Hearsay — Declaration against Interest — Court Must Consider All Facts & Circumstances to See If Statement Is in Fact So Contrary to Declarant’s Interest That S/he Must’ve Believed It to Be True — Email Evid.: Redact Hearsay to Admit Remainder
In re Estate of Smith, 2018 Ida. LEXIS 216 (Idaho Dec. 18, 2018):
This case centers on the estate of Victoria H. Smith. The magistrate court ruled that Victoria died intestate after finding that her will was a product of the undue influence of her son, Appellant Vernon K. Smith Jr. Vernon appeals from that ruling, as well as an earlier partial summary judgment ruling that invalidated a series of transactions that transferred all of Victoria's assets to a limited liability company that Vernon owned and a corresponding judgment entered [*2] pursuant to Idaho Rule of Civil Procedure 70(b). We affirm the decisions of the magistrate court.
I. FACTUAL AND PROCEDURAL BACKGROUND
Victoria H. Smith was nearly 100 years old when she died on September 11, 2013. During her life she married Vernon K. Smith Sr., a lawyer who died of a heart attack in 1966. The couple had three children: Joseph H. Smith, Vernon K. Smith Jr., and Victoria A. (Smith) Converse. The Smith family members are referred to throughout this opinion as Victoria, Vernon Sr., Joseph, Vernon, and Victoria Converse.
Victoria and Vernon Sr. accumulated substantial real estate and business interests during their lifetimes. Vernon, who is also a lawyer, managed Victoria's legal and business affairs from the time he was licensed to practice law in 1971 until the time she died.
On February 14, 1990, more than twenty years before her death, Victoria prepared a holographic will. Vernon was the only person present when Victoria signed the document. The will stated in full:
In event of my death I give all my property, real and personal, to my son Vernon with the right to serve as Executor with-out bond. I have given my son Joseph real and personal property in my life time. I have given my daughter, Victoria Converse, [*3] personal property in my life time.
Dated February 14, 1990. Victoria H. Smith
In 1999, Victoria executed a durable power of attorney making Vernon her attorney in fact. In 2008, following hospitalization for a fall, Victoria executed a second, more robust power of attorney. Vernon drafted both of these documents. The 2008 power of attorney read in full:
I, Victoria H. Smith, residing at 5933 Branstetter Street, Boise, Ada County, Idaho, born October 31, 1913, Social Security Number  does herewith reaffirm, reconfirm and continue the ongoing appointment of my son, Vernon K. Smith Jr., born , from the original appointment I made in 1999, and to remain authorized to act as my unconditional attorney in fact and agent under this Durable and Irrevocable Power of Attorney, and he is authorized to exercise all powers and authority I otherwise possess and could exercise in my own name and on my own behalf.
The power and authority vested in him is unconditional, unlimited and all inclusive, and he shall have the full and exclusive power and authority to manage and conduct all of my affairs, and to exercise all of my legal rights and powers, including any rights and powers I [*4] may acquire in the future, and specifically including, but without any intended limitation, to collect all funds, hold, maintain, improve, invest, lease, or otherwise manage or dispose of any or all of my real or personal property, or any interest therein; purchase, sell, mortgage, encumber, grant, option or otherwise deal in any way in any real property or personal property, tangible or intangible, or any interest therein; to borrow funds, to execute promissory notes, and to secure any obligation by mortgage, deed of trust or pledge; to conduct any and all business and banking needs, of any nature or kind, including the right to sign checks and draw funds on any and all my accounts, with the same authority as my own signature, to sign any and all agreements and documents in my behalf, to continue any corporations, limited liability companies and venture entities I presently have, and to organize, reorganize, merge, consolidate, capitalize, recapitalize, close, liquidate, sell, or dissolve any business interest, and to vote all stock, including the exercise of any stock options and any buy-sell agreements; to receive and to endorse checks and other negotiable paper, to deposit and [*5] to withdraw funds from any accounts, by check or by withdrawal slips, or otherwise, to transfer funds from any account and to do so from any bank, savings and loan, or any other financial institution in which I have funds now or in the future; to prepare, sign and file any and all tax returns and other governmental reports and documents, and to represent me in all matters before the Internal Revenue Service or State Tax Commission; to have access to all certificates of deposit, and any safety deposit box registered in my name, whether alone or with others, and to remove any property or papers located therein; to act unconditionally with regard to any funds, stocks, bonds, shares, investments, interests, rights, benefits or entitlements I may now have or hereafter come to have and hold; to engage in any administrative or legal proceedings or lawsuits regarding any rights and interests I have on matters therein; to create trusts and to transfer any interest I may have in property, whether real or personal, tangible or intangible, to the trustee of any trust, to engage and to dismiss agents, counsel, and employees, in connection with any matter, and for purposes, this power and authority [*6] vested in my son, Vernon K. Smith Jr., is unlimited, unconditional and all inclusive, and with the same authority and effect as though I had caused the action to be undertaken.
This Durable Power of Attorney is irrevocable and shall remain in full force and effect, having been coupled with adequate consideration, and shall not be affected, altered or impaired by the event of my death or disability, and shall continue in effect for all time, as it has been my long-standing intention and desire that my son, Vernon K. Smith Jr., shall be the sole and exclusive heir of my entire estate, as I have so declared openly in the past many years, because of his commitment, dedication, and devotion to my best interests, welfare, and financial well being.
On July 3, 2012, Vernon formed a limited liability company, VHS Properties, LLC ("VHS" are Victoria's initials). He named his mother and himself as the only members of the company. The next day, Vernon used the 2008 power of attorney to transfer all of Victoria's real and personal property to VHS Properties. He signed the transfer document on behalf of Victoria, as her attorney in fact, and on behalf of VHS Properties, as a member. Vernon then used [*7] the 2008 power of attorney to execute a second document, by which he transferred to himself all of Victoria's interest in VHS Properties. He once again signed the document on behalf of Victoria and also signed for himself. By the end of the day on July 4, 2012, Vernon had exclusive ownership and control of all of Victoria's assets.
In 2014, following Victoria's passing, Sharon Bergmann filed a petition seeking the probate of Victoria's estate. In her petition, Bergmann claimed that Vernon, her ex-husband, was in possession of Victoria's will and sought its probate for purposes of satisfaction of an outstanding judgment against him. Soon thereafter, Joseph filed a petition for formal adjudication of Victoria's intestacy and for his appointment as the personal representative of her estate. Within his petition, Joseph acknowledged the existence of the will-which he also claimed was in Vernon's possession-but asserted that Victoria's estate should be subject to intestate administration because the will was invalid as a product of Vernon's undue influence.
Vernon filed responses and objections to both petitions. Bergmann eventually withdrew her petition, acknowledging Joseph's priority, and [*8] remained in the proceedings as an interested party. Specific to Joseph's petition, Vernon denied the claim of undue influence and asserted that, regardless of that claim, intestate administration of Victoria's estate would prove meaningless because the estate did not hold any assets as a result of the series of transactions he completed using the 2008 power of attorney. Vernon also separately applied for formal probate of the holographic will and for his appointment as personal representative. Joseph objected to Vernon's petition. He did not contest the will's authenticity, but once again claimed that it was executed as a result of Vernon's undue influence.
Joseph later filed a second petition in conjunction with his earlier request for intestate administration, in which he claimed that Vernon was liable for breach of fiduciary duty and conversion of property. This petition sought, among other things, the restitution of Victoria's estate in light of Vernon's series of transactions, and an accounting of Victoria's income and expenditures made by Vernon. Vernon moved to dismiss the petition pursuant to Idaho Rule of Civil Procedure 12(b)(6) claiming that Joseph lacked standing to bring such claims where he was not a named [*9] beneficiary in the holographic will. Joseph voluntarily dismissed his conversion claim. The magistrate court reserved its decision on the dismissal of the breach of fiduciary duty and accounting claims so as to allow Joseph to proceed with his contest of Victoria's will.
Vernon later moved for summary judgment on the issue of undue influence, requesting the dismissal of all of Joseph's claims. The magistrate court denied the motion, finding that there remained genuine issues of material fact regarding the issue of undue influence. Vernon then once again moved to dismiss all of Joseph's claims pursuant to Rule 12(b)(6) or for a judgment on the pleadings pursuant to Idaho Rule of Civil Procedure 12(c). The magistrate court also denied this motion.
Following all of these motions, Joseph moved for partial summary judgment. In his motion, Joseph requested a ruling that Victoria's property was not gifted to VHS Properties because the power of attorney Vernon drafted and used did not expressly authorize the making of gifts. The magistrate court granted Joseph's motion. As part of its ruling, the magistrate court set aside the series of transactions involving Vernon and VHS Properties and ordered Vernon to provide an accounting of the estate's [*10] property. Vernon's subsequent motion for reconsideration was denied. Later, after finding that Vernon had failed to provide a satisfactory accounting of the estate's assets and that said assets appeared to be dissipating, the magistrate court appointed a special master and ordered supervised administration of the estate to ensure its assets were preserved.
In October 2016, the magistrate court held a two-day bench trial on the issue of undue influence. The parties then submitted post-trial briefing. On March 9, 2017, the magistrate court issued its Findings of Fact and Conclusions of Law, in which it ruled that Victoria's will was invalid because it was a product of Vernon's undue influence, and that Victoria died intestate. The court later amended its decision to correct minor typographical and clerical errors. In June 2017, the court entered a judgment pursuant to Idaho Rule of Civil Procedure 70(b), which vested title to all of Victoria's real and personal property in the personal representative who had been appointed.
Vernon appealed these decisions, and this Court granted Joseph's motion for acceptance of appeal directly from the magistrate court pursuant to Idaho Appellate Rule 44. This appeal follows the parties' stipulation to bifurcate [*11] the appeal to first address any matters occurring up to and including the post-trial judgment under Rule 70(b) before considering any matters occurring thereafter. The personal representative of the estate, Intervenor-Respondent Noah Hillen, is not participating in this portion of the appeal.
3. The magistrate court did not abuse its discretion in its evidentiary rulings.
Vernon also contests two evidentiary rulings that were made by the magistrate [*54] court. "This Court reviews challenges to a trial court's evidentiary rulings under the abuse of discretion standard." Vreeken v. Lockwood Eng'g, B.V., 148 Idaho 89, 106, 218 P.3d 1150, 1167 (2009) (quoting Perry v. Magic Valley Reg'l Med. Ctr., 134 Idaho 46, 50, 995 P.2d 816, 820 (2000)). "Error is disregarded unless the ruling is a manifest abuse of the trial court's discretion and affects a substantial right of the party." Id. (quoting Perry, 134 Idaho at 51, 995 P.2d at 821). To determine if a trial court abused its discretion, this Court considers whether the trial court (1) perceived the issue as one of discretion, (2) acted within the outer boundaries of that discretion, (3) acted consistently with the legal standards applicable to the specific choices available to it, and (4) reached its decision by an exercise of reason. Lunneborg v. My Fun Life, 163 Idaho 856, 63, 421 P.3d 187, 195 (2018).
a. Admission of certain temporally distant evidence
Vernon challenges the magistrate court's admission of certain evidence as being far removed from the will's creation and execution. He specifically disputes the admission of evidence regarding the 2008 power of attorney transactions and the trial testimony of Victoria's priest. This argument is consistent with a pair of motions in limine that Vernon filed before trial for the purpose of identifying and limiting the scope of admissible evidence on the issue of undue influence. During [*55] a pretrial hearing, the magistrate court deferred its ruling on the motions and explained that such matters would be better adjudged at trial. Then, following trial, the magistrate court partially granted the motions. Specifically, the magistrate court explained that for purposes of assessing the existence of undue influence, it would only consider competent evidence, and inferences drawn therefrom, from approximately one year prior to and six months after the will was executed. The magistrate court also explained that this ruling did not limit its ability to consider evidence and inferences falling outside of that window for other purposes, such as to corroborate an already made finding of undue influence or to establish an unbroken chronology of the relationship between Vernon and Victoria.
As discussed above under the disposition element, when considered, the magistrate court made clear that it was using temporally distant evidence for corroborating or reinforcing purposes only. Admission of evidence for these purposes is consistent with other jurisdictions who have considered the same issue. See, e.g., In re Estate of Laitinen, 483 A. 2d 265, 268 (Vt. 1984) ("[E]vidence which tends to show that the beneficiary acquired control over [*56] the testator's mind before the will was made, and retained such control beyond the period at which the will was executed, is admissible . . . ." (citation omitted)). With appropriate constraints in place, the magistrate court's admission of the disputed evidence was proper.
b. Refusal of admission of Victoria Converse email
Vernon also contends that the magistrate court erred in its refusal to admit an exhibit at trial, which was purported to be an email from Victoria Converse to Vernon and Joseph regarding her relationship with the siblings' mother. The email was sent following Victoria's passing in 2013. The magistrate court refused admission of the email, finding that it was hearsay and not relevant to the issue of Vernon's undue influence. Vernon argues that the email was relevant because it offered justification for Victoria Converse's disinheritance in the will, which ran contrary to the magistrate court's factual finding that no such evidence existed. Given its relevance, Vernon contends that it should have been admitted despite being hearsay either as an admission by party opponent, I.R.E. 801(d)(2), or through the hearsay exception for statements against interest, I.R.E. 804(b)(3). The magistrate court did [*57] not abuse its discretion in refusing to admit the email.
There was a lengthy exchange between counsel and the magistrate court concerning the admissibility of the email. While the magistrate court concluded that the email was not relevant and contained inadmissible hearsay, it also left the door open for Vernon to redact the hearsay portions and seek to re-admit the exhibit:
Quite frankly, counsel, I don't agree with you. This was written some 20 years after this will was put in place. The issue is what was - whether the mother was unduly influenced back in the early 90s when she - or just prior to her writing this holographic will. It is not relevant that this daughter upon her death bed some 20 years later has certain feelings and is expressing it. She is also not a party in this case. I understand that she may benefit, but there is no evidence that she is actually participating in this case. So I am going to sustain the objection and I am not going to consider it at all.
Now, if the parties want to work out some way to redact those portions which are clearly not hearsay, and I have not read this document so I don't know what portions those might be. So I just don't see this as admissible. [*58] This is all about - these are all her statements. You want me to accept it for the truth of the matter asserted so it is clearly an out of court statement. It is hearsay. And the only issue is, does it fall within the exception? And so far the only exception you have given, it seems to me, an admission of a party opponent. She is not a party to this case by your own statement.
Counsel: Well, it's also an admission against interest because she has an interest in this case and a punitive (sic) heir under the statute. Whether she is here to advance or not.
Court: I am not going to admit this at this time. You have to provide an awful lot of support for it for me to admit it.
After testifying the next day that Converse was unavailable as a witness because she lived out-of-state and was beyond the court's subpoena power, Vernon again moved to admit the email, arguing that it was a statement against interest and advancing other grounds for admission that are not raised on appeal. The magistrate court again refused to admit the exhibit.
The magistrate court's refusal to admit the exhibit was consistent with I.R.E. 801(d)(2) because Converse is not a party to this action. The fact that she might possibly have [*59] some interest in the outcome as a putative heir does not make her a party.
The magistrate court's decision was also consistent with I.R.E. 804(b)(3) which provides that an out of court statement is not hearsay if the declarant is unavailable and it is:
[a] statement which was at the time of its making so far contrary to the declarant's pecuniary or proprietary interest, or so far tended to subject declarant to civil or criminal liability, or to render invalid a claim by declarant against another, that a reasonable man in declarant's position would not have made the statement unless declarant believed it to be true. A statement tending to expose the declarant to criminal liability and offered in a criminal case is not admissible unless corroborating circumstances clearly indicate the trustworthiness of the statement.
I.R.E. 804(b)(3). We recently addressed the application of this exception in the criminal context in State v. Robins, explaining that this rule requires the court to consider each statement included in a broader narrative to determine whether the statement is in fact one that is so far contrary to the declarant's interests that a reasonable person in the declarant's position would not have made it unless [*60] the declarant believed it to be true. No. 44296, 2018 WL 6254427, at *1 (Idaho Nov. 30, 2018). In Robins, we went through a letter sentence by sentence and determined that only one sentence was genuinely self-inculpatory and met the requirements of I.R.E. 804(b)(3). Id. at *12-14.
Even without the benefit of our decision in Robins, the magistrate court recognized how I.R.E. 804(b)(3) operates when it ruled that Vernon could redact the hearsay from the email and seek to admit those portions which reflected statements against interest. It does not appear from the record that Vernon ever did so. As a result, the magistrate court's decision was consistent with applicable legal standards, and no abuse of discretion has been shown.
Attorney's Fees and Costs
8-208. Vernon asserts that the magistrate court erred by determining Joseph the prevailing party below, and requests that this Court remand the case to make a finding that he was the prevailing party. He also seeks costs below and on appeal. Joseph is the prevailing party on appeal and nothing suggests that the magistrate court's prevailing party determination was incorrect.
Turning to Joseph's requests, in reverse order, section 15-8-208 allows for discretionary costs and reasonable [*61] attorney's fees for proceedings governed by the Trust and Estate Dispute Resolution Act ("TEDRA"), Idaho Code sections 15-8-101 to 15-8-305. The statute permits the court to award costs and fees from any party, assets of the estate or trust, or nonprobate asset that is subject of the proceedings. I.C. § 15-8-208(1); Quemada v. Arizmendez, 153 Idaho 609, 617, 288 P.3d 826, 834 (2012). Unlike in Quemada, Joseph did not file his initial petition for probate pursuant to TEDRA, Idaho Code section 15-3-302. As such, this was not a TEDRA proceeding and its costs and fees provision does not have applicability here.
Section 12-121 allows for an award of reasonable attorney's fees to the prevailing party in cases that have been brought, pursued or defended frivolously, unreasonably or without foundation. I.C. § 12-121. Although some of Vernon's arguments on appeal misconstrue certain findings and conclusions of the magistrate court, other issues have been reasonably raised in an attempt to sort out a procedurally complex action. Given this, it cannot be said that this appeal was pursued frivolously, unreasonably, or without foundation, and we will decline to award fees pursuant to section 12-121.
In light of the foregoing, the decisions of the magistrate court are affirmed. Costs are awarded on appeal to Joseph.
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