Webb v. Anderson Children Trust , 2020 Ohio 4975 ( 2020 )

[Cite as Webb v. Anderson Children Trust, 2020-Ohio-4975.]
IN THE COURT OF APPEALS
FIRST APPELLATE DISTRICT OF OHIO
HAMILTON COUNTY, OHIO
KIMBERLY A. WEBB, INDIVIDUALLY : APPEAL NO. C-190600
AND AS BENEFICIARY OF THE TRIAL NO. 2017-00246
BETTY S. ANDERSON CHILDREN
TRUST, :
O P I N I O N.
Plaintiff-Appellant, :
vs.
:
THE BETTY S. ANDERSON
CHILDREN TRUST, :
and :
MICHAEL R. WEBB,
INDIVIDUALLY AND AS TRUSTEE, :
Defendants-Appellees. :
Appeal From: Hamilton County Court of Common Pleas, Probate Division
Judgment Appealed From Is: Affirmed
Date of Judgment Entry on Appeal: October 21, 2020
Robbins, Kelly, Patterson & Tucker, LPA, Robert M. Ernst and Jarrod M. Mohler,
for Plaintiff-Appellant,
Haas & Haas Law, LLC, and Herbert J. Haas, for Defendants-Appellees.
OHIO FIRST DISTRICT COURT OF APPEALS
MYERS, Presiding Judge.
{¶1} Kimberly A. Webb (“Kimberly”) appeals from the trial court’s
judgment in favor of her brother Michael R. Webb (“Michael”), individually and as
trustee of the Betty S. Anderson Children Trust, on her complaint asserting various
claims relating to their mother’s opening a new Individual Retirement Account
(“IRA”) and her designation of Michael as the sole beneficiary of that IRA.
{¶2} Because the trial court correctly determined that Kimberly failed to
prove by clear and convincing evidence that their mother Betty S. Anderson lacked
the mental capacity to enter into the IRA agreement and to designate a beneficiary
on her IRA, we affirm its judgment.
I. Background
{¶3} Several months after Anderson’s death in May 2012, Michael filed an
application in the probate court to relieve Anderson’s estate from administration,
alleging that she died intestate. He subsequently filed an application to admit a lost
will to probate, and the application was granted in August 2013.
{¶4} Under the terms of Anderson’s will, her net estate was to be
distributed in equal one-third shares to Michael, to the Betty S. Anderson Children
Trust, and to the Betty S. Anderson Grandson Trust. Anderson executed the will,
created the trusts, and appointed Michael her attorney-in-fact under a durable power
of attorney on June 25, 2003. She designated Michael as the successor trustee of
both trusts.
{¶5} According to the terms of the Children Trust, the primary beneficiaries
of the trust upon Anderson’s death were Kimberly and Michael. The trust stated that
Anderson’s intention was to create a supplemental needs trust for Kimberly, who was
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OHIO FIRST DISTRICT COURT OF APPEALS
a recipient of government benefits, and that the trust property be used to
supplement, not supplant, Kimberly’s government benefits.
{¶6} Under the terms of the Grandson Trust, upon Anderson’s death, the
entire trust estate was to be maintained for the benefit of Kyle M. Webb (“Kyle”),
Anderson’s grandson. The trust would terminate and the balance of the trust estate
would be distributed to Kyle upon his reaching the age of 25.
{¶7} Anderson was the owner of a PaineWebber IRA. Initially, she
designated Kimberly and Michael as 50 percent beneficiaries of the IRA. On June 4,
2003, Anderson changed her beneficiary designation on the IRA so that Michael was
the sole primary beneficiary. On June 26, 2003 (one day after she executed her will
and created the trusts), Anderson again changed the IRA’s beneficiary designation.
This time she designated Michael, the Children Trust, and the Grandson Trust as
primary beneficiaries, each to receive 33 1/3 percent.
{¶8} When Anderson’s financial advisor left UBS PaineWebber and joined
the Stanford Financial Group, Anderson transferred her IRA to Stanford Financial
Group. The beneficiary designation on the account remained unchanged. In early
2009, Anderson learned that Stanford Financial Group was suffering financial
difficulties. Michael suggested moving the account to UBS and using his friend
Stephen Lee as her financial advisor.
{¶9} Anderson contacted Lee by phone about transferring her IRA. She
then met with Lee in person, by herself. Lee believes they may have met in person a
second time. Anderson provided Lee the information necessary to make this
transition, including filling out a form designating who she wanted as beneficiary.
UBS personnel then printed forms for her to sign, which included the information
she provided.
{¶10} On February 25, 2009, Anderson executed several documents in
relation to opening an account at UBS and transferring her IRA there. At Anderson’s
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request, Michael assisted her with the execution of the forms at her home. Anderson
signed a UBS power-of-attorney form designating Michael as power of attorney with
respect to the UBS account. Kimberly signed the power-of-attorney form as a
witness. Anderson also signed a UBS account-transfer form authorizing the transfer
of her IRA from Stanford Financial Group to UBS.
{¶11} In addition, Anderson signed a UBS signature page acknowledging
that she had read, understood, and agreed to the terms and conditions of the UBS
“Client Relationship Agreement” as well as the terms, conditions, and disclosures
included in her “New Account Booklet.” The “Client Relationship Agreement” was a
single-spaced seven-page document and the “New Account Booklet” incorporated
more than 60 pages of account documents pertaining to account information, terms,
conditions, and disclosures. The “Client Relationship Agreement” contained a
transfer-on-death designation, so that upon Anderson’s death, the IRA would be
transferred to Michael, the sole beneficiary. Michael delivered the executed
documents to Lee.
{¶12} Over a year later, and at Michael’s request, the probate court declared
Anderson incompetent due to dementia and appointed Michael her guardian in June
2010.
{¶13} On July 20, 2012, two months after Anderson’s death, her UBS
account, then valued at $433,379.87, was closed and the funds were transferred to
Michael.
Procedural History
{¶14} In June 2017, Kimberly filed a complaint for a declaratory judgment,
trust accounting, money damages and removal of Michael as trustee of the Children
Trust. She alleged that Michael knew Anderson suffered from dementia at the time
she opened the UBS IRA in February 2009 and that he allowed himself to be
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OHIO FIRST DISTRICT COURT OF APPEALS
designated as the account’s sole beneficiary in contravention of Anderson’s will and
overall estate plan. Kimberly alleged that Michael converted her share of the UBS
IRA, and that he breached his duty as financial power of attorney by designating
himself as sole beneficiary. Kimberly also alleged that Michael breached his
fiduciary duty when he acted in his own self-interest, failed to disclose his conflict of
interest, exerted undue influence on Anderson and/or caused her to execute
documents under a mistake of fact. She also alleged that Michael intentionally
interfered with her expected inheritance from the account.
{¶15} Kimberly sought a declaration that “the beneficiary designation of
Michael as sole beneficiary of the February 25, 2009 UBS IRA account be struck as
void, and the beneficiary designations as set forth in the earlier UBS IRA account is
[sic] the correct, appropriate, and applicable designations and be applied to the
assets contained in [Anderson’s] February 25, 2009 UBS IRA.” (The earlier UBS IRA
that Kimberly referred to designated Michael, the Children Trust, and the Grandson
trust as primary beneficiaries, each to receive 33 1/3 percent.) She sought an order
that Michael provide an accounting of the IRA, that he be removed as trustee of the
Children Trust, and that a constructive trust be imposed over the trust assets.
{¶16} Stephen Lee testified by way of deposition that he met with Anderson
alone in his office at least once before February 25, 2009. Anderson told Lee that she
needed to transfer her funds out of the Stanford firm as soon as she could in light of
its impending bankruptcy. She brought in copies of her Stanford account statements
and discussed with Lee her concern that her assets would be safe. Lee testified that
Anderson “was a lady that knew what she wanted to do” and that “her objective was
to get her assets initially out of the place where she was where she felt that it was in
danger and it was a risky situation for her to someplace where she could be
comfortable that the assets were being held.”
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{¶17} According to Lee, when he met with Anderson or talked with her on
the phone, she was “sharp,” and “she had it together when I had conversations with
her.” Lee testified that when he met with Anderson, she was “a confident lady” who
was “strong in her will” and she “had together what she wanted to do.” According to
Lee, Anderson was “a capable person.”
{¶18} Lee testified that before February 25, 2009, neither Anderson nor
Michael told him that she had been diagnosed with dementia in January 2009.
According to Lee, if he had felt that Anderson was not aware of what she was doing,
he would have referred the matter to his firm’s legal compliance department.
{¶19} According to Lee, he did not discuss Anderson’s beneficiary
designations with Michael and those decisions were made by Anderson alone. Lee
testified:
In fact, what would have happened is, is that she and I would have
talked, she would have made a decision that she wanted to open an
account with UBS, and I would have instructed a secretary, an
assistant to prepare, you know, the documents, you know, for her and
they would have been sent to her and she would have filled them out,
and she would then sent them back.
{¶20} Michael testified that he and Kimberly were present in Anderson’s
apartment on February 25, 2009, when Anderson executed the UBS documents. He
took the executed documents to Lee. He testified that, to his knowledge, Anderson
was not suffering from dementia and had not been diagnosed with dementia when
she signed the documents. Michael said that he had no discussions with Anderson or
Lee about making himself the sole beneficiary of the UBS IRA.
{¶21} Kimberly testified that she remembered being at Anderson’s
apartment when Michael brought documents for Anderson to sign. She
acknowledged that her signature appears on the UBS power-of-attorney form, but
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stated that she had not read the document before she signed it. She said that her
mother was not in the apartment at the time. According to Kimberly, at the time the
documents were signed, her mother “absolutely” knew who Kimberly was. She also
knew who Michael and her grandson Kyle were.
{¶22} Kimberly testified that she remembered going to probate court with
Anderson in 2010 when Michael applied to have Anderson declared incompetent.
She acknowledged that in a prior 2016 deposition she had testified that she thought
Michael was going to gain guardianship of Anderson and that, when asked whether
Anderson had needed a guardian at that time, she had responded, “No,” and when
asked, “Because she could take care of her own affairs?,” she had responded:
Basically. She was taking care of her own affairs. Mike would step in
periodically. I took her to the doctors. I took her to the bank. I made
sure she had her meds. I made sure she ate. I took care of her. * * *
She wrote her own checks.
{¶23} Kimberly acknowledged that when asked in the prior deposition
whether Anderson was taking care of her own financial affairs in 2010 at the time
that Michael sought guardianship, she had responded, “Yes,” and had testified that
she thought that Anderson did not need a guardian.
{¶24} Barbara Brewer, Ph.D., testified that she first evaluated Anderson on
April 2, 2009, because Michael was concerned that Anderson was experiencing a lot
of confusion. Dr. Brewer testified that Anderson performed a Mini Mental Status
Exam (“MMSE”), and scored 19 out of 30, which meant that she “was on the edge of
the mild” range of cognitive impairment.
{¶25} Dr. Brewer testified that she evaluated Anderson again about a year
later on March 11, 2010, and that Anderson scored 17 out of 30 on an MMSE, which
indicated “severe cognitive impairment.” Dr. Brewer used a scoring instrument for
the MMSE that interpreted a score of 24-30 as “No cognitive impairment,” a score of
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18-23 as “Mild cognitive impairment,” and a score of 0-17 as “Severe cognitive
impairment.”
{¶26} In conjunction with Michael’s 2010 guardianship application, Dr.
Brewer completed a “Statement of Expert Evaluation,” which recommended that
Michael’s application for guardianship be granted. In that statement, Dr. Brewer
noted that Anderson was mentally impaired by reason of “Dementia, NOS,” and that
her prognosis was “poor.”
{¶27} Dr. Brewer testified that she prepared an opinion letter for Kimberly’s
counsel dated March 23, 2018, in which she gave the following opinions:
The answer to your first question: “On February 25, 2009, was Betty
Anderson mentally impaired by reason of Dementia, NOS?” is YES.
***
Based on my 2009 (and later, 2010), evaluation of Betty Anderson, it
is my opinion that she suffered significant impairments in cognitive
comprehension and judgment that make it extremely unlikely that she
was able to read or comprehend the Client Relationship Agreement
she signed on February 25, 2009.1
{¶28} At the conclusion of the trial, the magistrate entered judgment in favor
of Michael. The magistrate pointed out that a diagnosis of dementia is not enough to
declare Anderson’s 2009 beneficiary designation invalid because there must be
evidence that the dementia actually affected Anderson’s ability to make the
designation. The magistrate concluded, therefore, that Dr. Brewer’s opinion that
Anderson suffered from dementia at the time she made the beneficiary designation
was not, in and of itself, determinative of whether the dementia actually affected
Anderson’s ability to make the designation. The magistrate found no evidence that
1 Dr. Brewer did not comment on Anderson’s ability to comprehend the power-of-attorney form
or the account-transfer form.
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OHIO FIRST DISTRICT COURT OF APPEALS
Michael manipulated Anderson into making the beneficiary designation. In
addition, the magistrate found no evidence that Michael unduly influenced Anderson
in making the beneficiary designation or that Michael acted out of self-interest when
he assisted her with the transfer of her IRA to UBS.
{¶29} Kimberly objected to the magistrate’s decision, specifically
challenging the magistrate’s conclusion that Kimberly did not present sufficient
evidence for the court to declare the 2009 beneficiary designation void.
{¶30} The trial court overruled Kimberly’s objections and adopted the
magistrate’s decision as the judgment of the court. The court determined that
Kimberly failed to prove that Anderson lacked the mental capacity to execute the
2009 beneficiary designation. Kimberly now appeals.
{¶31} In a single assignment of error, Kimberly argues that the trial court
erred in finding that she failed to present clear and convincing evidence of
Anderson’s lack of mental capacity to contract. She argues that the court applied the
wrong test for mental capacity to contract and that the court’s decision was against
the manifest weight of the evidence.
Mental Capacity
{¶32} First, Kimberly asserts that the trial court erred by applying the test for
testamentary capacity to its determination that Anderson possessed the mental
capacity to contract to open the IRA with a transfer-on-death beneficiary
designation. She argues that under the Ohio Uniform Transfer-on-Death Security
Registration Act, the transfer on Anderson’s death was not testamentary so the test
for testamentary capacity did not apply to a determination of her capacity to enter
into the contract. Rather, she argues that the general test for capacity to enter into a
contract governs.
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶33} The Ohio Uniform Transfer-on-Death Security Registration Act
provides for “designation of a beneficiary to take ownership of the security at the
time of the death of the owner.” R.C. 1709.04; Kropf v. Kropf, 6th Dist. Erie No. E-
09-068, 2010-Ohio-4207, ¶ 43. IRA proceeds transfer by virtue of the Act, which
provides:
Any transfer-on-death resulting from a registration in beneficiary form
is effective by reason of the contract regarding the registration between
the owner of the security and the registering entity by reason of
sections 1709.01 to 1709.11 of the Revised Code and is not
testamentary.
R.C. 1709.09(A); LeBlanc v. Wells Fargo, 134 Ohio St.3d 250, 2012-Ohio-5458, 981
N.E.2d 839, ¶ 31. The Act establishes that upon the death of the owner, ownership of
the security shall pass to the designated beneficiary. R.C. 1709.07; LeBlanc at ¶ 31.
“Accordingly, the Act removes such transfers on death from the decedent’s
testamentary estate, and also from the purview of Ohio’s Statute of Wills, which
outlines the formalities that apply to testamentary dispositions.” (Emphasis
omitted.) Bielat v. Bielat, 87 Ohio St.3d 350, 351, 721 N.E.2d 28 (2000).
{¶34} The test for mental capacity to enter a contract is whether the person
understood the nature of the transaction and the effects of her or his own actions and
is similar to the test used to determine testamentary capacity. Giurbino v. Giurbino,
89 Ohio App.3d 646, 658, 626 N.E.2d 1017 (8th Dist.1993). Even though the
transfer on death of IRA proceeds to a designated beneficiary is contractual and not
testamentary, Ohio courts have held that “the test of testamentary capacity can also
be used as a standard for mental capacity to execute a beneficiary designation.”
Stanek v. Stanek, 2d Dist. Greene No. 2018-CA-39, 2019-Ohio-2841, ¶ 38, quoting In
re Estate of Flowers, 2017-Ohio-1310, 88 N.E.3d 599, ¶ 84 (6th Dist.). Similarly,
courts have applied the test for testamentary capacity to determine whether a
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OHIO FIRST DISTRICT COURT OF APPEALS
decedent possessed the mental capacity to create a contract for a payable-on-death
bank account because such an account provides a vehicle for a person to make
dispositions similar to those made under a will. Giurbino at 658; Davis v. Marshall,
10th Dist. Franklin No. 94APE02-158, 1994 WL 425169, *3 (Aug. 4, 1994); see
Schiavoni v. Roy, 9th Dist. Medina No. 11CA0108-M, 2012-Ohio-4435, ¶ 17
(annuities). Accordingly, we find no error in the trial court’s application of the test
for testamentary capacity in the case at bar.
{¶35} The test for testamentary capacity is whether the person “has sufficient
mind and memory: First, to understand the nature of the business in which he is
engaged; Second, to comprehend generally the nature and extent of his property;
Third, to hold in his mind the names and identity of those who have natural claims
upon his bounty; [and] Fourth, to be able to appreciate his relation to the members
of his family.” Flowers at ¶ 84, quoting Niemes v. Niemes, 97 Ohio St. 145, 119 N.E.
503 (1917).
{¶36} To prove a contract or beneficiary designation is voidable on the
ground that a party lacked the mental capacity to enter into it, the complaining party
must establish the lack of mental capacity by clear and convincing evidence. Flowers
at ¶ 84; Giurbino at 658. Evidence that a person had dementia is insufficient by
itself to establish the person’s lack of testamentary capacity; there must be evidence
that dementia actually affected the person’s capacity to make the testamentary
disposition. Flowers at ¶ 86; Stewart v. Boland, 2015-Ohio-1712, 33 N.E.3d 551, ¶ 15
(1st Dist.).
{¶37} Kimberly argues that the court improperly limited its review of
Anderson’s mental capacity to her designation of a beneficiary and not the seven-
page “Client Relationship Agreement” as a whole, which incorporated the 60-plus
page “New Account Booklet.” Kimberly’s complaint, however, sought a declaration
striking only the beneficiary designation, not the entire contract, as void. And her
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objections to the magistrate’s decision were limited to the magistrate’s refusal to
declare the beneficiary designation void. Although Kimberly now asserts that the
trial court’s review should have taken into consideration the entire “Client
Relationship Agreement,” she really only challenges the beneficiary designation.
{¶38} Kimberly points to Dr. Brewer’s testimony that it was highly unlikely
that Anderson was capable of reading and comprehending the entire agreement,
filled with legal clauses and detailed technical information. However, as the trial
court pointed out, Dr. Brewer’s testimony failed to address the elements of
testamentary capacity and whether Anderson’s dementia actually affected her ability
to make beneficiary designations. And neither the test for testamentary capacity nor
the test for capacity to contract generally requires that a person understand each
provision of a 60-page agreement.
{¶39} Here, the trial court properly applied the test for testamentary capacity
in determining whether Anderson lacked the mental capacity to designate a
beneficiary on her IRA. The court determined that (1) Anderson contacted Lee to
move her IRA because the institution holding her account was having financial
difficulty; (2) Anderson met with Lee independently to open the account; (3)
according to Lee, Anderson appeared sharp and confident and knew what she
wanted to do; and (4) Anderson’s selection of Michael as beneficiary was not
inconsistent with at least one of Anderson’s prior estate plans and it continued to
fulfill Anderson’s objective of protecting Kimberly’s government benefits. The court
concluded that the factors supported a finding of testamentary capacity. Therefore,
even though there was evidence that Anderson may not have understood all of the
terms of the transfer documents, there was ample evidence that she was capable of
knowingly and competently executing the beneficiary designation.
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{¶40} Even applying the test for competency to contract generally, we reach
the same result. It is clear that Anderson understood the nature of the transaction in
opening the UBS IRA and the effects of her actions in doing so.
Weight of the Evidence
{¶41} Kimberly next argues that the trial court’s decision was against the
weight of the evidence because Dr. Brewer’s expert opinion testimony outweighed
the lay opinion testimony of Lee. When reviewing the manifest weight of the
evidence in a civil case, “[w]e weigh the evidence and all reasonable inferences,
consider the credibility of the witnesses, and determine whether in resolving
conflicts in the evidence, the trial court clearly lost its way and created such a
manifest miscarriage of justice that its judgment must be reversed and a new trial
ordered.” United States Fire Ins. v. Am. Bonding Co., Inc., 1st Dist. Hamilton Nos.
C-160307 and C-160317, 2016-Ohio-7968, ¶ 16, citing Eastley v. Volkman, 132 Ohio
St.3d 328, 2012-Ohio-2179, 972 N.E.2d 517, ¶ 20.
{¶42} Here, the trial court’s decision makes clear that the court gave careful
consideration to the testimony of both Dr. Brewer and Lee. As the court pointed out,
while Dr. Brewer testified that she believed it was highly unlikely that Anderson was
capable of comprehending the “Client Relationship Agreement,” an MMSE
administered by Dr. Brewer five weeks after the agreement was signed indicated that
Anderson scored in the range of having only mild cognitive impairment. The court
also noted Dr. Brewer’s acknowledgement that a person with dementia may have
periods of lucidity. In addition, the court noted that Dr. Brewer’s opinion relied in
part on her second evaluation of Anderson, which was conducted more than a year
after the signing.
{¶43} The trial court noted Lee’s testimony that, in assisting Anderson with
the opening of the UBS IRA, Anderson was sharp, confident, strong in her will, and
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knew what she wanted to do. The court noted Lee’s testimony that Anderson relayed
to him that she needed to move her IRA because the company that currently held the
account was having financial difficulty. The court pointed to Lee’s testimony that if
he had believed Anderson was not aware of what she was doing, he would have
referred the matter to their legal compliance department.
{¶44} We cannot say that the trial court clearly lost its way in evaluating the
evidence. Therefore, we hold that the court reasonably concluded that Kimberly
failed to prove by clear and convincing evidence that Anderson lacked the mental
capacity to open the IRA and to make the beneficiary designation. See Flowers,
2017-Ohio-1310, 88 N.E.3d 599, at ¶ 96 (where conflicting evidence was presented as
to the decedent’s testamentary capacity and there was a difference of opinion as to
the weight to be given lay and expert witness evidence, the probate court, as the trier
of fact, did not lose its way in resolving those conflicts).
{¶45} Consequently, we overrule the assignment of error and affirm the trial
court’s judgment.
Judgment affirmed.
BERGERON and CROUSE, JJ., concur.
Please note:
The court has recorded its own entry on the date of the release of this opinion.
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