In Re the Guardianship & Conservatorship of Nelson , 903 N.W.2d 753 ( 2017 )

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2017 S.D. 68IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
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IN THE MATTER OF THE
GUARDIANSHIP AND CONVERSATORSHIP
OF DEAN A. NELSON, a Protected Person.
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APPEAL FROM THE CIRCUIT COURT OF
THE SIXTH JUDICIAL CIRCUIT
SULLY COUNTY, SOUTH DAKOTA
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THE HONORABLE JOHN L. BROWN
Judge
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MATTHEW P. BOCK
JAMES A. POWER of
Woods, Fuller, Shultz & Smith
Sioux Falls, South Dakota Attorneys for appellant
Elizabeth Nelson.
ROBERT B. ANDERSON of
May, Adam, Gerdes &
Thompson, LLP
Pierre, South Dakota Attorneys for appellee Dean A.
Nelson.
RONALD A. PARSONS, JR. of
Johnson Janklow Abdallah
Reiter & Parsons LLP
Sioux Falls, South Dakota Attorneys for appellee Chet
Groseclose.
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ARGUED OCTOBER 4, 2017
OPINION FILED 11/01/17
MARK A. MORENO of
Moreno, Lee & Bachand, P.C.
Pierre, South Dakota Attorneys for appellee Georgia
K. Hanson.
MARGO D. NORTHRUP of
Riter, Rogers, Wattier
& Northrup, LLP
Pierre, South Dakota Attorneys for appellee Angela L.
Nix.
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SEVERSON, Justice
[¶1.] Elizabeth Nelson appeals a circuit court order approving the redrafting
of her husband Dean Nelson’s will. The new will eliminates a trust established for
Elizabeth’s benefit consisting of Elizabeth’s lifetime, one-half interest in the residue
of Dean’s estate. The change in the will was proposed upon the petition of Dean’s
conservator, Chet Groseclose (Conservator), after Dean was diagnosed with
Alzheimer’s disease. Elizabeth raises one issue on appeal: whether the circuit court
erred in permitting Conservator to adopt the new will eliminating Elizabeth’s
interest in the residuary estate. We reverse.
Background
[¶2.] Dean Nelson owned and operated a successful farming operation near
Onida, South Dakota. Dean has four daughters from his first marriage: Georgia
Hanson, Deborah Bouchie, Carol Nelson, and Angela Nix. In 1978, Dean married
Elizabeth Nelson. The pair lived in Onida, then moved to Las Vegas, Nevada,
where they currently reside.
[¶3.] On September 30, 2008, Dean and Elizabeth entered into a postnuptial
agreement, which replaced a prior prenuptial agreement. In the postnuptial
agreement, they agreed to the disposition of Dean’s property after his death, and
provided that Dean would not allow his durable power of attorney to amend his will.
Also in 2008, Dean made a will acknowledging the postnuptial agreement and
making other testamentary gifts. The 2008 will provided that if Elizabeth were to
survive Dean, one-half of Dean’s residuary estate would be held in trust for
Elizabeth. Under the trust, Elizabeth was entitled to receive all net income and as
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much of the principal as the trustees deemed necessary for Elizabeth’s health and
comfort. Upon her death, the remainder of the trust would pass in accordance with
the other half of the residue, which was to be distributed in equal shares to three of
Dean’s four daughters.
[¶4.] In September of 2012, Dean drafted a new estate plan including a
pourover will and trust agreement. The trust agreement acknowledged the
postnuptial agreement and essentially echoed the terms of the 2008 will, except
that the one-half of Dean’s estate not belonging to Elizabeth would be placed in
trust for three of Dean’s four daughters. On February 11, 2013, Dean had yet
another estate plan drafted. This plan mirrored the 2008 and 2012 estate plans but
added Dean’s fourth daughter to the trust made up of half of his residuary estate.
[¶5.] After the 2013 plan was drafted, Dean was diagnosed with
Alzheimer’s. On April 18, 2013, Conservator was temporarily appointed to oversee
Dean’s estate. The circuit court made the appointment permanent in September of
2013. Conservator petitioned the circuit court to change Dean’s February 11, 2013
estate plan. Among other things, Conservator proposed replacing the 2013 plan
with a newly drafted will. The proposed will would omit Elizabeth from the
residuary estate and allow for the entire residue to be distributed equally among
Dean’s four daughters.
[¶6.] At a circuit court hearing on the proposed will on December 13, 2013,
Conservator, Dean’s daughters, and Elizabeth instead stipulated to a compromise
will. That will allowed Elizabeth to retain her one-half interest in the residue
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within a trust funded with contributions made before the payment of estate tax.
Conservator signed the compromise will on December 30, 2013.
[¶7.] On September 28, 2016, in the tenth report to the circuit court on
Dean’s estate, Conservator again petitioned for a new will for Dean, changing the
residuary clause to eliminate Elizabeth’s trust and with it, her one-half interest in
the residuary. The entire residuary estate would instead be divided equally among
Dean’s four daughters. Elizabeth objected to these changes to Dean’s will as well as
certain other requests from the Conservator regarding distributions. A hearing on
the matter was held on October 12, 2016. No witnesses were called and no exhibits
were presented. The circuit court approved the new will in an order on October 27,
2016. Elizabeth appeals, raising one issue: whether the circuit court erred in
permitting Conservator to adopt a new will eliminating Elizabeth’s interest in the
residuary estate.
Analysis
[¶8.] Matters of statutory interpretation are reviewed de novo. Milstead v.
Johnson, 2016 S.D. 56, ¶ 7, 883 N.W.2d 725, 729. In In re Conservatorship of
Didier, 2010 S.D. 56, 784 N.W.2d 486, we applied de novo review to the question
whether SDCL 29A-5-420(3)∗ allowed for the replacement of a trustee by a
conservator. Id. ¶¶ 5-6, 784 N.W.2d at 489-90.
[¶9.] Appellees argue the circuit court’s order to rewrite Dean’s will should
be evaluated for an abuse of discretion. They claim the text of SDCL 29A-5-240
∗ 29A-5-420(3) allows a circuit court to authorize a conservator
[t]o amend or revoke trusts, or to create or make additions to
revocable or irrevocable trusts, even though such trusts may
extend beyond the life of the protected person[.]
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plainly gives a circuit court discretion to approve the redrafting of a will by a
conservator by requiring a circuit court to balance a number of factors in making its
determination. Appellees point out that this Court has previously held the abuse of
discretion standard applies to a circuit court’s decision to appoint a conservator, In
re Conservatorship of Gaaskjolen, 2014 S.D. 10, ¶ 9, 844 N.W.2d 99, 101, and to
terminate a conservator, In re Guardianship of Stevenson, 2013 S.D. 4, ¶ 22, 825
N.W.2d 911, 916; Guardianship & Conservatorship of Fischer, 2008 S.D. 51, ¶ 6,
752 N.W.2d 215, 217. “An abuse of discretion is ‘a fundamental error of judgment, a
choice outside the range of permissible choices, a decision, which, on full
consideration, is arbitrary or unreasonable.’” Gaaskjolen, 2014 S.D. 10, ¶ 9, 844
N.W.2d at 101 (quoting Thurman v. CUNA Mut. Ins. Soc’y, 2013 S.D. 63, ¶ 11, 836
N.W.2d 611, 616).
[¶10.] Appellees also note that a circuit court’s findings “[i]n guardianship
proceedings . . . are reviewed under the ‘clearly erroneous’ standard.” In re
Conservatorship of Irwin, 2007 S.D. 41, ¶ 14, 732 N.W.2d 411, 414 (quoting In re
Guardianship and Conservatorship of Miles, 2003 S.D. 34, ¶ 11, 660 N.W.2d 233,
236). “Under [that] standard, we do not analyze ‘whether this Court would have
made the same finding that the trial court did,’ but rather we look at ‘whether on
the entire evidence we are left with a definite and firm conviction that a mistake
has been committed.’” Tisdel v. Beadle Cty. Bd. Of Comm’rs, 2001 S.D. 149, ¶ 5, 638
N.W.2d 250, 252-53 (quoting In re Estate of Roehr, 2001 S.D. 85, ¶ 4, 631 N.W.2d
600, 601).
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[¶11.] None of the cases cited by the parties pertain exactly to the
determination made by the circuit court here: allowing a conservator to redraft a
will. The proper standard can be found simply by evaluating the actions of the
circuit court in this case. Such an exercise brings about the conclusion that all
three standards mentioned above are applied in the context of South Dakota’s
conservatorship statute. SDCL 29A-5-420 provides in pertinent part:
Upon petition therefor, the court may authorize a conservator to
exercise any of the powers over the estate or financial affairs of a
protected person which the protected person could have
exercised if present and not under conservatorship, including
the powers . . . [t]o make, amend, or revoke a will.
The court, in authorizing the conservator to exercise any of the
above powers, shall primarily consider the decision which the
protected person would have made, to the extent that the
decision can be ascertained. The court shall also consider the
financial needs of the protected person and the needs of legal
dependents for support, possible reduction of income, estate,
inheritance or other tax liabilities, eligibility for governmental
assistance, the protected person’s prior pattern of giving or level
of support, the existing estate plan, the protected person’s
probable life expectancy, the probability that the
conservatorship will terminate prior to the protected person’s
death, and any other factors which the court believes pertinent.
(Emphasis added.)
[¶12.] Under this statute, de novo review applies only to interpret the
meaning of the text. As to this case, the text of the statute is clear: a court “may
authorize” a conservator to revoke and redraft a will. Thus, there is no issue of
statutory interpretation, and we do not review the circuit court’s order de novo.
[¶13.] The text also very clearly states that a court “shall primarily consider
the decision which the protected person would have made, to the extent that the
decision can be ascertained.” Id. (emphasis added). It also plainly requires the
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circuit court to review eight other factors as well as any factors the circuit court
“believes pertinent.” But while the court is required to consider these nine factors,
it has discretion in weighing them. As such, we review the court’s decision to
permit a conservator to amend a will for an abuse of discretion.
[¶14.] The record here, however, is unclear as to the factual findings of the
circuit court and the application of the facts to the statute. The circuit court only
touched on its potential factual findings in the October 12, 2016 hearing:
Well, I’ve got to tell you, under the circumstances, my
sympathies certainly lie with the proposal to modify the Will
given the experience we’ve had with Liza’s unwillingness to
participate in gifts and generally has been somewhat
uncooperative in the process here.
I’m somewhat concerned. I think, at least in my quick look at
this is that the major issue with respect to that or the major
driving point of it is the impact that the equipment sale has on
the daughters as it relates to them being able to receive that
benefit of the sale of the equipment, which now becomes part of
the estate and, by virtue thereof, half of which would go into the
residuary trust.
But it appears to me and as we’ve discussed here, that the tax
implications in terms of reduction of the estate are probably
relatively insignificant. The benefit to the daughters is
primarily by acceleration of a gift to them rather than—and
we’re speculating on, obviously, who among the parties here
may pass first. We’re speculating then as to how long, if Dean
passed first and how long Liza survived him and received the
benefits of the income off of the trust. So there’s a great deal of
speculation there as to what benefit, if any, Liza would obtain
from the trust and, frankly, also what benefit, if any, the
children actually receive unless by a substantially accelerated
direct gift to them out of the estate.
So as I said, I think primarily on the fact that non-essential
estate property has been disposed of through the farm
machinery and by that, the daughters would perhaps lose a
certain percentage of the benefit they might otherwise obtain
earlier, I’m going to agree that the trust—or that the Will may
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be amended as proposed, including the references here to the
Nevada residence and the paid-up life insurance and surplusage
as it relates to the postnuptial and the non-contest clause that’s
been spoken of here.
[¶15.] These minimal oral findings were reflected in the circuit court’s order
on October 27, 2016. But the circuit court’s statements, the hearing transcripts,
and the circuit court’s orders contain no factual findings based on evidence on which
this Court could adequately review for an abuse of discretion. Thus, the abuse of
discretion standard alone is also inappropriate in this case.
[¶16.] In-depth factual determinations are needed primarily as to what
Dean’s wishes would have been as well as to the other factors listed in the statute.
The record in this case is devoid of evidence needed to make those required
statutory findings. Dean’s estate plan had consistently provided for Elizabeth to
have a lifetime interest in one-half of Dean’s residuary estate. At the October 12
hearing, no exhibits were entered into the record other than Conservator’s tenth
report on Dean’s estate. No witnesses presented testimony. Only the arguments of
counsel were presented to the circuit court. This was despite the fact that Elizabeth
had objected to the proposed changes to Dean’s will at the hearing.
[¶17.] This case therefore boils down to a lack of evidence to make factual
determinations required by the statute—significantly, the record lacks evidence
sufficient to primarily consider the decision that Dean Nelson would have made.
Evidence on the record is missing, and thus we are left with “a definite and firm
conviction that a mistake has been committed.” Tisdel, 2001 S.D. 149, ¶ 5, 638
N.W.2d at 252-53 (quoting Roehr, 2001 S.D. 85, ¶ 4, 631 N.W.2d at 601). As noted
above, factual determinations are reviewed for clear error. It was clearly erroneous
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for the circuit court to make these important determinations changing Dean’s estate
plan without adequate factual findings based on evidence. Furthermore, it was an
abuse of discretion to grant Conservator the power to redraft a will without making
factual findings based on evidence.
Conclusion
[¶18.] It must be emphasized that Conservator is asking to redraft the will of
an incompetent individual. The proposed will significantly changes Dean’s estate
plan. This is a decision of great import. While the action is authorized by statute,
absent strong and specific factual findings based on evidence in a fully developed
record, the circuit court’s factual findings were clearly erroneous. Thus, the circuit
court’s decision to authorize the Conservator to change the will was an abuse of
discretion due to the lack of adequate factual findings. We reverse.
[¶19.] GILBERTSON, Chief Justice, and KERN, Justice, and JENSEN and
GILES, Circuit Court Judges, concur.
[¶20.] JENSEN, Circuit Court Judge, sitting for ZINTER, Justice,
disqualified.
[¶21.] GILES, Circuit Court Judge, sitting for WILBUR, Retired Justice,
disqualified.
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