Opinion
NO. 2015-CA-001001-MR
05-26-2017
STEVEN A. ROSE, AMY R. McCORMICK, JAMES C. ROSE, JASON A. MANGOLD, BENJAMIN G. MANGOLD, CHARLES R. FULLER, DANIELLE M. SPURLOCK, and LISA A. EVANS APPELLANTS v. MARY VANHOOSE, DELBERT HACKWORTH, and DAVID HACKWORTH APPELLEES
BRIEF FOR APPELLANT: Brandon M. Music Grayson, Kentucky BRIEF FOR APPELLEE MARY VANHOOSE: R. Stephen McGinnis Greenup, KY Jeremy Lee Clark Cattlesburg, Kentucky Delbert Hackworth, pro se Furnace, OH David Hackworth, pro se Ashland, KY
NOT TO BE PUBLISHED APPEAL FROM BOYD CIRCUIT COURT
HONORABLE GEORGE DAVIS, JUDGE
ACTION NOS. 06-CI-00049 and 06-CI-00247 OPINION
AFFIRMING, IN PART, AND REVERSING, IN PART
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BEFORE: JONES, D. LAMBERT, AND MAZE JUDGES. LAMBERT, D., JUDGE: The Appellants, heirs-at-law of William E. Hackworth bring this appeal of the summary dismissal of their claims against Mary Vanhoose, who is the sister of, and the Administratrix of the Estate of, William E. Hackworth. In addition to their assertion that the Court improperly dismissed the matter, they assert that the court failed to award interest pursuant to KRS 395.310. After careful review of the record, for the reasons herein described, we reverse, in part, and affirm, in part, the ruling of the circuit court.
Steven Rose (nephew of the Decedent), James C. Rose (nephew of the Decedent), Jason Mangold (great-nephew of the Decedent), Benjamin Mangold (great-nephew of the Decedent), Amy McCormick (niece of the Decedent), Charles Fuller (nephew of the Decedent), Lisa Evans (great-niece of the Decedent), and Danielle Spurlock (great-niece of the Decedent).
I. FACTUAL AND PROCEDURAL HISTORY
After he suffered a debilitating stroke in 1998, the Decedent, William E. Hackworth, executed a document giving his nephew, David Hackworth, power of attorney over his affairs. On May 11, 1999, David, acting as William's attorney-in-fact, conveyed two parcels of realty owned by William. David conveyed one of these parcels to himself, with the deed reflecting consideration in the amount of one dollar paid. David conveyed the other parcel to Vanhoose and her husband, with the deed reflecting consideration in the amount of $20,000 paid. However, there was no payment made to Mr. Hackworth by the Vanhooses until 2005, over five years later.
Though named as an Appellee before this Court, David Hackworth is not an actual party to this appeal. He is named such by virtue of the circuitous procedural history of this action below, having been consolidated with another civil action and certain claims later severed.
The record on appeal in this case makes no reference to any challenges to the Decedent's competency, after the stroke, to execute such a document. Whether it was challenged in the related civil action against David Hackworth, which is still pending before the circuit court, is unknown to this Court. --------
William died intestate on February 15, 2003. The Boyd District Court appointed Vanhoose as Administratrix of his Estate on August 21, 2003. The record reflects no objection to this appointment. Significant to the litigation, Vanhoose swore at the time of her appointment that she was not indebted to William. Vanhoose then began distributing the assets, submitting her Report and Final Settlement to the district court on December 9, 2005. The record indicates a check drawn on Vanhoose's account payable to the Estate in the amount of $20,000 on December 29, 2005.
The Appellants filed suit against David and three other individuals who are not party to this appeal, on January 11, 2006. That action was assigned Boyd Circuit Court Civil Action No. 06-CI-00049, and asserted no claims against Vanhoose. In March of 2006, the Appellants filed a separate civil action, Boyd Circuit Court Civil Action No. 06-CI-00247, against Vanhoose, in both her individual capacity and in her capacity as Administratrix of the Estate.
The two actions were ordered consolidated by the trial court on August 20, 2009, and later severed by a subsequent judge. The parties litigated claims asserted against Vanhoose under Civil Action No. 06-CI-00247.
In the action against Vanhoose, the Appellants made several allegations. First, they alleged that Vanhoose was incapable of performing the fiduciary duties of Administratrix because she was indebted to William. Second, they alleged that Vanhoose falsely swore that she was not indebted to William in her petition that led to her appointment. Third, the Appellants alleged that Vanhoose breached her fiduciary duty in that she failed to collect, from herself, the debt she owed to William from the May 11, 1999, conveyance. Fourth, the Appellants alleged that Vanhoose breached her fiduciary duty in her failure to pursue action against David, who received his property at a price below fair market value, and further that he had sold the property to Vanhoose for less than half the parcel's fair market value (basing that allegation on the fact that William had previously offered to sell the same property to Steven Rose for $50,000). Finally, the Appellants alleged that Vanhoose breached her fiduciary duty by failing to investigate the Appellants' allegations that she had diverted a sum of money from the Estate to her personal use.
The litigation proceeded intermittently, and in 2012, Vanhoose moved to dismiss the claims asserted against her personally, and for the claims that she failed to pursue claims against David and others as Administratrix. She argued that the Appellants could not pursue claims asserted against her based on the conveyances made before William's death, as those claims would be more properly asserted against David. Also, she argued that seeking damages against her for failing to pursue action against David was improper, as the Appellants should recover damages from David directly.
In an order entered on October 22, 2012, the trial court granted Vanhoose's motion and dismissed all claims arising before William's death in February 2003. It also dismissed the Appellants' claims against Vanhoose for failing to pursue action against David as unripe. Vanhoose thereafter tendered an offer of judgment on the remaining claim for misappropriation of Estate funds in June 2013.
The parties agreed to accept the offer of judgment in 2015. Yet, the Appellants argued that Vanhoose should be required to pay a significant additional sum in interest. The trial court rejected this argument and entered judgment ordering Vanhoose to pay $9,387.96 on May 8, 2015. The trial court found as follows:
Given the nature of the allegations made against Defendant Vanhoose, she made no further movements or transactions with the estate funds or accounts based upon the pending litigation filed by the Plaintiffs. To permit them to obtain interest on money that was not distributed or moved based on the litigation filed by the Plaintiffs would be unjust. The Plaintiff acknowledged all parties knew the funds were located in a non-interest bearing account and no party ever requested the funds be transferred to an interest bearing account.Thus, the trial court denied the Appellant's request for interest.
The Appellants filed a motion to alter, amend, or vacate, the judgment, which the trial court also denied. This appeal followed.
II. ANALYSIS
A. STANDARD OF REVIEW
"The standard of review on appeal of a summary judgment is whether the circuit judge correctly found that there were no issues as to any material fact and that the moving party was entitled to a judgment as a matter of law." Pearson ex rel Trent v. Nat'l Feeding Sys., Inc., 90 S.W.3d 46, 49 (Ky. 2002). The appropriate standard of review for matters of law is de novo. Nash v. Campbell County Fiscal Court, 345 S.W.3d 811 (Ky. 2011).
B. THE TRIAL COURT IMPROPERLY DISMISSED THE CLAIMS
AGAINST VANHOOSE RELATED TO HER POTENTIAL CONFLICT OF
INTEREST
The Appellants contend that the trial court improperly dismissed the claims asserted in the complaint in the face of unresolved issues of material fact. In their complaint, the Appellants sought Vanhoose's removal as administrator. The Appellants point to Vanhoose's discovery responses in arguing that she had never paid the purchase price for the 1999 conveyance. That position is seemingly confirmed by Vanhoose's own actions in paying the Estate the exact amount allegedly still owed after Vanhoose submitted the Estate's Report and Final Settlement to the District Court.
Vanhoose argued, and the trial court agreed, that no proof was offered that tended to prove Vanhoose owed any duty to the estate for events occurring prior to William's death. However, this finding disregards the fact that David and Vanhoose would both have been well aware of the complete lack of consideration and the false assertion in the deed that payment had been timely made. Certainly the fiduciary duties of the administrator attached at the time of her appointment, and the alleged debt continued to be due for years after that time. The fiduciary duties of an administrator include discovery and collection of debts owed to the Estate. Belcher v. Belcher's Adm'r, 13 S.W.2d 1019, 1020-21 (Ky. 1929). This Court has previously held that an executor or administrator of a decedent's estate may be removed on the basis of a conflict of interest where the administrator's indebtedness to the estate adversely affected the interests of the heirs. Morris v. Brien, 712 S.W.2d 347, 348 (Ky. App. 1986). Here, the $20,000 figure represented 44% of the total assets of the estate, according to the inventory filed by Vanhoose.
Given the factual disputes regarding these issues, the trial court improperly granted judgment as a matter of law.
C. THE TRIAL COURT IMPROPERLY DISMISSED THE CLAIMS
RELATING TO VANHOOSE'S ALLEGED BREACH OF FIDUCIARY
DUTY IN FAILING TO PURSUE CLAIMS AGAINST DAVID
HACKWORTH AND HERSELF
The Appellants contend that the trial court committed reversible error when dismissing the claims against Vanhoose for breach of fiduciary duty in her failure to pursue the claims against both herself and David resulting from the allegedly fraudulent 1999 conveyances. They cite case law to stand for the proposition that an administrator of an estate may be held liable for failure to carry out fiduciary duties in all matters pertaining to the estate. Citizen's Nat'l Bank v. Brewer, 69 S.W.2d 745, 747 (Ky. 1934).
The trial court, on this issue, concluded that judgment as a matter of law was appropriate, because Vanhoose did not have a fiduciary duty to the heirs.
The dispute, in part, involves the conveyance of real property, and the proceeds derived therefrom. When the owner of real property dies intestate, "title to any real estate . . . shall descend in common to his kindred, male and female . . . ." KRS 391.010. Kentucky appellate courts have repeatedly interpreted that provision to mean that title to realty passes by operation of law directly to the beneficiaries and not through a decedent's estate. Turner v. Perry County Coal Corp., 242 S.W.3d 658 (Ky. App. 2007); Slone v. Casey, 194 S.W.3d 336 (Ky. App. 2006); Wood v. Wingfield, 816 S.W.2d 899 (Ky. 1991). Consequently, heirs and beneficiaries are considered the real parties in interest in proceedings concerning realty inherited from an intestate decedent. Slone at 337 (citing Levin v. Ferrer, 535 S.W.2d 79 (Ky. 1975).
The Appellants' argument, that Vanhoose's failure to pursue actions against herself and David amounted to a breach of fiduciary duty in that it deprived the beneficiaries of the proceeds of any sale, is valid. Vanhoose argues that the realty was conveyed during William's life, and was thus no longer owned by him at the time of his death and never part of the estate. The significant oversight in that argument is that but for the questionable transaction, both tracts of real estate in dispute, would have remained assets of the decedent and passed to all his heirs-at-law.
D. THE TRIAL COURT PROPERLY REJECTED THE APPELLANTS'
CLAIMS FOR INTEREST PURSUANT TO KRS 395.310
After the parties accepted Vanhoose's offer of judgment relating to the claim against her for misappropriation of Estate assets, the trial court considered, and explicitly declined to award, a significant sum in interest. The Appellants contend that the compulsory language of KRS 395.310 demands the trial court include interest in the judgment. KRS 395.310 states: "A personal representative, after the expiration of two (2) years from the time he qualifies, shall be charged with interest on the surplus assets in his hands from that period, and before the expiration of two (2) years shall be charged with all interest realized on assets."
The Appellants contend not only that this language mandates the inclusion of interest in this situation, but also that the trial court ignored an unresolved factual issue in whether they are entitled to interest. We disagree on both counts. Interpretation of a statute, which necessarily implicates a determination that a given statute applies to a situation, is a matter of law. Commonwealth v. Gaitherwright, 70 S.W.3d 411, 413 (Ky. 2002). "The construction and application of statutes is interpreted de novo and without deference to interpretations adopted by the lower courts." Daviess County Public Library Taxing Dist. v. Boswell, 185 S.W.3d 651, 656 (Ky. App. 2005) (citing Wheeler & Clevinger Oil Co. v. Washburn, 127 S.W.3d 609, 612 (Ky. 2004)). As set forth herein, we also believe KRS 395.310 does not apply to the facts presented here.
The predecessor to the Kentucky Supreme Court previously opined when interpreting a prior version of the statute:
It is not unusual for a personal representative to hold funds in his hands, and [KRS 395.310] provides for interest to be charged against him on surplus assets in his hands if no settlement is made within two years. We have construed this section as not fixing the time within which a personal representative must settle or be sued for a settlement of accounts, but as placing the burden on him to show cause why he should not be charged with interest.Rison v. Shepherd, 186 S.W.2d 648, 649 (Ky. 1945) (internal citations omitted). The obvious intent of the provision is to bring probate matters to quick resolution, but not to impose a strict deadline and monetary burden on administrators and executors who are unable to meet them. The general rule that an administrator is liable for interest if settlement is not made after two years "is inapplicable to circumstances where the settlement was not due or other causes shown why the funds are not payable." Clay v. Eager, 444 S.W.2d 124, 128 (Ky. 1969). In instances where distribution of assets is delayed by litigation, courts have held the administrator is not liable for interest beyond what the beneficiaries have already received. Maynard v. Maynard's Adm'r, 64 S.W.2d 567, 570 (Ky. 1933).
The trial court's May 8, 2015, opinion noted that "the Plaintiff[s] want interest on sums of money that has not been distributed because it cannot be distributed due to Plaintiff[s'] pending litigation regarding the matter." This falls squarely within the rules of Maynard and Clay. Though the Appellants contend that the trial court's ruling was based primarily on equitable principles, the law on the issue is clear: the two-year deadline and requirement of interest found in KRS 395.310 do not apply when distribution is, as here, delayed by litigation. The trial court thus correctly concluded that the Appellants are not entitled to the interest they sought.
III. CONCLUSION
We first conclude that the trial court improperly granted Vanhoose's motion as it related to her possible removal as Administratrix of the Estate. The trial court resolved questions of fact regarding Vanhoose's alleged indebtedness which would have needed a jury's finding.
This Court, therefore, reverses the ruling of the trial court on the issues of the alleged breaches of fiduciary duty in Vanhoose's failure to pursue claims against David Hackworth and herself; and on the issue of whether Vanhoose indebtedness to the estate, disqualified her service as Administratrix.
However, we affirm the trial court's ruling as it relates to the imposition of interest.
ALL CONCUR. BRIEF FOR APPELLANT: Brandon M. Music
Grayson, Kentucky BRIEF FOR APPELLEE MARY
VANHOOSE: R. Stephen McGinnis
Greenup, KY Jeremy Lee Clark
Cattlesburg, Kentucky Delbert Hackworth, pro se
Furnace, OH David Hackworth, pro se
Ashland, KY