An executor has a fiduciary duty as to the beneficiaries of a probate estate. If they breach this duty, the beneficiaries still have to establish the amount of any damages.
If the damage is the loss of property, the measure of damages is the fair market value of the property that was lost. This raises a valuation question.
The recent Sklar v. Sklar, No. 14-18-00214-CV (Tex. App. Houston [14th Dist.] 2020), case provides an opportunity to consider the measure of damages in a breach of fiduciary duty case.
Facts & Procedural History
This case involves a probate dispute between siblings. Their mother died. The mother’s will appointed two of the siblings as co-executors, John and Pamela.
The will also made specific bequests to another sibling, Peggy. The specific bequests were for Vanguard stock and a car.
The co-executors filed an application for probate and, eventually, sold the car to a car dealership. The co-executors paid the proceeds to Peggy to satisfy the specific bequest in the will.
Peggy disputed the amount that the car was sold for. The co-executors sold the car to a car dealership for $7,500. The car dealership repaired the car and re-sold it for $16,599.
Peggy filed a claim for breach of fiduciary duty based on this. The probate court found that there was not breach of fiduciary duty as to the sale of the car. The appeals court then considered the case.
The Sale of the Vehicle
The appeals court noted that John and Pamela, as co-executors, owed a fiduciary duty to Peggy.
It then focused on the terms of the will to determine what duty was owed. The mother’s will included this language:
I authorize and empower my said Co-Executors to sell, dispose of, deliver and convey any portion of my Estate, real or personal, at public and private sale for any price, on any terms and in any manner that may seem best for them for the purpose of paying any of my debts, partitioning assets or any other purpose, giving due regard for the bequests that I have made herein.
The probate court concluded that this language allowed the co-executors to sell the car (if the estate only consisted of the vehicle, the parties may have used the motor vehicle affidavit in lieu of a probate).
It then considered the evidence the co-executors presented for the purchase price:
Roy T. Bent, a certified car appraiser, testified that the fair market value and the actual cash value of the Nissan at the time it was sold to CarMax was $7,500. He further opined that the $16,599 sales price CarMax received when it resold the Nissan was not fair market value, and he explained that CarMax had to take restorative measures to get the Nissan into marketable condition. He further asserted that CarMax’s pricing likely took into account the buyer’s credit score and down payment as well as CarMax’s “carrying cost,” documentation and administrative fees, and other business expenses as well as profit. He also stated that he did not know what warranties or gap insurance might have been involved in the sale. Bent estimated the repairs CarMax made to the Nissan cost $2,608.92, and he noted that the vehicle had been modified for use by a handicapped person, which may have negatively affected its value. Bent rated the Nissan’s condition as “below average” and observed that at least part of it had been repainted.
Peggy did not present expert testimony to contradict this assessment.
Damages for Breach of Fiduciary Duty
The appeals court concluded that Peggy had not suffered any damages.
According to the appeals court, even if she was successful in arguing that the co-executors breached their fiduciary duty to her, she was still not entitled to recover for the claim.
Peggy argued that her measure of damages was the difference between the $7,500 proceeds and the amount needed to purchase a replacement.
The appeals court noted that fair market value is the proper measure of damages for the loss of personal property.
Peggy did not present any evidence at trial as to the fair market value. Instead, she questioned the testimony offered by the co-executors. Given the evidence in the record, the appeals court sided with the probate court–finding that $7,500 was the fair market value.
Litigating Probate Disputes
This case shows how important and how difficult it is to prove up every element of a claim in probate disputes.
The focus in claims involving the breach of a fiduciary duty, are often focused on establishing that a breach occurred. The measure of damages is often a secondary concern or taken as a given.
As a valuation question, the probate court record should include direct evidence of the value. This will typically include testimony or a report from an expert witness. It may also include references to third party data sets.