Wilson v. Kane

1993 OK 65, 852 P.2d 717, 64 O.B.A.J. 1497, 1993 Okla. LEXIS 78, 1993 WL 150649

Opinions

OPALA, Justice.

The dispositive question here is whether Linda Wilson’s [plaintiff’s or Wilson’s] claim against Matthew Kane, Jr. [Kane], personal representative of her uncle’s estate, for his alleged “conversion” of certain nonprobate assets by mismanagement could have been litigated in probate.1 We answer this question in the negative. The remedial deficiency of probate procedure to accommodate Wilson’s claim prevents the probate adjudications on which Kane relies from having res judicata (also known as claim preclusion) effect.²

I.

THE ANATOMY OF LITIGATION

A.

THE PROBATE PROCEEDING

Wilson’s uncle [the uncle] bought certificates of deposit [certificates] for $130,-000.00, payable to Wilson upon his death. He also named Wilson a beneficiary of his will and joint tenant in a checking account. When the uncle died, the certificates were delivered to Kane, the estate’s personal representative. Kane allowed them to mature; then he cashed the certificates and deposited the proceeds in the estate’s non-interest bearing account. Over a year after her uncle’s death, Wilson learned from the bank’s president that she was the certificates’ POD (payable on death) beneficiary.

When Wilson sought in probate to recover the certificates’ proceeds, the estate contested her claim. After a hearing in probate, the judge (1) decreed Wilson to be the owner of the certificates and of a joint checking account and (2) ordered the proceeds from the certificates and from the account to be turned over to her.³ A second probate order approved a settlement that divides the checking account proceeds between Wilson and her two cousins (beneficiaries under the uncle’s will) and made unappealable the earlier probate order.⁴ The certificate proceeds went to Wilson. Her lawyer approved Kane’s final account; while sitting in probate the judge issued a decree of distribution and discharged Kane from his duties as the estate’s personal representative.⁵

B.

WILSON’S CLAIM FOR KANE’S ALLEGED “CONVERSION” OF NON-PROBATE ASSETS BY MISMANAGEMENT

Later Wilson brought this action against Kane. She contends his mismanagement of her certificates (nonprobate assets) cost her not only -interest that the certificates could have earned while they languished in the estate’s non-interest bearing account but a large attorney’s fee as well.6 The trial court gave summary judgment⁷ to Kane, believing that res judicata⁸ bars Wilson’s claim because it could have been litigated (a) in probate during the dispute over the certificates’ ownership or (b) as a challenge to the decree of distribution or to the personal representative’s discharge. Wilson appealed;⁹ the Court of Appeals affirmed the trial court's summary judgment and we granted certiorari.¹⁰

c.

THE CONTROVERSY

Wilson contends the doctrine of res judicata does not bar her claim against Kane for converting nonprobate assets and urges that the probate order that discharges him from his duties as the estate’s personal representative does not exonerate Kane from liability for mismanagement of the certificates. According to Kane, since only one controversy¹¹ arises from his dealings with the certificates, any and all recovery to which Wilson might have been entitled could have been litigated in probate during the dispute over the certificates’ ownership. Kane believes that his discharge in probate (as personal representative of the uncle’s estate) fully absolves him of any responsibility to Wilson.

II.

WILSON’S CLAIM FOR KANE’S ALLEGED CONVERSION OF NON-PROBATE ASSETS BY MISMANAGEMENT LIES DEHORS THE ADJUDICATIVE RANGE OF A COURT SITTING IN PROBATE

Wilson’s claim for alleged conversion of nonprobate assets by mismanage ment, pressed for the first time in this action, is fit for the district court’s process of ordinary judicature, but not for resolution in probate.¹² A probate proceeding moves along a procedural track vastly dif-' ferent from that followed by a regular “action” upon a claim. The latter is governed by the Pleading Code¹³ and is regulated by the rules of practice applicable to the ordinary process of adjudication. Before the Judicial Article of the Oklahoma Constitution¹⁴ and the provisions of § 91.-1¹⁵ became effective on January 13, 1969, the remedial track for probate had its point of inception in the since-defunct county court.¹⁶ Although probate now begins and ends in district court, interdocket remedial boundaries survive. Probate is a special statutory proceeding.¹⁷ Its mainstream¹⁸ issues, procedural stages, and special statutory remedies remain the same as they were before 1969. The law confines them to: (1) ascertaining whether decedent died testate or intestate, and if testate, (2) what testamentary disposition, if any, may be admitted to probate, (3) the administration of the estate’s assets and (4) the final account and distribution.¹⁹

Wilson’s claim for alleged conversion of nonprobate assets (later adjudged as her property) does not fit within probate’s statutorily limited framework.²⁰ The relief she seeks (interest and other out-of-pocket losses) is for Kane’s alleged mismanagement of her personal property, not of that which belongs to the estate. Demands for a money judgment for one’s dealings with assets dehors the estate are not within the limited arsenal of special remedies affordable in probate.,²¹

Under the doctrine of res judica-ta,²² a final judgment on the merits of an action bars the parties from relitigating not only the adjudicated claim but also any theories or issues that were actually decided or could have been decided in that action.²³ For probate adjudications the effect of res judicata is circumscribed by the reality of our interdocket boundaries²⁴ and by the statutes that narrowly craft probate as a special remedy. Where, as here, the claim sought to be litigated lay dehors probate and could not have been accommodated by its restricted framework, res judicata effect may not be accorded to the earlier orders in probate. In short, Wilson’s claim survives as a viable demand and the summary judgment for Kane cannot stand.

hi.

WILSON’S FAILURE TO CHALLENGE IN PROBATE EITHER THE DECREE OF DISTRIBUTION OR KANE’S DISCHARGE AS PERSONAL REPRESENTATIVE DOES NOT BAR HER CLAIM AGAINST HIM FOR ALLEGED CONVERSION OF NONPROBATE ASSETS BY MISMANAGEMENT

Had Wilson attempted to cast her demand for alleged conversion of nonprobate assets as an objection to the decree of distribution or to the personal representative’s discharge, as Kane urges she should have done, the court below would have been compelled to declare her claim irremediable in probate. It would have been indeed an act of supererogation for Wilson to have pressed a demand for which no redress was affordable.

A personal representative is responsible for the faithful administration of the estate’s property²⁵ and may be surcharged for mismanagement of estate assets.26 Sitting in probate a judge can require a personal representative to account, in his fiduciary capacity, only for funds and property coming into his hands which are assets of the estate.27

Wilson does not seek to hold the personal representative liable for wrongful administration or mismanagement of the estate’s assets.28 Rather, the redress sought here is for alleged mismanagement of her nonprobate assets. She has no quarrel with the decree of distribution; her demand may not be- viewed as a collateral attack on that decree. Since Wilson’s claim against Kane is litigable solely de-hors probate, she had no duty to call it to the attention of the judge in probate by interposing a challenge to the final decree or to Kane’s discharge.

SUMMARY

Wilson’s claim cannot be barred for her failure to make an irremediable demand. Her claim for Kane’s alleged conversion of nonprobate assets by mismanagement clearly was not litigable in probate. Inter-docket boundaries and narrowly drawn statutory remedies limit the remedial range of probate. They require that Wilson be allowed to press her claim in an ordinary action dehors probate. Neither res judica-ta nor issue preclusion bars this action. Summary judgment for Kane cannot stand.

ON CERTIORARI PREVIOUSLY GRANTED, THE COURT OF APPEALS’ OPINION IS VACATED; THE TRIAL COURT’S SUMMARY JUDGMENT IS REVERSED AND CAUSE REMANDED.

HODGES, C.J., LAVENDER, V.C.J. and SIMMS, HARGRAVE, OPALA, ALMA WILSON and KAUGER, JJ., concur. SUMMERS, J., concurs in result. WATT, J., dissents.

Footnotes

1

.Wilson characterizes her theories of recovery as "negligence, conversion and breach of fiduciary duty against a personal representative of an estate in connection with his handling of certificates of deposit that belonged to the plaintiff and were not properly part of the estate." [Emphasis supplied.] Whether Wilson’s claim is actionable or whether her evidence will support the quest for relief under any of these theories is not before us today. For the sake of simplicity we refer to Wilson’s claim as one for Kane’s alleged “conversion" of non-probate assets by mismanagement.

2

. For an explanation of the effect of res judica-ta, see part II and infra note 22.

3

. The pertinent terms of the May 18, 1989 pro- • bate order provide that five certificates of deposit and a checking account, together with accumulated interest, "should be set over to Linda Wilson as her property separate and apart from the Estate of Floyd C. Morris.” The certificates earned no interest; Kane did not reinvest them after their maturity.

4

. While sitting in probate the judge on May 31, 1989 approved the parties’ posthearing settlement of their dispute over title to the certificates and to the bank account.

5

. Both the final account’s approval and the personal representative’s discharge were pronounced July 31, 1989 and memorialized August 1, 1989.

6

. Wilson also contends she was forced to sell her house at a loss because she needed money while the dispute was pending. She seeks punitive as well as actual damages.

7

. Summary judgment for the defendant was pronounced September 17, 1990 and memorialized October 10, 1990.

8

. For an explanation of the effect of res judica-ta, see Part II and infra note 22.

9

. A timely petition in error was filed on November 6, 1990 after the trial court’s October 23, 1990 denial of Wilson's motion for new trial.

10

. The February 14, 1992 ’affirmance of the nisi prius decision by a lawyer-staffed panel of the Court of Appeals was followed by Wilson’s timely petition for certiorari on February 28, 1992. We granted certiorari on July 8, 1992.

11

. Kane points to Retherford v. Halliburton Co., Okl., 572 P.2d 966, 968-969 (1978), which explains Oklahoma’s transactional approach to the concept of a cause of action. It is not applicable here primarily because of statutory limitations on the probate’s remedial range. See our discussion in Part II.

The general rule against splitting a cause of action recognizes an exception where, as here, “formal barriers existed against full presentation of [the] claim in [the] first action." See Restatement (Second) of Judgments § 26(l)(c) and cmt. c (1982).

12

.We do not address the question whether Wilson’s certificate ownership claim was fit for probate judicature; whether Wilson had standing in prohate to challenge the estate’s title to the certificates is not before us today. See in this connection Matter of Adoption of B.K.J., Okl., 639 P.2d 611, 613-614 (1982); In re Griffin's Estate, 199 Okl. 676, 189 P.2d 933, 935 (1947). But see Lowrance v. Patton, Okl., 710 P.2d 108, 112 (1985); Estate of Kizziar, Okl., 554 P.2d 791, 792-793 (1976); Taliaferro v. Reirdon, 186 Okl. 603, 99 P.2d 522, 524 (1940).

13

.12 O.S.Supp.1985 § 2001. The pertinent terms of § 2001 provided:

"The Oklahoma Pleading Code governs the procedure in the district courts of Oklahoma in all suits of a civil nature whether cognizable as cases at law or in equity except where a statute specifies a different procedure_” [Emphasis provided.]

The notion of multiple procedural tracks for some classes of district court proceedings which cannot be accommodated by the Pleading Code is not new to the body of our procedural law. See, e.g., the Uniform Adoption Act, 10 O.S.1981 §§ 60.1 et seq.; the provisions of 10 O.S.Supp. 1988 §§ 1101 et seq. (amended by Okl.Sess.Laws 1990, c. 51, Okl.Sess.Laws 1990, c. 302, § 1 and Okl.Sess.Laws 1991, c. 335 §§ 1, 36), commonly known as the "Juvenile Code” or “Children's Code"; statutes governing filiation proceedings, 10 O.S.Supp.1987 §§ 70 et seq. (amended by Okl.Sess.Laws 1989, c. 198, § 1 and Okl.Sess. Laws 1991, c. 71, § 1); condemnation proceedings for highways, 69 O.S.1981 § 1708 (amended by Okl.Sess.Laws 1991, c. 175, § 4); condemnation proceedings for railroads, 66 O.S.1981 §§ 51 et seq.; and of course, probate procedure, 58 O.S.1981 §§ 1 et seq. (amended by Okl.Sess. Laws 1989, c. 276, § 1); Williams v. Mulvihill, Okl., 846 P.2d 1097, 1102 n. 14 (1993); Board of Law Library Trustees v. State, Okl., 825 P.2d 1285, 1288 n. 11 (1992); Court Fund of Tulsa County v. Cook, Okl., 557 P.2d 875, 877-878 (1976).

Our citations are to enactments in effect when the probate orders invoked here were rendered.

14

. Article 7 is the Judicial Article. Art. 7, § 1, Okl. Const., provides in pertinent part:

"The judicial power of this State shall be vested in ... a Supreme Court [and] ... District Courts_” [Emphasis supplied.]

Art. 7, § 7(a), Okl. Const., provides in pertinent part:

"The District Court shall have unlimited original jurisdiction of all justiciable matters, except as otherwise provided in this Article....” [Emphasis supplied.]

Article 7 was ratified in 1907. Its repeal and the enactment of what is now Article 7 was proposed by Laws 1967, p. 698, H.J.R. No. 508 and adopted at an election on July 11, 1967.

15

. 20 O.S.1981 § 91.1 (adopted verbatim from Okl.Sess.Laws, 1968, c. 162, § 1, eff. Jan. 13, 1969). The pertinent terms of § 91.1 are:

The District Courts of the State of Oklahoma are the successors to the jurisdiction of all other courts, including ... the County Courts_” [Emphasis supplied.]

16

. Art. 7, §§ 12-17, Okl. Const, (repealed in 1967, eff. Jan. 13, 1969), provided:

“The County Court, co-extensive with the county, shall have original jurisdiction in all probate matters....” [Emphasis provided.] Art. 7, § 13, Okl. Const, (repealed in 1967, eff. Jan. 13, 1969), provided:

"The County Court shall have the general jurisdiction of a Probate Court. It shall probate wills, appoint guardians of minors, idiots, lunatics, persons non compos mentis, and common drunkards; grant letters testamentary and of administration, settle accounts of executors, administrators, and guardians; transact all business appertaining to the estates of deceased persons, minors, idiots, lunatics, persons non compos mentis, and common drunkards, including the sale, settlement, partition, and distribution of the estates thereof. * * * ” [Emphasis provided.]

See Kizziar, supra note 12 at 792. For the pertinent provisions of the present Article 7, see supra note 14. For examples of county court cases, see Cassina v. Jones, Okl., 340 P.2d 482, 484 (1959); In re Johnson, 72 Okl. 174, 179 P. 605, 607 (1919).

17

. 58 O.S.1981 §§ 1 et seq. (amended by Okl. Sess Laws 1989, c. 276, § 1); Williams,, supra note 13 at 1102; Kizziar, supra note 12 at 792. The pertinent terms of § 1 provided that "the district court has probate jurisdiction ... which must be exercised in the cases and in the manner prescribed by statute_” [Emphasis provided.]

18

. Mainstream probate issues are not the only ones limited by statute; ancillary proceedings in probate are limited as well. See, e.g., 58 O.S. 1981 § 339, which provides that "[w]hen a [creditor's] claim is rejected [in probate] the holder may bring suit as an ancillary proceeding in the probate case or as an independent action _” [Emphasis provided.]

19

. See the probate procedure, 58 O.S.1981 §§ 1 et seq. (amended by OkI.Sess.Laws 1989, c. 276, § 1); Williams, supra note 13 at 341.

20

. For an explanation of the kind of mismanagement claim that is fit for probate, see Part III.

21

. See 58 O.S.1981 §§ 1 et seq. (amended by Okl.Sess Laws 1989, c. 276, § 1).

22

. The Restatement of Judgments now speaks of res judicata as "claim preclusion”. See Restatement, supra note 11 at § 24; Veiser v. Armstrong, Okl., 688 P.2d 796, 800 n. 8 (1984); Oklahomans for Life, Inc. v. State Fair of Oklahoma, Okl., 634 P.2d 704, 706-707 (1981). See also Allen v. McCurry, 449 U.S. 90, 96, 101 S.Ct. 411, 415-416, 66 L.Ed.2d 308 (1980); Migra v. Warren City School Dist. Bd. of Educ., 465 U.S. 75, 80, 104 S.Ct. 892, 896, 79 L.Ed.2d 56 (1984); United States v. Mendoza, 464 U.S. 154, 157, 104 S.Ct. 568, 571, 78 L.Ed.2d 379 (1984).

23

. Veiser, supra note 22 at 800 n. 9; see Panama Processes v. Cities Service Co., Okl., 796 P.2d 276, 283-284 n. 27 (1990). See also Allen, supra note 22, 449 U.S. at 94, 101 S.Ct. at 414; Cromwell v. County of Sac, 94 U.S. (4 Otto) 351, 352, 24 L.Ed. 195, 197 (1877).

Wilson argues that "the trial court erred in ruling that the doctrine of res judicata or collateral estoppel barred [her] claim.” The doctrines of res judicata and collateral estoppel are not interchangeable. See Panama Processes, supra at 283-284 n. 27.

The Restatement of Judgments describes collateral estoppel as "issue preclusion." See Restatement, supra note 11 at § 27; Veiser, supra note 22 at 799 n. 7; Oklahomans for Life, supra note 22 at 706-707. See abo Allen, supra note 22, 449 U.S. at 94, 101 S.Ct. at 415; Migra, supra note 22, 465 U.S. at 76, 104 S.Ct. at 894; Mendoza, supra note 22, 464 U.S. at 157, 104 S.Ct. at 571. Under bsue preclusion, once a court has decided an bsue of fact or law necessary to its judgment, that bsue may not be relitigated between the same parties or their privies in a suit on a different cause of action. Veber, supra note 22 at 800 n. 9. See Allen, supra note 22; Montana v. United States, 440 U.S. 147, 153, 99 S.Ct. 970, 973, 59 L.Ed.2d 210 (1979);

No bsue in Wibon's claim was ever presented at any stage of the earlier proceeding in probate; collateral estoppel b hence clearly inapplicable to bar any of these bsues.

24

. For an explanation that a cause may sometimes be restricted by a special proceeding’s remedial range, see supra note 11. For exam- pies of the court’s interdocket boundaries, see supra note 13.

25

. Campbell v. Campbell, 120 Okl. 294, 251 P. 502, 504 (1926).

26

. In re Hanson’s Estate, 77 S.D. 474, 93 N.W.2d 606, 612-613 (1959).

27

. Boudinot v. Locust, 55 Okl. 662, 151 P. 579, 582 (1915), aff'd. on rehearing 155 P. 698 (1916); Judge v. Tyson, 42 Ala. 401 (1868). The disposi-tive question is whether the personal representative was entitled to receive the money or property in his capacity as administrator. If not, the judge sitting in probate has no power to require him to account for those assets. An order requiring the personal representative to account might be condemned as void. An exception to this rule may apply when a judge mistakenly orders the administration of a nonprobate asset under the erroneous belief it belonged to the estate. Boudinot, supra 151 P. at 582.

The general rule, rather than the exception, governs this case. The certificates Wilson claimed as her own were never judicially declared as probate assets.

28

.The trial judge mistakenly viewed Wilson’s claim as an attack on the decree of distribution and on the personal representative’s administration of the estate in probate. He rested summary judgment for Kane upon (1) the text of 58 O.S.1981 § 632, which provides that the final decree is “conclusive as to the rights of heirs, legatees or devisees, subject only to be reversed, set aside, or modified on appeal" (2) the terms 58 O.S. 1981 § 691, which provide that when the personal representative has "performed all the acts lawfully required of him, the court must make a judgment or decree discharging him from all liability to be incurred thereafter and (3) the teachings of O’Neill v. Cunningham, 119 Okl. 157, 244 P. 444, 447 (1926) and Coyne’s Estate, 103 Okl. 279, 229 P. 630, 633 (1924), which hold that a personal representative is protected from personal liability by the decree of distribution if he has acted reasonably and in good faith in the disbursement of money pursuant to the decree. [Emphasis provided.]

Wilson’s claim is not barred by the adjudications made in probate; her quest for monetary recovery could not have been redressed in that special proceeding.