In re Estate of Hedke

• Decision Date: 23 October 2009
• Docket Number: No. S-08-980.,S-08-980.
• Citation: 278 Neb. 727,775 N.W.2d 13
• Parties: In re Estate of Leona M. HEDKE, deceased. John Nowak, Special Administrator of the Estate of Dolores Nowak, deceased, appellant and cross-appellee, and Nathan A. Schneider, Conservator of Leona M. Hedke, appellee and cross-appellee, v. Charles Hedke, as Trustee of the Leona M. Hedke Revocable Trust, dated December 30, 2004, as attorney in fact for Leona M. Hedke, and individually, appellee and cross-appellant.
• Court: Nebraska Supreme Court

775 N.W.2d 13

278 Neb. 727

In re Estate of Leona M. HEDKE, deceased.

John Nowak, Special Administrator of the Estate of Dolores Nowak, deceased, appellant and cross-appellee, and Nathan A. Schneider, Conservator of Leona M. Hedke, appellee and cross-appellee, v. Charles Hedke, as Trustee of the Leona M. Hedke Revocable Trust, dated December 30, 2004, as attorney in fact for Leona M. Hedke, and individually, appellee and cross-appellant.

No. S-08-980.

Supreme Court of Nebraska.

October 23, 2009.

J. Bryant Brooks, of Brooks Law Offices, P.C., McCook, for appellant.

Nathan A. Schneider, of Mousel & Garner, pro se.

Steve W. Hirsch, of Hirsch & Pratt, L.L.P., and Terry L. Rogers, Lincoln, of Terry L. Rogers Law Firm, for appellee Charles Hedke.

HEAVICAN, C.J., WRIGHT, CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.

CONNOLLY, J.

I. SUMMARY

Shortly before her death at age 92, while suffering from dementia, Leona M. Hedke created a trust. She deeded all her real estate to the trust and executed a new will that devised all her remaining property to the trust. In the trust, she left the bulk of her estate to her son, Charles Hedke, and nominal assets to her daughter, Dolores Nowak. Dolores contested the will, objecting, in part, to Charles' undue influence.

In a separate action, Dolores also sued to set aside the trust and to impose a constructive trust on assets that Charles had wrongfully taken while acting as Leona's attorney in fact. In addition, she sued to recover assets that Charles had wrongfully taken while acting as trustee of Leona's trust.

After Dolores transferred the probate action to district court, the court dismissed as time barred her claim challenging the trust's validity. After consolidating the cases, the court concluded that Dolores had failed to carry her burden on two issues: She failed to show that Leona (1) lacked testamentary capacity and (2) had executed the will and quitclaim deed because of Charles' undue influence. The court found that these documents were valid. But the court found that Charles had abused his fiduciary duties both while he was attorney in fact and while he was trustee. It ordered him to pay for many unauthorized expenditures and to return assets that he had wrongfully taken.

Our holding will be spelled out with some specificity in the following pages, but briefly stated, it is this:

1. We reverse the district court's order finding no undue influence, because the evidence shows that Charles improperly influenced Leona in making her will.

2. We vacate the district court's order finding that the deed was valid and that Charles had misappropriated Leona's assets while attorney in fact, because Dolores, as a devisee, lacked standing to recover assets for the estate, so the court did not have jurisdiction over these claims.

3. We conclude that Dolores, as a trust beneficiary, had standing to challenge Charles' actions while he was trustee.

4. We remand the cause to the district court to make further findings and determinations regarding Charles' transactions during the trust's winding-up period.

II. BACKGROUND

When his father became ill, Charles moved back to the Trenton, Nebraska, area to help manage the family farm. After his father died, he and Leona agreed to split the farm expenses and income evenly, and Leona would pay the taxes. In 1993, Leona signed a will which provided that Charles would receive the farmland but compensate Dolores for her share in cash. Leona's attorney had drafted the 1993 will. In 1998, Charles took Leona to see her attorney to draw up a power of attorney naming both Charles and Dolores as her joint attorneys in fact.

Later, in December 2003, Leona was hospitalized after falling because of a seizure. While she was at the hospital, her doctor diagnosed her with dementia, and she was later admitted to a nursing home. Before entering the nursing home, Leona lived alone in Trenton, and Charles and his wife lived on Leona's farmland. Dolores lived in Arizona. After Leona entered the nursing home, Charles handled all her financial affairs.

Leona had frequently told a neighbor and Leona's sister-in-law, close friends of Leona, that she had a will. And she said that she had treated her children equally: Charles was to get the farm and Dolores was to get an equal share of Leona's estate through a cash payment from Charles. She had also discussed her will several times with her neighbor while in the nursing home and had never indicated that she wanted a new will. The record shows that Dolores and Leona were close and maintained regular contact. And before entering the nursing home, Leona equally divided her oil royalty money between herself and her children.

Even before entering the nursing home, Leona had problems with confusion and memory loss. In October 2004, after she entered the nursing home, her doctor signed a report characterizing her dementia as "[significant Alzheimer's." The same month, he sent a letter to Dolores' attorney regarding Dolores' pending conservatorship application. He stated that Leona was usually confused and disoriented and could not make decisions in her best interests regarding her health care or finances.

Later, at trial, her doctor stated that on December 10, 2004—the date Leona allegedly requested a new estate plan from Charles' attorney—he believed that someone should have been overseeing her best interests. Because her condition would have only gotten worse, he believed she would have had a difficult time reading or understanding the estate planning documents that she signed on December 30, 2004. He also testified that Leona was vulnerable to suggestion and could be manipulated. He explained that she probably would have remembered who her family members were and that a person might not recognize her condition without probing because she could carry on a short conversation. Her nurses also considered Leona's cognitive abilities, short- and long-term memory, and decisionmaking to be severely impaired.

Both Leona's neighbor and Leona's sister-in-law testified that Leona was vulnerable to suggestion and that she relied upon Charles for every decision. Leona had paid off his defaulted business loan, and she had paid his child support arrears.

Charles claimed that before Leona entered the nursing home but while he was her attorney in fact, she gave him money because of his financial hardships. His wife had been unable to work since 2000 because of multiple sclerosis, his business had failed, and because of drought, the farm income had dropped. He stated that Leona would tell him to write out a check and then she would sign it. Charles admitted to keeping some of his mother's valuable items when her personal property was sold at auction; he claimed that Leona wanted him to have them. While Leona was in the nursing home, Charles also wrote himself checks from her account if he needed money. He said that he told her about the checks and that she did not object. Charles also admitted that in 2004, he cashed five of her monthly oil royalty checks and used the money for himself; he claimed that Leona had given him permission.

While Leona was in the nursing home, Dolores was being treated for terminal lung cancer but called Leona weekly and sometimes daily. Having access to Leona's financial statements, Dolores discovered that Charles was not paying the nursing home bills. Nor was he depositing farm income or oil royalty payments into Leona's account. She also discovered that Charles had written checks to himself from Leona's account. When confronted, he told Dolores he needed the money for his expenses. Dolores demanded that he account for these funds. He refused. In September 2004, she applied for an appointment of a guardian and conservator.

Dolores stated that she dismissed her first application because Leona was upset, but she had asked the guardian ad litem to further investigate, which he did. At the January 2005 hearing on Dolores' second application, the guardian ad litem reported to the court that a conservatorship was necessary. He had learned that Leona had incorrectly reported facts about her life during his first interview. He had concluded that she did not understand any specifics about her finances or assets.

In November 2004, Charles sold Leona's house and auctioned her personal property. The proceeds were several thousand dollars for the personal property and $45,500 for the house. Charles stated that he wrote a check for the full amount of the house proceeds to the nursing home to cover arrears. Yet, his 2005 accounting shows that he deposited $52,499.55 from the house and auction proceeds and paid only $22,400 to the nursing home. Dolores became concerned because large sums of Leona's money were still disappearing and because Charles had told her that Leona did not have enough money to remain in the nursing home. So in November 2004, she applied again for an appointment of a guardian and conservator. Charles claims that after this filing, Leona became very upset and wanted an attorney to fight the action.

Shortly after Dolores filed the second application, Charles removed Leona from the nursing home—over Dolores' objections—and took her to his home. At that time, Leona had $42,923 in three bank accounts. In 2004, her farm property was assessed for tax purposes at $174,630. The nursing home cost about $3,989 a month.

Leona's doctor agreed to discharge her from the nursing home after Charles assured him that he and his wife could care for Leona. Although Charles' wife was a registered nurse, she was disabled and, like Leona, needed a wheelchair. Charles used Leona's funds to pay his housekeeper for helping his wife with Leona's care and to build wheelchair ramps. Charles, his wife, and his housekeeper testified that Leona was happy living with Charles. The nursing home staff, however, was concerned about Leona's living with Charles because of her confusion and high risk...