Redies v. Cosner

No. 00-481 and 00-486
IN THE SUPREME COURT OF THE STATE OF MONTANA
2002 MT 86JANET B. REDIES,
Protected Person and Appellant,
v.
C.A. COSNER and JUDY UERLING,
Petitioners and Respondents.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable Diane G. Barz, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Alexandra Volkerts, Andree Larose, Montana Advocacy Program, Missoula,
Montana
For Respondents:
Lynn M. Grant, Peterson & Schofield, Billings, Montana (Conservator
Cosner); John Addy, Billings, Montana (Conservatorship and Guardian
Uerling)
For Amici:
James P. Reynolds, Reynolds, Motl, Sherwood, Helena, Montana (AARP;
ADAPT Montana; the Association of Disabled Students at the
University of Montana (ADSUM); AWARE Group Homes (AWARE);
the Brain Injury Association of Montana (BIA); the Coalition of
Montanans Concerned with Disabilities (CMCD); the Montana Center
for Disabilities (MCD); the Montana Mental Health Association
(MHA); the Montana Senior Citizens Association (MSCA); NAMI -
Montana Association for the Mentally Ill (NAMI-MT); People First;
Parent’s, Let’s Unite for Children (PLUK); the State Independent Living
Centers Council (SILC); Summit Independent Living Center (Summit);
and the Western Montana Mental Health Center, Inc. (WMMHC))
Submitted on Briefs: March 29, 2001
Decided: May 2, 2002
Filed:
__________________________________________
Clerk
Justice James C. Nelson delivered the Opinion of the Court.
¶1 The Appellant, Janet Redies (Redies), appeals from two orders of the Thirteenth Judicial
District Court, Yellowstone County, discharging the Respondents, her conservator, C.A. Cosner
(Cosner), and her guardian, Judy Uerling (Uerling), without liability. We reverse.
¶2 We address the following issues on appeal as framed by this Court:
¶3 1. Did the District Court err in holding that the inventory requirement in § 72-5-424, MCA,
is discretionary?
¶4 2. Did the District Court err in discharging the conservator and guardian without liability?
I. FACTUAL AND PROCEDURAL BACKGROUND
¶5 Prior to the events that gave rise to this conservatorship and guardianship, the parties in this
case were involved in a different dispute. Rosalie Redies (Rosalie), the mother of Redies and
Uerling, sold her real property in Billings and deposited the proceeds in an account which Redies
and Uerling could both access. Upon discovering that Redies had withdrawn over $63,000 from this
account without Rosalie’s knowledge, Uerling withdrew the rest of the money so that neither Redies
nor Rosalie could access it. Eventually, the parties reached an agreement by which Redies signed a
note to repay Rosalie, the money withdrawn by Uerling was returned to Rosalie, and Cosner, a
certified public accountant (CPA), was appointed conservator for Rosalie. This agreement was
reached in September 1994. These events are relevant to explain how Cosner came to be
conservator for both Rosalie and Redies and also serve as background for Redies’ belief that Cosner
and Uerling had conflicts of interest that prevented them from properly managing her affairs.
¶6 A few months later, the events that gave rise to this action occurred. Redies moved from
Billings to Wyoming to start a new job. On or about May 29, 1995, Redies was in a bicycling
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accident which resulted in a temporary coma and traumatic brain injury. Redies was taken to St.
Vincent’s hospital in Billings for treatment. After two months had passed and realizing the severity
of Redies’ condition, her mother Rosalie and her sister Uerling petitioned the district court in
Billings for appointment of a conservator and guardian. In September 1995, the court granted the
petition and appointed Cosner as conservator and Uerling as guardian for Redies as requested in the
petition.
¶7 Following their appointment, Cosner and Uerling met with Uerling’s counsel and the counsel
appointed for Redies by the court. At this meeting, the parties developed a management plan for
Redies’ estate. The overall goal of the plan was to “properly address Janet’s needs and to conserve
and properly manage her property.” The parties addressed specific assets in Redies’ estate and
further agreed that the plan should “maximize the amount of Jan’s wealth that is exempt from
recapture by the government [Medicare] or the claims of creditors.” However, because of Redies’
existing debt which included mounting medical bills, because of the possibility of bankruptcy and
because Cosner was conservator for Rosalie as well, the plan also sought to “maximize the amount
of the combined family estate.” Therefore, the plan also discussed the possibility of Rosalie revising
her will to prevent any devise to Redies actually going to creditors or the government under the
recapture provisions of the Medicare program. Shortly after this meeting, Cosner determined that
while Redies had substantial assets which included 20 acres in Red Lodge, payments due from the
sale of her former Billings restaurant Juliano’s, and its liquor license, vehicles, and other assets,
these assets would be quickly depleted by medical costs, since Redies did not have health insurance
to cover her bicycle accident.
¶8 Cosner proceeded to manage Redies’ property. This management consisted of selling real
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and personal property that was owned by Redies, paying debts owed by Redies, putting the
remaining personal property in storage, and seeking settlement with the remaining creditors. Cosner
successfully avoided bankruptcy and was able to negotiate forgiveness of approximately $123,000 in
medical bills. After this was resolved, Uerling qualified Redies for Medicaid and Social Security
Supplemental Security Income (SSI) coverage. At the same time that Cosner and Uerling addressed
Redies’ finances, Uerling arranged medical care for Redies. Eventually, Redies made a significant
recovery.
¶9 In 1998, Redies began to question the need for a guardian because she believed she
understood the "risks and benefits so as to make decisions in her best interest.” She also began to
question the disposition of her assets, since she was subsisting on SSI payments. Rather than
contacting her court appointed counsel, she contacted new counsel in Missoula where she now
resides. Through counsel, Redies sought details from Cosner regarding the management of her
estate. She also retrieved her remaining personal property from Cosner. Over the next year, Cosner
and Uerling attempted to answer Redies’ questions through counsel. Each time Cosner and Uerling
provided information, it gave rise to more detailed questions from Redies. The tone of
correspondence eventually became completely adversarial.
¶10 As a consequence of this correspondence, Cosner and Uerling filed petitions to terminate
their conservatorship and guardianship roles and a hearing was set. Redies sought to continue the
hearing, but the District Court denied her motion. We note here that Redies asserts as a factual
matter on appeal that she did not have enough time to prepare for the hearing, but does not argue on
appeal that the District Court’s denial of her motion for continuance was error. At the hearing, the
parties each presented evidence, which largely consisted of the documentation produced as a result
4
of their adversarial correspondence. In addition, Cosner submitted final accountings and Uerling
submitted a final report. After the hearing, the District Court issued its Findings of Fact,
Conclusions of Law, and Order (Order) which found that Redies’ estate was fully and accurately
accounted for and properly managed. Accordingly, the Order discharged Cosner without liability.
This Order also stated that Redies still needed a guardian. Later, the District Court allowed a new
guardian to be substituted for Uerling by stipulation of the parties. Based on the findings in its
earlier Order, the court issued a Judgment that also discharged Uerling without liability. Redies
filed separate appeals from the Order discharging Cosner and the Judgment discharging Uerling,
which we consolidated into one appeal upon motion of the Respondents. Further facts are discussed
below.
II. STANDARD OF REVIEW
¶11 We review a trial court’s determinations of law de novo. In re Kovatch (1995), 271 Mont.
323, 326, 896 P.2d 444, 446. We review a trial court’s findings of fact to determine whether those
findings are clearly erroneous. Kovatch, 271 Mont. at 326, 896 P.2d at 446. A finding of fact is
clearly erroneous if substantial evidence does not support it, if the district court misapprehended the
effect of the evidence, or, if after reviewing the record, this Court is left with a firm conviction that a
mistake has been made. Eschenbacher v. Anderson, 2001 MT 206, ¶ 22, 306 Mont. 321, ¶ 22, 34
P.3d 87, ¶ 22 (citing Interstate Prod. Credit Ass'n v. DeSaye (1991), 250 Mont. 320, 323, 820 P.2d
1285, 1287). However, we refined the clearly erroneous test when considering accountings
submitted for conservatorships by holding that an accounting is clearly erroneous if it is not
accurate, complete, and verifiable. In re Estate of Clark (1989), 237 Mont. 179, 184, 772 P.2d 299,
302.
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III. DISCUSSION
¶12 1. Did the District Court err in holding that the inventory requirement in § 72-5-424,
MCA, is discretionary?
¶13 Redies first argues that, as a matter of law, the District Court erred in waiving the inventory
requirement in § 72-5-424(1), MCA, because the statute is mandatory. Section 72-5-424(1), MCA,
reads:
Within 90 days after his appointment, every conservator shall prepare and file with
the appointing court a complete inventory of the estate of the protected person,
together with his oath or affirmation that it is complete and accurate so far as he is
informed. The conservator shall provide a copy thereof to the protected person if he
can be located, has attained the age of 14 years, and has sufficient mental capacity to
understand these matters and to any parent or guardian with whom the protected
person resides. (emphasis added)
Redies also argues that the District Court erred in waiving the inventory requirement by virtue of it
findings that Cosner’s final accounting only failed to inventory valueless items and that an inventory
would unnecessarily deplete an estate where the liabilities were greater than the assets.
¶14 Amici are a group of public and private non-profit corporations or organizations which
advocate for the rights of people who may become subject to a conservatorship or guardianship,
including people with physical, mental, emotional or developmental disabilities and senior citizens.
Amici agree with Redies and assert that this provision must be considered mandatory in order to
properly protect the interests of people who cannot care for themselves.
¶15 In their joint brief on appeal, Cosner and Uerling argue that two other statutory provisions
allow a court to make the inventory requirement in § 72-5-424(1), MCA, discretionary. Section 72-
5-413(3), MCA, reads: “Upon notice and hearing, the court may give appropriate instructions or
make any appropriate order.” Regarding accountings, § 72-5-438(1), MCA, reads: “Each
conservator shall account to the court for administration of the trust not less than annually, unless the
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court directs otherwise, upon resignation or removal, and at other times as the court may direct.”
Cosner and Uerling assert that these two sections, specifically the language “unless the court directs
otherwise,” demonstrate a court’s discretionary power to waive the 90 day inventory.
¶16 Regarding conservators, they assert that the Montana Uniform Probate Code, modeled after
the Uniform Probate Code, is designed to give conservators broad management powers which they
may exercise unless specifically restricted in the letters of appointment. See § 72-5-427, MCA, and
§ 72-5-430, MCA. Further, they assert that the District Court and Cosner both properly exercised
their discretion because much of the property in Redies’ estate was valueless 1 and because an
inventory would have taken much needed assets away from the estate. Based on the above statutes
and the facts as found by the District Court, they assert that the District Court’s waiver was properly
within its discretion because it is not important when an inventory is filed, as long as an adequate
inventory is eventually filed.
¶17 In this case, the District Court stated:
Mr. Cosner did not prepare a detailed inventory or submit the same within ninety
(90) days of appointment as permanent Conservator. . . . At no time has this Court or
any other required Mr. Cosner or any other Conservator to file an itemized inventory
within ninety (90) days of appointment. . . . [U]nder the circumstances of this matter,
primarily the limited number of valuable personal property assets, complete and
thorough records and accountings of the conservator with regard to the valuable
assets, and the condition of the protected person’s personal residence which was
filled with possessions the protected person hoarded and collected, waiver of that
requirement is appropriate with respect to those items. To require . . . an itemized
inventory . . . would have imposed an unreasonable financial burden on the estate
1
Respondents alternately describe some of Redies’ personal property as garbage, refuse,
junk, trash, and a floor to ceiling mountain of worthless belongings; they describe her former
residence as uninhabitable or like a pack rat.
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which was never . . . sufficient to meet outstanding and accruing liabilities.
The District Court also indicated during the hearing that the Thirteenth Judicial District did not
usually require inventories when liabilities exceed assets. However, after notice of appeal was filed
in this action, Uerling petitioned this Court to take judicial notice of an order of the Thirteenth
Judicial District issued after the District Court made its decision in this case. This order reads:
Pursuant to § 72-5-423, MCA, one who is appointed a conservator is to act as a
fiduciary and shall observe the standards of care applicable to trustees. As part of
that duty, a conservator is required to PREPARE AND FILE an inventory of the
estate he or she is appointed to protect within 90 days of his or her appointment
(emphasis in original).
Presumably, Uerling requested judicial notice of this order to emphasize that the Thirteenth Judicial
District was not requiring 90 day inventories previous to this order.
¶18 We cannot agree that the 90 day inventory requirement in § 72-5-424(1), MCA, is
discretionary for Montana’s trial courts or for conservators as a matter of law. First, the overall
purpose of a conservatorship is to preserve the property of the protected person. Clark, 237 Mont. at
184, 772 P.2d at 302; see also § 72-5-421, MCA (court, directly or through conservator, to manage
property for the benefit of the protected person). Further, a conservator will likely be appointed only
when there are assets that should be managed, even if liabilities exceed assets. See § 72-5-409(2)(b),
MCA (one of the main criteria to be considered by court in appointment of conservator is whether
the protected person has property which will be wasted unless proper management is provided).
¶19 Second, the plain language of the statute at issue here reads “every conservator shall prepare
and file with the appointing court a complete inventory of the estate” (emphasis added). Shall
indicates a mandatory requirement. In re City of Columbus Police Dept. (1994), 265 Mont. 379,
381-82, 877 P.2d 470, 471. Further, the general rule is that a specific statute controls over a more
8
general statute. Montana Dep’t of Revenue v. Kaiser Cement Corp. (1990), 245 Mont. 502, 506-07,
803 P.2d 1061, 1063-64; In re Guardianship of Evans (1978), 179 Mont. 438, 443, 587 P.2d 372,
375; § 1-2-102, MCA. Here, the 90 day inventory requirement is a specific mandatory requirement
that controls the discretionary statutes cited by Cosner and Uerling.
¶20 Finally, and most importantly, although the main case cited by Redies, In re Allard (1914),
49 Mont. 219, 141 P. 661, addresses statutes which have since been replaced, we agree with its
central holding that the purpose of the statutory inventory requirements at issue here is to furnish a
means by which the conservator's management may be checked and the accounts verified. Allard,
49 Mont. at 226, 141 P. at 664. While we agree that trial courts and conservators are granted broad
discretionary powers by § 72-5-421, -422, and -427, MCA, to manage a protected person’s estate,
the specific directive in § 72-5-424(1), MCA, provides the key baseline to determine whether that
discretion is in fact properly exercised. Compare Evans, 179 Mont. at 445, 587 P.2d at 375
(guardianship system is designed to provide protection for those incapable of protecting themselves;
if statutory protections are ignored the whole system becomes a farce); In re Cuffe's Estate (1922),
63 Mont. 399, 408-09, 207 P. 640, 644 (attorney fees disallowed because guardian failed to follow
statutory inventory requirements). This baseline is also needed to establish if liabilities in fact
exceed assets and to determine the proper course of management of the estate. Respondent’s attempt
to distinguish Allard based on the fact that in Allard no inventory was ever filed is not persuasive
because it ignores the importance of a baseline or initial inventory in assessing the conservator’s
management of an estate. Therefore, we hold that § 72-5-424(1), MCA, is a mandatory requirement,
even when the liabilities exceed the assets.
¶21 This case is a perfect example of why the 90-day inventory is mandatory. Here, Redies
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sustained an injury which severely impairs her ability to remember the status of her affairs at the
time of her accident. Respondents argue that all of Redies’ contentions regarding her estate are
based on her faulty memory. In Cosner’s Memorandum in Support of Petition to Accept Final
Accounting and for Discharge of Conservator filed with the District Court, Cosner himself stated:
After responding to questions for nearly 20 months, providing documents, providing
information, providing additional services to the estate in formulating recaps of
check books, assets sales and expenditures, and other delays in making a final
accounting to the Court, the Conservator ultimately filed his final accounting.
This 20 month back and forth between the parties concerned, for the most part, Redies substantial
assets. If an opening inventory had been done of her assets, then submitted to and accepted by the
District Court, these exchanges would have been avoided because Redies would not have had to ask
specific questions about each and every asset in her estate. In short, the initial inventory required by
§ 72-5-424(1), MCA, would have protected both Redies and Cosner from what eventually occurred.
¶22 Regarding the fact that the District Court waived the inventory only as to valueless items, we
agree that in constructing the inventory itself, a conservator should have discretion in deciding what
to include and how to value the items in the estate. A conservator should not write down every half
bar of soap sitting on a sink. See § 72-34-129, MCA (discretion shall be exercised reasonably). In
this case, Cosner may have properly exercised his discretion in determining what was refuse.
However, the point to be made here is that no initial inventory was done at all, so no baseline was
established. Further, that exercise of discretion by the conservator in conducting the inventory must
be verifiable, as we discuss below.
¶23 In this case, even if there was substantial refuse or garbage in the estate, it is undisputed that
Cosner sold about $3,000 worth of personal property at garage sales. These assets were not
worthless and if even a cursory inventory had been conducted, Redies would know what was sold.
10
¶24 Finally, the subsequent order of the Thirteenth Judicial District requiring inventories is
irrelevant to prove the District Court’s prior waiver was valid because we review a trial court’s
interpretation of a statute de novo. Kovatch, 271 Mont. at 326, 896 P.2d at 446. In this case, it
appears the Thirteenth Judicial District merely corrected its legal error before ordered to do so by
this Court. And it appears that the statutory safeguard in § 72-5-424(1), MCA, for Redies’
protection was either ignored or overlooked by the trial court after Cosner and Uerling were
appointed, even though the petition for appointment of a conservator and guardian stated both that
Redies possessed property which needed protection and that an initial inventory would be provided
to the court.
¶25 Given our holding that the District Court erred in waiving the inventory as a discretionary
procedure, we now turn to address whether the District Court erred in finding that the failure to file
an inventory was properly cured by the evidence presented by Cosner and Uerling regarding the
management of Redies’ estate.
¶26 2. Did the District Court err in discharging the conservator and guardian without
liability?
¶27 Redies next asserts that the District Court erred in discharging Cosner and Uerling without
liability. In her reply brief on appeal, Redies argues that the hearing was only intended to address
the final accounting and that none of her claims regarding Cosner’s or Uerling’s liability were
properly before the court. However, under § 72-5-438(2), MCA, a final account accepted by the
court after notice and hearing adjudicates all previously unsettled liabilities of the conservator to the
protected person relating to the conservatorship. See also In re Smith (1965), 145 Mont. 567, 568,
403 P.2d 604, 604-05. Therefore, it was incumbent upon Redies to bring her claims when Cosner
petitioned for termination of the conservatorship. Further, as noted above, Redies does not assert on
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appeal that the District Court erred when it denied her motion to continue. Therefore, Cosner’s
liability was properly before the District Court.
¶28 Regarding guardians, under § 72-5-324, MCA, the termination proceeding for a guardian
does not necessarily adjudicate unsettled liabilities. However, in this case all of Redies’ claims
against Uerling concern Uerling’s involvement in Cosner’s management and accounting of her
estate. Therefore, we hold that resolution of Uerling’s liability was properly before the District
Court as well. Further, because Redies’ claims regarding Uerling only involve the accounting of the
estate and not Uerling’s care of Redies, the following discussion regarding Cosner also pertains to
Uerling only to the extent she assisted in the accounting or management of assets.
¶29 Redies next argues that the District Court erred in discharging Cosner because she asserts the
District Court’s finding that Cosner met his fiduciary duty to properly manage and fully account for
the estate is not supported by substantial evidence. Redies supports this argument in numerous
ways. First, Redies argues that the accountings are inadequate because they are incomplete,
unverifiable, and inconsistent. Redies further asserts that Cosner and Uerling had conflicts of
interest, as demonstrated by the management plan and the revision of Rosalie’s will, which
prevented proper management of the estate. Redies also argues that Cosner failed to establish that
Redies would not have been eligible for trusts that might preserve her property from Medicare
recapture. She also asserts that Cosner improperly commingled Rosalie’s and Redies’ estates.
Redies asserts the District Court erred in taking judicial notice of physician testimony regarding her
mental state in a separate proceeding. In addition to these evidentiary issues, Redies argues that the
District Court prevented her from pursuing all her claims of liability against the conservator when it
stated during the hearing that probate issues regarding Rosalie’s will could not be litigated during
12
that proceeding. She also asserts that the District Court erred by applying a conservator’s ordinary
duty of care to Cosner, rather than the duty of care owed by a conservator with special skills such as
Cosner, a CPA. Finally, Redies asserts that Cosner’s failure to inventory justifies withholding his
compensation.
¶30 Amici generally agree with Redies. Specifically, Amici assert that in addition to the initial
inventory, proper annual accountings are required by § 72-5-438(1), MCA, unless excused by the
court. Amici believe that the two annual accountings filed in this case were inadequate. Amici also
note two general issues in this case that gave them cause for concern relative to other protected
persons. First, Amici assert that in meeting fiduciary duties, conservators and guardians must
consider any legal trusts set up for protected persons that would shield their assets from government
recapture provisions. Further, Amici expressed concern regarding conflicts of interest between
conservators, guardians, and protected persons.
¶31 Cosner and Uerling assert that the District Court findings that Cosner met his duties to
account for and manage Redies’ estate were based on substantial evidence. They assert that Redies
failed on appeal to argue that any of the District Court’s findings of fact were clearly erroneous.
They further argue that the District Court properly found that Cosner’s accountings and the other
documentation admitted as evidence at the hearing constituted a complete, accurate, and verifiable
accounting of Redies’ estate. This documentation includes the management plan, the amended final
accountings prepared by Cosner and the documentation produced as a result of correspondence
between the parties. Respondents assert these accountings in effect cured Cosner’s failure to file an
initial inventory because these documents properly account for all the valuable assets in Redies’
estate. They also argue that it is within a conservator’s discretion to decide whether items should be
13
included in an inventory and that, in this case, all items not accounted for to the District Court were
valueless. In making this argument, Respondents assert that the District Court properly recognized a
prior proceeding in which there was testimony that Redies may have an obsessive compulsive
disorder that causes her to accumulate excessive amounts of personal property. They also argue that
the District Court was correct in putting the burden on Redies to prove she was missing certain items
of personal property because she actually signed for those items upon retrieving them from Cosner.
¶32 Cosner and Uerling further assert Redies did not suffer when Cosner properly exercised his
discretion to commingle Redies’ and Rosalie’s estates because the personal property was
commingled before Redies’ accident and before Cosner was appointed, the loans between the estates
were in Redies’ best interests because the loans covered medical care and prevented her eviction
from care providers, because Cosner had discretion to permit Uerling to use Redies’ vehicle, and
because any accounting mistakes Cosner made were to Redies’ benefit because that money was
consequently not available to Redies’ creditors. Further, they argue that Cosner was at all times
relying on the advice of Redies’ court appointed counsel and Uerling’s counsel, both of whom
approved the management plan for Redies' estate.
¶33 Cosner and Uerling also argue that any potential conflict of interest Cosner may have had in
serving as conservator for Rosalie and Redies was cured because all parties consented to his
appointment with full knowledge of this dual role. They also assert that any conflict of interest
Uerling might have had due to Rosalie’s disinheritance of Redies’ is moot because Rosalie no longer
has any assets.
¶34 They further assert the District Court was correct in finding that even if minor errors were
made in the accounting, Cosner met his fiduciary duties and Redies had no actual damages because
14
the amount of Redies’ debt Cosner was able to have forgiven by her creditors was greater than any
possible errors. They assert that the new counsel for Redies had more than adequate time to pursue
claims on Redies’ behalf because they represented Redies’ interests for a year and a half before the
District Court’s hearing in this case. Finally, they argue that the District Court did not prevent
Redies from pursuing her claims at the hearing.
¶35 Because we reverse and remand for audit on the issue of the adequacy of accountings as
discussed below and because proper determination of the other issues depends in part on the status
of the estate as demonstrated by an audit, we do not address any of the other arguments discussed
above that were presented by Redies and Cosner. However, we hold that Redies properly argued on
appeal that the District Court’s findings were clearly erroneous because she contests numerous
findings of fact.
¶36 The District Court found that taken as a whole, Cosner’s documentation of Redies’ estate
was “true, accurate, complete and thorough.” As mentioned above, the court waived the inventory
requirement by finding that the valuable assets were accounted for. Further, the court found that due
to the amount of debt forgiven by medical care providers, any discrepancies in the accounting would
not have shown a loss. Basically, the District Court determined that the evidence before it was
sufficient, despite the failure to file an initial inventory. Based on its findings, the District Court
discharged Cosner and Uerling without liability to Redies.
¶37 Under § 72-5-423, MCA, a conservator is held to the standard of care applicable to trustees.
Under § 72-34-114, MCA, a trustee has a duty to use the care, skill, and diligence of a prudent
person. If a trustee has special skills, then the trustee has a duty to use those skills. Section
72-34-115, MCA. Section 72-5-424(2), MCA, requires a conservator to keep suitable records of
15
administration. Section 72-5-438(1), MCA, requires annual accountings unless waived by the court.
Section 72-34-128, MCA, gives an example of an accounting that meets a trustee’s standard of care.
This accounting includes, among other things, a statement of receipts and disbursements of
principal and income that have occurred since the last account; a statement of the assets and
liabilities of the trust since the last account; the trustee's compensation since the last account; the
agents hired by the trustee, their relationship to the trustee, if any, and their compensation since the
last account.
¶38 We have addressed the issue of the adequacy of accountings before. In Clark, we held that
conservators bear the initial burden of proving that their fiduciary duties were met. Clark, 237
Mont. at 183, 772 P.2d at 302. We further held that to meet that burden, an accounting must be
accurate, complete, and verifiable. Clark, 237 Mont. at 184, 772 P.2d at 302. We stated: “[t]he
conservator must . . . keep meticulous accounts of his administration of the estate, accounting for
‘the source of every item of income and the purpose of every item of expense.’” Clark, 237 Mont. at
183, 772 P.2d at 302 (citing Allard, 49 Mont. at 229, 141 P. at 665). In that case, we held that the
accountings were inadequate because no documentation was submitted to independently verify the
conservator’s accounting of assets. Clark, 237 Mont. at 183-84, 772 P.2d at 302. We noted that
there was no evidence such as bank statements, receipts, or tax returns that could be used to verify
the accounting. Clark, 237 Mont. at 183-84, 772 P.2d at 302. In Allard, we held that the testimony
of a guardian regarding his management of an estate was insufficient to meet his initial burden
because there was no way to verify the information. Allard, 49 Mont. at 226, 141 P. at 664 (the
purpose of statutory scheme is to furnish a means by which the guardian's management may be
checked and his accounts verified).
16
¶39 In this case, Cosner filed two intermediate annual accountings in 1996 and 1997 which each
consisted of nothing more than three numbers: total income, total expenditures, balance remaining.
There is absolutely nothing about these intermediate inventories which would enable a court to
verify Cosner’s management of the estate. Further, because no initial inventory was done, it is
impossible to reconcile these two accountings with anything. In fact, the two accountings are not
reconcilable with each other. Therefore, these accountings are incomplete and unverifiable.
¶40 Regarding Cosner’s final accountings, these reports do summarize income and expenses by
general category. Further, these reports appear to be based in large part on Cosner’s “Recaps” of
checking accounts, also submitted as evidence, which include check numbers and dates. However,
like the situation in Clark, no bank statements, tax returns, receipts, or appraisals were submitted
with which the District Court could have sufficiently verified Cosner’s accounting. Further, no
pictures were taken to document Cosner’s determination that much of Redies’ estate was refuse.
Consequently, like the situation in Allard, much of Cosner’s evidence is not significantly verifiable
because it consists mainly of Cosner’s own testimony and self-created documents.
¶41 Cosner asserts that he has documents to back up his summary accountings, as discussed in
correspondence between Redies and Cosner entered as evidence. Nevertheless, virtually none of
these types of documents were entered as evidence. Further, although the District Court found
Cosner credible, credibility is not sufficient as documentation of accountings. Rather, verification
must consist of a means by which a trial court can independently determine accountings are
generally complete and accurate. This is pursuant to the court’s duty to assure a conservator is
acting in the best interests of the protected person as contemplated by the statutory scheme. See §
72-5-421, MCA.
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¶42 In this case, Cosner was responsible for an estate worth almost half a million dollars over a
four year period. Cosner failed to file an initial inventory and failed to file proper annual inventories.
Further, the final accountings are insufficient to compensate for these failures because the
accountings are not significantly independently verifiable. Therefore, because the record here does
not contain a complete, accurate and verifiable accounting as required by Clark, we conclude that
the District Court’s determination that Cosner met his burden to prove he properly accounted for
Redies’ estate is clearly erroneous. Further, we hold that like the appellant in Clark, the proper
remedy in this case is to remand for an audit pursuant to § 72-5-438(3), MCA.
¶43 We note in making this holding that we do not intend it to be a comment on whether or not
Cosner and Uerling in fact properly managed the estate. Further, while we agree that the burden is
on the conservator to show proper management, once the conservator has met that burden, the
burden then shifts to the protected person. For example, in this case, Redies argued that she no
longer had certain items of personal property and argued Cosner had the burden to show where the
items were. However Cosner delivered all remaining personal property to Redies before the hearing
with an estimated inventory and Redies signed for that property. Therefore, Redies has the burden
to show that the items she asserts are missing but that are listed on that inventory were never
delivered to her.
¶44 Finally, Amici assert that given the importance of enforcing statutes for the protection of
people who cannot care for themselves, we should use this case as a vehicle to set forth standards for
district courts and conservators similar to those used in California’s HANDBOOK FOR CONSERVATORS
(1992) approved by the Judicial Council of California. However, other than the two issues properly
addressed here, i.e. whether an initial inventory is mandatory and what constitutes a complete,
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accurate and verifiable accounting, we cannot address other standards regarding conservators or
guardians that were not appealed. While we agree that a handbook for conservators or for guardians
would be helpful, we decline to adopt these standards in this Opinion. We do, however, take this
opportunity to encourage the State Bar or other interested parties to consider pursing the adoption of
such standards or guidelines.
IV. CONCLUSION
¶45 Because the District Court erred in waiving the initial inventory and because the final
accountings accepted by the District Court are not verifiable, we remand to the District Court for an
audit.
¶46 We reverse.
/S/ JAMES C. NELSON
We Concur:
/S/ KARLA M. GRAY
/S/ PATRICIA COTTER
/S/ JIM REGNIER
/S/ TERRY N. TRIEWEILER
/S/ JIM RICE
Justice W. William Leaphart did not participate in this decision.
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