Opinion
No. 63719-3-I.
Filed: February 7, 2011.
Appeal from a judgment of the Superior Court for King County, No. 06-4-02161-1, Mary Yu, J., entered May 26, 2009.
Affirmed in part, reversed in part, and remanded by unpublished opinion per Becker, J., concurred in by Dwyer, C.J., and Leach, J.
Shortly before her death, Shirley Harty put one of her three sons on bank accounts worth $336,000 as a joint owner with right of survivorship. Although this choice seemed unnatural to other family members when they learned of it, they failed to convince the trial court that the designation was unintended or that the benefited son had exerted undue influence. We conclude that the trial court properly imposed the burden of proof upon the challengers and did not err in finding their evidence uncompelling.
Shirley Harty had three sons, Patrick, Doug, and Greg. She also had two grandchildren who were very close to her, Patrick's sons Benjamin and Jason. After the death of her husband in 2002, Shirley lived comfortably alone in the family home in Renton. In the summer of 2004, having begun to chafe at the burdens of home ownership, she accepted an unsolicited offer for her house. After selling the house, Shirley put most of her money in five Boeing Employees Credit Union accounts worth about $336,000. She made two of these accounts, totaling $45,000, payable upon death to the two grandsons.
At Patrick's urging, she moved into an assisted living facility in Bellevue, closer to where he lived and worked. Shirley did not like living there. Her health was reasonably good, and she wanted to return to more familiar surroundings and activities. After six months, Shirley recruited her son Greg, a resident of Oregon, to help her move back to Renton. Greg located a small apartment in Renton, moved her in, and retained the services of a friend to help with chores and errands. Greg's agreement to facilitate this move angered the rest of the family, who believed that it would be safer for Shirley to stay where she was.
Shirley's move to the apartment occurred in April 2005. Greg came up from Oregon to visit her on her birthday, July 28, 2005. The next day, at Shirley's request, Greg took her to the credit union. She signed forms changing all five of her accounts so that Greg became a joint owner with right of survivorship. She also signed a broad power of attorney allowing Greg to conduct financial and medical transactions on her behalf.
Shirley Harty died on October 20, 2005, after a sudden illness. She was 83. Her will, made in 1998, appointed Greg as personal representative. It divided her estate equally between Patrick, Greg, and Doug. Through proceedings that need not be recounted in detail, Shirley's will was eventually put into probate with Patrick as the personal representative. Patrick learned that the credit union accounts were not part of the estate, as they had passed to Greg by right of survivorship. The assets of the estate amounted to about $100,000.
In March 2006, Patrick filed the present action, a petition under the Trust and Estate Dispute Resolution Act, chapter 11.96A RCW (TEDRA). Joining him in the petition were his two sons, Benjamin, age 18, and Jason, age 25. In an amended petition filed in September 2007, they alleged that Shirley had never intended for Greg to have such a disproportionate share of her wealth and that his involvement with the credit union transactions represented a violation of his fiduciary responsibilities to Shirley. They asked the court to direct that the account change forms signed by Shirley in July 2005 be disregarded.
The matter proceeded to a bench trial in January 2009. Patrick presented several days of testimony. His family and several of Shirley's friends testified how surprising it was that Shirley had left most of her money to Greg alone, when she had openly planned for years to make an equal division among the three sons.
After Patrick rested his case, Greg moved to dismiss. Under CR 41(b)(3), after the plaintiff rests, the defendant may move to dismiss "on the ground that upon the facts and the law the plaintiff has shown no right to relief. The court as trier of the facts may then determine them and render judgment against the plaintiff or may decline to render any judgment until the close of all the evidence. If the court renders judgment on the merits against the plaintiff, the court shall make findings as provided in rule 52(a)." The trial court granted the motion to dismiss and awarded attorney fees to Greg. This appeal followed.
BURDEN OF PROOF
Central to the trial court's decision was the statute that controls ownership of funds on deposit in a joint account with right of survivorship: "Funds belonging to a deceased depositor which remain on deposit in a joint account with right of survivorship belong to the surviving depositors unless there is clear and convincing evidence of a contrary intent at the time the account was created." RCW 30.22.100(3). The trial court concluded that Patrick failed to prove that Shirley had a contrary intent.
Patrick contends the trial court should have followed the common law of gifts, under which the burden of proof would be placed on Greg as the recipient of the gifts to prove that he did not exert undue influence upon Shirley. Patrick relies on Doty v. Anderson, 17 Wn. App. 464, 471, 563 P.2d 1307 (1977). But Doty supports the trial court's decision to place the burden of proof on Patrick. Once an account holder adds a joint account owner with right of survivorship, the account holder's intention as to the ownership of the accounts becomes a matter of statute, rather than common law. Doty, 17 Wn. App. at 467. The statutory presumption of the depositor's intent that arises under RCW 30.22.100(3) will control unless the challenger proves undue influence. Doty, 17 Wn. App. at 466-67. In this respect, the law governing joint accounts follows the law applicable to will contests, not the common law of gifts. Doty, 17 Wn. App. at 468.
In Doty, the trial court found Mrs. Doty's son Raymond had presented sufficient evidence of undue influence by a housekeeper, Mrs. Anderson, to overcome the statutory presumption that Mrs. Doty intended for Mrs. Anderson to become a joint owner of her bank accounts with right of survivorship. That finding was affirmed on appeal. In the present case, however, the trial court found that Patrick had not presented sufficient evidence of undue influence by Greg.
Patrick acknowledges in his reply brief that the statute does, at least initially, impose the burden of proof on the party challenging the account designations. But he contends he established certain facts that necessarily raised a presumption of undue influence and when he did so, the burden shifted to Greg. Accordingly, he argues that the court erred in making its ruling before Greg proceeded with the defense case.
A presumption of undue influence does not necessarily arise from particular facts. In this way, it differs from the statutory presumption of intent that necessarily arises from the creation of a joint bank account with right of survivorship. The law of will contests speaks in terms of possibility. Despite the "daunting burden" that is placed upon contestants, a presumption of undue influence "can" be raised "by showing certain suspicious facts and circumstances." In re Estate of Lint, 135 Wn.2d 518, 535, 957 P.2d 755 (1998). The trial court did not find that Patrick had raised such a presumption. But even if a presumption had been established, the result would not have been to impose upon Greg the burden of proving absence of undue influence; it would have merely been to impose upon Greg the burden of coming forward with evidence to "balance the scales." See Estate of Lint, 135 Wn.2d at 536. This is because the ultimate burden of proving undue influence by clear, cogent, and convincing evidence always remains with the challenger of the account designation. Estate of Lint, 135 Wn.2d at 536.
Certain facts and circumstances that a court should consider in determining whether the beneficiary interfered with the exercise of free will by a testator (or, as in this case, by an account holder) are set forth in Dean v. Jordan, 194 Wash. 661, 671-72, 79 P.2d 331 (1938).
The most important of such facts are (1) that the beneficiary occupied a fiduciary or confidential relation to the testator; (2) that the beneficiary actively participated in the preparation or procurement of the will; and (3) that the beneficiary received an unusually or unnaturally large part of the estate. Added to these may be other considerations, such as the age or condition of health and mental vigor of the testator, the nature or degree of relationship between the testator and the beneficiary, the opportunity for exerting an undue influence, and the naturalness or unnaturalness of the will.
Dean, 194 Wash. at 672. The trial court considered and made determinations concerning all of the Dean factors. Greg did have a fiduciary or confidential relationship with Shirley; he did actively participate in the procurement of her signature on the account change forms; and the share of her accumulated wealth that he received did appear unnatural when compared to what he would have received under Shirley's original plan for disposing of her estate. But the rest of the factors weighed against a finding of undue influence by Greg. "Greg was the only son who had assisted Shirley during the last year of her life and it was not unnatural under the circumstances for Shirley to elect to make a disproportionately large gift of her financial estate to him." Conclusion of Law 6. Patrick failed to show that Shirley suffered diminished capacity or that she was vulnerable due to poor health or lack of mental vigor when she added Greg to the accounts. Conclusions of Law 7, 10. "Greg had limited opportunity to exert undue influence over Shirley." Conclusion of Law 11. These determinations are all supported by the record, and they suffice to explain why the trial court granted Greg's motion to dismiss without hearing his defense case. Patrick's demonstration that contrary evidence was presented does not show the contested findings were not supported.
Patrick contends that the facts supporting the existence of undue influence by Greg were so compelling that the trial court erred by failing to make a finding of undue influence. Patrick emphasizes certain similarities with the facts in Doty, where this court affirmed the trial court's determination that the survivor on the bank accounts had exerted undue influence. Mrs. Anderson, the survivor, enjoyed a confidential relationship with the elderly Mrs. Doty and assisted her in changing the account forms. But unlike Shirley Harty, Mrs. Doty was unusually susceptible to undue influence because she was frail, sometimes hallucinatory, and had difficulty seeing.
Another factor discussed at length in Doty was the unnaturalness of adding Mrs. Anderson to the bank accounts for any other purpose than to enable her to assist Mrs. Doty with payment of bills. Doty, 17 Wn. App. at 470. Patrick contends that the court here was obligated to look at Shirley's act of putting Greg on the accounts in exactly the same way, as a mere convenience. In view of Shirley's documented longstanding plan to provide for an equal division among her three sons, he argues, she may have intended for Greg to be able to make sure her bills were paid as she grew older, but she could not have intended him to be a joint owner of the funds. This argument overlooks the evidence showing that Greg alone among the family had demonstrated his willingness to assist Shirley in carrying out her own decision about where to live. There is nothing unnatural about rewarding a family member for providing such assistance. And unlike Mrs. Doty, Shirley had already created a different instrument that would allow Greg to make sure her bills were paid — the power of attorney. This tends to make it more likely that the reason she added him to the accounts was to give him the right of survivorship.
The trial court's analysis of undue influence is also supported by evidence that Shirley herself told Greg she wanted him to have the remainder of the funds in the accounts when she died. This evidence will be discussed more fully below in connection with the deadman's statute.
The trial court concluded that "even if certain factual evidence gave rise to a suspicion, or a rebuttable presumption of undue influence on the part of Greg, the totality of the evidence also provided proof of the absence of undue influence, and that Shirley was acting in the exercise of her own free will when she added Greg to her BECU accounts. . . . Shirley's designation of her son, Greg, as a joint account holder with a right of survivorship was her free, voluntary, and informed intention." Conclusions of Law 12, 14. This conclusion is supported by the record.
In summary, Greg did not have the burden to present a case to prove the absence of undue influence. Having found that Patrick failed to provide clear, cogent, and convincing evidence of undue influence, the trial court correctly dismissed the case when he rested.
DEADMAN'S STATUTE During pretrial proceedings, Greg submitted a declaration. He described going with Shirley to the credit union in July 2005 and helping her change the accounts to make him a joint owner. According to his declaration, the credit union employee who assisted Shirley with this transaction was careful to ascertain that Shirley did understand the significance of the changes she was making to her accounts and did intend to make Greg a joint owner. Patrick took the deposition of Jemima Vila Pinto, the credit union employee, and asked her about this portion of Greg's declaration.
Patrick called Vila Pinto as a witness at trial and questioned her about the conversation she had with Shirley. Because Vila Pinto could not remember Shirley's visit to the credit union, counsel asked her about her usual practices when account holders add names to an account. Counsel read the passages from Vila Pinto's deposition that included Greg's declaration. Counsel asked her if it was "fair to say that Mr. Harty's declaration is incorrect and that you don't ask the member whether it's their intent or not to do something?" Vila Pinto did not agree or disagree.
As soon as Vila Pinto finished testifying, Greg argued that Patrick had waived the deadman's statute by asking Vila Pinto to comment on the accuracy of Greg's declaration. The trial court agreed that a limited waiver had occurred.
Patrick called Greg to testify in the plaintiff's case. On cross-examination, Greg said Shirley told him she wanted him "to have what's left in the accounts when I'm gone":
She asked if we could go to BECU and have [the power of attorney notarized] there and I responded sure. That's as good as any. Is there any particular reason you would like to go to BECU. She said yes, while we're there I would like to add your name to my accounts. My response was mom, with this power of attorney I don't need to have my name on your account. You are giving me the right to sign for you. She says yes, I know that, but I'd like you to be able to write yourself checks if you need money and I would like you to be able to have what's left in the accounts when I'm gone.
Patrick contends that under the deadman's statute, it was error to admit Greg's testimony about what Shirley said.
The deadman's statute bars testimony by a "party in interest" regarding "transactions" with the decedent or statements made by the decedent. RCW 5.60.030. But the bar may be waived when the protected party introduces evidence concerning a transaction with the deceased. "Once the protected party has opened the door, the interested party is entitled to rebuttal." Estate of Lennon v. Lennon, 108 Wn. App. 167, 175, 29 P.3d 1258 (2001).
Patrick argues that his introduction of Vila Pinto's testimony was not a waiver because it concerned only her usual practices during account change transactions. But he does not explain why he needed to use Greg's description of what Vila Pinto did to establish Vila Pinto's usual practices. The evident reason for asking Vila Pinto to say Greg's declaration was incorrect was to create the inference that Greg was making up evidence of Shirley's intent and that the transaction with Vila Pinto did not occur the way Greg described it. Patrick, as the protected party, opened the door on this subject. Greg was entitled to explain his declaration in his own testimony, and he did so by narrating what Shirley said to him about her intent. The door was opened further when Patrick elicited testimony from Greg about the circumstances surrounding Shirley's signing of the power of attorney.
We conclude the court did not err in allowing the challenged testimony by Greg. Patrick's limited waiver of the deadman's statute also waived, to the same limited extent, the parties' pretrial agreement to be scrupulous in following the deadman's statute with respect to the changes on the account forms. And in any event, it is clear that Greg's testimony was not the critical evidence; it was merely supportive of other evidence which, as discussed above, persuaded the court that Shirley made the changes to her account of her own free will.
ATTORNEY FEES
The trial court awarded attorney fees to Greg as the prevailing party. Greg proposed a judgment for $135,015.44 "against J. Patrick Harty and Christine Harty, husband and wife and the marital community comprised thereof, Benjamin Harty, and Jason Harty, jointly and severally." The court entered the judgment as proposed. Patrick assigns error to the award of attorney fees on several grounds.
"In Washington attorney fees may be recovered only when authorized by a private agreement of the parties, a statute, or a recognized ground of equity." Mellor v. Chamberlin, 100 Wn.2d 643, 649, 673 P.2d 610 (1983). The award of attorney fees in this case was based on RCW 11.96A.150, a section in TEDRA:
(1) Either the superior court or any court on an appeal may, in its discretion, order costs, including reasonable attorneys' fees, to be awarded to any party: (a) From any party to the proceedings; (b) from the assets of the estate or trust involved in the proceedings; or (c) from any nonprobate asset that is the subject of the proceedings. The court may order the costs, including reasonable attorneys' fees, to be paid in such amount and in such manner as the court determines to be equitable. In exercising its discretion under this section, the court may consider any and all factors that it deems to be relevant and appropriate, which factors may but need not include whether the litigation benefits the estate or trust involved.
Patrick asserts that he brought the petition commencing this action as the personal representative of Shirley's estate and that therefore only the estate should be liable for fees. We reject this argument. Patrick, Benjamin, and Jason all signed the petition commencing this action before the estate was admitted to probate. Therefore, Patrick could not have brought the action as Shirley's personal representative. Further, none of the petitioners designated a representative capacity when signing the petition or amended petition.
Patrick argues the trial court erred by making Benjamin and Jason jointly and severally liable for the fee award. He says the trial court should have imposed fees on them proportional to the percentage of the account proceeds they would have received. We reject this argument as well. The statute allows the court discretion in how to award fees against parties. RCW 11.96A.150(1). Benjamin and Jason joined in all the allegations in the petition. Greg had to incur the same attorney fees in defending against those allegations irrespective of whether there were three petitioners or only one.
Patrick's challenge to the award of attorney fees does have merit insofar as the judgment was entered against Patrick's wife Christine and the marital community comprised of Patrick and Christine. The statute authorizes fees only against estate or trust assets, nonprobate assets that are the subject of the proceedings, or parties to the action. RCW 11.96A.150(1). Christine was a witness. But Christine and the marital community were not parties.
Greg argues that Christine and the marital community can be held liable under the statute as "the real parties in interest" due to Christine's degree of participation in a lawsuit carried on as a "family project." He does not offer authority for this position. We therefore reverse the portion of the judgment awarding fees against Christine and the marital community.
Our determination that the court lacked authority for entering judgment against nonparties also requires reversal of a supplemental judgment for attorney fees entered a year later. After the original judgment for attorney fees was entered, Patrick moved for reconsideration partially on the basis that Christine and the marital community were not parties. He maintained that he alone controlled the litigation and that the marital community did not stand to benefit from the action. The court invited a response from Greg on this issue. Greg responded that liability was properly imposed upon the marital community because "the members of the marital community were motivated to fight for the perceived rights of their sons, and to risk community assets to do so." The court denied reconsideration.
In April 2010, Greg moved for supplemental attorney fees for the cost of responding to Patrick's motion for reconsideration. In his efforts to collect on the judgment, Greg discovered that before the motion for reconsideration was decided, Patrick and Christine had recorded a deed of trust against their house to secure the unpaid fees owed to Patrick's attorney. Greg argued that Patrick's motion for reconsideration was disingenuous because Patrick, while claiming the lawsuit was his separate endeavor, had used community assets to fund it. He asked that the supplemental award be imposed as a sanction under CR 11.
The court found that the recording of the deed of trust was inconsistent with Patrick's argument on reconsideration that the marital estate was not involved and that any inheritance received would be his sole and separate property. The court concluded that Patrick's denial that his marital community had no stake or involvement in this prosecution was unwarranted and caused Greg Harty to spend additional resources. The court imposed a supplemental judgment of $7,040.00 against Patrick and Christine and their marital community as a CR 11 sanction.
This court reviews an award of sanctions under CR 11 for abuse of discretion. Just Dirt, Inc. v. Knight Excavating, Inc., 138 Wn. App. 409, 417, 157 P.3d 431 (2007). Civil Rule 11(a) allows a court to impose an "appropriate sanction" upon the person who signs a motion or pleading that is not well grounded in fact or makes unwarranted denials of factual contentions. The court can also impose the sanctions on "a represented party." CR 11(a).
Use of the marital home, a community asset, to fund litigation for Patrick's benefit did not make it false for Patrick to claim that any recovery he achieved would belong solely to him. A nonparty who funds an action does not necessarily obtain a financial stake in the outcome. There was no tenable reason for imposing a sanction under CR 11.
In summary, the judgment awarding attorney fees to Greg is reversed to the extent it includes fees and costs he incurred in persuading the court to impose liability upon Christine and the marital community and to enter the supplemental judgment. On remand, the court will enter an amended judgment with those amounts deducted. The supplemental judgment awarding CR 11 sanctions is reversed in its entirety.
Greg requests fees on appeal under RCW 11.96A.150(1). We exercise our discretion and conclude that Greg is entitled to an award of fees on appeal against Patrick, Benjamin, and Jason. The award shall not include fees and costs Greg incurred defending the supplemental judgment and the inclusion of Christine and the marital community in the original judgment.
Affirmed in part and reversed in part.