Zimmer, Duncan & Cole

Where There's a Will, There's a Way for a Family to Fight

A death can often bring a family closer together. Yet nothing has more power to pull that family back apart than a Last Will and Testament.
Our firm handles a lot of disputes involving estates. Sometimes the issue is a Will that was changed in the last days or weeks of someone's life. Another common situation is property that was unexpectedly gifted or sold before death (often for a very low price).
Other cases involve mismanagement of the probate process: when the executor engages in self-dealing or improperly handles the estate's assets.
This week's case involves this last scenario. The saga begins in 2002 and unfolded into three separate trips to our Supreme Court.
The most recent appeal is Jared and Luke Muhlbauer v. the Heirs and Estate of Glenn E Olson (2011 S.D. 42).
Glenn Olson died nine years ago this week. He lived in the same house since birth: a modest farmhouse built in 1900, and situated on 132 acres in Clay County. He spent his entire life farming that land.
More than anything, Mr. Olson wanted to keep the land in the family. He had no children, so he drafted a Will which gave everything to his seven nieces and nephews.
After his death in 2002, another relative, Wayne, served as the personal representative (executor) of the estate. On behalf of the estate, Wayne took care of the farm, the house, and the barns.
Wayne soon realized that the buildings were in such poor condition that they were a drain on the estate's resources.
He then made the decision that it would be better to sell part of the farm and divide the proceeds among the seven relatives, rather than continue owning and operating the farm.
Wayne scheduled a public auction and sold the six acres where the buildings were located. The sale brought an exceptional price, exceeding market value. The highest bidders were Jared and Luke Muhlbauer, who became the new owners.
Wayne then reported the sale to the seven heirs. However, the news was a surprise to some, because he apparently didn't notify them prior to the auction.
When they found out, five of the heirs approved, but two of the nephews were quite upset. They filed a lawsuit to unwind the sale.
When you die, the ownership of your land and personal property is governed by your Will. (If you die without a Will, the property is given to your closest living relatives, based on a complicated set of rules. If no living relatives can be found, all of it goes to the State.)
Before the property is formally transferred to your chosen heirs, it passes first through an "estate". The estate includes almost all of your assets and almost all of your debts.
The person in charge of managing your estate is called the Personal Representative (the old-fashioned term was "executor").
The Personal Representative must first pay any debts, and then divides up what is left based on the instructions you gave in your Will. This is called the "probate" process.
If your Will gave specific property to specific people, the Personal Representative should always attempt to follow your instructions.
In this case, the state Supreme Court was clearly troubled by the fact that the family homestead was sold without notice to the other heirs.
In addition, the Court was troubled that the sale seemed to violate the specific directions in the Will.
And the home site wasn't sold to pay any debts. Instead, the Personal Representative sold it because it was old and dilapidated...although it clearly had sentimental value which exceeded its high sales price.
Equally problematic, though, was the situation of the highest bidders. The Muhlbauers bought the land without any knowledge of these tricky issues. They had no idea that the Personal Representative didn't have approval to sell, or that he had failed to notify all of the heirs prior to the auction.
Fortunately for Muhlbauers, the law considers them to be "innocent third parties". Their dealings with the Personal Representative are protected. As a result, they will be permitted to keep the land.
In turn, the disgruntled nephews will be permitted to pursue a claim against the Personal Representative. His alleged mishandling of the estate may be a breach of his fiduciary duty. If so, he is liable for money damages to fix the harm.