#25909-a-GAS
2012 S.D. 17
IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
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IN THE MATTER OF THE ESTATE
OF BERNADINE J. MONCUR.
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APPEAL FROM THE CIRCUIT COURT OF
THE FOURTH JUDICIAL CIRCUIT
BUTTE COUNTY, SOUTH DAKOTA
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THE HONORABLE JOHN W. BASTIAN
Judge
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CASEY N. BRIDGMAN
Wessington Springs, South Dakota Attorney for appellant
Shirley Anderson.
TIMOTHY R. JOHNS of
Johns & Kosel, Prof LLC
Lead, South Dakota Attorneys for appellant
Janet Nelson.
WESLEY W. BUCKMASTER
Belle Fourche, South Dakota Attorney for appellees Dianne
Irene Shear and Miki Val
Scheef.
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CONSIDERED ON BRIEFS
ON NOVEMBER 14, 2011
OPINION FILED 03/07/12
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SEVERSON, Justice
[¶1.] Two beneficiaries of the Moncur Revokable [sic] Family Trust (Trust)
petitioned the trial court to remove the co-trustees of the Trust on the grounds that
the co-trustees violated various fiduciary duties. The trial court denied the petition.
The beneficiaries appeal, raising the following issues: (1) whether the trial court
erred in finding the co-trustees did not violate their fiduciary duties by using a
surrogate bidder to purchase Trust property at public auction; and (2) whether the
trial court erred in finding the remaining allegations that the co-trustees breached
their fiduciary duties were without merit. We affirm.
Background
[¶2.] Bernadine Moncur (Bernadine) created the Trust on December 20,
2002.1 The beneficiaries of the Trust included Bernadine’s five daughters: Lois
Marie Moncur (Lois), Dianne Irene Shear (Dianne), Miki Val Scheef (Miki), Shirley
Kay Anderson (Shirley), and Janet Leann Nelson (Janet). Under the terms of the
Trust, Bernadine served as trustee until the date of her death, at which time Miki
and Dianne were to serve as successor co-trustees.
[¶3.] Bernadine executed her last will and testament on January 14, 2003.
Under Article II of the will, Bernadine devised and bequeathed her entire estate to
the Trust. Miki and Dianne were named as co-personal representatives. Both the
Trust document and the will document were prepared by Bernadine’s attorney,
Leroy Hill.
1. The Trust was amended on October 14, 2004.
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[¶4.] Bernadine died on December 25, 2007. On December 31, 2007, Miki
and Dianne accepted their appointment as co-personal representatives of the estate
and co-trustees of the Trust. In accordance with Hill’s advice, Miki and Dianne
established a single checking account for the Moncur Trust and the Moncur estate.
This was done because under Bernadine’s will, the Moncur estate was to be devised
and bequeathed to the Moncur Trust.
[¶5.] Among the assets held in the Trust was certain real property located in
Butte County. Shirley and Janet wanted the Butte County property sold
immediately. Miki and Dianne elected not to sell the Butte County property
immediately because they believed it was prudent to delay disposition of the
property until after the period for notice to creditors expired on May 12, 2008.
[¶6.] Miki and Dianne arranged for the Butte County property to be sold at
auction. The auction took place on November 13, 2008.2 Miki and Dianne sent a
copy of the auctioneer’s employment contract to Shirley and Janet’s attorney. An
addendum to the employment contract stated family members were permitted to
enter the bidding. At the auction, Miki and Dianne used a surrogate bidder and
purchased the Butte County real estate for $309,000.
[¶7.] On June 5, 2009, Shirley petitioned the circuit court to remove Miki
and Dianne from their positions as co-trustees of the Trust. Janet joined the
petition. The petition alleged Miki and Dianne breached their fiduciary duties to
the beneficiaries of the Trust by using a surrogate bidder to purchase the Butte
2. The personal property held in the Trust was sold at a separate auction that
took place on April 5, 2008.
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County property without obtaining permission from the beneficiaries. The petition
also contained several other allegations that Miki and Dianne violated the terms of
the Trust and breached their fiduciary duties to the beneficiaries.
[¶8.] A court trial was held on February 24, 2010 and on April 23, 2010. In
a memorandum opinion dated November 30, 2010, the trial court denied Shirley
and Janet’s petition and found Miki and Dianne did not breach any of their
fiduciary duties.
Decision
[¶9.] As a fiduciary, a trustee has a duty “to act in all things wholly for the
benefit of the trust.” Willers v. Wettestad, 510 N.W.2d 676, 680 (S.D. 1994) (citing
Schroeder v. Herbert C. Coe Trust, 437 N.W.2d 178 (S.D. 1989); Restatement
(Second) of Trusts §§ 175, 176 (1959)). SDCL 55-2-1 provides that “[i]n all matters
connected with his trust a trustee is bound to act in the highest good faith toward
his beneficiary and may not obtain any advantage therein over the latter by the
slightest misrepresentation, concealment, threat, or adverse pressure of any kind.”
In addition, we have declared that “a fiduciary must act with utmost good faith and
avoid any act of self-dealing that places his personal interest in conflict with his
obligations to the beneficiaries.” In re Estate of Stevenson, 2000 S.D. 24, ¶ 9, 605
N.W.2d 818, 821 (quoting American State Bank v. Adkins, 458 N.W.2d 807, 811
(S.D. 1990)).
[¶10.] Whether a trustee has breached a fiduciary duty is a question of fact.
Weekley v. Prostrollo, 2010 S.D. 13, ¶ 11 n.3, 778 N.W.2d 823, 827 n.3 (citing Ward
v. Lange, 1996 S.D. 113, ¶ 12, 553 N.W.2d 246, 250). “We review questions of fact
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under the clearly erroneous standard of review.” Id. (citing In re Regennitter, 1999
S.D. 26, ¶ 11, 589 N.W.2d 920, 923). However, we review purely legal questions de
novo, giving no deference to the trial court’s findings. Estate of Stevenson, 2000
S.D. 24, ¶ 7, 605 N.W.2d at 820 (citing Lustig v. Lustig, 1997 S.D. 24, ¶ 5, 560
N.W.2d 239, 241).
[¶11.] 1. Whether Miki and Dianne violated their duty of loyalty to the
beneficiaries by purchasing the Butte County property.
[¶12.] A trustee owes a duty of loyalty to the beneficiaries of the trust.
Willers, 510 N.W.2d at 680. This duty of loyalty generally precludes a trustee from
“tak[ing] part in any transaction concerning the trust in which he or anyone for
whom he acts as agent has an interest, present or contingent, adverse to that of his
beneficiary . . . .” SDCL 55-2-3. “However, our statutes set forth specific exceptions
to this general rule.”3 Estate of Stevenson, 2000 S.D. 24, ¶ 11, 605 N.W.2d at 821.
One such exception is set forth under SDCL 55-2-3(1), which provides:
When the beneficiary does have the capacity to contract and,
with a full knowledge of the motives of the trustee and of all
other facts concerning the transaction which might affect his
own decision and without the use of any influence on the part of
the trustee, permits the trustee to do so . . . .
3. An exception to this rule is set forth under SDCL 55-2-3(4). This statute
allows a trustee to “take part in any transaction concerning the trust in
which he or anyone for whom he acts as agent has an interest, present or
contingent, adverse to that of his beneficiary . . . [w]hen the instrument
creating the trust expressly grants permission to the trustee to buy, sell or
lease property for the trust from or to the trust.” SDCL 55-2-3(4). Miki and
Dianne concede that the Trust instrument does not expressly grant
permission for the trustees to purchase Trust property for themselves. Thus,
SDCL 55-2-3(4) is inapplicable.
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[¶13.] The trial court found that the elements of SDCL 55-2-3(1) were met.
Shirley and Janet contend that the trial court abused its discretion in making this
finding. Specifically, Shirley and Janet argue they did not have “full knowledge of
the motives of [Miki and Dianne]” or the facts concerning the sale of the Butte
County property. It is undisputed that both Shirley and Janet have capacity to
contract.
[¶14.] The record shows Shirley and Janet each received written notice of the
auction. This notice listed the date of the auction, as well as the terms and
conditions of the sale of the Butte County property. In addition, Shirley and Janet
received a copy of the auctioneer’s employment contract. An addendum to the
auctioneer’s employment contract indicated family members were welcome to enter
the bidding. During the court trial, both Shirley and Janet admitted that they were
aware that Miki and Dianne were interested in purchasing the Butte County
property. They also admitted that they were aware Miki and Dianne were going to
bid on the Butte County property during the auction. Neither Shirley nor Janet
voiced any objection to Miki and Dianne bidding on the property. We thus hold the
record supports the trial court’s finding that the elements of SDCL 55-2-3(1) were
met.
[¶15.] Shirley and Janet argue that even if Miki and Dianne satisfied the
elements of SDCL 55-2-3(1), they still failed to overcome the presumption that the
Butte County property was sold “without sufficient consideration and under undue
influence.” This presumption is set forth under SDCL 55-2-8, which “provides that
when a trustee obtains an advantage from the beneficiary, it is presumed that the
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beneficiary entered into the transaction ‘without sufficient consideration and under
undue influence . . . .’” Estate of Stevenson, 2000 S.D. 24, ¶ 19, 605 N.W.2d at 823
(quoting SDCL 55-2-8). Shirley and Janet note that the Butte County property
appraised for $490,000 in February 2008. However, at auction on November 13,
2008, the property sold for only $309,000.
[¶16.] Prior to the auction, Bernadine had a real estate broker list the Butte
County property at $500,000 for an extended period of time. She did not receive an
offer. Miki and Dianne eventually elected to sell the property at auction. They
hired Jack Mills to be the auctioneer. Mills had thirty years of experience as an
auctioneer and realtor. Mills testified at the court trial that the auction was
competitive, and that the price was pushed higher by the use of a surrogate bidder
for Miki and Dianne. Prior to the auction, Mills estimated that the Butte County
property would bring between $275,000 and $375,000 at auction. The property sold
for an amount within this range.
[¶17.] Mills’s testimony that the auction was competitive was corroborated by
Merlin Porterfield, who was a registered auction bidder on the Butte County
property. Porterfield testified that he bid aggressively against the surrogate bidder,
John Wolff. Porterfield also testified he did not know Wolff was acting as a
surrogate bidder for Miki and Dianne.
[¶18.] The record supports the trial court’s finding that Miki and Dianne did
not use their influence as trustees to compel Shirley and Janet to permit them to
purchase the Butte County property at auction. Shirley and Janet admitted they
knew the terms and conditions of the sale of the Butte County property and were
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aware Miki and Dianne were planning to bid on the property. Evidence was
introduced at trial to show that the auction of the Butte County property was
competitive and Miki and Dianne’s bid was fair and reasonable. The record
supports the trial court’s finding that Miki and Dianne overcame the presumption
set forth under SDCL 55-2-8. We thus hold the trial court did not abuse its
discretion in finding Miki and Dianne did not violate their duty of loyalty to the
beneficiaries by purchasing the Butte County property.
Timing of the auction
[¶19.] Before the auction of the Butte County property, Miki and Dianne held
an auction to dispose of personal property held in the Trust. This personal property
auction took place April 5, 2008. Shirley and Janet argue that Miki and Dianne
should have arranged to auction the Butte County property at the same time the
personal property was auctioned on April 5, 2008. Shirley and Janet allege that
Miki and Dianne used their position as trustees to delay the sale of the Butte
County property until November 13, 2008, so that they could purchase the property
at a reduced price. We find no evidence in the record to support the claim that Miki
and Dianne deliberately delayed the sale of the Butte County property in order to
reduce its price.
[¶20.] Under the terms of the Trust, it was within Miki and Dianne’s
discretion to hold the auction of the Butte County property on November 13, 2008.
Section Fifteen, Subsection I of the Trust states, “Trustees in their discretion is [sic]
expressly authorized to hold and retain any securities, properties, or other
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investments for such length of time as Trustees deems [sic] advisable.” In addition,
SDCL 55-1A-5 provides,
A trustee may collect, hold, and retain trust assets until, in his
judgment, disposition of the assets should be made, without
regard to any effect the retention may have upon the
diversification of the trust estate. Trust property may be
retained even though it includes an asset in which its trustee is
personally interested.4
[¶21.] By holding the Butte County property auction on November 13, 2008,
Miki and Dianne gave the auctioneer time to conduct advertising and prepare for
the auction. In addition, the preparation of the Butte County property for sale
involved obtaining an engineering survey to subdivide the property. Miki and
Dianne testified that they were unable to find an engineer that could conduct the
survey before the personal property sale on April 5, 2008. In light of these facts,
Miki and Dianne determined it was in the best interest of the Trust to hold the
Butte County property auction on November 13, 2008. The trial court properly
concluded Miki and Dianne did not violate their fiduciary duties by holding the
auction on this date.
[¶22.] 2. Whether the trial court erred in finding the remaining
allegations that the co-trustees breached their fiduciary
duties were without merit.
[¶23.] Shirley and Janet made numerous additional allegations that Miki and
Dianne breached their fiduciary duties to the beneficiaries of the Trust. The trial
4. SDCL 55-1A-1 provides that the powers enumerated in SDCL chapter 55-1A
“apply to any trust which is governed by South Dakota law unless the
instrument specifically excludes any or all of the powers provided in [SDCL
chapter 55-1A].” In this case, the Trust did not exclude the powers
enumerated in chapter 55-1A. Therefore, SDCL 55-1A-5 applies.
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court evaluated each of these claims and determined they were without merit.
After reviewing the record in this case, we find that the trial court properly found
Shirley and Janet’s allegations were unsubstantiated by the record.
[¶24.] Affirmed.
[¶25.] GILBERTSON, Chief Justice, and KONENKAMP, ZINTER, and
WILBUR, Justices, concur.
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