Opinion
No. 36638-0-II.
October 14, 2008.
Appeal from a judgment of the Superior Court for Clark County, No. 06-4-00291-2, Robert A. Lewis, J., entered June 29, 2007.
Reversed and remanded by unpublished opinion per Armstrong, J., concurred in by Houghton and Bridgewater, JJ.
Julia Rider, as personal representative of the estate of Bernice Karnath, appeals the trial court's decision upholding an inter vivos gift of real property from Karnath to Rider's sister and brother-in-law, Susan and Larry Sampson, as well as the trial judge's refusal to recuse himself. In declining to void the gift, the trial court held that Karnath's estate did not prove that it was the result of undue influence and that the Sampsons did not need to prove that the transfer was not the product of undue influence. Holding that the Sampsons had the burden of proving that the inter vivos gift was not the result of undue influence, and also holding that the trial judge did not abuse his discretion by refusing to recuse himself, we reverse and remand for a new trial before the same judge. We also award Rider attorney fees on appeal.
FACTS
In 1995, Karnath executed a will leaving one-third of her estate to each of her three beneficiaries: Rider, Susan Sampson, and James Margeson. Karnath had no children and was the great aunt of the three named beneficiaries, who are siblings.
When she executed her will, Karnath also executed a durable power of attorney naming Susan as her attorney in fact. Karnath added Susan's name to her checking account so that Susan could help her pay bills. Starting in 1995, Susan and her husband Larry provided companionship for Karnath as well as household and maintenance services. The Sampsons never lived with Karnath, but in 1998, Susan began stopping by Karnath's home on a daily basis and doing her cooking and shopping.
On April 9, 2000, Karnath signed a quitclaim deed conveying her home to the Sampsons in exchange for one dollar and "love and affection." Exh. 3. Larry prepared the deed and an accompanying excise tax affidavit that described the transfer as a gift.
On June 30, 2000, Karnath fell in her home and was taken to the hospital. In describing her medical history, Susan stated that Karnath had suffered four falls in the previous six months and had a history of dementia. Karnath never returned home, but eventually moved into an adult foster care facility where she remained until her death at age 88 in 2005. The Sampsons moved into her home after they lost their own residence to foreclosure.
Following Karnath's death, her will was admitted to probate. Rider, as personal representative, petitioned the court for an order requiring Susan to provide a full accounting of her actions with regard to Karnath's estate. The court ordered the Sampsons to provide this financial information within certain time limits, but they failed to fully comply with the court's orders. Rider then brought an action under the Trust and Estate Dispute Resolution Act, chapter 11.96A RCW, seeking an award of damages from the Sampsons for moneys taken from the estate or not accounted for, as well as an order invalidating the quitclaim transfer of property to them. After a trial in which the Sampsons represented themselves and called no additional witnesses, the trial court concluded that they had failed to provide a sufficient verified accounting of their actions with regard to the expenditure of $95,000 of Karnath's funds. The court awarded the estate a judgment in that amount as well as $15,000 in attorney fees. With regard to the inter vivos gift, the trial court observed that the estate had the burden of showing either that undue influence was the reason the property was transferred or that the Sampsons were in such a confidential fiduciary relationship with Karnath that it was the Sampsons' burden to show that the transfer was not the product of undue influence. The court did not find that the estate had met either burden so it did not void the gift.
At a subsequent hearing to consider the proposed findings of fact and conclusions of law, the trial judge first addressed a different matter. Following the judge's oral ruling, Rider's attorney had discovered that the judge had represented Susan's daughter seven years earlier in a Skamania County paternity proceeding. Rider's attorney had attempted to review the case file, but most of it was sealed. The judge acknowledged his representation and noted that the action was contested only with regard to custody and visitation issues. He confirmed that he had called Susan as a witness to testify on her daughter's behalf and noted that there was no record that Susan had paid any of her daughter's fees directly to his firm.
Rider's attorney stated that if the judge was not inclined to recuse himself, he would ask leave to unseal the Skamania County court file and potentially pursue an affidavit of prejudice. When the judge asked the basis for recusal, the attorney responded that Rider saw a conflict of interest in the judge having once been an advocate for Susan and being now in a position to assess her credibility. The judge declined to recuse himself, concluding that he had no personal bias or prejudice concerning the parties as a result of his former representation of Susan's daughter.
The court then entered written findings of fact and conclusions of law and a final judgment. The court entered the following conclusion of law regarding the transfer of Karnath's real property:
4. The Estate has failed to prove that Bernice Karnath's execution of the Quit Claim Deed, and her gift of her residence to Susan and Larry Sampson, was the result of undue influence, or the result of a breach of fiduciary duties by Susan and Larry Sampson. The evidence presented by the Estate does not establish the type of relationship between Susan and Larry Sampson and Bernice Karnath, in April, 2000, which would require Susan and Larry Sampson to prove that the execution of the Quit Claim Deed by Ms. Karnath was not the result of undue influence. Further, the evidence does not support a finding that Bernice Karnath lacked the capacity to transfer her own property in April, 2000, at the time she executed the Quit Claim Deed in the presence of a notary. Clerk's Papers (CP) at 227-28.
Rider now appeals, challenging the above conclusion upholding the inter vivos transfer of Karnath's residence to the Sampsons as well as the trial judge's refusal to recuse himself.
ANALYSIS I. Inter Vivos Gift
Generally, the party seeking to set aside an inter vivos gift has the burden of showing that the gift is invalid. Endicott v. Saul, 142 Wn. App. 899, 922, 176 P.3d 560 (2008). But if the recipient has a confidential or fiduciary relationship with the donor, the burden shifts to the donee to prove that the gift was intended and not the result of undue influence. Endicott, 142 Wn. App. at 922; Lewis v. Estate of Lewis, 45 Wn. App. 387, 388-89, 725 P.2d 644 (1986). This is particularly true when the donor is elderly. See C. Mitchell and F. Mitchell, 26 Washington Practice: Elder Law and Practice § 5.42, at 547 (2d ed. 2004) ("Undue influence may exist when assets are transferred by a dependent elderly person to a caregiver or advisor. . . . If a confidential relationship exists, the burden is on the caregiver or advisor to prove that no undue influence has occurred.").
Where a confidential relationship exists, evidence to sustain the gift must show that it "`was made freely, voluntarily, and with a full understanding of the facts. . . . If the judicial mind is left in doubt or uncertainty as to exactly what the status of the transaction was, the donee must be deemed to have failed in the discharge of his burden and the claim of gift must be rejected.'" McCutcheon v. Brownfield, 2 Wn. App. 348, 356, 467 P.2d 868 (1970) (quoting 38 Am. Jur. 2d Gifts § 106 (1968)). The donee's burden of proof is clear, cogent, and convincing evidence. Endicott, 142 Wn. App. at 922; Pedersen v. Bibioff, 64 Wn. App. 710, 720, 828 P.2d 1113 (1992).
The trial court did not find that the relationship between Karnath and the Sampsons required the latter to prove that undue influence was not a factor in the property's transfer. The court so found despite its conclusion that Susan owed a fiduciary obligation to Karnath when she acted as an attorney in fact pursuant to the durable power of attorney relationship. "`A confidential or fiduciary relationship between two persons may exist either [in law] because of the nature of the relationship between the parties . . . or the confidential relationship between persons involved may exist in fact.'" Endicott, 142 Wn. App. at 923 (quoting McCutcheon, 2 Wn. App. at 356-57). A durable power of attorney relationship results in a confidential relationship. In re Estates of Palmer, ___ Wn. App. ___, 187 P.3d 758, 765 (2008). A confidential relationship also exists when one person has gained the confidence of another and purports to act or advise with the other's interests in mind. McCutcheon, 2 Wn. App. at 357. "`A confidential relation[ship] is particularly likely to exist where there is a family relationship.'" McCutcheon, 2 Wn. App. at 357 (quoting Restatement of Restitution § 166d (1937)); see also Peterson v. Groves, 111 Wn. App. 306, 312, 44 P.3d 894 (2002) (confidential relationship occurs when one acts as advisor or counselor to another so as to inspire confidence that he will act in good faith for the other's interest); Doty v. Anderson, 17 Wn. App. 464, 468, 563 P.2d 1307 (1977) (confidential relationship shown where recipient managed donor's financial affairs).
In her appellate brief, Rider asserts without citation of authority that because Karnath was a vulnerable adult under former RCW 74.34.020(13)(a) (2006), the Sampsons' management of her property resulted in a fiduciary relationship. Given the trial court's unchallenged finding that a fiduciary relationship existed, as well as the absence of legal support for Rider's argument, we do not consider it further. RAP 10.3(a)(6); Zunino v. Rajewski, 140 Wn. App. 215, 220, 165 P.3d 57 (2007).
The facts support the conclusion that both of the Sampsons had a confidential relationship with Karnath, regardless of Susan's status as her attorney in fact. Susan entered into a joint checking account with Karnath in 1995 and visited her every day from 1998 until Karnath left her home in June 2000. Both of the Sampsons provided Karnath with companionship and services. Susan testified that from 1995 on, "Larry and I were all she had. Nobody visited, nobody did things for her. . . . We did everything for her that she wanted done." Report of Proceedings (RP) at 95. Larry added that he was very close to Karnath and that she put her trust in him.
By contrast, James Margeson testified that he saw Karnath a couple of times in 1999 independently of family gatherings, and Rider testified that she saw Karnath 10 times from mid-1999 to mid-2000. Rider said that she never volunteered to care for Karnath and that she trusted the Sampsons to provide that care.
For the five years preceding the execution of the quitclaim deed, the Sampsons operated as Karnath's primary if not sole caregivers. It is clear from their testimony that they were close to her, and it would appear equally clear that their elderly great aunt relied heavily on them. We hold that the evidence supports the conclusion that a confidential relationship existed between Karnath and the Sampsons.
Given that relationship, the Sampsons had the burden of proving that the inter vivos gift was not the result of undue influence. The existence of undue influence is a factual question. Pedersen, 64 Wn. App. at 720. Factors to consider in determining whether undue influence affected a gift include whether the donor had independent advice before the transaction and whether the donee prepared the transaction documents. Meyer v. Campion, 120 Wash. 457, 468-70, 207 P. 670 (1922); see also McCutcheon, 2 Wn. App. at 359 (absence of independent advice is not fatal to validity of gift, but inference may be drawn therefrom that undue influence was exerted). Other significant factors are whether the transaction carried out the donor's previously expressed wishes, and the donor's physical and mental health at the time of the transaction. Thomas v. Maring, 144 Wash. 657, 660, 258 P. 465 (1927); Lewis, 45 Wn. App. at 392.
The Sampsons testified that they encouraged Karnath to seek legal counsel when she proposed to transfer her residence to them. But Larry prepared the quitclaim deed, apparently because Karnath's attorney was unavailable. The April 2000 deed conveyed the entirety of Karnath's residence and surrounding property to the Sampsons, even though her will instructed that her estate was to be divided equally among her three heirs and even though Karnath told Rider's daughter in 1999 that no one was getting her house.
Karnath was 80 when the Sampsons began to care for her and 84 when she signed the quitclaim deed. Although the trial court concluded that the evidence did not support a finding that she lacked the capacity to transfer her property when she executed the deed, this conclusion does not demonstrate that her decision was unaffected by undue influence. Susan said that Karnath was in good health until she went to the hospital in June 2000, but she also told hospital staff that Karnath had a history of dementia. Margeson testified initially that Karnath's mental condition in 2000 was good but then said he saw some decline during that year. Both he and Rider remembered Larry saying that Karnath did not know what she was signing when she wrote a check for him in June 2000. Karnath did not sign any checks by herself after March 1, 2000; after that, they also had Susan's signature. Rider testified that Karnath was forgetful by mid-2000 and that Susan had said she had the beginnings of dementia in March 2000. Rider's daughter testified that in 1999, Karnath attempted to introduce Larry to her, even though she had known her uncle for 20 years. The hospital reports state that Karnath had a history of dementia when she was admitted and that she was disoriented as to time and place during her stay. By September 2000, her current medical status was listed as dementia.
The record shows that the Sampsons cared for Karnath almost exclusively in the years just preceding the inter vivos transfer, and that they had ample opportunity to exercise undue influence. See In re Estate of Eubank, 50 Wn. App. 611, 620, 749 P.2d 691 (1988) (finding it obvious that beneficiary, holding general power of attorney and being sole relative present, had sufficient opportunity to exercise undue influence over testators). Larry testified that he and Susan had a verbal agreement with Karnath that she would give the Sampsons all of her property in exchange for them taking care of her. "Ms. Karnath in our agreement turned over her entire assets, both real and personal, in exchange for continued care and not abandoning her in her old age." RP at 110. This verbal agreement "encompassed everything" and "took nine months to evolve." RP at 110. The quitclaim deed nowhere notes that the transfer is made in exchange for services, but states only that it is a gift given in exchange for a dollar and love and affection. The trial court found that the evidence did not support the Sampsons' claim of a verbal agreement.
It is true that Karnath signed the quitclaim deed in the presence of a notary, and that, as the trial court observed, she made three equal gifts to her beneficiaries in 2000 that the estate does not challenge. On this record, however, we do not find clear evidence that undue influence did not affect the inter vivos gift of Karnath's property to the Sampsons. Rather than showing that the gift was made freely and with a full understanding of the facts, the record leaves us in doubt as to "`exactly what the status of the transaction was.'" McCutcheon, 2 Wn. App. at 356 (quoting 38 am. jur. 2d, Gifts § 106 (1968)). We therefore remand for a new trial on this issue, allocating the proper burden of proof to the Sampsons. If no further evidence is available, the Sampsons must be deemed to have failed in discharging their burden and the transfer must be declared void. See McCutcheon, 2 Wn. App. at 356.
II. Recusal
Rider argues here that the trial judge abused his discretion in failing to recuse himself before entering the written findings and conclusions and the final judgment.
Recusal lies within the sound discretion of the trial court. In re Marriage of Farr, 87 Wn. App. 177, 188, 940 P.2d 679 (1997). A party should move for recusal before the judge has made any rulings. Farr, 87 Wn. App. at 188; RCW 4.12.050. To support an untimely motion, a party must demonstrate prejudice on the judge's part. State v. Cameron, 47 Wn. App. 878, 884, 737 P.2d 688 (1987).
Rider supports this claim of error by asserting that the trial court denied her the opportunity to pursue the unsealing of the Skamania County court file, to conduct further review of the record in that case, and to pursue further discovery. According to Rider, these actions resulted in actual prejudice and constitute an abuse of discretion.
We disagree. The record shows that Rider sought permission to unseal an unrelated court file to determine whether the trial judge's previous representation of Susan's daughter might somehow disqualify him from presiding over the case at bar. This request came after the trial court had entered its oral ruling but before it had entered written findings and conclusions and a final judgment. Rider's claim of prejudice is hypothetical at best and does not demonstrate that the trial judge abused his discretion in refusing to recuse himself. See Rich v. Starczewski, 29 Wn. App. 244, 246, 628 P.2d 831 (1981) (casual and unspecific allegations of judicial bias provide no basis for appellate review).
III. Attorney Fees
Finally, Rider requests attorney fees under RCW 11.96A.150(1)(a), which authorizes the recovery of such fees in proceedings brought under the Trust and Estate Dispute Resolution Act. Concluding that her appeal is successful in part, we award fees accordingly. Eagle Group, Inc. v. Pullen, 114 Wn. App. 409, 424, 58 P.3d 292 (2002).
Rider also requests fees under RCW 74.34.200(3), which authorizes an award of fees in actions brought under the Abuse of Vulnerable Adults Act. Although Rider's original petition for relief is not part of the appellate record, a supplemental petition as well as the transcript indicates that she sought relief only under the Trust and Estate Dispute Resolution Act. We decline to award fees under RCW 74.34.200(3).
We hereby reverse and remand for a new trial before the same judge, awarding attorney fees on appeal to Rider.
A majority of the panel having determined that this opinion will not be printed in the Washington Appellate Reports, but will be filed for public record pursuant to RCW 2.06.040, it is so ordered.
Houghton, PJ. and Bridgewater, J., Concur.