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Estate of Dahlke v. Dahlke

Supreme Court of Wyoming

February 25, 2014

THE ESTATE OF H. KENT DAHLKE, by and through its Personal Representative Susan M. Jubie, Appellant (Plaintiff), and THE ESTATE OF SARA WESTERBERG DAHLKE, by and through its Personal Representative Susan M. Jubie, and SUSAN M. JUBIE, individually, Appellants (Defendants),
v.
JAY H. DAHLKE, KURT M. DAHLKE, HEARTHSIDE CARE CENTER, UMPQUA HOMES FOR THE HANDICAPPED, and M. SCOTT McCOLLOCH, Appellees (Defendants)

Page 117

Appeal from the District Court of Big Horn County. The Honorable John G. Fenn, Judge.

For Appellants: Eldon E. Silverman, Esq., of Preeo Silverman Green & Egle, P.C., Denver, Colorado; Randy L. Royal, Esq., Greybull, Wyoming.

For Jay H. Dahlke and Kurt M. Dahlke, Appellees: Edward G. Luhm, Esq., Worland, Wyoming.

For Umpqua Homes for the Handicapped and Hearthside Care Center, Appellees: Laurence Stinson, Stinson Law Group, P.C., Cody, Wyoming.

For M. Scott McColloch: No appearance.

Before KITE, C.J., and HILL, VOIGT,[*] BURKE, and DAVIS, JJ.

OPINION

Page 118

DAVIS, Justice.

[¶1] The Estate of J. Kent Dahlke included a checking account he held jointly with his surviving wife Sara Dahlke. There were irregularities in the administration of the estate, including failure to assure that the heirs waived a hearing on a decree of distribution, and failure to advise Sara Dahlke of her statutory elective share. Sara

Page 119

served as the personal representative of Kent's estate. After Sara died, her daughter Susan Jubie, acting as the subsequent personal representative of Kent's estate, the personal representative of Sara's estate, and individually, sought to set aside the decree of distribution of Kent's estate five years after it was entered and its assets were distributed to the devisees. The district court denied the requested relief. We affirm.

ISSUES PRESENTED

[¶2] 1. Was the decree of distribution interlocutory and therefore subject to being set aside or revised because the personal representative was never discharged and the estate was never closed?

2. Was the decree of distribution void under Wyoming Rule of Civil Procedure 60(b)(4) due to irregularities in the probate proceeding, including failure to obtain waivers of hearing and failure to advise the surviving spouse of a statutory right to an elective share?

3. Did the district court err in failing to set the decree aside because of fraud on the court or exceptional circumstances under Wyoming Rule of Civil Procedure 60(b)(6)?

4. Did the existence of a possible malpractice claim against the estate's attorney prevent the district court from setting the decree of distribution aside?

FACTS

[¶3] J. Kent (Kent) and Sara Westerberg Dahlke (Sara) were married in Oregon in 1987. Both had children from prior marriages. Appellees Jay H. Dahlke and Kurt M. Dahlke are Kent's adult sons, and he was also survived by another adult son and daughter. Appellant Susan Jubie is Sara's daughter.

[¶4] Kent owned and operated a bar called the Barge Inn in Newport, Oregon before and after he and Sara were married. He also owned other Oregon real estate, including apartments he had acquired before he married Sara. Sara was not technically employed during the marriage and therefore relied upon Kent for support, but she worked with him at the Barge Inn without set compensation.

[¶5] The couple moved to Greybull, Wyoming around 1999 because Kent believed the dry climate there would alleviate respiratory problems from which he suffered. The couple purchased a home which they owned as tenants by the entirety.

[¶6] The Dahlkes established a joint checking account at Big Horn Federal Savings Bank in Greybull in 1999. They held the account as " joint tenants with right of survivorship and not as tenants in common." The parties used the money in the account to pay their living expenses. It was at least in part funded by payments of rent from Kent's apartments and the Barge Inn.

[¶7] In 2003, Kent sold some or all of the Oregon apartments, and the sales proceeds of $1,998,893.75 were deposited by wire transfer into the Big Horn Federal checking account on May 23 of that year. The couple continued to pay their living expenses from the account. Sara paid the bills and cared for Kent as his health deteriorated.

[¶8] Kent died at home on December 31, 2003, leaving a will he had executed in 2001. In it, he made specific bequests of $100,000 to each of his four children and to Sara's daughter, Appellant Susan Jubie. He also left $30,000 to Hearthside Care Center and $40,000 to the Umpqua Home for the Handicapped, both of which had cared for a daughter who predeceased him. He willed his tangible personal property to Sara. Sara was nominated as personal representative of the estate.

[¶9] The residue of Kent's estate was to be paid into a marital trust for Sara's benefit if she survived him. Sara was nominated as trustee, with Appellant Jay Dahlke to serve as successor trustee if she was unwilling or unable to serve. The marital trust was to distribute the income from the trust property to Sara as often as monthly and no less than quarterly. The trustee was authorized to invade principal as necessary for Sara's support, maintenance, and education. Upon Sara's death, the trustee was to pay all accrued and undistributed income to her estate, and to pay certain amounts from the trust

Page 120

principal to cover some taxes and all administrative expenses of her estate. The balance of the trust principal was then to be paid to Jay and Kurt Dahlke if they survived Sara, with the share of either who predeceased her to go to the other or to that son's issue.[1]

[¶10] Sara contacted Greybull attorney M. Scott McColloch (McColloch) about probating Kent's estate in August of 2004, about eight months after his death. At their first meeting, Sara was primarily concerned about transferring title to the parties' home. McColloch advised her that it would not be an asset of the estate because it was held in a tenancy by the entireties, and that it would only be necessary to record an affidavit of survivorship with Kent's death certificate to transfer it to her alone. He asked Sara to prepare a list of Kent's assets so that they could begin probate proceedings. When Sara did not promptly return with the list, McColloch reminded her that she needed to do so by a letter he sent in September of that same year.

[¶11] Sara came back to McColloch's office with a list of property some time before January 26, 2005, when the petition to probate Kent's will was filed in Big Horn County District Court. Among the assets she identified was the Big Horn Federal account, which then contained about $1,300,000.[2] The parties agree that account would normally have become Sara's alone because it was held as joint tenants with a right of survivorship, and that it would not therefore have been an asset of Kent's probate estate. However, McColloch testified, subject to objections based on Wyoming's version of the Dead Man's statute,[3] that Sara told him that the funds should be included in Kent's estate, even though the two discussed that the only assets subject to probate were those belonging to Kent. McColloch indicated that Sara told him that the funds were from real estate Kent owned before they were married, and that she was supposed to have placed them in a separate account in his name, but simply failed to do so. He advised her that this would not be a problem if she included the balance left in the account in the estate.

[¶12] The petition for probate listed the Big Horn Federal account as an asset of the estate. By then it contained $1,424,318.00. The entire estate was valued at $2,046,212.30 in the inventory, meaning that the account was by far its largest asset. Appellants point out that inclusion of the account substantially increased the statutory attorney fee.[4] Sara was duly appointed personal representative of the estate.

Page 121

[¶13] The probate proceedings were by any standard irregular and did not, in alarming respects, comply with the probate code. Sara was never advised of her right to an elective share against the will under Wyo. Stat. Ann. § 2-5-101(a). Attorney McColloch applied for and was authorized his entire statutory fee on July 13, 2005, eight months before filing a final report, accounting, and petition for distribution of the estate. Sara's fee as personal representative was also authorized at that time.[5] Sara never opened an account for the funds belonging to the estate, instead using the Big Horn Federal account for all disbursements. She wrote the checks for the specific bequests to the charities, Kent's surviving children, and Appellant Susan Jubie from that account about four months before the district court entered an order of final distribution authorizing these payments.

[¶14] A final report, accounting, and petition for distribution signed by Sara Dahlke was filed on March 9, 2006. The document indicated that the heirs had waived notice of any hearing required by Wyo. Stat. Ann. § 2-7-811(c), and that they consented to the distribution proposed in the petition. In reality, although McColloch claims to have prepared and sent the notices to the heirs, none of them returned the waivers, and they therefore could not have been attached to the petition.

[¶15] An order approving the final report, accounting, and decree of distribution (hereinafter decree of distribution) was entered without hearing on August 1, 2006.[6] It incorrectly recited that the probate court had examined waivers of notice of hearing. The order directed the personal representative to file a petition for discharge when all estate assets had been distributed. No petition for discharge has ever been filed, and therefore no order discharging Sara as personal representative or closing the estate has ever been entered.

[¶16] In addition, the balance of the Big Horn Federal account was not transferred to the marital trust, and so that trust was not funded until 2008, when an ancillary probate in Oregon resulted in the transfer of other assets to it. In other words, the funds from the Big Horn Federal account remained under Sara's individual control rather than being transferred to an account owned by the trust.

[¶17] In the decision letter described below, the district court found that a certificate of service on the decree of distribution indicated that it had been served on all distributees after it was entered, and McColloch testified that it was his practice to send executed copies after such decrees are signed.[7] He specifically testified that he sent a signed copy of the decree of distribution to Sara, who would have known of the proposed distribution anyway, because she signed the final report, accounting and petition for distribution under oath.

[¶18] An ancillary probate was filed in Oregon in order to dispose of Kent's assets there. Sara Dahlke served as the personal representative. The probate court for Lincoln County, Oregon, distributed the assets, including the Barge Inn, to Sara Dahlke as trustee of the marital trust established by Kent's will by order dated March 6, 2008. Sara subsequently deeded the Barge Inn property to the trust in her capacity as the Oregon personal representative.

Page 122

[¶19] The attorney retained to conduct the probate proceedings in Oregon evidently realized that the Big Horn Federal account in Wyoming was jointly held with right of survivorship, and that Sara had paid the specific bequests to the charities and the parties' children from it. He did not appear to be aware that the Big Horn Federal account had been included in the Wyoming probate of Kent's estate based on the correspondence in the record.

[¶20] The Oregon attorney wrote to McColloch on March 12, 2008, expressing his understanding that the Big Horn Federal account passed to Sara on Kent's death under Wyoming law, and that Sara had paid the bequests in Kent's will, totaling $590,000, from that account. He suggested that Sara be reimbursed for those payments with the Barge Inn property (also called the Bay Haven Tavern), as well as certain partnership and brokerage accounts. This would mean that the marital trust established by Kent's will would have few or no assets to generate income for Sara or to pass on to Jay and Kurt Dahlke after Sara's death. The attorney also pointed out that his proposed solution might have significant tax consequences for Sara.

[¶21] McColloch responded by letter dated March 17, 2008, agreeing that under Wyoming law the joint tenancy account would not become part of Kent's estate. He did not advise the Oregon attorney that the account had in fact been included in Kent's Wyoming estate. He likewise did not explain that this was because Sara had told him that the funds from the sale of Kent's apartments were meant to be deposited in a separate account and should therefore be included in the estate, as he later testified to be the case.

[¶22] Sara's health began to fail, and her daughter Susan Jubie began to assist with her affairs. Sara established The Sara L. Dahlke Living Trust on April 15, 2010, appointing Ms. Jubie as its trustee. This trust was to deliver all of its assets to Ms. Jubie on Sara's death. On April 30, 2010, Sara deeded the Barge Inn property from the Kent Dahlke marital trust to the Sara Dahlke trust, meaning that the asset would pass to Ms. Jubie after Sara died, rather than to Jay and Kurt Dahlke as provided in Kent's will. This transfer has led to litigation in Oregon.

[¶23] On April 26, 2010, with the help of another Wyoming attorney, Sara and Ms. Jubie drafted a letter for Sara to send to McColloch. It indicated that Sara believed he had made substantial mistakes in the handling of Kent's estate, including listing the Big Horn Federal account as one of its assets. It asked that he explain how other property included in the estate was valued, and for a refund of the portion of McColloch's fee related to the claimed erroneous inclusion of the Big Horn Federal account. Sara died shortly thereafter on May 21, 2010.

[¶24] Ms. Jubie was appointed as personal representative of both the Kent Dahlke and Sara Westerberg Dahlke estates.[8] On June 24, 2011, as personal representative of the Kent Dahlke estate, she filed a complaint against all of Kent's children, Umpqua Homes and the Hearthside Care Center, Sara's estate, herself individually as the recipient of a specific bequest under Kent's will, and McColloch. She sought an equitable order setting aside the August 1, 2006 decree of distribution and requiring the recipients of the individual bequests to return the funds to Kent's estate, as well as an order requiring McColloch to pay back all or part of his fee for handling the estate. She also sought a declaratory judgment that the Big Horn Federal account should not have been included in Kent's estate.[9]

Page 123

[¶25] The parties filed cross-motions for summary judgment,[10] which the district judge resolved in a thorough decision letter dated January 2, 2013. The court denied Appellants'[11] motion for partial summary judgment and granted the defense motions, holding as follows:

o The decree of distribution was a final order, and Appellants' remedy if they disagreed with its contents was to appeal rather than to try to reopen the estate. The court went further and considered whether Appellants' complaint might qualify as a W.R.C.P. 60(b) motion for relief from a final judgment, and determined that a Rule 60(b) motion is not a substitute for an appeal.

o Appellants' claims for equitable relief were barred by laches because most if not all of the irregularities in the administration of the estate could have been discovered in a reasonable time, and the delay in bringing the action was inexcusable. In addition, there would be significant prejudice to innocent parties who had done nothing to cause the claimed errors and might be unable to repay the money.

o The district court sitting in probate had jurisdiction to enter the decree of distribution in spite of the absence of waivers of notice and the hearing required by statute. While entering the order without the waivers or holding a hearing was probably error, it was not error of such magnitude as to deprive the court of jurisdiction. In addition, Sara knew of the order, and she was the only person then arguably aggrieved by it.

o There was no denial of due process because Sara knew of the proposed distribution and of the proceedings to obtain the order, and yet did not object. Moreover, all devisees had notice of the order after it was entered and did nothing to set it aside until Ms. Jubie filed suit. Any failure to advise Sara of her forced share was harmless because she received more than 25% of the estate under the will.

o The court would not determine the ownership of the Barge Inn because that issue would be determined by the Oregon courts. That decision has not been appealed.

o A motion by Hearthside Care Center and Umpqua Homes to dismiss for lack of personal jurisdiction was denied as moot because of the rulings listed above.

This appeal was timely perfected.

STANDARD OF REVIEW

[¶26] Our standard for review of orders granting summary judgment under W.R.C.P. 56 has been stated often and requires no further elaboration:

We review a summary judgment in the same light as the district court, using the same materials and following the same standards. [ Snyder v. Lovercheck, 992 P.2d 1079, 1083 (Wyo. 1999)]; 40 North Corp. v. Morrell, 964 P.2d 423, 426 (Wyo. 1998). We examine the record from the vantage point most favorable to the party opposing the motion, and we give that party the benefit of all favorable inferences that may fairly be drawn from the record. Id. A material fact is one which, if proved, would have the effect of establishing or refuting an essential element of the cause of action or defense asserted by the parties. Id. If the moving party presents supporting summary judgment materials demonstrating no genuine issue of material fact exists, the burden is shifted to the ...

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