Joyce Dickson and Loretta Wortham v. Phil Smith, Administrator of the Estate of Lyle Dickson, DeceasedAnnotate this Case
ARKANSAS COURT OF APPEALS
NOT DESIGNATED FOR PUBLICATION
May 26, 2004
JOYCE DICKSON and AN APPEAL FROM ARKANSAS COUNTY
LORETTA WORTHAM CIRCUIT COURT, NORTHERN DISTRICT
APPELLANTS [P 94-56]
HONORABLE DAVID HENRY,
PHIL SMITH, Administrator of the CIRCUIT JUDGE
ESTATE OF LYLE DICKSON, Deceased
Terry Crabtree, Judge
This appeal is a twelve-year family dispute over accountings for assets belonging to the estate of their father. The sole issue on appeal is whether the trial court erred in approving the final accounting by the executor because, according to appellants, the beginning point for the accounting was flawed. We find no error and affirm.
Lyle Dickson was declared incompetent, and Imogene Berg and Billy Dickson, two of his six children, were appointed co-guardians of his person and estate by order entered on May 7, 1993. On December 2, 1993, Emmie Dickson, Lyle's wife, filed a petition alleging, inter alia, that the co-guardians had failed to post bond, file an inventory of the ward's property, or file an accounting. An order was entered on February 15, 1994, requiring the co-guardians to file an inventory within thirty days and requiring the co-guardians to "immediately" post a corporate surety bond in the amount of $70,000.
A hearing was held on April 27, 1994, during which the trial court ruled that the co-guardians should file their inventory and accounting no later than May 4, 1994, and that the co-guardians should also file their corporate surety bond by the same date. The trial court also ruled that, if bond was not timely posted, administration of the estate would be turned over to a local bank. On May 16, 1994, Emmie Dickson filed a petition seeking the removal of the co-guardians for failing to file either the inventory or accounting. The co-guardians filed their inventory and accounting on June 8, 1994. On July 7, 1994, appellant Joyce Dickson, another of Lyle Dickson's children, filed her petition seeking removal of the co-guardians. She alleged that there were inconsistencies in the accounting and that the co-guardians had violated several court orders. On July 28, 1994, an order was entered removing the co-guardians and appointing First Stuttgart Bank & Trust (FSBT) as successor guardian of the estate of Lyle Dickson. The order also appointed Billy Cotten1 to audit the accounts from the date a guardian was sought (August 19, 1992) and issue a report.
Lyle Dickson died testate on August 21, 1994. Joyce Dickson filed a petition seeking to probate the will on August 22, 1994, and nominated FSBT to serve as administrator of the estate. Imogene Berg, Linda Moritz, Wanda Bouyer, and Billy Dickson, four of Lyle Dickson's children, filed a petition seeking to probate the will, noting that the will nominated DeWitt Bank & Trust to serve as executor.2 On January 26, 1995, an order was entered appointing Phil Smith, a local certified public accountant, as administrator. The order also estimated that approximately $500,000 in estate property would pass through the administrator's hands.
On February 9, 1995, FSBT filed its petition to approve its final accounting in the guardianship case. The petition noted that no objections to the accounting had been filed. An order approving the accounting and noting that the estate's assets had been transferred to Phil Smith was entered on February 17, 1995.
Smith later sought, and was granted, permission to sell certain items of personal property. He also sought, and was granted, permission to sell the estate's real property after the widow, Emmie Dickson, disclaimed any interest she might have in the estate or in a trust created by the will. The sale of real estate brought $560,000 and was confirmed. Linda Moritz purchased one tract for $70,000, and Randy Moritz and Regail Moritz purchased the bulk of the remainder of the property. The relationship between Linda Moritz, Randy Moritz, and Regail Moritz is not explained. In addition to $512,776.65 in cash, Linda Moritz, Randy Moritz, and Regail Moritz executed a note for $40,000 for the purchase of the property. Loretta Wortham purchased one tract of the real estate as a credit against future distributions. Partial distributions were made to the heirs from time to time.
On February 18, 1997, Smith filed a final accounting accompanied by a petition for approval of the final accounting, final distribution, and for discharge as personal representative, alleging that the estate was ripe for final distribution. On November 21, 1997, Joyce Dickson filed objections to Smith's accounting. Among the objections were that Imogene Berg and Bill Dickson, the former co-guardians, had failed to file proper inventories and accountings and had violated court orders requiring them to do so; that the approval of FSBT's final accounting as guardian of the estate was obtained without proper notice to the heirs; that Smith failed to press for discovery of assets that remained unaccounted for in the guardianship case; that Smith hired himself to prepare the estate's tax returns and failed to supply certain schedules to the beneficiaries; and that the accounting failed to have proper documentation attached. The petition also sought to reopen the guardianship case for the purpose of obtaining the previously ordered audit (by Billy Cotten) and to make discovery of all assets in the co-guardians' possession. On December 22, 1997, the trial court entered an order stating that the accounting was deficient because the disbursements were not accompanied by proper documentation. The order also required Smith to discover whether there were any assets of the guardianship estate not accounted for. Finally, the order set aside FSBT's final guardianship accounting and consolidated the two cases into the probate estate.
Appellants, together with Billy Dickson and Wanda Bouyer, filed a petition on June 19, 1998, seeking to remove Smith as administrator of the estate. The reasons given mirrored the objections to Smith's final accounting filed in November 1997. This motion was taken under advisement by order entered on August 19, 1998. In addition, the order provided that Oscar Hirby, attorney for appellants, was to be appointed "special counsel" to the administrator to undertake discovery of estate assets by deposing the former co-guardians. FSBT filed its guardianship inventory and accounting on July 24, 1998. On March 27, 2000, appellants, together again with Billy Dickson and Wanda Bouyer, filed a motion for full accounting and to remove Smith as personal representative. The motion alleged that more than nineteen months had elapsed since the court had ordered Smith to restate his accounting following FSBT's filing its restated final guardianship accounting and Smith had failed to do so.
On May 19, 2000, Smith filed a final accounting accompanied by a petition for approval of the final accounting, final distribution, and for discharge as personal representative. Appellants filed objections and supplemental objections to the final accounting. These objections go to specific items, such as an item listed on the federal estate tax return of a $100,000 gift by loan and a discrepancy in the accounting listing the sale of an automobile for $15,700 when the vehicle actually sold for $18,000. The motion also raised the issue of Berg's failing to properly account, making it impossible to know whether Smith's accounting listed all of the estate's assets. Berg was also alleged to have used a $32,000 insurance payment to pay her personal mortgage and other debts without repaying the estate. After hearing Smith testify that Hirby did not direct him to proceed with an investigation, the trial court entered an order on May 31, 2000, approving FSBT's final guardianship accounting and foreclosing further inquiry into Imogene Berg's failure to properly account while serving as co-guardian.3 The order also delayed any hearing on approval of Smith's final accounting until sixty days had passed, as provided by Ark. Code Ann. § 28-52-107 (Repl. 2004).
Appellants sought reconsideration of that part of the order preventing inquiry into Imogene Berg's actions as co-guardian. Attached to the motion was Oscar Hirby's affidavit in which he states that he obtained documentation of the $32,000 insurance payment and Berg's apparent use of that money to pay her personal mortgage. Hirby also stated that his attempts to obtain further information were "stonewalled" by Smith and by Berg's attorney. Hirby ultimately concluded that he could not say with certainty whether assets were misappropriated by Berg or others.
A final hearing on appellants' objections was held on August 9, 2001. Prior to that hearing, appellants had Smith's accounting reviewed by Scott Despain, a certified public accountant. Despain prepared a report detailing his findings, including his belief that certain changes in the federal estate tax return required a better explanation; that certain activity was not documented in either the bank registry or the accounting; and that Smith's accounting was flawed because it began with an uncertain starting point, due to the lack of a proper accounting by Imogene Berg. Despain's testimony largely expanded on and explained the conclusions contained in his report. He admitted that he never called Smith to discuss his concerns about the lack of documentation. He also admitted that the taxes on the gifts made by Lyle Dickson decreased because Smith had negotiated with the Internal Revenue Service (IRS).
Phil Smith testified that a $47,000 gift listed on the audited tax return and discussed in Despain's report was because the decedent had guaranteed a loan to Jerry Wortham and Loretta Wortham, who declared bankruptcy, and the decedent had to pay the bank. Smith stated that the IRS considered $40,000 of that debt to be gifts from the decedent and Emmie Dickson to the Worthams, leaving the remaining $7,000 as taxable to the estate. He admitted that there was no documentation of the forgiveness after the bankruptcy.
Smith testified that the $35,836 in equipment mentioned in Despain's report was for farm equipment that Lyle Dickson sold during his lifetime to cover debts of Bobby Mortiz and Billy Dickson. He stated that this amount was the result of a compromise with the IRS auditor and that he never attempted to discover the true amount. He also was unable to learn when the equipment was sold or the notes paid but stated he believed that it occurred in the 1980s.
Regarding the $10,000 for an automobile, Smith testified that Imogene Berg told him that $10,000 was used to purchase a car. He stated that he was unable to negotiate that out of the estate with the IRS. He also testified that the $100,000 gift figure on the original, unaudited estate tax return was an estimate based on conversations with the heirs without documentation to substantiate the amount. He stated that this figure changed in the audited return as a result of the negotiations with the IRS.
Appellant Joyce Dickson testified that she challenged the accounting because she did not have receipts for all of the items in the final accounting, such as the $100,000 gift.
On September 24, 2002, the probate court entered an opinion denying appellants's objections and approving the final accounting. The trial court stated that greater weight was given to Smith's testimony explaining the issues covered by Despain's report and that such testimony was sufficient to explain his actions. The opinion was incorporated into an order entered on October 7, 2002. This appeal is from that order.
Appellants raise one point on appeal, namely, that the trial court erred in approving the final accounting.
We review probate matters de novo on appeal and will not reverse unless the court clearly erred. Hodges v. Cannon, 68 Ark. App. 170, 5 S.W.3d 89 (1999). A probate court order is clearly erroneous if it is clearly against the preponderance of the evidence. In re Davidson, 310 Ark. 639, 839 S.W.2d 214 (1992). We will consider a court's finding of fact to be clearly erroneous when we are left with the definite and firm conviction that the court erred. Balletti v. Muldoon, 67 Ark. App. 25, 991 S.W.2d 633 (1999). In determining the credibility of witnesses and the weight to be accorded their testimony, we defer to the superior position of the trial judge. Hodges v. Cannon, supra.
Citing Ark. Code Ann. § 28-49-103 (Repl. 2004) and Robinson v. Winston, 64 Ark. App. 170, 984 S.W.2d 38 (1998), appellants argue that Smith should have gone behind FSBT's accounting and pursued Imogene Berg because she allegedly admitted to using guardianship estate funds to pay her personal expenses. Further, appellants argue that Berg never filed a proper accounting of her activities as co-guardian of the estate of Lyle Dickson so that Smith's final accounting cannot have a proper starting point. We cannot agree. We first note that appellants have not produced any evidence that the original co-guardians misappropriated funds from the estate in their care. Two individuals were appointed by the trial court to investigate the co-guardians' handling of the estate. However, neither individual ever reported any wrongdoing. Appellants attached an affidavit from Oscar Hirby, who stated that his efforts to investigate were "stonewalled." It is telling that Hirby neither testified at the hearing nor sought assistance from the court to break through the "stonewall" he encountered.
Second, Berg and Billy Dickson filed their inventory and accounting on June 8, 1994, without objection by appellants. FSBT filed its inventory and final accounting on July 24, 1998, without objection from appellants. The trial court approved FSBT's accounting and FSBT was discharged. Arkansas Code Annotated section 28-65-320(d) (Repl. 2004)provides in part that "the settlement by the court of an account is binding upon all persons concerned, subject to the right of appeal and to the power of the courts to vacate its final order." Therefore, we hold that the trial court was correct to preclude further inquiry into the original co-guardian's handling of the estate. An administrator is responsible only for those assets which come into his hands at the time of his appointment or thereafter. See Ark. Code Ann. § 28-52-101(a) (Repl. 2004); In re Estate of Timoschuk, 381 N.Y.S.2d 911 (N.Y. App. Div. 1976); In re Estate of Kjorvestad, 375 N.W.2d 160 (N.D. 1985). Therefore, Smith had a reasonable basis for beginning his accounting with the FSBT accounting.
As to the specific objections to the accounting, this issue turns on the findings and the weight given to the testimony by the trial court. The judge noted that Smith did the work and that his explanations were reasonable. Resolving disputed facts and determining the credibility of the witnesses are matters within the province of the circuit court, sitting as the trier of fact. Heartland Cmty. Bank v. Holt, 68 Ark. App. 30, 3 S.W.3d 694 (1999). We cannot say that his findings are clearly erroneous.
Bird and Vaught, JJ., agree.
1 Cotten was not a certified public accountant. He had prepared Lyle Dickson's tax returns for some years.
2 The remaining child is appellant Loretta Wortham. She was not a party to these petitions. These petitioners filed an identical petition on October 14, 1994, after appellants filed a motion to strike their first petition because it was not verified.
3 FSBT was also discharged as guardian.