Black v. Gardner

• Decision Date: 02 June 1982
• Docket Number: No. 13443,13443
• Parties: Shirley A. BLACK, as Guardian of the Person and Estate of Charlotte E. Black, Plaintiff and Appellee, v. Charles GARDNER and Evelyn Gardner, Defendants and Appellants.
• Court: South Dakota Supreme Court

Page 153

320 N.W.2d 153

Shirley A. BLACK, as Guardian of the Person and Estate of Charlotte E. Black, Plaintiff and Appellee, v. Charles GARDNER and Evelyn Gardner, Defendants and Appellants.

No. 13443.

Supreme Court of South Dakota.

Argued on Reassignment Jan. 18, 1982.

Decided June 2, 1982.

John J. Delaney of Amundson & Fuller, Lead, for plaintiff and appellee.

Gregory A. Eiesland and Gary D. Jensen of Lynn, Jackson, Shultz & Lebrun, P. C., Rapid City, for defendants and appellants.

DUNN, Justice (on reassignment).

This case involves a series of gifts given by Charlotte Black (Charlotte) to appellants Charles and Evelyn Gardner (hereinafter referred to individually as Charles and Evelyn respectively or jointly as Gardners). Appellee Shirley Black (Shirley), as guardian of the person and estate of Charlotte, claims these gifts resulted from the exercise of fraud and undue influence on Charlotte by Gardners. She also claims that these gifts were obtained by Gardners willfully, wantonly, maliciously and fraudulently from Charlotte. Shirley prayed for recovery of actual damages and punitive damages. The jury found for Shirley, and a judgment was entered in the sum of $244,922.99 for actual damages and the sum of $100,000.00 for punitive damages, plus prejudgment interest. We affirm the judgment.

Charlotte and Harold Black (Harold) were married in the early 1900s and lived in Deadwood, South Dakota during most of their married life. Three children were born of this marriage: Evelyn, Vernon, and Shirley. Harold developed a very successful creamery and beer distributing business. Charlotte primarily worked as a housewife and mother.

The children soon married and moved from Deadwood. Evelyn married Charles Gardner, who was a career United States Air Force officer, and they lived on various military installations. Vernon married Mary Black and lived in Belle Fourche, South Dakota. Vernon was killed in a boating accident in 1963 and was survived by three children. Shirley married Stanley Parsons and they lived in Kansas City, Missouri. The children frequently kept in contact with their parents.

When Harold died in 1959, he left an estate of approximately $500,000.00. His estate was left to his wife Charlotte in two testamentary trusts of approximately equal value. Charlotte had access to and control over the income and principal of one trust and the income generated by the second trust. The principal of the second trust was to be divided in equal one-third shares to Evelyn, Vernon, and Shirley or their respective children upon Charlotte's death. Charlotte also had holdings of her own valued at approximately $200,000.00 at the time of Harold's death.

Prior to Harold's death, he usually gave $3,000.00 annually to each of his children. Charlotte continued giving a gift of $3,000.00 per year per child after Harold's death. Until 1973, she made no investments and engaged in no financial dealings other than depositing her dividends and other income into her savings account.

In 1967, Charles Gardner retired from the Air Force. He and his wife Evelyn moved to Rapid City, South Dakota. Charlotte was in her middle seventies. By 1972, her advancing age made it difficult for her to handle many of her daily chores, so the Gardners moved to Lead, South Dakota to assist Charlotte. They helped Charlotte with the household duties, did her laundry, drove her to the doctor and assisted with her banking matters.

Shirley and her husband were divorced in 1973 and Shirley requested her maiden name of Black be reinstated. Shirley had severe emotional problems during this time, and reached out to Evelyn and Charles for support. In March of 1974, Shirley entered the hospital for psychiatric treatment.

Gardners drove Charlotte to Attorney David Morrill's office on November 14, 1973. Charlotte subsequently executed a will bequeathing her estate in thirds to Evelyn, Shirley, and Vernon's children. Morrill suggested to Charlotte that she could obtain considerable estate tax savings if she made substantial gifts. They did not discuss specific gifts.

In December of 1973, Charlotte began making a series of large gifts to Gardners: $40,000.00 in December of 1973, $40,000.00 in January of 1974, and approximately $100,000.00 in March of 1974. These transactions are discussed in detail later in the opinion. Gardners testified that one of the reasons they received these gifts was because Charlotte believed Shirley was incapable of handling her affairs as a result of her mental condition.

On March 28, 1974, Charlotte again met with Morrill. Her will was subsequently changed to leave most of her estate to Evelyn, with Shirley and Vernon's children being totally disinherited.

During this period of time, Evelyn's mental health deteriorated. In May of 1976, she was hospitalized for psychiatric treatment. Charles testified that Charlotte felt partially responsible for Evelyn's failing mental health and thus gave them two more gifts--a diamond necklace worth $5,500.00 and $32,700.00 worth of Homestake Mining Company stock.

While Evelyn was hospitalized, Shirley went to Deadwood to take care of her mother. Shirley discovered that Charlotte's savings account had decreased by $127,000.00 since 1971. She took her mother to see Morrill. After private discussions with Charlotte, Morrill drew up a living trust and another will. Charlotte's will returned to the former distribution of her estate by thirds. The living trust took title to all her real and personal property.

In January of 1978, Charlotte moved in with Gardners because she was unable to care for herself. A letter to the trust company dated March 17, 1978, typed by Evelyn, requested that Charlotte's three trusts be terminated. This request was denied. Evelyn then prepared a general power of attorney appointing Charles as Charlotte's attorney and authorizing him to terminate her trusts. The power was delivered to the trust company by Charles. The power was not honored. In May of 1978, Charlotte moved to a nursing home.

Shortly thereafter, Shirley began guardianship procedures and this litigation ensued after an investigation of Charlotte's finances. Both parties consented to a trial by jury.

While there has been no objection by either party, we are met with the threshold question of whether this equity action, ¹ with full consent of the parties, was properly submitted to a jury for a binding verdict. If not, the verdict would be advisory only, and the case should be remanded to the trial court for findings of fact and conclusions of law.

The case was submitted to the jury under the authority of SDCL 15-6-39(c) which states: "In all actions not triable of right by a jury the court upon motion or of its own initiative may try any issue with an advisory jury, or the court, with the consent of both parties, may order a trial with a jury whose verdict has the same effect as if trial by jury had been a matter of right." SDCL 15-6-39(c) was adopted by an order of this court as a court rule, effective July 1, 1966. It was part of this court's adoption of the Federal Rules of Civil Procedure. It is presumed that the rule was adopted with full knowledge of the 1926 case of State v. Nieuwenhuis, 49 S.D. 181, 207 N.W. 77 (1926), which found a similar provision in the probate code unconstitutional as taking away the prerogative of a trial judge in an equitable action. It is also presumed that the court adopted the Federal Rules of Civil Procedure with the meaning previously given to those federal rules by the federal courts. See In re Estate of Hobelsberger, 85 S.D. 282, 181 N.W.2d 455 (1970).

The federal courts, including the Eighth Circuit Court of Appeals, have upheld this rule. Security Mutual Cas. Co. v. Affiliated FM Insurance Co., 471 F.2d 238 (8th Cir. 1972); Stockton v. Altman, 432 F.2d 946 (5th Cir. 1970). Our neighboring state of North Dakota, under a similar rule, has likewise held that a jury verdict in an equitable action, consented to by the parties, has the same effect as if the trial by jury had been a matter of right. Sprenger v. Sprenger, 146 N.W.2d 36 (N.D.1966).

We now hold that SDCL 15-6-39(c) should be given full effect and that the verdict rendered by the jury after the parties had consented to a jury trial is all that is necessary to support the judgment. To the extent that this holding is inconsistent with Nieuwenhuis, supra, and the decisions based thereon, they are specifically overruled.

Gardners contend that the trial court erred in refusing to grant their motion for directed verdict on the ground that the evidence of undue influence was insufficient to submit the case to the jury. We disagree.

The trial court, when ruling on a motion for directed verdict, must consider the evidence in the light most favorable to the nonmoving party and grant to the nonmoving party the benefit of every reasonable inference in their favor. A motion for directed verdict is properly denied if there is substantial evidence introduced at trial that would allow reasonable minds to reach differing conclusions. Martino v. Park Jefferson Racing Ass'n, 315 N.W.2d 309 (S.D.1982); Lytle v. Morgan, 270 N.W.2d 359 (S.D.1978); Heiser v. Rodway, 247 N.W.2d 65 (S.D.1976).

"Under certain circumstances, a confidential relationship can give rise to a presumption of undue influence." Matter of Estate of Pierce, 299 N.W.2d 816, 819 (S.D.1980). These circumstances require the contestants to prove by a preponderance of the evidence that the beneficiary actively participated in the questioned transactions and unduly profited therein. See Matter of Estate of Weickum, 317 N.W.2d 142 (S.D.1982); Matter of Heer's Estate, 316 N.W.2d 806 (S.D.1982); Matter of Estate of Pierce, supra; In re Estate of Anders, 88 S.D. 631, 226 N.W.2d 170 (1975).

In the case before us, Gardners admitted that a confidential relationship existed between them and Charlotte. After 1972, Gardners took an active role in assisting...