Court Opinion

ID: 2802538
Source: CourtListenerOpinion
Date Created: 2015-05-21 13:07:03.820085+00
Date Added: 2024-06-11T12:22:16.618559
License: Public Domain

#27195-a-LSW

2015 S.D. 33

                            IN THE SUPREME COURT
                                    OF THE
                           STATE OF SOUTH DAKOTA

                                   ****
RONALD L. STUDT,                            Plaintiff and Appellant,

      v.

BLACK HILLS FEDERAL
CREDIT UNION,                               Defendant,

      and

DAVID SHOLES,                               Defendant and Appellee.

                                   ****

                  APPEAL FROM THE CIRCUIT COURT OF
                    THE SEVENTH JUDICIAL CIRCUIT
                  PENNINGTON COUNTY, SOUTH DAKOTA

                                   ****

                   THE HONORABLE ROBERT GUSINSKY
                               Judge

                                   ****

STANTON A. ANKER of
Anker Law Group, PC
Rapid City, South Dakota                    Attorneys for plaintiff
                                            and appellant.

KYLE L. WIESE of
Gunderson, Palmer, Nelson
 & Ashmore, LLP
Rapid City, South Dakota                    Attorneys for defendant
                                            and appellee.

                                   ****
                                            CONSIDERED ON BRIEFS
                                            ON APRIL 20, 2015
                                            OPINION FILED 05/20/15
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WILBUR, Justice

[¶1.]        Ronald L. Studt appeals the circuit court’s grant of summary judgment

in favor of Black Hills Federal Credit Union (BHFCU) and David Sholes. The court

determined that the operative language in the power of attorney authorizing Studt

to make gifts was too broad and did not specifically permit Studt to self-deal. We

affirm.

                            Facts and Procedural History

[¶2.]        On October 28, 2008, Dorothy E. McLean invested in a certificate of

deposit (the CD) with BHFCU with a maturity date of October 28, 2013. On July

19, 2011, McLean changed the CD’s payable-on-death beneficiary from Studt to

Sholes. Studt is the only child of McLean. Sholes is McLean’s second cousin.

[¶3.]        In the summer of 2012 and due to McLean’s age and poor health, she

moved from Rapid City, South Dakota, to Winona, Minnesota, to live with Studt so

that he could care for her. On October 22, 2012, McLean executed a general,

durable power of attorney, naming Studt as her attorney-in-fact. Steven Pederson,

an attorney from Minnesota, prepared the power of attorney.

[¶4.]        According to the undisputed facts of the case, Pederson and McLean

discussed the power of attorney before McLean effectuated it. They discussed that

Studt, as the attorney-in-fact, would be able to transfer and gift property to any

persons or organizations as long as he determined that her financial needs would

still be met and that such transfers and gifts were prudent for the purpose of estate

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and tax planning. 1 McLean further understood that Studt would have full and

complete authority over her assets and financial matters.

[¶5.]         After McLean executed the power of attorney, Studt forwarded a copy

to BHFCU via email on October 23, 2012. The email directed BHFCU to close all of

McLean’s accounts and send the assets to Winona. The email further directed

BHFCU to forward the funds of the CD to McLean when it matured. Jessica Paul,

Senior Personal Financial Officer at BHFCU, acknowledged receipt of Studt’s email

on November 29, 2012, stating that BHFCU was able to accept the power of

attorney. On or about December 10, 2012, all of the accounts, except the CD, were

closed as requested. By April 2013, Studt had transferred all of McLean’s assets

except the CD from South Dakota to Minnesota. The CD was not withdrawn from

BHFCU at that time because it had a favorable interest rate and early withdrawal

would result in a redemption penalty.

[¶6.]         Around April or May 2013, McLean became terminally ill. Studt sent

an email to Paul on May 21, 2013, at 2:42 p.m., inquiring who was designated as the

beneficiary on the CD. Paul replied via email on May 22, 2013, at 2:32 p.m., stating

that the beneficiary on the CD was Sholes. On May 22, 2013, at 6:24 p.m., Studt

emailed Paul requesting the beneficiary be changed to him. In that email, Studt

advised Paul that McLean was terminally ill, could pass away at any time, and, as a

result, there was a need to press the requested change. McLean died on the

1.      The power of attorney stated as follows:
              Gifts. The power [to] make gifts, in my name, to any person or
              organizations, but only to the extent that my Attorney
              determines that my financial needs can be met, and such gifts
              continue to be prudent estate and tax planning devices.

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afternoon of May 23, 2013. At that time, the named beneficiary on the CD was

Sholes.

[¶7.]         On May 24, 2013, at 1:18 p.m., Studt sent another email to Paul asking

whether the change of beneficiary had been completed. Paul replied to Studt’s May

22, 2013, email on May 24, 2013, at 3:06 p.m. She stated that as McLean’s

attorney-in-fact, Studt would not be allowed to change the beneficiary because only

an owner of the CD could change the beneficiary. When Paul responded, Paul was

unaware that McLean had passed away on May 23. Thus, Sholes, being the named

beneficiary at McLean’s death, was to receive the CD’s funds.

[¶8.]         On September 11, 2013, Studt filed a declaratory judgment action

against BHFCU and Sholes to determine the rightful beneficiary of the CD. The

parties filed motions for summary judgment. The circuit court held a hearing on

July 22, 2014. Studt argued that the language of the power of attorney granted him

broad powers to make gifts to any person, including himself. BHFCU and Sholes

argued that the power of attorney did not “clearly and unmistakably” grant Studt

the power to self-deal. BHFCU also argued that even if the power of attorney did

grant Studt the power to self-deal, BHFCU’s policies and procedures did not permit

Studt to change the beneficiary on the CD without an exception. The circuit court

found that the language in the power of attorney was too broad and too general and

did not specifically authorize self-dealing. 2 Studt appeals and argues that the

2.      The circuit court also stated that there were some factual disputes regarding
        the issue of substantial compliance with BHFCU’s policies and procedures to
        change the beneficiary. However, the court found there was no need to reach
                                                             (continued . . .)
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circuit court erred when it found that the power of attorney did not authorize self-

dealing.

                                  Standard of Review

[¶9.]        “Summary judgment is proper where ‘the pleadings, depositions,

answers to interrogatories, and admissions on file, together with the affidavits, if

any, show there is no genuine issue as to any material fact and that the moving

party is entitled to judgment as a matter of law.’” Titus v. Chapman, 2004 S.D. 106,

¶ 13, 687 N.W.2d 918, 923 (quoting SDCL 15-6-56(c)). “The burden is on the moving

party to clearly show the absence of genuine issues of material fact and entitlement

to judgment as a matter of law.” Id. (quoting Morgan v. Baldwin, 450 N.W.2d 783,

785 (S.D. 1990)). “All reasonable inferences drawn from the facts must be viewed in

favor of the non-moving party.” Id. “Conclusions of law are reviewed under a de

novo standard, giving no deference to the circuit court’s conclusions of law.” Id.

(quoting Sherburn v. Patterson Farms, Inc., 1999 S.D. 47, ¶ 4, 593 N.W.2d 414,

416).

                                        Decision

[¶10.]       In Bienash v. Moller, “[t]his Court . . . held that ‘a power of attorney

must be strictly construed and strictly pursued.’” 2006 S.D. 78, ¶ 13, 721 N.W.2d

431, 435 (quoting In re Guardianship of Blare, 1999 S.D. 3, ¶ 14, 589 N.W.2d 211,

214). “‘Only those powers specified in the document are granted to the attorney-in-

fact.’” Id. (emphasis omitted) (quoting Blare, 1999 S.D. 3, ¶ 14, 589 N.W.2d at 214).

________________________
(. . . continued)
         a decision on this issue because the power of attorney did not authorize self-
         dealing under South Dakota law.

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The relationship between a principal and an attorney-in-fact is a fiduciary

relationship. See id. ¶¶ 11-14, 721 N.W.2d at 434-35. “‘[A] fiduciary must act with

utmost good faith and avoid any act of self-dealing.’” Id. ¶ 14, 721 N.W.2d at 435

(quoting Estate of Stevenson, 2000 S.D. 24, ¶ 9, 605 N.W.2d 818, 821). “In order for

self-dealing to be authorized, the instrument creating the fiduciary duty must

provide ‘clear and unmistakable language’ authorizing self-dealing acts.” Id.

(emphasis added) (quoting Stevenson, 2000 S.D. 24, ¶ 15, 605 N.W.2d at 822).

“Thus, if the power to self-deal is not specifically articulated in the power of

attorney, that power does not exist.” Id. (emphasis added).

[¶11.]          Studt argues that the power of attorney, while broad, permits him to

engage in self-dealing. The power of attorney permits Studt to make a gift to “any

person.” Because “any” is an inclusive rather than exclusive term, he contends the

power of attorney permits him to make gifts without restriction, so long as

McLean’s needs are met. Thus, Studt contends the power of attorney permitted

self-dealing.

[¶12.]          This case is similar to Bienash. In Bienash, the attorneys-in-fact

sought to engage in acts of self-dealing when they tried to name themselves as the

payable-on-death beneficiaries on several CDs owned by the principal. Id. ¶¶ 6-7,

721 N.W.2d at 433. In Bienash, “[t]he powers granted to [the attorneys-in-fact]

under the power of attorney were broad, but general in nature and authorized them

to do all things that [the principal] would personally have the right to do.” Id. ¶ 5,

721 N.W.2d at 432. “The document did not contain any language giving them the

power to self-deal.” Id. ¶ 5, 721 N.W.2d at 433. We held that the power of attorney

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did not permit self-dealing in Bienash because the language was “broad” and

“general” in nature. Id. ¶ 15, 721 N.W.2d at 435 (“The power of attorney did not

specifically authorize [the attorneys-in-fact] to engage in acts of self-dealing and it

cannot now be construed to allow such acts.”).

[¶13.]         In this case, as in Bienash, the power of attorney was broad and did

not specifically authorize self-dealing. Studt relies on “broad” and “general”

language for the proposition that he may self-deal. 3 Because we are required to

strictly construe language in a power of attorney, it cannot be presumed that the

power of attorney conferred the power to self-deal absent explicit language.

Therefore, we hold that Studt lacked the power to self-deal because the power of

attorney did not contain clear and unmistakable language authorizing self-dealing.

[¶14.]         Studt attempts to overcome the lack of the required clear and

unmistakable language allowing self-dealing by introducing parol evidence in the

form of an affidavit from Pederson. In Bienash, we examined cases from Nebraska

(Crosby v. Luehrs, 669 N.W.2d 635 (Neb. 2003)); Hawaii (Kunewa v. Joshua, 924

3.       We note that one of the cases we relied on in Bienash was a Wisconsin case,
         Praefke v. American Enterprise Life Insurance Co., 655 N.W.2d 456 (Wis. Ct.
         App. 2002). In Praefke, the court indicated “that self-dealing may be allowed
         where there is an ‘unlimited or unbridled power of disposition.’” 655 N.W.2d
         at 459 (quoting Alexopoulos v. Dakouras, 179 N.W.2d 836, 840 (Wis. 1970)).
         However, the Praefke court went on to say that while “the power of attorney
         document did contain broad language[,] . . . the power of attorney in
         Alexopoulos had similar language and the supreme court still determined
         that the fiduciary had breached his duty.” Id. Thus, it appears that the
         language authorizing self-dealing must be clear and unmistakable. In any
         event, South Dakota law clearly states that “the instrument creating the
         fiduciary duty must provide ‘clear and unmistakable language’ authorizing
         self-dealing acts,” Bienash, 2006 S.D. 78, ¶¶ 14, 27, 721 N.W.2d at 435, and
         South Dakota law governs this case.

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#27195

P.2d 559 (Haw. Ct. App. 1996)); and Wisconsin (Praefke v. Am. Enter. Life Ins. Co.,

655 N.W.2d 456 (Wis. Ct. App. 2002)) to determine whether oral, extrinsic evidence

may be introduced to prove the principal’s intent. After analyzing those cases, we

adopted a bright-line rule that oral, extrinsic evidence is inadmissible “to raise a

factual issue.” Bienash, 2006 S.D. 78, ¶¶ 24, 27, 721 N.W.2d at 437. An affidavit is

merely oral evidence reduced to writing. Therefore, the affidavit is inadmissible to

determine whether McLean intended to allow Studt to self-deal.

[¶15.]       Consequently, we affirm the circuit court.

[¶16.]       GILBERTSON, Chief Justice, and ZINTER, SEVERSON, and KERN,

Justices, concur.

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