Estate of Lynch v. Lynch

Decision Date17 May 2023
Docket Number29823,29830
Citation2023 S.D. 23
PartiesESTATE OF ROBERT T. LYNCH, Deceased,Plaintiff, Counter-Defendant, and Appellant, v. KEVIN LYNCH, Defendant, Counter-Plaintiff, and Appellee.
CourtSouth Dakota Supreme Court

ARGUED OCTOBER 4, 2022

APPEAL FROM THE CIRCUIT COURT OF THE FIRST JUDICIAL CIRCUIT CLAY COUNTY, SOUTH DAKOTA THE HONORABLE TAMI BERN Judge

MICHAEL J. SCHAFFER of Schaffer Law Office, Prof. LLC Attorneys for plaintiff, counter-defendant, and appellant

RONALD A. PARSONS, JR. PAMELA R. REITER SARA E. SHOW of Johnson Janklow Abdallah & Reiter LLP Attorneys for defendant counter-plaintiff, and appellee.

JENSEN, Chief Justice

[¶1.] The Estate of Robert T. Lynch (the Estate) sued Kevin Lynch alleging claims for fiduciary fraud, conversion, breach of fiduciary duty, and elder exploitation arising from Kevin's management of his father Robert's (Bob) finances and farm operation prior to Bob's death. Kevin answered and filed a counterclaim against the Estate for conversion, among other claims. The circuit court denied the Estate's motion for partial summary judgment on its claims against Kevin. At trial, a jury returned a verdict for Kevin on the Estate's claims, and the court entered judgment as a matter of law for Kevin on his counterclaim for conversion.

[¶2.] The Estate appeals, arguing that the circuit court erred by denying its motion for partial summary judgment, and that the court erred at trial in permitting Kevin to introduce oral extrinsic evidence responsive to the Estate's claims for self-dealing, in instructing the jury, and in granting Kevin's motion for judgment as a matter of law on his claim for conversion. In the event we reverse and remand Kevin seeks review of the circuit court's ruling that the power of attorney naming Kevin as Bob's attorney-in-fact (POA) did not expressly authorize self-dealing and of the court's refusal to give his proposed jury instruction providing for a credit against any damages awarded for gifts authorized by the POA.[1] We affirm in part, reverse in part, and remand.

Facts and Procedural History

[¶3.] Bob was born on March 13, 1932. He had four children with his wife, Mary Imelda Lynch: Carleen, LaCarla Annette (Ann) Glenda, and Kevin. Bob was predeceased by Mary and Glenda. Bob was a lifelong farmer. He owned and operated a successful crop and cattle operation on approximately 675 acres of farmland near Vermillion. Kevin joined his father in the farming operation after he reached adulthood, while Carleen and Ann pursued other professional endeavors outside South Dakota. Bob and Kevin farmed together in an arrangement that evolved over the years as Kevin took on increased responsibilities. When Bob retired from farming in 1995 Kevin took over the operation, but Bob continued to own the land and most of the stock cows. Bob and Kevin agreed that Kevin would assume a 60% share of the expenses and income from the crops and cattle, while Bob would assume a 40% share of the same. As part of the arrangement, Kevin used Bob's equipment. Bob moved off the farm in 2006 and began living with his long-time friend, Patty.

[¶4.] Bob had a stroke in 2007 that primarily impacted his physical mobility. On December 5, 2007, Bob appointed Kevin as his attorney-in-fact under the POA.[2] On February 1, 2008, Bob completed separate paperwork with his bank that authorized Kevin to sign checks on his checking account under a power of attorney. On May 13, 2008, Bob went to the bank and changed the checking account to a joint ownership account with Kevin. The joint ownership form Bob signed included language giving Kevin a right of survivorship upon Bob's death.

[¶5.] On March 1, 2010, Bob executed a Will. The Will gave 51% of his farm real estate to Kevin, with his surviving daughters each receiving a 24.5% share. Kevin was also given a right of first refusal if his sisters wished to sell the land. The Will further gave all of Bob's farm machinery, equipment, grain, and livestock to Kevin, along with his pickup and truck. The remainder of Bob's estate was to be split between the three surviving children share and share alike, "including all of my cash assets including certificates of deposit, savings accounts, and checking accounts." Bob stated in his Will the reasons for the disposition of his property:

In this my Last Will and Testament I have benefitted my son Kevin J. Lynch over my two daughters. I do this because he stayed home to help me on the farm. He has also helped me considerably in my problems in daily living as I have aged. I further have the specific intention of continuing on the farming heritage in the Lynch family. For these reasons I have provided more to my son Kevin J. Lynch than to the other children.

The Will designated Kevin and Ann as co-personal representatives of his estate.

[¶6.] Bob's physical condition continued to deteriorate. It became more difficult for Patty to care for Bob in the home as he moved from using a walker into a wheelchair. He entered a nursing home in September 2011. The notes from the nursing home, at various times, indicate Bob had some cognitive impairment, including occasional confusion, short-term memory loss, and inability to recall the day, month, and year. Kevin testified that Bob had some bad days, but most days he could converse and knew what was going on at the farm.

[¶7.] To ensure adequate income to pay his nursing home expenses, Bob began receiving rent for leasing his cropland to a local farmer in 2012 on a cash rent basis.[3] Kevin testified Bob agreed to begin paying him $30,000 annually to maintain the farmstead and non-tillable acres because Kevin was no longer farming the cropland and receiving 60/40 share rental income. Kevin also claimed that he and Bob agreed Kevin would continue to handle the duties associated with the cattle operation and modified the compensation arrangement so Kevin would receive all the income from the sale of the cattle produced each year while Bob paid the expenses of the cattle operation.

[¶8.] After Bob began residing in the nursing home, Kevin issued and signed checks totaling $398,000 from the joint checking account payable directly to himself and deposited the funds into his personal checking account. Kevin testified that $210,000 consisted of the annual $30,000 compensation that Bob agreed to pay Kevin. Kevin further testified that $145,000 was used to pay equipment loans and farm indebtedness Kevin was no longer able to pay after Bob began cash renting his cropland. Kevin testified that Bob made the decision to pay off these loans to ensure Kevin could continue a viable farming operation into the future. Kevin testified that the remaining $43,000 consisted of $17,000 in additional compensation; $16,000 for reimbursement of other farm-related expenses Kevin paid, such as repairing the roof on Bob's farmhouse; and $10,000 that Kevin mistakenly withdrew from the joint account and later reimbursed to Bob. Kevin claimed that each of these transactions was discussed and approved by Bob.

[¶9.] Kevin also issued checks from the joint account in the amount of $106,774.62 for Morton buildings constructed on land Kevin owned and $104,514.20 to purchase machinery and equipment that Kevin would inherit under the Will. Kevin testified that each purchase was discussed with Bob and approved by him. Kevin explained that Bob supported locating new Morton buildings on Kevin's property because the machine sheds on Bob's property had dirt floors and were in low spots that would at times flood. Kevin also testified to his own belief that the Morton buildings constructed on his property belonged to the Estate.[4] He further testified that it was necessary to continue to upgrade the farm equipment to maintain the farm, despite the cash rental arrangement. Even though Kevin had discussed parts of the Will with his sister before Bob died, Kevin testified that he was unaware he would receive the farm equipment until after Bob died.

[¶10.] Consistent with Kevin's testimony about the modified cattle arrangement after Bob went into the nursing home, Kevin also paid for most of the cattle operation expenses from the joint account from 2011 until Bob's death. The Estate presented evidence that Kevin paid $93,401 from the joint account for cattle feed during this time and purchased $60,000 in stock cattle for Bob.[5] Kevin used $17,000 of his own money to purchase two bulls and another $13,510 to purchase cattle feed after 2011. From 2011 until Bob's death, Kevin received all the income from the sale of cattle, which totaled $147,841.

[¶11.] Apart from the checks written by Kevin from the joint account, Kevin used the POA to withdraw money from several of Bob's retirement accounts (IRAs), certificates of deposit (CDs), and a money market account, totaling $322,539.89. Kevin deposited most of these funds into the joint account, except for two CDs, totaling $44,590.22, that Kevin withdrew and deposited directly into his personal checking account in 2012. Both CDs were owned by Bob, designated Kevin as the payable-on-death beneficiary, and had a maturity date in 2013. Kevin used the funds from these two CDs to buy a new mid-sized pickup, which he titled in his name. Kevin explained that he bought the smaller pickup to replace Bob's larger pickup because it was difficult for Bob to get into the larger pickup to ride with Kevin around the farm. Kevin testified that Bob approved this purchase.

[¶12.] Bob died on March 13, 2018. At the time of Bob's death the joint bank account had a balance of $112,296.13, $110,000 of which Kevin transferred to the Estate at Ann's direction. Ann petitioned to have Kevin removed as personal representative based upon her claim that Kevin had breached fiduciary duties owed to Bob...

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