In re Estate of Kindsfather

• Decision Date: 01 March 2005
• Docket Number: No. 03-582.,03-582.
• Citation: 326 Mont. 192,2005 MT 51,108 P.3d 487
• Parties: In the Matter of the ESTATE OF Frieda KINDSFATHER, Deceased, Judy Franks, Personal Representative, Respondent, v. Gary H. Kindsfather and Jacqueline P. Kindsfather, Appellants.
• Court: Montana Supreme Court

108 P.3d 487

2005 MT 51

326 Mont. 192

In the Matter of the ESTATE OF Frieda KINDSFATHER, Deceased,

Judy Franks, Personal Representative, Respondent, v. Gary H. Kindsfather and Jacqueline P. Kindsfather, Appellants.

No. 03-582.

Supreme Court of Montana.

Submitted on Briefs February 25, 2004.

Decided March 1, 2005.

For Appellants: Kenneth D. Peterson, Peterson and Schofield, Billings, Montana.

For Respondent: Mark D. Parker, Casey Heitz, Parker Law Firm, Billings, Montana.

For Estate: Richard A. Brekke, Brekke & Hoskins, PLLC, Billings, Montana.

Justice JAMES C. NELSON delivered the Opinion of the Court.

¶ 1 Gary H. and Jacqueline P. Kindsfather appeal a decision of the District Court for the Thirteenth Judicial District, Yellowstone County, denying their request for a declaratory judgment declaring the validity and effectiveness of a waiver-of-interest document executed by Frieda Kindsfather, now deceased, and ordering them to make all payments due Frieda's estate. We affirm.

¶ 2 We address the following issues on appeal:

¶ 3 1. Whether the District Court erred when it determined that the waiver-of-interest document could be rescinded because it was obtained by fraud.

¶ 4 2. Whether the District Court erred in determining that the waiver-of-interest document was invalid because it lacked consideration.

Factual and Procedural Background

¶ 5 Frieda died on September 1, 2002, at the age of 86. Frieda's Last Will and Testament, executed on October 14, 1988, was admitted to probate on September 9, 2002, and Letters of Administration were issued to her daughter, Judy Franks, as Personal Representative of Frieda's estate. In addition to Judy, Frieda was survived by two other daughters: Bonnie Wallila and Donna Walter. She was also survived by three sons: Tom Kindsfather, Ronald Kindsfather and Appellant Gary Kindsfather.

¶ 6 At the time of her death and for approximately 46 years prior thereto, Frieda resided on a farm in Laurel, Montana. The land is legally described as follows:

Tract 1, Certificate of Survey No. 1872; Tract 1, Certificate of Survey No. 1106; and E 1/2 (less Certificates of Survey No. 1106, 1511, 1839 and 1872), all in Section 12, Township 2 South, Range 23 East, MPM, Yellowstone County, Montana.

¶ 7 At issue in this appeal are approximately 163 acres of farm land on which Gary and his wife Jackie reside. Frieda sold this land to Gary and Jackie on a Contract for Deed in December 1984 for $126,000.00. The contract carried 9% interest and was payable in annual installments for 25 years. The first installment was due on July 1, 1986, in the amount of $17,010.82. Subsequent installments in the amount $12,877.82, were due on July 1st of each year thereafter. Frieda retained a life estate for her house, and she continued to live there until her death.

¶ 8 Gary and Jackie failed to make timely payments as required by the Contract for Deed resulting in a delinquency of their interest obligations in the amount of $65,000.00. Consequently, in late December 2001, Gary approached Frieda and told her that he did not believe the farm would produce enough income to pay off the delinquent interest obligation plus the principal balance remaining on the contract. Jackie also spoke with Frieda about the hard times she and Gary had encountered while trying to make ends meet on the farm. According to Gary and Jackie, Shane Osburn, a loan officer with the Yellowstone Bank of Columbus who was in charge of the escrow on the Contract for Deed, advised them to obtain a waiver-of-interest document from Frieda indicating her agreement to forgive all of the back interest. However, at the April 28, 2003 hearing in this matter, Osburn denied making any such recommendation.

¶ 9 On January 2, 2002, Jackie prepared the following document for Frieda to sign:

I, Frieda Kindsfather, on the day of 1/2/02 chose the right to wave [sic] the back interest due to me, on the land known as, the property of Gary and Jacqueline Kindsfather. As per the agreement on the contract for deed account number L676. The dates for the back interest include Jan. 1, 1996 to Dec. 31, 2001.

This document does not, on its face, provide any consideration for Frieda's benefit. And, although Judy held a Power of Attorney for her mother, neither Gary nor Jackie consulted with Judy about waiving the interest. Moreover, Judy testified that Frieda never spoke with her or any of her other siblings about waiving the interest on the deed.

¶ 10 On December 9, 2002, Gary and Jackie petitioned the District Court requesting that the Court enter a declaratory judgment that the waiver-of-interest document was valid and that, upon receipt of the unpaid balance of the Contract for Deed, the Yellowstone Bank of Columbus release the Warranty Deed held in escrow to Gary and Jackie. Judy, as Personal Representative of Frieda's estate, resisted the declaratory judgment action.

¶ 11 The District Court held a hearing on Gary and Jackie's petition on April 28, 2003. Because Judy raised a question about the authenticity of the waiver-of-interest document itself and Frieda's capacity to enter into that agreement, the court heard testimony from several individuals regarding whether Frieda had signed the document and Frieda's mental condition prior to her death.

¶ 12 Brett Lund of Rocky Mountain Crime Consultants testified that, in his opinion, the signature on the waiver-of-interest document did not appear to have been written by Frieda when compared to Frieda's known writing exemplars. However, Leslie Hutchins, a Notary Public for the Laurel Federal Credit Union, testified that Frieda, Gary and Jackie all signed the document in her presence on January 2, 2002. And, while Gary and Jackie both testified that they explained to Frieda in front of Hutchins the amount of interest Frieda would be waiving by signing the document, Hutchins testified that she did not hear either Gary or Jackie inform Frieda of the amount of interest Frieda would be waiving.

¶ 13 Hutchins also testified that when she notarized Frieda's signature on the document, Frieda appeared to have all of her faculties about her and Frieda claimed that she understood the document. Frieda's family physician, Dr. Robert Ulrich, testified by deposition that prior to Frieda's death, he treated her for stomach problems and hypertension, but that he had not noticed any signs of dementia or Alzheimers disease.

¶ 14 On June 27, 2003, the court entered its Findings of Fact, Conclusions of Law and Order wherein the court determined that the waiver-of-interest document could be rescinded because it had been fraudulently obtained and because it lacked consideration. The court did not address the authenticity of the document itself. Because it determined that the document was invalid, the court denied Gary and Jackie's request for a declaratory judgment and ordered that they make all payments due Frieda's estate on the Contract for Deed, together with interest and back interest, on or before August 31, 2003. Gary and Jackie appeal from the District Court's order.

Standard of Review

¶ 15 We review a district court's findings of fact to determine whether those findings are clearly erroneous. Galassi v. Lincoln County Bd. of Com'rs, 2003 MT 319, ¶ 7, 318 Mont. 288, ¶ 7, 80 P.3d 84, ¶ 7 (citing Wareing v. Schreckendgust (1996), 280 Mont. 196, 202-03, 930 P.2d 37, 41). A district court's findings are clearly erroneous if they are not supported by substantial credible evidence, if the trial court has misapprehended the effect of the evidence, or if a review of the record leaves this Court with the definite and firm conviction that a mistake has been committed. Galassi, ¶ 7 (citing Daines v. Knight (1995), 269 Mont. 320, 325, 888 P.2d 904, 906; Interstate Production Credit v. DeSaye (1991), 250 Mont. 320, 323, 820 P.2d 1285, 1287). We review a district court's conclusions of law to determine whether the court's interpretation of the law is correct. City of Great Falls v. DPHHS, 2002 MT 108, ¶ 10, 309 Mont. 467, ¶ 10, 47 P.3d 836, ¶ 10 (citing Safeco v. Montana Eighth Judicial Dist., 2000 MT 153, ¶ 12, 300 Mont. 123, ¶ 12, 2 P.3d 834, ¶ 12).

Issue 1.

¶ 16 Whether the District Court erred when it determined that the waiver-of-interest document could be rescinded because it was obtained by fraud.

¶ 17 To establish a prima facie case of actual fraud, the party asserting the claim must establish the following nine elements: (1) a representation; (2) the falsity of that representation; (3) the materiality of the representation; (4) the speaker's knowledge of the representation's falsity or ignorance of its truth; (5) the speaker's intent that the representation should be acted upon by the person and in the manner reasonably contemplated; (6) the hearer's ignorance of the representation's falsity; (7) the hearer's reliance upon the truth of the representation; (8) the hearer's right to rely upon the representation; and (9) the hearer's consequent and proximate injury or damages caused by their reliance on the representation. State ex rel. Ins. Fund v. Berg (1996), 279 Mont. 161, 175, 927 P.2d 975, 983 (citing Davis v. Church of Jesus Christ (1993), 258 Mont. 286, 293, 852 P.2d 640, 644; Lee v. Armstrong (1990), 244 Mont. 289, 293, 798 P.2d 84, 87).

¶ 18 Actual fraud is always a question of fact. Section 28-2-404, MCA. A mere suspicion of fraud is not sufficient, fraud must be proven by a preponderance of the evidence. Barrett v. Holland & Hart (1992), 256 Mont. 101, 106, 845 P.2d 714, 717 (citing Batten v. Watts Cycle and Marine, Inc. (1989), 240 Mont. 113, 117, 783 P.2d 378, 380-81,cert. denied, 494 U.S. 1087, 110 S.Ct. 1826, 108 L.Ed.2d 955 (1990)). In order to sustain the burden of proof, the party asserting fraud must prove each of the nine elements. Barrett, 256 Mont. at 106,845 P.2d at 717.

¶ 19 To determine whether fraud was committed in this case, we will examine each of the elements in turn.

1. A Representation...