Background
Harry Fairhurst died in February 2019, leaving an estate with seven equal beneficiaries, including William H. Fairhurst and Mary L. Fairhurst, who served as co-executors. The estate’s principal asset was real property in Cumberland, Rhode Island. The testator’s will, executed in 1981 with a 1997 codicil, authorized the co-executors to “sell any or all of my estate without obtaining permission from the Probate Court” provided they notified the devisees of their option to purchase within a specified timeframe.
In July 2020, the estate attorney sent notice to the devisees of their purchase option but did not include specific sale terms. In October 2020, a second notice indicated William intended to purchase the property for $260,000. William and his wife then purchased the property in November 2020 for that price, financing the acquisition with a $247,000 mortgage and a $17,192 advance from his probate share. However, a bank appraisal valued the property at $330,000, and a comparative market analysis suggested a listing price of $285,000.
When the co-executors filed their first accounting in January 2021, three other devisees objected. The probate court voided the sale, finding it violated Rhode Island General Law § 33-19-9, which requires probate court approval for a fiduciary to purchase estate property. The Superior Court affirmed, and the co-executors appealed to the state Supreme Court.
The Court’s Holding
The Rhode Island Supreme Court affirmed the lower courts’ decisions, holding that § 33-19-9 requires probate court approval for any co-executor to purchase real estate from an estate, regardless of whether the testator’s will purports to authorize such sales without court approval. The statute is mandatory and serves a protective function that cannot be overridden by testamentary language. The court reasoned that a co-executor admitted to probate becomes an officer of the probate court and owes fiduciary duties to all estate beneficiaries. When a fiduciary seeks to purchase estate property for themselves, they occupy a conflicting position—both managing the asset for all beneficiaries while seeking personal benefit. Section 33-19-9 requires probate court approval to prevent self-dealing and allows the court to set a minimum sale price protecting the estate’s interests.
The court found William breached his fiduciary duty by purchasing the property for $260,000 when independent valuations suggested values of $285,000 to $330,000, and by taking an advance against his probate share without court authorization. The court rejected William’s argument that he was simply exercising his rights as a beneficiary rather than self-dealing as a fiduciary—his dual capacity created an inherent conflict that required judicial oversight. The court also rejected the co-executors’ argument that notice to devisees was adequate; under common law principles governing options, an option to purchase requires precise terms including the purchase price to be enforceable, and the defective notice compounded the statutory violation. The court further rejected a laches defense, finding the other devisees had no adequate opportunity to object before the sale was completed.
Key Takeaways
- Fiduciaries cannot purchase estate property without probate court approval, even if the testator’s will authorizes asset sales without court approval—statutory protections override testamentary intent
- A fiduciary’s dual role as both administrator and interested purchaser creates an inherent conflict of interest requiring judicial review to protect beneficiaries
- Options to purchase real property must include essential terms, particularly the purchase price, to be legally enforceable under common law
- Discrepancies between the purchase price and independent valuations demonstrate breach of the fiduciary’s duty of good faith and support voiding self-dealing transactions
Why It Matters
This decision reinforces that Rhode Island statutory protections for estate beneficiaries cannot be circumvented by testamentary language, even where explicit. Estate fiduciaries must understand that probate court approval is not merely procedural but substantively required before they or anyone closely related to them can purchase estate assets. The decision clarifies that § 33-19-9 exists to prevent exactly the type of self-dealing that occurred here—an executor using their position of trust to acquire estate property below fair market value and on favorable financial terms.
Importantly, the court rejected arguments that fiduciaries should be permitted to act simultaneously as administrator and interested purchaser. Any executor or administrator seeking to purchase estate property must petition the probate court, comply with notice requirements, and allow judicial determination that the transaction price and terms are fair to all beneficiaries. The decision serves as a cautionary reminder that good faith intent and general will authorization do not exempt fiduciaries from statutory duties governing conflicts of interest in estate administration.