#25761-a-DG

2011 S.D. 42

                      IN THE SUPREME COURT
                              OF THE
                     STATE OF SOUTH DAKOTA

                            * * * *

JARED MUHLBAUER and
LUKE MUHLBAUER,                         Plaintiffs and Appellees,
  v.
ESTATE OF GLENN E. OLSON,               Defendant,

  and

JAMES W. OLSON and
GARY E. OLSON,                          Intervenors and Appellants,
  v.
ESTATE OF GLENN E. OLSON,               Defendant.

                            * * * *

               APPEAL FROM THE CIRCUIT COURT OF
                   THE FIRST JUDICIAL CIRCUIT
                  CLAY COUNTY, SOUTH DAKOTA

                           * * * *
                  HONORABLE STEVEN R. JENSEN
                            Judge

                            * * * *
SHEILA S. WOODWARD of
Johnson, Miner, Marlow
 Woodward & Huff, LLP
Yankton, South Dakota                   Attorneys for appellees.

ROBERT W. KLIMISCH of
Goetz and Klimisch
Yankton, South Dakota                   Attorneys for appellants.
                              ** * *

                                       CONSIDERED ON BRIEFS
                                       ON APRIL 25, 2011

                                       OPINION FILED 07/27/11
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GILBERTSON, Chief Justice

[¶1.]        The personal representative of an estate sold real property that had

been specifically devised to several heirs. This Court ruled in a previous appeal

that the personal representative lacked the authority to sell the property. We

remanded the case to allow the buyers of the real property to intervene to protect

their interests. After remand, the buyers filed suit against the estate. The heirs

who objected to the sale intervened. The buyers moved for summary judgment,

which the trial court granted. The intervening heirs appeal. We affirm.

                                       FACTS

[¶2.]        The underlying facts can be found in In re Estate of Olson (Olson I),

2008 S.D. 4, 744 N.W.2d 555, and In re Olson (Olson II), 2008 S.D. 126, 759 N.W.2d

315. The facts are not disputed. Consequently, they are only briefly recited now.

Glenn Olson died testate in 2002. Wayne Olson was appointed personal

representative of Glenn’s estate (Estate). In the will, Glenn specifically devised his

real estate to James Olson and six other nieces and nephews. The Estate was

informally probated in accordance with the Uniform Probate Code. Without notice

to the heirs in violation of SDCL 29A-3-715(b), Wayne sold part of the specifically

devised real property at public auction to Jared and Luke Muhlbauer. The

purchase agreement did not indicate that court approval of the sale was needed. At

the time of the sale, Wayne held letters of administration. Two to three months

after closing, Muhlbauers were informed that some of the heirs questioned the sale

of the land they had bought at auction.



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[¶3.]        James objected to the confirmation of the sale to the Muhlbauers.

Jared Muhlbauer was asked to testify at the hearing confirming the sale. Despite

James’ objection, the trial court confirmed the sale. The objecting heirs appealed.

Muhlbauers were not informed of the appeal confirming the sale until after our

decision was issued. On appeal, this Court determined that Wayne lacked the

power to sell the specifically devised land and “reverse[d] the trial court order

confirming the sale of specifically devised real estate and remand[ed] for further

proceedings[.]” Olson I, 2008 S.D. 4, ¶ 29, 744 N.W.2d at 564. This Court also

instructed that on remand the third-party purchaser would have “the opportunity to

intervene to protect his or her interests.” Id.

[¶4.]         “Following remand, Muhlbauers intervened and filed a claim against

the Estate seeking to confirm the sale that this Court had previously voided. In the

alternative, Muhlbauers asserted a damage claim that they contended would arise

if the sale were not confirmed.” Olson II, 2008 S.D. 126, ¶ 2, 759 N.W.2d at 317.

James and another heir, Gary Olson (collectively Heirs), moved to intervene in the

proceedings. Id. ¶ 3, 759 N.W.2d at 317-18. The trial court denied their motion to

intervene, but this Court reversed that decision on appeal, and remanded to allow

the heirs to intervene. Id. ¶ 12, 759 N.W.2d at 321.

[¶5.]        On remand, Muhlbauers filed a motion for summary judgment. Heirs

filed a motion for partial summary judgment. The Estate then filed a response to

the cross-motions for summary judgment, agreeing that summary judgment was




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appropriate but declining to advocate for either side. 1 The trial court granted

summary judgment in favor of Muhlbauers, stating that “[b]ecause there is no

factual dispute that the Muhlbauers were good faith purchasers for value from the

Estate and that they had no knowledge of the Personal Representative’s lack of

authority to sell, the Muhlbauers are protected by SDCL 29A-3-714 as a matter of

law.”

[¶6.]         On appeal, the issue presented is:

              Whether, under the facts of this case, Muhlbauers were good faith
              purchasers for value of specifically devised land protected by SDCL
              29A-3-714.

                             STANDARD OF REVIEW

[¶7.]         This Court’s standard of review of a grant or denial of a motion for

summary judgment is well settled.

              In reviewing a grant or a denial of summary judgment under
              SDCL 15–6–56(c), we determine whether the moving party has
              demonstrated the absence of any genuine issue of material fact
              and showed entitlement to judgment on the merits as a matter
              of law. In considering a trial court’s grant or denial of summary
              judgment, this Court will affirm only if all legal questions have
              been decided correctly.

Bertelsen v. Allstate Ins. Co., 2011 S.D. 13, ¶ 15, 796 N.W.2d 685, 692-93 (internal

citations omitted).

                                     ANALYSIS

[¶8.]         Heirs argue that Olson I determined that the sale to Muhlbauers was

void, specifically relying on our language that “[t]he sale should have been voided as


1.      The Estate of Wayne Olson, the personal representative for Glenn Olson’s
        estate, is not a party to this action.

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the personal representative did not have authority to sell the specifically devised

property[.]” Olson I, 2008 S.D. 4, ¶ 28, 744 N.W.2d at 563. Because the property

vested in the Heirs at the time of Glenn’s death, the Estate did not have an interest

in the land that the personal representative could sell. Id. ¶ 15, 744 N.W.2d at 560.

Heirs assert that Olson I contemplated a remedy for Muhlbauers directly against

the personal representative, not the confirmation of the sale. Muhlbauers respond

that Olson I did not determine their title to the land because it “determined the

rights of the personal representative vis-à-vis the heirs, not the rights of the

Muhlbauers as innocent third party purchasers for value.” They point out that this

Court remanded precisely to allow Muhlbauers an opportunity to assert their

rights. Muhlbauers contend that a sale can be void in one context and valid in

another. See, e.g., Hauck v. Crawford, 75 S.D. 202, 69 N.W.2d 92 (1953) (discussing

void versus voidable title).

[¶9.]        The trial court found that this “Court recognized the lack of an

indispensable party [the Muhlbauers] to afford the complete relief sought by the

Heirs and remanded the matter back to the trial court to permit the Muhlbauers to

intervene and hold further proceedings consistent with Olson I.” The trial court

framed the issue it was addressing on remand as whether the “sale is void as to the

Muhlbauers as third party purchasers[.]” In other words, the trial court did not

read Olson I as determining any of Muhlbauers’ rights.

[¶10.]       Today, we affirm on more narrow grounds. At the time Muhlbauers

purchased the property at auction, the law was not clear as to whether a personal

representative possessed the power to sell specifically devised land when the power

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of sale was not contained in the will and the sale was not necessary to pay estate

debts; that was the subject of Olson I. 2008 S.D. 4, ¶ 9, 744 N.W.2d at 559. This

Court extensively reviewed our Territorial Probate Code, the effect of the enactment

of the Uniform Probate Code, and case law regarding the power of personal

representatives to sell property. See id. ¶¶ 11-29, 744 N.W.2d at 559-64. This

Court held that “the personal representative did not have authority to sell the

specifically devised property[.]” Id. ¶ 28, 744 N.W.2d at 563. Muhlbauers could not

have known the outcome of Olson I at the time they purchased the property.

[¶11.]       Muhlbauers seek the protection of SDCL 29A-3-714, which provides:

             A person who in good faith either assists a personal
             representative or deals with a personal representative for value
             is protected as if the personal representative was properly
             authorized to act. The fact that a person deals with a personal
             representative with knowledge of the representative capacity
             does not alone require the person to inquire into the existence of
             a power or the propriety of its exercise. Except for restrictions
             on powers of supervised personal representatives which are
             endorsed on letters as provided in § 29A-3-504, no provision in
             any will or order of court purporting to limit the power of a
             personal representative is effective except as to persons with
             actual knowledge thereof. A person is not bound to see to the
             proper application of estate assets paid or delivered to a
             personal representative. The protection here expressed extends
             to instances in which some procedural irregularity or
             jurisdictional defect occurred in proceedings leading to the
             issuance of letters, including a case in which an alleged decedent
             is found to be alive.

[¶12.]       In order to be protected by SDCL 29A-3-714, Muhlbauers must be good

faith purchasers for value. We conclude they are good faith purchasers for value for

two reasons. First, as discussed above, Muhlbauers could not have known the

outcome of Olson I at the time they purchased the property. Second, since its


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beginnings, this Court has viewed “a definition sometimes given of ‘good faith’ . . .

[as] ‘without notice.’” Hawke v. Deffenbach, 4 Dak. 20, 22 N.W. 480, 490 (1885),

aff’d, 115 U.S. 392, 6 S. Ct. 95, 29 L. Ed. 423 (1885). At the time of the purchase,

Muhlbauers did not have notice of the Heirs’ interest in the land or the law at issue

in Olson I. Based on this lack of notice and the unique facts of this case, we

conclude that Muhlbauers were good faith purchasers for value. As such,

Muhlbauers are protected by SDCL 29A-3-714.

[¶13.]         Muhlbauers contend that title must vest in them under SDCL 29A-3-

714, “[o]therwise every purchaser of any asset from an estate . . . will demand a

court order approving the sale, thereby inundating the circuit courts with

unnecessary probate pleadings.” Heirs respond that SDCL 29A-3-714 states that

“the protection here expressed extends to instances in which some procedural

irregularity or jurisdictional defect occurred in proceedings leading to the issuance

of letters[.]” Consequently, Heirs argue that SDCL 29A-3-714 does not protect

Muhlbauers because there was not a procedural or jurisdictional defect. Instead,

the personal representative sold property that he did not have authority to sell.2



2.       Muhlbauers argue that “when a personal representative sells land
         improperly, the beneficiaries have a remedy against the defaulting fiduciary
         under SDCL 29A-3-712, but not against the innocent third parties who dealt
         with the personal representative in good faith.” Heirs respond that
         Muhlbauers have a remedy against the personal representative for damages
         under the same statute. SDCL 29A-3-712 provides: “If the exercise of power
         concerning the estate is improper, the personal representative is liable to
         interested persons for damage or loss resulting from breach of fiduciary duty.
         The rights of purchasers and others dealing with a personal representative
         shall be determined as provided in §§ 29A-3-713 and 29A-3-714.” Neither the
         Muhlbauers nor the Heirs were granted relief under SDCL 29A-3-712.
                                                             (continued . . .)
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[¶14.]       SDCL 29A-3-714 protects persons who deal in good faith with a

personal representative for value as if the personal representative was properly

authorized to act. Because there is no factual dispute that Muhlbauers are good

faith purchasers for value and had no knowledge that the personal representative

lacked the authority to sell the land, Muhlbauers are entitled to summary judgment

confirming the deed under SDCL 29A-3-714.

                                    CONCLUSION

[¶15.]       We affirm because at the time Muhlbauers purchased the land, Olson I

had not been decided, and as a result, they could not have known that the personal

representative lacked the authority to sell them the land. Muhlbauers were good

faith purchasers for value, and therefore, protected by SDCL 29A-3-714. We leave

for a future case the more general issue of the status of those who purchased real

property under similar circumstances after Olson I.

[¶16.]       MEIERHENRY, Retired Justice, concurs.

[¶17.]       KONENKAMP, ZINTER, and SEVERSON, Justices, concur in result.



SEVERSON, Justice (concurring in result).

[¶18.]       I concur only in the result. The Muhlbauers are good faith purchasers

for value under SDCL 29A-3-714. No restrictions were endorsed on the letters of

appointment as provided in SDCL 29A-3-504, and they had no actual knowledge of

________________________________
(. . . continued)
         Whether either party is entitled to relief is not an issue on appeal at this
         time.


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any will provision or court order limiting the authority of the personal

representative. The deed from the personal representative thus transferred title

free from the claim of any heir with a specific devise in the will.

[¶19.]        I do not join that part of the opinion that relies on In re Estate of Olson

(Olson I), 2008 S.D. 4, 744 N.W.2d 555. Before the South Dakota Legislature

adopted the Uniform Probate Code (UPC), one who purchased property from an

executor needed to examine the will, court records, or other relevant sources to

confirm the executor’s authority to complete the transaction. See 1994 S.D. Sess.

Laws ch. 232 (enacting the UPC in South Dakota effective July 1, 1995). This

requirement changed with the enactment of SDCL 29A-3-714 and SDCL 29A-3-

715(a)(23):

              Section 3-714 explicitly protects purchasers from allegations
              that a sale from a personal representative was unnecessary or at
              too low a price or even against the terms of a will. The
              purchaser is expressly excused from examining the terms of the
              will, court records relating to the appointment, or other sources
              that might be relevant to the question of whether the sale is
              proper as between the fiduciary and those entitled to the
              inheritance. The only restriction on the power of sale
              contemplated by the Code is when supervised administration (§§
              3-501 et seq.) has been ordered. In this setting, the court is
              authorized to endorse restrictions on the personal
              representative’s power on the letters of authority the court
              issues to the personal representative. A purchaser does take
              subject to these restrictions. In the ordinary case, however, a
              title examiner would only need to see that letters were issued
              and in effect when a personal representative gave a deed to a
              purchaser.

3 Patton and Palomar on Land Titles § 521 (3d ed. & Supp. 2010).

[¶20.]        Limiting SDCL 29A-3-714 would significantly impact marketable title

to real estate and personal property. A buyer or other person relying on the validity

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of title documents could only be certain of title by examining the will, court records,

or other relevant sources. The buyer could not rely on the validity of transfers by

personal representatives as SDCL 29A-3-714 allows. Yet under the UPC, many, or

even most transactions, do not require court approval. And unless a probate

proceeding is conducted as a formal proceeding with court supervision, its probate

file would not contain the documents necessary to confirm the personal

representative’s authority.

[¶21.]        Furthermore, Olson I does not follow this Court’s settled precedent in

In re Estate of Kappenmann, 82 S.D. 91, 141 N.W.2d 780 (1966). In Kappenmann,

we held that an executor may sell specifically devised real property under a power

of sale in a will, even if there is not a directive in the will to sell the property and

the sale is not necessary to pay debts and costs of administration. Id. Although

Kappenmann was decided before the Legislature adopted the UPC, there is no

reason to conclude that the UPC dictates a different result. Nothing distinguishes a

power of sale in a will and a power of sale granted by statute.

[¶22.]        The Olson I majority concluded that a statutory power of sale is

inherently inconsistent with a specific devise. 2008 S.D. 4, ¶ 20, 744 N.W.2d at 561.

That conclusion is logically flawed. It assumes as a premise a difference between a

power of sale in a will and a power of sale granted by statute. See SDCL 29A-3-

715(a)(23). But I believe, based on this Court’s holding in Kappenmann, that

conclusion is contrary to precedent. Indeed, Justice Zinter, in his dissent, explained

that the authority the Olson I majority cited does not support its conclusion. Id. ¶



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44 (discussing Kappenmann, 82 S.D. 91, 141 N.W.2d 780). Because Justice Zinter’s

dissent is a persuasive statement of the law, I would have joined it.

[¶23.]       Thus, I concur in the result that the Muhlbauers are good faith

purchasers for value under SDCL 29A-3-714 and take title free from the claim of

any heir with a specific devise in the will. But I do not agree with that part of the

opinion that implies a different result in future cases based on the holding in Olson

I. Olson I was not decided in accordance with settled precedent and should not be

relied upon as authority.

[¶24.]       KONENKAMP and ZINTER, Justices, join this special writing.




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