Opinion ID: 900897
Heading Depth: 1
Heading Rank: 2

Heading: facts specific to this complaint

Text: [¶ 4.] Mattson's uncle, T. Ralph Mattson, was born on November 11, 1904. He was known as Pete Mattson and called Uncle Pete by relatives. He managed a bank in Hot Springs from 1935 until his retirement in the early 1970s. [¶ 5.] Uncle Pete and his wife, Gertrude, had no children. When she died in 1981, Mattson probated her several hundred thousand dollar estate. Uncle Pete was the primary beneficiary of the estate. [¶ 6.] Uncle Pete was described as an independent and stubborn man. He did not lead a lavish lifestyle. He was a frugal man who tended to tightly hang on to his money. While he did give Mattson nominal amounts of money while Mattson was in law school and exchanged Christmas gifts, by Mattson's own account, Uncle Pete was not prone to giving generous gifts. [¶ 7.] On September 16, 1990, Uncle Pete executed an Appointment of Guardian which appointed Norwest Bank, South Dakota, NA, Rapid City, South Dakota or its successor, to be the independent guardian of his person and estate should incompetency proceedings become necessary. The document stated that in making this appointment, I am not unmindful I have sisters, nieces and nephews, but do not want any of them to be my guardian. In no case whatsoever, shall any or all of my heirs at law, sisters, nieces or nephews, or any members of their families serve as my Guardian. [¶ 8.] On November 22, 1994, Uncle Pete executed a Last Will and Testament that was drafted by attorney David P. Russell. He gave his house, its furnishings and a lot in Hot Springs to his wife's niece, Gretchen Frey. Specific devises of personal property and money were given to twelve relatives and five charities. The residue of his estate was split between his sister, Mayme, his wife's niece, Gretchen, two grandnieces, and one grandnephew. His sister received 3/10ths of the residue while Gretchen received 2/5ths. The grandnieces, one of whom was Whitney Mattson, the daughter of Mattson's brother, each received 1/10th of the estate as did the grandnephew. [¶ 9.] The will directed that there be no proration of any federal estate tax or federal inheritance tax. It appointed Norwest Bank to be its independent executor and Mattson to be attorney for the estate. The will specifically provided that Uncle Pete purposely made no provision for any other person, whether claiming to be an heir of mine or not[.] Mattson, his wife, children, and grandchildren received nothing under the will. [¶ 10.] On November 26, 1994, four days after executing the will, Uncle Pete, who was then ninety years old, fell at his home and suffered a head injury which required his hospitalization in Rapid City. He suffered some mental incapacity for the next three months and was physically unable to return home. Mattson and Barbara began managing his assets and arranged for him to move to the Dorsett Health Care facility in Spearfish, South Dakota. He moved there in December 1994. [¶ 11.] Because both of their mothers live at the Dorsett facility, Mattson and Barbara visited them and Uncle Pete several times a week. They took Uncle Pete to dinner at least twice a week and Barbara took him to medical appointments and did his laundry due to his allergy to soap. He was included in family events. Although his physical health progressively deteriorated, he regularly read Time magazine and the Wall Street Journal and kept up on Nebraska Cornhusker football. [¶ 12.] On March 16, 1995 Uncle Pete executed a power of attorney drafted by Mattson. It appointed Mattson to be his attorney-in-fact. Uncle Pete executed a durable power of attorney on June 6, 1995. It, too, was drafted by Mattson and appointed him to be Uncle Pete's attorney. Neither power of attorney gave Mattson the authority to make gifts of Uncle Pete's assets to himself or to anyone else. Mattson did not charge Uncle Pete for drafting either document. [¶ 13.] During the spring of 1995 Mattson began discussing estate planning with Uncle Pete. That summer Uncle Pete gave $5,000 to Mattson and $5,000 to Barbara, the proceeds from negotiated bonds that were cashed. [¶ 14.] In August 1995 Mattson prepared an inventory of Uncle Pete's assets. On September 20, 1995 he wrote to Uncle Pete, attached the inventory, and suggested that they visit about two methods of reducing his estate in order to save his heirs from federal and state death taxes. He advised Uncle Pete to make gifts or purchase Norwest annuities which, he said, would provide income to him during his lifetime and a nontaxable balance to the beneficiaries. [¶ 15.] Two months later, on November 22, 1995 Barbara took Uncle Pete to Norwest Bank. Mattson joined them as they met with financial consultant Eric Lee. According to Lee, Mattson made recommendations to Uncle Pete and served as a facilitator while Uncle Pete made the decision to invest in a Franklin Fund annuity. He purchased it for $136,920. Barbara was named as the primary beneficiary; Mattson was named the contingent beneficiary. [¶ 16.] Between October 23, 1995 and July 29, 1996 Barbara received $6,016 and Mattson a total of $30,552.41 of Uncle Pete's assets in seven transactions. In some instances checks were made payable to Mattson and his wife. While Uncle Pete signed some checks, Mattson signed others using Uncle Pete's name in the signature block with no indication that he was signing on his behalf or pursuant to a power of attorney. In addition, other transactions were completed by cashing negotiated bonds and certificates of deposit and putting the proceeds in the form of cashier's checks payable to Uncle Pete. Mattson then endorsed them by signing Uncle Pete's name, again with no designation of the power of attorney, and deposited the money in his or Barbara's checking account. [¶ 17.] Mattson drafted a codicil to Uncle Pete's November 22, 1994 will and presented it to him on August 2, 1996. It changed the will in two respects. First, instead of giving Whitney Mattson 1/10th of the residue of the estate, the 1/10th was equally divided between Whitney, Mattson's two sons and three grandsons, and Mattson's brother's grandchild. Second, Mattson replaced Norwest Bank as the personal representative. [¶ 18.] On August 2, 1996, a series of checks totaling $42,500 were also written on Uncle Pete's accounts. $24,000 was divided among seven relatives. Mattson received $8,500. Barbara was the recipient of $10,000. Mattson does not recall who signed these checks, but Barbara testified that she watched Uncle Pete sign them. Mattson advised the recipients of the checks to hold them until Uncle Pete's Series E bonds were cashed and the proceeds were placed in Uncle Pete's account. [¶ 19.] On August 3, 1996, the day after the codicil was executed and the checks giving away $42,500 were written, Uncle Pete was rushed to the emergency room due to internal bleeding. He returned to the Dorsett facility two days later and began experiencing periods of confusion and disorientation. [¶ 20.] Mattson continued to manage Uncle Pete's affairs. On August 5, 1996 Uncle Pete was issued 1,520 shares of First Bank System common stock. That day Mattson went to Uncle Pete's safety deposit box and removed some bonds and a deed executed in 1981 which transferred his house to Gretchen Frey. Mattson negotiated the bonds and filed the deed. A week later, on August 12, Mattson transferred the proceeds of two of Uncle Pete's certificates of deposit that totaled $22,273.43 to Mattson's bank account. [¶ 21.] On August 26, 1996 Mattson and Barbara were leaving for a fishing vacation in Montana. Mattson wrote a $5,000 check to himself on Uncle Pete's account. On the way out of town he delivered 2,600 shares of Uncle Pete's Norwest stock to Norwest Investment Services. He instructed the service representative to set up two accounts, one for Mattson and Barbara, the other for Gretchen and Don Frey. [¶ 22.] Uncle Pete died the next day, August 27. He would have been ninety-two years old that November. [¶ 23.] On September 3, 1996 Mattson, as attorney for the estate, filed an application with the Lawrence County Clerk of Courts seeking informal probate of Uncle Pete's will and codicil and appointment of himself as the personal representative. [¶ 24.] On September 12, 1996 Mattson signed a letter written and also signed by a Norwest investment services investment officer to Norwest Client Services. The letter directed Client Services to transfer the 2,600 shares of Norwest Corporation stock from Uncle Pete's account and put 1,300 shares in Mattson and Barbara's account and 1,300 shares in the account of Gretchen and Don Frey. Under Mattson's signature, POA is still in full force and in effect, was typed. [¶ 25.] Then, on October 4, 1996, the 1,520 shares of First Bank System stock issued to Uncle Pete on August 5, 1996 were reissued. In this transaction five weeks after Uncle Pete's death a) 506 shares were issued to Uncle Pete and Barbara Mattson, joint tenants; b) 506 shares were issued to Uncle Pete and Gretchen Frey, joint tenants; c) 253 shares were issued to Uncle Pete and Jana Nolte, joint tenants; and d) 253 shares were issued to Uncle Pete and Reid P. Edwards, joint tenants. [¶ 26.] In the course of probating Uncle Pete's estate, Mattson prepared and filed a state inheritance tax report. In it he included a deduction of $6,650 as an overdraft on Uncle Pete's checking account. The account, however, was not overdrawn. He failed to include the transfer of the house to Gretchen Frey and the $136,920 annuity that Barbara was the primary beneficiary of and he, the contingent beneficiary. Mattson paid $68,195.23 in inheritance tax from the residue of Uncle Pete's estate. He did not prorate the tax among the beneficiaries. Neither he, nor any member of his family, paid any inheritance or estate taxes on the non-probate transfers they received. [¶ 27.] Mattson also filed a federal estate tax return. Once again, the home transfer and annuity were omitted from the return. The certified public accountant who assisted in the preparation of the return testified that the annuity was omitted because Mattson told him that it was a life insurance policy owned by Barbara. Although Mattson signed the federal estate tax return, he cannot recall reviewing it and its schedule requiring the disclosure and reporting of annuities owned by a decedent. The federal estate tax, $12,931, was paid without proration. [¶ 28.] Mattson paid himself both attorney's fees and executor's fees from Uncle Pete's residuary estate. In October 1998 the final accounting and verified statement for the informal closing of the estate was filed with the Lawrence County Clerk of Courts and served upon the heirs. [¶ 29.] As a result of the omissions in the state inheritance tax report and federal estate tax return, the amount of state and federal taxes increased. The additional amounts matured after the estate had been distributed to the heirs. Mattson paid $54,903.57 in additional federal tax and $6,181 in additional state tax. He paid these amounts from his own funds and did not attempt to collect the additional taxes from the other heirs. [¶ 30.] Mattson moved to a smaller law office in 1998. Among the items he moved were two large filing cabinets filled with Uncle Pete's personal and financial records including over twenty-five years of bank statements and documents. Mattson's term as personal representative would not end until October 1999. Despite this and the fact that he had a barn filled with client files at his home and was notorious for keeping records and not destroying them unless copies were made, Mattson directed Barbara to dispose of Uncle Pete's records in March 1999. [¶ 31.] On April 27, 1999 Karen Mattson, Whitney Mattson's guardian, filed a claim in Uncle Pete's estate. On June 7, 1999 she initiated a lawsuit against Mattson and Barbara. She claimed that the codicil was invalid as well as several transactions prior to and under the power of attorney. At issue was the validity of Uncle Pete's signatures, an issue made difficult by the destruction of his records, although copies of some checks were recovered from banks. She claimed that Mattson breached his fiduciary duty. She sought damages for the loss of inheritance to which Whitney may have been entitled and made a demand for punitive damages. [¶ 32.] Following a motions hearing on June 1, 2000, the trial court dismissed the punitive damage claim against Barbara but allowed the claim against Mattson to be submitted to the jury. The court held: The claim for punitive damages against Jon Mattson will, in fact, be allowed, by virtue of the relationship of Jon Mattson to Ralph Mattson, not only I guess being a relative of his by blood but by virtue of SDCL Chapter 55-2, which provides for the duties and liabilities of trustees. It provides in there, as you are all aware, of certain statutory provisions providing for the duty of a trustee, and under 55-2-7 it provides that every violation of the provisions of 55-2-1 through 55-2-6 is a fraud. So if the jury were to find that the actions of Jon Mattson were in violation of the duties as provided by statute then it's a fraud, and if it's fraud then punitive damages are allowed under our statute. Further, under 55-2-8 by virtue of this relationship and the properties that have flowed from the decedent to Jon Mattson there is a presumption of undue influence. So I find that pursuant to SDCL 21-1-4.1 that the evidence submitted is clear and convincing, and that there is a reasonable basis to believe there has been willful, wanton or malicious conduct or fraudulent conduct, and therefore I will allow the punitive damages issue against Jon Mattson. The trial court also ordered that Mattson be removed as the personal representative. He was ordered to pay the successor personal representative $96,200, the value of the Norwest stock, and $30,000, the value of the August 2 checks not paid prior to Uncle Pete's death. [¶ 33.] The lawsuit on behalf of Whitney Mattson was settled by stipulation on August 2, 2000. The settlement included the payment of $130,000 to Whitney Mattson and $10,000 to Karen Mattson. Mattson borrowed money to pay his $90,000 share of the settlement while his malpractice insurance company paid the balance. [¶ 34.] The Disciplinary Board concluded that Mattson violated Rules 1.2(d), 1.7(b), 1.8(a)(b) and (c) and 8.4(a)(c) and (d) of the Rules of Professional Conduct, SDCL ch 16-18 Appx. It recommended that he be suspended from the practice of law for three years and not be allowed to act as a legal assistant during the suspension. [¶ 35.] After reviewing the facts in this case, the Referee filed a report and recommendation. In it he noted: To the objective observer, the above scenario is certainly indicative of someone who at the very least took advantage of his uncle's situation to enrich himself. Although the evidence is not clear and convincing that any influence exercised by [Mattson] was undue to the extent that the transactions should be voided, it does come close. By catering to his uncle and acting as a trusted legal advisor, there is no doubt that the defendant benefited unduly therefrom. [¶ 36.] Citing Matter of Discipline of Theodosen, 303 N.W.2d 104 (S.D.1981) the Referee concluded that Mattson acted inappropriately by receiving fees for acting as both the estate's attorney and the personal representative. He concluded that Mattson violated the fiduciary duty owed a client by his attorney. As power of attorney for Uncle Pete, Mattson had the fiduciary duty to act in the highest good faith and refrain from obtaining any advantage by the slightest misrepresentation or adverse pressure. By not doing so, the Referee concluded that Mattson violated SDCL 55-2-1 and 59-3-11. [1] The Referee also concluded that Mattson violated the spirit of the preamble of the Rules of Professional Conduct, as well as Rules 1.7, 1.8 and 8.4. [¶ 37.] The Referee recommended that Mattson be disciplined by public censure. SDCL 16-19-35(4). The Referee did so on the basis that Mattson admitted he acted improperly, the situation involved a relative, the victims had been fully reimbursed by the lawsuit settlement, and Mattson, until now, had a good reputation and no history of disciplinary problems.