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Sandstead-Corona v. Sandstead

Supreme Court of Colorado, En Banc

April 9, 2018

Shauna Sandstead-Corona, Petitioner:
v.
Vicki J. Sandstead. Respondent:

          Certiorari to the Colorado Court of Appeals Court of Appeals Case No. 14CA231

          Attorneys for Petitioner David F. Steinhoff R. Eric Solem Englewood, Colorado

          Attorneys for Respondent: The Law Offices of Peter R. Bornstein Peter R. Bornstein Greenwood Village, Colorado

          OPINION

          GABRIEL JUSTICE

         ¶1 This case involves a dispute between two sisters, Shauna Sandstead-Corona ("Corona") and Vicki Jo Sandstead ("Sandstead"), over how to divide their mother Auriel Sandstead's ("Auriel's") estate. Prior to her death, Auriel placed proceeds from the sale of the family's farm into a multi-party bank account (the "Wells Fargo Account") on which Sandstead and Corona were also signatories, with the intent that the money would transfer to Sandstead and Corona outside of probate upon Auriel's death. With Auriel's permission, Sandstead later moved a large portion of the funds into different bank accounts (the "Citizens Bank Accounts") that Corona could not access. Auriel subsequently died, and the court appointed Sandstead as the personal representative of Auriel's probate estate. Corona then filed a motion to surcharge Sandstead for, as pertinent here, her use of the funds that Sandstead had removed from the Wells Fargo Account and placed in the Citizens Bank Accounts.

         ¶2 The Logan County District Court, acting in its capacity as probate court in this proceeding, conducted a trial on Corona's surcharge motion and determined that Sandstead's custody of the funds prior to filing a probate proceeding was "in the nature of an implied trust." The court further concluded that Sandstead had failed to account properly for the funds, thus warranting a surcharge for the unaccounted amounts.

         ¶3 In the course of the above-described probate proceeding, a pour-over will and related revocable trust executed by Auriel and her late husband were discovered. Corona contested the will and trust on the ground that Auriel and her husband had revoked the trust. The trial court rejected this contention, however, and further concluded that under the trust's no-contest clause, because Corona had contested the will and trust, she forfeited all property that she would have inherited under the will.

         ¶4 Both Sandstead and Corona appealed, and in a published decision, a split division of the court of appeals concluded that the trial court had erred in surcharging Sandstead for her use of the farm proceeds. The division majority reasoned that the funds at issue were not part of the probate estate. Rather, they passed to Sandstead alone under the probate code's multi-party account statute. Therefore, the surcharge was inappropriate. The division also affirmed the trial court's determination regarding the no-contest clause.

         ¶5 Corona petitioned for certiorari, and we granted the petition to consider (1) whether an implied trust could be imposed on the farm proceeds that Sandstead had placed in the Citizens Bank Accounts; (2) whether the fiduciary oversight statute in the probate code permitted the trial court to sanction Sandstead for actions taken prior to Auriel's death and prior to Sandstead's appointment as personal representative of Auriel's estate; (3) whether the trial court erred in applying the no-contest clause in the trust to Corona's challenge to the pour-over will; and (4) whether Corona had probable cause to contest the will.[1]

         ¶6 We now reverse the division's ruling. As a preliminary matter, we conclude that pursuant to section 13-9-103(3)(b), C.R.S. (2017), the trial court had jurisdiction to resolve the present dispute because the dispute presented a question as to whether the funds that Sandstead had placed in the Citizens Bank Accounts were part of Auriel's probate estate. Turning then to the issues presented, we conclude first that the trial court properly imposed an implied trust over at least a portion of the farm proceeds. Specifically, when Sandstead moved the funds from the Wells Fargo Account to the Citizens Bank Accounts, she was in a confidential relationship with her mother and Corona. When she then misspent those funds, she abused that confidential relationship, thereby justifying the imposition of an implied trust.

         ¶7 We further conclude that because an implied trust is included in the fiduciary oversight statute's definition of an "estate, " the trial court could properly surcharge Sandstead for her malfeasance as to the funds in the implied trust.

         ¶8 Finally, we conclude that although the no-contest clause in the trust was incorporated by reference into the will, by its plain language, that clause applies only to actions contesting the trust, not challenges to the will. Accordingly, we conclude that the trial court erred in enforcing the no-contest clause against Corona based on her actions contesting the will.

         ¶9 We therefore reverse the division's judgment, and we need not reach the final issue on which we granted certiorari.

         I. Facts and Procedural History

         ¶10 The pertinent facts of this case are lengthy and complex. We begin by tracing the facts leading to the present probate proceeding. We then provide the facts necessary to understand the dispute over Sandstead's handling of the funds in the Citizens Bank Accounts. Next, we review the facts related to the dispute over the no-contest clause. Finally, we discuss the parties' appeals of the trial court's pertinent orders.

         A. Events Leading to this Probate Proceeding

         ¶11 Auriel and her husband Willard had three daughters, Corona, Sandstead, and Margo Mesch. Mesch is not involved in this case.

         ¶12 In 1991, Auriel executed a will (the "1991 Will"), naming Willard as her heir and Sandstead and Corona as the residuary beneficiaries.

         ¶13 In 2000, Auriel executed a second will (the "2000 Will") and, along with Willard, a related revocable living trust (the "Trust"). Willard and Auriel placed three parcels of property into that Trust: (1) their house in Sterling, Colorado; (2) their condominium in Florida; and (3) a parcel of land from the family farm. Under the terms of the Trust, upon the death of both Willard and Auriel, the assets of the Trust were to be divided 40% to Sandstead, 40% to Corona, and 20% (10% each) to Mesch's two sons. The 2000 Will also named the Trust as the residuary beneficiary of Auriel's estate.

         ¶14 In 2000, Willard began arranging to sell the family's farm, and the sale was completed shortly after he died in 2007. At the suggestion of Willard and Auriel's attorney, the proceeds from the sale were deposited into the Wells Fargo Account, which was a multi-party account with Willard, Auriel, Sandstead, and Corona as joint signatories. The parties do not appear to dispute that Auriel placed the funds into the Wells Fargo Account to avoid having those funds pass through probate on her death.

         ¶15 Thereafter, and while Auriel was still alive, Sandstead moved approximately $200, 000 from the Wells Fargo Account to the Citizens Bank Accounts, which were located in Boston, where Sandstead lives. Corona was not a signatory on any of the Citizens Bank Accounts. Rather, only Sandstead, and in some cases Auriel, was a signatory on those accounts. According to Sandstead, Auriel agreed to allow Sandstead to move the money to the Citizens Bank Accounts, and Sandstead understood that the money was to be used for Auriel's care until her death, after which it would be split equally between herself and Corona. Corona likewise understood that she was to be entitled to one-half of the money in the Citizens Bank Accounts after Auriel's death.

         ¶16 Auriel died in late 2007. Thereafter, 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, 000. At the time the sisters signed this affidavit, they believed that because the farm proceeds had been transferred to the joint bank accounts, Auriel's estate consisted solely of a car and certain personal property.

         ¶17 Sandstead and Corona subsequently began to disagree about matters relating to their parents' assets. Corona also began to ask Sandstead for her half of the money that had been held in the Citizens Bank Accounts.

         ¶18 About a year later, Sandstead initiated the present probate proceeding because she believed that items were missing from Auriel's estate. Sandstead lodged the 1991 Will with the trial court (apparently because she was unaware at that time of the 2000 Will), and the registrar signed an order appointing her as the personal representative of Auriel's estate. Thereafter, Sandstead opened an estate account at Citizens Bank and transferred the funds in the Citizens Bank Accounts that were in her name into the estate account.

         B. Corona's Surcharge Motion

         ¶19 About a year after Sandstead opened the probate estate, Corona filed a petition to remove Sandstead as personal representative, alleging that Sandstead had misadministered Auriel's estate in a number of ways. Rather than litigate this petition, Sandstead resigned as personal representative, and she and Corona agreed to the appointment of a successor personal representative.

         ¶20 Subsequently, the successor personal representative filed, and the trial court granted, a motion requiring Sandstead to provide a detailed accounting. After Sandstead filed the requested accounting, Corona filed a motion for surcharge and other relief against Sandstead.

         ¶21 The trial court held a bench trial on Corona's surcharge motion and ultimately issued an order finding that Sandstead had improperly accounted for and unnecessarily spent funds (1) before Auriel's death, (2) after Auriel's death but before Sandstead's appointment as personal representative, and (3) after Sandstead's appointment. The trial court thus concluded that Sandstead held the farm proceeds in an implied trust. In addition, the trial court concluded that because Sandstead had treated the funds in the Citizens Bank Accounts as estate property, she had made a judicial admission that she did not claim those funds individually. Finally, the court found that it did not have sufficient information to decide whether to surcharge Sandstead for certain transactions. The court thus ordered the successor personal representative to conduct an accounting as to those transactions.

         ¶22 Sandstead moved for reconsideration of the court's order and for a new trial. As pertinent here, she asserted that the trial court (1) could not surcharge her for actions predating her appointment as personal representative, (2) did not have jurisdiction over the funds in the Citizens Bank Accounts until Sandstead transferred the remaining funds to the estate, and (3) incorrectly determined that Sandstead's placement of the funds in an estate account constituted a judicial admission. The trial court denied this motion.

         ¶23 Corona then filed a motion for final surcharge, which the trial ...


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