This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2004).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A04-1310

 

 

Lavonne Kuntz, individually; as an heir to the Estate of Peter Redmann

and as Personal Representative of the Estate of Peter Redmann, et al.,

Appellants,

 

vs.

 

Jensen & Gordon, et al., U.S. Bank, N.A.,

Respondents.

 

 

Filed April 26, 2005

Affirmed; motion granted

Randall, Judge

 

McLeod County District Court

File No. C4-03-000901

 

 

Richard Diamond, Jesse Kibort, Richard I. Diamond, P.A., 601 Carlson Parkway, Suite 1050, Minnetonka, MN  55305 (for appellants).

 

Charles Lundberg, Bassford Remele, P.A., 33 South Sixth Street, Suite 3800, Minneapolis, MN  55402-3787 (for respondent Jensen & Gordon, P.A.).

 

Kevin Spellacy, Kenneth Bayliss, Quinlivan & Hughes, P.A., P.O. Box 1008, St. Cloud, MN  56302-1008 (for respondent U.S. Bank).

 

 

            Considered and decided by Randall, Presiding Judge; Lansing, Judge; and Wright, Judge.


U N P U B L I S H E D   O P I N I O N

RANDALL, Judge

            Appellants, daughters of the deceased Peter Redmann, sued respondents, the successor personal representative for the estate and the attorney hired by the original personal representative, alleging fraud and misrepresentation.  Appellants challenge the dismissal of their complaint and the denial of their motion to amend their complaint, arguing: their claims are not barred by collateral estoppel; the district court should have granted their motion to amend; the successor personal representative, as well as the former counsel for the original personal representative, can be liable to the estate’s beneficiaries for breaches of fiduciary duty and attorney-client duties.  Respondents move to strike material from appellants’ brief.  We affirm on all issues and grant the motion to strike.

FACTS

            La Vonne Kuntz was personal representative of her deceased father’s estate.  Kuntz employed counsel to assist in dealing with the estate.  Counsel, to avoid a conflict of interest, encouraged Kuntz to move the district court to appoint a successor personal representative.  Kuntz made that motion, and the probate court appointed U.S. Bank as successor personal representative.  Kuntz later moved to vacate U.S. Bank’s appointment, arguing that counsel misinformed her about the extent of authority U.S. Bank would have as successor personal representative.  The probate court denied Kuntz’s motion, she appealed, and this court affirmed.  In re Estate of Redmann, No. C9-02-1589, 2003 WL 1962122 (Minn. App. Apr. 29, 2003), review denied (Minn. Jul. 15, 2003).  Kuntz and her sisters then sued counsel and his firm (collectively, Jensen), as well as U.S. Bank, seeking damages for fraud, reckless misrepresentation, and negligent misrepresentation.  The district court granted the motions of Jensen and U.S. Bank to strike an affidavit of Kuntz, and granted judgment on the pleadings, ruling that the results of the first action collaterally estopped appellants from bringing the current action.  Kuntz appealed, including the stricken affidavit in the appendix to her brief.  Jensen moves to strike that affidavit, and the references thereto, from Kuntz’s brief. 

D E C I S I O N

I.

            Generally, appellate courts may not base a decision on matters outside the record on appeal.  Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988).  The record on appeal is “[t]he papers filed in the trial court, the exhibits, and the transcript of the proceedings, if any[.]”  Minn. R. Civ. App. P. 110.01.  If matters outside the record on appeal are included in the appendix to a brief, an appellate court can strike those materials, and any references thereto in the brief.  Brett v. Watts, 601 N.W.2d 199, 201-02 (Minn. App. 1999), review denied (Minn. Nov. 17, 1999); see Merle’s Constr. Co. v. Berg, 442 N.W.2d 300, 303 (Minn. 1989) (allowing sua sponte striking of extra-record materials). 

            While the disputed materials are included with the papers sent to this court from the district court, they are included because they were filed with the district court on December 29, 2003, as part of appellants’ opposition to the motions of Jensen and US Bank for judgment on the pleadings and in support of appellants’ motion to amend their
complaint.  But the district court’s May 11, 2004, order granted the motion to strike those materials from the record.  Therefore, the district court did not consider them and they were functionally removed them from the record on appeal.  See Black’s Law Dictionary 1436 (7th ed. 1999) (defining “strike” as including “[t]o expunge, as from a record <motion to strike the prejudicial evidence>”); see generally, Taylor v. Northern States Power Co., 196 Minn. 22, 24, 264 N.W. 139, 140 (1935) (stating evidence not considered by a jury in deciding case was beyond appellate review).  The motion to strike is granted. 

II.

            The district court invoked collateral estoppel to grant the motions of Jensen and U.S. Bank for judgment on the pleadings.  The availability of collateral estoppel is a mixed question of law and fact subject to de novo review.  If collateral estoppel is available, whether to apply the doctrine is discretionary with the district court.  Pope County Bd. of Comm’rs v. Pryzmus, 682 N.W.2d 666, 669 (Minn. App. 2004), review denied (Minn. Sept. 29, 2004).

            Collateral estoppel is available where (1) an issue in an existing proceeding is identical to one in a prior proceeding; (2) there was a final judgment on the merits in the prior proceeding; (3) the estopped party was a party or in privity with a party to the prior proceeding; and (4) the estopped party was given a full and fair opportunity to be heard on the adjudicated issue.  Ellis v. Minneapolis Comm’n on Civil Rights, 319 N.W.2d 702, 704 (Minn. 1982).  Here, because the prior proceeding culminated in the supreme court’s denial of a petition for review of Redmann, the opportunity to be heard, and the finality of the judgment rendered in, the prior proceeding is beyond debate[1].

A.        Identity of Issues

            Appellants argue in the current litigation that they suffered damages because Jensen or U.S. Bank or both defrauded, or otherwise improperly induced, Kuntz into surrendering her position as personal representative.  Regarding U.S. Bank, this argument was rejected in Redmann: “Kuntz’s argument that U.S. Bank, as an adverse party, participated in fraud is not well taken; no evidence shows that U.S. Bank intentionally misled her as to her status with respect to the estate.”  2003 WL 1962122 at *4.  Regarding U.S. Bank, the issues in the two proceedings are the same. 

            While the fraud-based argument regarding Jensen was also rejected in Redmann, it was rejected for procedural reasons, rather than on the merits:

            Kuntz also seeks to set aside the judgment under Rule 60.02 for fraud, contending that she had reason to rely on the representation of her then-attorney that she would remain personal representative of the estate.  But Rule 60.02 provides only for relief on the grounds of fraud of an “adverse party.”  Kuntz’s attorney was not an adverse party with respect to Kuntz. 

 

Id. at *4 (citations omitted).  That the procedural issue addressed in Redmann is different than the merits of the fraud-based argument presented in the current action does not weaken the district court’s ruling. 

            Appellants’ argument in the current action assumes that, but for Kuntz being improperly induced into surrendering her status as personal representative, she would have served as personal representative and appellants’ (alleged) damages arising from her not doing so would not have occurred.  For reasons unrelated to the allegedly improper conduct by Jensen and U.S. Bank, Redmann affirmed the district court’s refusal to reinstate Kuntz as personal representative:

[Kuntz’s] stance regarding the administration of the estate raises definite questions as to her suitability as personal representative.  The Minnesota Supreme Court has stated that the personal representative of an estate should be “entirely free from adverse interests or partiality.”  In this case, it quickly became evident that the dispute between the heirs over the amount of rent to be charged on the farmland was spilling over into the administration of the estate as a whole, with the family split into two factions; each with a materially different proposal for dealing with the farmland as an estate asset.  In such situations, the estate is entitled to have a disinterested third party acting as personal representative.  The district court, in denying Kuntz’s request for reconsideration, specifically found that her position was inconsistent with the duties required of a personal representative and that she was not in an emotional position to discharge those duties.  This finding is not clearly erroneous.

 

Id., at *3 (citation omitted).  Thus, Kuntz’s ability to serve as personal representative was resolved against Kuntz in the prior action.  Even if appellants prevailed in the current action on their allegations that Kuntz was improperly induced to surrender her personal representative status, there would still be an independently sufficient basis for precluding her from serving as personal representative.


B.        Privity

            Appellants maintain that the district court incorrectly ruled that Kuntz’s sisters, who were not parties to the prior action, were in privity with Kuntz in that proceeding.  Appellants do not support their assertion with argument or authority.  See Schoepke v. Alexander Smith & Sons Carpet Co., 290 Minn. 518, 519-20, 187 N.W.2d 133, 135 (1971). 

            Regarding privity:

Because there is no prevailing definition of privity that is applied automatically, the distinctive facts of each case must be carefully examined.  Non-parties may be deemed to be in privity if they are connected with the action to the extent that they are “affected by the judgment with reference to interests involved in the action as if they were parties.”  Parties in privity with those involved in the earlier action include those whose “interests are represented by a party to the action,” sufficiently enough so that “the application of collateral estoppel is not inequitable.” 

 

State v. Victorsen, 627 N.W.2d 655, 660-61 (Minn. App. 2001) (citations omitted).  Kuntz’s sisters were beneficiaries of the estate.  A personal representative must act in the best interests of the estate.  Minn. Stat. § 524.3-703(a) (2004).  And a personal representative’s duty to conduct an estate in the estate’s best interest, is, essentially, a duty to conduct the estate in the best interests of those who are to benefit from it.  See Minn. Stat. § 524.3-703(a) (stating personal representative “shall” use personal representative’s powers “for the best interests of successors to the estate”); see also Minn. Stat. § 524.1-201, subd. 48 (2004) (defining “successors” as those, other than creditors, entitled to decedent’s property).  Thus, to the extent Kuntz was acting as personal representative (or claiming to act as personal representative or claiming that she was never properly removed as personal representative), she was (purportedly) acting in the best interests of the estate, and hence the estate’s beneficiaries, including her sisters who are her co-plaintiffs in the current action.  See generally, Goldberger v. Kaplan, Strangis, & Kaplan, 534 N.W.2d 734, 739 (Minn. App. 1995) (stating services of personal representative’s attorney “must be directed towards serving the best interests of the estate, and, thus, all beneficiaries”), review denied (Minn. Sept. 28, 1995).  Under these circumstances, and especially given that the crux of both proceedings is the assertion, by Kuntz in the first action and by appellants in this action, that Kuntz should have continued as personal representative, Kuntz’s conduct in the first action represented her sisters’ interests thoroughly enough.  Applying collateral estoppel is not inequitable under Victorsen

III.

            In response to Jensen and U.S. Bank’s motions for judgment on the pleadings, appellants moved to amend their complaint to add claims of professional negligence, attorney deceit and collusion, and attorney misconduct.  The district court denied that motion, and appellants challenge that denial. 

            After a response is served, a party can amend pleadings only by leave of the court, “and leave shall be freely given when justice so requires.”  Minn. R. Civ. P. 15.01[2].  Leave to amend, however, “may properly be denied when the additional alleged claim cannot be maintained.”  Hunt v. Univ. of Minn., 465 N.W.2d 88, 95 (Minn. App. 1991).

            Here, while appellants admit that, as beneficiaries of the estate, they lacked an attorney-client relationship with Jensen, they argue that they can seek a recovery from Jensen for (alleged) legal malpractice because they, as beneficiaries of the estate, were intended beneficiaries of the services provided by Jensen.  To support their argument, appellants cite cases, including Holmes v. Winners Enter., Inc, 531 N.W.2d 502 (Minn. App. 1995), stating that an intended third-party beneficiary of legal services can pursue a legal malpractice action despite the lack of an attorney-client relationship. 

            Holmes also states that, in probate proceedings, courts “frequently” apply the intended-third-party-beneficiary exception to the general requirement that legal-malpractice plaintiffs have had an attorney-client relationship with the defendant, “when an attorney’s negligent act has caused an intended beneficiary to lose a bequest.”  Id. at 505.  Holmes’ statement is dicta because Holmes involved corporate litigation.  To support its dicta, Holmes cites Marker v. Greenberg, 313 N.W.2d 4, 5 (Minn. 1981).  Holmes, 531 N.W.2d at 505.  Marker, however, is narrower than suggested by Holmes, stating that “[e]xceptions [to the general requirement of an attorney-client relationship] are frequently found in cases involving drafting or executing a will” and that

[t]he relaxation of the strict privity requirement is very limited, however.  Especially in probate proceedings, this stringent restriction is a necessity to prevent a myriad of causes of action.  The will cases listed above which follow Lucas v. Hamm are all situations in which the attorney by his actions produced an instrument that failed to carry out the testamentary intent of the testator, either by faulty drafting or by improper attestation.  The cases extending the attorney’s duty to non-clients are limited to a narrow range of factual situations in which the client’s sole purpose in retaining an attorney is to benefit directly some third party. 

 

313 N.W.2d at 5 (emphasis added). 

            Here, appellant’s new claims do not go to drafting, executing, or attesting to a will.  Thus, given Marker’s emphasis on limiting, in the probate context, the third-party-beneficiary exception, we cannot say that Jensen is liable to appellants as beneficiaries of the estate.  Cf. Goldberger, 534 N.W.2d at 739 (rejecting argument that personal representative’s attorney is liable to beneficiaries in malpractice context, stating “[i]f any ‘person’ is a third-party beneficiary of the [services of the attorney], it is the estate itself; at best, individual beneficiaries of the estate are only ‘incidental beneficiaries’”)[3].

            Further, because Redmann affirmed the district court’s determination that Kuntz was unable to serve as personal representative for reasons unrelated to the allegedly improper conduct of Jensen and U.S. Bank, Kuntz, in her (alleged) status as personal representative, lacks an ability to recover for damages related to her not serving as personal representative. 

We understand that probate matters can, for parties and their counsel, be challenging personally as well as legally.  We understand that probate matters involving close relatives can touch on sensitive issues and engender strong opinions that then aggravate the existing relationships and create new challenges.  We understand both sides are struggling to put their best foot forward.

We conclude the record adequately supports the good-faith actions taken by the district court to resolve this matter.

            Affirmed; motion granted.



[1] We do not address appellants’ argument that “judicial estoppel” does not preclude appellants’ suit.  The district court did not address that doctrine. 

[2] To support their argument, appellants also cite Minn. R. Civ. P. 15.02.  Rule 15.02 allows amendment of pleadings to conform to the evidence presented at trial.  Here, however, there was no trial. 

[3] To the extent appellants argue that U.S. Bank, as personal representative, can be liable to beneficiaries under the correct circumstances, appellants are correct.  See Goldberger, 534 N.W.2d at 739 (stating “[i]f a personal representative breaches his fiduciary duty of acting in the estate’s best interests, the beneficiaries may hold the representative responsible” (citing Minn. Stat. §§ 524.3-703(a), 524.3-712 (1994)).  U.S. Bank does not dispute this fact.  Appellants’ new claims, however, do not implicate U.S. Bank.