Argument Recap:  Heisinger v. Cleary, SC 19633

In Heisinger v. Cleary, SC 19633, the Supreme Court heard argument in a case alleging mismanagement of a decedent’s estate and residuary trust. The plaintiff claimed that the overvaluing of the principal asset of the estate by some $3,000,000 was a breach of the co-executor’s fiduciary duty to plaintiff, the sole beneficiary of the estate, because reliance upon an allegedly erroneous appraisal resulted in severe federal estate tax liabilities.

The co-executors, the plaintiff’s aunt and an attorney with a long-time relationship with the decedent, raised several special defenses, including the fact that they were entitled to rely on an expert appraisal in valuing the assets of the estate – the so-called third party reliance rule.  The defendants ultimately moved for summary judgment, which was denied initially as premature.  After much discovery and numerous depositions, the defendants renewed their summary judgment motions just prior to trial. The plaintiff also sought partial summary judgment.

After hearings on the motions, the trial court granted summary judgment in favor of the defendants on grounds that there was insufficient evidence to submit the case to a jury.  The plaintiff  had offered no expert testimony regarding the proper standard of care for a fiduciary of an estate when faced with the need to value substantial estate assets.  Of particular importance to the trial court was the complexity of valuing the corporate assets in this estate, something that the trial court believed no lay person could understand without expert assistance.  The trial court stated:  ‘When the totality of the plaintiff’s proof is evaluated even in the light most favorable to the plaintiff, there is nothing in the record before this court which would permit a jury to conclude, without resort to speculation, that the acts or omissions of the defendants breached a duty to the plaintiff to “safely administer” the Heisinger Estate or to “manage the Heisinger Estate with the care and skill of a prudent business person in the management of his or her own business affairs.”

Although the trial court had suggested in its memorandum of decision that there may be circumstances under which “blind” negligence could constitute a fiduciary breach, the trial court did not agree this was one of those cases.  On appeal, the plaintiff’s aunt asks the Supreme Court to reject the notion that “blind” negligence could ever be a standard of care for a fiduciary.  She asserted as an alternative ground for the Court’s affirmation, the fact that the plaintiff also had offered no evidence that she had breached her fiduciary duties to him based upon fraud, self-dealing or conflict of interest – standards that she asserted are the hallmark of any breach of fiduciary obligation claim and should remain so.

It will be interesting to see if the Supreme Court reaches the issue of “blind” negligence as a standard for breaching one’s fiduciary obligations to a beneficiary of an estate or whether it will base its decision solely on the grounds ultimately espoused by the trial court; namely, whether summary judgment was properly rendered for want of expert testimony.