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In re Estate of Smith

Supreme Court of Idaho

July 30, 2018

In the Matter of the Estate of Victoria H. Smith, Deceased.
v.
JOSEPH H. SMITH, an intestate heir of the Estate of Victoria H. Smith, Deceased, Defendant-Respondent-Respondent on Appeal, 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, and NOAH G. HILLEN, in his capacity as Personal Representative of the Estate of Victoria H. Smith, Intervenor-Respondent on Appeal.

          Appeal from the Magistrate Court of the Fourth Judicial District of the State of Idaho, Ada County. Honorable Cheri C. Copsey, Senior District Judge, presiding as Magistrate Judge.

         The magistrate court's orders are affirmed.

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

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

          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 conversion claim. The magistrate court reserved its decision on the dismissal of the breach of fiduciary duty and accounting claims so as to allow Joseph to proceed with his contest of Victoria's will.

         Vernon later moved for summary judgment on the issue of undue influence, requesting the dismissal of all of Joseph's claims. The magistrate court denied the motion, finding that there remained genuine issues of material fact regarding the issue of undue influence. Vernon then once again moved to dismiss all of Joseph's claims pursuant to Rule 12(b)(6) or for a judgment on the pleadings pursuant to Idaho Rule of Civil Procedure 12(c). The magistrate court also denied this motion.

         Following all of these motions, Joseph moved for partial summary judgment. In his motion, Joseph requested a ruling that Victoria's property was not gifted to VHS Properties because the power of attorney Vernon drafted and used did not expressly authorize the making of gifts. The magistrate court granted Joseph's motion. As part of its ruling, the magistrate court set aside the series of transactions involving Vernon and VHS Properties and ordered Vernon to provide an accounting of the estate's property. Vernon's subsequent motion for reconsideration was denied. Later, after finding that Vernon had failed to provide a satisfactory accounting of the estate's assets and that said assets appeared to be dissipating, the magistrate court appointed a special master and ordered supervised administration of the estate to ensure its assets were preserved.

         In October 2016, the magistrate court held a two-day bench trial on the issue of undue influence. The parties then submitted post-trial briefing. On March 9, 2017, the magistrate court issued its Findings of Fact and Conclusions of Law, in which it ruled that Victoria's will was invalid because it was a product of Vernon's undue influence, and that Victoria died intestate. The court later amended its decision to correct minor typographical and clerical errors. In June 2017, the court entered a judgment pursuant to Idaho Rule of Civil Procedure 70(b), which vested title to all of Victoria's real and personal property in the personal representative who had been appointed.

         Vernon appealed these decisions, and this Court granted Joseph's motion for acceptance of appeal directly from the magistrate court pursuant to Idaho Appellate Rule 44. This appeal follows the parties' stipulation to bifurcate the appeal to first address any matters occurring up to and including the post-trial judgment under Rule 70(b) before considering any matters occurring thereafter. The personal representative of the estate, Intervenor-Respondent Noah Hillen, is not participating in this portion of the appeal.

         II. ANALYSIS

         Vernon asserts that the magistrate court erred in granting Joseph partial summary judgment (and the corresponding Rule 70(b) judgment) and then erred again in its ruling that the will was invalid. Not surprisingly, Joseph argues that these decisions were correctly made. Joseph also contends that Vernon's appeal from the order granting partial summary judgment should be dismissed as untimely. We will start there.

         A. Joseph's Motion to Dismiss Appeal.

         In his motion to this Court requesting acceptance of a direct appeal, Joseph explained that Vernon was appealing from the magistrate court's order granting partial summary judgment and its order invalidating Victoria's will and declaring Victoria's intestacy. He acknowledged that both orders were appealable pursuant to Idaho Code section 17-201. After this Court granted that motion, and thereby allowed the appeal to proceed on both issues, Joseph filed another motion seeking the dismissal of Vernon's appeal from the order granting partial summary judgment, which he contended was untimely. His argument was that the order granting partial summary judgment was appealable when it was entered in November 2016 under Idaho Code section 17-201(5). Because the notice of appeal was not filed until April 13, 2017, his argument was that Vernon's appeal was untimely. We rejected that argument and denied the motion to dismiss. Now, Joseph once more asks this Court to dismiss Vernon's appeal from the order granting partial summary judgment. He does so without advancing any new argument in support. Finding no reason to depart from our earlier decision, we will allow the appeal to proceed.

         B. Joseph's Motion for Partial Summary Judgment.

         In granting partial summary judgment, the magistrate court found that the series of transactions conducted by Vernon using the 2008 power of attorney constituted gifts. Because the 2008 power of attorney did not specifically authorize Vernon to gift Victoria's property, as required under the Uniform Power of Attorney Act, Idaho Code section 15-12-201(1)(b), the magistrate court concluded that the transactions were invalid. Using the remedial provisions of the Act, the magistrate court further declared that Victoria's estate included the gifted property and ordered that no further actions could be taken as to that property prior to a determination on the validity of Victoria's will. The magistrate court also directed Vernon to prepare a complete accounting of the relevant property pursuant to the Act, Idaho Code section 15-12-114(8). Vernon now appeals from that order.

         1. Standard of review

         Appeals from an order of summary judgment are reviewed de novo, and this Court's standard of review is the same standard applied by the trial court. Trotter v. Bank of N.Y. Mellon, 152 Idaho 842, 845-46, 275 P.3d 857, 860-61 (2012). Summary judgment is appropriate if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. I.R.C.P. 56(a). The Court is to liberally construe all disputed facts and draw all reasonable inferences from the record in favor of the nonmovant. Mackay v. Four Rivers Packing Co., 145 Idaho 408, 410, 179 P.3d 1064, 1066 (2008). The movant carries the burden of proving the absence of a genuine issue of material fact. Banner Life Ins. v. Mark Wallace Dixson Irrevocable Tr., 147 Idaho 117, 123, 206 P.3d 481, 487 (2009).

         This action was set to be (and eventually was) tried before the trial court without a jury. In that situation, the trial court can rule upon summary judgment despite the possibility of conflicting inferences arising from undisputed evidentiary facts. Riverside Dev. Co. v. Ritchie, 103 Idaho 515, 519, 650 P.2d 657, 661 (1982). This is permissible because under such circumstances the court would be responsible for resolving the conflict between those inferences at trial. Id. Even with this permission, however, conflicting evidentiary facts must still be viewed in favor of the nonmovant. Banner Life Ins., 147 Idaho at 124, 206 P.3d at 488. This Court exercises free review over the entire record that was before the trial court to determine whether either side was entitled to judgment as a matter of law and reviews the inferences drawn by the trial court to determine whether the record reasonably supports those inferences. Intermountain Forest Mgmt., Inc. v. La. Pac. Corp., 136 Idaho 233, 236, 31 P.3d 921, 924 (2001).

         Vernon essentially raises six legal challenges to the magistrate court's order: (1) the magistrate court lacked subject matter jurisdiction over the transferred property; (2) the magistrate court lacked personal jurisdiction over VHS Properties; (3) Joseph lacked standing under the Uniform Power of Attorney Act; (4) Joseph's summary judgment claim was barred by res judicata or judicial estoppel; (5) the 2008 power of attorney was exempt from adjudication under the Uniform Power of Attorney Act; and (6) the transactions at stake were not gifts. We find none of these arguments to be persuasive.

         2. The magistrate court had subject matter jurisdiction.

         Vernon argues that the magistrate court's partial summary judgment decision was beyond its authority under Idaho Code section 1-2208(2). That statute provides that magistrate courts may be assigned matters involving "[p]roceedings in the probate of wills and administration of estates of decedents, minors and incompetents." I.C. § 1-2208(2). In the summary judgment order, the magistrate court acknowledged that it was acting as a court of general jurisdiction and therefore had authority to adjudicate matters ancillary to its probate assignment. Vernon disagrees, claiming that Joseph's motion was essentially an effort to quiet title under Idaho Code section 6-401, which was beyond the scope of section 1-2208(2). For support, he cites to Pincock v. Pocatello Gold & Copper Mining Co., 100 Idaho 325, 597 P.2d 211 (1979). Vernon's reliance on the Pincock decision is misplaced.

         In Pincock, this Court reviewed a quiet title action that arose following the distribution of six mining lode claims through a probate decree. 100 Idaho at 326-27, 597 P.2d at 212-13. The decedent had been one of the original subscribing stockholders of a since-defunct corporation that had held the lode claims. Id. at 326, 597 P.2d at 212. The decedent's sole beneficiaries, the

         Pincocks, attempted to quiet title on the lode claims in the district court, asserting that the decree from the probate court demonstrated their ownership of the claims. Id. at 327, 597 P.2d at 213. The district court granted summary judgment in the Pincocks' favor, but this Court remanded the case due to numerous unresolved issues of material fact. Id. at 328, 331, 597 P.2d at 214, 217. Amongst those issues was the unanswered question of whether the defunct corporation had ever transferred title to the lode claims to the decedent. Id. at 328, 597 P.2d at 214. The Court explained that this deficiency was significant, as the probate court's "jurisdiction" to distribute the property depended on the decedent being the record owner of that property. Id. at 328-29, 597 P.2d at 214-15. The Court quoted the following language from a prior decision:

[T]he probate courts have exclusive, original jurisdiction in the settlement of estates of deceased persons, and it is within the jurisdiction of those courts to determine who are the heirs of a deceased person and who is entitled to succeed to the estate and their respective shares and interests therein. The decrees of probate courts are conclusive in such matters. A probate court, however, does not have jurisdiction to determine adverse claims or an adverse title to real estate, except in so far as such questions arise between the heirs or devisees of an estate, and are necessary to be determined in the administration of the estate. No such jurisdiction, however, exists in the probate court to determine and adjudicate adverse and conflicting claims to title to real estate as between the estate or heirs thereof and third parties, and such issues can only be tried in a court of competent jurisdiction where the issue as to title and interest is directly and squarely made and presented to the court.

Id. at 329, 597 P.2d at 215 (quoting Miller v. Mitcham, 21 Idaho 741, 745, 123 P. 941, 942 (1912)).

         While the Pincock decision uses the term "jurisdiction" it is important to recognize what was at issue in that case and in Miller, the case upon which the Pincock decision relied. The question presented to the Court in those cases was whether a probate decree distributing real property interests to an heir had any preclusive effect in a subsequent dispute over whether the decedent owned the property. While this Court couched its opinions in terms of jurisdiction, a careful reading of the Pincock and Miller decisions reveals that the Court decided that there is no preclusive effect to a decree of distribution-not necessarily because the probate court did not have jurisdiction, but because the decedent's actual ownership of the property was not at issue or actually decided during the probate proceedings. In the typical case, when a probate decree distributes Blackacre to son and daughter, it only passes whatever interest the estate had. To put it plainly, Pincock is not about the magistrate court's subject matter jurisdiction-it is about the effect of a decree of distribution.

         This Court explained the subject matter jurisdiction of the magistrate courts in Carr v. Magistrate Court of the First Judicial District, 108 Idaho 546, 700 P.2d 949 (1985). In Carr, we stated that article V, section 2 of the Idaho Constitution gave the Legislature the authority to create inferior courts and to specify the jurisdiction of those courts. 108 Idaho at 547, 700 P.2d at 950. The Legislature exercised that authority by creating the magistrate division of the district court and specified through Idaho Codes sections 1-2208 and 1-2210 the cases that are assignable to magistrates. Id. at 548, 700 P.2d at 951.

         Section 1-2208(2) states that magistrate courts may be assigned matters arising from the "[p]roceedings in the probate of wills and administration of estates of decedents, minors and incompetents." I.C. § 1-2208(2). With this assignment, the Uniform Probate Code-Idaho Code sections 15-12-101 to 15-12-403-broadly provides that "[t]he court has exclusive jurisdiction of formal proceedings to determine how decedents' estates subject to the laws of this state are to be administered, expended and distributed." I.C. § 15-3-105. Idaho Code section 15-3-106 enables the magistrate court to consider "any other controversy" arising from a probate matter that is not covered by Idaho Code section 15-3-105. I.C. § 15-3-106; In re Estate v. Peterson, 157 Idaho 827, 832, 340 P.3d 1143, 1148 (2014). "Since magistrate judges have been assigned responsibility for probate proceedings, all matters related to decedent's [sic] estates should first be considered and determined by the magistrate judge in the probate proceeding." Miller v. Estate of Prater, 141 Idaho 208, 213-14, 108 P.3d 355, 360-61 (2005).

         This case arose from the parties' petitions for formal probate of Victoria's estate. In his motion for partial summary judgment, Joseph sought a ruling that Vernon did not have authority under the 2008 power of attorney to gift Victoria's property. Joseph asserted that Vernon's unauthorized gifting left the estate with no assets to probate and violated the Uniform Power of Attorney Act. Considering that the Act is found under the Uniform Probate Code it necessarily follows that the magistrate court's determination of this issue was a controversy related to the probate proceeding. As such, the magistrate court had subject matter jurisdiction to rule on the motion.

         3. Vernon's argument that the magistrate court did not have personal jurisdiction over VHS Properties is an improper attack on the failure to join an indispensable party.

         Vernon also argues that the magistrate court erred because it did not have personal jurisdiction over VHS Properties. The record confirms that VHS Properties has never been a party to this action. Vernon's argument is not really about a lack of personal jurisdiction. Rather, his claim of error stems from the fact that VHS Properties was not joined as an indispensable party even though it was a party to Vernon's 2008 transfer of Victoria's property. The problem with this argument is that the failure to join an indispensable party is an affirmative defense that must be raised in a responsive pleading or by motion. See I.R.C.P. 12(b)(7), 19. Vernon made a motion to join Victoria Converse as an indispensable party, but the record does not show that he ever made such a motion with respect to VHS Properties or raised the defense in his responsive pleading. Vernon is raising this argument for the first time on appeal and it is improper.

         4. Joseph had standing to petition the series of transactions under ...


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