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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Martin v. Dieringer (03/04/2005) sp-5873

Martin v. Dieringer (03/04/2005) sp-5873

     Notice:   This opinion is subject to correction  before
     publication  in  the  Pacific  Reporter.   Readers  are
     requested to bring errors to the attention of the Clerk
     of  the  Appellate  Courts, 303  K  Street,  Anchorage,
     Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,


DARREL MARTIN,                 )
                               )   Supreme Court No. S-11102
               Appellant,      )
                               )   Superior Court No.
     v.                        )   4FA-85-113 PR
JAMES DIERINGER, Personal      )   O P I N I O N
Representative of the Estate of)
               Appellee.       )   [No. 5873 - March 4, 2005]

          Appeal  from the Superior Court of the  State
          of    Alaska,   Fourth   Judicial   District,
          Fairbanks, Niesje Steinkruger, Judge.

          Appearances:  Thomas R. Wickwire, Law  Office
          of Thomas Wickwire, Fairbanks, for Appellant.
          Matthew C. Christian, Borgeson & Burns, P.C.,
          Fairbanks, for Appellee.

          Before:   Bryner,  Chief  Justice,  Matthews,
          Eastaugh, Fabe, and Carpeneti, Justices.

          PER CURIAM

          This  case  involves an estate that remained  open  for

more than seventeen years.  William Martin died in 1985.  He  was

survived  by two children, Donna, then age fourteen, and  Darrel,

then  age  eighteen.  His will left everything (after payment  of

debts  and certain expenses) in equal shares to the children,  in

trust.   James  Dieringer  (Dieringer or  PR)  was  the  personal

representative, and with his wife Nancy Dieringer, co-trustee  of

the trust.

          The assets of the estate included a house in Fairbanks,

a lot on Summit Lake, a motor home, some snowmachines, an escrow,

and  some  life insurance.  The net value of the estate was  less

than $250,000.

          Dieringer  put  all cash generated  by  the  estate  in

estate  accounts  when he received it.  Under the  terms  of  the

trust,  the  funds  were to be distributed as necessary  for  the

childrens education at least twice each year.  The trust  was  to

terminate   when  Donna  turned  twenty-two,  and  the  remainder

distributed  to the children.  Although money was not distributed

biannually, Dieringer applied funds to the childrens  needs.   He

appears  to  have performed this aspect of his duties  well.   He

required   the  children  to  make  budgets  and  they   received

substantial funds from the trust for educational purposes.

          About  the  time Donna turned twenty-two, in 1992,  the

children  met  with Dieringer.  At the meeting he presented  them

with the option of distributing the remaining assets to them then

or  leaving  the estate open so he could collect the  assets  and

close  the  estate at some later time.  The children agreed  that

they  preferred the latter option, but Darrel testified  that  he

believed  this would mean that the estate would remain open  only

for a matter of months.

          By  1997  the only remaining assets of the estate  were

the  Summit Lake lot, which was subject to a mortgage, and a loan

Dieringer had made to a company that he owned a half interest in.

The  children  agreed that Darrel would receive the  Summit  Lake

property  and  Donna  would receive more cash  from  the  estate.

Darrel  contacted  Dieringer a number  of  times  concerning  the

Summit  Lake property and closing the estate.  Dieringer informed

Darrel  that  he  wanted  to  buy the Summit  Lake  property  for

$15,000.   Darrel had received a substantially larger  offer  for

the  property and was reluctant to agree to sell to Dieringer  at

Dieringers price.  When this occurred Dieringer took the position

that  unless  Summit Lake were sold to him he  would  charge  the

estate  fees  for  his services.  Further,  he  stated  that  the

proceeds  of  a  $50,000 life insurance policy he and  Nancy  had

received when William died were actually owned by him and  Nancy,

that  they had merely loaned the proceeds to the estate, and that

the proceeds would have to be repaid.  Darrel was unpersuaded and

the  parties  apparently remained at an impasse  for  some  time.

Eventually Darrel became concerned that the Summit Lake  property

would  be foreclosed.  Dieringer told him there were insufficient

funds  in  the estate to pay the mortgage, so Darrel  loaned  the

estate  $6,700 of his own funds to pay it in March 2000.   Darrel

expected  to  be conveyed the property from the estate  when  the

mortgage was paid.

          Dieringer  used  the  funds to pay  off  the  mortgage.

There was some delay in obtaining the necessary releases and  the

deed  was not  transferred to Darrel.  Darrel petitioned to  have

Dieringer removed as personal representative.  While the petition

to  remove was pending, Dieringer took steps to close the estate.

After  a  series of hearings and an aborted settlement agreement,

the  petition to remove and Dieringers motion for approval  of  a

final accounting were scheduled for hearing. At that point Darrel

filed an independent civil action against Dieringer and sought to

have  his petition to remove withdrawn.  The petition to withdraw

was  denied,  and after an evidentiary hearing and a supplemental

evidentiary  hearing  the master issued  extensive  findings  and

conclusions  that  denied the petition to  remove.   The  masters

findings  and  conclusions were approved by the  superior  court,

which  also granted Dieringers final accounting motion and closed

the estate.

          The  final  accounting shows that the estate  sold  the

Summit  Lake  property to a third party for  $30,000.   In  round

numbers and less appraisal costs the final sum was distributed as

follows:   $16,320  in  attorneys fees  for  Dieringers  counsel,

$5,850 in fees for Dieringers services (pared down from a $49,000

request), and $7,430 as a distribution to Darrel.

          Darrel appeals, focusing primarily on the findings that

supported  the  denial  of  the  petition  to  remove  Dieringer.

Although  the  estate has closed and Dieringer is no  longer  its

personal  representative, many of the challenges to  the  masters

findings  and conclusions may still be important because  of  the

collateral estoppel effect the latter were given in the dismissal

of  Darrels separate civil action against Dieringer.1  Because of

this  effect and because Darrels challenge might impact the award

of counsel fees and fees to Dieringer, this case is not moot.2

          On  appeal Darrel contends that Dieringer breached  his

duty  as  a fiduciary with respect to his rental of the house  at

what  Darrel contends were submarket rates, with respect  to  his

sale  of the motor home to his partner, with respect to the  loan

of  estate funds to a company half-owned by Dieringer,  and  with

respect  to  his  efforts  to buy the  Summit  Lake  property  at

submarket  rates.  Darrel further challenges the masters  finding

that the $50,000 in life insurance proceeds received by James and

Nancy Dieringer in 1985 on account of William Martins death  were

the property of the Dieringers rather than trust property for the


          We  conclude  that the masters findings concerning  the

house  and the motor home are supported by the evidence  and  are

not  clearly erroneous.  But the masters findings concerning  the

loan, the Summit Lake transaction, and the $50,000 life insurance

policy are erroneous, as explained in the following paragraphs.

          Darrel  presents seven primary arguments.  We summarize

each below together with our decision concerning it.


          Darrel  argues  that  numerous  findings  made  by  the

probate  master and adopted by the superior court are  erroneous.

We conclude that several of the findings are erroneous.

     Findings 21 through 25

          Findings  21  through 25 are clearly erroneous.   These

findings have to do with an $8,000 loan made by the estate.   The

master found:

               21.  The estate made a loan of $8,000 to
          a  company called AEC.  Without being  asked,
               PR volunteered the information that he was a
          shareholder  in AEC Corp.  The AEC  loan  was
          documented with a Promissory Note.  The  note
          was unsecured and was set at an interest rate
          that  was  equal to the savings account  rate
          that  the  money was earning at the  bank  at
          that  time.  The loan was paid back in  full.
          This  loan  clearly involved  a  conflict  of
          interest between the estate and the PR.
               22.   A.S.  13.16.400 Sale, encumbrance,
          or transaction involving conflict of interest
          voidable;   exceptions  provides   [sic]   as
               Any  sale  or encumbrance
               to      the      personal
               representative,       the
               personal  representatives
               spouse,     agent,     or
               attorney,     or      any
               corporation or  trust  in
               which     the    personal
               representative   has    a
               substantial    beneficial
               interest,     or      any
               transaction   which    is
               affected by a substantial
               conflict  of interest  on
               the  part of the personal
               representative,        is
               voidable  by  any  person
               interested in the  estate
               except   one   who    has
               consented   after    fair
               disclosure, unless
               (1)   the   will   or   a
               contract entered into  by
               the   decedent  expressly
               authorized            the
               transaction; or
               (2)  the  transaction  is
               approved  by  the   court
               after      notice      to
               interested persons.
          There  is  no  statutory  requirement  for  a
          personal   representative   to   seek   court
          approval to do a conflict of interest sale or
          loan.  However the penalty for failing to  do
          so  is  set  out  in the statute  as  is  the
          procedure   to   obtain  approval   and   the
          procedure for asking that the loan be voided.
          It   does  not  appear  that  petitioner   is
          requesting that either transaction be  voided
          at this time.
               23.   The only credible testimony before
          the  court is that the interest rate  on  the
          note to AEC was at the rate of 6% and it  was
          paid back in full with all interest that  was
               24.  Although technically a conflict  of
          interest transaction, the evidence before the
          court  indicates that the loan to AEC was  an
          arms  length  transaction  documented  by   a
          Promissory Note and paid back in  full.   The
          6% interest rate equaled the bank rate and as
          such  was a comparable transaction and caused
          no  harm to the estate.  The interest rate on
          the  AEC  loan was 6% and all sums appear  to
          have been paid in full.  There is no harm  to
          the estate from the transaction.
               25.   Occasional payments on the  Summit
          Lake  property  were technically  delinquent.
          However,  PR testified that the note payments
          were   allowed   to  be  delayed.    In   all
          actuality,  PR  should not  have  distributed
          money  to  the heirs that they had requested.
          This  distribution to the petitioner and  his
          sister caused the estate to be in a cash poor
          situation   which   situation   caused    the
          delinquency.   Petitioner  and   his   sister
          should have understood that as payments  came
          in  from the house and other sources that the
          Summit Lake property would be paid.
          The masters conclusion that the loan was an arms length

transaction and that it caused no harm to the estate  is  clearly

erroneous.   Dieringers loan to his own company was a  breach  of

his   fiduciary  duty  to  the  trust  and  not  an  arms  length

transaction.   The bank rate of six percent was  the  rate  banks

paid  at the time on savings accounts, not the rate at which they

loaned  money, and thus was a preferential benefit to  AEC.   The

loan  caused harm to the estate.  The last undisposed asset  held

by  the  trust was property on Summit Lake.  There was an initial

$13,000  debt on the property, bearing a twelve percent  interest

rate.   The $8,000 loaned to AEC could have been applied  to  the

remaining debt on the Summit Lake property, discharging  part  of

the twelve percent obligation.

     Findings 42 and 43

          Findings  42  and  43  are  clearly  erroneous.   These

findings  concern the alleged $50,000 loan that Dieringer  claims

to have made to the estate.  In Finding 26, the master found that

the  petitioner does not dispute that PR and Nancy Dieringer  put

$50,000  into the estate.  The master addressed this  subject  in

Findings 42 and 43 stating:

               42.   It  was reasonable for the  PR  to
          leave  the estate open and continue to manage
          the affairs of the estate.  It was understood
          that  decedents  estate at the  time  of  his
          death  was not in financially good condition.
          In fact, PR had to loan the estate $50,000 in
          order  to  allow the estate the liquidity  it
          needed  so  that  Donna and petitioner  could
          have funds to attend college.
               43.   PR did testify at the hearing  and
          it  is  true  that  he  and  Nancy  Dieringer
          received  life insurance proceeds payable  to
          them  individually in the amount  of  $50,000
          which policy was purchased by decedent.  This
          money   passed  to  PR  and  Nancy  Dieringer
          outside  of the estate and per the  insurance
          policy  between  decedent and  the  insurance
          The  evidence  does not sustain the  finding  that  the

$50,000  life insurance payment was intended to be the individual

property of the Dieringers as distinct from property that  passed

to  them for the benefit of the Martin children.3  The Dieringers

were  not relatives, business partners, or associates of  William

Martin,  and were not the natural object of Williams beneficence.

Upon  receiving the $50,000 insurance payment shortly  after  the

death  of  William  Martin in 1985, Dieringer paid  it  into  the

estate.  He made no claim that it was a loan until fourteen years

later, in approximately 1999, when this dispute arose.  Even then

Dieringers  claim  was equivocal in nature.  His  attorney,  upon

opening  statement, suggested that reimbursement for the  $50,000

would  only be sought by Dieringer if he were removed as personal

representative.  When asked by his counsel would you characterize

that  as  a  loan?  Dieringer answered I  will  today,  yes.   He

explained  that what he meant by today was that he could  forgive

          some of that loan. He was asked on cross-examination:  Are you

reserving your position from what you do with that loan depending

on what Mr. Martin does in this court proceeding?  His answer was

Possibly.   Given the fact that there was no reason  for  William

Martin to leave property to the Dieringers except to benefit  his

children,  for  whom they were trustees, and the  contemporaneous

treatment by Dieringer of the $50,000 in 1985 by contributing  it

to  the estate with no indication that it was merely a loan until

the  dispute arose fourteen years later, the court clearly  erred

in  concluding  that the $50,000 was individually  owned  by  the


          This  conclusion  is  supported  by  the  general  rule

concerning  gifts  to  executors that  unless  the  intention  to

benefit  the  executor personally is clearly expressed,  it  will

ordinarily  be  assumed or presumed that  the  gift  was  to  the

executor  in  his  fiduciary capacity .  .  .  .4   No  intention

contrary to this presumption was expressed in this case.

     Findings 27 through 33

          Findings 27 through 33 are clearly erroneous.  In these

findings  the  master  addressed the situation  that  arose  with

regard to the Summit Lake property.  The master found:

               27.   PR  never  refused to  convey  the
          Summit  Lake property to petitioner after  he
          made the $6,700 payment.  PR used those funds
          to  pay  off  the  note on  Summit  Lake  and
          proceeded   with   getting   the   Deed    of
          Reconveyance   executed.   He  retained   the
          services   of  legal  counsel  to  do   that.
          Petitioner  became impatient  with  the  time
          that  it  was  taking the  legal  counsel  to
          complete the transaction.
               29.[sic]  At  one point PR was  told  by
          petitioner  that  he  intended  to  keep  the
          Summit  Lake  property.  PR  apparently  told
          petitioner  if  he ever wanted  to  sell  the
          property, he would like to buy it.
               30.     In   determining   what   shares
          petitioner and his sister would receive  from
          the  estate, at a meeting between  them,  PR,
          petitioner  and  petitioners  sister,   Donna
          Martin,  had  agreed that the  value  of  the
               Summit  Lake property was $15,000.   PR,
          apparently  at this time, does  not  wish  to
          purchase   the   Summit  Lake  property   and
          believes it needs to be sold to pay the debts
          of  the estate at the highest value possible.
          The  parties seem to agree this is in  excess
          of $15,000 and in fact there is a court order
          for  the  property  to be sold  at  appraised
          value  but  not less than $25,000 entered  by
          the court 11/30/01 in this case.
               31.   The  payments to the  Summit  Lake
          property  were  deferred; and  although  they
          were  technically delinquent, PR did not view
          them   as   delinquent  as  he  had  obtained
          permission to defer payments from the seller,
          Joseph  D.  Lanni.  Petitioner believed  that
          the  $6,700 he reimbursed to PR would pay off
          the  balance on this note and that  PR  would
          convey   the   Summit   Lake   property    to
               32.    At  one  point  in  the  dealings
          between  petitioner and PR, the  PR  demanded
          that  he  be  allowed to purchase the  Summit
          Lake  property  at the price which  had  been
          given  it in the share of the estate  meeting
          which  was held with PR, petitioner and Donna
          Martin.   Petitioner had  received  an  offer
          from  a  third party to purchase  the  Summit
          Lake   property   for  $23,000.    Petitioner
          testified that PR told him that the  decedent
          had  expressed his desire to sell the  Summit
          Lake  lot  to PR if neither of the  decedents
          children  wished to remain in  Alaska.   This
          evolved into a significant dispute between PR
          and petitioner which caused much hard feeling
          between  them  and significant  breakdown  in
          their  communications  and  understanding  of
          communications  made between  them.   All  of
          this  resulted in the dispute  which  is  now
          before the court.
               33.   As  stated above, PR  most  likely
          should  not have distributed as much cash  to
          petitioner and Donna Martin but instead  used
          those  funds  to  pay  off  the  Summit  Lake
          property.  If any harm to the estate occurred
          by  his  premature distributions, it resulted
          in  the benefit to the heirs of their use  of
          the  funds  at  a  time they  apparently  had
          requested and were in need of the funds.   It
          is  unclear therefor if there was any  breach
          of  fiduciary  duty and since this  issue  is
          unclear,   the  preponderance   of   evidence
          standard  would dictate that  the  court  can
          find  no  breach of fiduciary duty  regarding
          this  issue.  Even were there to be  findings
          of  some  breach of fiduciary duty, there  is
          insufficient  evidence  in  the   record   to
          determine  the extent of damage to the  heirs
          of the estate.
          The  finding that there was no breach of fiduciary duty

is  clearly  erroneous.  When asked by opposing  counsel  whether

Darrels  refusal to sell him the Summit Lake property for $15,000

was  the  reason he decided to charge the estate fees,  Dieringer

responded,  Im  sure that had an influence on my  decision,  yes.

Dieringer  testified that he had not decided  what  he  would  do

concerning the $50,000 life insurance money at the time he put it

into the estate.  He also testified that he first told Darrel the

money  had  to be repaid during the discussion about  the  Summit

Lake  property, after Darrel refused to sell the property to  him

for $15,000.

          Dieringers  demand  that he be allowed  to  purchase  a

trust  asset for less than fair market value and the  threats  he

made  in  conjunction with this demand were  self-dealing  and  a

breach of his fiduciary duty.

     Finding 39

          Finding 39 was based on a legal error about the  extent

of the superior courts discretion to control the appointment of a

personal   representative  to  replace  Dieringer.   The   master

determined  that Nancy Dieringer, who was named as the  successor

personal representative in the will, would have the next priority

of appointment if Dieringer were removed.  But it would be within

the  courts  discretion  not to appoint Nancy  as  the  successor

personal   representative.5   If  Dieringer  were   removed   for

conflicts  of  interest, Nancy probably would not  have  been  an

appropriate successor given that she would also have many of  the

same conflicts.

     Finding 52

          Finding 52 is clearly erroneous.  This finding stated:

               This  PR did little if anything contrary
          to the will and little if anything that could
          be  construed  as  substantial  harm  to  the
          estate that would require his removal  as  PR
          in  light  of  the  facts  and  circumstances
          listed  in  these  findings.   There  is   no
          credible  evidence in the record to  indicate
          bad  faith on the part of PR in administering
          this  estate or in defending his position  in
          these proceedings.
          Our  discussion of Findings 21-25, 42 and 43, and 27-33

indicates  that  Dieringer breached his  fiduciary  duties  as  a

trustee.  He engaged in self-dealing when he made a loan with the

estate  assets  to  a company in which he had  an  interest.   He

improperly,  albeit equivocally, claimed that  the  $50,000  life

insurance proceeds were his individually rather than as  trustee,

and  he engaged in self-dealing when he attempted to purchase the

Summit  Lake  property for less than fair  market  value.   These

breaches were intentional and are equivalent to bad faith.6


          Darrel  argues  that  the master erred  in  failing  to

remove  Dieringer as the personal representative of  the  estate.

Although  we agree that there were grounds under which  Dieringer

could have been removed, we conclude that the master did not  err

in  recommending nonremoval given that the estate was ready to be

closed by the time the petition to remove was decided.


          Darrel argues that the master erred in Finding 36  that

there   was   no  bad  faith  on  Dieringers  part  as   personal

representative.  For the reasons already indicated  with  respect

to  Dieringers breaches of fiduciary duty and his claim of  trust

property  as  his  own,  we agree that this  finding  is  clearly



          Darrel  makes  an evidentiary argument  concerning  the

exclusion of testimony.  We find no abuse of discretion.


          Darrel  raises a statute of frauds argument  concerning

          the apparent agreement of the beneficiaries to extend the

continuation  of the trust.  It appears that this point  was  not

raised below and it is therefore waived.


          Darrel  challenges  the award of $16,320  in  attorneys

fees  and $5,850 award of personal representative fees.  In light

of  our  conclusion that the court clearly erred with respect  to

failing  to  find  that  Dieringer  had  committed  breaches   of

fiduciary  duties and acts of bad faith, we vacate  these  awards

and remand the fee issues for reconsideration.


          Darrel argues that the court erred in failing to  allow

him   to   withdraw   his   petition  to  remove   the   personal

representative.  We conclude that there was no error because  the

petition to withdraw was untimely.


          For  the  foregoing reasons, we VACATE as erroneous  in

the  respects indicated Findings 21-25, 42 and 43, 27-33, 36, 39,

and   52,  VACATE  the  award  of  attorneys  fees  and  personal

representative fees, and REMAND this case for reconsideration  of

attorneys fees and fees of the personal representative  in  light

of the conclusions expressed herein.

     1     Martin  v. Dieringer, Mem. Op. & J. No. 1203  (Alaska,
March 4, 2005).

     2     Cf. City of Valdez v. Gavora, Inc., 692 P.2d 959, 960-
61  (Alaska  1984)  (where appeal had become moot,  not  reaching
merits  but  vacating judgment, to prevent judgment  from  having
collateral effects).

     3     Notwithstanding the masters findings that the  $50,000
life  insurance  proceeds  were the individual  property  of  the
Dieringers,  it  does not appear from the final  accounting  that
this  amount was repaid or approved for repayment from the estate
to the Dieringers.

     4    R. A. Horton, Annotation, Testamentary Gift to Executor
as  One in His Fiduciary Capacity or in His Own Right, 3 A.L.R.3d
1376, 1380 (1965).

     5    See AS 13.16.305.

     6    See Blacks Law Dictionary 108 (Abridged 7th ed. 2000).