Smith v. Smith (In re Estate)

• Decision Date: 18 December 2018
• Docket Number: Docket No. 45313
• Citation: 432 P.3d 6,164 Idaho 457
• Court: Idaho Supreme Court
• Parties: In the MATTER OF the ESTATE OF Victoria H. SMITH, Deceased. Vernon K. Smith, Jr., Individually, and in His Capacity as the Former Attorney-in-Fact, Agent and/or Fiduciary for Victoria H. Smith and/or the Estate of Victoria H. Smith, and in Any Other Capacity Relevant to these Proceedings; and Does 1-20, Plaintiff-Appellant-Appellant on Appeal, v. Joseph H. Smith, an Intestate Heir of the Estate of Victoria H. Smith, Deceased, Defendant-Respondent-Respondent on Appeal, and Noah G. Hillen, in His Capacity as Personal Representative of the Estate of Victoria H. Smith, Intervenor-Respondent on Appeal.

164 Idaho 457

432 P.3d 6

In the MATTER OF the ESTATE OF Victoria H. SMITH, Deceased.Vernon K. Smith, Jr., Individually, and in His Capacity as the Former Attorney-in-Fact, Agent and/or Fiduciary for Victoria H. Smith and/or the Estate of Victoria H. Smith, and in Any Other Capacity Relevant to these Proceedings; and Does 1-20, Plaintiff-Appellant-Appellant on Appeal,

v. Joseph H. Smith, an Intestate Heir of the Estate of Victoria H. Smith, Deceased, Defendant-Respondent-Respondent on Appeal,andNoah G. Hillen, in His Capacity as Personal Representative of the Estate of Victoria H. Smith, Intervenor-Respondent on Appeal.

Docket No. 45313

Supreme Court of Idaho, Boise, June 2018 Term.

Filed: December 18, 2018

Jones Gledhill Furhman Gourley, PA, Boise, for appellant. Erika P. Judd argued.

Ellis Law, PLLC, Boise, for respondent. Allen B. Ellis argued.

SUBSTITUTE OPINION. THE COURT'S PRIOR OPINION DATED JULY 30, 2018, IS HEREBY WITHDRAWN.

BRODY, Justice.

This case centers on the estate of Victoria H. Smith. The magistrate court ruled that Victoria died intestate after finding that her will was a product of the undue influence of her son, Appellant Vernon K. Smith Jr. Vernon appeals from that ruling, as well as an earlier partial summary judgment ruling that invalidated a series of transactions that transferred all of Victoria's assets to a limited liability company that Vernon owned and a corresponding judgment entered pursuant to Idaho Rule of Civil Procedure 70(b). We affirm the decisions of the magistrate court.

I. FACTUAL AND PROCEDURAL BACKGROUND

Victoria H. Smith was nearly 100 years old when she died on September 11, 2013. During her life she married Vernon K. Smith Sr., a lawyer who died of a heart attack in 1966. The couple had three children: Joseph H. Smith, Vernon K. Smith Jr., and Victoria A. (Smith) Converse. The Smith family members are referred to throughout this opinion as Victoria, Vernon Sr., Joseph, Vernon, and Victoria Converse.

Victoria and Vernon Sr. accumulated substantial real estate and business interests during their lifetimes. Vernon, who is also a lawyer, managed Victoria's legal and business affairs from the time he was licensed to practice law in 1971 until the time she died.

On February 14, 1990, more than twenty years before her death, Victoria prepared a holographic will. Vernon was the only person present when Victoria signed the document. The will stated in full:

In event of my death I give all my property, real and personal, to my son Vernon with the right to serve as Executor with-out bond. I have given my son Joseph real and personal property in my life time. I have given my daughter, Victoria Converse, personal property in my life time.

Holographic Will.

Dated February 14, 1990.

Victoria H. Smith

In 1999, Victoria executed a durable power of attorney making Vernon her attorney in fact. In 2008, following hospitalization for a fall, Victoria executed a second, more robust power of attorney. Vernon drafted both of these documents. The 2008 power of attorney read in full:

I, Victoria H. Smith, residing at 5933 Branstetter Street, Boise, Ada County, Idaho, born October 31, 1913, Social Security Number [ ] does herewith reaffirm, reconfirm and continue the ongoing appointment of my son, Vernon K. Smith Jr., born [ ], from the original appointment I made in 1999, and to remain authorized to act as my unconditional attorney in fact and agent under this Durable and Irrevocable Power of Attorney, and he is authorized to exercise all powers and authority I otherwise possess and could exercise in my own name and on my own behalf.

The power and authority vested in him is unconditional, unlimited and all inclusive, and he shall have the full and exclusive power and authority to manage and conduct all of my affairs, and to exercise all of my legal rights and powers, including any rights and powers I may acquire in the future, and specifically including, but without any intended limitation, to collect all funds, hold, maintain, improve, invest, lease, or otherwise manage or dispose of any or all of my real or personal property, or any interest therein; purchase, sell, mortgage, encumber, grant, option or otherwise deal in any way in any real property or personal property, tangible or intangible, or any interest therein; to borrow funds, to execute promissory notes, and to secure any obligation by mortgage, deed of trust or pledge; to conduct any and all business and banking needs, of any nature or kind, including the right to sign checks and draw funds on any and all my accounts, with the same authority as my own signature, to sign any and all agreements and documents in my behalf, to continue any corporations, limited liability companies and venture entities I presently have, and to organize, reorganize, merge, consolidate, capitalize, recapitalize, close, liquidate, sell, or dissolve any business interest, and to vote all stock, including the exercise of any stock options and any buy-sell agreements; to receive and to endorse checks and other negotiable paper, to deposit and to withdraw funds from any accounts, by check or by withdrawal slips, or otherwise, to transfer funds from any account and to do so from any bank, savings and loan, or any other financial institution in which I have funds now or in the future; to prepare, sign and file any and all tax returns and other governmental reports and documents, and to represent me in all matters before the Internal Revenue Service or State Tax Commission; to have access to all certificates of deposit, and any safety deposit box registered in my name, whether alone or with others, and to remove any property or papers located therein; to act unconditionally with regard to any funds, stocks, bonds, shares, investments, interests, rights, benefits or entitlements I may now have or hereafter come to have and hold; to engage in any administrative or legal proceedings or lawsuits regarding any rights and interests I have on matters therein; to create trusts and to transfer any interest I may have in property, whether real or personal, tangible or intangible, to the trustee of any trust, to engage and to dismiss agents, counsel, and employees, in connection with any matter, and for purposes, this power and authority vested in my son, Vernon K. Smith Jr., is unlimited, unconditional and all inclusive, and with the same authority and effect as though I had caused the action to be undertaken.

This Durable Power of Attorney is irrevocable and shall remain in full force and effect, having been coupled with adequate consideration, and shall not be affected, altered or impaired by the event of my death or disability, and shall continue in effect for all time, as it has been my long-standing intention and desire that my son, Vernon K. Smith Jr., shall be the sole and exclusive heir of my entire estate, as I have so declared openly in the past many years, because of his commitment, dedication, and devotion to my best interests, welfare, and financial well being.

On July 3, 2012, Vernon formed a limited liability company, VHS Properties, LLC ("VHS" are Victoria's initials). He named his mother and himself as the only members of the company. The next day, Vernon used the 2008 power of attorney to transfer all of Victoria's real and personal property to VHS Properties. He signed the transfer document on behalf of Victoria, as her attorney in fact, and on behalf of VHS Properties, as a member. Vernon then used the 2008 power of attorney to execute a second document, by which he transferred to himself all of Victoria's interest in VHS Properties. He once again signed the document on behalf of Victoria and also signed for himself. By the end of the day on July 4, 2012, Vernon had exclusive ownership and control of all of Victoria's assets.

In 2014, following Victoria's passing, Sharon Bergmann filed a petition seeking the probate of Victoria's estate. In her petition, Bergmann claimed that Vernon, her ex-husband, was in possession of Victoria's will and sought its probate for purposes of satisfaction of an outstanding judgment against him. Soon thereafter, Joseph filed a petition for formal adjudication of Victoria's intestacy and for his appointment as the personal representative of her estate. Within his petition, Joseph acknowledged the existence of the will—which he also claimed was in Vernon's possession—but asserted that Victoria's estate should be subject to intestate administration because the will was invalid as a product of Vernon's undue influence.

Vernon filed responses and objections to both petitions. Bergmann eventually withdrew her petition, acknowledging Joseph's priority, and remained in the proceedings as an interested party. Specific to Joseph's petition, Vernon denied the claim of undue influence and asserted that, regardless of that claim, intestate administration of Victoria's estate would prove meaningless because the estate did not hold any assets as a result of the series of transactions he completed using the 2008 power of attorney. Vernon also separately applied for formal probate of the holographic will and for his appointment as personal representative. Joseph objected to Vernon's petition. He did not contest the will's authenticity, but once again claimed that it was executed as a result of Vernon's undue influence.

Joseph later filed a second petition in conjunction with his earlier request for intestate administration, in which he claimed that Vernon was liable for breach of fiduciary duty and conversion of property. This petition sought, among other things, the restitution of Victoria's estate in light of Vernon's series of transactions, and an accounting of Victoria's income and expenditures made by Vernon. Vernon moved to dismiss the petition pursuant to Idaho Rule of Civil Procedure 12(b)(6) claiming that Joseph lacked standing to bring such claims where he was not a named beneficiary in the holographic will. Joseph voluntarily dismissed his...