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Nethken v. Peerless Insurance Co.

August 20, 2009


Appeals from the Superior Court of the District of Columbia, (ADM 2185-79), (Hon. Eugene N. Hamilton, Trial Judge).

The opinion of the court was delivered by: Kramer, Associate Judge

Argued September 5, 2008

Before KRAMER, FISHER, and THOMPSON, Associate Judges.

Appellants/cross-appellees, nieces and nephews of Mary Nethken ("Mary"), prevailed in their suit against appellee/cross-appellant Peerless Insurance Company ("Peerless") to recover on the surety bond Peerless issued to the administrator of her estate. They contend that assets of Mary's estate that were due them were distributed to others. In its cross-appeal, Peerless challenges that judgment, arguing that the trial court erred in determining that the administrator of Mary's Nethken's estate had committed fraud, in refusing to dismiss the action as untimely, in holding Peerless liable and in making other evidentiary and procedural rulings. The prevailing appellants/cross-appellees argue that the trial court erred in failing to award them prejudgment interest and legal expenses. We reverse the judgment below on the ground that fraud was not established by clear and convincing evidence and that the claim is, therefore, time-barred.

I. Factual Background

Mary was born on May 30, 1906, to Truman Nethken and Blanche Ballusie. Prior to Mary's birth, Truman had had two children with Zada May Day: Frank M. Nethken and Denise Nethken. After Mary was born, her mother, Blanche Ballusie, married Frank Warner, Sr. and had three children with him: Frank Warner, Jr. ("Warner"), William Warner, Sr., and Masie Warner. Therefore, Mary had five half-siblings.

Mary died intestate in Washington, D.C. on September 27, 1979. She had never married and had no children. Mary was predeceased by her half-sister, Masie Warner, who left no children, and her half-brother, William Warner, Sr., who left four children: William, Jr., Glenn, James, and Ellen.

In December 1979, Warner, Mary's half-brother, filed a Petition for Letters of Administration for Mary's estate in Superior Court, which stated that Mary had died intestate leaving only himself as sole heir and next-of-kin, and that the estate was worth $30,000 in stocks and bonds and $750 in household goods. On December 19, 1979, the Superior Court appointed Warner as administrator of Mary's estate and ordered him to file a surety bond in the amount of $2,000. Pursuant to the order, Warner filed a bond issued by Peerless in the amount of $2,000. The Petition for Letters of Administration was later amended to include as heirs the four children of William Warner, Sr. It is unclear whether Warner was aware of the existence of his brother William's children at the time that he filed the original Petition for Letters of Administration. The Amended Petition valued the decedent's estate at over $500,000. As a result, the court ordered Warner to file an additional undertaking of $290,000. He proceeded to increase his surety bond with Peerless to a total amount of $292,000.

Warner's attorney, John Green, Jr., carried out a nationwide search for Mary's heirs.In a petition to the court requesting attorneys' fees, Green stated that

this was the estate of a recluse spinster who had almost no contact with any of her relatives. She died on [sic] an efficiency apartment with over two (2) tons of loose papers in no apparent order laying around. She had several years earlier given the name of the administrator as her next of kin to a police neighborhood inquiry. The administrator had not seen the decedent for over 20 years. The administrator had no knowledge of decedent's holdings and vague recollection of some relatives in New England. Our office conducted a nationwide search using motor vehicle driving records, state death records and funeral information and was finally able to reconstruct the line of sucession [sic] and locate all heirs.

In 1979, Warner, Frank M. Nethken, and Frank K. Nethken, the son of Frank M. Nethken, had all lived in Cumberland, Maryland, a city of approximately 20,000 people. Frank K. Nethken served as mayor of Cumberland from 1978-1982, and he testified at trial that his campaign was widely covered by the local media. Frank M. Nethken and Frank K. Nethken were both listed in the Allegany County Telephone Directory.

In August 1981, Warner filed an Affidavit of Relationships, declaring that he had made a "deligent [sic] search to locate all the heirs at law," and found as heirs only himself and the four children of his brother, William Warner, Sr. On August 11, 1981, Warner filed his First and Final Account of Mary Nethken's estate, reporting total assets of $878,968.04. The court approved the final account on January 10, 1983, which gave roughly half of the estate to Warner and half to the four children of his brother William.

Warner died on March 29, 1988. Frank M. Nethken died on June 7, 1985. Although the exact date is unclear, it appears that Denise Nethken died sometime between 1983 and 2004.

On December 22, 2004, Frank K. Nethken, Roy Nethken, Rance Nethken, and Shirley Nethken Smeltzer, the children of Frank M. Nethken, and Patricia Hartsfield Schmertzler, the daughter of Denise Nethken ("the Nethkens"), filed suit against Warner's estate,*fn1 Liberty Mutual, which purchased Peerless before this suit was filed, and the children of William Warner, Sr.*fn2 for fraud, seeking damages in the amount of ...

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