In re the Estate of Auriel Josephine Sandstead, a/k/a Auriel J. Sandstead, a/k/a Auriel Sandstead, deceased.
Shauna Sandstead Corona, Appellee and Cross-Appellant. Vicki J. Sandstead, Appellant and Cross-Appellee,
County District Court No. 09PR30 Honorable Michael K. Singer,
AFFIRMED IN PART, REVERSED IN PART, AND CASE REMANDED WITH
Announced April 7, 2016 Peter R. Bornstein, Greenwood
Village, Colorado, for Appellant and Cross Appellee.
Mack & Steinhoff PC, Peter T. Harris, Nathan C. Williams,
Englewood, Colorado, for Appellee and Cross Appellant.
1 This is a probate case. The former personal representative
(PR) of the estate, Vicki J. Sandstead (Sandstead), appeals
five orders: (1) the October 4, 2011, order regarding the
motion for surcharge; (2) the May 11, 2012, order denying her
motion for reconsideration or for a new trial; (3) the June
14, 2012, order granting in part, and reserving in part, the
motion for surcharge and other relief; (4) the December 9,
2013, order concerning attorney fees, costs, and expenses;
and (5) the December 20, 2013, order concerning the motion
for final surcharge. We affirm in part, reverse in part, and
remand with directions the first, third, and fifth orders
regarding surcharges. Because of how we resolve
Sandstead's challenges to the first, third, and fifth
orders, we need not address the second order denying the
motion for reconsideration or for a new trial. We vacate and
remand the fourth order concerning attorney fees, costs, and
2 Shauna Sandstead Corona (Corona), an heir of the decedent,
cross-appeals the district court's October 21, 2013,
order enforcing an in terrorem clause. We affirm that order.
3 Willard and Auriel Sandstead were married, had three
daughters, and lived in Sterling, Colorado. They owned
several pieces of real property (a farm in Colorado, a
condominium in Florida, and a house in Sterling, Colorado)
and a large collection of personal items.
4 Willard and Auriel executed wills in 1991; subsequently,
they each executed second wills and a related revocable trust
in 2000. On February 28, 2007, they signed a revocation of
the revocable trust on advice from their attorney, who had
not seen the trust. And on March 6, 2007, they also signed
durable powers of attorney naming two of their daughters -
Sandstead and Corona - as their attorneys-in-fact.
5 Throughout their lives, Willard and Auriel sought to
minimize or avoid probate of their estates upon their deaths.
They took steps to simplify their affairs so that Sandstead
and Corona would divide their property equally without the
property entering probate.
6 One such step involved the sale of the family farm. Willard
and Auriel began to arrange the sale before Willard's
death. Willard died on March 14, 2007. Auriel proceeded with
the sale and put the money from the sale into an account at
Wells Fargo bank in Sterling. The Wells Fargo account was a
multi-party account with Auriel, Sandstead, and Corona as
joint signatories. It is undisputed that Auriel placed the
farm sale funds into this multi-party account to avoid
probate on her death.
7 After Willard's death, Auriel opened his estate by
lodging his will from 1991, but did not tell her attorney
that Willard had executed a second will in 2000.
8 In June 2007, Sandstead moved about $200, 000 from the
Wells Fargo account to Citizens Bank accounts in Boston,
where Sandstead lived. The only two signatories on the Citizens
Bank accounts were Sandstead and Auriel; though Corona was
aware of the accounts, she was not a signatory on any of
those accounts because of logistical difficulties relating to
Corona living in Mexico (where she had lived since 1977).
Sandstead testified that her mother agreed to move the money
because Sandstead had had a falling out with a banker at
Wells Fargo and it would be easier for Sandstead to manage
the funds where she lived. Sandstead considered the money in
the Citizens Bank accounts to be Auriel's money to be
used for Auriel's care until her death, and then to be
split equally between herself and Corona, as her parents
9 Both Sandstead and Corona were placed on the titles for the
house in Sterling and the condominium in Florida before their
parents' deaths. Before Auriel's death, Sandstead used
money from the joint Citizens Bank accounts to pay for work
and trips allegedly related to the condominium in Florida.
10 Auriel died on November 25, 2007. On that date, the Wells
Fargo account had a balance of $67, 972, and the Citizens
Bank accounts had a total balance of $179, 790.46.
11 On June 18, 2008, both Sandstead and Corona met with their
parents' lawyer to sign a small estate affidavit
representing that the value of the estate was less than $50,
Willard and Auriel's lawyer believed a small estate
affidavit was appropriate since Willard and Auriel had deeded
their real property to their daughters and had placed their
money in joint bank accounts, leaving only personal property
in the estate.
12 About a year later, Sandstead contacted an attorney
because she believed personal items were missing from her
mother's estate. The attorney told Sandstead that to try
and reclaim estate property, she would have to file a probate
case. Sandstead opened a probate case, and was appointed PR
in June 2009. After being appointed PR, Sandstead opened an
estate account at Citizens Bank and placed funds from the
other Citizens Bank accounts into this estate account.
13 After their mother's death, Sandstead and Corona began
to disagree about matters relating to their parents'
former property. Disagreements arose regarding gifts from the
estate, expenditures from the bank accounts, and distribution
14 On May 11, 2010, Corona filed a petition to remove
Sandstead as PR. On June 10, 2010, Sandstead resigned as PR,
and she and Corona agreed to the appointment of a successor.
15 On February 10, 2011, Corona filed a motion for surcharge,
attorney's fees, and other relief against Sandstead
expressly limited to Sandstead's alleged actions as PR.
See § 15-10-504(2), C.R.S. 2015 (providing that
a court may surcharge a "fiduciary for any damage or
loss to the estate, beneficiaries, or interested
persons" resulting from a breach of fiduciary duty or
improper exercise of power by a fiduciary). The motion
alleged, in only the most general terms, mismanagement of
estate funds and property, and "damage or loss to the
estate and/or to [Corona]."
16 On July 11, 2011, seven days before the surcharge hearing,
Sandstead filed a motion in limine to prohibit evidence
regarding the $230, 000 transferred from the Wells Fargo
account to Citizens Bank because the transfers had occurred
before Auriel's death and the funds were not property of
Auriel's estate. The court granted the motion in limine,
ruling that because Corona had sued Sandstead only in her
capacity as PR, the court did not have personal or subject
matter jurisdiction regarding any claims against Sandstead as
an alleged fiduciary before being appointed PR.
17 Despite granting the motion in limine, at the hearing on
July 18, 2011, the court allowed Corona's attorney to ask
questions about transactions and money transfers occurring
before Auriel's death. The court said such questioning
was relevant to trace where the estate account money came
from, but agreed with Sandstead's attorney that it was
not relevant to any dispute between the sisters regarding
funds expended before Sandstead was appointed PR because that
was not a probate issue. At the hearing, Corona's counsel
argued repeatedly that Sandstead had breached her fiduciary
duties to Corona personally.
18 In its first written post-hearing order on the motion for
surcharge, the court found, notwithstanding its prior
rulings, and notwithstanding Corona's counsel's
contention that Sandstead had violated her fiduciary duties
to Corona, that Sandstead was an estate
fiduciary as to the money in Citizens Bank accounts because
Sandstead had acted under an agency created by the March 2007
durable power of attorney in transferring the money from
Wells Fargo to Citizens Bank, and had established an implied
trust, the assets of which were later administered in the
estate under Sandstead's authority as PR. The court
determined that its prior granting of the motion in limine
was merely a preliminary order that it could reconsider based
on changed circumstances; the evidence at trial persuaded the
court to change course. The court ordered surcharges against
Sandstead for actions she took before Auriel's death;
after Auriel's death, but before her appointment as PR;
and after her appointment as PR. Many of those actions
related to the farm sale funds originally placed in the Wells
Fargo account, but some related to tangible estate property.
The court reserved judgment on certain potential surcharges
pending investigation and reports.
19 Sandstead filed a motion for reconsideration or for a new
trial in February 2012, objecting to the court's decision
to surcharge her for actions predating her appointment as PR
and relating to expenditures of funds transferred from the
Wells Fargo account before Auriel's death. The court
denied the motion on May 11, 2012.
20 That same day, Corona filed a motion for final surcharge
and other relief. The court issued an order granting the
motion in part and reserving ruling in part on June 14, 2012.
21 Sometime after the surcharge hearing, Willard and
Auriel's 2000 wills and the 2000 revocable trust
instrument were discovered. On September 21, 2012, Sandstead
filed a petition for formal probate of Auriel's 2000 will
and a motion for determination of the validity of the 2000
revocable trust. In 2013, the court held a hearing on the
validity of the 2000 will and revocable trust. Corona
challenged the validity of the 2000 revocable trust because
of the written revocation signed by both Willard and Auriel.
Corona contended Willard and Auriel had also revoked their
2000 wills because they were unaware those wills existed, had
relied on their 1991 wills, and their conduct indicated their
intention that their estate be divided evenly between
Sandstead and Corona. (The 2000 wills and trust gave ten
percent of their residual estates to each of two grandsons
and forty percent each to Sandstead and Corona, thereby
reducing each sister's share.)
22 The court held a hearing on the validity of the 2000 will
and trust on February 25, 2013, and admitted Auriel's
2000 will to probate on March 21, 2013.
23 The court found the trust revocation was invalid because
of Willard and Auriel's impaired functioning and
insufficient information from their attorney. The court also
found that Auriel's 2000 will was valid because under
section 15-11-507(1) and sections 15-11-803 and -804, C.R.S.
2015, a will can be revoked in only two ways - by a physical
act or by means of a later will - and neither had occurred.
And the court found that there was no evidence Willard and
Auriel intended to disinherit their grandchildren.
24 On September 30, 2013, Sandstead and her two nephews filed
a motion to enforce the incontestability provision (the
so-called "in terrorem clause") in the 2000 trust.
They argued that because Corona had contested the validity of
the 2000 will and trust, she could no longer be a beneficiary
of either. Corona argued that the in terrorem clause was not
enforceable because she had probable cause to challenge both
the 2000 will and the trust.
25 On October 21, 2013, the court issued an order enforcing
the in terrorem clause as to the 2000 will but not as to the
trust. The court found that while Corona had probable cause
to challenge the trust - based on the written revocation -
she lacked probable cause to challenge the will; Corona had
not produced evidence that she could reasonably have thought
the will had been revoked by either means authorized under
the Probate Code, and there was no evidence that Willard and
Auriel had intended to disinherit their
26 Corona filed a motion to reconsider, which the court
denied. On December 9, 2013, the court issued an order
granting Corona attorney fees and costs relating to the
surcharge motion. And on December 20, 2013, the court issued
an order against Sandstead and in favor of the estate
concerning the motion for final surcharge.
27 Sandstead contends that the district court erred by: (1)
surcharging her for actions she took before her appointment
as PR relating to non-probate funds; (2) surcharging her for
actions as to which the court had ruled Corona could not
present evidence; and (3) awarding attorney's fees to
28 Corona contends that the district court erred in enforcing
the in terrorem clause to preclude her from benefiting under
Auriel's 2000 will.
29 We address each party's contentions in turn.
30 In essence, Sandstead contends that the statutes under
which probate cases are administered, and which pertain
specifically to the surcharging of fiduciaries, did not give
the district court authority to decide disputes between her
and Corona over expenditure of the farm sale proceeds because
those funds were not estate funds and she did not expend
those funds in any fiduciary capacity vis-à-vis the
Standard of Review
31 Sandstead does not challenge historical facts found by the
district court. Rather, she challenges the court's
application of the law to those facts. Her arguments present
issues of statutory interpretation, which we review de novo.
Oldham v. Pedrie, 2015 COA 95, ¶ 9. When
interpreting statutes, we give effect to the General
Assembly's intent. Id. (citing Jefferson
Cty. Bd. of Equalization v. Gerganoff, 241 P.3d 932, 935
(Colo. 2010)). To determine the General
Assembly's intent, we consider the context of the statute
as a whole and look to the statute's plain language,
giving that language its commonly understood meaning.
Id.; accord Farmers Grp., Inc. v. Williams,
805 P.2d 419, 422 (Colo. 1991).
Multi-Party Bank Accounts
32 Part 5 of article 10 of the Probate Code gives a court
authority to take actions with respect to certain
"fiduciaries" over which it has acquired
jurisdiction to protect the interests of those as to whom
fiduciaries owe their duties. As immediately relevant, the
court may surcharge a PR - that is, order a PR to reimburse
the estate - for mismanagement of an estate. See
§§ 15-10-501(2)(c), (3), -504(2), C.R.S. 2015. An
"estate" means, again as relevant here, "the
estate of a decedent." § 15-10-501(2)(b).
"Estate" is further defined as "the property
of the decedent." § 15-10-201(17), C.R.S. 2015. In
delineating the court's powers to oversee and sanction a
PR, part 5 repeatedly phrases that power in terms of actions
with respect to estate property. §§
15-10-501(2)(b), (c), (3); 15-10-502(1)(a); 15-10-503;
15-10-504(1)(a); 15-10-505(1)(a), C.R.S. 2015. We are
convinced, therefore, that any proceeding to surcharge a PR
of an estate must pertain to the PR's actions
vis-à-vis estate property.
33 Sandstead contends that the district court should not have
surcharged her for actions related to the farm sales
proceeds, which were placed in joint bank accounts before
Auriel's death, because that money was not estate
property. We agree.
34 Sums in a joint bank account are non-probate property.
"During the lifetime of all parties, an account belongs
to the parties in proportion to the net contribution of each
to the sums on deposit." § 15-15-211(2), C.R.S.
2015. But, upon one party's death, the money
automatically passes by operation of law to the surviving
parties on the account. § 15-15-212(1), C.R.S. 2015.
"If two or more parties survive and none is the
surviving spouse of the decedent, the amount to which the
decedent . . . was beneficially entitled under section
15-15-211 belongs to the surviving parties in equal shares .
. . ." Id. "Sums remaining on deposit at
the death of a party to a multiple-party account . . . belong
to the surviving party or parties as against the estate
of the decedent unless there is clear and convincing evidence
of a different intention." § 15-15-212(5)
(emphasis added). And "a transfer resulting from the
application of section 15-15-212 is effective by reason of
the terms of the account involved and this part 2 and is
not testamentary or subject to articles 10 to 13 of this
title (estate administration)." § 15-15-214,
C.R.S. 2015 (emphasis added).
35 In re Estate of Beasley, 40 Colo.App. 347, 578
P.2d 662 (1978), is substantially on point. In that case the
decedent established two savings accounts before her death in
her name and those of her two daughters. The accounts were in
joint tenancy, with rights of survivorship. The parties
intended that upon the death of one of them, the others would
receive the entire amount in the accounts. Shortly before the
decedent died, one of the sisters withdrew substantially all
of the funds in the accounts. After the decedent died, the
other sister, who was the estate's PR, asserted a claim
for half of the withdrawn funds on behalf of the estate. The
district court awarded the estate half the funds, but a
division of this court reversed. The division held that under
the terms of the account the withdrawals were lawful, and
that those withdrawals did not destroy the joint tenancy
nature of the account. Accordingly, the estate had no claim
to the funds. Id. at 348-49, 578 P.2d at 663.
36 In this case, it is undisputed (and the district court so
found) that Auriel contributed all of the money in the Wells
Fargo and Citizens Bank accounts, intending that the funds
would go to Sandstead and Corona upon her death without going
through probate. It is likewise undisputed that the transfer
to the Citizens Bank accounts was made for the same purpose.
By operation of law, during Auriel's lifetime, the money
in the Wells Fargo account was hers, though both Sandstead
and Corona could withdraw funds. Likewise, by operation of
law, during Auriel's lifetime the money in the Citizens
Bank accounts was hers, though Sandstead could withdraw
funds. But upon Auriel's death, by operation of law, the
money in the Wells Fargo account belonged to Sandstead and
Corona in equal shares while the money in the Citizens Bank
accounts belonged to Sandstead alone (subject to Corona's
claim to one-half of the funds); the estate had no claim to
the money. See § 15-15-212(1), (5); §
15-15-214; In re Estate of Beasley, 40 Colo.App. at
347-48, 578 P.2d at 663. Thus, because there is not "clear
and convincing evidence" that Auriel intended the money
to be subject to probate (indeed, all evidence is to the
contrary), see § 15-12-212(5), by law the money
in the accounts was never property of Auriel's estate.
37 Taking a position Corona never asserted, the district
court applied an exception to the rules governing multi-party
accounts to conclude that the funds in the Citizens Bank
accounts were estate property. Under section 15-15-202,
C.R.S. 2015, the provisions of title 15, section 15 regarding
multi-party accounts do not apply to "a fiduciary or
trust account in which the relationship is established other
than by the terms of the account." The district court
determined that section 15-15-202 applied to Sandstead's
account transfers because in transferring money from Wells
Fargo to Citizens Bank, she created a type of trust
account. We disagree because there is no
evidence the farm sale proceeds were placed in these
accounts for any purpose other than to avoid probate; indeed,
it is undisputed that the money was placed in these accounts
precisely to avoid probate by operation of the rules
governing multiparty accounts. Sandstead testified, without
contradiction, that the money was transferred because she had
had a falling out with a Wells Fargo employee and it would be
easier to manage the funds where she lived. Sandstead and
Corona agreed all along that the money was to be used for
Auriel's care, and then split between them upon
Auriel's death. However, this was not a strict or formal
arrangement. While Auriel was still alive, the money was also
used to pay for things like renovations to the Florida
condominium (which had been deeded to the sisters) and travel
expenses. There is simply no evidence the accounts were
created or used as a fiduciary or trust accounts.
38 Apparently, the district court based its conclusion on the
fact that Sandstead was Auriel's attorney-in-fact at the
time of the transfer by virtue of the durable power of
attorney. But Sandstead did not use that authority
or need to use that authority to make the transfer; her
status as signatory was alone sufficient to allow her to do
39 The fact a person possesses a power of attorney to act for
another person does not transform every action affecting the
other person by the one in possession of such power into one
pursuant to that power. The purpose of a durable power of
attorney is obviously to allow the holder of that power to do
things she otherwise would have no legal authority to do. And
using such a power requires presenting the document creating
it to establish one's authority to act. For instance,
Sandstead testified that she had to "send [the] power of
attorney to some of the billing companies to stop billing, or
to make payments, or to close accounts" after her
parents died. But Sandstead had legal authority to transfer
the funds in the Wells Fargo account independent of the power
of attorney, and there was no evidence that she acted
pursuant to or presented the power of attorney for that
40 The district court also concluded that the Citizens Bank
money was estate property because Sandstead had put some of
the money in a Citizens Bank estate account in 2009 and had
listed the amount in a Citizens Bank estate account in two
estate inventory forms after opening formal probate in 2009.
The district court said that Sandstead's "treatment
of the Citizens' Bank Funds as estate property
constituted a judicial admission that she did not claim them,
individually." Again, we disagree.
41 "A judicial admission is a formal, deliberate
declaration which a party or his attorney makes in a judicial
proceeding for the purpose of dispensing with proof of formal
matters or of facts about which there is no real
dispute." Kempter v. Hurd, 713 P.2d 1274, 1279
42 We conclude that there was no judicial admission, for
three reasons. First, we are not persuaded that the context
of Sandstead's actions shows an unequivocal, deliberate
declaration that the farm sale proceeds were estate funds.
See Gonzalez v. Windlan, 2014 COA 176, ¶¶
45-46 (alleged judicial admission must be considered in
context). Sandstead testified that she placed some of the
farm sale proceeds in an estate account and showed them on
estate inventory forms because of perhaps dubious legal
advice that doing so would facilitate resolution of disputes
over other property that did belong to the estate. There was
no contrary evidence. She has at all times since they became
an issue maintained that the farm sale proceeds were never
estate funds. And we note that because at all relevant
times Sandstead and Corona believed themselves to be the sole
heirs of Auriel's estate, disbursing the funds through
probate would have the same effect as disbursing them outside
probate - both would receive one-half of the funds. See
Bd. of Cty. Comm'rs v. Rohrbach, 226 P.3d 1184, 1189
(Colo.App. 2009) (where property owners contested the zoning
of their property in the litigation, statement in their use
permit application that their property was zoned agricultural
was not an unequivocal or formal declaration so as to
constitute a judicial admission).
43 The partial dissent says, however, that Sandstead did not
claim that the farm sale proceeds were not estate funds until
July 2011. But the record shows that Sandstead took that
position earlier when the status of the funds first appeared
to be an issue. And the record shows that Sandstead continued
to adhere to that position throughout litigation over her
44 As noted, the motion for surcharge expressly challenged
only actions Sandstead had taken as PR relating to estate
property. Sandstead was not appointed PR until two years
after she had transferred the money to Citizens Bank.
45 In her response to the motion for surcharge, filed March
2, 2011, Sandstead let it be known that she considered any
dispute relating to spending farm sale proceeds to be off
limits. The response stated: "Monies held in joint bank
accounts due to the decedent putting that money into a joint
bank account before her death deprives the probate court of
jurisdiction to administer those funds or to adjudicate how
those funds were spent."
46 Both Sandstead and Corona filed trial briefs on July 8,
2011, in advance of the hearing on the surcharge motion. In
her trial brief, Sandstead again argued expressly that the
farm sale proceeds transferred to Citizens Bank were not
estate property because those funds were in "a joint
bank account which passed to the survivor outside of the
47 Corona's trial brief sought, for the first time, to
challenge actions Sandstead took before her appointment as
PR, and claimed that, as to all the money transferred to
Citizens Bank, Sandstead had breached her fiduciary duties to
Corona. The brief referred to three separate
transfers: (1) a transfer of "$200, 000 from a bank
account in Colorado that was jointly owned by [Auriel],
[Sandstead], and [Corona] to accounts in Massachusetts"
on "June 20, 2007"; (2) a transfer of "$10,
000" on "August 2, 2007"; and (3) a transfer
of "$20, 000" on "November 19, 2007."
Corona's brief did not allege expressly that the money in
the Citizens Bank accounts was estate property, nor did it
allege expressly that Sandstead had breached any duty to
Auriel or the estate with respect to that money. It did
allege that Sandstead had breached her fiduciary duties to
Corona "with [r]espect to [f]unds [c]ontrolled by
[Sandstead] as well as [e]state [p]roperty, "
placing the farm sale proceeds in the former category by then
alleging that Sandstead controlled those proceeds "which
[Sandstead] held for the benefit of them both."
48 It was in response to Corona's new allegations that
Sandstead filed her motion in limine three days later.
She expressly moved "to prohibit the introduction of
evidence regarding" all three transfers mentioned in
Corona's trial brief, including "$200, 000
transferred from a jointly owned bank account on June 20,
2007, while the Decedent was still alive . . . ." The
motion argued that the court lacked jurisdiction to resolve
disputes over those ...