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Watkins v. Watkins

Supreme Court of Idaho

September 7, 2017

STELLA WATKINS, as Personal Representative of the Estate of ARTHUR DONALD WATKINS, Plaintiff-Counterdefendant-Respondent,
v.
ARNOLD DOUGLAS WATKINS, Defendant-Counterclaimant-Appellant, and STEVEN G. NEIGHBORS, as Trustee of the A. DON WATKINS REVOCABLE TRUST DATED MAY 1, 2009, RESTATEMENT DATED JULY 8, 2011, Counterdefendant, and BRIAN D. WATKINS and ROBYNLEE WATKINS, husband and wife, and the Marital Community composed thereof, Defendants-Counterclaimants, and DONALD EUGENE WATKINS and KATIE WATKINS, husband and wife, and the Marital Community composed thereof; and VIRGINIA WATKINS, Defendants.

         2017 Opinion No. 97

         Appeal from the District Court of the Fourth Judicial District of the State of Idaho, Ada County. Hon. Melissa Moody, District Judge.

         The amended judgment of the district court dated March 4, 2016, is affirmed in part and vacated in part. The judgment of the district court entered on March 16, 2016, awarding costs and attorney's fees to respondent is vacated. The case is remanded.

          Dinius & Associates, PLLC, Boise, for appellant. Kevin E. Dinius argued.

          Hawley Troxell Ennis & Hawley, LLP, Boise, for respondent. Beth L. Coonts argued.

          BRODY, JUSTICE.

         This case involves Arthur Donald Watkins' (Father) attempt to recover damages based on a default by his son, Arnold Douglas Watkins (Son or Doug), under a real estate installment contract. The question presented is whether the complaint gave adequate notice of the election to accelerate the debt as required by Washington law. Son also brought a counterclaim for breach of a compensation agreement executed by a sibling acting on behalf of Father using a power of attorney. The compensation agreement purported to obligate Father to pay Son $3, 000 per month for life. Father argued that the compensation agreement lacked consideration. The district court held a bench trial. The district court found in favor of Father on his breach of contract claim and on the counterclaim brought against him. Son timely appealed.

         I.

         FACTUAL AND PROCEDURAL BACKGROUND

         Father was a successful businessman and accumulated a number of businesses and assets over his lifetime, including, nursing homes, airplanes, apartment complexes, storage units, and a cattle ranch. Father and his first wife Florence had six children, three daughters and three sons. The three sons-Doug, Brian, and Donald-and their three spouses were named as defendants in this case. On the eve of trial, Brian and Donald filed bankruptcy and the claims against them were automatically stayed. The case proceeded to trial on Father's claims against Doug and Doug's counterclaim. While the case was pending, Father passed away and Stella Watkins, Father's wife at the time of his death and the personal representative of his estate, was substituted as the plaintiff.

         There are two agreements at issue. The first is a real estate installment contract. Father and Florence owned a nursing home in Seattle, Washington. In August of 1984, Father and Florence sold 78% of their interest in the facility to their six children. Son acquired a 13% interest for the agreed price of $676, 000. Son paid $65, 000 as a down payment. He was obligated to pay the balance of $611, 000 in equal monthly installments of $5, 590 plus interest. The contract was amended twice, eventually reducing the monthly payments to $1, 645. Florence passed away in 1988. Her interest in the contract was initially transferred to a testamentary trust and later to Father.

         On August 2, 2010, Son breached the real estate installment contract by failing to make the full monthly payment when it came due. Son has not made full monthly payments since that time, but he has made partial payments that were accepted on behalf of Father. At trial, Son did not deny that he entered into the real estate installment contract, that the contract is valid, or that he stopped making payments. Rather, Son contended that he does not know or have a record of the balance due under the terms of the agreement, and therefore, denies liability as claimed by Father.

         The second agreement at issue is the compensation agreement. Beginning in 1984, Son worked for Father in various capacities, including as a backhoe operator, mechanic, and general farm laborer. In September 1989, Son injured his back while working for one of Father's business ventures, but he continued working for his father after his injury. Son received an hourly wage until September 1993, when he began receiving a salary of $3, 000 per month. In December 1995, Son's compensation was reduced to $1, 000 per month.

         Another son, Brian, assisted Father with the operation of Father's business interests for many years. On October 24, 2000, at seventy-five years old, Father executed a general power of attorney, appointing Brian as his attorney-in-fact to assist Father with the management and operation of Father's business interests. Approximately one week before Father revoked the power of attorney, Brian used it to execute four compensation agreements, purportedly on Father's behalf, requiring Father to make substantial monthly payments to Brian, Brian's wife, and his brothers-Doug and Donald. Son did not sign the compensation agreement. That same day, Brian used the power of attorney to execute a settlement and release agreement, purportedly on Father's behalf. Each of the compensation agreements obligated Father to pay $3, 000 per month to each party for life, and at death, to his or her spouse for the spouse's life, and each included a cost-of-living escalator. Brian did not discuss the compensation agreements with Father before signing them, nor obtain Father's approval for the compensation agreements after they were signed. The power of attorney authorized Brian to enter into contracts, but it did not authorize Brian to make gifts of Father's estate.

         Father revoked the power of attorney in March 2009. Father filed a complaint against his three sons and their spouses on November 6, 2009. The complaint made claims for rescission, fraud or deceit, constructive trust, unjust enrichment, conversion, civil RICO, and breach of contract. In September 2010, a conservator was appointed for Father. The conservator and an expert retained to trace Father's assets discovered serious issues with the financial records that Brian had maintained. On January 12, 2012, Defendants filed an answer and counterclaim alleging breach of contract relating to the compensation agreements executed by Brian.

         Father and Son both filed motions for summary judgment. The district court entered partial summary judgment in favor of Son on Father's fraud claim. Otherwise, the motions for summary judgment were denied and the case proceeded to trial. Father presented his breach of contract claim arising out of Son's default under the real estate installment contract, but did not pursue the other claims. The district court dismissed the other claims on a motion for a directed verdict prior to Son presenting evidence on his claim for breach of the compensation agreement.

         On January 11, 2016, the district court issued its Findings of Fact, Conclusions of Law, and Order. It also entered a corresponding judgment as follows:

1. Judgment is entered in favor of Plaintiff Arthur Donald Watkins and against Defendant Arnold Douglas Watkins on the breach of contract claim pertaining to the nursing home real estate contract in the amount of five hundred twenty eight thousand six hundred forty dollars and forty three cents ($528, 640.43).
2. Judgment is entered in favor of Plaintiff Arthur Donald Watkins and against Defendant Arnold Douglas Watkins on the counterclaim for breach of contract on the compensation agreement. Plaintiff owes Defendant nothing.
3. On Count V (fraud and deceit), with respect to Defendant Arnold Douglas Watkins only, the claim is dismissed with prejudice.
4. All remaining claims against Defendant Arnold Douglas Watkins are dismissed without prejudice.

         Son filed a motion for reconsideration asking the district court to dismiss the remaining claims against him with prejudice. The district court granted Son's motion and an amended judgment was entered on March 4, 2016. The district court ...


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