Margaret Ellis v. Roger Thompson and Frances Thompson

2019 Ark. App. 579

• Court: Court of Appeals of Arkansas
• Decided: December 4, 2019
• Status: Published

Opinion

Cite as 2019 Ark. App. 579 Digitally signed by Elizabeth Perry ARKANSAS COURT OF APPEALS Date: 2022.08.09 11:01:26 DIVISION IV -05'00' No. CV-17-893 Adobe Acrobat version: 2022.001.20169 MARGARET ELLIS Opinion Delivered: December 4, 2019 APPELLANT

V. APPEAL FROM THE CROSS COUNTY CIRCUIT COURT ROGER THOMPSON AND [NO. 19CV-08-75] FRANCES THOMPSON APPELLEES HONORABLE CHALK MITCHELL, JUDGE

AFFIRMED

WAYMOND M. BROWN, Judge

This is a dispute between siblings over their late father’s estate. Appellant Margaret

Ellis sued her brother and sister-in-law, appellees Roger Thompson and Frances Thompson,

for an accounting, to set aside certain gifts allegedly made to Roger, and for various torts

arising out of Roger’s alleged mishandling of the property of Edward Thompson, the now

deceased father of Margaret and Roger, as a signatory on Edward’s bank accounts, and under

a power of attorney granted to Roger. After a bench trial, the circuit court ruled that the

statute of limitations barred some of Ellis’s claims, that she lacked standing to bring other

claims, that the alleged gifts would not be set aside, and that Roger’s accounting was

adequate. We affirm the circuit court. I. Facts and Procedural History

Edward Thompson was the father of four children: appellant Margaret Ellis, appellee

Roger Thompson, Phillip Thompson, and Barbara Mugge. Roger and Frances Thompson

are husband and wife. In August 1997, Edward executed a power of attorney appointing

Roger as his attorney-in-fact to act on Edward’s behalf and for all purposes. That power of

attorney was recorded on January 31, 2002.

On November 12, 1997, Roger and Frances were added as “agents” authorized to

sign on Edward’s accounts at First National Bank and were listed as “authorized signers”

only.

On December 21, 2000, Roger and Phillip Thompson and their wives purchased

two tracts totaling approximately 685 acres from Edward. They executed a promissory note

for the purchase price in the amount of $256,556. The terms of the note were seven annual

payments of $39,017.28 at 6 percent interest, and if not paid timely, then the entire note

would bear interest at 10 percent. The note also contains an undated, typed statement signed

by Edward that the note was to be canceled and forgiven in the event of his death. A copy

of the note containing handwritten statements purportedly signed by Edward that payments

were waived by gift on various dates was introduced into evidence. 1

In 2002, Edward received over $400,000 from the estate of his mother, Rosa

Thompson, who died in 1997.

1 Previously, Edward had made other conveyances to Roger and Phillip: a February 1993 quitclaim deed from Edward and his then wife to Roger and Phillip and a November 1998 deed by gift to Roger and Phillip.

2 Edward died on July 18, 2006. Upon Edward’s death, Roger opened the estate and

was appointed personal representative. Ellis responded with a petition to set aside the will

and to contest the will. On January 24, 2007, an agreed order was entered setting aside the

will. On February 21, 2007, Roger filed an inventory in the probate case, and Ellis filed an

objection to the inventory, claiming that it understated the decedent’s property.

Ellis filed the present case on May 21, 2008, separate from the probate case, asserting

causes of action for breach of fiduciary duty and conversion and seeking an accounting and

damages. Ellis alleged that Roger had failed to properly inventory Edward’s property upon

Edward’s death; that Roger had transferred property from Edward to himself using the

power of attorney; that Roger had failed to account for the inheritance Edward received

from his mother’s estate; that Roger and Phillip failed to pay the purchase price for the real

property they purchased from Edward, claiming that Edward waived the payments as gifts;

that Edward was incompetent to make gifts; and that Roger and Frances had converted

Edward’s property for their own use.

On June 12, 2008, Roger and Frances answered Ellis’s complaint, denying that she

had any causes of action. They also asserted various affirmative defenses, including lack of

standing and the statute of limitations.

On September 24, 2014, the circuit court entered an order directing Roger and

Frances to submit an accounting by October 22, 2014, and to make a good-faith effort to

obtain all the records necessary to complete the accounting. 2

2 There is no explanation for the gap from 2008 until 2014.

3 On October 23, 2014, Roger filed an affidavit averring that he had, with his

attorney’s assistance, reviewed Edward’s available bank records dating back to 2002 and had

compiled a partial list of checks written on the account. He asserted that most of the checks

were written with Edward’s knowledge and permission or based on his (Edward’s) previous

customs. Roger stated that the checks written for cash were to pay Edward’s caretaker or to

reimburse her for Edward’s household expenses. He also said that he did not sign any checks

pursuant to the power of attorney because he had been added to the account to help pay

his father’s bills that he was instructed to pay. The affidavit stated that neither Edward nor

Roger used the checks in sequential order and that Roger did not have copies of some

checks. Finally, Roger said that checks were consistently written for certain routine

expenses, including Edward’s medications, car tags, insurance, and monthly utility

payments.

On December 17, 2014, Ellis filed a pleading raising multiple issues. First, she

objected to the affidavit filed by Roger as being an accounting. She asserted that the affidavit

lacked sufficient documentation to be considered an accounting. Ellis further alleged that

on December 12, 2014, Roger did file an accounting in the probate case that showed he

was self-dealing by paying his farming operations from estate funds without probate court

authorization.

A hearing on Ellis’s objections was held in March 2016, and the court ruled that

Roger’s affidavit was not sufficient as an accounting. On the day of the hearing, Roger and

Frances amended their prior accounting with a spreadsheet prepared by counsel.

4 On March 30, 2016, Ellis filed a renewed objection to Roger’s accounting. She

repeated her original objections to Roger’s October 2014 affidavit. As for the updated

accounting, Ellis asserted that numerous checks were missing, that income was omitted, that

receipts and disbursements were unaccounted for, that Roger and Frances may have

destroyed financial records, and that checks listed in the previous spreadsheet were not

included in the revised spreadsheet. Ellis further objected to numerous disbursements as not

being proper expenses, such as checks for cash, checks for Roger and his children, and

checks to Roger’s farming operations. She also asserted that Roger failed to account for any

CDs or the promissory note and that documentation was lacking for the disbursements.

At trial, the court, with the agreement of the parties, bifurcated the issues, with Roger

and Frances presenting their case first as they had the burden of proof to show they handled

Edward’s accounts properly. At the conclusion of Roger and Frances’s case, the circuit court

ruled from the bench and found that, based on the circumstances, the accounting was

adequate and showed how the money had been spent three years before Edward’s death.

The court found no evidence showing a pattern of self-dealing.

Ellis then presented her case for breach of fiduciary duty and conversion. Ellis did

not believe Edward was competent and thought he was influenced by Roger and Frances.

She presented evidence that Edward had Alzheimer’s and dementia and that there was

evidence possibly indicating Parkinson’s and depression. She also produced evidence that

Edward owned several CDs but that his interest income had declined from $15,239 in 1995

to $995 in 2002 without any explanation from Roger and Frances.

5 The circuit court took the matter under advisement and entered its order on April

4, 2017. The court found that Ellis’s claim that Roger had breached his fiduciary duty under

the power of attorney was barred by the three-year statute of limitations because there was

no evidence presented that Roger used the power of attorney prior to the expiration of the

statute of limitations. The court found that a fiduciary duty was owed to Edward, the grantor

of the power of attorney, not Ellis. The court also concluded—despite its earlier finding that

there was no evidence of self-dealing—that Ellis lacked standing to bring a conversion claim

against Roger and Frances for conversion of assets belonging to Edward. According to the

court, any such cause of action occurred while Edward was still alive and would have

expired three years after the wrongful act constituting the conversion.

Regarding undue influence, the court ruled that although Ellis contended that the

checks written on Edward’s account for cash, to Roger and Phillip’s farming operation, and

to other family members were not “gifts,” Roger and Frances had presented clear and

convincing evidence at trial to overcome the presumption that any “gifts” arising from their

relationship with Edward were void. The court noted the contradictory evidence as to

Edward’s competency. The court found that although Edward took medication for mental

conditions, his mental condition was not severe, and his medications were not mind altering.

Based on the record before it, the circuit court declined to set aside any gifts made by

Edward.

Finally, the court found that the bank records used to complete Roger’s accounting

accurately showed Edward’s financial condition at the time of his death. The court further

6 found that there was no proof that Roger or Frances destroyed or hid these bank records.

The court dismissed Ellis’s complaint with prejudice. This appeal followed.

II. Standard of Review

In civil bench trials, the standard of review on appeal is whether the circuit court’s

findings were clearly erroneous or clearly against a preponderance of the evidence. 3 A

finding is clearly erroneous when, although there is evidence to support it, the reviewing

court, on the entire evidence, is left with a firm conviction that a mistake has been made. 4

Due regard shall be given to the opportunity of the circuit court to judge the credibility of

the witnesses. 5

III. Discussion

For her first point, Ellis argues that the circuit court erred in applying the statute of

limitations to her claim that Roger breached his fiduciary duties. She presses three separate

points under this heading. First, she argues that Roger cannot interpose that statute of

limitations. Second, she argues that because Roger had a long fiduciary relationship with his

father, all transactions during that relationship should be considered. Third, she argues that

Roger and Frances were fiduciaries because they were named as “agents” on the signature

card for Edward’s bank accounts. We are not persuaded.

3 Tadlock v. Moncus, 2013 Ark. App. 363, 428 S.W.3d 526. 4 Id. 5 Ark. R. Civ. P. 52(a)(1).

7 The statute of limitations for breach of fiduciary duty is three years. 6 The circuit

court ruled that the statute cut off any transactions occurring more than three years prior to

Ellis’s filing of her complaint. Ellis argues that this was error because, according to Ellis,

Roger cannot assert a statute-of-limitations defense for various reasons, including estoppel.

We are not persuaded. The authority she cites is distinguishable because this is not a trust,

Roger was not a trustee, and there was no evidence that Roger refused to return money or

property obtained by use of the power of attorney. Most importantly, Ellis never made these

arguments to the circuit court. Arguments raised for the first time on appeal will not be

considered. 7 If the record does not reflect that the argument, or any similar argument, was

made to the circuit court, we will not reach the merits of the argument on appeal. 8

Next, Ellis argues that the circuit court should have considered the entire length of

the fiduciary relationship between Edward and Roger and all transactions that occurred

during that time. We disagree because our supreme court has rejected a very similar

argument.

In its ruling, the circuit court relied on Stoltz, 9 but Ellis does not address that case.

The Stoltz court declined to depart from the holding of Chapman v. Alexander, 10 an earlier

6 Ark. Code Ann. § 16-56-105 (Repl. 2005); Stoltz v. Friday, 325 Ark. 399, 405, 926 S.W.2d 438, 442 (1996). 7 Burke v. Strange, 335 Ark. 328, 983 S.W.2d 389 (1998). 8 Id. 9 Supra. 10 307 Ark. 87, 817 S.W.2d 425 (1991).

8 legal-malpractice action, where the court considered but rejected the “termination of

employment” rule, which provides that the statute of limitations does not begin to run until

the attorney-client, doctor-patient, or other professional-client relationship has ended. Ellis’s

argument that the entire length of the fiduciary relationship should be looked at in

ascertaining whether there has been a breach of duty is analogous to the “termination of

employment” rule rejected by the supreme court.

As her final argument under this topic, Ellis argues that the circuit court only

considered her claims for breach of fiduciary duty arising under the power of attorney

Edward granted to Roger instead of also considering evidence dating back to 1997 when

Roger was added as a signatory to Edward’s bank accounts. However, she does not explain

how this would change the analysis of the statute-of-limitations issue. She also does not offer

any authority to support her suggestion that being a signatory on a bank account gives rise

to a fiduciary relationship or, for that matter, that any such fiduciary relationship would have

extended to her. The only basis for this argument is that the signature card had “agent”

typed next to the names of Roger and Frances below the signature line. There was no

testimony concerning what this designation meant or what the parties (Edward, Roger, and

Frances) intended by it. It is an appellant’s burden to demonstrate and explain reversible

error. 11 Moreover, this court may refuse to consider an argument when the appellant fails

to cite any legal authority, and the failure to cite authority or make a convincing argument

11 See Fayetteville Express Pipeline, LLC v. Ark. Pub. Serv. Comm’n, 2017 Ark. App. 557, 533 S.W.3d 106.

9 is sufficient reason for affirmance. 12 The circuit court did not err in its application of the

statute of limitations.

For her second point, Ellis argues that the circuit court erred in failing to set aside

“gifts” Edward made to Roger, Frances, and others. She contends that Roger and Frances

failed to prove all the elements of an inter vivos gift. Specifically, she argues that Roger and

Frances failed to prove that Edward was mentally competent at the time of the various

transactions. She further argues that Roger and Frances failed to offer any proof on the other

elements of an inter vivos gift. However, she misstates the burden Roger and Frances bore

as fiduciaries.

It was undisputed that Roger held a power of attorney from his father. A person who

holds power of attorney is an agent, and it has long been recognized that a fiduciary

relationship exists between principal and agent in respect to matters within the scope of the

agency. 13 Transactions between persons connected by fiduciary relations will be closely

scrutinized when the relation implies that one person has controlling influence over the

other. 14 It is generally recognized that in order to invalidate a contract, undue influence

must operate to deprive a party of his or her free will. 15 When unfair advantage in a

transaction is rendered probable because of superior knowledge of the matter derived from

12 Goodman v. Goodman, 2019 Ark. App. 75. 13 Dent v. Wright, 322 Ark. 256, 909 S.W.2d 302 (1995); Yahraus v. Cont’l Oil Co., 218 Ark. 872, 239 S.W.2d 594 (1951). 14 Dent, supra; Hawkins v. Randolph, 149 Ark. 124, 231 S.W. 556 (1921). 15 Dent, supra.

10 a fiduciary relationship; from overmastering influence on the one side; or from weakness,

dependence, or trust justifiably reposed on the other side, it is incumbent on the stronger

party to show that no deception was practiced. 16 Also, in certain circumstances a

presumption of undue influence may arise in connection with the execution of a deed. 17

The invocation of the presumption of invalidity is really the product of a two-prong

test. Before the presumption of invalidity would ever be invoked, the transferring party

must not only claim that the receiving party was the dominant one, but must also establish

that that party occupied such a superior position of dominance or advantage as would imply

a dominating influence sufficient to amount to duress, coercion, or undue influence; once

this has been established, the presumption of involuntariness on the part of the transferring

party is invoked, and the burden then shifts to the donee to prove that the transfers were

voluntary. 18 In other words, the simple existence of a dominant party in the relationship

does not, in and of itself, invoke the presumption of invalidity; rather, the party claiming

duress or coercion must establish further sufficient evidence to invoke the presumption,

after which the burden to prove otherwise rests with the dominant party. 19

However, even in fiduciary relationships our courts have refused to find undue

influence in the transfer of property when there has been no showing that the donees said

16 Id.; see also Restatement (Second) of Contracts § 177 (Am Law Inst. 1981). 17 See Myrick v. Myrick, 339 Ark. 1, 2 S.W.3d 60 (1999). 18 Id. 19 Id.

11 or did anything to put the donor in a position of fear or that they committed fraud or

overreached in any way. 20 This is true even when there is evidence to raise suspicion about

impure motives. 21

Ellis argues that Roger and Frances failed to carry their burden of proving by clear

and convincing evidence that Edward was of sound mind at the time of the various

transactions. She argues that Roger testified that there was a time when Edward was no

longer able to handle his own business but was unsure of exactly when the memory loss

began and when Edward was unable to handle his own affairs. She also points to other

instances when Roger or Frances could not recall certain aspects of Edward’s condition.

Ellis also relies on testimony from her and her husband that it was their opinion Edward

was not competent as early as of 2002 and that he never improved. She also relies on medical

records showing that by March 2002, Edward’s doctor had documented that he had

dementia, evidence of Parkinson’s, and depression and that Edward was having more

behavioral changes. The test on appeal is not whether there is clear and convincing evidence

to support the circuit court’s findings, but whether we can say that the circuit court’s

findings are clearly erroneous. 22

Essentially, Ellis’s argument is that the circuit court should have weighed the

evidence in her favor by giving more weight to the medical evidence. The circuit court

20 Howard v. Glaze, 292 Ark. 28, 727 S.W.2d 843 (1987). 21 Id. at 31, 727 S.W.2d at 846. 22 Bellis v. Bellis, 75 Ark. App. 213, 216, 56 S.W.3d 396, 398 (2001).

12 noted the contradictory evidence as to Edward’s competency but did not make an explicit

finding as to competency. Instead, the court found that although Edward took medication

for mental conditions, his mental condition was not severe, and his medications were not

mind altering. The court’s declining to set aside the gifts is an implicit finding of

competency. When there are two permissible views of the evidence, the fact-finder’s choice

between them cannot be clearly erroneous. 23

Finally, Ellis argues in her third point that the circuit court erred in ruling that the

accounting filed by Roger and Frances satisfied the requirements of Ark. Code Ann. § 28-

52-103 because the court applied the wrong burden of proof when it concluded that the

accounting was proper because the accounting accurately showed Edward’s financial

condition at the time of his death. However, the only argument Ellis makes about the

burden of proof is that Roger and Frances have the burden of proof to overcome the

presumption that transactions with Edward were void. That is addressed above in her second

point.

Instead, Ellis argues that the “accounting” filed by Roger was deficient and points

out several perceived flaws. She asserts that the circuit court’s failure to properly scrutinize

the accounting led the court to dismiss her other causes of action and that the court’s ruling

on the accounting should be reversed, leading to the reversal of the dismissal of her other

causes of action based on her request for an accounting. However, the court’s dismissal of

Ellis’s breach-of-fiduciary-duty claim was based on the expiration of the statute of

23 Rymor Builders, Inc. v. Tanglewood Plumbing Co., 100 Ark. App. 141, 265 S.W.3d 151 (2007).

13 limitations, not the failure to properly scrutinize the accounting. Likewise, her conversion

claim failed for lack of standing, not the accounting.

Section 28-52-103 does not apply in this case. The statute governs accountings filed

by the personal representative during the probate of a decedent’s estate. 24 This is not the

probate of Edward’s estate. Moreover, the probate court handling Edward’s estate was the

proper forum for this proceeding on the accounting. 25

Affirmed.

WHITEAKER and HIXSON, JJ., agree.

Andrea Brock, for appellant.

Woodruff Law Firm, P.A., by: Jennifer Woodruff Douglas; and Chrestman Group, PLLC,

by: Keith L. Chrestman, for appellees.

24 In re Estate of Kemp, 2014 Ark. App. 160, 433 S.W.3d 911. 25 See, e.g., Estates of McKnight v. Bank of Am., N.A., 372 Ark. 376, 380, 277 S.W.3d 173, 177 (2008); In re Guardianship of Vesa, 319 Ark. 574, 892 S.W.2d 491 (1995).