Court Opinion

ID: 4217183
Source: CourtListenerOpinion
Date Created: 2017-11-02 13:18:29.81151+00
Date Added: 2024-06-11T07:47:44.692911
License: Public Domain

#28050-r-GAS
2017 S.D. 68

                          IN THE SUPREME COURT
                                  OF THE
                         STATE OF SOUTH DAKOTA

                                 ****

                        IN THE MATTER OF THE
                 GUARDIANSHIP AND CONVERSATORSHIP
                  OF DEAN A. NELSON, a Protected Person.

                                 ****

                  APPEAL FROM THE CIRCUIT COURT OF
                      THE SIXTH JUDICIAL CIRCUIT
                     SULLY COUNTY, SOUTH DAKOTA

                                 ****

                     THE HONORABLE JOHN L. BROWN
                                Judge

                                 ****

MATTHEW P. BOCK
JAMES A. POWER of
Woods, Fuller, Shultz & Smith
Sioux Falls, South Dakota                   Attorneys for appellant
                                            Elizabeth Nelson.

ROBERT B. ANDERSON of
May, Adam, Gerdes &
 Thompson, LLP
Pierre, South Dakota                        Attorneys for appellee Dean A.
                                            Nelson.

RONALD A. PARSONS, JR. of
Johnson Janklow Abdallah
 Reiter & Parsons LLP
Sioux Falls, South Dakota                   Attorneys for appellee Chet
                                            Groseclose.

                                 ****

                                            ARGUED OCTOBER 4, 2017
                                            OPINION FILED 11/01/17
MARK A. MORENO of
Moreno, Lee & Bachand, P.C.
Pierre, South Dakota          Attorneys for appellee Georgia
                              K. Hanson.
MARGO D. NORTHRUP of
Riter, Rogers, Wattier
 & Northrup, LLP
Pierre, South Dakota          Attorneys for appellee Angela L.
                              Nix.
#28050

SEVERSON, Justice

[¶1.]        Elizabeth Nelson appeals a circuit court order approving the redrafting

of her husband Dean Nelson’s will. The new will eliminates a trust established for

Elizabeth’s benefit consisting of Elizabeth’s lifetime, one-half interest in the residue

of Dean’s estate. The change in the will was proposed upon the petition of Dean’s

conservator, Chet Groseclose (Conservator), after Dean was diagnosed with

Alzheimer’s disease. Elizabeth raises one issue on appeal: whether the circuit court

erred in permitting Conservator to adopt the new will eliminating Elizabeth’s

interest in the residuary estate. We reverse.

                                     Background

[¶2.]        Dean Nelson owned and operated a successful farming operation near

Onida, South Dakota. Dean has four daughters from his first marriage: Georgia

Hanson, Deborah Bouchie, Carol Nelson, and Angela Nix. In 1978, Dean married

Elizabeth Nelson. The pair lived in Onida, then moved to Las Vegas, Nevada,

where they currently reside.

[¶3.]        On September 30, 2008, Dean and Elizabeth entered into a postnuptial

agreement, which replaced a prior prenuptial agreement. In the postnuptial

agreement, they agreed to the disposition of Dean’s property after his death, and

provided that Dean would not allow his durable power of attorney to amend his will.

Also in 2008, Dean made a will acknowledging the postnuptial agreement and

making other testamentary gifts. The 2008 will provided that if Elizabeth were to

survive Dean, one-half of Dean’s residuary estate would be held in trust for

Elizabeth. Under the trust, Elizabeth was entitled to receive all net income and as

                                          -1-
#28050

much of the principal as the trustees deemed necessary for Elizabeth’s health and

comfort. Upon her death, the remainder of the trust would pass in accordance with

the other half of the residue, which was to be distributed in equal shares to three of

Dean’s four daughters.

[¶4.]        In September of 2012, Dean drafted a new estate plan including a

pourover will and trust agreement. The trust agreement acknowledged the

postnuptial agreement and essentially echoed the terms of the 2008 will, except

that the one-half of Dean’s estate not belonging to Elizabeth would be placed in

trust for three of Dean’s four daughters. On February 11, 2013, Dean had yet

another estate plan drafted. This plan mirrored the 2008 and 2012 estate plans but

added Dean’s fourth daughter to the trust made up of half of his residuary estate.

[¶5.]        After the 2013 plan was drafted, Dean was diagnosed with

Alzheimer’s. On April 18, 2013, Conservator was temporarily appointed to oversee

Dean’s estate. The circuit court made the appointment permanent in September of

2013. Conservator petitioned the circuit court to change Dean’s February 11, 2013

estate plan. Among other things, Conservator proposed replacing the 2013 plan

with a newly drafted will. The proposed will would omit Elizabeth from the

residuary estate and allow for the entire residue to be distributed equally among

Dean’s four daughters.

[¶6.]        At a circuit court hearing on the proposed will on December 13, 2013,

Conservator, Dean’s daughters, and Elizabeth instead stipulated to a compromise

will. That will allowed Elizabeth to retain her one-half interest in the residue

                                          -2-
#28050

within a trust funded with contributions made before the payment of estate tax.

Conservator signed the compromise will on December 30, 2013.

[¶7.]         On September 28, 2016, in the tenth report to the circuit court on

Dean’s estate, Conservator again petitioned for a new will for Dean, changing the

residuary clause to eliminate Elizabeth’s trust and with it, her one-half interest in

the residuary. The entire residuary estate would instead be divided equally among

Dean’s four daughters. Elizabeth objected to these changes to Dean’s will as well as

certain other requests from the Conservator regarding distributions. A hearing on

the matter was held on October 12, 2016. No witnesses were called and no exhibits

were presented. The circuit court approved the new will in an order on October 27,

2016. Elizabeth appeals, raising one issue: whether the circuit court erred in

permitting Conservator to adopt a new will eliminating Elizabeth’s interest in the

residuary estate.

                                       Analysis

[¶8.]         Matters of statutory interpretation are reviewed de novo. Milstead v.

Johnson, 2016 S.D. 56, ¶ 7, 883 N.W.2d 725, 729. In In re Conservatorship of

Didier, 2010 S.D. 56, 784 N.W.2d 486, we applied de novo review to the question

whether SDCL 29A-5-420(3)∗ allowed for the replacement of a trustee by a

conservator. Id. ¶¶ 5-6, 784 N.W.2d at 489-90.

[¶9.]         Appellees argue the circuit court’s order to rewrite Dean’s will should

be evaluated for an abuse of discretion. They claim the text of SDCL 29A-5-240

∗       29A-5-420(3) allows a circuit court to authorize a conservator
              [t]o amend or revoke trusts, or to create or make additions to
              revocable or irrevocable trusts, even though such trusts may
              extend beyond the life of the protected person[.]
                                           -3-
#28050

plainly gives a circuit court discretion to approve the redrafting of a will by a

conservator by requiring a circuit court to balance a number of factors in making its

determination. Appellees point out that this Court has previously held the abuse of

discretion standard applies to a circuit court’s decision to appoint a conservator, In

re Conservatorship of Gaaskjolen, 2014 S.D. 10, ¶ 9, 844 N.W.2d 99, 101, and to

terminate a conservator, In re Guardianship of Stevenson, 2013 S.D. 4, ¶ 22, 825

N.W.2d 911, 916; Guardianship & Conservatorship of Fischer, 2008 S.D. 51, ¶ 6,

752 N.W.2d 215, 217. “An abuse of discretion is ‘a fundamental error of judgment, a

choice outside the range of permissible choices, a decision, which, on full

consideration, is arbitrary or unreasonable.’” Gaaskjolen, 2014 S.D. 10, ¶ 9, 844

N.W.2d at 101 (quoting Thurman v. CUNA Mut. Ins. Soc’y, 2013 S.D. 63, ¶ 11, 836

N.W.2d 611, 616).

[¶10.]       Appellees also note that a circuit court’s findings “[i]n guardianship

proceedings . . . are reviewed under the ‘clearly erroneous’ standard.” In re

Conservatorship of Irwin, 2007 S.D. 41, ¶ 14, 732 N.W.2d 411, 414 (quoting In re

Guardianship and Conservatorship of Miles, 2003 S.D. 34, ¶ 11, 660 N.W.2d 233,

236). “Under [that] standard, we do not analyze ‘whether this Court would have

made the same finding that the trial court did,’ but rather we look at ‘whether on

the entire evidence we are left with a definite and firm conviction that a mistake

has been committed.’” Tisdel v. Beadle Cty. Bd. Of Comm’rs, 2001 S.D. 149, ¶ 5, 638

N.W.2d 250, 252-53 (quoting In re Estate of Roehr, 2001 S.D. 85, ¶ 4, 631 N.W.2d

600, 601).

                                           -4-
#28050

[¶11.]       None of the cases cited by the parties pertain exactly to the

determination made by the circuit court here: allowing a conservator to redraft a

will. The proper standard can be found simply by evaluating the actions of the

circuit court in this case. Such an exercise brings about the conclusion that all

three standards mentioned above are applied in the context of South Dakota’s

conservatorship statute. SDCL 29A-5-420 provides in pertinent part:

             Upon petition therefor, the court may authorize a conservator to
             exercise any of the powers over the estate or financial affairs of a
             protected person which the protected person could have
             exercised if present and not under conservatorship, including
             the powers . . . [t]o make, amend, or revoke a will.
             The court, in authorizing the conservator to exercise any of the
             above powers, shall primarily consider the decision which the
             protected person would have made, to the extent that the
             decision can be ascertained. The court shall also consider the
             financial needs of the protected person and the needs of legal
             dependents for support, possible reduction of income, estate,
             inheritance or other tax liabilities, eligibility for governmental
             assistance, the protected person’s prior pattern of giving or level
             of support, the existing estate plan, the protected person’s
             probable life expectancy, the probability that the
             conservatorship will terminate prior to the protected person’s
             death, and any other factors which the court believes pertinent.

(Emphasis added.)

[¶12.]       Under this statute, de novo review applies only to interpret the

meaning of the text. As to this case, the text of the statute is clear: a court “may

authorize” a conservator to revoke and redraft a will. Thus, there is no issue of

statutory interpretation, and we do not review the circuit court’s order de novo.

[¶13.]       The text also very clearly states that a court “shall primarily consider

the decision which the protected person would have made, to the extent that the

decision can be ascertained.” Id. (emphasis added). It also plainly requires the

                                          -5-
#28050

circuit court to review eight other factors as well as any factors the circuit court

“believes pertinent.” But while the court is required to consider these nine factors,

it has discretion in weighing them. As such, we review the court’s decision to

permit a conservator to amend a will for an abuse of discretion.

[¶14.]       The record here, however, is unclear as to the factual findings of the

circuit court and the application of the facts to the statute. The circuit court only

touched on its potential factual findings in the October 12, 2016 hearing:

             Well, I’ve got to tell you, under the circumstances, my
             sympathies certainly lie with the proposal to modify the Will
             given the experience we’ve had with Liza’s unwillingness to
             participate in gifts and generally has been somewhat
             uncooperative in the process here.

             I’m somewhat concerned. I think, at least in my quick look at
             this is that the major issue with respect to that or the major
             driving point of it is the impact that the equipment sale has on
             the daughters as it relates to them being able to receive that
             benefit of the sale of the equipment, which now becomes part of
             the estate and, by virtue thereof, half of which would go into the
             residuary trust.

             But it appears to me and as we’ve discussed here, that the tax
             implications in terms of reduction of the estate are probably
             relatively insignificant. The benefit to the daughters is
             primarily by acceleration of a gift to them rather than—and
             we’re speculating on, obviously, who among the parties here
             may pass first. We’re speculating then as to how long, if Dean
             passed first and how long Liza survived him and received the
             benefits of the income off of the trust. So there’s a great deal of
             speculation there as to what benefit, if any, Liza would obtain
             from the trust and, frankly, also what benefit, if any, the
             children actually receive unless by a substantially accelerated
             direct gift to them out of the estate.

             So as I said, I think primarily on the fact that non-essential
             estate property has been disposed of through the farm
             machinery and by that, the daughters would perhaps lose a
             certain percentage of the benefit they might otherwise obtain
             earlier, I’m going to agree that the trust—or that the Will may

                                           -6-
#28050

             be amended as proposed, including the references here to the
             Nevada residence and the paid-up life insurance and surplusage
             as it relates to the postnuptial and the non-contest clause that’s
             been spoken of here.

[¶15.]       These minimal oral findings were reflected in the circuit court’s order

on October 27, 2016. But the circuit court’s statements, the hearing transcripts,

and the circuit court’s orders contain no factual findings based on evidence on which

this Court could adequately review for an abuse of discretion. Thus, the abuse of

discretion standard alone is also inappropriate in this case.

[¶16.]       In-depth factual determinations are needed primarily as to what

Dean’s wishes would have been as well as to the other factors listed in the statute.

The record in this case is devoid of evidence needed to make those required

statutory findings. Dean’s estate plan had consistently provided for Elizabeth to

have a lifetime interest in one-half of Dean’s residuary estate. At the October 12

hearing, no exhibits were entered into the record other than Conservator’s tenth

report on Dean’s estate. No witnesses presented testimony. Only the arguments of

counsel were presented to the circuit court. This was despite the fact that Elizabeth

had objected to the proposed changes to Dean’s will at the hearing.

[¶17.]       This case therefore boils down to a lack of evidence to make factual

determinations required by the statute—significantly, the record lacks evidence

sufficient to primarily consider the decision that Dean Nelson would have made.

Evidence on the record is missing, and thus we are left with “a definite and firm

conviction that a mistake has been committed.” Tisdel, 2001 S.D. 149, ¶ 5, 638

N.W.2d at 252-53 (quoting Roehr, 2001 S.D. 85, ¶ 4, 631 N.W.2d at 601). As noted

above, factual determinations are reviewed for clear error. It was clearly erroneous

                                          -7-
#28050

for the circuit court to make these important determinations changing Dean’s estate

plan without adequate factual findings based on evidence. Furthermore, it was an

abuse of discretion to grant Conservator the power to redraft a will without making

factual findings based on evidence.

                                      Conclusion

[¶18.]          It must be emphasized that Conservator is asking to redraft the will of

an incompetent individual. The proposed will significantly changes Dean’s estate

plan. This is a decision of great import. While the action is authorized by statute,

absent strong and specific factual findings based on evidence in a fully developed

record, the circuit court’s factual findings were clearly erroneous. Thus, the circuit

court’s decision to authorize the Conservator to change the will was an abuse of

discretion due to the lack of adequate factual findings. We reverse.

[¶19.]          GILBERTSON, Chief Justice, and KERN, Justice, and JENSEN and

GILES, Circuit Court Judges, concur.

[¶20.]          JENSEN, Circuit Court Judge, sitting for ZINTER, Justice,

disqualified.

[¶21.]          GILES, Circuit Court Judge, sitting for WILBUR, Retired Justice,

disqualified.

                                            -8-