Thiel v. Miller

• Decision Date: 28 June 2005
• Docket Number: No. WD 63471.,WD 63471.
• Citation: 164 S.W.3d 76
• Parties: Donald J. THIEL, et al., Appellants, v. Harold L. MILLER (Deceased), et al., Respondents.
• Court: Missouri Supreme Court

Page 76

164 S.W.3d 76

Donald J. THIEL, et al., Appellants, v. Harold L. MILLER (Deceased), et al., Respondents.

No. WD 63471.

Missouri Court of Appeals, Western District.

May 10, 2005.

Rehearing Denied June 28, 2005.

COPYRIGHT MATERIAL OMITTED

Donald G. Stouffer, Marshall, MO, for appellants.

Errol D. Taylor, St. Joseph, MO, for respondents.

Before EDWIN H. SMITH, C.J., and ELLIS and HOWARD, JJ.

EDWIN H. SMITH, Chief Judge.

Diane Adell Burtrum, Robert Clay Killion, Nina Claire Tanner, Barbara Thiel, Michael M. Reece, Phillip Reece, and Donald J. Thiel appeal from the judgment of the Circuit Court of Daviess County for Day Miller (DM), individually, and as the defendant ad litem for Harold L. Miller (HM), deceased,¹ on the appellants' claim against DM and HM for legal malpractice. The appellants, other than Donald J. Thiel (Thiel), are legatees under the wills of Donald M. (Donald) and Clara M. (Clara) Reece. Donald died on August 26, 1992, while Clara died on December 21, 1997. Thiel is the personal representative of Clara's estate. In their petition, the appellants alleged that HM was negligent with respect to legal services he provided the Reeces in 1985 and 1992. They further alleged that they were damaged as a result of his negligence in that it caused Clara's estate to have to pay federal estate taxes and probate expenses totaling $205,486. The appellants' petition also named DM as a defendant, alleging that HM was acting as DM's agent or partner in rendering legal services to the Reeces. The case was transferred for trial from Dekalb County to Daviess County on a change of venue.

The appellants raise two points on appeal. In Point I, they claim that the trial court erred in concluding that HM was not negligent in providing legal services to the Reeces, as alleged in their petition, because its finding in support thereof, that he exercised that degree of skill and diligence ordinarily exercised by an attorney under the same or similar circumstances, was against the weight of the evidence. In Point II, they claim that the trial court erred in concluding that DM was not liable for HM's negligence in providing legal services to the Reeces because the court's finding, that HM, in providing legal services to the Reeces, was not acting as DM's agent, was against the weight of the evidence.

We affirm.

Facts

HM, a licensed attorney who practiced law in Maysville, Missouri, before his death in 1993, was a longtime friend of Donald. In October of 1982, HM drafted wills for the Reeces, both of which provided that, upon the death of the survivor, and after providing for the care of Donald's mother and making certain charitable distributions, the remainder of the property was to be divided among the appellants, other than Thiel, who are Donald's nephews and Clara's sisters. The Reeces had no children.

On May 29, 1985, Clara executed an "EXCLUSIVE AND IRREVOCABLE POWER OF ATTORNEY" prepared by HM, which designated Donald and her brother-in-law, Thiel, as her joint attorneys-in-fact, to act jointly or separately in performing the powers enumerated therein. The POA prepared for Clara was not a durable POA, despite the adoption several years earlier of the Missouri Durable Power of Attorney Act, §§ 486.550-486.595.²

In the years that followed, both Clara and Donald experienced worsening health. Clara, who was blind in one eye as the result of a childhood accident, developed glaucoma in the other eye and gradually lost her sight, a condition that caused her to move into a nursing home in Maysville in 1986. By late 1989 or early 1990, Clara had developed some degree of dementia such that she could no longer carry on conversations with her friends and relatives. On September 10, 1993, Clara was declared totally disabled by the Circuit Court of Saline County, which appointed Thiel and his wife Barbara as her co-conservators.

In late June or early July of 1992, Donald, who had a history of heart problems and diabetes, was admitted to a hospital in St. Joseph, Missouri. While hospitalized, Donald asked HM to draft a trust. HM prepared a declaration of trust which designated Donald and Clara as the settlors and Donald and his friend Hershel Shepherd as the trustees of the "Don Reece and Clara Reece Trust." On July 2, 1992, Donald executed the declaration of trust, individually, and on behalf of Clara as her attorney-in-fact, under her 1985 POA. In an addendum, prepared by HM and signed by Donald for himself individually and for Clara under the POA, all of the Reeces' property, both real and personal, was transferred to the trust.

Donald died on August 26, 1992, approximately two months after the execution of the trust. Subsequently, prompted by a concern over the validity of the trust, Shepherd, as personal representative of Donald's estate, filed a petition to determine title to the assets in the trust in the Probate Division of the Circuit Court of Dekalb County. In a judgment entered September 13, 1994, the probate division declared that the Reeces' 1992 trust was void:

By virtue of the fact that ... Clara Reece was physically and mentally incapacitated, on or about July 2, 1992, and remained so thereafter and to this time, and for the further reason that the ... Exclusive and Irrevocable Power of Attorney [drafted by HM for her in May of 1985] was not "durable," the actions of Donald M. Reece, signing and acknowledging the Trust Declaration, and its Addendum, were of no legal force and effect, and accordingly were null and void such that no "Trust" was thereby created.

Clara passed away on December 21, 1997. On December 9, 1999, the appellants filed a two-count petition for damages for legal malpractice in the Circuit Court of Dekalb County. The petition named as defendants both HM and DM, who, before HM's death on April 21, 1993, practiced law in the same office in Maysville, Missouri. Count I alleged that HM was negligent in failing to draft a durable POA that would have given Donald, her attorney-in-fact, authority to make dispositions of the couple's property regardless of Clara's incapacity or disability, and drafting an invalid declaration of trust, which failed to accomplish the purpose of avoiding estate taxes and the expense and delay of probate. Count II alleged that HM was negligent for failing to pursue an alternative means of avoiding estate taxes once he knew, or should have known, that the 1992 trust was invalid, by opening a conservatorship in 1992 for Clara, and then taking advantage of the provisions of § 475.094, which allows the probate court to take certain steps to keep a disabled protectee's estate from being "substantially depleted" by federal estate taxes. The petition sought to hold DM liable for HM's negligence on the ground that HM, when providing legal services to the Reeces, was acting as his partner or agent of DM.

On December 9, 1999, the appellants filed a motion to appoint DM as defendant ad litem for HM, pursuant to § 537.021, which was sustained on December 27, 1999. On January 3, 2000, the appellants moved for a change of venue pursuant to Rule 51.03.³ On February 14, 2000, the motion was sustained, and the case was transferred to the Circuit Court of Daviess County.

The case was tried to the court on November 6-7, 2002. Robert Ravenhill, a former circuit judge, appeared as an expert witness for the appellants, and testified that HM's failure to draft a durable POA for Clara in 1985, given her deteriorating health and the possibility that she would subsequently become incapacitated, constituted a failure to exercise the degree of skill and diligence ordinarily used by an attorney under the same or similar circumstances. Ravenhill also testified that, in July 1992, HM attempted to draft an A/B trust, which was designed to avoid estate tax liability upon the death of the surviving spouse, while at the same time providing support for the remainder of that spouse's life, but the declaration of trust failed to include necessary provisions for the disposition of the funds in the "B" trust, so the trust failed to accomplish the goal of avoiding estate tax liability. Ravenhill further testified that HM's failure to properly draft the A/B trust constituted a failure to exercise the degree of skill and diligence ordinarily used by an attorney under the same or similar circumstances.

When asked, on direct examination, what an attorney "ought to do" when, as in the Reeces' situation, there is no durable POA or valid trust to effect estate tax savings, Ravenhill replied that "[o]bviously, you'd have to go to the probate court in the jurisdiction where she resides and establish a conservatorship." Ravenhill then stated that, if an attorney went this route, "all you could do is make gifts ... if you knew who to make them to and the probate court would allow same." Subsequently, Ravenhill testified: "In 1992, when Don Reece was alive, if there had been a conservatorship established for Clara Reece, that the conservator of the estate and Don Reece could have gone to the probate court and done enough to divide the estate and avoid probate tax — if they had both gone. I see no barrier to that."

Ravenhill also testified that the amount of estate taxes which could have been avoided had HM not been negligent in his legal services was $166,608. Ravenhill derived this figure from the Internal Revenue Service Form 706 filed for Clara, which also showed a total estate of $1,110,547. The appellants also claimed that, as a result of HM's negligence, the estate incurred both attorney's and personal representative's fees as probate costs, so that the total damages claimed by the appellants was $205,486.

At trial, the appellants also presented the deposition testimony of DM, who stated that he and HM were never partners. According to DM's deposition testimony, from 1975 until August of 1989 he "was an independent contractor paid a straight salary by Harold." After DM bought "the law...