No. 88-380 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

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ANNA 

IN THE 

MARGARET CLARK, 

MATTER OF THE ESTATES 

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WALIVACE BRADLEY CLARK, SR., 37 

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Protected Persons. - ' r \-' 

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APPEAL FR.OM: ~istrict Court of the Twelfth ~udicial ~istrict, 

In and for the County of Chouteau, 

The Honorable Chan ~ttien, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Don A. Labar and Margaret M. Joyce Johnson, Church, 

Harris, Johnson and ~illiams; Great Falls, Montana 

For Respondent: 

~llin H. Cheetham, Fort Benton, Montana 

Gary W. jella and, Great Falls, Montana 

Submitted on Briefs: December 16, 1988 

~~~id~d: April 26, 1989 

- - " Clerk 
Mr. ;rustice ~il-lj-am F. Hunt, Sr. deliver~d t-he Opinion of the 

Court. 

Appellants, George Clark, Bertha ~ovelli and Marian 

Molnar, three of the five adult children of Anna Marqaret and 

Wallace Bradley Clark, Sr. (~eniors), appeal from a decree of 

the District Court of the Twelfth Judicial District, Chouteau 

County, which, with exceptions, approved! the accounting of 

the conservator of their parents' estates. We reverse and 

remand for further proceedings. 

The issues raised are as follows: 

1. id t.he District Court err j.n substantially 

approving the conservator's first annual accounting? 

2. Did the ~istrict Court properly scrutini-ze the 

conservator's t.ransactions with the protected persons? 

3. Did the ~istrict Court. err in determining that the 

protected persons were mentally competent? 

In the 1970 's, Wallace Bradley Clark, Jr. (Brad) , the 

youngest son of the Seniors, moved from Alaska to Montana to 

operate hi.s parents ' 1,760-acre farm located near Geraldine. 

In 1977, the seniors entered into a contract for deed with 

Brad whereby Brad agreed to purchase 800 acres of the farm 

for $160,000 at 6 percent interest. The contract providecl 

for annual payments to be made from the net proceeds of 

one-third of the grain grown on the land. 

At about the same time, Brad and the Seniors entered 

into a ten-year lease for the remaining 96G acres of the 

farm. The contract provided for the annual payment of a 

one-fourth share of a1.l crop producecl on the acreage under 

lease. 

None of the other Clark chi.1-dren resided near the 

Seniors. The 01-dest son, George, had farmed in the Geraldine 
area until 1981, when he retired and moved to West 

Yellowstone. The remaining children, Bertha Novelli, Marian 

Molnar and ~osephine Wilson, all resided in Alaska. Although 

the daughters an3 George did not live in the vicinity of the 

Seniors, the record indicates that they each v?sited their 

parents yearly. 

During his visits, George became concerned that his 

parents were no longer capable of managing their financial 

affairs. In 1984, he discovered that his mother had 

overdrawn her checking account by writing checks to the 

grandchildren. In 1985, his Father told him that he had 

signed some papers but didn't know what they were. Upon 

investigation, George found that the seniors had deeg~d 

one-half of the 960 acres of farmland to the five children. 

Further investigation revealed that the Seniors had given 

Brad full power of attorney over their affairs. 

On April 25, 1985, George petitioned the District Court 

for the appointment of a conservator for the seniors, both in 

their early 90s at the time. Concerned that Brad might be 

exercising undue influence over his parents, George nominated 

one L.C. Siebenaler, a disinterested party, as conservator. A 

hearing was held on the matter, during which the District 

Court interviewed the elderly couple. The court found that 

due to their advanced age and occasional forgetfulness, both 

parties were unable to manage their property and affairs 

effectively without assistance. Over George's objection, the 

court appointed Rrad as conservator, finding that it would be 

in the best interest of the Seniors if a family member held 

the position rather than someone they did not know. On June 

11, 1985, Rrad posted two bonds in the amount of $25,000 

each. Letters of conservatorship issued. 

On September 18, 1985, Brad filed an inventory and 

appraisement of the fair market value of the assets of the 
Seniors as of Ju1.y 8, 1985. He failed to file his first 

annual accounting, however, until January 8, 1987. Shortly 

after filing the accounting, Brac7 filed an amended inventory 

and appra isement of assets. The amended inventory reflected 

a decrease of approximately $30,600 of the balance receivable 

from the 1377 contract for deed between Brad and the Seniors. 

Brad later testified that the original inventory showed both 

the principal and interest due and owing on the contract for 

deed; the amended version reflected only the principal. No 

reference to the $30,600 in interest Brad admittedly owed on 

the contract as of July 8, 1985, can be found on the amended 

inventory. 

A hearing on the accounting was held on January 19, 

1987, during which George filed written objections. Shortly 

thereafter, George filed additional exceptions, seeking to 

void certain transactions made by Brad, as we]-!_ as a more 

detailed accounting, an audit of the estates and the removal 

of Brad as conservator. 

A hearing to consider the objections was held on March 

2, 1987. The court took testimony at that time but. also 

granted Brad's motion for a continuance to ~pril 6, 1987, to 

all-ow Josephine Wilson, one of the Clark daughters, to appear 

and testify. After the hearing, the District Court issued an 

order that accepted and approved the first annual accounting. 

George, Rertha and Marian moved the court- to re-open the 

hearing on the accounting and to remove Brad as conservator. 

The District Court granted the motion and trial was held on 

August 17 and 19, 1987. 

~uring the trial, Brad testified that in 1985 and 1986 

he exchanged a series of checks with the seniors, resulting 

in the forai veness of approximately $70,566 in indebtedness 

Brad had accumulated under the contract for deed, including 

$30,600 in interest. In its orcler issued after the tri-a!, 
the District Court voided these transactions, finding that 

t.hey were of such magnitude as to endanger the Seniors' 

welfare and that they violated S 72-20-203, MCA, the statute 

prohibiting a fiduciary from dealing with trust property for 

his own benefit. Appellants do not appeal from this part of 

the District Court order. 

Erad also testified that his father had given him other 

gifts that were not reflected on the accounting, including 

$720 for grasshopper poison and the Seniors' share of the 

1985 crop, which amounted to approximztely 700 bushels of 

winter wheat and 375 bushels of barley. Rrad stated that his 

father had given him the Seniors' share of the crop every 

year since 1981. ~ccording to Brad, his father intended to 

give him the farm. The contract for deed was executed only 

to avoid gift taxes. Therefore, Rrad contended, when farminq 

became less I-ucrative, his father no longer required him to 

pay under the contract. Erad also test-ified that he had 

taken out a $3,900 loan on the 1985 crop, putting all of the 

proceeds in his personal account and none in the Seniors, 

even though the seniors owned a share of the crop under the 

contract and lease. 

with the exception of the avoidance of the $70,566 in 

forgiven indebtedness mentioned above, the ~istrict Court 

once again approveci the first annual accounting. The court 

found that the Seniors' promised to give Brad the -Farm and 

gave him their share of the crop and other gifts in honor of 

that promise. The court also found that the seniors were 

mentally competent and capable of handling their own affairs, 

though they had difficulty remembering their actions 

afterward. The court refused to remove Brad as conservator, 

continuing the question to the hearing on the second annual 

accounting, which Brad had not yet filed. 
On April 18, 1988, George, Bertha and Marian filed a 

motion asking the District Court to either withdraw or amend 

its findings and conclusions. The movants sought a new trial 

in the alternative. The District Court failed to rule on t.he 

motion withi-n 45 days. Hence, under Rule 59 (d) , M.R..Civ.P, 

the motion was deemed denied.. 

On June 24, 1988, George, Bertha and Yarian appealed to 

this Court, seeking, among other things, the removal of Brad 

as conservator. This question was rendered moot. when, on 

October 17, 1988, Brad resigned his position. Gary W. 

~jel.I.and, the conservator appointed in Brad's stead, has 

joined as amicus curiae in the appeal of George, Sertha and 

Marian wi+.h respect to the remaining issues. 

A conservatorship may be warranted when, due to advanced 

age, a person is unable to effectively manage his affairs and 

he owns property that is in danger of being wasted or 

dissipated unless proper management is provided. Section 

72-5-409 (2) , MCA. The institution of a conservatorship 

grants the district court broad powers. The court may 

exercise all powers over the estate that a protected person 

could exercise if he were not under a disability, except the 

power to make a will. At all times, however, the court's 

handling of the property must be for the benefit of the 

protected person. section 72-5-421(3), MCA. The court may 

exercise these powers directly or through a conservator. 

Section 72-5-427., MCA. If a conservator is appointed, he 

must administer the estate as vrou7.d the court if 

administering it directly, that i.s, for the benefit of the 

protected person. 

The conservator is required to account to the District 

Court on. an annual basis. Section 72-5-438, MCA. The 

District Court must carefully scrutinize the accounting, 

keeping in mind t.hat it is the conservator, as trustee of the 
estate, who bears the burden of proving the proper 

disposition of the property under his control. Local Union 

No. 400 of the Internat'l Union of Operating Eng'rs v. Bosh 

(1986), 220 Mont. 304, 312, 715 P.2d 36, 41. The conservator 

must therefore keep meticulous accounts of his administration 

of the estate, accounting for "the source of every item of 

income and the purpose of every item of expense." In re 

Allard 11914), 49 Mont. 219, 229, 141 P. 661, 665. 

The record demonstrates that +he first annual accounting 

filed by Brad Clark, the conservator in this case, was less 

than adequate. Other than a ledger listing drafts written on 

his father's checking account, Brad failed to introduce any 

evidence to verify the accounting. He failed to submit bank 

statements reflecting opening and closing balances, deposits 

and withdrawals. Re failed to produce receipts for purchases 

made on his personal credit card allegedly for the benefit of 

the Seniors. Fe failed to introduce gift and income tax 

returns filed by the Seniors. 

Furthermore, Brad's accounting was inaccurate an? 

incomplete. He failed to account for grain held in storage 

at the opening of the conservatorship but sold subsequently. 

He failed to account for his gift from the Seniors' of their 

share of the qrain under the contract for deed and lease. He 

failed to account for interest due under the contract for 

deed. He failed to indicate either in the original 

inventory, the amended inventory or the accounting that the 

Seniors' interest in the land under the 1977 contract for 

dee6 had been subordinated in 1983 to a Federal Land Rank 

mortgage that secured a $230,000 loan. 

The purpose of the statutorily required annual 

accounting is to inform the court of the financial- condition 

of the estste and to ensure that the conservator is managing 

the property for the benefit of the protected persons. In 
order to fulfill these purposes, the accounting must be 

accurate, complete and verifiable. The accounting filed by 

the conservator in this case is none of these. The ~istrict 

Court erred in accepting and approving it. 

When the accounting proferred by the conservator is 

inadequate, the District: Court may require the conservator to 

suhmit to a physical check of the estate. The physical check 

may be made in any manner specified by the court. Section 

72-5-438 (3), MCA. In this case, the appellants have 

requested an audit of the estate. I?nder the circumstances, 

an audit may be the best method by which to determine the 

estate's financial condition. We therefore remand this case 

for an audit and rehearing. 

The conservator acts as a fiduciary. As such, he is 

required to observe the stringent standards applicable to 

trustees. Section 72-5-423, MCA. Appellants argue that the 

~istrict Court failed to measure Brad's actions against these 

rigorous standards. Instead, the court excused Brad's 

actions because he "was told he should handle his folks' 

affairs just as he had prior to the institution of the 

conservatorship, and which he did without any advice to the 

contrary from his attorney." 

The purpose of a conservatorship is to preserve the 

property of the protected person. A conservator who profits 

to the detriment of his wards cannot be excused because he 

acted out of ignorance or because he acted in t.he same 

self-serving manner as he had prior to the institution of the 

trust. On remand, the Df-strict Court must more carefully 

scrutinize Brad's administration of the estate. Any 

transactions in which Rrad obtained an advantage must be 

presumed to be entered into by the Seniors without sufficient 

consideration and under un$ue influence. Section 72-20-208, 

MCA . Rrad has the burden of proving that the any 
transactions in which he obtained an advantage were for the 

benefit of the Seniors and that the Seniors freely entered 

into the transactions with full knowledge of the facts. 

Appellants argue that the District Court improperly 

ruled that the Seniors were mentally competent from 1981. 

through the period of the first accounting. We agree. Jn 

order to prove that any transactions in which Brad obtained 

an advantage were entered into by the Seniors freely and with 

full knowledge of the facts, Brad must also prove that the 

Seniors were mentally competent. He failed to do so. 

The institution of a conservatorship is not an 

adjudication of competency and has no effect on the protected 

person's capacity. Section 72-5-421(5), MCA. The protected 

person is therefore presumed to have the capacity to contract 

with third parties. 

When the protected person transacts with the 

conservator, however, the presumption shifts. Because the 

conservator is held to the utmost standard of good faith and 

fair dealing, he bears the burden of proving that the 

protected persons were at all times capable of understanding 

the nature of any transaction in which the conservator 

obtained a benefit. 

In the instant case, the only evidence in favor of a 

finding that the Seniors were mentally competent comes from 

the testimony of the conservator himself. his t-estimony is 

refuted by at least two of the other children. Under the 

circumstances, we cannot say that the conservator met his 

burden of proof. 

We reverse and remand for further proceedings in 

accordance with this opinion. 
We concur: 1 
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CORRECTION 

Date 

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