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In re Estate of Hartshorne

Court of Appeals of Wisconsin, District II

August 9, 2017

In re the Estate of Harold Hartshorne Jr.
v.
James Johnson and SVA Plumb Trust Company, LLC, as personal representative for the Estate of Harold Hartshorne, Jr., Respondents, Kim Hartshorne Troy, Thomas H. Hartshorne, Francis Anne Inniss, Margaret Inniss de Suarez and Margaret Bryan Carrasco Hartshorne, Appellants-Cross-Respondents, Eric Hurkman, Richard McGeehan and Timothy J. Wrzesinski, Respondents-Cross-Appellants.

         CROSS-APPEAL from a judgment of the circuit court for Walworth County, Cir. Ct. No. 2013PR202 KRISTINE E. DRETTWAN, Judge.

          Before Neubauer, C.J., Reilly, P.J., and Gundrum, J.

          GUNDRUM, J.

         ¶1 Cross-Appellants Eric Hurkman, Richard McGeehan, and Timothy Wrzesinski appeal the probate court's denial of their individual requests for attorney fees and costs from the estate of Harold Hartshorne related to the real property date-of-death valuation the personal representatives used in the inventory, interim accounting, and federal real estate tax return filings for the estate.[1] The court rejected their requests because it concluded that although they had prevailed on the valuation issue, they did not do so in an "appealable contested matter" and thus it did not have authority under the relevant statutes to order such payments. Because we conclude that the matter on which Hurkman, McGeehan, and Wrzenski prevailed was an appealable contested matter, we reverse and remand for a determination of the appropriate amount of attorney fees and costs, if any, to be awarded to them.

         Background

         ¶2 Harold Hartshorne, Jr. ("Hartshorne") passed away on October 28, 2013, leaving a will and three codicils which bequeathed portions of his approximately eighty-seven acres of real property near Geneva Lake to Hurkman, McGeehan, and Wrzesinski (collectively "nonfamily beneficiaries") and portions to Kim Hartshorne Troy ("Kim"), Thomas Hartshorne ("Tom"), Francis Anne Inniss, Margaret Inniss de Suarez, and Margaret Bryan Carrasco Hartshorne (collectively "residual beneficiaries"). Hartshorne also bequeathed the residue of the estate to the residual beneficiaries.

         ¶3 In April 2014, Tom and Kim, who were the personal representatives for the estate at that time, objected to the third codicil in which Hartshorne left approximately ten acres of property (the "third-codicil property") outright to McGeehan. Asserting Tom and Kim had "an irreconcilable conflict of interest, [2]are violating their fiduciary duty to [him], and are treating him unfairly, " McGeehan petitioned in September 2014 for them to be removed as personal representatives and for him to be granted access to the third-codicil property. In December 2014, a hearing was held on the petition, at which Tom and Kim were the only witnesses to testify.

         ¶4 As relevant to the cross-appeal, Tom testified that following Hartshorne's death, he had appraiser Dale Hibbard complete an appraisal of the Hartshorne real property. Rather than appraising all of the parcels separately, Hibbard, with Tom's participation, "lump[ed] together" certain parcels. Hibbard's March 2014 appraisal identified the value of the third-codicil property at approximately $13, 900 per acre and the entire estate's real property at approximately $3 million.

         ¶5 Tom acknowledged that in 2011, two years before Hartshorne's death, Hartshorne sold a thirty-five-acre parcel to neighbor Patrick Ryan for approximately $73, 000 per acre. He also testified that in August 2014, another neighbor, Richard Driehaus, submitted a written offer to purchase the real property of the estate for $6.5 million, [3] which came out to approximately $75, 000 per acre. Tom agreed that considering an estate tax rate of forty percent and other factors, valuing the real property for federal estate tax purposes at the Hibbard appraisal amount of $3 million instead of the $6.5 million amount offered by Driehaus would result in the estate incurring approximately $1.4 million less in taxes. He admitted that if the additional $1.4 million had to be paid, it would come out of the residue of the estate, and thus reduce the amount of money the residual beneficiaries, including Tom and Kim, would receive. Tom and Kim both testified that under the will they together receive one-third of the residue of the estate. In her testimony, Kim conceded that "the lower the appraisal on the land value, the more [she would] receive as the residue of the estate."

         ¶6 Tom admitted that during the time he and Kim served as personal representatives the estate refused McGeehan's request to provide him with a copy of Hibbard's 2014 appraisal and did not inform McGeehan of the $6.5 million Driehaus offer until after he filed the petition to remove them as personal representatives. Tom agreed that with the estate's approximately $140, 000 valuation of McGeehan's property based upon the Hibbard appraisal, if McGeehan sold his property for an amount greater than that, McGeehan would have to pay a twenty-percent capital gains tax on "the difference between the $140, 000 set by the estate and whatever he sold it for."

         ¶7 The probate court found that Tom and Kim were treating McGeehan "differently, " had a "great personal stake" in the outcome of the third-codicil property, were "no longer representing ... the interest of the estate, " and were "unsuitable" to continue as personal representatives. The court ordered them removed as personal representatives, but made their removal effective January 28, 2015, so they could file the federal estate taxes that were due by that date.

         ¶8 On that date, Tom and Kim filed an inventory with the probate court and the estate's federal estate tax return, using the values from Hibbard's appraisal as the date-of-death real property values. On April 16, 2015, Tom and Kim also filed with the probate court a petition to approve their "Interim Estate Accounting, " which utilized Hibbard's appraisal values as the date-of-death values. Around this time, the nonfamily beneficiaries sold their parcels to neighbor Ryan for amounts greater than the appraisal values: McGeehan sold 10.067 acres on May 20, 2015, for $2 million-fourteen times the appraisal value-with a life estate for himself; Hurkman sold 5.459 acres on June 30, 2015, for $2.2 million-twenty-seven times the appraisal value; and Wrzesinski sold 20.691 acres on April 3, 2015, for $1, 325, 000-two times the appraisal value.

         ¶9 Following these sales, each of the nonfamily beneficiaries filed a petition and objection challenging the date-of-death property values Tom and Kim utilized on the interim accounting, inventory, and federal estate tax return and seeking a determination by the probate court that the price at which each sold his parcel to Ryan was the correct date-of-death value of his parcel. They sought an order directing the new personal representative, SVA Plumb Trust Company, LLC, to file an amended inventory, accounting, and federal estate tax return utilizing the Ryan sales prices, instead of the Hibbard appraisal values, as the date-of-death values. The nonfamily beneficiaries also requested that the estate pay their attorney fees and costs. A trial to determine the appropriate date-of-death valuation of the estate's real property was scheduled for December 14, 2015.

         ¶10 On September 28, 2015, the residual beneficiaries moved to dismiss the nonfamily beneficiaries' petitions/objections on the basis that they failed to state a claim upon which relief may be granted. Arguing against the motion at an October 15, 2015 ...


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