#29511-aff in pt & rev in pt-MES
2022 S.D. 57
IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
…
GUSTAV K. JOHNSON, as Personal
Representative of the ESTATE OF
SUSAN JANE MARKVE, Plaintiff and Appellant,
v.
KENNETH CHARLES MARKVE Defendant and Appellee.
…
APPEAL FROM THE CIRCUIT COURT OF
THE SEVENTH JUDICIAL CIRCUIT
FALL RIVER COUNTY, SOUTH DAKOTA
…
THE HONORABLE ROBERT GUSINSKY
Judge
…
GEORGE J. NELSON
Rapid City, South Dakota Attorney for plaintiff and
appellant.
HEATHER LAMMERS BOGARD of
Costello, Porter, Hill, Heisterkamp,
Bushnell & Carpenter, LLP
Rapid City, South Dakota Attorneys for defendant and
appellee.
…
ARGUED
NOVEMBER 8, 2021
OPINION FILED 09/21/22
#29511
SALTER, Justice
[¶1.] Acting as the personal representative of the Estate of Susan Markve,
Gustav Johnson commenced this action against Kenneth Markve, alleging a variety
of claims including undue influence, conversion, breach of fiduciary duty, statutory
fraud, and common law fraud. The circuit court granted Kenneth Markve’s motion
for summary judgment after determining that there were no genuine disputes of
material fact as to any of the claims. The Estate appeals, and we affirm in part and
reverse in part.
Facts and Procedural History
[¶2.] Kenneth Markve (Ken) and Susan Johnson lived in the Hot Springs
area of Fall River County and met in 2011 while playing bridge. They quickly fell in
love and were engaged in the fall of 2012. Ken and Susan had met later in their
lives, and both had accumulated their own property and wealth. Given the
circumstances, they made a plan to enter into a prenuptial agreement, but before
they did, Susan broke off the engagement following a visit with her brother, Gustav
Johnson (Gus), who was opposed to the marriage.
[¶3.] Prior to canceling their wedding plans, Ken and Susan were preparing
to purchase a home. They settled on a residence in Hot Springs referred to in the
record as the “Flock house.” In an affidavit, Ken later explained that the two
planned to purchase the home as joint tenants with rights of survivorship, though
he did not indicate how or if they would share the cost of the home. The couple
ultimately did not purchase the Flock house after their engagement ended.
-1-
#29511
[¶4.] Despite canceling their plan to be married, Ken and Susan continued
to spend time together, and they soon rekindled their romance and were again
engaged. On January 15, 2013, they entered into a prenuptial agreement using a
form obtained from an unspecified internet source and without the assistance of
counsel. 1
[¶5.] The prenuptial agreement provided that “[a]ll property, including real
or personal property” would “remain and be [each spouse’s] separate property.”
Attached to the agreement and specifically incorporated into its provisions were
individual schedules of separate property owned by Ken and Susan. The property
Ken listed totaled approximately $1.8 million and was heavily weighted to his $1.5
million interest in a farm. Susan listed assets of approximately $1 million. 2
[¶6.] The couple’s prenuptial agreement contemplated that they would live
in a home Susan already owned in Rapid City, which the agreement stated “shall
remain her separate property.” However, the agreement also gave Ken and Susan
flexibility with respect to the joint acquisition of property in the future and even the
ability to transfer property to each other:
The parties agree and understand that nothing in the
Agreement shall preclude them from acquiring property
interests during the course of their marriage as joint tenants
with right of survivorship or as tenants in common with
undivided interests. Additionally, nothing in the Agreement
shall preclude them from making binding transfers of real or
personal property to the other at any time during the marriage.
1. Neither party has challenged the validity of the prenuptial agreement.
2. The schedules also addressed debt and indicated both parties had significant
net worth. Susan’s schedule reflected no debt, and Ken listed a relatively
modest amount of debt.
-2-
#29511
…
Furthermore, nothing in this Agreement shall preclude the
parties from voluntarily electing to comingle a part or all of the
income from their respective properties for investment purposes
or for the purpose of jointly providing for their mutual support
and living expenses, or for other reasons.
[¶7.] The prenuptial agreement also provided that if either spouse sustained
a partial or total disability, the other spouse would assume responsibility and care
for the disabled spouse. The agreement further allowed Ken and Susan to
“voluntarily elect[ ] to comingle a part or all of the income from their respective
properties . . . for the purpose of jointly providing for their mutual support and
living expenses.”
[¶8.] Ken and Susan were married on January 23, 2013. For Susan’s
wedding ring, Ken purchased a wedding band and had it joined to an existing
diamond ring that Susan owned. In the summer of 2013, the Markves went to
Alaska for a bridge tournament and a vacation. Susan eventually traveled back to
Hot Springs alone to attend her 50-year high school reunion, and Ken stayed in
Alaska to attend to an unrelated matter. While Ken was still in Alaska, Susan
purchased a home in Hot Springs that became the Markves’ marital home. She
paid $250,000 for the house and purchased it individually as the trustee of the
Susan J. Markve Trust. 3 The record does not indicate whether Ken contributed to
the purchase price at any point.
3. Despite the fact that it is referenced and cited at various places throughout
the record and the parties’ briefs, the trust document for the Susan J. Markve
Trust is not included in the record. From its uncontroverted description, it
(continued . . .)
-3-
#29511
[¶9.] In December 2013, Susan was diagnosed with glioblastoma, a deadly
and incurable form of brain cancer. She underwent extensive medical care and
treatment, including surgery to remove a tumor, as well as radiation,
chemotherapy, and holistic care. Over the course of her treatment, Susan spent
time in a swing bed facility as she transitioned from acute care in a hospital setting
to skilled nursing care in her home.
[¶10.] It was during this period of time in early 2014 that Susan did two
significant things with respect to her financial affairs: 1) she conveyed the Hot
Springs house she held separately in her living trust by quitclaim deed to herself
and to Ken as joint tenants with the right of survivorship; and 2) she executed a
general power of attorney, naming Ken her agent. Susan’s capacity to undertake
either of these actions lies at the heart of this case.
[¶11.] Both the quitclaim deed conveying Susan’s separate right to the Hot
Springs home and the power of attorney were drafted by attorney Brian Hagg and
signed by Susan on March 25, 2014. In two lines of an eleven-sentence affidavit,
Hagg expressed the view that Susan had the capacity to convey her interest in the
house and appoint Ken as her agent:
• I met with Susan two times regarding the deed and power
of attorney.
• Susan was competent and very clear on what she wanted
to do with the couple’s marital home and desiring Ken to
be her agent.
________________________
(. . . continued)
appears Susan established a self-settled living trust in 2003, and though the
record indicates she amended it after her marriage to Ken, he was apparently
not a trust beneficiary.
-4-
#29511
[¶12.] Nevertheless, notes contained in Susan’s medical records from
February and March 2014 indicate she was experiencing some degree of memory
and cognitive difficulty. For instance, on February 17, 2014, the medical records
from the swing bed facility, Fall River Health, indicate her attending physician
noted “Short Term Memory loss/confusion[.]” The subjective assessment for
February 17 also stated that “Husband present and reports that this is the worst
her short term memory has been and Pt did not deny.” On March 9, 2014, Susan’s
medical records stated that “she is aware of who she is[, but she is] [n]ot oriented to
where she is but was able to recall after she was told.”
[¶13.] Susan was transferred from Fall River Health to Rapid City Regional
Hospital on March 11, and the hospital records indicate she was experiencing
slurred speech and memory problems. Susan returned to Fall River Health on
March 19, but she was largely unresponsive. On Monday, March 24, the nurse
practitioner caring for Susan noted that Susan was feeling well. The nurse’s notes
further stated that Susan had a good weekend and that she was currently alert and
oriented as she visited with her husband. The following day, March 25, was the day
Susan signed the quitclaim deed to her Hot Springs home and the power of
attorney. Though her medical records for March 25 indicate improved mental
status, they also reveal Susan was experiencing low oxygen saturation levels and
-5-
#29511
“require[d] almost total care[.]” During this time, the medical records indicate
Susan was experiencing significant “somulence” 4 and was unresponsive.
[¶14.] In early April 2014, Susan was also experiencing delirium while at Fall
River Health and was transferred to a facility in Crawford, Nebraska. In her
discharge report from Fall River Health on April 10, her doctor wrote:
The patient’s stay is most notable for altered levels of
consciousness. At times she would be slightly appropriate and
able to talk with us. And at times she would have one to two
days where she was almost noncoherent. She did better with
the feeds with the husband present. She would go through
levels of delirium at times.[ 5]
[¶15.] After her release from the Crawford facility, Susan returned home to
live with Ken in Hot Springs. Ken hired caregivers and home health workers and
paid any bills relating to Susan’s treatment and care. Ken and Susan resumed
hosting bridge club at their home. One of Susan’s friends indicated in an affidavit
that Susan maintained her “cognitive behavior” even as her physical health
deteriorated, though the statement does not relate to a specific time period.
4. Though reported as “somulence” in the medical records, the context and the
explanation of Susan’s attending physician during his deposition causes us to
believe the records meant to use the word “somnolence,” which describes an
inclination to sleep.
5. On April 6, 2014, Susan’s medical records indicated significant confusion:
Pt remembers her maiden name only. Says she was married for
14 years and divorced. Says she is not married and that she is
getting remarried to her prior husband tomorrow. She does not
know where she is. She thinks today is february [sic] . . . . Pt.
markedly confused today and goes off on tangenual [sic] stories
that have no point.
-6-
#29511
[¶16.] Susan passed away on April 12, 2016. Ken provided an inventory of
the household goods to Gus who was appointed to serve as the personal
representative of Susan’s estate (the Estate). Ken also gave Susan’s nephew the car
that Susan had devised to him and transferred to the Estate all accounts and funds
owned by Susan or held by the Susan J. Markve Trust. Ken did retain Susan’s
wedding ring but offered to give the ring to Susan’s niece after he passed, though
Ken states she declined this offer.
[¶17.] Gus commenced this action on behalf of the Estate in May 2018,
alleging Susan lacked capacity to execute the quitclaim deed to her Hot Springs
house and the power of attorney naming Ken as her agent. Gus sought the
imposition of an implied trust and further alleged claims of undue influence,
conversion, breach of fiduciary duty, statutory fraud, and common law fraud.
[¶18.] Ken filed a motion seeking summary judgment on all of the Estate’s
claims in April 2020. The Estate opposed the motion and argued initially that
additional time was necessary to allow for the completion of a forensic accountant’s
report regarding Ken’s administration of Susan’s bank and investment accounts.
The circuit court allowed the Estate additional time, and the report was completed
in August by certified public accountant Nina Braun.
[¶19.] In her report, Braun stated that she was engaged to determine if
Susan’s separate funds, “per the prenuptial agreement . . . less reasonable cost[s]
[for] shared living expenses and the reasonable cost for medical care and assistance
have been accounted for.” Among the information Braun reviewed was account
information relating to several bank and investment accounts along with a “[l]isting
-7-
#29511
of cost of care and home health costs as prepared by Kenneth Markve.” Braun
noted she was unable to “tie all of the payments [for health care expenses] . . . to
bank statements.” She allowed for the possibility that many of the expenses had
been paid in cash.
[¶20.] In addition, Braun was not able to find evidence that the liquidating
disbursement for the Markves’ joint account at Black Hills Federal Credit Union
“was shared.” Braun noted a number of transfers from Susan’s accounts to the
Black Hills Federal Credit Union account and another shared account, accompanied
by a number of cash withdrawals. Ultimately, Braun concluded that Susan’s
accounts “were depleted beyond her costs required for her support estimated in the
amount of approximately $415,679.”
[¶21.] While Braun’s report was pending, the Estate’s attorney withdrew,
citing a “material and irretrievable breakdown of the attorney-client relationship.”
The Estate then retained its current attorney who filed a motion to compel
supplemental answers to interrogatories. Among the topics covered by the
unanswered interrogatories were details of Hagg’s representation, including the
circumstances of his engagement, any discussions with Susan about her estate plan
and trust arrangement, and discussions about Ken’s management of Susan’s
financial affairs. For each of these inquiries, Ken invoked the attorney-client
privilege.
[¶22.] The circuit court conducted a status hearing on October 6, 2020. Ken’s
attorney expressed the view that the court should proceed to determine his
summary judgment motion filed on April 10. Substitute counsel for the Estate,
-8-
#29511
however, opposed a decision on the pending motion because, in his view, discovery
had not yet been completed. In addition to the pending motion to compel, counsel
for the Estate stated that he had not yet deposed Ken. The court allowed the Estate
to file an affidavit pursuant to SDCL 15-6-56(f) (Rule 56(f)) and instructed counsel
that the affidavit should “state exactly what it is that you need from the deposition
of Mr. Markve that prevents you from fully responding to the motion for summary
judgment.”
[¶23.] The Estate filed its Rule 56(f) affidavit on October 9, 2020. In it, the
Estate summarized the course of the discovery to date, including a description of
Braun’s report. 6 The Estate also included a recently executed affidavit from Rapid
City psychiatrist, Stephen Manlove, M.D. In his affidavit, Dr. Manlove stated that
he had reviewed Susan’s medical records and was “inclined to agree” with an April
6, 2014 assessment by Susan’s treating physician, indicating that Susan’s delirium
was likely chronic. Dr. Manlove stopped short of rendering a medical opinion
concerning Susan’s capacity without reviewing additional information, but he
provisionally opined that Susan’s medical records indicated she “had a disability
that significantly interfered with her ability to make responsible decisions
regarding healthcare, food, clothing, shelter, or finances in the time frame of March
of 2014.”
[¶24.] At an October 27, 2020 hearing, the circuit court granted, in part, the
Estate’s motion to compel by directing Ken to provide responses to the questions
6. Braun’s report is dated August 20, 2020, but it apparently was not shared
with Ken’s counsel until the Estate attached it to the Rule 56(f) affidavit on
October 9, 2020.
-9-
#29511
relating to Hagg’s representation around the time Susan executed the quitclaim
deed to her Hot Springs house and the general power of attorney appointing Ken to
be her agent. However, the court was inclined to proceed with determining the
pending summary judgment motion after allowing the parties an opportunity to
submit supplemental briefs addressing the conclusions in Braun’s report and any
relevant information that might be contained in Ken’s supplemental discovery
responses.
[¶25.] After receiving a supplemental response brief from Ken, the circuit
court granted Ken’s motion for summary judgment. In its memorandum opinion
and order, the court concluded there was “no factual basis which supports [the
Estate’s] undue influence claim[.]” The court determined that Hagg’s affidavit
indicating “Susan was competent” dispositively resolved the question of undue
influence. Though the court acknowledged that the deposition testimony of Susan’s
treating physician and a nurse practitioner who cared for her “provide conflicting
accounts of Susan’s competency on March 25, 2014[,]” the court reasoned that the
Estate had not “provide[d] any basis to dispute attorney Hagg’s personal
observations while meeting with Susan in regard to drafting the quitclaim deed and
power of attorney.”
[¶26.] The circuit court also determined that the Estate could not sustain its
breach of fiduciary duty claim as it related to the allegation that Ken had
improperly dissipated or converted Susan’s money and had sold a coin collection of
Susan’s below its market value. The court concluded that the fiduciary duty claim
was supported only by bare assertions that Ken comingled Susan’s money with his
-10-
#29511
own. The court acknowledged Braun’s forensic accounting report and concluded
that the indeterminate cash withdrawals referenced in the report were explained by
Ken’s written statement indicating the amounts paid for Susan’s care. For similar
reasons, the court rejected the Estate’s claim that Ken had converted Susan’s
money. The court did not address Braun’s broader opinion that over $400,000 of
Susan’s money was unaccounted for. 7
[¶27.] The circuit court also rejected the Estate’s fraud claims. It concluded
that the statutory fraud claim based upon SDCL 55-2-1 to -6 applied only to
trustees, and the undisputed facts indicated Ken was not a trustee. The Estate’s
common law fraud claim was also unsustainable, in the court’s view, because there
was no evidence that Ken had made a false representation to Susan or that she
relied upon any such statement. Given its conclusion that Ken had not obtained
any of Susan’s property wrongfully under any of the Estate’s theories, the court
declined to impose an implied or constructive trust.
[¶28.] The Estate has appealed, arguing that the circuit court overlooked
disputed issues of material fact concerning Susan’s capacity. Citing additional
disputed issues of fact, the Estate also claims the court erroneously granted
summary judgment on the Estate’s claims of undue influence, breach of fiduciary
duty, conversion, fraud, and its request seeking the imposition of an implied trust.
7. As for the coin collection, the circuit court decided that Ken’s decision to sell
it for $1,401 did not, itself, support a claim he breached his fiduciary duty
because there was no evidence that it was sold “below market value.”
-11-
#29511
Standard of Review
[¶29.] “We review a circuit court’s entry of summary judgment under the de
novo standard of review.” Harvieux v. Progressive N. Ins. Co., 2018 S.D. 52, ¶ 9,
915
N.W.2d 697, 700 (quoting Wyman v. Bruckner,
2018 S.D. 17, ¶ 9,
908 N.W.2d 170,
174). We also review de novo questions involving the interpretation of statutes,
rules, and contracts, all of which present legal issues. See Moss v. Guttormson,
1996
S.D. 76, ¶ 10,
551 N.W.2d 14, 17 (stating that “[q]uestions of law such as statutory
interpretation are reviewed by the Court de novo”); In re Black Hills Power, Inc.,
2016 S.D. 92, ¶ 8,
889 N.W.2d 621, 633 (stating that rules are interpreted de novo);
Coffey v. Coffey,
2016 S.D. 96, ¶ 7,
888 N.W.2d 805, 808 (stating that “[c]ontract
interpretation is a question of law reviewed de novo”). In the end, “[s]ummary
judgment is properly granted when ‘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.’” Estate of Lien v. Pete Lien & Sons, Inc.,
2007 S.D. 100, ¶ 9,
740 N.W.2d 115, 119 (quoting SDCL 15-6-56(c)).
Analysis and Decision
Susan’s Capacity
[¶30.] A person’s capacity is essential to her ability to contract or devise her
property. Agreements, wills, and transfers of property undertaken without capacity
are void. In re Estate of Perry, 1998 S.D. 85, ¶ 28,
582 N.W.2d 29, 35; First State
Bank of Sinai v. Hyland,
399 N.W.2d 894, 896 (S.D. 1987). The standards by which
capacity is assessed are different for contracting parties as compared to those
-12-
#29511
wishing to dispose of their property in anticipation of death. Here, we believe both
standards are implicated.
[¶31.] For the Estate’s claim that Susan lacked capacity to name Ken as her
agent, we agree with the parties’ view that SDCL 20-11A-1 expresses the correct
rule. “A person entirely without understanding has no power to make a contract of
any kind . . . .” SDCL 20-11A-1; see also SDCL 59-2-1 (“Any person with capacity to
contract may create an agency and confer authority on any other person to do any
act which he might do . . . .”). We have interpreted the phrase “entirely without
understanding” to mean that “the person contracting did not possess the mental
dexterity required to comprehend the nature and ultimate effect of the transaction
in which [she] was involved.” Hyland, 399 N.W.2d at 896–97 (citing Fischer v.
Gorman, 65 S.D. 453, 458–60,
274 N.W. 866, 870 (1937)). The critical “inquiry must
always focus on the person’s mental acuity and understanding of the transaction at
the time contracting occurred.”
Id. (citing Fischer,
65 S.D. at 459, 274 N.W. at 869–
70).
[¶32.] However, the Estate’s additional claim that Susan lacked capacity to
convey ownership of the Hot Springs house requires a different standard because
the circumstances establish that the transfer came amid Susan’s treatment for
incurable brain cancer. We have held, in this regard, that lifetime real estate gifts
“are testamentary in nature when the record indicates that they were executed
‘with a mind toward disposition of the real property following [the testator’s]
-13-
#29511
death.’” Stockwell v. Stockwell, 2010 S.D. 79, ¶ 26,
790 N.W.2d 52, 62 (alteration in
original) (quoting In re Estate of Pringle,
2008 S.D. 38, ¶ 24,
751 N.W.2d 277, 285). 8
[¶33.] Our cases describe testamentary capacity in the following terms:
Testamentary capacity and competence evincing the soundness
of mind required to make a will are demonstrated when, without
prompting, one is able to comprehend the nature and extent of
his property, the persons who are the natural objects of his
bounty, and the disposition that he desires to make of [his]
property. Testamentary capacity and competence [ ] does not
require that one have the intellectual vigor of youth or perfect
health. Moreover, it is not necessary that a person desiring to
make a will have the capacity to make contracts and do
business. One may lack competency, such that in the view of
medical science he is not of sound mind and memory, yet still
retain the requisite competency to execute a will. Testamentary
capacity is not determined by any single moment in time, but
must be considered as to the condition of the testator’s mind a
reasonable length of time before and after the will is executed.
Id. ¶ 27 (cleaned up); see also SDCL 29A-2-501 (“An individual eighteen or more
years of age who is of sound mind may make a will.”). 9
8. The parties do not make this distinction and appear to agree that the
capacity to contract standard is the only one that applies here.
9. The circuit court did not separately address Susan’s capacity, but rather
considered the related concept of Susan’s competency in the context of her
susceptibility to undue influence. We believe the issue of capacity requires
distinct consideration. As noted by Professor Thomas E. Simmons in the
context of testamentary capacity:
Testamentary capacity precedes an analysis of . . . undue
influence . . .; it considers whether the individual had the
capacity to understand the nature and extent of his property, to
know the natural objects of his bounty, and to form an intent
regarding the disposition of his property at death. . . . The
doctrine of undue influence considers whether one or more
provisions of a will should fail on account of a wrongdoer’s
interference with the testator’s estate plan.
(continued . . .)
-14-
#29511
[¶34.] Though the capacity to contract and testamentary capacity are
different, resolution of the summary judgment issue before us does not require a
critical comparison. Both standards require fact-intensive inquiries regarding
Susan’s cognition that are very much disputed by the parties and the evidence
contained in the record. This evidence, when viewed in the light most favorable to
the Estate, supports the reasonable inference that Susan lacked the capacity to
contract and to devise her property.
[¶35.] In this regard, there is evidence that as Susan suffered from the effects
of glioblastoma, she experienced episodic and significant cognitive lapses.
Information principally from her medical records indicates that those treating
Susan noticed she experienced difficulty orienting herself to time and place after
her surgery and during her convalescence. In one instance, she believed she was
still married to her ex-husband, and in another incorrectly thought her brother,
Gus, was dead.
[¶36.] Susan’s medical records while at the Fall River Health swing bed
facility indicate she suffered from delirium and experienced periods of somnolence
during which she was simply unresponsive. Though he could not make a conclusive
diagnosis, Dr. Manlove credited the assessment of Susan’s treating physician that
her delirium was likely chronic, adding that delirium “is defined as a serious
disturbance in metal [sic] abilities that result in confused thinking and reduced
awareness of the environment.” In Dr. Manlove’s view, “a patient suffering from
________________________
(. . . continued)
Thomas E. Simmons, Testamentary Incapacity, Undue Influence, and Insane
Delusions, 60 S.D. L. Rev. 175, 179–80 (2015).
-15-
#29511
delirium would not have the cognitive abilities necessary to make decisions
involving the transfer of significant items of property and appointment of a legal
agent.”
[¶37.] When viewed with the entirety of the record, Hagg’s conclusory opinion
concerning Susan’s capacity does not resolve the question—it illustrates the
disputed and uncertain nature of the issue. Hagg’s bare claim that Susan knew
what she wanted to do and was competent cannot serve as the conclusive view of
Susan’s capacity simply because he was with her when she executed the quitclaim
deed and appointed Ken as her agent. This is particularly true for the quitclaim
deed because, as indicated above, “[t]estamentary capacity is not determined by any
single moment in time, but must be considered as to the condition of the testator’s
mind a reasonable length of time before and after the [testamentary disposition].”
Stockwell, 2010 S.D. 79, ¶ 27,
790 N.W.2d at 62.
[¶38.] As it relates to the power of attorney, the effect of Hagg’s testimony
arguably presents a closer question because the capacity to contract inquiry focuses
on the time at which Susan appointed Ken to be her agent. But still, the inferences
of incapacity drawn from the medical evidence around and including the March 25
date on which Susan executed the power of attorney are reasonable. The conflict
between Hagg’s testimony and the expert medical evidence involve questions of
relative weight that are ill-suited for summary judgment.
[¶39.] For similar reasons, we cannot accept Ken’s additional argument that
Susan never expressed any regret after executing the power of attorney and deed
until her death approximately two years later. Ken also attempts to support his
-16-
#29511
claim that Susan’s capacity to act is undisputed by pointing to the affidavits of
friends who observed Ken and Susan. But this evidence simply adds to the
quantum of evidence upon which Ken relies; it does not eliminate the disputed
nature of the capacity question itself. Indeed, our well-settled rules for determining
summary judgment prohibit us from focusing parochially on Ken’s evidence and,
instead, require us to credit the evidence offered by the Estate, as the non-moving
party, and any reasonable inferences it supports. To do otherwise would require us
to weigh the conflicting evidence—a practice which is, of course, categorically
proscribed for courts considering motions for summary judgment.
[¶40.] The question of Susan’s capacity permeates this case. It is
unquestionably material and just as conspicuously disputed. The circuit court
should have denied Ken’s motion for summary judgment on this claim.
Undue Influence
[¶41.] “Undue influence is [the] unfair persuasion of a party who is under the
domination of the person exercising the persuasion[.]” Schaefer v. Sioux Spine &
Sport, Prof. LLC, 2018 S.D. 5, ¶ 11,
906 N.W.2d 427, 432 (quoting Restatement
(Second) of Contracts § 177, cmt. A (1981)). “A party to a contract may rescind the
same . . . [i]f consent of the party rescinding . . . was . . . obtained through . . . undue
influence[.]” SDCL 53-11-2(1). A person may unduly influence another by “taking
an unfair advantage of [the person’s] weakness of mind[.]” SDCL 53-4-7(2). As we
have explained:
Influence, to be undue, must be of such character as to destroy
the free agency of the [consenting party] and substitute the will
of another person for [her] own. Its essential elements are (1) a
person susceptible to such influence, (2) opportunity to exert
-17-
#29511
such influence and effect the wrongful purpose, (3) a disposition
to do so for an improper purpose, and (4) a result clearly
showing the effect of such influence.
In re Estate of Metz, 78 S.D. 212, 214–15,
100 N.W.2d 393, 394 (1960).
[¶42.] “A presumption of undue influence arises ‘when there is a confidential
relationship between the testator and a beneficiary who actively participates in
preparation and execution of the will and unduly profits therefrom.’” Pringle,
2008
S.D. 38, ¶ 39,
751 N.W.2d at 289 (quoting In re Estate of Dokken,
2000 S.D. 9, ¶ 28,
604 N.W.2d 487, 495); Estate of Gaaskjolen,
2020 S.D. 17, ¶ 21,
941 N.W.2d 808,
814. Although “[t]he existence of a confidential relationship is [generally] a
question of fact rather than law[,]”Delany v. Delany,
402 N.W.2d 701, 705 (S.D.
1987), under our decisional law, a confidential relationship exists as a matter of law
between Ken and Susan because they were husband and wife. See Jeffries v.
Jeffries,
434 N.W.2d 585, 587–88 (S.D. 1989); SDCL 25-2-10.
[¶43.] Consequently, the burden of going forward with the evidence at trial
would shift to Ken to prove “he took no unfair advantage of the decedent.” Dokken,
2000 S.D. 9, ¶ 28,
604 N.W.2d at 495. 10 However, the ultimate burden of proving
undue influence remains with the Estate. See Pringle,
2008 S.D. 38, ¶ 39,
751
N.W.2d at 289. Therefore, we must determine whether there are disputed material
facts in the record precluding summary judgment on this question.
[¶44.] We have observed that “[b]y their very nature, claims of undue
influence are fact intensive inquiries.” In re Estate of Tank,
2020 S.D. 2, ¶ 48, 938
10. We have applied these rules in cases involving traditional will contests as
well as specific challenges to lifetime transfers. See Stockwell, 2010 S.D. 79,
¶ 31,
790 N.W.2d at 63.
-18-
#29511
N.W.2d 449, 462. The extent to which Ken actively participated in preparing the
quitclaim deed and the general power of attorney is unclear, but the circumstances,
when viewed in the light most favorable to the Estate, could support a finding that
he had the opportunity to exert influence over Susan.
[¶45.] As to whether Ken was disposed to influence Susan for a wrongful
purpose and whether the transfer of her property was the result of his influence, we
note that a separate provision of the prenuptial agreement supports a reasonable
inference that Susan may well have intended to keep her house as her separate
property, even though it served as the couple’s home. At the time Ken and Susan
executed the prenuptial agreement, Susan owned a home in Rapid City, and the
agreement provided that it “would remain her separate property” and that “the
parties plan to maintain such property as their principal residence.” The fact that
the parties changed their plan at some point and decided to live in Hot Springs may
not have changed Susan’s desire to maintain the home she purchased through her
living trust as her separate property, as she had originally contemplated for the
Rapid City home. 11
[¶46.] Further, Ken’s arguments regarding Susan’s ultimate intent when she
executed the quitclaim deed to the Hot Springs home on March 25, 2014, are not
helpful to our summary judgment analysis. The plain fact that Susan intended for
Ken to remain in the Hot Springs house after her death, even if it were undisputed,
11. Susan’s schedule of assets indicates the Rapid City home was a condominium
unit valued at $200,000. The record does not reveal whether she retained her
home in Rapid City or sold it.
-19-
#29511
does not foreclose the reasonable possibility that she expected him to expend his
separate resources to pay for his interest in the home.
[¶47.] The facts contained in the record also support the inference that Ken
played a large, if not determinative, role in selecting Hagg to draft the deed and
power of attorney. The record indicates Ken did not want to use the services of
Susan’s previous estate planning attorney, at least in part, because Ken believed
that Susan’s previous attorney held an adverse opinion of him. Complicating
matters is the apparent secrecy surrounding Ken’s relationship with Hagg and
Hagg’s advice. Ken refused to answer the Estate’s interrogatories seeking this
information, asserting an attorney-client privilege. 12 Although the circuit court
ordered Ken to furnish the information, the Estate filed its final brief regarding
Ken’s summary judgment motion before the compelled responses were due.
[¶48.] Beyond this, other disputed material facts concerning the other
elements of undue influence would also preclude summary judgment regardless of
whether Ken rebuts the presumption of undue influence. In this regard, the
uncertainty surrounding Susan’s mental state also impacts the determination of her
susceptibility to influence. We have observed that “[s]usceptibility to influence does
not mean mental or testamentary incapacity[,]” because “the application of undue
influence presupposes mental competency.” Metz, 78 S.D. 212, 100 N.W.2d at 398.
Therefore, as indicated above, the dispute as to Susan’s capacity is material for the
undue influence claim as well.
12. Hagg filed a notice of appearance stating he represented Ken in Susan’s
informal probate action.
-20-
#29511
[¶49.] Also, viewing the evidence in the light most favorable to the Estate, a
court could not state with certainty that Ken lacked the opportunity to exert
influence over Susan. He was her spouse and in close contact with her even when
she was hospitalized and in a transitional facility, and there is evidence to indicate
that he isolated Susan from Gus who had previously been skeptical of Ken. 13
[¶50.] Finally, we do not believe the circuit court could have determined as a
matter of law that Susan’s decision to effectively give her home to Ken reflected a
proper disposition that was not the result of undue influence. As indicated above,
there is evidence that Susan and Ken intended to keep their accumulated
premarital wealth separate, to some extent. Though their prenuptial agreement
allowed either spouse to transfer or gift property to the other, they were not
required to or expected to do so.
[¶51.] In the end, Ken’s effort to parse the factual record and emphasize
favorable facts to the exclusion of adverse ones is strained and inconsistent with our
standard for determining motions for summary judgment. Perhaps most telling is
Ken’s reliance upon our decision in Smid v. Smid, 2008 S.D. 82,
756 N.W.2d 1,
which he argues is factually aligned with this case. Whatever factual similarities
Ken believes exist, Smid is inapposite for the simple reason that our decision to
uphold a circuit court’s finding of no undue influence followed a two-day trial and
involved our review of the court’s factual findings under our deferential clearly
13. Ken asserts that any absence from Gus is attributable to Gus’s disruptive
behavior while Susan was hospitalized, but determining which party bears
the greater responsibility is not possible when determining a summary
judgment motion because it requires the court to impermissibly weigh
evidence.
-21-
#29511
erroneous standard. See id. ¶ 11, 756 N.W.2d at 5–6 (stating the clearly erroneous
standard of review); see also id. ¶ 16, 756 N.W.2d at 7 (“[T]he circuit court
conducted a two-day bench trial . . . .”); accord Gaaskjolen,
2020 S.D. 17, ¶ 17,
941
N.W.2d at 813 (affirming the circuit court’s determination of undue influence
following a five-day trial).
Fraud
(1) Statutory fraud
[¶52.] The Estate’s claim that Ken committed statutory fraud prohibited by
SDCL 55-2-1 to -7 is unsustainable. Though these statutory provisions describe
certain prohibited acts as “a fraud,” they apply only to a trustee who deals with a
trust beneficiary. See SDCL 55-2-7 (stating “[e]very violation of the provisions of §§
55-2-1 to 55-2-6, inclusive, is a fraud against the beneficiary of the trust”). The only
trust at issue in this case is Susan’s living trust, but there is no indication Ken
served as a trustee.
[¶53.] Chapter 55-2 does not provide for a definition of trustee, but SDCL 55-
1-12 provides that “[t]he person whose confidence creates a trust is called the
trustor; the person in whom the confidence is reposed is called the trustee; and the
person for whose benefit the trust is created is called the beneficiary.” Black’s Law
Dictionary states that “[u]nder trust law, the trustee generally holds legal title to
the trust’s property.” Black’s Law Dictionary (11th ed. 2019). 14
14. Ken cites as controlling the definition of “trustee” in SDCL 55-1A-2, which he
states defines a trustee as a person “acting as an original, substitute, added,
or successor trustee of a testamentary or inter vivos trust, whichever in a
particular case is appropriate.” By its terms, the definition is limited in its
(continued . . .)
-22-
#29511
[¶54.] The Estate appears to argue that Ken is a trustee by virtue of an
implied or constructive trust, not yet imposed upon him. See SDCL 55-1-8 (“[o]ne
who gains a thing by fraud, accident, mistake, undue influence, the violation of a
trust or other wrongful act, is . . . an implied trustee of the thing gained for the
benefit of the person who would otherwise have had it.”). In other words, the Estate
seeks to apply a prohibition against statutory fraud to a purported trustee of an
implied trust whose status would be conferred because he committed fraud or undue
influence. The Estate’s cursory argument has not illuminated a path out of this
circular analysis and is otherwise unsupported by any authority. Under the
circumstances, we believe the circuit court correctly granted Ken’s motion as to this
claim.
(2) Common law fraud
[¶55.] The Estate’s common law fraud claim is also unmeritorious. We have
held that “[f]raud requires proof of three elements.” Aqreva, LLC v. Eide Bailly,
LLP, 2020 S.D. 59, ¶ 56,
950 N.W.2d 774, 791. “First, the representation at issue
must be ‘made as a statement of fact, which was untrue and known to be untrue by
the party making it, or else recklessly made[.]’”
Id. “Second, the representation
must have been ‘made with intent to deceive and for the purpose of inducing the
other party to act upon it[.]’”
Id. Third, “the person to whom the representation
[was] made must demonstrate ‘that he did in fact rely on it and was induced
thereby to act to his injury or damage.’”
Id.
________________________
(. . . continued)
use to chapter 55-1A, but it would be unavailing in any event because Ken
was never the “trustee of a testamentary or inter vivos trust.”
-23-
#29511
[¶56.] “To avoid summary judgment, ‘the essential elements’ of fraud must be
‘adequately supported by alleged facts.’” Id. (quoting Ehresmann v. Muth,
2008 S.D.
103, ¶ 22,
757 N.W.2d 402, 406). Additionally, “averments of fraud must be stated
with particularity.” Chem-Age Indus. v. Glover,
2002 S.D. 122, ¶ 16,
652 N.W.2d
756, 765 (citing SDCL 15-6-9(b)).
[¶57.] Here, there is no evidence to satisfy the elements of common law fraud.
The Estate does not identify a false statement made by Ken to Susan, much less
facts demonstrating an intent to deceive and reliance.
[¶58.] The Estate argues that its other allegations of wrongdoing also
establish that “a reasonable fact finder could conclude that the power of attorney,
quitclaim deed, or other subsequent transactions was the result of fraud committed
by [Ken] as a ‘trustee’ or under the common law.” However, this broad assertion
overlooks the legal requirements for establishing fraud, and we conclude that the
circuit court did not err by granting summary judgment on this claim.
Conversion
[¶59.] “Conversion is the unauthorized exercise of control or dominion over
personal property in a way that repudiates an owner’s right in the property or in a
manner inconsistent with such right.” First Am. Bank & Trust, N.A. v. Farmers
State Bank of Canton,
2008 S.D. 83, ¶ 38,
756 N.W.2d 19, 31 (quoting Chem-Age
Indus.,
2002 S.D. 122, ¶ 20,
652 N.W.2d at 766). A plaintiff claiming conversion
must prove:
(1) [plaintiff] owned or had a possessory interest in the property;
(2) [plaintiff’s] interest in the property was greater than
[defendant’s]; (3) [defendant] exercised dominion or control over
or seriously interfered with [plaintiff’s] interest in the property;
-24-
#29511
and (4) such conduct deprived [plaintiff] of [his or her] interest
in the property.
Id.
[¶60.] “Intent or purpose to do a wrong is not a necessary element of proof to
establish conversion.” Rensch v. Riddle’s Diamonds of Rapid City, Inc.,
393 N.W.2d
269, 271 (S.D. 1986). Thus, the foundation for a conversion action “rests upon the
unwarranted interference by defendant with the dominion over the property of the
plaintiff from which injury to the latter results.” Chem-Age Indus.,
2002 S.D. 122,
¶ 20,
652 N.W.2d at 766 (quoting Rensch,
393 N.W.2d 269 at 271).
[¶61.] In addition to the claim that Ken used his position as Susan’s agent to
wrongfully assert control over money from her separate accounts, the Estate also
alleges Ken interfered with Susan’s ownership in her wedding ring, her household
goods, and her coin collection. We address these in turn.
[¶62.] Whether and to what extent Ken may have converted Susan’s money
or investments involve disputed issues of material facts. Forensic accountant Nina
Braun opined that the amount of money Ken claimed to have spent for Susan’s care
exceeded the estimated costs by $415,679. Braun also concluded that Ken’s
management of Susan’s assets featured a number of transfers from Susan’s
individual accounts to the couple’s joint accounts from which Braun noted
unexplained cash withdrawals.
[¶63.] Still too, there is Braun’s determination that Ken closed a joint account
by transferring approximately $50,000 over the course of a week in April 2016 to his
own individual account, after Susan had passed away. In Braun’s view, “it
appear[ed] the balance in the account came from Susan Marvke’s [sic] personal
-25-
#29511
accounts, as such the remaining balance in the account should be transferred to
Susan’s estate.”
[¶64.] Whether these discrepancies in the administration of Susan’s assets
amount to conversion or, as Ken asserts, can be resolved through his explanations,
illustrates the unsuitability of this conversion claim for summary judgment. The
circuit court accepted that Ken’s accounting of his expenditures disposed of the
issues identified in Braun’s report. However, relating the information Ken
produced to Braun’s concerns is no simple task because they are not so easily
reconciled. Perhaps if it were otherwise, and Braun had issued an opinion that
turned on a single piece of missing information that Ken furnished at some point, a
court may have been able to correlate the two and conclude there was no issue of
disputed fact as to that topic. But that is not the case here.
[¶65.] The information concerning Susan’s cash and equity assets involves
several accounts, and the expenditures for her care involve many payments,
apparently made in cash, to different people and entities. Ken may prevail at trial,
or not, but in either event, the claims that he converted Susan’s separate money
should be subjected to the adversarial process to allow a fact finder to assess the
strength of the evidence and the credibility of the witnesses.
[¶66.] We also believe questions of fact preclude summary judgment as to
Susan’s ring. For her wedding ring, Susan used a diamond ring she already owned
to which a wedding band, furnished by Ken, was attached. Viewing the facts in the
light most favorable to the Estate, we will indulge the inference that the diamond
ring was at least initially Susan’s separate property. This view is consistent with
-26-
#29511
the schedule of Susan’s separate property attached to the parties’ prenuptial
agreement, listing as a general category “jewelry,” which she valued at $100,000. It
is reasonable to infer that the ring remained Susan’s during the course of the
marriage, and there is no indication she gifted it to Ken or allowed for it to be his
upon her death. Simply put, Ken’s ownership of the wedding ring is not
undisputed, and he cannot demonstrate his claim to it as a matter of law.
[¶67.] We have a different view about the remaining conversion claims. The
Estate has not demonstrated a genuine issue of material fact to support a claim
that Ken converted the household property that belonged to Susan. Ken provided
an inventory of Susan’s items to the Estate and also turned over her property to the
Estate. In addition, Ken allowed Susan’s nephew to retrieve a car devised to him in
Susan’s will. Ken indicates, without a contrary claim, that Susan’s nephew declined
Ken’s offer to take additional personal property belonging to Susan. In our view,
the Estate’s unspecified conversion claim as to this class of property fails to raise an
issue of disputed material fact.
[¶68.] The same is true for the Estate’s claim that Ken converted Susan’s coin
collection. It appears the coin collection was sold during the two years before
Susan’s death. The proceeds were subsequently placed in Susan and Ken’s joint
Wells Fargo account, and this account was provided to the Estate following Susan’s
death.
[¶69.] The Estate’s claim is based upon the fact that Ken obtained about
$1,500 for the collection, which Susan had, at some earlier point, valued at $7,500.
Other than noting this difference, however, the Estate has not provided specific
-27-
#29511
information that would support the existence of disputed material facts. Perhaps
sensing this void, the Estate has attempted on appeal to demonstrate that the value
of the coins did, in fact, exceed $1,500 using an online source to support a higher
value. However, this source was never used to support the claim before the circuit
court, and the Estate cannot unilaterally augment the evidentiary record on appeal
in this way. 15
Fiduciary Duty
[¶70.] A fiduciary relationship arises “whenever a power of attorney is
created.” In re Estate of Duebendorfer, 2006 S.D. 79, ¶ 26,
721 N.W.2d 438, 445. “A
fiduciary is defined as ‘[a] person who is required to act for the benefit of another
person on all matters within the scope of their relationship.” Dykstra v. Page
Holding Co.,
2009 S.D. 38, ¶ 27,
766 N.W.2d 491, 497 (emphasis omitted) (quoting
Black’s Law Dictionary (8th ed. 2004)). “Whether a breach of fiduciary duty
occurred . . . is a question of fact.” Chem-Age Indus.,
2002 S.D. 122, ¶ 37,
652
N.W.2d at 772.
[¶71.] Fiduciaries “may not engage in self-dealing.” Smith Angus Ranch, Inc.
v. Hurst,
2021 S.D. 40, ¶ 16,
962 N.W.2d 626, 630; see also In re Estate of Stevenson,
2000 S.D. 24, ¶ 11,
605 N.W.2d 818, 821. As a general rule, “[f]iduciar[ies] must act
with utmost good faith and avoid any act of self-dealing that places [their] personal
interest in conflict with [their] obligations to the beneficiaries.”
Id. (quoting
15. The Estate also makes an additional argument regarding the coins on appeal,
theorizing that a July 2014 check to a coin dealer for a similar amount
somehow relates to the coin collection sale in January 2016. Even if the
argument had been made to the circuit court, we fail to understand its
significance, which the Estate itself does not clearly identify.
-28-
#29511
Stevenson, 2000 S.D. 24, ¶ 9,
605 N.W.2d at 821). We have prohibited self-dealing,
even when broad language of a power of attorney document might support a claim
of authority to do so. Wyman,
2018 S.D. 17, ¶ 22,
908 N.W.2d at 177. Instead we
have construed powers of attorney strictly and held that “if the power to self-deal is
not specifically articulated in the power of attorney, that power does not exist.”
Bienash v. Moller,
2006 S.D. 78, ¶¶ 13–14,
721 N.W.2d 431, 435.
[¶72.] Ken owed a fiduciary duty to Susan by virtue of the fact that he served
as Susan’s agent under a general power of attorney. It is equally clear that the
power of attorney document did not authorize self-dealing. Although the power of
attorney dictates that Ken “may perform for [Susan] and in [Susan’s] name and on
[Susan’s] behalf act in the management, supervision, and care of [Susan’s] estate
and affairs that [Susan] personally [has] authority to perform[,]” this is not “clear
and unmistakable language authorizing” Ken’s ability to self-deal. See Bienash,
2006 S.D. 78, ¶ 14,
721 N.W.2d at 435 (holding that the power of attorney’s
authorization to allow the attorney-in-fact to do all the things the principal would
“personally have the right to do” did not authorize self-dealing).
[¶73.] As a result, there are disputed questions of material fact regarding
whether or not Ken engaged in self-dealing when he handled Susan’s finances. In
her forensic accounting report, Braun noted that “substantial” cash transactions
between Ken and Susan’s accounts were “unusual in nature and not supported with
documentation for the use of the cash.” Additionally, Braun opined that “Susan
Marvke’s [sic] accounts were depleted beyond her costs required for support
estimated in the amount of approximately $415,679.” These questions of fact
-29-
#29511
should have precluded summary judgment on the Estate’s breach of fiduciary duty
claim.
Implied Trust
[¶74.] “An implied trust arises from the facts and circumstances of a
transaction.” DFA Dairy Fin. Servs., L.P. v. Lawson Special Trust, 2010 S.D. 34,
¶ 32,
781 N.W.2d 664, 672 (quoting Noll v. Brende,
318 N.W.2d 319, 320 (S.D.
1982)). An implied trust is generally remedial in nature and is an equitable tool
used to restore the status quo and to protect assets wrongfully obtained. Perry,
1998 S.D. 85, ¶ 28,
582 N.W.2d at 35 (citing Knock v. Knock,
80 S.D. 159,
120
N.W.2d 572, 576 (S.D. 1963)); see also SDCL 55-1-8. To impose a constructive trust,
the wrongful act must be proven by clear and convincing evidence, and must show:
(1) the constructive trustee gained; (2) that gain was by fraud,
accident, mistake, undue influence, violation of a trust, or other
wrongful act; (3) the constructive trustee has no superior right
to the thing gained; and (4) the party seeking the constructive
trust would have otherwise had the thing gained.
In re Estate of Perkins, 508 N.W.2d 597, 600 (S.D. 1993) (citing Rosebud Sioux Tribe
v. Strain,
432 N.W.2d 259, 264 (S.D. 1988)).
[¶75.] Here, the Estate has alleged that a constructive trust is necessary due
to the invalidity of the power of attorney and quitclaim deed. However, whether
this equitable remedy is appropriate here cannot be determined until a fact finder
resolves the claims we have identified above. See
id. (emphasizing that the
constructive trustee must have gained by a wrongful act, including fraud and undue
influence, before a constructive trust can be imposed).
-30-
#29511
Rule 56(f)
[¶76.] Given our disposition on the principal issues largely in favor of the
Estate, a remand for further proceedings is necessary. Therefore, we need not
address the Estate’s allegation that the circuit court abused its discretion when it
considered and ruled on the pending summary judgment motion notwithstanding
the Estate’s Rule 56(f) motion and the court’s order compelling supplemental
discovery from Ken.
Conclusion
[¶77.] Ken may well believe he has a strong case in his effort to resist the
Estate’s claims of incapacity, undue influence, conversion, and breach of fiduciary
duty, and we express no opinion in this regard. Suffice it to say that Ken’s evidence
is not of such a character that it eliminates issues of material fact relating to the
Estate’s claims, particularly when we review the facts in the light most favorable to
the Estate. Neither we, nor the circuit court, can weigh the strength of the parties’
evidence, the reasonableness of Ken’s actions, or the credibility of any witness as
matters of law. These questions must be submitted to a fact finder. We affirm in
part, reverse in part, and remand for further proceedings.
[¶78.] JENSEN, Chief Justice, and KERN, DEVANEY, and MYREN,
Justices, concur.
-31-
