Johnson v. Markve

980 N.W.2d 662, 2022 S.D. 57

• Court: South Dakota Supreme Court
• Decided: September 21, 2022
• Docket: 29511
• Status: Published

Opinion

#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.

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[¶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.

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*****

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.

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[¶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

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“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.

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[¶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

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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,

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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.

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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

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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.”

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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

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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]

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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).

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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

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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

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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.

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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.

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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.

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[¶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.

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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.”

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[¶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;

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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

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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

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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

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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.

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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

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should have precluded summary judgment on the Estate’s breach of fiduciary duty

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).

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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.

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