Sande v. Sande (In re Estate of Sande)

943 N.W.2d 826

In the MATTER OF the ESTATE OF Geraldine SANDE, Deceased

Frederick Sande, Personal Representative of the Estate of Geraldine Sande, deceased, Petitioner and Appellant

v.Paulette June Sande, Personal Representative of the Estate of Philip James Sande aka Philip Sande, deceased, Respondent, Third-Party Plaintiff, and AppelleeandFrederick Sande, individually, Third-Party Defendant and Appellant

No. 20190171

Supreme Court of North Dakota.

Filed June 2, 2020

Matthew D. Kirschenmann, Fargo, ND, for petitioner, third-party defendant, and appellant.

Vince H. Ficek, Dickinson, ND, for respondent, third-party plaintiff, and appellee.

VandeWalle, Justice.

[¶1] Fred Sande, the personal representative of the Estate of Geraldine Sande, appealed from a judgment distributing the estate. We conclude the evidence supports the district court's findings, the court's finding that Fred Sande breached his fiduciary duty is not clearly erroneous, and the court did not abuse its discretion by denying Fred Sande's request for personal representative's fees and attorney's fees. We affirm.

I

[¶2] Geraldine Sande and her son, Philip Sande, owned Sande Music Company, a partnership. Geraldine Sande owned 55 percent of the partnership and Philip Sande owned the remaining 45 percent. In March 2010, Geraldine Sande and Philip Sande sold the company for $800,000, of which $600,000 was paid shortly after the sale and the remaining amount was to be paid in installments. Philip Sande executed a promissory note in the amount of $55,000 in favor of Geraldine Sande.

[¶3] Geraldine Sande died on October 17, 2012. On November 2, 2012, Fred Sande, also a son of Geraldine Sande, was appointed the personal representative of Geraldine Sande's estate. Philip Sande died on August 17, 2014, and his wife, Paulette Sande, was appointed the personal representative of his estate. Philip Sande and his estate are hereinafter referred to as Philip Sande whether the reference is to Philip Sande while living or his estate as a party to this action.

[¶4] On July 14, 2016, Fred Sande filed an inventory and appraisement of Geraldine Sande's estate, which included real property, Geraldine Sande's share of Sande Music sale proceeds, the $55,000 promissory note from Philip Sande, and other assets. Philip Sande objected to the inventory and appraisement, demanded an accounting of the Estate, and requested the immediate return of any Estate assets. Philip Sande alleged the Estate's real property was undervalued, Fred Sande removed assets from the real property, Fred Sande conveyed the real property to himself and deprived Philip Sande of his interest in the property, and Fred Sande failed to pay rent for use of the Estate's real property while conducting business out of the property. Philip Sande also claimed that the value of the promissory note did not reflect payments that had been made and that there were no assets from the sale of Sande Music at the time of Geraldine Sande's death.

[¶5] In October 2017, Fred Sande petitioned for confirmation of the distribution plan. He requested attorney's fees, personal representative's fees, and fees for forensic accounting services from Eide Bailly, which he claimed were necessary to determine whether there were problems with the allocation of the sales proceeds for the sale of Sande Music. He claimed the forensic accounting report showed Philip Sande received more than his share of the funds from the sale of Sande Music. He also alleged no payments were ever made on the promissory note from Philip Sande to Geraldine Sande. He alleged Philip Sande had possession of Estate assets worth $466,950.26 and any distribution must reflect the disproportionate share Philip Sande received from Sande Music and the unpaid promissory note. Philip Sande answered and counterclaimed, alleging Fred Sande breached his fiduciary duty to the Estate and its beneficiaries.

[¶6] Philip Sande also brought a third-party complaint against Fred Sande, individually. Philip Sande claimed Fred Sande breached his fiduciary duty to the Estate and to Philip Sande. Philip Sande also alleged he entered into a partnership with Fred Sande, Philip-Frederick Enterprises, for the purpose of renting the real property Geraldine Sande owned at the time of her death, and he is entitled to half of the rents and profits from the relationship and half of the real property if the court determined the real property was an asset of the partnership.

[¶7] After a bench trial, the district court ordered distribution of the Estate but denied Fred Sande's petition for confirmation of distribution, awarded Fred Sande a portion of the attorney's fees he requested, found Fred Sande breached his fiduciary duty to Philip Sande, and awarded Philip Sande damages for the breach. The court found Geraldine Sande entered into an accord and satisfaction for any funds Philip Sande may have owed her for the sale of Sande Music, Philip Sande paid Geraldine Sande for the $55,000 promissory note, and Geraldine Sande agreed all funds had been paid in full. The court also found a $90,000 check Philip Sande issued to Fred Sande after Geraldine Sande's death constituted payment in settlement of Fred Sande's interest in Geraldine Sande's estate.

[¶8] The district court found Fred Sande's actions as personal representative and his expenditure of attorney's fees did not benefit the Estate and were done primarily to benefit himself. The court found Fred Sande breached his fiduciary duty as personal representative, and Philip Sande was entitled to damages in the amount of half of the value of the real property. The court dismissed Philip Sande's claims for damages arising out of the operation of Philip-Frederick Enterprises, concluding the claims failed for lack of evidence. Judgment was entered.

II

[¶9] Fred Sande argues the district court erred by raising and applying affirmative defenses that were not asserted or argued.

[¶10] Generally, a party must assert any affirmative defenses in responding to a pleading. N.D.R.Civ.P. 8(c)(1) ; Smestad v. Harris , 2011 ND 91, ¶ 9, 796 N.W.2d 662. Accord and satisfaction and waiver are affirmative defenses. N.D.R.Civ.P. 8(c)(1). An affirmative defense is waived if it is not pled. Smestad , at ¶ 9. However, this Court has recognized "when the court receives evidence on an unpled affirmative defense and considers that evidence in arriving at its decision, we consider the merits of the affirmative defense issue on appeal under the theory the issue was tried by the express or implied consent of the parties." Johnson v. Mark , 2013 ND 128, ¶ 16, 834 N.W.2d 291.

[¶11] Philip Sande pled various affirmative defenses, including accord and satisfaction and waiver, in his answer and amended answer to the petition for confirmation of the distribution plan. The affirmative defenses were also asserted in Philip Sande's pretrial and post-trial briefs, his proposed findings of fact and conclusions of law, and his proposed judgment. The affirmative defenses were pled and were not waived. We conclude the district court did not err by applying the affirmative defenses in deciding the case.

III

[¶12] Fred Sande argues the district court erred in finding his acceptance of $90,000 from Philip Sande was an accord and satisfaction of his share of Geraldine Sande's estate. He contends evidence established the payment was a capital contribution to Philip-Frederick Enterprises.

[¶13] A party asserting an affirmative defense has the burden of proving the defense. Mougey v. Salzwedel , 401 N.W.2d 509, 513 (N.D. 1987). The question of whether there is an accord and satisfaction is a question of fact, subject to the clearly erroneous standard of review. Wheeler v. Southport Seven Planned Unit Dev. , 2012 ND 201, ¶ 22, 821 N.W.2d 746. A finding of fact is clearly erroneous if it induced by an erroneous view of the law, there is no evidence to support it, or if on the entire evidence we are left with a definite and firm conviction a mistake has been made. Id. at ¶ 23.

[¶14] "An accord is an agreement to accept in extinction of an obligation something different from or less than that to which the person agreeing to accept is entitled." N.D.C.C. § 9-13-04. "Satisfaction" is defined as "[a]cceptance by the creditor of the consideration of an accord extinguishes the obligation[.]" N.D.C.C. § 9-13-05. This Court has explained "accord and satisfaction" is:

"[A] method of discharging a contract or cause of action by which the parties agree to give and accept something in settlement of a claim or demand of one against the other, where they thereafter perform such agreement." Campbell v. Beaton , 117 N.W.2d 849, 850 (N.D. 1962). The "accord" is the agreement and the "satisfaction" is its execution or performance. Beaton , supra ; §§ 9-13-04 and 9-13-05, N.D.C.C.

Mougey , 401 N.W.2d at 513 (quoting Shirazi v. United Overseas, Inc. , 354 N.W.2d 651, 654 (N.D. 1984) ).

[¶15] The district court noted Fred Sande's petition for confirmation of distribution requested that the $90,000 payment from Philip Sande to Fred Sande be treated as a distribution from the Estate to Fred Sande, and found Fred Sande testified the $90,000 payment was in settlement of his rights in the Estate. The court indicated Philip Sande suggested in his post-trial brief that the payment was a contribution toward Philip-Frederick Enterprises, but the court rejected that argument. The court found the payment was made days after Geraldine Sande's death and before Fred Sande was appointed personal representative, the payment was made nearly eight months before checks were written on the Philip-Frederick Enterprises partnership account and more than six months before payments were allegedly made for refurbishing Geraldine Sande's real property, and evidence established Philip Sande would not have authorized a check for that amount or that far in advance of the commencement of work or expenditure of funds for the partnership. The court found the...