Opinion
No. C2-00-697.
Filed December 19, 2000.
Appeal from the District Court, Washington County, File No. C8-99-1180.
Kevin K. Shoeberg, (for appellants)
Dean A. LeDoux, (for respondents)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1998).
UNPUBLISHED OPINION
Appellants challenge the district court's judgment, order amending the judgment, and order denying appellants' motion for amended findings or a new trial. Appellants assert the district court erred as a matter of law and abused its discretion by refusing to impose a constructive trust on a testator's assets. Appellants also contend the district court erred by not ordering an accounting of the testator's revocable trust and assert the district court erred and abused its discretion by (a) failing to order the trust to reimburse one appellant for loans to the testator, (b) determining another appellant was responsible for a credit-card debt paid by the trust, and (c) ordering two appellants to pay attorney fees to two of the respondents. Finally, appellants assert that the law firm representing respondents had a conflict of interest because a member of the firm prepared the testator's will and trust. We affirm in part, reverse in part, and remand.
FACTS
Jane Volin (Volin) executed a will in 1978 that divided her estate equally among her four children: Charles J. Volin (Charles), James F. Volin (James), Susan J. Klein (Susan), and Nancy A. Volin (Nancy). In 1996 she executed four wills, each time revoking all of her previous wills. The first 1996 will stated that James was to receive "the sum of one dollar since he has received his share in previous years" and the rest of her estate was to be divided equally among Volin's other children. Volin's three other 1996 wills all excluded James and stated that such exclusion was intentional.
Volin executed a new will and a revocable trust on June 5, 1998. This will stated that her personal property was to be equally divided among her four children, absent a separate written statement directing the distribution of such property. It further provided that her entire residuary estate be given to her revocable trust. Volin signed a separate, handwritten document stating her jewelry was to be divided equally between her two daughters and her furniture was to be given to Frank Presley, her live-in companion.
According to the revocable trust, after Volin's death, the first $600,000 of her estate would be divided equally among Charles, Susan, and Nancy. The trust stated James would not receive a specific gift because he had received significant assets during Volin's lifetime. It further provided that any residuary-trust property must be distributed in equal shares to all four children. The revocable trust agreement named Volin, Presley, and Susan as trustees and named Nancy as a successor trustee. Susan and Presley later appointed U.S. Bank Trust (U.S. Bank) as the corporate trustee.
After Volin's death in January 1999, appellants Charles and James commenced this action against respondents Susan, Nancy, Presley, and U.S. Bank as trustee of the Jane Volin Trust. Charles and James asserted (a) tortious interference with contract, (b) fraud and conversion, (c) undue influence and constructive trust, (d) negligence, (e) conversion, (f) various claims in equity, and (g) improper accounting. June Schafer, Volin's sister, was later joined as a plaintiff and sought reimbursement from the trust for monies she expended for Volin's funeral and for monies she loaned to Volin. Susan and Nancy counterclaimed and, in relevant part, asserted that James fraudulently caused a credit card to be issued in Volin's name. They sought reimbursement from James for the trust's extinguishment of the debt incurred on this card.
The district court rejected all of Charles's and James's claims. The court ordered the trust to reimburse Schafer for funeral expenses and for $65,060.79 she paid to prevent the foreclosure of Volin's property. The court rejected Schafer's
claim for interest and for reimbursement of other alleged loans to Volin. The court further ordered James to repay the trust $7,563.84 for a credit-card debt paid by the trust on an account in both James's and Volin's names. Finally, the district court ordered Charles and James to pay attorney fees incurred by the trust totaling $114,922.72.
The district court denied appellants' motion for amended findings or a new trial. Respondents requested clarification of the attorney fees award, and the district court (a) amended its conclusions of law to reflect that such fees were awarded to Susan and Nancy, rather than the trust; (b) added new conclusions explaining its reasoning in awarding attorney fees; and (c) amended the judgment entered on its original order.
Appellants now challenge the judgment entered on the original order, the order amending the judgment, and the order denying appellants' motion for amended findings or a new trial.
DECISION I. Constructive Trust
Appellants assert the district court abused its discretion and erred as a matter of law by not imposing a constructive trust on Volin's assets. Appellants contend a constructive trust should have been imposed because (a) James and Volin had an oral contract for her to make a will and the revocable trust breached this contract; (b) Volin lacked testamentary capacity to execute her final will and trust; and/or (c) Volin was under Susan and Nancy's undue influence when she executed the will and trust.
Whether a constructive trust should be imposed is a question of fact for the district court that this court reviews only to determine whether the district court's finding was clearly erroneous. Freundschuh v. Freundschuh, 559 N.W.2d 706, 711 (Minn.App. 1997), review denied (Minn. Apr. 24, 1997); Minn.R.Civ.P. 52.01. To impose a constructive trust, there must be clear and convincing evidence that such a trust is necessary to prevent an unjust enrichment. In re Estate of Eriksen, 337 N.W.2d 671, 674 (Minn. 1983).
A. Oral Contract
Appellants allege Volin and James had an oral contract to make a will under which Volin and James agreed that when James reimbursed Volin for the money she had loaned him, Volin would execute a will directing her property be divided equally among her children. Appellants do not explain when this alleged contract was formed.
The existence of a contract is generally a fact question, and the district court's finding on this issue shall be set aside only if it is clearly erroneous. Gresser v. Hotzler, 604 N.W.2d 379, 382 (Minn.App. 2000); Minn.R.Civ.P. 52.01. The Uniform Probate Code states:
A contract to make a will * * * may be established only by (i) provisions of a will stating material provisions of the contract, (ii) an express reference in a will to a contract and extrinsic evidence proving the terms of the contract, or (iii) a writing signed by the decedent evidencing the contract.
Minn. Stat. § 524.2-514 (1998). Appellants do not assert that the requirements of this statute have been met in this case. Instead, they contend that this statute does not apply because it is similar to the statute of frauds and the statute of frauds does not apply in constructive-trust cases. See Freundschuh, 559 N.W.2d at 711 (stating statute of frauds does not apply to constructive-trust cases). Appellants disregard the fact that their constructive-trust claim is based on their theory that a contract to make a will existed between Volin and James. Thus, appellants must first establish the existence of a contract to make a will, and such a contract must comply with Minn. Stat. § 524.2-514.
In what appears to be an alternative argument, appellants assert that there was part performance of the oral contract, and, thus, the statute does not apply. This court specifically rejected such an argument in Olesen v. Manty, 438 N.W.2d 404, 409 (Minn.App. 1989), and we will not revisit that issue.
Appellants make no claim that the alleged oral contract complies with § 524.2-514, and their assertion that this statute does not apply is without merit. Thus, the district court's determination that appellants failed to establish the existence of a valid contract between Volin and James is not clearly erroneous.
B. Testamentary Capacity
Appellants next assert that the district court should have imposed a constructive trust because, contrary to the district court's finding, Volin did not have testamentary capacity to sign her June 1998 will and trust.
Whether a decedent had testamentary capacity is a factual determination that will not be overturned unless clearly erroneous. See In re Estate of Lange, 398 N.W.2d 569, 572 (Minn.App. 1986) (holding evidence adequately supported finding on testamentary capacity and finding could not be set aside because it was not clearly erroneous). Although "[p]roponents of a will have the burden of establishing prima facie proof of due execution in all cases[,]" will contestants have the burden of establishing a lack of testamentary capacity. Minn. Stat. § 524.3-407 (1998).
In evaluating testamentary capacity, the district court must determine whether, when making the will, the testator understood
the nature, situation, and extent of his property and the claims of others on his bounty or his remembrance, and he [is] able to hold these things in his mind long enough to form a rational judgment concerning them.
Congdon v. LeRoy (In re Estate of Congdon), 309 N.W.2d 261, 266 (Minn. 1981) (quotation omitted). The district court may also consider certain factors, including (a) the reasonableness of the property disposition; (b) the testator's behavior within a reasonable time before and after the will was executed; (c) any prior adjudication regarding the testator's mental capacity; and (d) expert testimony about the testator's mental and physical condition. In re Estate of Anderson, 384 N.W.2d 518, 520 (Minn.App. 1986).
Appellants point to Volin's diagnosis with central nervous system (CNS) vasculitis in September 1995. This diagnosis, on its own, does not demonstrate that Volin lacked testamentary capacity when she executed her will and trust. See Congdon, 309 N.W.2d at 266-67 (upholding testamentary capacity finding despite evidence testator had suffered stroke, paralyzing her right side, and had aphasia, which caused her to misunderstand statements and have difficulty speaking).
Constance Paiement, the attorney who drafted the June 1998 will and trust, testified that she first met with Volin on June 1 or 2, 1998. Paiement explained that during their meeting, Volin articulated her assets and the approximate value of her two major assets, which included her home and her property on Radio Drive in Woodbury (Radio Drive property). According to Paiement, Volin knew (a) she was 75 years old, (b) she lived with Presley, (c) she had lived in her home for approximately 20 years, and (d) she had four children. She also gave Paiement her children's names, addresses, and employment information. Paiement testified that during their meeting, Volin produced a copy of her most recent will and explained that she had excluded James because he had taken a lot of money from her and she was afraid of him. Paiement additionally testified that Volin understood how the trust would work and expressed that she wanted the trust in place before she closed on the sale of the Radio Drive property so the sale proceeds would go directly into the trust. Further, Paiement testified that Volin had the mental capacity to understand and execute those documents.
Considering the factors iterated by this court in Anderson, the reasonableness of this property disposition is supported by Volin's expressed concern over the fact that James borrowed substantial sums of money from her over the years. See Anderson, 384 N.W.2d at 520 (listing reasonableness of disposition as factor). Although James asserts that he paid the majority of these monies back, this is not at all clear from the record. Additionally, there was no prior adjudication involving Volin's mental capacity, and there was no expert testimony about her mental condition. See id. (including prior adjudication of mental capacity and expert testimony as relevant considerations).
Regarding Volin's behavior within a reasonable time before and after execution of the documents, testimony from numerous individuals supports the finding that Volin had testamentary capacity. See id. (stating district court may consider testator's behavior within reasonable time of will execution). The listing agent for the sale of Volin's home, Carol Huie, testified that she met with Volin on approximately June 2, 1998, to execute the listing agreement. According to Huie, Volin understood the nature of the real-estate transaction. Additionally, Judith Krow, an attorney who represented Volin in the Radio Drive property sale stated by affidavit that Volin understood the nature of the transaction when she agreed to sell the Radio Drive property in April 1998. Further, Charles testified that Volin understood during the Radio Drive property closing in June 1998 that the property was being sold and she would receive a substantial amount of money.
Notably, all of the wills executed in 1996 excluded James. Appellants allege that because these wills were executed after Volin's diagnosis with CNS vasculitis, they too were executed when Volin lacked testamentary capacity. Appellants fail to note, however, that Charles was present during the execution of one of the 1996 wills and did not challenge Volin's capacity at that time.
In light of Paiement's testimony that Volin had the requisite capacity; the testimony of others who participated in legal transactions with Volin during the same time period; and the fact that, other than the division of personal property, the 1998 will and trust included essentially the same division of property as Volin's 1996 wills, the district court's determination that Volin had testamentary capacity is not clearly erroneous.
C. Undue Influence
Appellants also assert that the district court should have imposed a constructive trust because Volin's will and trust were the product of undue influence by Susan and Nancy. Will contestants have the burden of establishing undue influence by clear and convincing evidence. In re Estate of Rechtzigel, 385 N.W.2d 827, 832 (Minn.App. 1986). The district court's findings will be set aside only if clearly erroneous. Id.
Generally, undue influence must be demonstrated through circumstantial evidence. In re Estate of Olsen, 357 N.W.2d 407, 411 (Minn.App. 1984), review denied (Minn. Feb. 27, 1985). To establish undue influence,
[t]he evidence must go beyond suspicion and conjecture and show, not only that the influence was in fact exerted, but that it was so dominant and controlling of the testator's mind that, in making the will, he ceased to act of his own free volition and became a mere puppet of the wielder of that influence.
Congdon, 309 N.W.2d at 268 (quotations omitted). The court may consider whether (a) the alleged influencer had the opportunity to exercise influence and actively participated in the will preparation, (b) a confidential relationship existed between the testator and the alleged influencer, (c) those who probably would have been remembered were disinherited, (d) the will provisions are consistent with each other, and (e) influence or persuasion caused the testator to make the will. In re Estate of Opsahl, 448 N.W.2d 96, 100 (Minn.App. 1989).
Although Susan and Presley were present for a portion of Volin's meeting with Paiement, they left when Paiement and Volin began discussing Volin's wishes regarding the distribution of her assets. There is no evidence that any of the children or Presley actively participated in the preparation of the will or trust. There is also no evidence that Susan or Nancy had a fiduciary relationship with their mother at the time Volin executed the documents. Additionally, although it could be presumed that testators generally provide for their children, here, Volin specifically articulated to Paiement her reasons for excluding James. Further, the provisions of Volin's will and trust are not internally inconsistent, and the record does not demonstrate that Susan or Nancy influenced or persuaded Volin to create the trust and new will. The fact that Susan arranged the meeting with Paiement does not demonstrate influence. Cf. Congdon, 309 N.W.2d at 268 (upholding testator's will despite fact that testator did not initiate will's preparation because no evidence showing influence dominated or controlled testator's mind). According to Paiement, Susan called her and arranged the meeting, but, Paiement testified, when she met with Volin, Volin did not appear to be under any undue influence or pressure to sign the documents. In addition, Paiement testified that when she was alone with Volin, Volin expressed her desire to protect her assets from James.
Appellants did not meet their burden of establishing undue influence by clear and convincing evidence. Thus, the district court's finding that Volin acted "of her own free volition" is not clearly erroneous.
Because we conclude the district court's findings that (a) Volin and James did not have an oral contract; (b) Volin had testamentary capacity; and (c) Volin was not subject to undue influence are not clearly erroneous, we uphold the districts court's refusal to impose a constructive trust.
II. Trust Accounting
Volin's revocable trust specifically provides for an annual written accounting. Volin created her trust in June 1998. Thus, under the trust provisions, the trustees should have completed at least one accounting. The trust provisions do not define the scope of the mandated accounting, but the requirement of an "annual written account of the administration of [the] trust" includes, at a minimum, a written statement of the trust's assets, income, and expenses. See Black's Law Dictionary 19 (7th ed. 1999) (stating "accounting" "frequently refers to the report of all items of property, income, and expenses prepared by a personal representative [or] trustee * * * and given to heirs, beneficiaries, and the probate court").
The district court did not order an accounting, but found that the bank had "provided an accounting of the funds [of the trust]." A full accounting has not been done, however. U.S. Bank compiled a list of all trust assets, and both respondents and appellants submitted copies of checks written against the account from July 4, 1998, through March 16, 1999, but the trustees have not created a document listing all trust expenditures and the reasons for those expenditures. Cf. Plunkett v. Lampert, 231 Minn. 484, 490, 43 N.W.2d 489, 493 (1950) (recognizing trustees bear the burden of proving accounts, and they have a duty "to make the fullest measure of disclosure").
Absent a full accounting, it is impossible for the beneficiaries to determine whether the trustees have adequately managed the trust. The lack of such an accounting also makes it difficult to enforce the district court's order that Susan and Nancy must reimburse the trust for any expenses not related to Susan's trustee activities. We therefore reverse and remand to the district court for a full accounting of the trust's assets, income, and expenditures. After this accounting, the district court shall make specific findings regarding the expenditures chargeable to the trust and those expenditures for which the trustees must reimburse the trust.
Appellants assert that respondents should also provide an accounting of all the personal property contained in the apartment Volin shared with Presley. Volin's will contains a provision stating that her personal property, including "clothing, jewelry, artworks, * * * household furniture and furnishings," is to be divided equally among her four children absent a signed statement by her that these items should be otherwise divided. Volin signed an attachment to her will that stated her jewelry was to be divided equally between Susan and Nancy and her "furniture" was to be given to Presley.
The district court determined that the attachment to Volin's will disposed of all her personal property and determined that "furniture" encompassed all personal property other than her jewelry. Although this finding is supported by testimony from Paiement, the document is unambiguous and states that Presley would receive only the furniture. "Furniture" has a meaning (unless otherwise amplified, which is not our case) that is not difficult to grasp. However, the district court's seeming error that the attachment meant that, with the exception of her jewelry, all of Volin's personal property (including non-furniture) should go to Presley, is cleared up by the record. See Wolfson v. City of St. Paul, 535 N.W.2d 384, 386 (Minn.App. 1995) ("Where the intention of the parties can be determined wholly from the writing, the construction of the instrument is a question of law for the court to resolve." (citation omitted)), review denied (Minn. Sept. 28, 1995). The district court attempted to resolve the dispute over personal property during the posttrial proceedings. At the hearing on appellants' posttrial motion, the court directed both parties to try to resolve the personal property dispute before the court ruled on the motion. After the hearing, respondents submitted a list of personal property in Presley's possession. With the exception of a few knickknacks, all of the listed items are furniture and/or are listed as joint purchases by Volin and Presley. Appellants did not respond, and they do not now assert that the list was inaccurate or incomplete. Additionally, at no point in this litigation have appellants indicated what specific items of personal property they wish divided. On this basis, we will not upset the district court's decision to award all the remaining personal property to Presley.
Within their argument on the trust accounting, appellants raise a number of other issues. They assert Susan and Nancy breached their trustee duties by not gathering and dividing personal property and assert U.S. Bank breached its duty to the beneficiaries. Neither issue was raised or addressed below, and both are therefore waived. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (stating appellate court generally will not consider matters not argued to, and considered by, district court). Appellants also contend Susan and Nancy breached their trustee duties by selling Volin's home for less than market value and incurring expenses for improvements before selling. The district court concluded the trustees did not breach their fiduciary duties with respect to the home sale or home improvements. This is supported by the listing agent's testimony that she recommended such improvements and she believed the price for which the home was sold was a fair and reasonable.
III. June Schafer's Claim
Appellants next allege the district court erroneously refused to reimburse June Schafer for all of her loans to Volin. This is a factual decision that this court will not overturn unless clearly erroneous. See In re Estate of Weber, 418 N.W.2d 497, 501 (Minn.App. 1988) (stating probate court's determination of factual question shall not be set aside unless clearly erroneous), review denied (Minn. Apr. 4, 1988).
The district court ordered the trust to reimburse Schafer $65,060.79 for sums she expended to prevent the foreclosure of the Radio Drive property and $4,671 for her expenditures on Volin's funeral. But the district court did not order the trust to pay interest on these funds and refused to order the trust to reimburse Schafer for $23,707 that she allegedly loaned to Volin. The court found that there was no documentation introduced to evidence the parties' intent regarding repayment or interest accrual and determined that Schafer did not have a valid and enforceable claim for this sum.
Appellants point to no evidence demonstrating that the $23,707 was anything other than a gift, and they point to no evidence stating that Volin and Schafer agreed Schafer would receive interest on the loaned funds. Although Schafer testified that she believed that she would be paid back, deference is given to the district court's credibility determinations. See In re Conservatorship of Lundgaard, 453 N.W.2d 58, 61 (Minn.App. 1990) (stating due regard must be given to district court credibility determinations). Additionally, Schafer testified that she was requesting five percent interest based on the interest rate on her bank account and not on any agreement between her and Volin. On this record, the district court's determination that Schafer did not demonstrate she had a valid claim against the trust was not clearly erroneous.
IV. Credit-Card Debt
Appellants next contend the district court erroneously ordered James to reimburse the trust $7,563.84 for the amount the trust paid on a credit-card debt. Appellants argue that James was not the customer on this account. Again, this is a factual determination that will be upset only if clearly erroneous. See Weber, 418 N.W.2d at 501.
All of the credit-card statements introduced at trial list this account under both James's and Volin's names and list James's address as the mailing address for the account. At some point this account was submitted to a collection agency. Information from the credit agency lists only Volin as the customer. But these documents do not list a customer address, and there is no evidence that the collection agency did not simply list Volin because her name was listed first on the account. Further, James's testimony that he had never been a customer on this account contradicts the credit-card statements listing his name and address and lends support to the district court's apparent rejection of his testimony on this issue. See Opsahl, 448 N.W.2d at 102 (refusing to disturb findings based on credibility assessments). Based on this record, the district court's finding on this issue was not erroneous; the district court properly exercised its discretion by ordering James to reimburse the trust for its payment of this credit-card debt.
V. Attorney Fees
The district court does not explain under what legal authority it awarded attorney fees. Respondents sought fees under Minn. Stat. § 549.211 (1998) in their motion for summary judgment, and the district court stated in its order denying summary judgment that it was reserving the attorney-fee issue until the matter was completely resolved. Assuming the court awarded fees under Minn. Stat. § 549.211, appellants note there was "no notice or motion made under Minn. Stat. § 549.211."
Minn.R.Civ.P. 11 does not provide a basis for upholding this award because respondents did not request fees under rule 11. See Empire Fire Marine Ins. Co. v. Carlson, 476 N.W.2d 666, 669 (Minn.App. 1991) (holding claim that attorney-fee award could be sustained under rule 11 not before court on appeal because rule 11 not argued in the district court and appellate court's review limited to issues presented to and considered by district court).
Minn. Stat. § 549.211, subd. 4(a), unambiguously states that a sanctions motion
must be made separately from other motions or requests and describe the specific conduct alleged to violate subdivision 2. It must be served as provided under the Rules of Civil Procedure, but may not be filed with or presented to the court unless, within 21 days after service of the motion, or another period as the court may prescribe, the challenged paper, claim, defense, contention, allegation, or denial is not withdrawn or appropriately corrected.
(Emphasis added.) Respondents did not serve appellants with a separate motion seeking fees. Further, the court itself did not initiate an attorney-fee award by issuing an order to show cause. See Minn. Stat. § 549.211, subd. 4(b) (stating on own initiative court may enter order describing conduct that appears to violate statute and directing counsel or party to show cause why it has not violated statute). Thus, neither respondents' counsel nor the district court followed the procedural requirements for an award under Minn. Stat. § 549.211, subd. 4. We therefore reverse the attorney fees award.
VI. Conflict of Interest
Finally, appellants assert that they are entitled to a new trial because Paiement was an attorney at Gray, Plant, Mooty, Mooty Bennett and that firm also represented respondents in this action. Appellants insist that this was a conflict of interest.
An attorney should not serve as both trial counsel and witness. See Cole v. Healy (In re Stephens' Estate), 207 Minn. 597, 604, 293 N.W. 90, 93 (1940) (chastising counsel for appearing as both trial counsel and witness). Here, however, the attorney serving as respondents' trial counsel did not testify. Although Paiement testified, and she is employed by the same law firm as respondents' trial counsel, this action is not precluded by law. Cf. Minn. R. Prof. Conduct 3.7(b) (stating "lawyer may act as advocate in a trial in which another lawyer in the lawyer's firm is likely to be called as a witness unless precluded from doing so by Rule 1.7 or Rule 1.9"); Minn. R. Prof. Conduct 1.7, 1.9 (precluding attorneys from representing client if representation will be adverse to another client or former client). Thus, there was no conflict of interest here.
Affirmed in part, reversed in part, and remanded.