In the Matter of the ESTATE OF Ethlyn M. DAVIS, Deceased.
No. 18442.
Supreme Court of South Dakota.
Argued March 22, 1994. Decided Nov. 16, 1994.
That continuation of the Defendant as Trustee of the Henrietta C. Sandquist Trust would be commensurate with the wishes of Henrietta C. Sandquist inasmuch as she selected her granddaughter to serve as Trustee with knowledge of any dispute or conflict between the Plaintiff and the Defendant.
IX.
The Defendant has done a good job of management of the Trust corpus.
X.
That the terms of the Testamentary Trust provide for the Defendant as Trustee to invade the principal of the Trust in her sole discretion and where the Testatrix has made a selection of a Trustee the same should not be disturbed absent a demonstrated abuse of power detrimental to the Trust. See also 906 F.2d 1206.
XI.
Based upon the totality of the circumstances, the Defendant has not been demonstrated to have committed any abuse of power detrimental to the Trust and should remain as Trustee.
The trial court‘s findings of fact support its conclusion that Eldredge should remain trustee. In closing, the trial court‘s decision retaining Eldredge as trustee is affirmed, but the unjust enrichment claim is reversed and remanded for further proceedings consistent with this opinion.
MILLER, C.J., WUEST, HENDERSON and SABERS, JJ., concur.
F.M. Smith and Michael Billion of Woods, Fuller, Shultz & Smith, Sioux Falls, for appellee Estate of Davis.
KONENKAMP, Justice (on assignment as a Circuit Court Judge prior to appointment as a Supreme Court Justice).
The South Dakota Department of Revenue (Department) appeals the trial court‘s decision to redetermine inheritance tax and grant a refund to the Estate.
Ethlyn M. Davis died on November 4, 1986 before the final outcome of her lawsuit against the brokerage firm of Merrill Lynch, Pierce, Fenner & Smith (Merrill Lynch). The suit, brought in the United States District Court, sought compensatory damages of $122,674 and punitive damages of $6,000,000 for alleged wrongful acts, including account churning. The Estate‘s Inheritance Tax Re-
The Merrill Lynch lawsuit settled for $2,000,000 on October 17, 1990. The attorneys who handled the lawsuit later appeared on behalf of the Estate and moved on December 4, 1991 to set aside the stipulation alleging a legal mistake in the method of valuing the lawsuit and the Estate attorney‘s lack of authority to enter the stipulation. The Estate paid the tax due of $147,293.75 in January, 1991, then filed an amended inheritance tax report valuing the lawsuit at $10,000 on the date of death and requested a refund. The Department refused.
At the hearing to set aside the stipulation and order, both the Estate attorney and the Department‘s attorney testified that they believed at the time they made their stipulation that for inheritance tax purposes a cause of action is valued based on its proceeds. The trial court determined that the stipulation and order of February 28, 1990 should be vacated on a mutual mistake of law. Finding mistake dispositive, the court made no finding on the Estate‘s claim that its attorney lacked authority to enter the stipulation. After hearing expert testimony, the court then valued the Merrill Lynch lawsuit at $62,285 on the date of death. In its judgment of June 16, 1993, the trial court ordered a refund after allowing the Estate a deduction for attorney‘s fees and costs incurred in seeking to set aside the stipulation and order.
IS THE DEPARTMENT‘S APPEAL TIMELY?
The trial court entered an order and judgment on March 30, 1993, granting the Estate‘s application for redetermination of inheritance tax due and requiring the Department to refund excess taxes paid based the lawsuit‘s newly determined date of death value. On April 27, 1993, the Estate filed a second claim for redetermination and refund for the amount of attorney‘s fees incurred in the prosecution of its claim for an inheritance tax redetermination. The court entered a judgment on that matter on June 16, 1993, allowing for a reduction in value for attorney‘s fees and costs. The Department filed its notice of appeal on August 12, 1993.
The Estate contends that the Department‘s appeal of both orders is untimely under
DID THE TRIAL COURT HAVE JURISDICTION TO SET ASIDE THE STIPULATION AND ORDER OF FEBRUARY 28, 1990?
The trial court believed that it had jurisdiction to vacate its earlier order approving the stipulation for four reasons: (1) Inherent power of the court; (2) the stipulation and order were void as they contravened South Dakota law; (3)
The circuit court first invoked the inherent power of the court citing Purinton v. Purinton, 41 S.D. 125, 131, 169 N.W. 236, 238 (1918):
The power of a court to open up a judgment for a sufficient reason does not rest upon statute, though statutes may limit the power; but such power is one inherent in a court and, except as limited by statute, is within the sole control of the courts.
But in commenting on inherent power this Court has also stated
The remedy [to set aside a judgment] by motion is available only in case of irregular and void judgments (irregular and void by reason of the want of jurisdiction or want of adherence to some essential legal procedure), and cannot be resorted to as a means of enabling the court to review, revise, or correct errors of law into which it may have fallen.
Janssen v. Tusha, 68 S.D. 639, 642, 5 N.W.2d 684, 685 (1942) (quoting Jennings v. Des Moines Mutual Hail & Cyclone Ins. Ass‘n, 33 S.D. 385, 146 N.W. 564, 565 (1914)). As recently as 1985 we relied on Purinton to hold that a trial court was obliged to set aside its own judgment in the case of a mother who conditionally terminated her parental rights finding that such arrangement was the antithesis of full consent required by statute. Matter of J.M.J., 368 N.W.2d 602 (S.D. 1985). The lack of full consent was an essential legal procedure invalidating the judgment and empowering the court to set it aside. On the other hand, no essential legal process was broached here. Furthermore, we have long held that a court‘s inherent power cannot override a controlling statute and as discussed below,
The trial court determined that the attorney for the State and the Estate‘s attorney stipulated based on a mutual mistake of law. The court did not rely on
The Estate and the Department undertook to resolve an uncertainty: the value of a cause of action on the date of decedent‘s death. They did so by agreeing to value the suit at whatever its proceeds would be and thus avoided the difficulty of trying to quantify the worth of pending litigation. We agree that the value of a cause of action as of the date of death, not its future proceeds, is what should be assessed for inheritance tax purposes.
Since the parties assume the risk of mistake as to matters intended to be resolved by the compromise, a compromise and settlement is not defective merely because the parties were ignorant or mistaken as to the full extent of their rights.
15A Am.Jur. Compromise and Settlement § 33 (1976); See C. Wright & Miller § 2858, n. 10 (1973) (consent decrees based on errors of law ordinarily not set aside). See also Smith v. Widman Trucking & Excavating, 627 F.2d 792 (7th Cir. 1980) where the court stated: “The rule [60(b)] is not intended to enable litigants to avoid the consequences of
The trial court next relied on
The court also found that it had jurisdiction pursuant to
A statute which provides for the additional tax on newly discovered assets after the inheritance tax has been paid, as ours does, surely is bound to permit the deduction of newly discovered and approved claims.
Id. at 709. No tax was paid here erroneously, because there were no new assets or claims discovered; the Merrill Lynch lawsuit was known and accounted for in the stipulation.
The Estate next contends that the trial court‘s order approving the stipulation was merely an interlocutory order which could be revised at any time prior to its becoming final pursuant to
An action is an ordinary proceeding in a court of justice, by which a party prosecutes another party for the enforcement, determination, or protection of a right, the redress or prevention of a wrong, or the punishment of a public offense. Every other remedy is a special proceeding....
A proceeding in probate to set inheritance taxes is a special proceeding.
The Estate asserts that its attorney was not authorized to enter the inheritance tax stipulation. This attorney testified at the motion hearing to set aside the stipulation and order that he signed the stipulation and submitted it for the court‘s approval without the knowledge or consent of the Estate‘s executor. The Executor testified that he did not become aware of the stipulation and order of February 28, 1990 until September 1990. Yet at the hearing the Executor conceded that the Estate attorney had his full authority to act on his behalf except for those matters which required his signature. We are reluctant to attribute to a client a settlement made by his attorney without the client‘s express knowledge and consent, but we believe
Lastly, we examine the court‘s allowance of attorney fees as a deduction from the value of the estate. The court allowed all the attorney fees incurred in seeking to set aside the stipulation and order as well as the expert attorney‘s fee for giving the opinion of the Merrill Lynch lawsuit‘s value as of the date of death.
Having determined that the trial court had no jurisdiction to set aside the inheritance tax stipulation and order, we need not reach the other matters alleged as error.
Reversed and remanded with instructions to reinstate the order of February 28, 1990 for payment of inheritance tax.
MILLER, C.J., and WUEST and SABERS, JJ., concur.
HENDERSON, Retired Justice, dissents.
KONENKAMP, Justice (on assignment as a Circuit Court Judge prior to appointment as a Supreme Court Justice), for AMUNDSON, J., disqualified.
HENDERSON, Retired Justice (dissenting).
It is a long-standing rule of law that the trier of fact, in its capacity as sole judge of the credibility of witnesses, may accept or reject all or part of an expert‘s testimony. Lewton v. McCauley, 460 N.W.2d 728 (S.D. 1990); Cargill Inc. v. Elliott Farms, Inc., 363 N.W.2d 212 (S.D. 1985); State v. Romero, 269 N.W.2d 791 (S.D. 1978). Expert Deming Smith testified that the assets were capable of being valued at the time of Ethlyn Davis’ death. He fixed the amount at $62,255.00. Another expert David Gerdes testified the lawsuit was not capable of evaluation at the date of death; but expressed that were he obliged to do so, his valuation would be at such a wide range that his valuation would be meaningless from an acceptable appraisal viewpoint. The trial court accepted Smith‘s analysis and rejected the other.* We can reverse the trial court only if the ruling was a clear abuse of discretion. Stormo v. Strong, 469 N.W.2d 816 (S.D. 1991).
In my opinion, settled law sides with the trial court. The lawsuit in question (1) was an asset of the estate and (2) was properly evaluated for tax purposes as of the date of decedent‘s death. In South Dakota, inheritance taxes are imposed upon succession and not upon property. In re Jahn‘s Estate, 65 S.D. 124, 271 N.W. 903 (S.D. 1937). Per Jahn‘s Estate, 271 N.W. at 904, the interest which is transferred, is to be valued “... as of the date of the death of the decedent, without regard to any subsequent increase or decrease in value.” The meaning of this holding has no area of doubt and darkness. The approach to valuation is not limited to South Dakota. Indiana Dept. of State Rev. v. Estate of Cohen, 436 N.E.2d 832 (Ind. App. 1982); Matter of Estate of Van Duzer, 369 N.W.2d 407 (Iowa 1985); Gearhart‘s Ex‘r and Ex‘x v. Howard, 302 Ky. 709, 196 S.W.2d 113 (Ky. App. 1946); Matter of Estate of Phillips, 92 Wash. 2d 362, 597 P.2d 1358 (1979); Matter of Estate of Irish, 89 Wis. 2d 148, 277 N.W.2d 872 (1979); 42 Am.Jur.2d Inheritance, Estate, & Gift Taxes § 250 (1969).
Accordingly, the valuation is to be fixed at the time of the devolution of the property, which is the death of the transferor. See In re Guider‘s Estate, 63 S.D. 495, 260 N.W. 828 (1935). We should base our decision on Law, not on a private notion of policy. The lawsuit in question was property.
An abuse of discretion occurs only if no “judicial mind, in view of the law and circumstances of the particular case, could reason-