Landmark Trust (USA), Inc. v. Goodhue

• Decision Date: 21 September 2001
• Docket Number: No. 99-381.,99-381.
• Citation: 782 A.2d 1219
• Court: Vermont Supreme Court
• Parties: LANDMARK TRUST (USA), INC. and Scott Farm, Inc. v. John GOODHUE, Mary H. Panzera and First Vermont Bank & Trust Co.

782 A.2d 1219

LANDMARK TRUST (USA), INC. and Scott Farm, Inc. v. John GOODHUE, Mary H. Panzera and First Vermont Bank & Trust Co.

No. 99-381.

Supreme Court of Vermont.

September 21, 2001.

Peter W. Hall and Mary E. Grady of Reiber, Kenlan, Schwiebert, Hall & Facey, P.C., Rutland, for Plaintiffs-Appellees.

James B. Anderson and John A. Serafino of Ryan Smith & Carbine, Ltd., Rutland, for Defendant-Appellant Goodhue.

Hanson S. Reynolds of Rackemann, Sawyer & Brewster, Boston, Massachusetts, and Timothy W. Caldwell, Lyme, New Hampshire, for Defendant-Appellant Panzera.

Present: DOOLEY, MORSE, JOHNSON and SKOGLUND, JJ., and CHEEVER, Superior Judge, Specially Assigned.

JOHNSON, J.

This dispute arose from the gift by Fred Holbrook, a noted Vermont apple orchardist, of his farm to plaintiffs Scott Farm, Inc., and Landmark Trust (USA), Inc., a land preservation organization. Defendants John Goodhue, a fourth cousin and guardian for Holbrook, and Mary Panzera, Holbrook's sister, sought to challenge the transfer of Scott Farm to plaintiffs on the ground that Holbrook was not competent at the time of the transfer in June, 1995. Plaintiffs brought a declaratory judgment action to determine the validity of the transfer. After a bench trial, the Windham Superior Court ruled that the transfer was valid. We affirm.

Fred Holbrook is a life long bachelor who has lived most of his life on Scott Farm in Dummerston, Vermont. Holbrook had operated Scott Farm as an apple orchard since the early 1950s and continued to work on the farm until the fall of 1995. Holbrook was the sole shareholder in Scott Farm, Inc., and was keenly interested in preserving the farm as an apple orchard. The Landmark Trust (USA), Inc. is a nonprofit organization dedicated to land preservation. Its headquarters are also located in Dummerston, and the president of the organization is David Tansey. Landmark is a subsidiary of the Landmark Trust, an historical preservation society located in Great Britain.

Holbrook was the majority stockholder of the farm, but shared ownership with his mother Anna Holbrook, and sister, Mary Panzera. Anna Holbrook died in 1993 and left the family home to her two children, Fred and Mary. Fred exchanged his half interest in the house with his sister Mary for the remaining shares of stock. The transaction made Holbrook the sole shareholder in August 1994. The monetary value of the half interest in the house was considerably greater than the value of the shares, but the consolidation of stock allowed Holbrook to carry out his intent to preserve the farm.

On June 23, 1995, Holbrook executed a deed of gift donating the stock of Scott Farm to Landmark. The value of the farm was approximately $1.4 million, and the gift to Landmark included $120,000 operating capital in addition to land, buildings and equipment comprising the farm. As part of the agreement, Holbrook retained the right to use his residence for his lifetime, rent free, and to claim any personal property within one year that was stored on the farm. At the closing, Holbrook received a $45,000 dividend from the farm's cash account.

In July 1995, Holbrook completed his estate plan by executing a will and inter vivos trust. Included in this instrument was a $10,000 bequest to his sister, Mary Panzera and a residuary clause that gave the trustees the right to decide which charities would receive the remainder of Holbrook's estate. Holbrook was unsatisfied with these aspects of his will and trust as he had repeatedly stated that he did not want his sister to inherit from him. In August 1995 Holbrook's will and trust were amended to omit any bequest to his sister and redirect the residuary of Holbrook's estate to Landmark.

In the fall of 1995, Fred Holbrook's mental acuity began to deteriorate. Although several of Holbrook's advisors and associates had previously noticed episodes of confusion, the fall of 1995 marked a substantial and rapid decline in Holbrook's condition. Holbrook began to have difficulty understanding financial matters and the arrangement with Landmark. He also experienced confusion in performing errands such as picking up a prescription at the pharmacy. Holbrook was unable to recognize his attorney, Ken Fisher, during a chance meeting on the streets of Brattleboro. Additionally, Holbrook began to lose interest in the day to day workings of Scott Farm, although in the middle of harvest season.

At the time that Holbrook began experiencing more difficulties with his cognitive functioning, John Goodhue, Holbrook's fourth cousin from Peducah, Kentucky arrived at the farm and began living in Holbrook's house. Goodhue, who did not yet know about the gift to Landmark, expressed an interest in acquiring Scott Farm. In December 1995, Goodhue and Panzera petitioned the probate court to have Holbrook placed under guardianship. Goodhue was appointed Holbrook's involuntary guardian in March 1996. Anticipating a challenge to the validity of the transfers, Landmark filed a declaratory judgment action against Goodhue and Panzera, and defendants counterclaimed.

The trial court held a six day trial at which extensive evidence was heard on the issue of Holbrook's competence at the time he executed the deed, the trust and will, and the trust amendments. The court held that all transfers were valid. The court's findings of fact were extremely through, encompassing 240 separate findings over 75 pages of text. On balance, the court found Landmark's account of the events and of Holbrook's mental state credible. The court acknowledged that at the time of the gifts Holbrook was displaying some of the effects of Alzheimer's disease, which might call his competence into question, but that Holbrook was sufficiently cognizant to appreciate the nature and effect of his gifts. The court found that giving Scott Farm to Landmark was consistent with the preservation goals that Holbrook had clearly expressed for years. This appeal followed.

Defendants' principal claim on appeal is that the court erred in concluding that Fred Holbrook was competent at any time relevant to the transfer of his interest in Scott Farm. First, defendants argue that the court applied the wrong standard for competence by which it determined that the transfers were valid. Second, defendants raise numerous challenges to the court's findings of fact. Defendants allege that the court's findings are erroneous because of contrary or modifying evidence. They argue that the court should have weighed certain evidence about Holbrook's mental state and competence more heavily than other evidence on the same issue. According to defendants' view of the evidence, Holbrook was not competent to execute the disputed transfers. Additionally, defendants claim that the court erred in relying on medical conclusions about the stages of Alzheimer's disease detailed in O'Brien v. Belsma, 108 Or.App. 500, 816 P.2d 665 (1991), that were not supported in this trial. Finally, defendants claim that the gifts were the result of undue influence by David Tansey on behalf of his employer, Landmark.

I.

Defendants first claim that the court erred in applying the standard for testamentary capacity to the inter vivos transfers. Defendants claim the tests are different and that competence to enter a highly complex inter vivos transaction should be different from the competence necessary to execute a will. In Vermont, the test for testamentary capacity is "whether the testator had sufficient mind and memory at the time of making the will to remember who were the natural objects of his bounty, recall to mind his property, and dispose of it understandingly according to some plan formed in his mind." In re Estate of Burt, 122 Vt. 260, 263, 169 A.2d 32, 34 (1961). The trial court based its standard for donative capacity, however, on Estate of Holton v. Ellis, 114 Vt. 471, 49 A.2d 210 (1961), which defendants agree sets forth the standard for inter vivos gifts. In Holton, we held that a donor has sufficient mental capacity to make a gift when the donor understands and comprehends in a reasonable manner the nature and effect of the gift. Id. at 488, 49 A.2d at 222. We need not address the question of whether the standard set forth in Holton is indeed different from the standard for testamentary capacity because we agree with the trial court and defendants that Holton sets forth the proper inquiry for capacity to make an inter vivos gift.

Defendants argue, however, that the trial court should have reached a different result when it applied the Holton standard and that its reliance on the facts of that case is misplaced because the gift in Holton involved a very simple transaction. In Holton, a donor in her eighties was diagnosed with senile dementia some 21 months after creating a joint bank account with a plumber. The question for the court was whether the donor had sufficient mental capacity at the time she created the account. Although it is true that Holton involved a transaction that was less complex than the one entered by Holbrook, and therefore the Holton Court may have had no difficulty in finding the transaction was easily understood by the donor, the Holton case does not compel a different result here or the application of a different standard. The real dispute in this case is not over the standard, but how it was applied by the trial court. This is a mixed question of law and fact that is inextricably entwined with whether the trial court's findings of fact are sound on the evidence, and whether those facts support the trial court's conclusion. Where the trial court applied its factual findings to the correct legal standard, we will not disturb its conclusion if it is supported by the findings. See City of Burlington v. Davis, 160 Vt. 183, 184, 624 A.2d 872, 873 (1993) (court's conclusions which addressed mixed questions of law and fact will be upheld if supported by the findings); Gallagher v. McCarthy, 148 Vt. 258, 263, 532 A.2d...