Marian I. Erdelyi v. Bradley T. Lott

IN THE SUPREME COURT, STATE OF WYOMING
2014 WY 48
APRIL TERM, A.D. 2014
April 11, 2014
MARIAN I. ERDELYI,
Appellant
(Plaintiff),
v. S-13-0116
BRADLEY T. LOTT,
Appellee
(Defendant).
Appeal from the District Court of Teton County
The Honorable Timothy C. Day, Judge
Representing Appellant:
C.M. Aron and Galen B. Woelk of Aron and Hennig, LLP, Laramie, Wyoming.
Argument by Mr. Woelk.
Representing Appellee:
James K. Lubing and Leah K. Corrigan of Lubing & Corrigan, LLC, Jackson,
Wyoming. Argument by Ms. Corrigan.
Before KITE, C.J., and HILL, VOIGT*, BURKE, and DAVIS, JJ.
*Justice Voigt retired effective January 3, 2014.
NOTICE: This opinion is subject to formal revision before publication in Pacific Reporter Third.
Readers are requested to notify the Clerk of the Supreme Court, Supreme Court Building,
Cheyenne, Wyoming 82002, of typographical or other formal errors so correction may be made
before final publication in the permanent volume.
KITE, Chief Justice.
[¶1] Marian I. Erdelyi filed an action against her stockbroker, Bradley T. Lott, for fraud
and constructive fraud. After a trial, a jury found that Mr. Lott committed constructive
fraud but that Ms. Erdelyi knew or in the exercise of due diligence should have known
before February 10, 2007, that the fraud had occurred. Based on the jury’s findings, the
district court entered judgment holding Ms. Erdelyi’s claims were barred by the statute of
limitations and dismissed the action.
[¶2] On appeal, Ms. Erdelyi contends the district court erred in instructing the jury on
negligence and comparative fault in this fraud action. She also asserts the district court
erred in instructing the jury, for purposes of applying the statute of limitations, to
determine whether she knew or should have known with the exercise of due diligence
before February 10, 2007, that the fraud had occurred, because there was no evidence to
support the instruction. We hold that when the law is properly applied, the evidence did
not support a finding that Ms. Erdelyi could have discovered the fraud sooner and it was
error to dismiss the case based on the statute of limitations. We, therefore, reverse the
judgment and remand for a new trial.
ISSUES
[¶3] Ms. Erdelyi states the issues for this Court’s determination as follows:
Whether the trial court’s jury instructions, taken as a
whole, misstated the law in the following particulars:
(A) By instructing the jury to compare a victim’s
fault on a claim of fraud, and including the victim on the
verdict form;
(B) By imposing a negligence standard on [Ms.
Erdelyi] with regard to discovery of her stockbroker’s fraud;
and
(C) By instructing the jury to determine the date
[Ms. Erdelyi] discovered her stockbroker’s fraud, when there
was no evidence of any such discovery presented.
Mr. Lott asserts the district court properly instructed the jury.
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FACTS
[¶4] Ms. Erdelyi was the only child of S. Isabel Sprankle. Ms. Sprankle and Ms. Erdelyi
were joint tenants with rights of survivorship on an investment account. Pursuant to the
account agreement, either joint tenant had the authority to independently make purchases
and sales or withdraw money from the account unless one of them terminated that
authority in writing. Ms. Sprankle contributed all of the funds held in the account.
[¶5] In 1999, Mr. Lott, a financial advisor employed by UBS/Paine Webber in Michigan,
took over as manager of the joint account for Ms. Sprankle and Ms. Erdelyi. At the time,
Ms. Sprankle was eighty-one years old and both she and her daughter were living in
Laramie, Wyoming. Although Mr. Lott and Ms. Sprankle did not meet face-to-face until
later, they were by 2001 having regular telephone contact, sometimes speaking with each
other several times per week.
[¶6] According to Mr. Lott’s client contact report, Ms. Sprankle shared with him quite
early in their relationship that she and her daughter did not have a good relationship. Mr.
Lott quickly befriended Ms. Sprankle, sending her cards and gifts, expressing his desire
to be friends over and above being her broker and listening to her complaints about her
daughter. He also offered to find an attorney in Wyoming for her to discuss setting up a
trust. According to his contact report, Mr. Lott made the offer to find an attorney for Ms.
Sprankle in February of 2001, after she told him she did not want her daughter to inherit
her money.
[¶7] During this same time frame, Mr. Lott persuaded Ms. Sprankle and Ms. Erdelyi to
transfer to him additional accounts they held as joint tenants with rights of survivorship.
Ms. Erdelyi requested in writing that Mr. Lott contact her before making any transactions
with respect to the accounts. Mr. Lott agreed to do as she requested. Although he knew
at the time that Ms. Sprankle did not want her daughter to have control of the accounts
and, in fact, wanted her name taken off the accounts, he did not disclose that information
to Ms. Erdelyi.
[¶8] By April or May of 2001, despite his earlier agreement to talk with her before
making any transactions involving the joint accounts, Mr. Lott stopped talking with Ms.
Erdelyi about what was happening with the joint accounts. He specifically did not tell
her that Ms. Sprankle was contemplating transferring them to a trust. He also did not
advise Ms. Erdelyi that he would not be contacting her concerning the accounts. Mr. Lott
continued, however, to work with Ms. Erdelyi to have her transfer her individual
accounts to him. Meanwhile, Mr. Lott referred Ms. Sprankle to Clay Geittmann in
Jackson, Wyoming for purposes of setting up a trust. By May of 2001, Mr. Lott was
continuing to communicate with Ms. Erdelyi about her accounts without informing her
that he had referred her mother to a lawyer to begin discussions about transferring the
joint accounts into a trust.
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[¶9] In the summer of 2002, Ms. Sprankle began talking about moving back to
Michigan. Over the course of the next ten months, Mr. Lott took it upon himself to look
for a place for Ms. Sprankle to live and sent her pictures of places he thought she might
want to consider. According to his client contact report, Ms. Sprankle asked him to fly to
Wyoming and drive her back to Michigan. Mr. Lott declined but agreed to help with the
logistics of the move as much as he could. In fact, Mr. Lott took an active role in
assisting Ms. Sprankle in moving to Michigan.
[¶10] In August of 2001, Ms. Sprankle informed Mr. Lott that she wanted him to be a
beneficiary of her trust. He understood from what she told him that she intended to make
a few minor gifts to others, but wanted him to receive the balance of her estate. Mr. Lott
did not tell Ms. Erdelyi about her mother’s plans nor did he tell Ms. Erdelyi that he could
not discuss her mother’s plans with her.
[¶11] In September of 2001, Ms. Sprankle met with Mr. Geittmann. She advised Mr.
Geittmann that she wanted to appoint Mr. Lott as her trustee upon incapacity and her
agent for purposes of her durable power of attorney and power of attorney for healthcare.
She also informed Mr. Geittmann that she wanted to make Mr. Lott the beneficiary of her
trust to the exclusion of her daughter. She told Mr. Geittmann that Mr. Lott was “her
close friend” and she wanted to “reward him for his kindness, friendship and support
throughout the years.” At the time Ms. Sprankle made these statements, she had not met
Mr. Lott in person and, according to Mr. Lott’s client contact reports, had been in regular
contact with him by telephone for less than a year.
[¶12] Also in September, Mr. Lott forwarded to Mr. Geittmann a letter of authorization
for Ms. Erdelyi’s signature allowing the transfer of the joint investment accounts into the
trust. Mr. Geittmann induced Ms. Erdelyi to sign the letter of authorization by telling her
that she and her mother would realize substantial tax savings by having the joint accounts
in the name of the trust. No one informed Ms. Erdelyi that her mother’s intention was to
disinherit her, that Ms. Sprankle was making Mr. Lott her primary beneficiary, or that by
signing the letter of authorization, Ms. Erdelyi was giving up her joint ownership rights.
Even when Ms. Erdelyi called Mr. Lott in October of 2001, and specifically asked about
the trust, he did not tell her that Ms. Sprankle planned to disinherit her and make him the
primary beneficiary of her trust. He also did not tell Ms. Erdelyi that her mother had
instructed him not to discuss her plans for the trust with her daughter. According to Ms.
Erdelyi, sometime in September or October, Mr. Lott told her that she was the primary
beneficiary of the trust.
[¶13] In December of 2001, UBS/Paine Webber was designated as Ms. Sprankle’s
successor trustee. Subsequently, in March of 2002, Mr. Lott forwarded a letter to Mr.
Geittmann that he (Mr. Lott) had written to Ms. Sprankle confirming a conversation in
which, according to Mr. Lott, she told him that she did not want him or UBS/Paine
3
Webber to disclose to Ms. Erdelyi the details of her trust, and specifically the fact that she
had designated Mr. Lott as her beneficiary. The letter went on to state that Mr. Lott also
managed Ms. Erdelyi’s financial assets and UBS/Paine Webber deemed it “imperative
that [Ms. Erdelyi] be made aware that [Mr. Lott is] a beneficiary to your trust.” The letter
stated further that Mr. Lott understood Ms. Sprankle did not want her daughter to know
this information and he would honor Ms. Sprankle’s request to not disclose her wishes to
her daughter.
[¶14] After receiving the letter from Mr. Lott, Mr. Geittmann crossed out the following
lines:
However, I have been advised by my firm’s compliance
department to have your attorney prepare a document
directing UBS Paine Webber and me not to disclose any
information about your trusts, my being a beneficiary or other
personal information that you do not want made available to
your daughter Marian.
We should follow up with it all to [Mr. Geittmann] to have
this document drafted and sent to my boss so that he can pass
it along to the compliance department to assist in carrying out
your trust’s directives.
Mr. Lott sent the letter to Ms. Sprankle as revised.
[¶15] Mr. Geittmann sent a letter dated the same day to Mr. Lott’s boss advising him
that:
Ms. Sprankle prohibits UBS Paine Webber, Inc., and any of
its agents, employees, brokers or representatives from
discussing the terms of Ms. Sprankle’s estate planning with
her daughter, Marian I. Erdelyi, or otherwise informing Ms.
Erdelyi about any of the provisions of Ms. Sprankle’s estate
planning. As a result of the rift that has grown between Ms.
Sprankle and her daughter, Ms. Erdelyi, Ms. Sprankle has
elected to leave the majority of her estate to her friends, and
to virtually disinherit Ms. Erdelyi. Furthermore, Ms.
Sprankle again reiterated to me that she made the decision to
benefit [Mr.] Lott, her financial planner, as a result of the
kindness and friendship that he [has] shown her over the
years, and not as a result of any persuasion on the part of Mr.
Lott.
4
At trial, Mr. Geittmann was not able to say whether he confirmed with Ms. Sprankle that
those were her wishes before sending the letter in March of 2002. At the time Mr.
Geittmann sent the letter referencing Mr. Lott’s friendship with Ms. Sprankle “over the
years,” Mr. Lott and Ms. Sprankle had still not met face-to-face and had been in regular
contact by telephone for just over one year.
[¶16] In May of 2002, Ms. Sprankle moved back to Michigan and into an apartment Mr.
Lott had found for her. Mr. Lott picked her up at the airport and assisted her with the
move. Once Ms. Sprankle was in Michigan, the relationship she and Mr. Lott had
developed over the telephone grew closer, with Mr. Lott devoting considerable time to
assisting and caring for Ms. Sprankle in numerous ways.
[¶17] In mid-July of 2003, Ms. Erdelyi contacted Mr. Lott, stating that she had not heard
from her mother since early June and her mother had not wanted to see her when she was
in Michigan earlier that year. Ms. Erdelyi thanked Mr. Lott for looking after her mother
and asked that he let her know if any problems arose. Mr. Lott responded, saying that he
had not prevented Ms. Erdelyi from seeing her mother and that he could not discuss Ms.
Sprankle with her because he had received a “stern” letter from Mr. Geittmann
prohibiting him from doing so. He did not disclose that Mr. Geittmann wrote the letter
only after reviewing a similar letter Mr. Lott had written to Ms. Sprankle.
[¶18] Ms. Erdelyi had no further contact with Mr. Lott until November 2003 when she
wrote to him about her individual accounts. Mr. Lott responded with the suggestion that
she work with another broker. In her reply, Ms. Erdelyi expressed concern that Mr. Lott
had ignored her account and avoided communication with her for five months. She also
asked him to clarify his relationship with her mother, noting that finding her mother an
apartment and helping her move were beyond his responsibilities as her broker. Ms.
Erdelyi asked specifically whether Mr. Lott held any powers of attorney to act as her
mother’s agent and whether he had been appointed to act as executor of any will or trust
her mother might have. Mr. Lott never responded.
[¶19] In 2005, Ms. Erdelyi traveled to Michigan. She visited her mother and tried to see
Mr. Lott but was told he was out of the office. In 2006, Ms. Erdelyi sent Mr. Lott a letter
asking him to let her know if her mother became ill or passed away and thanking him for
looking after her mother. Again, Mr. Lott did not respond.
[¶20] In August of 2009, Ms. Sprankle was declared incompetent and was quite ill. A
friend of hers contacted Ms. Erdelyi who then traveled to Michigan to be with her
mother. Ms. Erdelyi asked Mr. Lott for a copy of the power of attorney. Mr. Lott
refused to provide any documentation to her and contacted Mr. Geittmann. Mr.
Geittmann then wrote a letter advising Ms. Erdelyi that neither he nor her mother’s
successor trustees were allowed to provide any information concerning the trust “to any
person who is not a current beneficiary of the trust, and since your mother is the sole
5
current beneficiary of the trust, this would preclude any dissemination of the actual estate
planning documents or statements of the trust assets to you.” Mr. Geittmann requested
that Ms. Erdelyi make no further requests for information about the trust during Ms.
Sprankle’s lifetime.
[¶21] Ms. Sprankle died on October 6, 2009. Ms. Erdelyi learned that she was not a
beneficiary of her mother’s trust when she received a copy of the trust after her mother’s
death. Pursuant to the terms of the trust, Mr. Lott received $245,000 in securities and
over $300,000 in cash from Ms. Sprankle’s estate.
[¶22] In February of 2011, two years and four months after learning she had been
disinherited, Ms. Erdelyi filed a complaint against Mr. Lott for fraud and constructive
fraud.1 She claimed that he failed to disclose material facts and induced her to sign the
letter of authorization, thereby giving up her ownership rights to the assets in the joint
accounts. She further claimed she had a special relationship of trust and confidence with
Mr. Lott by virtue of his position as her investment adviser and he had a duty to disclose
any conflicts between her interests and his and obtain fully informed consent from her
before engaging in transactions to his benefit involving accounts in which she had an
ownership interest.
[¶23] The case went to trial before a jury. At the close of the evidence, the district court
instructed the jury concerning the law. Among the instructions given were the following:
INSTRUCTION NO. 16
Constructive fraud is defined as consisting of all acts,
omissions, and concealments involving breaches of a legal or
equitable duty resulting in damage to another, and exists
where such conduct, although not actually fraudulent, ought
to be so treated when it has the same consequences and legal
effects.
INSTRUCTION No. 17
In considering whether constructive fraud occurred,
you must determine whether Defendant had a duty to Plaintiff
and, if so, whether it was breached. What is known as an
informal fiduciary duty may be established if a special
relationship of trust and confidence existed between
1
In addition to Mr. Lott, Ms. Erdelyi named Mr. Geittmann as a defendant. By joint stipulation of the
parties, the district court entered an order dismissing him from the action. The complaint also alleged a
third cause of action against Mr. Lott— breach of agent duties—which Ms. Erdelyi dropped before trial.
6
Defendant and Plaintiff. Such a duty arises where one party
has undertaken to gain the confidence of another and
purported to act or advise with the other’s interests in mind.
The express reposing of trust and confidence by one party in
another is not enough to create a fiduciary duty. The duty
arises from the conduct of the purported fiduciary where 1)
the other party reposes confidence in the integrity of the
purported fiduciary, and 2) the purported fiduciary voluntarily
assumes and accepts the confidence in advising the other
party.
Fiduciary relationships are extraordinary and not easily
created. They cannot be the product of wishful thinking,
because they carry significant legal relationships.
In determining whether a fiduciary duty arose due to a
relationship of trust and confidence, you should consider the
factual situations surrounding the involved transactions in this
matter and the relationship of the parties to each other and to
the transactions.
If you determine that Defendant owed Plaintiff such a
duty, it is for you to determine whether Defendant breached
that duty by his acts, omissions, and concealments.
INSTRUCTION NO. 19
A person has the duty to take reasonable steps under
the circumstances to reduce her injuries and damages. Any
damages resulting from a failure to take such reasonable steps
cannot be recovered.
INSTRUCTION NO. 21
Your verdict must be determined on the basis of the
comparative fault of the parties themselves and certain other
individuals and entities who are not parties to this case. Even
though certain of the individuals and entities named on the
verdict form have not appeared or offered evidence, it is
necessary that you determine whether each of them was at
fault in the events at issue and determine the percentage of
fault which is attributable to each of them. The party
claiming the fault of these “non-party actors” has the burden
of establishing by a preponderance of the evidence all of the
facts necessary to prove that any such individual was at fault
7
and that such fault contributed to the damages claimed to
have been suffered.
A party or non-party actor is at fault when that
individual is negligent or acts willfully or wantonly and that
individual’s negligence or willful and wanton action is a
cause of the damages for which the claim is made. The terms
negligence, willful and wanton, and cause are explained in
other instructions.
The verdict form provided to you includes spaces for
you to record your determination of the percentage of fault of
each of the parties and each of the non-party actors. It also
contains a space for you to record your determination of the
total damages sustained.
If you find that Plaintiff is fifty percent at fault or less,
then you should fill in the total amount of damages, if any, on
the verdict form. Do not reduce your determination of total
damages by any percentage of fault you have attributed to the
Plaintiff, the Defendant, or any of the non-party actors.
The Court, and not the jury, will reduce the total
amount of damages by the percentage of fault you may
attribute to the Plaintiff and other non-party actors.
In explaining the consequences of your verdict, the
Court has not meant to imply that any person is at fault. That
is for you to decide, in conformity with these instructions.
INSTRUCTION NO. 23
When the word negligence is used in these
instructions, it means the failure to use ordinary care.
Ordinary care means the degree of care which should
reasonably be expected of the ordinary careful person under
the same or similar circumstances. The law does not say how
such an ordinary person would act. That is for you to decide.
The party seeking to prove negligence must prove it by
a preponderance of the evidence.
A “preponderance of the evidence” is defined as the
amount of evidence, taken as a whole, that leads the jury to
find that the existence of a disputed fact is more probable than
not. You should understand that “a preponderance of the
evidence” does not necessarily mean the greater number of
witnesses or exhibits.
8
INSTRUCTION NO. 25
If you were to decide that fraud occurred in this case, then
you will be asked to decide when the Plaintiff discovered the
fraud. Discovery of the fraud is determined by when the
injured party knew, or should have known through the
exercise of due diligence, that the fraud occurred.
[¶24] The district court gave the jury the following verdict form:
1. Do you find that Bradley Lott committed a fraudulent
misrepresentation of a material fact as defined by the
Court in Instruction 12?
_______ _______
Yes No
Please proceed to question 2.
2. Do you find that a special relationship of trust and
confidence existed between Bradley Lott and Marian
Erdelyi, as defined in the Court’s Instruction 17?
_______ _______
Yes No
If you answered yes to question 2, please proceed to
question 3, below. If you answered no to question 2 and
no to question 1, please sign the form and return it to the
Bailiff, who will then return it to the Court. If you
answered no to question 2 but yes to question 1, please
proceed to question 4 below.
3. Having found a special relationship of trust and
confidence between the parties, did Bradley Lott breach
his duty of honest advice and full disclosure, as defined in
Instruction 17?
_______ _______
Yes No
If you answered yes to question number 3, then go on to
question number 4, below. If you answered no to question
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number 3, but yes to question number 1, then proceed to
question 4, below. If you answered no to questions 1 and
3, please sign the verdict form, and deliver it to the Bailiff
who will then deliver it to the Court.
4. Having found that Defendant committed fraud, do you
find that, before February 10, 2007, the Plaintiff, Marian
Erdelyi, knew or should have known in the exercise of due
diligence, that the fraud alleged against Defendant,
Bradley Lott, occurred?
_______ _______
Yes No
If you answered yes to question number 4, please sign the
verdict form and give it to the Bailiff who will then
deliver it to the Court. If you answered no to question
number 4, go on to answer question number 5, below.
5. Having found fraud by answering “yes” to question 1
and/or questions 2 and 3, did Marian Erdelyi suffer
damage as a result of the fraudulent misrepresentation
and/or constructive fraud committed by Bradley Lott?
_______ _______
Yes No
If you answered yes to question number 5, then go on to
the questions below. If you answered no to question
number 5, please sign the verdict form, and deliver it to
the Bailiff who will then deliver it to the Court.
COMPARATIVE FAULT
6. Do you find that the acts or omissions constituting fault by
Attorney Clay Geittmann were a substantial factor in
bringing about damage to Marian Erdelyi?
_______ _______
Yes No
7. Do you find that acts or omissions constituting fault of
UBS/PaineWeber were a substantial factor in bringing
about damage to Marian Erdelyi?
10
_______ ________
Yes No
8. Do you find that Marian Erdelyi’s own acts or omissions
constituting fault were a substantial factor in bringing
about damages to herself?
_______ _______
Yes No
9. Assuming the total percentage of fault to be 100%, what
percentage of the fault do you attribute to each of the
following? (Your percentages must total 100%):
Marian Erdelyi __________%
If plaintiff’s percentage of fault is greater than 50%,
please sign the verdict form and return it to the Bailiff,
who will then return it to the Court. If Plaintiff’s
percentage of fault is less than 50%, please proceed to the
questions below.
Attorney Clay Geittmann __________%
Bradley Lott __________%
UBS/PaineWebber __________%
10. What do you find to be the total amount of damage
suffered by Plaintiff Marian Erdelyi? (Do not reduce by
the percentage of fault you found. The Court will reduce
this amount by any percentage of fault you attribute to
other actors.)
$__________
The jury answered question 1 “No” and questions 2, 3 and 4 “Yes”. In accordance with
the verdict form instruction, having answered question 4 “Yes” the jury signed the verdict
form without answering the remaining questions. The district court entered judgment on
the jury verdict holding that Ms. Erdelyi’s claims were barred by the statute of
limitations. Ms. Erdelyi timely appealed to this Court.
STANDARDS OF REVIEW
[¶25] We conclude the statute of limitations question is dispositive of this appeal. The
application of a statute of limitations is a mixed question of law and fact when the
11
material facts are in dispute; otherwise, it is a question of law. Redland v. Redland, 2012
WY 148, ¶ 54, 288 P.3d 1173, 1187 (Wyo. 2012).
DISCUSSION
1. Evidence that Ms. Erdelyi Discovered the Fraud
[¶26] Although the jury found that Mr. Lott committed fraud, it then found that Ms.
Erdelyi “knew or should have known” before February 10, 2007, that the fraud occurred.
Ms. Erdelyi contends there was no evidence to support that conclusion. A cause of action
for fraud is not deemed to have accrued until the discovery of the fraud. Wyo. Stat. Ann.
§ 1-3-106 (LexisNexis 2013). We have interpreted the words “until the discovery of the
fraud” to mean from the time the fraud was known or “could have been discovered in the
exercise of reasonable diligence.” Retz v. Siebrandt, 2008 WY 44, ¶ 12, 181 P.3d 84, 89-
90 (Wyo. 2008), quoting Mason v. Laramie Rivers Co., 490 P.2d 1062, 1064 (Wyo.
1971) (emphasis added).
[¶27] Applying this meaning in Retz, we held a claim for conversion was barred by the
four year statute of limitations because the conversion could easily have been discovered.
There, the claimants’ mother jointly held a brokerage account with the deceased. They
claimed that prior to his death the deceased used a fraudulent document to withdraw
securities from the joint account. They attempted to bring a claim for conversion thirteen
years after the withdrawal and the district court concluded it was barred by the statute of
limitations. This Court affirmed, stating that “[a] simple inquiry at the brokerage would
have shown [the mother] that the account had been emptied.” Id., ¶ 13, 181 P.3d at 90.
Because the mother could easily have discovered the conversion, the action brought
thirteen years later was barred.
[¶28] In Mason, the Court dismissed a claim for fraud based on the four year statute of
limitations. There, corporate stockholders filed an action in 1969 alleging that the
transfer of stock to another stockholder six years earlier was fraudulent. The district
court held the action was barred by the statute of limitations. This Court affirmed,
finding that the claimant stockholders had voted personally or by proxy at the meeting in
1963 when the stock was transferred, the transfer had been challenged at the meeting by
an attorney stockholder who attached a letter to the minutes protesting the transfer and
the corporate books showed the transfer two months later. The Court held the action was
barred by the statute of limitations because the stockholders had access to and the right to
examine the corporate records and could easily, therefore, have discovered the fraud
within four years of the stock transfer.
[¶29] In both Mason and Retz, the Court held actions filed after the four year statutes of
limitation were barred because the claimants were legally entitled to the information and
could easily access it. If the claimants’ mother in Retz had inquired at the brokerage, she
12
would have discovered the account was empty. Similarly, if the stockholders in Mason
had examined the corporate records, they would have discovered the fraudulent transfer.
[¶30] In contrast to Mason and Retz, the instruction in the present case did not ask the
jury to determine whether Ms. Erdelyi in the exercise of due diligence “could have
discovered” the fraud. Instead, the instruction asked the jury to determine whether Ms.
Erdelyi knew or with the exercise of due diligence should have known about the fraud.
As proof that Ms. Erdelyi should have known, the defense attempted to show that all she
had to do was ask her mother about the terms of her trust or her relationship with Mr.
Lott, or hire a lawyer. On cross-examination, defense counsel questioned Ms. Erdelyi as
follows:
Q. . . . you didn’t call your mother and ask her what was going on, did
you?
A. I’m not sure when I called my mother, but would I have called her
about this, no.
Q. You wouldn’t call and say why is this guy being so nice to you, that
didn’t occur to you in 2003? Yes or no?
A. In that context, I would not have called her.
Q. I mean your position in this case is, among other things, that . . . Mr.
Lott concealed things about the trust and Mr. Lott’s relationship with your
mother and whatnot for a period of better than half a decade; isn’t that true?
A. Yes.
Q. And you had the ability to call your mother up and ask her what was
going on anytime from the time she left Laramie until she became
incompetent; isn’t that true?
A. Yes.
Q. And you never asked if Mr. Lott, why he was being so nice, is she
going to make him a beneficiary, you never asked any of those questions,
did you?
A. No.
Q. And even in 2005 when she gave you a hug and whatnot you
decided not to ask her, correct?
A. It was not a subject that was mutually agreeable to either one of us
and I was not –
Q. You –
A. -- going to question her.
Q. Okay. But you could have, correct?
A. Yes.
[¶31] The defense also questioned Ms. Erdelyi as follows:
13
Q. Why don’t you – you could have hired a lawyer at the
point, correct?
A. Yes.
....
Q. And you could have hired a lawyer on the basis of how
come these people won’t tell me anything, correct?
A. I would assume so, yes.
Q. Yeah, but you didn’t, correct?
A. Correct.
Q. And I mean if you really wanted to find out what was
going on and if you were going to use due diligence to find
out what was going on you would have hired a lawyer or at
least talked to a lawyer and told him about this scenario,
correct?
A. I could have, yes.
Defense counsel returned to the issue later when he asked Ms. Erdelyi whether in
hindsight the reasonable thing to have done would have been to hire a lawyer. Ms.
Erdelyi responded, “In hindsight, yes. At the time, no.”
[¶32] The problem with the defense theory that Ms. Erdelyi could have discovered the
fraud by talking with Ms. Sprankle or hiring a lawyer is that it assumes such action would
have disclosed the fraud. No evidence was presented to support that assumption. With
regard to asking her mother, the evidence suggests Ms. Sprankle likely would not have
discussed her relationship with Mr. Lott or her estate plans with Ms. Erdelyi. As for
seeking legal advice, one can only speculate as to what the outcome might have been.
While Mr. Lott’s fraud might have been discovered, a lawyer might also have advised
Ms. Erdelyi that she had no recourse until she was able to obtain a copy of the trust upon
her mother’s death.
[¶33] In any event, unlike the circumstances in Mason and Retz, no evidence was
presented to show that if Ms. Erdelyi had asked her mother or if she had gone to a lawyer
she could have discovered the fraud. Likewise, unlike Mason and Retz, no evidence was
presented to show that Ms. Erdelyi was legally entitled to and had access to information
about the trust or Mr. Lott’s relationship with her mother. In fact, the evidence presented
showed that information concerning Ms. Sprankle’s trust and relationship with Mr. Lott
was actively concealed from Ms. Erdelyi.2
2
Some courts have held that the statute of limitations governing actions for fraud is tolled if the
perpetrator takes affirmative action to conceal the fraud, and the statute only begins to run when the fraud
is discovered; that is, when damage is sustained and objectively capable of ascertainment. See generally
54 CJS Limitation of Actions § 276. Other courts have held that when a fiduciary or confidential
relationship exists between the parties, failure to exercise due diligence to discover the fraud does not toll
14
[¶34] As support for the jury’s finding that Ms. Erdelyi “knew or should have known”
about the fraud, Mr. Lott points to Ms. Erdelyi’s testimony that “you would have to be
comatose” not to have been suspicious of Mr. Lott’s relationship with Ms. Sprankle by
the mid-2000s. Mr. Lott also points to Ms. Erdelyi’s letter of 2003 in which she asked
Mr. Lott whether he held any powers of attorney for her mother. Additionally, he
stresses Ms. Erdelyi’s poor relationship with her mother, her failure to ask her mother
about her estate plan and a letter she received from UBS/Paine Webber in 2003 refusing
to provide information to her concerning the accounts or trust.3 Under Mason and Retz,
this evidence does not support a finding that with the exercise of due diligence Ms.
Erdelyi could have discovered the fraud. While there is no question Ms. Erdelyi was
suspicious and concerned about the relationship, she testified that it did not occur to her
that her mother had made Mr. Lott, rather than her daughter, her primary beneficiary until
close to the time of her mother’s death. More importantly, there was no showing
information that would have revealed the fraud was accessible to Ms. Erdelyi prior to her
mother’s death or that she was legally entitled to it. To the contrary, her efforts to obtain
information were met with active concealment by Mr. Lott and others. Under these
circumstances, the evidence did not support dismissal of the case on the basis of the
statute of limitations.
[¶35] The statute of limitations issue is dispositive of this appeal. On remand for a new
trial, however, the issues relating to the jury instructions and verdict form are likely to
rise again. We, therefore, address Ms. Erdelyi’s claim that it was error to instruct the jury
concerning negligence and comparative fault, and place her name on the verdict form for
the jury to allocate her percentage of fault. See Glenn v. Union Pacific R. Co., 2011 WY
126, ¶ 30, 262 P.3d 177, 191 (Wyo. 2011), in which the plaintiff’s first issue was
dispositive of the appeal, but we addressed the second issue because it was likely to rise
again in the new trial.
2. Jury Instructions on Negligence and Comparative Fault
[¶36] Ms. Erdelyi contends it was error to give the negligence and comparative fault
instructions because it suggested that the act or omission of a victim of fraud could be the
proximate cause of someone else’s fraudulent act and the victim could be at fault for the
fraud. She also asserts the instructions confused the jury by mixing the concepts of
negligence and fraud, which have different standards of proof. She further contends the
instructions confused the jury by improperly introducing the concept of negligence when
there was no claim or counter-claim for negligence in this constructive fraud case.
the statute of limitations. Id., § 277. Ms. Erdelyi did not raise either of these issues in the district court
and so we do not address them.
3
The letter, although apparently introduced into evidence at trial, is not part of the record on appeal. We,
therefore, do not consider it.
15
[¶37] Wyoming’s comparative fault statute provides in relevant part as follows:
§ 1-1-109. Comparative fault.
(a) As used in this section:
(i) “Actor” means a person or other entity, including
the claimant, whose fault is determined to be a proximate
cause of the death, injury or damage, whether or not the actor
is a party to the litigation;
(ii) “Claimant” means a natural person, including the
personal representative of a deceased person, or any legal
entity, including corporations, limited liability companies,
partnerships or unincorporated associations, and includes a
third party plaintiff and a counterclaiming defendant;
(iii) “Defendant” means a party to the litigation against
whom a claim for damages is asserted, and includes third
party defendants. Where there is a counterclaim, the claimant
against whom the counterclaim is asserted is also a defendant;
(iv) “Fault” includes acts or omissions, determined to
be a proximate cause of death or injury to person or property,
that are in any measure negligent, or that subject an actor to
strict tort or strict products liability, and includes breach of
warranty, assumption of risk and misuse or alteration of a
product;
(v) “Injury to person or property,” in addition to bodily
injury, includes, without limitation, loss of enjoyment of life,
emotional distress, pain and suffering, disfigurement, physical
or mental disability, loss of earnings or income, damage to
reputation, loss of consortium, loss of profits and all other
such claims and causes of action arising out of the fault of an
actor;
[¶38] In Board of County Comm’rs of Teton Co. v. Bassett, 8 P.3d 1079, 1084 (Wyo.
2000), a negligence action, this Court held that Wyo. Stat. Ann. § 1-1-109 requires that
“all species of culpable conduct” be compared in assessing fault. There, the plaintiffs
were injured when a suspect fleeing from law enforcement ran a roadblock and crashed
into their vehicle at a high rate of speed. Prior to the crash, law enforcement had waved
the plaintiffs through the roadblock and onto the highway in front of the suspect without
warning them that the suspect was speeding down the highway toward them. The
plaintiffs brought an action against the officers alleging they were negligent for failing to
warn them about the approaching vehicle. The issue was whether the suspect, a non-
16
party actor, should be included on the verdict form so that his willful conduct could be
compared with the officers’ negligence.
[¶39] In holding that the suspect must be included on the verdict form, the Court
concluded that by using the word “fault” rather than negligence in § 1-1-109 and
including strict and products liability, the legislature intended to broaden the scope of the
statute to include willful conduct. The Court further concluded that the adoption of § 1-
1-109 and the elimination of joint and several liability showed the legislature’s intent to
limit a tortfeasor’s exposure to liability for the misconduct of other tortfeasors. The
Court said:
To leave an actor such as [the fleeing suspect] out of the
apportionment calculation exposes the remaining [defendants]
to the possibility that they will be held to answer for his
misconduct. * * * The legislature has clearly opted to relieve
joint tortfeasors of liability beyond that for which they bear
proportional fault . . . .
Bassett, 8 P.3d at 1084. Thus, under Bassett, a joint tortfeasor who acts willfully is
properly included as an actor on a verdict form in a negligence case so that the jury can
compare the defendant’s negligence and the non-party actor’s willful conduct and
apportion liability.
[¶40] Subsequently, in Cathcart v. State Farm Mut. Auto Ins. Co., 2005 WY 154, ¶ 36,
123 P.3d 579, 592 (Wyo. 2005), this Court declined to decide whether comparative fault
was a proper matter for a jury instruction in a bad faith case because the issue was not
squarely raised or adequately argued. That the Court declined to answer the question of
whether § 1-1-109 encompasses bad faith suggests Bassett did not settle the issue and
perhaps should not be read literally to include “all species of culpable conduct.” More
recently, in Strong Constr., Inc. v. City of Torrington, 2011 WY 82, ¶ 126, 255 P.3d 903,
915 (Wyo. 2011), the Court held comparative fault was not applicable in a breach of
contract action because the comparative fault statute applies to tort claims where a party
is seeking personal injury or property damages caused by the fault of another, and breach
of contract is not a tort claim. Cathcart left open the question whether Bassett applies in
the context of a bad faith case; Strong squarely held that § 1-1-109 does not apply in
breach of contract cases. Thus, Bassett’s holding that § 1-1-109 requires “all species of
culpable conduct” to be compared is not as broad as that decision might suggest.
[¶41] The holding in Bassett must be placed in context. There, the issue was whether,
under the comparative fault statute, the culpable conduct of a non-party tortfeasor must
be compared with that of the defendants in a negligence case. Bassett did not address
whether, in an intentional tort case, the negligence of a non-actor should be compared
with the willful conduct of the defendant. More significantly for purposes of the present
17
case, Bassett did not address whether in an intentional tort case any negligence on the
part of the claimant should be compared with the willful act of the defendant. Confined
to its facts, Bassett addressed only whether a non-party actor whose willful acts were a
proximate cause of the claimants’ injuries should be compared with the defendants’
negligence to apportion fault and liability. In that context, it makes sense to include the
non-party actor because it ensures the negligent defendants are not held liable for the
intentional acts of another. In that context, it seems clear the legislature sought to ensure
negligent defendants would not be held accountable for the intentional acts of another.
We are not persuaded the legislature intended negligence on the part of a fraud victim to
be compared with the intentional acts of the perpetrator so as to reduce the perpetrator’s
liability based upon any percentage of fault apportioned to the victim.
[¶42] Some courts have declined to apply comparative fault principles when to do so
would be inconsistent with public policy. Otero v. Jordan Rest. Enters, 922 P.2d 569,
574 (N.M. 1996), citing Reichert v. Atler, 875 P.2d 379, 381 (N.M. 1994). Concluding it
would be against public policy to allow the perpetrator of fraud to profit from his
conduct, these courts have held comparative fault inapplicable in fraud cases. Id. See
also Tratchel v. Essex Group, Inc., 452 N.W.2d 171, 180-81 (Iowa 1990) (holding that
instruction on comparative fault of plaintiff was properly denied to defendant guilty of
fraud); Cruise v. Graham, 622 So. 2d 37, 40 (Fla. Ct. App. 1993) (holding that denial of
comparative fault instructions in fraud action was not error); cf. Neff v. Bud Lewis Co., 89
N.M. 145, 149, 548 P.2d 107, 111 (Ct. App.) (holding contributory negligence was not a
defense to a claim for negligent misrepresentation by building owner against real estate
broker and salesmen having fiduciary relationship to plaintiff), cert. denied, 89 N.M. 321,
551 P.2d 1368 (1976); Estate of Braswell v. People’s Credit Union, 602 A.2d 510, 515
(R.I. 1992) (holding comparative negligence principles inapplicable in action for
negligent misrepresentation against credit union).
[¶43] Unlike this Court’s holding in Bassett, some of these courts have held that
comparative fault does not apply in any intentional tort case. Despite this difference, we
find their reasoning persuasive in the context of a fraud claim. One who has committed
fraud should not be allowed to escape liability for his wrongful conduct by shifting the
responsibility to the victim. Such a result is contrary to public policy. Absent clear
statutory language showing the legislature intended the negligence of a fraud victim to be
compared to the conduct of the perpetrator, thereby potentially reducing the latter’s
liability for his intentionally wrongful acts, we decline to hold that § 1-1-109 is a proper
matter for a jury instruction in a fraud case. The district court erred in instructing on
comparative fault and negligence so as to allow the jury to compare Mr. Lott’s willful act
with any negligence of Ms. Erdelyi in this constructive fraud case. The district court
further erred in providing a verdict form requiring the jury to compare Mr. Lott’s
constructive fraud and any negligence of Ms. Erdelyi.
18
[¶44] In reaching this result, we note also that the legislature has provided a mechanism
for relieving the perpetrator of fraud from liability for his conduct when a jury finds that
the victim did not use due diligence to discover the fraud. As noted above in paragraph
26, the statute of limitations for fraud actions is triggered when a claimant knows or
could have discovered the fraud in the exercise of due diligence. Mason, 490 P.2d at
1064. If a jury finds that a claimant knew or could have discovered the fraud more than
four years before filing the action, the perpetrator of the fraud is relieved from any
liability. Thus, any “negligence” of the claimant in not discovering and timely pursuing a
fraud claim is addressed in § 1-3-106. There is no need for a separate instruction
allowing a jury to compare a claimant’s negligence or comparative fault with the willful
act of the perpetrator in a fraud case.
[¶45] On remand, the jury should not be instructed on negligence as to Ms. Erdelyi. The
jury also should not be instructed on comparative fault as between Ms. Erdelyi and Mr.
Lott.
[¶46] Reversed and remanded for a new trial.
19