Opinion
NO. 2019-CA-000602-DG NO. 2019-CA-000703-MR
03-27-2020
SHERRY L. STIVERS, EXECUTRIX OF THE ESTATE OF FOREST S. STIVERS and SHERRY L. STIVERS, INDIVIDUALLY APPELLANTS v. MICHELLE STIVERS ENGLISH AND KIM STIVERS VISE APPELLEES AND MICHELLE STIVERS ENGLISH AND KIMBERLY STIVERS VISE APPELLANTS v. ESTATE OF FOREST S. STIVERS, by and through SHERRY L. STIVERS, EXECUTRIX, and SHERRY L. STIVERS, INDIVIDUALLY APPELLEES
BRIEFS FOR SHERRY L. STIVERS, AS EXECUTRIX OF THE ESTATE OF FOREST S. STIVERS AND INDIVIDUALLY: J. Robert Lyons, Jr. Lexington, Kentucky BRIEFS FOR MICHELLE STIVERS ENGLISH AND KIMBERLY STIVERS VISE: David J. Guarnieri Lexington, Kentucky
NOT TO BE PUBLISHED ON DISCRETIONARY REVIEW FROM FAYETTE CIRCUIT COURT
HONORABLE THOMAS L. TRAVIS, JUDGE
ACTION NO. 18-XX-00025 APPEAL FROM FAYETTE CIRCUIT COURT
HONORABLE LUCY A. VANMETER, JUDGE
ACTION NO. 18-CI-03471 OPINION
AFFIRMING THE FAYETTE CIRCUIT COURT AND REMANDING TO THE FAYETTE DISTRICT COURT IN APPEAL NO. 2019-CA-000602-DG AND OPINION AND ORDER DISMISSING APPEAL NO. 2019-CA-000703-MR
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BEFORE: COMBS, AND LAMBERT, JUDGES; BUCKINGHAM, SPECIAL JUDGE. COMBS, JUDGE: This is a consolidated appeal pertaining to two Fayette Circuit Court proceedings involving a probate matter. Exercising its appellate jurisdiction, the circuit court reviewed an order of the district court with the respect to exceptions to the proposed settlement of an estate. However, the circuit court declined to exercise its original jurisdiction to consider a contested issue. After our review, we affirm as to the circuit court's first order, and we dismiss the appeal pertaining to its subsequent judgment.
Retired Judge David C. Buckingham sitting as Special Judge by assignment of the Chief Justice pursuant to Section 110(5)(b) of the Kentucky Constitution.
Forest S. Stivers, a resident of Fayette County, died testate on September 26, 2016. In a will executed on March 2, 2016, Stivers made specific bequests and devises of both real and personal property to his widow, Sherry Stivers. He left the rest, residue, and remainder of his estate to Michelle Stivers English and Kimberly Downs Stivers Vise (the Beneficiaries), his two adult daughters born of a prior marriage. He named Sherry Stivers to serve as Executrix of his estate. Despite the seemingly straightforward nature of the decedent's estate, the litigation arising from it has been extensive, and a substantial record has been compiled. It is necessary to give a comprehensive account of the procedural history of the matter.
On October 13, 2016, Sherry Stivers filed a petition in Fayette District Court to be appointed Executrix and to probate the self-proved will. Stivers was appointed Executrix of the estate, and the will was admitted to probate. On June 15, 2017, pursuant to the provisions of KRS 395.012, the Beneficiaries filed separate demands for notice of all actions or orders sought from the district court in the probate proceedings.
Kentucky Revised Statutes.
On July 21, 2017, Stivers filed a motion for an order approving and authorizing the estate's payment of certain expenses of administration, including state and federal income taxes, her commission as Executrix ($15,632), and an attorney's fee ($9,950). On August 8, 2017, Stivers filed a motion asking the district court to interpret a single provision of the decedent's will and to declare the rights of the Beneficiaries thereunder. A disagreement had arisen among the parties concerning the distribution of specific items of personal property, including decedent's firearms, his jewelry, and a sterling silver tea set.
The Beneficiaries interpreted Stivers's motion for an order approving and authorizing payment of some of the expenses of administration as a proposed settlement of the decedent's estate filed pursuant to the provisions of KRS 395.617(1). This statute provides that before filing a periodic or final settlement and prior to a distribution of assets, a fiduciary may file with the court a proposed settlement. The proposed settlement must be set for hearing and notice be given as for any other settlement -- except that beneficiaries of the estate must also be given notice by certified mail, return receipt requested, at least twenty (20) days prior to the hearing date. KRS 395.617(1) requires that the proposed settlement: must list all assets and disbursements previously made; must indicate assets on hand and anticipated to be received subsequent to the date of the proposed settlement and prior to the filing of the periodic or final settlement; and must further indicate the manner in which the remaining and anticipated assets are proposed to be distributed. The proposed settlement may also list fees and commissions proposed to be paid to the fiduciary and her attorney.
KRS 395.617(1) permits exceptions to the proposed settlement to be filed. The Beneficiaries filed exceptions as authorized. They contended that the motion of the Executrix was deficient in its contents and objected further to specific proposed expenses, including costs related to television service, garbage pick-up, and repairs made to the residence (which was devised to Stivers). The Beneficiaries argued that the request for the Executrix's commission was premature and, in a separate motion, asked the court to afford them an opportunity "to inspect a complete and accurate accounting of the entirety of the administration of [the decedent's] estate to allay their concerns." They also observed that the district court was authorized to reduce the amount paid by the estate for the fiduciary's attorney fees.
The contested matters were set for a hearing to be conducted by the district court on August 30, 2017. In an order entered on August 31, 2017, the district court determined that the decedent's intent as determined by the four corners of his will was to leave the antique furniture found in the residence to the Beneficiaries and the remaining personal property found at the residence (including decedent's firearms, his jewelry, and a sterling silver tea set) to Sherry Stivers, his widow. The other motions remained pending. The district court allowed a period of discovery. The Beneficiaries subpoenaed the records of their father's bank account records and deposed Stivers.
On April 20, 2018, Stivers filed an extensive proposed settlement of the decedent's estate with the district court. The proposed settlement was served on the Beneficiaries and their attorney according to the requirements of KRS 395.617. A hearing date was set for June 20, 2018.
Counsel for the Beneficiaries represented to opposing counsel that exceptions would be forthcoming. As local rules require an evidentiary hearing on exceptions, Stivers's counsel and counsel for the Beneficiaries called the court and set another hearing for August 7, 2018. However, on July 6, 2018, Stivers filed a motion requesting the court to approve the proposed settlement because no exceptions had been filed.
On July 16, 2018, the Beneficiaries filed their response to the motion in which their counsel acknowledged that she had "indicat[ed] to the Court that she would file a reply to the Executrix's response to our Exceptions in the April 20th, 2018 newly proposed settlement. . . ." The Beneficiaries now contended that their exceptions had been filed originally on August 25, 2017, and that their arguments had been presented in the hearing before the district court conducted on August 30, 2017. As an alternative to this theory, the Beneficiaries filed a motion for enlargement of time in which to file "updated exceptions." On July 18, 2018, they filed a "restatement of exceptions" in the district court.
In their exceptions, the Beneficiaries challenged the inter vivos transfer of funds by a check signed by the decedent and negotiated by Stivers; the commission sought by Stivers; costs incurred to repair and maintain the residence devised to Stivers; and certain legal fees for services rendered to the Executrix because they were meant "to advance her interest in her individual capacity." By order entered on July 24, 2018, the district court granted the Beneficiaries' motion for an enlargement of time in which to file their exceptions to the proposed settlement.
On July 26, 2018, separate counsel made an entry of appearance for Stivers, individually. Counsel for Stivers in her capacity as Executrix filed a reply to the restatement of exceptions to the proposed settlement of the decedent's estate. In her reply, Stivers argued that the maintenance and repairs to the residence that she had undertaken were necessary and that she was authorized by law to negotiate the instrument that the decedent had made and delivered to her. She asked the court to render an order confirming the proposed settlement filed on April 20, 2018.
Following its hearing conducted on August 7, 2018, and by its order entered on August 14, 2018, the district court denied the exceptions to the Executrix's proposed commission; to the proposed attorney fee incurred in relation to the Executrix's defense against the claims of the Beneficiaries that she had committed fraud, waste, or mismanagement of the decedent's estate; and to the expenses related to the repairs and maintenance undertaken at the residence devised to Stivers.
However, the district court, sua sponte, concluded that it lacked subject matter jurisdiction to consider the Beneficiaries' claims that the Executrix had breached her duty as a testamentary fiduciary when she failed -- or refused -- to recover for the benefit of the estate the value of the check that the decedent had signed and that she had negotiated prior to his death. The order was designated as final, and it provided that there was no just reason for delay (for an appeal).
On September 14, 2018, the Beneficiaries filed a notice of appeal in the district court. They alleged that the appeal was filed pursuant to CR 72.02 (governing appeals from district court to circuit court) and the provisions of KRS 395.617(2). KRS 395.617(2) provides that no later than thirty (30) days from the entry of the order upon the proposed settlement, an aggrieved party may institute an adversary proceeding in circuit court pursuant to the provisions of KRS 24A.120(2). KRS 24A.120(2) provides that a district court shall have exclusive jurisdiction in "[m]atters involving probate, except matters contested in an adversary proceeding. Such adversary proceeding shall be filed in Circuit Court in accordance with the Kentucky Rules of Civil Procedure and shall not be considered an appeal[.]" Id. (emphasis added).
Kentucky Rules of Civil Procedure.
In the "appeal"/adversary proceeding, Stivers was named as an appellee both in her individual capacity and in her capacity as Executrix of the decedent's estate. The Beneficiaries sought to appeal the district court's ruling that it lacked subject matter jurisdiction to consider the exception concerning the negotiation of the decedent's check; the denial of their exceptions to the Executrix's proposed commission; the proposed attorney fee; the proposed expenses related to the repair and maintenance of the residence devised to Stivers; and the interlocutory order interpreting the decedent's will as bequeathing the firearms, jewelry, and tea set to Stivers. The appeal was assigned to the Eighth Division of the Fayette Circuit Court.
In her individual capacity and in her capacity as Executrix of the decedent's estate, Stivers filed a motion to dismiss the appeal on October 1, 2018. She contended that the appeal was not an adversary proceeding as contemplated by the provisions of KRS 395.617(2) and KRS 24A.120(2) by which an aggrieved party may challenge an order upon the proposed settlement of an estate. She argued that no such proceeding had been filed within 30 days of entry of the district court's order. Stivers also contended that the Beneficiaries had failed to name a necessary party to the appeal, namely her attorney whose fee had been included in the proposed settlement. Finally, Stivers reserved an argument concerning the timeliness of the filed exceptions.
On the same date of October 1, 2018, the Beneficiaries filed an original action in Fayette Circuit Court against Stivers and the decedent's estate. This action was assigned to the Third Division of the Fayette Circuit Court. The Beneficiaries indicated that their complaint was filed pursuant to the provisions of KRS 24A.120(2) and KRS 395.510. KRS 395.510 allows any beneficiary of a decedent's estate to bring an action in circuit court for the settlement of the estate. It requires that all persons having an interest in the property left by the decedent and the creditors of the decedent be included as parties to the action. Id.
In their complaint, the Beneficiaries alleged that Stivers had breached her fiduciary duty under the decedent's durable power of attorney and committed fraud by writing checks on their father's account payable to herself; that she had failed to marshal the assets of the estate (including the value of the disputed checks negotiated by Stivers); and, finally, that Stivers had been unjustly enriched. They requested a jury trial.
The decedent's estate and Stivers, both individually and in her capacity as Executrix, filed a timely answer to the complaint. Shortly thereafter, Stivers filed a motion for judgment on the pleadings, contending that the action was untimely pursuant to the provisions of both KRS 395.617(2) and KRS 395.510. In their response, the Beneficiaries argued that the proceeding was not governed by the provisions of KRS 395.617(2) and denied that the complaint had been filed out of time under the provisions of KRS 395.510.
On January 7, 2019, the Third Division of the Fayette Circuit Court rendered a summary judgment in favor of Stivers and the decedent's estate. The court ruled that the action was untimely because the Beneficiaries had failed to file an adversary proceeding within thirty days of the district court's order entered on August 14, 2018. The court rejected the contention that the Beneficiaries were not bound by the provisions of KRS 395.617 and concluded that having filed exceptions to the proposed settlement of the decedent's estate, they had "elected their remedy and were bound to pursue an adversary proceeding pursuant to KRS 395.617(2)." That statute provides as follows:
An aggrieved party may, no later than thirty (30) days from the entry of the order upon the proposed settlement, institute an adversary proceeding in Circuit Court pursuant to KRS 24A.120(2).
The court explained that the Beneficiaries could have initiated an action pursuant to the provisions of KRS 395.510 divesting the district court of jurisdiction to settle the estate at any time before entry of the district court's order on the proposed settlement.
However, having failed to initiate the action pursuant to KRS 395.510 prior to entry of the order on the proposed settlement, [the Beneficiaries] were limited to the remedy provided in KRS 395.617(2). To hold otherwise would permit a Circuit Court action to settle an estate (pursuant to KRS 395.510) that has already been settled by the District Court (pursuant to KRS 395.617).Accordingly, the Third Division of the Fayette Circuit Court dismissed the Beneficiaries' claims as time-barred by the provisions of KRS 395.617(2), and it denied their subsequent motion to alter, amend, or vacate.
On April 5, 2019, an amended summary judgment was entered. The Third Division of the Fayette Circuit Court designated the judgment as final and appealable. On April 15, 2019, the Beneficiaries filed a motion to vacate the summary judgment on the basis that the order upon which it was predicated had been reversed by the Eighth Division of the Fayette Circuit Court.
The Eighth Division of the Fayette Circuit Court entered an order on April 3, 2019, ruling upon the Beneficiaries' first appeal of the district court order. In its order, the circuit court noted that while the Beneficiaries had raised other issues in its appeal, its consideration was confined to a single jurisdictional question. The circuit court concluded that the district court had exclusive subject matter jurisdiction to consider the Beneficiaries' contention that Stivers had wrongfully negotiated the decedent's check before his death. Consequently, the court remanded the probate matter to the district court with instructions to "conduct all necessary hearings in order to reach a substantive ruling on [the Beneficiaries'] primary exception to the Executrix's proposed settlement, i.e., whether the Executrix made an improper inter vivos transfer to herself from the decedent's bank account, thus rendering the beginning Inventory of the Estate inaccurate."
On April 18, 2019, Stivers, both individually and as Executrix of the decedent's estate, filed in this Court a motion for discretionary review of the decision of the Eighth Division of the Fayette Circuit Court. Stivers argued that the jurisdiction of the circuit court had not been properly invoked. In the alternative, the Executrix argued that the circuit court erred: (1) by failing to dismiss the appeal for failure to name a necessary party (the attorney in the fee dispute) and (2) by filing the appeal out of time.
By order entered on May 9, 2019, Division Three of the Fayette Circuit Court denied the Beneficiaries' motion to vacate its amended summary judgment dismissing their claims as untimely. The Beneficiaries filed a notice of appeal to this Court.
By our order entered on June 7, 2019, we granted Stivers's motion for discretionary review of the matter before Division Eight. We consolidated the proceeding with the Beneficiaries' matter-of-right appeal (from Division Three) for purposes of briefing and consideration by this single three-judge panel.
We note from the outset that the record indicates that Stivers has not filed a final settlement of the decedent's estate. No order approving or confirming a final settlement has been entered. Thus, the district court's probate proceeding remains open.
As recited above, the provisions of KRS 24A.120(2) grant the district court original and exclusive jurisdiction in "[m]atters involving probate, except matters contested in an adversary proceeding." KRS 24A.120(3) provides that: "[m]atters not provided for by statute to be commenced in Circuit Court shall be deemed to be nonadversarial within the meaning of subsection (2) of this section and therefore are within the jurisdiction of the District Court[.]"
The controversy concerning Stivers's decision to negotiate a check made to her on her husband's bank account called into question the beginning balance of the decedent's estate. The controversy arose by motion in the district court after the appointment of Stivers as Executrix of the estate and before she made the required final settlement in the district court. Despite the vigor with which the parties contested the issue, our statutes do not require that disputes like this be heard in the circuit court. See Maratty v. Pruitt, 334 S.W.3d 107, 111 (Ky. App. 2011) (citing KRS 395.617(1)) ("[T]he legislature has established jurisdiction in district court, and has contemplated that contested issues may arise with respect to those district court settlements."). A decision on this issue was squarely within the probate jurisdiction of the district court. As a result, the Eighth Division of the Circuit Court correctly determined that the matter should be decided by the district court. While that might seem to be the end of the matter, Stivers argues that the jurisdiction of the circuit court to decide the dispute was never properly invoked. We disagree.
Contesting the district court's order in all respects, the Beneficiaries proceeded to circuit court. The Beneficiaries indicated that they were invoking the provisions of KRS 395.617(1), which require that an aggrieved party institute an adversary proceeding by filing an original action in circuit court. However, the parties and the circuit court treated the matter as an appeal. The Beneficiaries filed a timely notice of appeal in the district court; set forth their arguments in a filing captioned as a Statement of Appeal; and indicated that the proceeding was filed pursuant to CR 72.02 (concerning how appeals are taken from district court to circuit court).
The scope of the circuit court's subject matter jurisdiction in this matter was not limited to an original action filed by the Beneficiaries. KRS 23A.080 provides for a direct appeal from the district court to the circuit court. In this case, it was the only viable means by which the Beneficiaries could challenge the district court's refusal to exercise its jurisdiction over their primary exception to the proposed settlement of the decedent's estate. An original action filed in circuit court would have divested the district court of its jurisdiction in the probate matter. Under these circumstances, the Beneficiaries were not limited to pursuing an action in the circuit court pursuant to the provisions of KRS 395.617(2). We are persuaded that the jurisdiction of the Eighth Division of the Fayette Circuit Court was properly invoked to consider the fundamental question of subject matter jurisdiction in this matter.
Stivers argues that the circuit court erred by failing to dismiss the appeal for failure of the Beneficiaries to name an indispensable party, her attorney in the probate proceedings, as a party to the proceedings. We disagree.
An Executrix is specifically permitted to retain the services of an attorney to assist and counsel her in the performance of her duties. KRS 395.195(18). If she does so, attorney fees are a chargeable claim against the estate -- provided that the fees are reasonable. White v. White, 883 S.W.2d 502, 505-06 (Ky. App. 1994). Stivers had a duty to see that the estate was properly administered and distributed, and she had a right to defend in court her actions in administering the estate. See Lucas v. Mannering, 745 S.W.2d 654, 331 (Ky. App. 1987). She included in her proposed settlement of the decedent's estate an order authorizing the estate's payment of her attorney's fee. The district court rejected the Beneficiaries' exception to this expense of administration, and they included the issue in their appeal. Stivers contends that the Beneficiaries were required to include her attorney as a party to the proceedings because the district court's award of a fee to him made him a real party in interest to the litigation.
Absent an award of fees to an attorney by judgment in his or her favor (thus allowing the attorney the right to enforce the award by execution), there is no reason for requiring the attorney to be named on appeal as a necessary party. Knott v. Crown Colony Farm, Inc., 865 S.W.2d 326 (Ky. 1993). Stivers is primarily liable for her attorney's fee. She is a named party to the appeal and is responsible for litigating the payment of expenses chargeable to the decedent's estate. Regardless of the district court's decision concerning payment of the attorney's fee from the estate, Stivers remains primarily responsible for the fee. The district court's order in this case benefitted Stivers. Her attorney is merely an incidental beneficiary of its decision. Under the circumstances, there was no reason to conclude that the district court's order made Stivers's attorney a party for purposes of the Beneficiaries' appeal to circuit court. The absence of Stivers's attorney did not prevent the circuit court from granting complete relief among the parties to the proceedings. See Braden v. Republic-Vanguard Life Ins. Co., 657 S.W.2d 241 (Ky. 1983). Consequently, the circuit court did not err in not finding him to be a necessary party to the appeal.
Stivers last argues that the failure of the Beneficiaries to file exceptions to the proposed settlement on or before June 20, 2018, means that the proposed settlement should have been accepted as a matter of law and that the circuit court was compelled to dismiss the Beneficiaries' appeal. Again, we disagree.
Stivers emphasizes that her proposed settlement filed with the district court on April 20, 2018, was in conformity with the procedural requirements of KRS 395.617(1). It contained the necessary information and was timely provided to the Beneficiaries by certified mail, return receipt requested. It was duly set for a hearing to be conducted on June 20, 2018. KRS 395.617(1) provides that "[a]t the hearing, if no exceptions are filed, the proposal, if made according to law, shall be approved." Stivers contends that the circuit court erred by failing to dismiss the Beneficiaries' appeal because they did not file exceptions before the June 20, 2018, hearing date.
The exceptions that the Beneficiaries filed on August 25, 2017, remained unresolved at the time that Stivers filed her second proposed settlement on April 20, 2018. These exceptions were sufficient to alert the district court that the Executrix's proposed settlement remained contested. Consequently, the district court was not required to approve the settlement on June 20, 2018. Nor did it abuse its discretion by permitting the Beneficiaries (having filed a motion for enlargement of time) to file a "restatement of exceptions" on July 18, 2018. Stivers filed a reply to the restatement of exceptions, and the district court conducted its scheduled hearing on August 7, 2018. Under these unique circumstances, the circuit court did not err by refusing to dismiss the Beneficiaries' appeal.
Therefore, we affirm the order of the Fayette Circuit Court, Eighth Division, requiring us to remand this matter to the Fayette District Court.
The Beneficiaries argue that our disposition of Stivers's contentions renders moot their subsequent appeal of the summary judgment granted by the Fayette Circuit Court, Third Division. Stivers does not disagree. Based upon the position of the parties, we dismiss as moot the appeal designated as 2019-CA-000703-MR. It is hereby dismissed.
ALL CONCUR.
ENTERED: March 27, 2020
/s/ Sara Combs
Sara Walter Combs, Judge BRIEFS FOR SHERRY L. STIVERS,
AS EXECUTRIX OF THE ESTATE
OF FOREST S. STIVERS AND
INDIVIDUALLY: J. Robert Lyons, Jr.
Lexington, Kentucky BRIEFS FOR MICHELLE STIVERS
ENGLISH AND KIMBERLY
STIVERS VISE: David J. Guarnieri
Lexington, Kentucky