Estate of Perry, Matter of

• Decision Date: 29 July 1998
• Docket Number: No. 20139,20139
• Parties: In the Matter of the ESTATE OF Oliver Paul PERRY, Deceased.
• Court: South Dakota Supreme Court

Page 29

582 N.W.2d 29

1998 SD 85

In the Matter of the ESTATE OF Oliver Paul PERRY, Deceased.

No. 20139.

Supreme Court of South Dakota.

Argued March 24, 1998.

Decided July 29, 1998.

Dennis Duncan of Zimmer, Duncan & Cole, Parker, for Dorris Gleaton.

Thomas J. Johnson, Sioux Falls, for Bonita B. Sills and Gary P. Brown.

AMUNDSON, Justice.

¶1 After husband's death, guardians for the estate of wife, who is an incompetent, challenged the validity of asset transfers purportedly made according to three separate powers of attorney, among other issues. The trial court ruled that wife was incompetent at the time of the execution of the powers. Therefore, the court held the transfers made pursuant to those instruments and challenged by the guardians were invalid. The personal representative of husband's estate appeals. We affirm in part and reverse in part.

FACTS

¶2 Oliver Paul Perry and Dorothy Perry were married from 1975 until Oliver's death on October 25, 1995. It was the third marriage for both Oliver and Dorothy. There were no children born of this marriage, but the parties did have children from their prior marriages. Oliver's first marriage produced his only child, Dorris Gleaton. Dorothy also had one child, Gary Brown.

¶3 Dorothy pursued a career at Southwestern Bell Telephone Company beginning before her marriage to Oliver and ending with her retirement in 1982. Oliver worked in the oil field business until his retirement in 1980. Oliver also continued to work as a handyman after his retirement.

¶4 In May of 1992, Dorothy became ill and was hospitalized, suffering from viral encephalitis. ¹ She was hospitalized until June 2, 1992, and then returned to the marital home in Granbury, Texas.

¶5 In December of 1992, Oliver and Dorothy consulted an attorney and made plans to transfer certain assets in contemplation of Dorothy entering a nursing home. Gleaton contended that Oliver and Dorothy outlined their plan to her to distribute some of Dorothy's property to Dorothy's family members. As part of this plan, Dorothy executed a power of attorney dated December 21, 1992, ² which purported to give Oliver the power to transfer certain assets, all of which were specifically referred to in the instrument. Gleaton contends that Dorothy directed Oliver to transfer certain savings bonds to Dorothy's family members that were mentioned in the instrument granting a power of attorney. These bonds were held jointly in Dorothy's name and in the name of Dorothy's family members. A number of other assets were also transferred to Dorothy's family members under the first power of attorney, including a rental residence in Graham, Texas, and certificates of deposit. Other asset transfers were made pursuant to the power of attorney, including the sale of Dorothy's "Baby Bell" stock portfolio to Gleaton. Gleaton contends that she paid $17,000 in cash for this stock.

¶6 In February of 1993, Oliver and Dorothy left Granbury, Texas, and came to Parker, South Dakota. Dorothy became a resident at the nursing home in Parker owned and operated by Oliver's grandson, Michael "Mick" Turner.

¶7 After Dorothy's move to Parker, Oliver sold their residence in Granbury, utilizing a May 13, 1993, durable power of attorney to dispose of Dorothy's interest in the jointly held property. It appears from the record that this new durable power of attorney was created because a previous one ³ was objected to by the bank or title company on the basis that the prior power of attorney lacked specific sale authority over Dorothy's real estate.

¶8 After the sale of the Granbury home, Oliver purchased a home in Parker in his name only. He continued to reside there until his death on October 25, 1995.

¶9 On November 22, 1995, Gleaton, the executor named in Oliver's will, applied for informal probate and for appointment of a personal representative. Gleaton, herself, was then appointed personal representative of Oliver's estate.

¶10 On March 14, 1996, Bonita Sills (Dorothy's sister), and Gary Brown, guardians for the estate of Dorothy (collectively referred to as Guardians), filed a petition with the circuit court. They made requests for a supervised administration of Oliver's estate, for the removal of Gleaton as Oliver's personal representative, for an elective share out of Oliver's estate for Dorothy, and for the return of assets that had been converted from Dorothy's ownership under the contested power of attorneys. On March 21, 1996, Guardians petitioned the circuit court for a restraining order, claiming, among other things, that the December 21, 1992, power of attorney granted by Dorothy to Oliver was invalid. A stipulated restraining order was filed on April 3, 1996. Finally, on May 9, 1996, Guardians brought additional motions requesting reimbursement from the estate for a family allowance, continuing support through a family allowance, a transfer of the homestead, a transfer of certain personal property, and to require delivery of certain certificate of deposit funds. Gleaton opposed the Guardians' motions. The circuit court entered a pretrial order dated July 11, 1996, requiring that Dorothy's personal property be mailed to her and that payment of family support commence retroactive to November, 1995, in the sum of $1,500 per month.

¶11 The trial was held to the court in Parker, South Dakota, and the court issued its opinion in favor of the Guardians. The trial court determined that Dorothy was incompetent, of unsound mind and unable to transact her own financial affairs when the first power of attorney was created and continuously thereafter. Therefore, all powers of attorney were invalid. The court's opinion directed the following: [T]he return of the "Baby Bell" stocks or their equivalent value; the transfer of bank savings account funds to Dorothy; the transfer of the Parker home titled in Oliver's name to Dorothy; an award of a homestead right to Dorothy; allowance of an absolute exemption for certain property owned by Dorothy; an elective share of Oliver's estate for Dorothy; the return of certain other property; and an award of attorney fees for Dorothy against Gleaton, personally. Additional facts will be recited as they become pertinent.

¶12 Gleaton appeals, contending that the trial court was clearly erroneous or erred as a matter of law in ruling that:

1. Dorothy Perry was incompetent to execute three separate powers of attorney beginning in December, 1992, and that as a result, the transfers of property under those instruments by Oliver Perry were invalid.

2. The bank accounts held in the Farmers State Bank of Parker, South Dakota, were joint accounts.

3. Dorothy Perry has a joint tenancy interest and a homestead right in the Parker residence.

4. The attorney's fees expended on behalf of Dorothy Perry should be paid by Gleaton.

5. The judgment to return certain stock will be a personal judgment against Gleaton.

STANDARD OF REVIEW

¶13 "This Court reviews a trial court's findings of fact under the 'clearly erroneous' standard and overturns a trial court's conclusions of law only when the trial court erred as a matter of law." Century 21 Associated Realty v. Hoffman, 503 N.W.2d 861, 864 (S.D.1993) (citing Dougherty v. Dougherty, 482 N.W.2d 320 (S.D.1992); Jankord v. Jankord, 368 N.W.2d 571 (S.D.1985)). "The question is not whether this Court would have made the same finding that the trial court did, but whether on the entire evidence we are left with a definite and firm conviction that a mistake has been committed." Id. (citations omitted). "We must give 'due regard' to the opportunity of the trial court 'to judge the credibility of the witnesses.' " Osman v. Keating-Osman, 521 N.W.2d 655, 657 (S.D.1994) (citation omitted).

DECISION

¶14 1. Invalidation of Powers of Attorney Based on Incompetence

¶15 Neither party disputes the fact that Dorothy is currently incompetent. However, the time when she became incompetent is a matter of dispute. Guardians assert that Dorothy became incompetent to handle her financial affairs in May of 1992. Gleaton claims Dorothy was competent until 1994.

¶16 The trial court, based on the evidence presented at trial, held that Dorothy was incompetent and of unsound mind at the time she signed the powers of attorney in December, 1992, February, 1993, and May, 1993. Therefore, she was not capable of entering into the agreements under SDCL 53-2-1 ⁴ and the transfer of property by Oliver under these powers was invalid.

¶17 However, Gleaton challenges this holding, asserting that there was no persuasive expert testimony presented on the issue of Dorothy's competency. Although Gleaton does not dispute that Dorothy was suffering from the effects of the viral encephalitis and the early stages of Alzheimer's in 1992, she asserts these conditions in and of themselves do not prove incompetency. [Gleaton] argues that the testimony of lay persons offered by the Guardians on the issue of Dorothy's competency was insufficient.

¶18 However, Gleaton admits the opinion of lay persons can generally be accepted to prove incompetency as long as the lay persons have had sufficient opportunity to observe the person in question. See Olsen v. Corporation of New Melleray, 245 Iowa 407, 60 N.W.2d 832, 843 (1953); In re Hartz's Estate, 237 Minn. 313, 54 N.W.2d 784, 788 (1952); In re Scoville's Estate, 149 Neb. 415, 31 N.W.2d 284, 291 (1948); see also Caldwell v. John Morrell & Co., 489 N.W.2d 353, 362 (S.D.1992) (holding South Dakota's general rule is that "[e]xpert testimony is required when the subject matter at issue does not fall within the common experience and capability of a lay person to judge."). Gleaton's argument thus boils down to essentially a dispute as to whether the lay witness testimony offered by the Guardians was based on sufficient contact with Dorothy.

¶19 Before addressing the lay witness evidence, we note there was evidence in the form of Dorothy's medical records which were introduced at...