In re Jones

• Decision Date: 11 September 2012
• Docket Number: No. 30008–1–III.,30008–1–III.
• Parties: In re the ESTATES OF Harvey L. JONES and Mildred L. Jones, Deceased.
• Court: Washington Court of Appeals

170 Wash.App. 594

287 P.3d 610

In re the ESTATES OF Harvey L. JONES and Mildred L. Jones, Deceased.

No. 30008–1–III.

Court of Appeals of Washington,

Division 3.

Sept. 11, 2012.

Tom Scribner, Attorney at Law, Walla Walla, WA, for Appellant.

Michael Rex Tabler, Paul Lauzier Foundation, Ephrata, WA, for Respondent/Cross–Appellant.

KORSMO, C.J.

[170 Wash.App. 598]¶ 1 This contest over the family farming operation pits two sisters against two brothers. We conclude that the trial court correctlydetermined that there was insufficient evidence of undue influence to proceed to trial and affirm the trial court's order granting summary judgment.

FACTS

¶ 2 Harvey Jones and Mildred Jones had four children: Will Jones, Dennis Jones, Teresa Engbretson, and Mary Ann Sealock.¹ Harvey and Mildred were farmers in Yakima County, where they owned 178 acres of orchard and crop land. They also owned 139 shares of Harvey L. Jones Farms, Inc. (HLJ), a corporation that owned 54 acres of orchard and crop land. Will and Dennis owned the remaining 66 shares of HLJ, which orchard and crop land. Will and Dennis owned the remaining 66 shares of HLJ, which was operated by Harvey, Will, and Dennis. Will and Dennis each also owned their own orchard and farm land that was farmed by HLJ. After experiencing financial difficulties, HLJ obtained financing from the Farm Service Agency (FSA). The FSA loan was funded in early 2003, and payment of the FSA loan to HLJ was personally guaranteed by Harvey, Mildred, Will and his wife, and Dennis and his wife. All parties also were required to pledge their personally owned farm land as collateral.

¶ 3 On February 21, 2003, Harvey, Mildred, Will and his wife, and Dennis and his wife signed a Farming Agreement. The Farming Agreement provided in part:

That all parties will continue to own and/or lease their agricultural real and personal property (land, equipment, crops and receivables thereof) to Harvey L. Jones Farms, Inc. until all indebtedness is retired.

Clerk's Papers (CP) at 275. The parties also agreed that the corporation would not pay rent and would receive all income from the joint farming effort.

¶ 4 Harvey and Mildred had reciprocal wills that were executed in 1995. Upon the death of one of the spouses, all property owned by the decedent was to go to the surviving spouse, with most of the property to be put in trust for the benefit of the surviving spouse who was named as the trustee. Upon the surviving spouse's death, both wills provided that the estate would go to the four children “share and share alike.” CP at 48, 304.

¶ 5 Harvey died on May 24, 2003, On August 4, before Harvey's will was admitted to probate, Will and Dennis, with the assistance of their financial advisor Eric Weinheimer, had Mildred sign multiple documents, referred to by the parties as the “2003 documents.” ² These documents included: (1) Agreement Between Shareholders for Transfer of Stock by Gift, (2) Right of First Refusal, and (3) Agricultural Property Lease–Option. Under the Agreement for Transfer of Stock by Gift, Mildred gifted to Will and Dennis the 139 shares of HLJ that she and Harvey had owned as their community property. Under the Agricultural Lease Option, Mildred agreed to lease the 178 acres (from community property) to Will and Dennis personally for $50,000 per year for 16 years, for a total of $800,000. If Will and Dennis elected to buy the property, the purchase price was $800,000 and “the base lease payments of $50,000 per year paid by Lessee under the Lease will be applied as a reduction to the Purchase Price on closing.” CP at 247.

¶ 6 The Harvey Jones will was admitted to probate on January 16, 2004, and Mildred was appointed the personal representative. The will directed that a trust be established for the benefit of Mildred, with Mildred as the trustee, but the trust was never established.

¶ 7 Mildred died on July 17, 2007. Will Jones was appointed the personal representative of Mildred's estate, as well as successor personal representative of the Harvey Jones estate. As personal representative, Will hired an appraiser to appraise the 178 acres of farm land owned by Harvey and Mildred. The appraisal report dated November 8, 2008 valued the property at $1,050,000 as of May 24, 2003.

¶ 8 On November 24, 2007, Teresa and Mary Ann filed a creditor's claim against Mildred's estate, alleging that Mildred breached fiduciary duties causing money damages when she entered the agreements to gift Harvey's community property interest in the stock and to lease Harvey's community property interest in the farm land. They also alleged that as to Mildred's community property interest in these transactions, they were entitled to money damages from her estate resulting from fraud, undue influence, misrepresentation, and mental incompetency. On December [170 Wash.App. 601]7, 2007, Will and Dennis filed a creditor's claim. Teresa and Mary Ann also filed a petition under the Trust and Estate Dispute Resolution Act (TEDRA), chapter 11.96A RCW, on January 14, 2010, seeking rescission of the 2003 agreements. Their theories of rescission were largely the same ones asserted in the creditor's claim.

¶ 9 In December 2009, Will and Dennis formed Jones Farms, LLC. On January 8, 2010, Will filed an Intention to Exercise Option, proposing to sell the 178 acres of farm land to Jones Farms, LLC for a purchase price of $285,389.13 and an assumption of debt (to MetLife and FSA) totaling $185,417.87.

¶ 10 On January 29, 2010, the two estates filed a motion for summary judgment, seeking dismissal of all claims. The estates argued that the TEDRA rescission claim was time barred and the sisters were otherwise estopped from seeking the requested relief. The estates also argued that the sisters could not seek both damages and rescission. In turn, the sisters argued that because of the confidential relationship between the brothers and Mildred, the brothers bore the burden of proving there was no undue influence. They also argued that the time bar and estoppel arguments failed because they were not aware of the basis of their claims until after Mildred died.

¶ 11 The motion for summary judgment was argued before the Honorable F. James Gavin on June 8, 2010. Judge Gavin denied the motion with respect to the damage claims, deciding that there were material questions of fact about what and when the sisters knew about the agreements. The court agreed that Teresa and Mary Ann could not seek damages and also ask for rescission; it ordered them to make an election of remedies. The sisters elected to pursue rescission of the 2003 documents and abandoned their creditors' claim for monetary damages.

¶ 12 On March 15, 2011, the estates filed a second motion for summary judgment on the basis that Teresa and Mary Ann had no ability to pursue a rescission claim since they were strangers to the agreements they sought to rescind and had not offered to restore the estates. The motion also renewed the arguments that the challenge was time barred and the sisters were estopped. The sisters argued that the motion had already been decided by Judge Gavin and specified several material questions of fact left to be resolved.

¶ 13 The parties argued the second motion for summary judgment before Judge Pro Tempore Douglas Peters on April 21, 2011. Judge Peters ruled that Teresa and Mary Ann had the right to seek rescission under the TEDRA statute, but there was no undue influence and that the 2003 documents were therefore valid. He granted the motion for summary judgment, but denied the estates' request for attorney fees against Teresa and Mary Ann.

¶ 14 After their motion for reconsideration was denied, Teresa and Mary Ann timely filed an appeal. The estates cross appealed, contending that the trial court erred in refusing to award attorneys fees.

ANALYSIS

¶ 15 The appeal presents two arguments which we will address as a single issue. We will then address the estates' cross appeal claim that they were wrongly denied attorney fees.

Direct Appeal.

¶ 16 The sisters argue that Judge Peters did not have the authority to again consider the summary judgment after Judge Gavin had previously ruled, and that they provided sufficient evidence to proceed to trial on their undue influence claim. We disagree and therefore do not address the estates' claims that the sisters could not rescind an agreement to which they were not parties, the action was untimely, and the sisters had not offered to return the estate to its original position.

[170 Wash.App. 603]¶ 17 This court reviews rulings on summary judgment in accordance with long-settled standards. We review a summary judgment de novo; our inquiry is the same as the trial court. Lybbert v. Grant County, 141 Wash.2d 29, 34, 1 P.3d 1124 (2000). The facts, and all reasonable inferences to be drawn from them, are viewed in the light most favorable to the nonmoving party. Id. If there is no genuine issue of material fact, summary judgment will be granted if the moving party is entitled to judgment as a matter of law. Id.,Trimble v. Wash. State Univ., 140 Wash.2d 88, 93, 993 P.2d 259 (2000).

¶ 18 These general principles of summary judgment review are supplemented in this context by two other principles. Where, as here, a party is required to establish its case by “clear, cogent, and convincing evidence,” this court recently noted:

When a challenged factual finding is required to be proved at trial by clear, cogent, and convincing evidence, we incorporate that standard of proof in conducting substantial evidence review. A party claiming undue influence must prove it by clear, cogent, and convincing evidence. In re Estate of Eubank, 50 Wash.App. 611, 619, 749 P.2d 691 (1988). When such a finding is appealed, the question to be resolved is not merely whether there is substantial evidence to support it but whether there is substantial evidence in light of the “highly probable” test. In re Welfare of Sego, 82 Wash.2d 736, 739, ...