Ward v. Lange

• Decision Date: 23 May 1996
• Docket Number: No. 19295,19295
• Citation: 553 N.W.2d 246,1996 SD 113
• Parties: Gary WARD, as Agent of the Estate of Walter O'Keefe, Deceased, Plaintiff and Appellee, v. Gail LANGE and Loren Lange, Defendants and Appellants. . Considered on Briefs
• Court: South Dakota Supreme Court

Page 246

553 N.W.2d 246

1996 SD 113

Gary WARD, as Agent of the Estate of Walter O'Keefe Deceased, Plaintiff and Appellee, v. Gail LANGE and Loren Lange, Defendants and Appellants.

No. 19295.

Supreme Court of South Dakota.

Considered on Briefs May 23, 1996.

Decided Sept. 4, 1996.

Dennis Duncan and Jeffrey Cole of Zimmer, Duncan and Cole, Parker, for plaintiff and appellee.

Kenneth D. Bertsch of Ulmer, Hertz & Bertsch, Menno, for defendants and appellants.

KONENKAMP, Justice.

¶1 This case requires us to determine the extent to which individuals contracting with elderly, impaired persons may become liable as fiduciaries. Defendants, having been found as a matter of law to have acted in a fiduciary capacity in dealings with their uncle, appeal an adverse jury verdict. We affirm.

BACKGROUND

¶2 Walter O'Keefe was 101 years old when he died on November 12, 1992. A retired farmer, he had been residing at the Pioneer Memorial Hospital and Nursing Home in Viborg since 1983. During those years, most of his personal and financial affairs were handled by his half-sister, Vera Lange, acting by power of attorney. Walter had three income sources: social security, a veteran's pension stemming from his service in World War I, and rental income on 540 acres of farmland in Turner County. Originally the fee owner, Walter in 1981 deeded 300 acres to Vera and 80 acres each to Vera's three children, Gail and Loren Lange, and Bernetta Woelz, reserving to himself a life estate in the property. The land was leased at $10 to $15 an acre, with the income used to pay real property taxes and the balance for Walter's care.

¶3 A tenant contacted Vera in 1989 about having the lease property irrigated. Vera herself was not interested, but Gail and Loren saw it as an opportunity. Loren told his mother, "Well, I will tell you what I will do, I will put up the money [by pledging his CD as security for a loan] ... [t]hat will cover the money we need if after operating expenses are done the remainder of the money goes back to satisfy this note." Dealing with Vera, as Walter's agent, in 1989, 1990, and 1991, Gail and Loren arranged for leases authorizing the placement of irrigation units on 400 acres of the land, considerably increasing its rental value. They then subleased the property back to the original lessees on more lucrative terms, but kept all the proceeds to pay on the loan for installing the irrigation equipment. Loren was later asked: "What was Walter O'Keefe supposed to get out of this transaction?" He replied:

Well, Walter O'Keefe was going to retain the same cash payments that he had always been getting. Had we not put the well in, he would have been getting $10 an acre, so he continued to get the same amount.

Yet due to an "oversight," as Loren put it, no rental funds were set aside for Walter for several years. With these leases on Walter's life estate property, Gail and Loren Lange collected a total of $54,870 in net profit. They declare it was used to repay their irrigation loans. On September 3, 1991, two days before Vera's death, Gail and Loren had Walter give them his power of attorney. Thereafter, they handled all his personal and financial affairs. At the same time, Loren acted as executor for Vera's estate and the brothers continued the same arrangement on the life estate, leasing the property from Walter.

¶4 Vera had $61,298.02 in three bank accounts. One account was in her name only and the other two were joint accounts with Gail. The two joint accounts totalled $35,137. Bank records reveal that over the years $54,468 of Walter's income had been deposited into these joint accounts. Gail and Loren took $18,000 from one of the joint accounts to purchase a $25,000 certificate of deposit in their names. According to them, interest earned on the CD was to be set aside for Walter's benefit. The account in Vera's name was the only one Loren originally reported on the South Dakota Inheritance Tax Return. ¹ Upon Walter's death in November 1992, Gail was appointed as agent for Walter's Estate.

¶5 Aggrieved by what she suspected were improprieties, Gail and Loren's sister, Bernetta, petitioned the court for an examination pursuant to SDCL 30-17-4. ² A hearing was held on June 13, 1993. Gail later resigned as agent and Gary Ward was appointed in his stead, and in that capacity, he brought the present action against Gail and Loren, seeking both compensatory and punitive damages for breach of fiduciary duty, conversion, fraud and deceit.

¶6 As part of the Estate's motion for summary judgment, counsel presented bank records, probate documents, deposition transcripts, answers to interrogatories, medical records, and affidavits from experts, including one from an appraiser and another from an experienced attorney-trust officer, who opined that Gail and Loren acted in a fiduciary capacity for Walter since 1988. In response, Gail and Loren submitted no affidavits or other opposing evidence, but contended that based on the state of the record material issues of fact precluded granting the motion. The circuit court granted summary judgment on liability.

¶7 At the trial on damages Gail and Loren said they believed their mother's joint accounts held none of Walter's money and that the leases they arranged on Walter's life estate were fair. They also maintained that Walter's caretaking expenses exceeded his income, but they nonetheless stood by their promise to Vera to take care of Walter. Yet the Estate submitted evidence that Walter's income from 1983 to his death exceeded his expenses every year, with a total surplus of almost $63,000. The jury returned a verdict for the Estate: $75,000 compensatory and $25,000 punitive damages.

¶8 Gail and Loren raise the following issues on appeal:

I. Whether the court erred in granting partial summary judgment on liability.

II. Whether the court erred in excluding evidence concerning the wills of Walter O'Keefe and Vera Lange.

III. Whether the court erred in excluding testimony regarding possible gifts from Walter O'Keefe to Vera Lange.

IV. Whether the court erred in excluding attorney testimony.

ANALYSIS

¶9 I. Partial Summary Judgment on Liability

¶10 Summary judgment shall be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." SDCL 15-6-56(c); Aetna Life Ins. Co. v. McElvain, 363 N.W.2d 186, 188 (S.D.1985). We will affirm only when there are no genuine issues of material fact and the legal questions have been correctly decided. Bego v. Gordon, 407 N.W.2d 801, 804 (S.D.1987). All reasonable inferences drawn from the facts must be viewed in favor of the nonmoving party. Morgan v. Baldwin, 450 N.W.2d 783, 785 (S.D.1990). The burden is on the moving party to clearly show an absence of any genuine issue of material fact and an entitlement to judgment as a matter of law. Wilson v. Great N. Ry. Co., 83 S.D. 207, 212, 157 N.W.2d 19, 21 (1968). On the other hand, "[t]he party opposing a motion for summary judgment must be diligent in resisting the motion, and mere general allegations and denials which do not set forth specific facts will not prevent issuance of a judgment." Breen v. Dakota Gear & Joint Co., Inc., 433 N.W.2d 221, 223 (S.D.1988). We address each liability theory.

¶11 A. Breach of Fiduciary Duty

¶12 Although Gail and Loren concede they were acting in a fiduciary capacity for Walter after September 3, 1991, when they obtained his power of attorney, they contend the court erred in ruling a fiduciary relationship existed before that time and in concluding as a matter of law that they had breached any fiduciary obligations. ³ We recently restated what comprises a fiduciary relationship:

A fiduciary relationship is founded on a "peculiar confidence" and trust placed by one individual in the integrity and faithfulness of another. When such relationship exists, the fiduciary has a "duty to act primarily for the benefit" of the other. "Generally, in a fiduciary relationship, the property, interest or authority of the other is placed in the charge of the fiduciary." South Dakota law reflects "the traditional view that fiduciary duties are not inherent in normal arm's-length business relationships, and arise only when one undertakes to act primarily for another's benefit. The law will imply such duties only where one party to a relationship is unable to fully protect its interests and the unprotected party has placed its trust and confidence in the other." We recognize no "invariable rule" for ascertaining a fiduciary relationship, "but it is manifest in all the decisions that there must be not only confidence of the one in the other, but there must exist a certain inequality, dependence, weakness of age, of mental strength, business intelligence, knowledge of the facts involved, or other conditions, giving to one advantage over the other."

High Plains Genetics Research, Inc. v. JK Mill-Iron Ranch, 535 N.W.2d 839, 842 (S.D.1995) (quoting Garrett v. BankWest, Inc., 459 N.W.2d 833, 839 (S.D.1990) and Taggart v. Ford Motor Credit Co., 462 N.W.2d 493, 500 (S.D.1990)). "The existence of a fiduciary duty and the scope of that duty are questions of law for the court." Id. at 842. Whether one breached a fiduciary duty, however, is a question of fact. American State Bank v. Adkins, 458 N.W.2d 807, 811 (S.D.1990). Nevertheless, the trial court found the various contrivances so undisputed as to render the issue determinable as a matter of law, leaving the extent of any damage to the Estate as the only factual question.

¶13 Gail and Loren argue that because they dealt with their mother, who acted as Walter's representative before her death, any breach of fiduciary responsibility before 1991 falls on her head, not theirs. While it is true Vera consented to setting up the irrigation...