reporter. Readers are requested to bring errors to the attention of
the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone
(907) 264-0608, fax (907) 264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
LEONARD HELGASON and )
KENNETH WOOD, ) Supreme Court No. S-9665
)
Appellants, ) Superior Court No.
) 3KO-98-42 PR
v. )
) O P I N I O N
THOMAS MERRIMAN, )
) [No. 5510 - December 7, 2001]
Appellee. )
______________________________)
Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Kodiak,
Donald D. Hopwood, Judge.
Appearances: James W. Hill, Jr., Alaska Law
Center, Anchorage, for Appellants. Melvin M. Stephens, II, Kodiak,
for Appellee.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, and Bryner, Justices. [Carpeneti,
Justice, not participating.]
FABE, Chief Justice.
I. INTRODUCTION
Clara Helgason died testate in 1998. Her will named
Thomas Merriman as the personal representative, and the superior
court appointed him as such. Helgason's heirs, her sons Leonard
Helgason and Ken Wood, sought removal of Merriman as the personal
representative, citing alleged conflicts of interest and undue
influence. The superior court held a hearing and issued a ruling
denying the request for removal. Helgason's sons appeal this
ruling.
II. FACTS AND PROCEEDINGS
A. Facts
Clara Helgason died in Kodiak on September 20, 1998, at
the age of ninety, leaving two heirs, her sons Leonard Helgason and
Ken Wood. Clara Helgason left a series of wills, and the last of
these, dated November 5, 1996, was apparently admitted into probate
in the superior court. In that will, Clara Helgason nominated a
friend, Thomas Merriman, as the personal representative of her
estate.
Clara Helgason and Thomas Merriman had a friendship that
began in July 1989, when Merriman flew with his wife and some
friends to Terror Bay, where Clara Helgason lived at the time.
Merriman and Helgason thereafter maintained a personal friendship.
The Merrimans ran errands for Helgason and socialized with her from
1989 until her death.
In 1989 or 1990 Helgason sold her hunting lodge and
residence at Terror Bay, and moved into a house that she owned in
Kodiak. Soon after this sale, Merriman introduced her to Ken
Horwitz, an executive with Paine Webber, and Helgason subsequently
entrusted her assets to Horwitz's management. Merriman discussed
with Helgason her plans for writing a will before the first of her
four wills was executed in February 1992. Merriman agreed to serve
as the trustee of the trusts created in that will, but he testified
that he "did not suggest provisions . . . or attempt to influence
Clara's wishes." [Fn. 1]
Also sometime after Helgason sold the lodge and moved to
Kodiak, Helgason apparently formed the desire to give a gift of
money to the Merrimans, as a token of friendship and appreciation.
Helgason spoke with Ken Horwitz about this and Horwitz counseled
her to structure her gift as a loan to avoid gift and estate tax
problems and to protect the estate for her heirs. On December 27,
1993, Helgason executed a promissory note with the Merrimans in the
amount of $100,000, on terms somewhat favorable to the Merrimans --
at an interest rate of six percent, due "upon maturity," with no
collateral agreement. [Fn. 2] The Merrimans repaid approximately
half of the principal and some of the interest before Helgason
forgave the remainder of the debt on June 4, 1998, a few months
before her death.
Beginning with her second will, Helgason discussed with
attorney Matt Jamin the possibility of including a specific devise
in the will for Thomas and Cheryl Merriman. The gift of $50,000
was included in her second will, but this was subsequently reduced
to $15,000 in the third and fourth wills.
Helgason's final will also grants substantial powers to
Thomas Merriman, as it names him personal representative and
trustee of two trusts created by the will. The will distributes
the bulk of the estate to two spendthrift trusts for the benefit of
Helgason's sons and grandson. The distribution of proceeds from
these trusts is entirely within the discretion of the trustee,
Merriman. [Fn. 3] The beneficiaries of these trusts are not
entitled to the corpus, which is to be donated to charity upon the
deaths of the beneficiaries.
B. Proceedings Below
After Clara Helgason's death, her final will from
November 5, 1996 was apparently admitted into probate in the
superior court, and Thomas Merriman was appointed as the personal
representative of the estate, as the will dictated. On December
14, 1998, the plaintiffs, Helgason's sons Ken Wood and Leonard
Helgason, filed a motion to revoke the will and remove Merriman as
the personal representative. Later, on June 16, 1999, the
plaintiffs withdrew their motion to revoke the will; however, the
plaintiffs did not abandon their motion to remove Merriman as the
personal representative.
On October 13, 1999, a hearing on this issue was held
before Standing Master Anna Moran. On February 25, 2000, the
master issued recommendations and a proposed order denying the
plaintiffs' motion. On March 24, 2000, the superior court accepted
these findings. The plaintiffs appeal this decision.
III. STANDARD OF REVIEW
We have never before reviewed the denial of a motion to
remove a personal representative under AS 13.16.295. We will apply
the abuse of discretion standard here, since we apply this standard
to review similar disputes in the probate context, such as the
reasonableness of attorney's fees and of the personal
representative's fees, [Fn. 4] and in the child welfare context,
such as the appointment of a guardian ad litem. [Fn. 5] We will
only overturn the superior court's findings of fact if they are
clearly erroneous. [Fn. 6]
IV. DISCUSSION
The only dispute in this appeal is whether Thomas
Merriman should remain as the personal representative. No other
probate issues, such as the validity of the will, are before us.
Alaska Statute 13.16.295 states that "[c]ause for removal
exists when removal would be in the best interests of the estate."
The statute also states that removal is proper under other
circumstances that are not relevant to this appeal. [Fn. 7]
The plaintiffs claim that Merriman should be removed as
the personal representative because his removal is in the "best
interests" of the Helgason estate. They present essentially two
arguments to support this conclusion: There is a conflict of
interest that requires removal, and hostility between Merriman and
the plaintiffs justifies removal.
A. The Alleged Conflicts of Interest Do Not Justify
Merriman's Removal.
The plaintiffs claim that Merriman has one or more
conflicts of interest that render him unfit to serve as the
personal representative of Clara Helgason's estate. We must first
determine what standard to use to decide if a conflict of interest
is an event that warrants removal of the personal representative.
Then we apply the proper standard to determine if the alleged
conflicts of interest warrant removal.
1. Removal of the personal representative is proper if
evidence establishes a "real issue" as to whether
there is a substantial conflict of interest.
Because we have never before addressed AS 13.16.295, we
must articulate a standard to determine how serious a conflict of
interest must be, and how much proof of that conflict is required,
to warrant removal of a personal representative.
The parties in this appeal ask us to adopt a standard
used by other jurisdictions. Under this standard, removal is
required if the plaintiffs present evidence that raises a "real
issue" as to whether there is a substantial conflict of interest.
There is such a real issue when the evidence indicates that the
personal representative is potentially liable to the estate because
of the existence of some cause of action against the personal
representative.
This standard was articulated clearly by an Oregon
appellate court in Wharff v. Rohrback. [Fn. 8] In Wharff, the
court held that a showing of a "substantial and bona fide" conflict
of interest will be enough to require the removal of a personal
representative; such a showing is made when there is "sufficient
evidence to create a real issue" as to whether there is a
substantial conflict of interest. [Fn. 9] In In re Estate of
Peterson, the Montana Supreme Court implied that a conflict of
interest required removal when there was a potential claim that
could be brought against the representative, since in that case a
conflict was "likely to arise." [Fn. 10] These two cases together
support the proposition that removal is required if there is
sufficient evidence, such as a potential claim against the
representative, that creates a "real issue" of whether or not there
is a substantial conflict of interest. We adopt this standard
where a party seeks removal of the personal representative because
of a conflict of interest. Once a "real issue" of a substantial
conflict of interest is raised, removal of the personal
representative is mandatory and it is an abuse of discretion to
deny removal. [Fn. 11]
We also note that under the standard that we adopt here
the plaintiffs need only present some evidence of a substantial
conflict of interest to raise a "real issue" requiring removal of
the personal representative. However, a mere allegation of a
conflict of interest is not sufficient. [Fn. 12]
The superior court implicitly applied this standard by
rejecting the notion that a "mere allegation" of a conflict of
interest could be enough to require removal of the personal
representative, and by noting that the plaintiffs "have not
presented any evidence of wrong doing or undue influence which
would warrant removing Merriman as personal representative."
2. No "real issue" of a substantial conflict of
interest has been raised.
The plaintiffs argue that there is a real issue of
whether there is a conflict of interest because Clara Helgason's
estate may have one or more causes of action against Merriman;
therefore, they contend, Merriman has a conflict of interest
because his personal interests are at odds with the estate's
interests. Wharff v. Rohrback supports the proposition that there
is a real issue of a conflict if the estate has a viable claim
against the personal representative for money damages. In Wharff,
the representative was involved in the same car accident that
killed the decedent; she was driving the car carrying the decedent.
[Fn. 13] Because of the circumstances of the accident, the estate
had a potential wrongful death claim against the representative.
[Fn. 14] The court held that this potential claim raised a real
issue of whether there was a conflict of interest, since the
representative would have to decide whether to file the claim
against herself. [Fn. 15]
The plaintiffs claim that Wharff presented facts
analogous to the circumstances of this appeal. The plaintiffs
claim that, like the estate in Wharff, Clara Helgason's estate has
potential claims against Merriman -- claims that require Merriman
to decide whether he should file suit against himself, creating a
conflict of interest. However, the plaintiffs do not clearly
define these potential claims; they merely state that Merriman's
conduct in allegedly inspiring the $100,000 loan and its
forgiveness, and his involvement in the drafting of each version of
Helgason's will give rise to causes of action against Merriman.
The plaintiffs make essentially three arguments in their
attempt to show the estate has claims against Merriman that raise
a real issue of a conflict of interest. The plaintiffs contend
that the estate has potential or actual claims of action against
Merriman concerning the $100,000 loan made to Merriman and the
circumstances of the will's formation and Merriman's alleged undue
influence. The plaintiffs also make a subsidiary argument that the
superior court placed undue weight on the fact that Merriman was
designated in the will as the named personal representative. For
the reasons stated below, we conclude that it was not an abuse of
discretion to hold that these arguments fail to raise a real issue
of a substantial conflict of interest.
a. There is no evidence that the estate has a
cause of action against Merriman concerning the $100,000 loan.
The plaintiffs' first argument is that the circumstances
surrounding the $100,000 loan create a conflict of interest. In
this argument, the plaintiffs restate their version of the facts
concerning the loan and its forgiveness, and imply that Merriman's
participation in these events was somehow improper, giving rise to
a cause of action against him.
In response, Merriman maintains that the plaintiffs
failed to produce any evidence that Merriman's conduct was wrongful
and could be the basis of any suit by the estate; therefore, the
plaintiffs have only alleged a conflict of interest. Merriman
contends that Wharff is distinguishable because, in that case, the
evidence that was actually presented demonstrated a potential claim
for the estate against the personal representative.
The superior court did not squarely address this dispute.
It did, however, review the facts concerning the $100,000 loan and
concluded that these circumstances alone did not create a conflict
of interest.
The plaintiffs presented no evidence of a conflict of
interest concerning the $100,000 loan. The record indicates that
Clara Helgason originally wanted to give a large gift to the
Merrimans but was instead persuaded to give them a loan on somewhat
favorable terms. The Merrimans made regular payments on the loan,
and the financial advisor Ken Horwitz stated that the loan was a
"very good investment" for Clara Helgason. A few months before her
death, when Helgason was in very poor health, she forgave the
balance of the loan.
Even though there is evidence that the terms of this loan
were somewhat more favorable than Merriman could have gotten
through a bank and that Helgason forgave the loan while she was
sick, the record reveals no other evidence that tends to show that
there was anything potentially actionable about Merriman's conduct
concerning the loan and its forgiveness. The plaintiffs do not
explain how these facts translate into a cause of action on behalf
of the estate, nor do they describe this alleged cause of action.
We decline to speculate on what the cause of action could be, since
these facts do not support any apparent cause of action based
solely on the facts concerning the $100,000 loan. [Fn. 16]
b. There is no evidence that the estate has any
cause of action against Merriman based on Merriman's alleged
exercise of undue influence.
The plaintiffs also claim that Merriman's influence over
Helgason gives rise to a cause of action because his conduct
constituted undue influence. Two other courts have affirmed
removals of personal representatives at least partially on this
basis. [Fn. 17]
In Paskvan v. Mesich [Fn. 18] and In re Estate of Kraft,
[Fn. 19] we discussed the circumstances under which a finding of
"undue influence" may be found. In situations in which the
defendant is the "principal or sole beneficiary," had a
"confidential relationship" with the testator, and "participated in
the drafting of the will," the defendant is presumed to have
exercised undue influence, and must prove otherwise. [Fn. 20] If
those circumstances do not apply, to show undue influence the
plaintiff must show that "by reason of influence exercised by [the
defendant], the testator was virtually compelled to make a will
which he would not have made had he been left to the free exercise
of his own judgment and wishes." [Fn. 21]
The plaintiffs argue that, under Kraft, there was undue
influence because Merriman was involved in the drafting of the will
and ingratiated himself with Clara Helgason to such an extent that
Helgason made a will that she would not have made if left to the
free exercise of her judgment and wishes. The plaintiffs also
argue that, under Paskvan, Merriman took advantage of Helgason's
advanced age, unsophistication, and medical condition to gain an
"improper" advantage.
Merriman responds to these arguments by claiming that
only Kraft is relevant to this appeal, and that there is no
evidence that Helgason wrote the will in a way that was compelled.
Merriman relies primarily on the terms of the will and testimony
showing the friendship between the Merrimans and Helgason, noting
that the will includes only a modest gift for Merriman and vests
him with some powers and discretion over the trusts created by the
will; Merriman implies that this is easily explained by the
friendship, and that the evidence shows that the Merrimans did not
actively seek these gifts.
The superior court noted summarily that "[the plaintiffs]
have not presented any evidence of wrong doing or undue influence."
Our decision in Paskvan is not relevant to the
circumstances of this appeal. Merriman is not the "principal or
sole beneficiary" of the will, [Fn. 22] since he receives only
$15,000 and the power to administer trusts and distribute items of
personal property unwanted by Helgason's sons. There is no
evidence in the record that Merriman's relationship with Helgason
was "confidential," even though the two were friends; and the only
evidence that Merriman "participated" in drafting the will was that
Merriman and Helgason spoke about the will before she drafted the
first version, and that Helgason sometimes spoke to her lawyer,
Matt Jamin, with Merriman present.
Also, there is no evidence of undue influence under the
standard we announced in Kraft. [Fn. 23] There is some evidence in
the record that tends to show that Merriman had some influence on
Helgason, and the will does confer some benefits on Merriman.
Merriman was apparently a friend of Helgason's, and the two of them
did, on occasion, drink wine that Merriman supplied. Also,
Merriman received some benefits from Helgason, apparently as the
result of their friendship. Foremost among these was the $100,000
loan and its forgiveness, which has already been discussed.
However, under the will, Merriman received only the $15,000 gift
along with the trustee powers granted by the will. [Fn. 24]
In our undue influence analysis in Kraft, we were
primarily concerned with whether the defendants benefitted from the
will. [Fn. 25] In rejecting the undue influence claim in that
case, we noted that the defendants who were involved in the
preparation and execution of the will were not beneficiaries of the
will. [Fn. 26] Even though Merriman is a minor beneficiary under
the will, the plaintiffs do not present any evidence to support the
inference that Merriman exercised his influence to receive any
benefits under the will or exercised his influence to otherwise
shape the will. On this point, plaintiffs seem to complain that
any such evidence of undue influence, if it existed, would probably
only be held by Merriman himself, since no one else was present
during the episodes in which Merriman allegedly exercised undue
influence over Helgason. However, the plaintiffs failed to conduct
any discovery on this issue; they took no depositions and presented
no interrogatories or requests for admissions, despite the fact
that they had ample time to do so, since Merriman was appointed as
personal representative in September 1998, and the hearing took
place in October 1999. Therefore, it was not an abuse of
discretion to hold that the plaintiffs have failed to raise a real
issue of a substantial conflict of interest caused by undue
influence in this case.
c. The superior court did not give undue weight
to the fact that the will designated Merriman as the personal
representative.
As a subsidiary argument, the plaintiffs impliedly claim
that the superior court gave undue weight to the fact that the will
designates Merriman as the personal representative. Merriman notes
that the superior court, in designating him as the personal
representative, was merely following AS 13.16.065, which states
that the testator's preference is given priority.
This dispute is largely irrelevant because AS 13.16.065
by its own terms applies only to the appointment of a personal
representative in the first instance, and not to the subsequent
removal of that representative. The superior court only mentions
AS 13.16.065 in passing, and the court correctly noted that the
standard to be applied for removal is the "best interests" of the
estate. Because the removal of a previously appointed personal
representative is what is at issue here, we decline to consider
this argument any further.
B. Hostility Between Merriman and the Plaintiffs Does Not
Require Merriman's Removal.
The plaintiffs claim that removal is also required
because of the hostility that has developed between Merriman and
the plaintiffs. Merriman claims that there is actually no evidence
at all of hostility, and the superior court agreed:
The mere fact that the Petitioners are unhappy
with their mother's choice for a personal representative, does not
warrant removing Merriman as personal representative. Aside from
the present matter before the court, there is no evidence of any
hostility between the Petitioners and Merriman or that Merriman
will be unable to carry out his duties as personal representative
and trustee. To find otherwise, would allow the beneficiaries of
an estate to select a personal representative in contravention of
the testator's wishes.
The trial court's finding in this regard is not clearly
erroneous. Moreover, any hostility between the Merrimans and the
Helgasons would presumably affect the trust relationship between
Merriman, the trustee, and the plaintiffs, as beneficiaries. Yet,
the plaintiffs do not challenge Merriman's status as trustee.
Therefore, the alleged hostility is not a basis for removal of
Merriman as personal representative of the estate.
V. CONCLUSION
Because it was not an abuse of discretion to find that
the plaintiffs failed to either raise a real issue of a substantial
conflict of interest, or show any hostility between the parties
relevant to Thomas Merriman's status as personal representative, we
AFFIRM the superior court's decision to retain Thomas Merriman as
the personal representative of the estate of Clara Helgason.
FOOTNOTES
Footnote 1:
The actual wills were drafted by attorney Matt Jamin and other
attorneys in his law firm.
Footnote 2:
However, Helgason did have the ability to call the note at any
time with 90 days' notice.
Footnote 3:
The will provides: "[T]he trustee shall distribute to, or use
for the benefit of, [the beneficiaries] as much of the income and
principal of the trust as the trustee, in his or her sole
discretion, from time to time believes desirable for [the
beneficiaries'] health, support in reasonable comfort, education,
best interests and welfare, considering all circumstances and
factors deemed pertinent by the trustee."
Footnote 4:
Gudschinsky v. Hartill, 815 P.2d 851, 854 (Alaska 1991)
(personal representative's fees); In re Estate of Gregory, 487 P.2d
59, 64 (Alaska 1971) (attorney's fees).
Footnote 5:
Rubright v. Arnold, 973 P.2d 580, 585 (Alaska 1999).
Footnote 6:
Bowman v. Blair, 889 P.2d 1069, 1072 n.5 (Alaska 1995).
Footnote 7:
Cause for removal also exists "if it is shown that a personal
representative or the person seeking appointment intentionally
misrepresented material facts in the proceedings leading to
appointment, or that the personal representative has disregarded an
order of the court, has become incapable of discharging the duties
of the office, or has mismanaged the estate or failed to perform
any duty pertaining to the office." AS 13.16.295. The plaintiffs
have not alleged that Merriman has committed any such acts.
Footnote 8:
952 P.2d 87 (Or. App. 1998).
Footnote 9:
Id. at 89-90.
Footnote 10:
874 P.2d 1230, 1232-33 (Mont. 1994).
Footnote 11:
In re Estate of Wemyss, 122 Cal. Rptr. 134, 138 (Cal. App.
1975) (implying that sufficient showing of conflict of interest
requires removal); Ramsdell v. Union Trust Co., 519 A.2d 1185, 1190
(Conn. 1987) (same); In re Estate of Devoy, 596 N.E.2d 1339, 1342
(Ill. App. 1992) (same, dicta); Vaughn v. Batchelder, 633 So. 2d
526, 528 (Fla. App. 1994) (holding that sufficient showing of
conflict of interest requires removal); Wharff, 952 P.2d at 89-90
(same).
Footnote 12:
In re Estate of Wemyss, 122 Cal. Rptr. at 138 (implying that
some evidence of a conflict of interest is required to justify
removal).
Footnote 13:
952 P.2d at 88.
Footnote 14:
Id. at 89-90.
Footnote 15:
Id.
Footnote 16:
In re Dissolution of Marriage of Alaback, 997 P.2d 1181, 1184
n.3 (Alaska 2000) ("Points given only a cursory treatment in the
argument portion of a brief will not be considered on appeal, even
if developed in the reply brief.").
Footnote 17:
Laushway v. Onofrio, 670 So. 2d 1135, 1136 (Fla. App. 1996)
(removal of personal representative was proper because he exercised
undue influence over testator); Pio v. Ramsier, 623 N.E.2d 174, 176
(Ohio App. 1993) (removal of interested executor was in the "best
interests" of the estate where there were allegations of undue
influence against the executor).
Footnote 18:
455 P.2d 229, 232-33 (Alaska 1969).
Footnote 19:
374 P.2d 413, 417 (Alaska 1962).
Footnote 20:
Paskvan, 455 P.2d at 233.
Footnote 21:
Kraft, 374 P.2d at 417.
Footnote 22:
Paskvan, 455 P.2d at 233.
Footnote 23:
Under Kraft, undue influence is shown if "by reason of
influence . . . the testator was virtually compelled to make a will
which he would not have made had he been left to the free exercise
of his own judgment and wishes." 374 P.2d at 417.
Footnote 24:
The will states that the trustee (Merriman) has the power
"[t]o lend money to the personal representative of my estate, and
to purchase property from the personal representative of my estate
and retain it for any period of time without limitation, and
without liability for loss or depreciation in value,
notwithstanding any risk, or lack of productivity or
diversification."
Of course, Merriman might not be able to abuse this power
without violating his fiduciary duties.
Footnote 25:
374 P.2d at 416.
Footnote 26:
Id.
