Hilbert v. Benson

• Decision Date: 03 June 1996
• Docket Number: No. 95-242,95-242
• Citation: 917 P.2d 1152
• Parties: William C. HILBERT, individually and as Guardian of the Guardianship of Virginia M. Hornig, Appellant (Defendant/Third-Party Plaintiff), v. Eugene H. BENSON, as Trustee for the Trust Estate of Virginia M. Hornig, Appellee (Plaintiff), and Frederick J. Harrison, Appellee (Third-Party Defendant).
• Court: Wyoming Supreme Court

Page 1152

917 P.2d 1152

William C. HILBERT, individually and as Guardian of the Guardianship of Virginia M. Hornig, Appellant (Defendant/Third-Party Plaintiff), v. Eugene H. BENSON, as Trustee for the Trust Estate of Virginia M. Hornig, Appellee (Plaintiff), and Frederick J. Harrison, Appellee (Third-Party Defendant).

No. 95-242.

Supreme Court of Wyoming.

June 3, 1996.

Cary R. Alburn, III, of Alburn & Earnshaw, P.C., Laramie, for appellant Hilbert.

Kermit C. Brown and Bruce B. Waters of Smith, Stanfield & Scott, LLC, Laramie, for appellee Benson.

Lawrence G. Orr of Orr, Buchhammer & Kehl, Cheyenne, for appellee Harrison.

Before GOLDEN, C.J., and THOMAS, MACY, TAYLOR, and LEHMAN, JJ.

GOLDEN, Chief Justice.

In a declaratory judgment action filed by a trustee against a guardian, the district court determined that trustor, Virginia Hornig (Hornig), possessed capacity and that appellee Frederick Harrison (Harrison), trustor's attorney, did not exert undue influence over her when she executed an irrevocable trust. Hornig's guardian, appellant William Hilbert (Hilbert), appeals the decision.

We affirm.

ISSUES

Hilbert presents the following issues:

I. Whether the district court's order of June 29, 1995, incorporating its April 28, 1995, opinion letter constitutes an appealable order under Rule 1.05(a) and/or (b), Wyoming Rules of Appellate Procedure.

II. Whether appellant met the burden of proof necessary to show lack of capacity on the part of Virginia Hornig, at the time she executed the irrevocable trust agreement on February 11, 1993.

III. Whether there was sufficient evidence for the district court to find that the irrevocable trust agreement executed by Virginia Hornig on February 11, 1993, is valid and enforceable.

Appellee Eugene H. Benson (Benson) presents these issues:

1. Does the Court's June 29, 1995, Order entered following the first portion of a bifurcated trial, constitute an appealable order?

2. Did Virginia Hornig have testamentary capacity sufficient to validly execute an Irrevocable Trust Agreement on February 11, 1995 (sic)?

Harrison presents these issues:

I. Does the order of June 29, 1995, entered following the first portion of a bifurcated trial, constitute an appealable order?

II. Did Virginia Hornig have testamentary capacity sufficient to validly execute an irrevocable trust agreement on February 11, 1995 (sic)?

III. Was the trial court correct in holding that the irrevocable trust was valid and enforceable?

FACTS

In its decision letter, the district court found that the evidence at trial painted a vivid picture of a remarkable woman:

[Virginia] Hornig was a school teacher in Rawlins, Wyoming for many years. People respected her. She was revered by her many former students. She was independent and financially responsible. She invested her funds wisely and managed to establish a modest estate of approximately $200,000.00. She apparently never married and has no children.... [S]he executed a will on April 17, 1990, at a time when no one disputes that she was competent. She had no doubt how she wanted her estate to be distributed [leaving] almost her entire estate to the Church and other Catholic organizations and [giving] one tenth of her estate to each [of two] cousins....

In 1992, Ms. Hornig began to experience a general physical and mental deterioration. At that time, she was 70 or 71 years of age and diabetic. She became uncharacteristically untidy, had short term memory problems and confusion from time to time and experienced problems managing her affairs. Virginia Hornig is currently residing in a nursing home in Texas and has been diagnosed as suffering from Alzheimer's Disease. The evidence indicated she was in the preliminary stages of Alzheimer's Disease during the time surrounding the execution of the trust. She became concerned that, because of her deteriorating condition, she might do something to cause a change in the disposition of her property as set forth in the will. She consulted with her attorney, Mr. Harrison, who had represented her over a long period of time. She, after being advised by Harrison, determined the answer to her worries was the formation of an irrevocable trust. Dispositive portions of the will and trust remained exactly the same, with the minor exception that her bequest to her cousins was capped at $5,000.00.

Hilbert, one of the two cousins, had himself appointed guardian for Hornig. Following The trial court bifurcated the matter and on March 29, 1995, determined the issues of whether the trustor, Hornig, was mentally competent or had testamentary capacity on February 11, 1993, when she executed the irrevocable trust agreement and whether her attorney exerted undue influence over Hornig regarding the execution of that trust. The district court determined that Hilbert failed to meet his burden of proving by a preponderance of the evidence that Hornig did not possess testamentary capacity when she executed the irrevocable trust agreement and upheld the validity of the trust. Specifically, the district court found that, in accordance with Matter of the Estate of Obra, 749 P.2d 272 (Wyo.1988), Hornig comprehended the extent and nature of her estate, understood the identity of the beneficiaries and their relationship to her, and understood the nature of the testamentary act of executing the trust document, that it was to be a disposition of her property to take effect at her death. The court also found there was no evidence that Harrison had exerted undue influence to cause her to execute the trust document. An order was entered to this effect and this appeal followed.

actions by Hilbert, Eugene H. Benson, as trustee for the trust estate of Hornig, sued Hilbert individually and as guardian of the guardianship for Hornig. Hilbert filed an answer and counterclaim and a third-party complaint against Frederick J. Harrison, Benson's attorney. Harrison withdrew as counsel for Benson. Benson's complaint alleged generally that Hilbert, appointed guardian in the State of Texas, transferred trust assets without knowledge of the trustee in Wyoming, revoked trust authority over retirement and social security accounts without authority and generally interfered with and jeopardized the ability of the trust to protect the interest of Hornig. The trustee's complaint requested that the court declare Hornig as having had capacity to execute the trust agreement, declare the trust's validity, declare that the trustee has control of Hornig's assets, command Hilbert to return assets to the trust, and enjoin Hilbert from interfering with the administration of the trust in the future. Hilbert's amended counterclaim and third-party complaint alleged that Hornig lacked testamentary capacity to execute the trust, Benson and Harrison knew or should have known she was incompetent, Harrison improperly influenced Hornig to sign the trust agreement, and Hornig is entitled to damages because of Benson's and Harrison's actions.

DISCUSSION

Appealable Order

The district court denied a motion to postpone the second portion of the bifurcated trial and scheduled it to proceed while this appeal was pending. Appellee Benson, on November 3, 1995, filed a motion with this Court to dismiss this appeal on the ground that the order from which the appeal is taken is not appealable pursuant to WYO. R.APP. P. 1.05. This Court denied that motion on November 16, 1995. In his appellate briefing, appellee Benson again raises this issue. Having previously ruled, we are reluctant to revisit the matter. Although the point is arguable and a close question is presented, we are satisfied that we should in the interests of judicial economy review the central issue presented, namely, the trustor's mental capacity to create and execute the trust agreement. On past occasion, this Court has treated a notice of appeal as a petition for either a writ of review or certiorari when we determined that the circumstances warranted. See, e.g., In Re Big Horn River System, 803 P.2d 61, 66-67 (Wyo.1990); J Bar H, Inc. v. Johnson, 822 P.2d 849, 854 (Wyo.1991). In any event, given the present posture of this case with the litigants having provided the Court with appropriate briefing, we believe that review is appropriate under the circumstances.

Capacity

In determining Hornig's competence, the district court applied the standard used for testamentary capacity set out by this Court in Matter of the Estate of Obra, 749 P.2d 272 (Wyo.1988). Under that standard, the district court determined that Hilbert failed to prove by a preponderance of the evidence that Hornig did not understand the nature of her act, the nature or character of her property and the natural objects of her bounty.

A review of the trust agreement indicates that it is an irrevocable inter vivos trust. A person lacking capacity to make an ordinary transfer of property has no capacity to create an inter vivos trust. Walton v. Bank of California, National Association, 218 Cal.App.2d 527, 32 Cal.Rptr. 856, 865 (1963) (citing RESTATEMENT (SECOND) OF TRUSTS §§ 19, 333 (see comment f, p. 151) (1959)); Harrison v. City Nat'l Bank of Clinton, Iowa, 210 F.Supp. 362, 371 (S.D.Iowa 1962). In determining the test for mental competency, Harrison considered the following:

"Mental incompetency, which will defeat the trust, exists where a person is incapable of understanding and acting with discretion in ordinary affairs of life, or is incapable of understanding, in a reasonable manner, the nature and effect of the trust. Strictly speaking, the question presented in such a case is not necessarily whether the settlor was generally of sound mind, but whether he had sufficient mental capacity to understand the trust which he executed."

Harrison, 210 F.Supp. at 370 (quoting 89 CJS Trusts § 73 (1955)).

That court determined the relevant question was:

did the...