Trusts & Estates – Bad Faith By Personal Representative

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WI Court of Appeals – District III

Case Name: Lori Laatsch v. Alan Derzon, et al.

Case No.: 2016AP1328

Officials: Stark, P.J., Hruz and Seidl, JJ.

Focus: Trusts & Estates – Bad Faith By Personal Representative

Lori Laatsch appeals an order surcharging her based on actions she took as personal representative of Rebecca Derzon’s estate (the Estate) and as the trustee of a related trust. The circuit court concluded Laatsch had acted in “extreme bad faith” in those roles, and it therefore ordered her to pay $1,235,954.20 in attorney fees that the Estate had incurred as a result of her conduct. Laatsch argues the circuit court mistakenly believed predecessor judges had already concluded her actions constituted bad faith, and it therefore erroneously denied her a full evidentiary hearing on that issue. Laatsch further contends the court erred by surcharging her for actions she took both before she became personal representative and trustee and after she was removed from those roles. Finally, Laatsch argues the court improperly relied on WIS. STAT. § 701.1004 (2015-16), in ordering her to pay the Estate’s attorney fees.

We reject Laatsch’s arguments. The issue before the circuit court was whether Laatsch’s actions as personal representative and trustee rose to the level of bad faith for purposes of imposing a surcharge. The court’s written decision shows that it did not mistakenly believe prior judges had already concluded Laatsch acted in bad faith. Instead, it properly relied on findings set forth in predecessor judges’ decisions, which we affirmed, as well as other evidence the Estate presented at the evidentiary hearing. Based on those findings and evidence, the court concluded Laatsch’s actions as personal representative and trustee rose to the level of “extreme bad faith.” It therefore properly exercised its equitable authority in surcharging Laatsch. Laatsch has failed to establish that the court surcharged her for actions she took outside her roles as personal representative and trustee. In addition, despite a passing reference to WIS. STAT. § 701.1004 in the court’s written decision, it is clear the court properly surcharged Laatsch based on its equitable authority to do so. We therefore affirm the order imposing the surcharge.

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.