#24898-rev & rem-SLZ
2008 SD 126
IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
* * * *
IN THE MATTER OF THE
ESTATE OF GLENN E. OLSON,
DECEASED.
* * * *
APPEAL FROM THE CIRCUIT COURT OF
THE FIRST JUDICIAL CIRCUIT
CLAY COUNTY, SOUTH DAKOTA
* * * *
HONORABLE ARTHUR L. RUSCH
Judge
* * * *
THOMAS E. ALBERTS
Avon, South Dakota Attorney for appellants James
W. Olson and Gary E. Olson.
CRAIG K. THOMPSON
Vermillion, South Dakota Attorney for appellees Estate of
Glenn E. Olson and Wayne A.
Olson, as Personal
Representative.
SHEILA S. WOODWARD
STEVEN K. HUFF of
Johnson, Miner, Marlow,
Woodward & Huff, LLP
Yankton, South Dakota Attorneys for appellees Jared
and Luke Muhlbauer
* * * *
CONSIDERED ON BRIEFS
ON NOVEMBER 3, 2008
OPINION FILED 12/23/08
#24898
ZINTER, Justice
[¶1.] Over the objection of the personal representative, 1 two specific
devisees in the Estate of Glenn Olson (the Estate) moved to intervene in an Estate
proceeding. The proceeding involved a third party claim to real property the
devisees stood to inherit under the will. The devisees appeal the denial of their
motion to intervene. Under the unusual circumstances of this case, we reverse.
Facts and Procedural History
[¶2.] In In re Estate of Olson, 2008 SD 4, 744 NW2d 555 (Olson I), a majority
of this Court held that the personal representative had no authority to sell
specifically devised real property, and therefore, the personal representative’s sale
to Jerad and Luke Muhlbauer (Muhlbauers) was void. The Court then remanded
the matter to the circuit court to allow the Muhlbauers to intervene and protect
their interests. Following remand, Muhlbauers intervened and filed a claim against
the Estate seeking to confirm the sale that this Court had previously voided. In the
alternative, Muhlbauers asserted a damage claim that they contended would arise
if the sale were not confirmed. Muhlbauers’ claims were based on their contention
that they were good faith purchasers for value who were protected as if the personal
1. During the pendency of this appeal, the parties informed this Court that
Wayne A. Olson, personal representative of the Estate of Glenn Olson, passed
away. The parties did not, however, indicate that the Estate has changed its
position on the merits.
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representative had been properly authorized to sell the property. See SDCL 29A-3-
714. 2
[¶3.] Over the personal representative’s objection, James W. Olson (James)
and Gary E. Olson (Gary), beneficiaries of the estate, moved to intervene in the
proceedings involving Muhlbauers’ claims. James and Gary, who were entitled to
the property as specific devisees under the will, objected to the personal
representative’s legal position that the sale of the property to Muhlbauers should
again be confirmed. The circuit court denied James and Gary’s motion to intervene,
concluding that the personal representative was deemed to adequately represent
the interests of all beneficiaries of the Estate. See SDCL 29A-3-715(22). James and
Gary appeal contending that the circuit court erred in denying their motion to
intervene as a matter of right under SDCL 15-6-24(a), or as a matter of discretion
under SDCL 15-6-24(b).
2. SDCL 29A-3-714 provides:
A person who in good faith either assists a personal representative
or deals with a personal representative for value is protected as if
the personal representative was properly authorized to act. The
fact that a person deals with a personal representative with
knowledge of the representative capacity does not alone require the
person to inquire into the existence of a power or the propriety of its
exercise. Except for restrictions on powers of supervised personal
representatives which are endorsed on letters as provided in § 29A-
3-504, no provision in any will or order of court purporting to limit
the power of a personal representative is effective except as to
persons with actual knowledge thereof. A person is not bound to
see to the proper application of estate assets paid or delivered to a
personal representative. The protection here expressed extends to
instances in which some procedural irregularity or jurisdictional
defect occurred in proceedings leading to the issuance of letters,
including a case in which an alleged decedent is found to be alive.
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Decision
[¶4.] We generally review a circuit court’s decision denying a motion to
intervene under the abuse of discretion standard of review. Baker, et al. v.
Atkinson, et al., 2001 SD 49, ¶12, 625 NW2d 265, 269-70 (citations omitted). This
case, however, presents a question of first impression in this jurisdiction
regarding intervention in representative litigation under SDCL 15-6-24. The
circuit court applied the general rule precluding intervention in such cases. We
must decide whether an exception should be adopted. We consider that question
of law de novo.
[¶5.] “South Dakota’s court rule SDCL 15-6-24(a)(2) is almost identical to
Federal Rule of Civil Procedure 24(a)(2).” In re D.M, 2006 SD 15, ¶5, 710 NW2d
441, 443-44. SDCL 15-6-24(a)(2) governs intervention as a matter of right and
provides, in relevant part:
Upon timely application anyone shall be permitted to intervene
in an action:
...
(2) When the applicant claims an interest relating to the
property or transaction which is the subject of the action and he
is so situated that the disposition of the action may as a
practical matter impair or impede his ability to protect that
interest, unless the applicant’s interest is adequately
represented by existing parties.
The purpose of this rule is “to obviate delay and multiplicity of suits by creating an
opportunity to persons directly interested in the subject matter to join in an action
or proceeding already instituted.” In re D.M., 2006 SD 15, ¶4, 710 NW2d at 443
(quoting Mergen v. N. States Power Co., 2001 SD 14, ¶5, 621 NW2d 620, 622).
Intervention is strictly procedural and “intervention standards are flexible, allowing
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for some tailoring of decisions to the facts of each case.” Id. (quoting Southard v.
Hansen, 342 NW2d 231, 233-34 (SD 1984)). “Rule 24 is construed liberally, and we
resolve all doubts in favor of the proposed intervenors.” United States v. Union
Elec. Co., 64 F3d 1152, 1158 (8thCir 1995) (citing Kansas Pub. Employees
Retirement Sys. v. Reimer Koger Assocs., Inc., 60 F3d 1304, 1307 (8thCir 1995)). In
applying this rule, this Court utilizes the following tripartite test:
1) the party must have a recognized interest in the subject
matter of the litigation; 2) that interest must be one that might
be impaired by the disposition of the litigation; and 3) the
interest must not be adequately protected by the existing
parties.
D.M., 2006 SD 15, ¶5, 710 NW2d at 444.
1) James’s and Gary’s Interests in the Subject Matter of the Litigation
[¶6.] “Upon the death of a person, that person’s real and personal property
devolves to the persons to whom it is devised by will. . . .” SDCL 29A-3-101. “This
statute makes it clear that Glenn’s real property vested in James and the other six
nieces and nephews [(Gary)] at the time of Glenn’s death, subject only to the
probate of the estate.” Olson I, 2008 SD 4, ¶15, 744 NW2d at 560 (citing generally
In re Estate of Roehr, 2001 SD 85, ¶6, 631 NW2d 600, 602). Because the real
property at issue vested in James and Gary subject only to administration of the
estate, they had a recognized interest in the property that was the subject matter of
this litigation.
2) Impairment of James’s and Gary’s Property Interests by the Disposition of the
Litigation
[¶7.] Muhlbauers’ primary claim against the Estate is to “award or
otherwise confirm the original sale from the Estate to the Muhlbauers.” Complaint,
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¶10. The Estate’s personal representative, Wayne A. Olson (Wayne), agreed with
the position of these claimants against the Estate. In his answer to Muhlbauers’
complaint, Wayne admitted “that part of paragraph 10 [of Muhlbauers’ complaint]
that the court should confirm the sale.” Estate’s Answer to Muhlbauers’ Complaint,
¶6. See also infra ¶10. Similarly, with respect to Muhlbauers’ alternative claim for
damages, Wayne asserted that confirmation of the sale was the Estate’s proposed
resolution of Muhlbauers’ claim for damages. Wayne stated:
[James and Gary’s] claim that Wayne’s ‘activities have resulted
in a claim for damages to be submitted’ by the [Muhlbauers].
This claim, however, has not come to fruition nor is it likely ever
to do so. The [Muhlbauers] will likely invoke SDCL [] 29A-3-
714[,] which protects bona fide purchasers for value. This will
permit the [Muhlbauers] to retain the land without loss to
Glenn’s Estate.
Estate’s Response to James and Gary’s Petition for Removal and Restraining Order,
¶9 (emphasis added). Thus, if the personal representative’s position were adopted
by the circuit court, James and Gary would be divested of their specific devise, and
their dispositional interest in that property would be impaired by the outcome of
this litigation.
3) James’s and Gary’s Interests-Adequate Protection by Existing Parties
[¶8.] The only dispute in this case is whether the personal representative
would adequately represent James’s and Gary’s interests. At the conclusion of the
hearing, the circuit court denied intervention reasoning that James’s and Gary’s
interests would be adequately represented by the personal representative. The
court reasoned:
I think there’s particularly a reason to deny the intervention in
this case when . . . the proposed intervenors have no interests
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that are in any way different from the other heirs’, no reason
why the personal representative would not – in defending
himself, would not – or defending the estate, would not
represent all of the heirs who have the same interests. These
proposed intervenors have no interest any different than any of
the other heirs.
The personal representative, however, aligned the Estate with the Muhlbauers’
claim against the Estate by agreeing that the original property sale to Muhlbauers
should be confirmed. This position was directly at odds with James’s and Gary’s
interests.
[¶9.] Although we have not had occasion to consider such conflicts, the issue
of a beneficiary’s right to intervene when the beneficiary’s interests are adverse to
those of the personal representative has been considered in both Colorado and
Montana under similar versions of Rule 24. Those courts apply the rule adopted by
the circuit court that, generally, in representative litigation, the personal
representative is entitled to represent the estate without intervention by
beneficiaries even if the beneficiaries have some disagreement with the personal
representative’s decisions. Those courts, however, also recognize an exception.
Both courts explained that on some occasions, compelling circumstances may make
representative litigation by the personal representative inadequate to represent the
interests of all beneficiaries. The Montana Supreme Court, referring to a Colorado
case, identified the circumstances under which the general rule and the exception
apply:
This . . . problem was addressed in the recent Colorado case of In
the Matter of the Estate of Scott. There, heirs of the decedent
attempted to intervene, in order to appeal from an adverse
ruling on a claim defended by the administrator. In denying
intervention, the Colorado Court said:
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We noted . . . that there are substantial problems with
basing the right to intervene upon various questions
as to how or in what manner a law suit should be
prosecuted. When the law created a mechanism
whereby one person as a representative of a group
could conduct litigation, the purpose was the efficient,
speedy, and orderly determination of rights which
were held in common. For the courts to grant
intervention to any member of a represented class
who disagrees with the decisions of the
representative, solely on that basis, would in our view
defeat the entire purpose of representative litigation.
A personal representative, under such a rule, would
always be in danger of losing the ability to represent
and act for the estate and might well find himself
relegated to a position of looking on as the affairs of
the estate became hopelessly entangled. It seems
hardly likely that the General Assembly when it
clothed the personal representative with far reaching
affirmative powers, could have intended for his
position to be so fragile.
Montana ex rel. Palmer, 619 P2d 1201, 1203-04 (Mont 1980) (quoting Estate of
Scott, 577 P2d 311, 313 (Colo 1978)) (internal citations omitted) (emphasis added).
That court went on to say that in determining adequacy of
representation under Rule 24(a), the court will look to see if
“there is a party charged by law with representing (the absent
party’s) interest. (If so,) then a compelling showing would be
required to show why this representation is not adequate.”
Id. As the Scott court further explained, although the general rule involves a
presumption that the personal representative will adequately represent the group
in discretionary matters (including matters such as trial strategy), the focus of the
analysis should ultimately depend on identity of interests. Scott, 577 P2d at 313-
14. When the representative is unable to adequately represent all the group
members because of a “divergence of interests . . . which in and of itself cast doubt
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upon the adequacy of the representation,” the exception may apply. Id. at 313.
We agree with this analysis.
[¶10.] In this case, it is apparent that the personal representative cannot
adequately represent the totally divergent interests of the personal representative
who desires to sell the property and those beneficiaries who contend that the will
does not authorize the personal representative to sell the property. While James
and Gary continue to object to confirmation of the sale that was voided in Olson I,
the personal representative seeks to have the sale confirmed. Indeed, the personal
representative answered the Muhlbauers’ complaint, specifically admitting that the
sale should be confirmed. That answer provided, in part:
6. [Estate] admits that part of paragraph 10 stating that the
court should confirm the sale.
7. [Muhlbauers] are recipients of a personal representative’s
deed and are good faith purchasers for value under SDCL
29A-3-714 and as such should have clear title to the property
in question and thus have no damages. . . .
WHEREFORE, [Estate] prays for Judgment as follows:
1. That the Court find [Muhlbauers] are good faith purchasers
for value under SDCL 29A-3-714 and as such, are entitled to
keep title to the real property in question[.]
[¶11.] This divergence of interests was compounded by the fact that James
and Gary had petitioned to remove Wayne as the personal representative.
Furthermore, Wayne was potentially liable to both the specific devisees and the
Muhlbauers as a result of the initial voided sale to the Muhlbauers. See SDCL 29A-
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3-712. 3 Although we express no opinion as to the validity of such claims, we note
that confirmation of the sale in this proceeding could favorably affect the personal
representative’s liability while adversely affecting James’s and Gary’s dispositional
interest.
[¶12.] Considering these circumstances, a compelling showing was made
that James’s and Gary’s interests were sufficiently divergent from that of the
personal representative to permit intervention as a matter of right under SDCL 15-
6-24(a)(2). 4 We adopt this exception to the general rule of representative
representation and reverse the circuit court’s denial of the motion to intervene.
Attorney’s Fees
[¶13.] The personal representative has moved for appellate attorney’s fees.
Because the Estate has not prevailed, the motion is denied.
[¶14.] Reversed and remanded for further proceedings consistent with this
opinion.
[¶15.] GILBERTSON, Chief Justice, and SABERS, KONENKAMP, and
MEIERHENRY, Justices, concur.
3. SDCL 29A-3-712 provides:
If the exercise of power concerning the estate is improper, the personal
representative is liable to interested persons for damage or loss
resulting from breach of fiduciary duty. The rights of purchasers and
others dealing with a personal representative shall be determined as
provided in §§ 29A-3-713 and 29A-3-714.
4. Because James and Gary are entitled to intervention as a matter of right
pursuant to SDCL 15-6-24(a)(2), we do not address their claims under SDCL
15-6-24(b).
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