In re Estate of Smid

• Citation: 2008 SD 82,756 N.W.2d 1
• Decision Date: 13 August 2008
• Docket Number: No. 24466.,24466.
• Parties: In the Matter of The ESTATE OF Ronald W. SMID, Deceased. Audrey E. Smid, Plaintiff and Appellant, v. Dale D. Smid, as the Trustee of the Ronald W. Smid Revocable Trust, Defendant and Appellee.
• Court: Supreme Court of South Dakota

756 N.W.2d 1

2008 SD 82

In the Matter of The ESTATE OF Ronald W. SMID, Deceased.

Audrey E. Smid, Plaintiff and Appellant, v. Dale D. Smid, as the Trustee of the Ronald W. Smid Revocable Trust, Defendant and Appellee.

No. 24466.

Supreme Court of South Dakota.

Argued March 28, 2007.

Decided August 13, 2008.

Drew C. Johnson, Aberdeen, South Dakota, Attorney for plaintiff and appellant.

Kimberly A. Dorsett of Richards, Oliver & Dorsett Aberdeen, South Dakota Attorneys for defendant and appellee.

SABERS, Justice.

[¶ 1.] With her husband's death imminent, Audrey Smid signed documents creating a trust, which gave her an interest in the marital home, but left the remainder to her husband's children from a prior marriage. She challenges the circuit court's decision that the waiver of her surviving spouse statutory rights contained within trust documents was valid. We affirm.

FACTS

[¶ 2.] Ronald W. Smid was married to Delores Smid until her death on September 17, 1996. The couple had four children. During the marriage, the couple purchased a home with money Delores inherited from her parent's estate. After her death, Ronald continued to live in this home. Ronald was diagnosed with cancer in 1997.

[¶ 3.] Ronald met Audrey Smid and later married her on March 16, 1999. Audrey was aware of Ronald's cancer diagnosis. During the marriage, they lived in the same home purchased with a portion of Delores' inheritance.

[¶ 4.] In January of 2003, Ronald's son, Dale Smid, became concerned about his father's failing health and the plans for his father's estate. Dale spoke with attorney Roy Wise about meeting with his father and getting his affairs in order. Wise agreed to meet with Ronald.

[¶ 5.] Wise met with Ronald and Audrey and Audrey's brother, Darwin Bettman, on January 24, 2003. Dale alleged that during this meeting, Bettman told Wise that he was familiar with estate planning matters and his attorney was Ken Gosch. Wise testified that he assumed Darwin was helping Audrey with this matter and legal counsel was available through her brother. Wise wanted to conduct the meeting with Ronald alone, but Ronald desired Audrey to be present the entire time.

[¶ 6.] During this meeting, Ronald informed Wise that he wanted the marital home to go to his and Delores' children. However, he wanted Audrey to be able to live in the home as long as she wished, with forfeiture only for remarriage, abandonment or death. Upon any of these events, ownership would pass to his children. Wise told Ronald and Audrey that the best way to fulfill these wishes was to create a trust and transfer the ownership of the marital home to the trust, with an interest in Audrey. He also explained that the trust should require the real estate taxes, insurance, and upkeep expenses remain Audrey's responsibility while she lived in the home. According to Wise, Audrey wanted to fulfill her dying husband's wishes.

[¶ 7.] Wise asked Ronald about any other important assets that should be considered to get his final affairs in order. Ronald indicated Audrey should be the beneficiary of his IRA and receive some savings bonds. Audrey volunteered to complete the change of beneficiary paperwork. Ronald indicated his sons should receive his gun collection and Delores' jewelry should go to their daughters. Additionally, Audrey gave Wise a box containing important documentation regarding his assets. Wise reviewed each document and prepared a list. Audrey was with Wise during this entire process, although she alleges she never reviewed any document or received the detailed list of assets. Wise also testified Audrey was present when he reviewed the list of assets with Ronald.

[¶ 8.] On January 27, 2003, Audrey called Wise and said Ronald decided to proceed with the trust for the marital home. Wise drafted the trust documents and met with Ronald and Audrey on January 29, 2003. During this meeting, Wise explained the trust documents. He then left the documents for their consideration and returned later that day to have Audrey and Ronald sign the trust documents and the deed,¹ which transferred ownership of the house to the Ronald W. Smid Revocable Trust (Trust). While the trust documents specifically declared Audrey would be waiving her statutory rights as surviving spouse, Wise did not discuss them with her. Audrey did not obtain counsel prior to signing the documents. Ronald passed away about 3:30 a.m. January 30, 2003.

[¶ 9.] Informal probate proceedings were commenced in April of 2006 and Audrey was appointed personal representative of the estate. Audrey continued to live in the marital home after Ronald's death, but due to a sewer maintenance problem that she claimed would cost $5000 to repair, the house was sold and she moved out of the marital home in April of 2006. Audrey sued Dale as trustee for the Trust, claiming the marital home proceeds should be removed from the trust and placed in the probate estate because the waiver of her surviving spouse statutory rights² was not valid. Dale alleged Audrey was in breach of the trust and counterclaimed for specific performance of the trust. Audrey claimed she did not voluntarily waive her surviving spouse statutory rights, she only signed the trust agreement to "avoid probate" and her waiver was a result of fraud, mistake or undue influence. The circuit court found against Audrey, finding she voluntarily waived her rights and concluding the waiver was valid and the agreement was enforceable. It ordered the marital home proceeds to be distributed in accordance with the trust.

[¶ 10.] Audrey appeals raising the following issues:

1. Whether the circuit court erred when it found the trust agreement and Audrey's waiver enforceable under SDCL 29A-2-213.

2. Whether the circuit court erred when it found Audrey's waiver was not obtained through fraud, undue influence or mistake; and therefore, whether the circuit court erred when it found the revocable trust agreement was not voidable or otherwise subject to rescission under SDCL 53-11-2.

STANDARD OF REVIEW

[¶ 11.] The circuit court's "findings of facts, reviewed under the clearly erroneous standard, will not be overturned unless the reviewing court is left with a firm conviction that a mistake has been made." Smetana v. Smetana, 2007 SD 5, ¶ 7, 726 N.W.2d 887, 891 (quoting Godfrey v. Godfrey, 2005 SD 101, ¶ 11, 705 N.W.2d 77, 80). Conversely, conclusions of law are reviewed de novo. Id. (quoting Sanford v. Sanford, 2005 SD 34, ¶ 12, 694 N.W.2d 283, 287). "The credibility of the witnesses, the import to be accorded their testimony, and the weight of the evidence must be determined by the trial court, and we give due regard to the trial court's opportunity to observe the witnesses and examine the evidence." In re Estate of Gustafson, 2007 SD 46, ¶ 13, 731 N.W.2d 922, 926 (quoting In re Estate of Schnell, 2004 SD 80, ¶ 8, 683 N.W.2d 415, 418). Whether the waiver of the surviving spouse statutory rights is unconscionable "is a decision by the court as a matter of law." SDCL 29A-2-213.

[¶ 12.] 1. Whether the circuit court erred when it found the trust agreement and Audrey's waiver enforceable under SDCL 29A-2-213.

[¶ 13.] With her husband's death approaching, Audrey signed the trust documents, which contained the following waiver provision:

SETTLOR'S WIFE'S WAIVER OF RIGHTS:

The settlor's wife (Audrey Smid) by executing this Agreement and by executing and delivering the Warranty Deed, on behalf of herself, her heirs, legal representatives and assigns, waives and renounces any and all rights of homestead, surviving spouse award, surviving spouse right of election, exemption, family allowance, inheritance, descent, or other marital right arising by virtue of statute or otherwise, in and to the real property.

Audrey argues that her waiver was unconscionable or not voluntary as set forth in SDCL 29A-2-213. That statute provides that a surviving spouse may waive any and all rights of the surviving spouse but:

(b) A surviving spouse's waiver is not enforceable if the surviving spouse proves that:

(1) the waiver was not executed voluntarily; or

(2) The waiver was unconscionable when it was executed and, before execution of the waiver, the surviving spouse:

(i) Was not provided a fair and reasonable disclosure of the property or financial obligations of the decedent;

(ii) Did not voluntarily and expressly waive, in writing, any right to disclosure of the property or financial obligations of the decedent beyond the disclosure provided; and

(iii) Did not have, or reasonably could not have had, an adequate knowledge of the property or financial obligations of the decedent.

SDCL 29A-2-213.³ Moreover, Audrey argues that she did not receive a disclosure of Ronald's property and financial obligations as required by the statute.

[¶ 14.] First, Audrey argues that her waiver was not voluntary. Voluntary is not defined in SDCL 29A-2-213. Audrey alleges that in order for waiver to be voluntary, one must have "knowledge of essential facts." (Citing Black's Law Dictionary (4th ed.)). Therefore, Audrey argues that her waiver was not voluntary because she did not know about the essential facts and law behind the document she signed. Dale argues that voluntary does not mean a "knowing and voluntary" waiver. Instead, he argues that voluntary means the action was "done by design or intention, intentional, proposed, intended, or not accidental." (Citing Black's Law Dictionary (Revised 4th ed. 1968)).

[¶ 15.] Audrey admits that she "was not physically forced to sign the document[.]" Audrey testified that she did not know what her surviving spouse rights were, that she was under stress and extremely upset because her husband was dying and she did not give the transaction much thought. She also alleged that she signed the document to "avoid probate." However, she also testified that she knew Ronald wished for his children to have the home and she wanted to fulfill his dying wishes and...