Webb v. Anderson Children Trust ( 2020 )


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  • [Cite as Webb v. Anderson Children Trust, 
    2020-Ohio-4975
    .]
    IN THE COURT OF APPEALS
    FIRST APPELLATE DISTRICT OF OHIO
    HAMILTON COUNTY, OHIO
    KIMBERLY A. WEBB, INDIVIDUALLY :                             APPEAL NO. C-190600
    AND AS BENEFICIARY OF THE                                    TRIAL NO. 2017-00246
    BETTY S. ANDERSON CHILDREN
    TRUST,                         :
    O P I N I O N.
    Plaintiff-Appellant,                    :
    vs.
    :
    THE   BETTY  S.             ANDERSON
    CHILDREN TRUST,                                 :
    and                                            :
    MICHAEL       R.       WEBB,
    INDIVIDUALLY AND AS TRUSTEE,                    :
    Defendants-Appellees.                   :
    Appeal From: Hamilton County Court of Common Pleas, Probate Division
    Judgment Appealed From Is: Affirmed
    Date of Judgment Entry on Appeal: October 21, 2020
    Robbins, Kelly, Patterson & Tucker, LPA, Robert M. Ernst and Jarrod M. Mohler,
    for Plaintiff-Appellant,
    Haas & Haas Law, LLC, and Herbert J. Haas, for Defendants-Appellees.
    OHIO FIRST DISTRICT COURT OF APPEALS
    MYERS, Presiding Judge.
    {¶1}    Kimberly A. Webb (“Kimberly”) appeals from the trial court’s
    judgment in favor of her brother Michael R. Webb (“Michael”), individually and as
    trustee of the Betty S. Anderson Children Trust, on her complaint asserting various
    claims relating to their mother’s opening a new Individual Retirement Account
    (“IRA”) and her designation of Michael as the sole beneficiary of that IRA.
    {¶2}    Because the trial court correctly determined that Kimberly failed to
    prove by clear and convincing evidence that their mother Betty S. Anderson lacked
    the mental capacity to enter into the IRA agreement and to designate a beneficiary
    on her IRA, we affirm its judgment.
    I. Background
    {¶3}    Several months after Anderson’s death in May 2012, Michael filed an
    application in the probate court to relieve Anderson’s estate from administration,
    alleging that she died intestate. He subsequently filed an application to admit a lost
    will to probate, and the application was granted in August 2013.
    {¶4}    Under the terms of Anderson’s will, her net estate was to be
    distributed in equal one-third shares to Michael, to the Betty S. Anderson Children
    Trust, and to the Betty S. Anderson Grandson Trust. Anderson executed the will,
    created the trusts, and appointed Michael her attorney-in-fact under a durable power
    of attorney on June 25, 2003.     She designated Michael as the successor trustee of
    both trusts.
    {¶5}    According to the terms of the Children Trust, the primary beneficiaries
    of the trust upon Anderson’s death were Kimberly and Michael. The trust stated that
    Anderson’s intention was to create a supplemental needs trust for Kimberly, who was
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    OHIO FIRST DISTRICT COURT OF APPEALS
    a recipient of government benefits, and that the trust property be used to
    supplement, not supplant, Kimberly’s government benefits.
    {¶6}     Under the terms of the Grandson Trust, upon Anderson’s death, the
    entire trust estate was to be maintained for the benefit of Kyle M. Webb (“Kyle”),
    Anderson’s grandson. The trust would terminate and the balance of the trust estate
    would be distributed to Kyle upon his reaching the age of 25.
    {¶7}     Anderson was the owner of a PaineWebber IRA.         Initially, she
    designated Kimberly and Michael as 50 percent beneficiaries of the IRA. On June 4,
    2003, Anderson changed her beneficiary designation on the IRA so that Michael was
    the sole primary beneficiary. On June 26, 2003 (one day after she executed her will
    and created the trusts), Anderson again changed the IRA’s beneficiary designation.
    This time she designated Michael, the Children Trust, and the Grandson Trust as
    primary beneficiaries, each to receive 33 1/3 percent.
    {¶8}     When Anderson’s financial advisor left UBS PaineWebber and joined
    the Stanford Financial Group, Anderson transferred her IRA to Stanford Financial
    Group. The beneficiary designation on the account remained unchanged. In early
    2009, Anderson learned that Stanford Financial Group was suffering financial
    difficulties. Michael suggested moving the account to UBS and using his friend
    Stephen Lee as her financial advisor.
    {¶9}     Anderson contacted Lee by phone about transferring her IRA. She
    then met with Lee in person, by herself. Lee believes they may have met in person a
    second time.     Anderson provided Lee the information necessary to make this
    transition, including filling out a form designating who she wanted as beneficiary.
    UBS personnel then printed forms for her to sign, which included the information
    she provided.
    {¶10} On February 25, 2009, Anderson executed several documents in
    relation to opening an account at UBS and transferring her IRA there. At Anderson’s
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    OHIO FIRST DISTRICT COURT OF APPEALS
    request, Michael assisted her with the execution of the forms at her home. Anderson
    signed a UBS power-of-attorney form designating Michael as power of attorney with
    respect to the UBS account.      Kimberly signed the power-of-attorney form as a
    witness. Anderson also signed a UBS account-transfer form authorizing the transfer
    of her IRA from Stanford Financial Group to UBS.
    {¶11} In addition, Anderson signed a UBS signature page acknowledging
    that she had read, understood, and agreed to the terms and conditions of the UBS
    “Client Relationship Agreement” as well as the terms, conditions, and disclosures
    included in her “New Account Booklet.” The “Client Relationship Agreement” was a
    single-spaced seven-page document and the “New Account Booklet” incorporated
    more than 60 pages of account documents pertaining to account information, terms,
    conditions, and disclosures.    The “Client Relationship Agreement” contained a
    transfer-on-death designation, so that upon Anderson’s death, the IRA would be
    transferred to Michael, the sole beneficiary.      Michael delivered the executed
    documents to Lee.
    {¶12} Over a year later, and at Michael’s request, the probate court declared
    Anderson incompetent due to dementia and appointed Michael her guardian in June
    2010.
    {¶13} On July 20, 2012, two months after Anderson’s death, her UBS
    account, then valued at $433,379.87, was closed and the funds were transferred to
    Michael.
    Procedural History
    {¶14} In June 2017, Kimberly filed a complaint for a declaratory judgment,
    trust accounting, money damages and removal of Michael as trustee of the Children
    Trust. She alleged that Michael knew Anderson suffered from dementia at the time
    she opened the UBS IRA in February 2009 and that he allowed himself to be
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    OHIO FIRST DISTRICT COURT OF APPEALS
    designated as the account’s sole beneficiary in contravention of Anderson’s will and
    overall estate plan. Kimberly alleged that Michael converted her share of the UBS
    IRA, and that he breached his duty as financial power of attorney by designating
    himself as sole beneficiary.     Kimberly also alleged that Michael breached his
    fiduciary duty when he acted in his own self-interest, failed to disclose his conflict of
    interest, exerted undue influence on Anderson and/or caused her to execute
    documents under a mistake of fact. She also alleged that Michael intentionally
    interfered with her expected inheritance from the account.
    {¶15} Kimberly sought a declaration that “the beneficiary designation of
    Michael as sole beneficiary of the February 25, 2009 UBS IRA account be struck as
    void, and the beneficiary designations as set forth in the earlier UBS IRA account is
    [sic] the correct, appropriate, and applicable designations and be applied to the
    assets contained in [Anderson’s] February 25, 2009 UBS IRA.” (The earlier UBS IRA
    that Kimberly referred to designated Michael, the Children Trust, and the Grandson
    trust as primary beneficiaries, each to receive 33 1/3 percent.) She sought an order
    that Michael provide an accounting of the IRA, that he be removed as trustee of the
    Children Trust, and that a constructive trust be imposed over the trust assets.
    {¶16} Stephen Lee testified by way of deposition that he met with Anderson
    alone in his office at least once before February 25, 2009. Anderson told Lee that she
    needed to transfer her funds out of the Stanford firm as soon as she could in light of
    its impending bankruptcy. She brought in copies of her Stanford account statements
    and discussed with Lee her concern that her assets would be safe. Lee testified that
    Anderson “was a lady that knew what she wanted to do” and that “her objective was
    to get her assets initially out of the place where she was where she felt that it was in
    danger and it was a risky situation for her to someplace where she could be
    comfortable that the assets were being held.”
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    OHIO FIRST DISTRICT COURT OF APPEALS
    {¶17} According to Lee, when he met with Anderson or talked with her on
    the phone, she was “sharp,” and “she had it together when I had conversations with
    her.” Lee testified that when he met with Anderson, she was “a confident lady” who
    was “strong in her will” and she “had together what she wanted to do.” According to
    Lee, Anderson was “a capable person.”
    {¶18} Lee testified that before February 25, 2009, neither Anderson nor
    Michael told him that she had been diagnosed with dementia in January 2009.
    According to Lee, if he had felt that Anderson was not aware of what she was doing,
    he would have referred the matter to his firm’s legal compliance department.
    {¶19} According to Lee, he did not discuss Anderson’s beneficiary
    designations with Michael and those decisions were made by Anderson alone. Lee
    testified:
    In fact, what would have happened is, is that she and I would have
    talked, she would have made a decision that she wanted to open an
    account with UBS, and I would have instructed a secretary, an
    assistant to prepare, you know, the documents, you know, for her and
    they would have been sent to her and she would have filled them out,
    and she would then sent them back.
    {¶20} Michael testified that he and Kimberly were present in Anderson’s
    apartment on February 25, 2009, when Anderson executed the UBS documents. He
    took the executed documents to Lee. He testified that, to his knowledge, Anderson
    was not suffering from dementia and had not been diagnosed with dementia when
    she signed the documents. Michael said that he had no discussions with Anderson or
    Lee about making himself the sole beneficiary of the UBS IRA.
    {¶21} Kimberly testified that she remembered being at Anderson’s
    apartment when Michael brought documents for Anderson to sign.                 She
    acknowledged that her signature appears on the UBS power-of-attorney form, but
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    OHIO FIRST DISTRICT COURT OF APPEALS
    stated that she had not read the document before she signed it. She said that her
    mother was not in the apartment at the time. According to Kimberly, at the time the
    documents were signed, her mother “absolutely” knew who Kimberly was. She also
    knew who Michael and her grandson Kyle were.
    {¶22} Kimberly testified that she remembered going to probate court with
    Anderson in 2010 when Michael applied to have Anderson declared incompetent.
    She acknowledged that in a prior 2016 deposition she had testified that she thought
    Michael was going to gain guardianship of Anderson and that, when asked whether
    Anderson had needed a guardian at that time, she had responded, “No,” and when
    asked, “Because she could take care of her own affairs?,” she had responded:
    Basically. She was taking care of her own affairs. Mike would step in
    periodically. I took her to the doctors. I took her to the bank. I made
    sure she had her meds. I made sure she ate. I took care of her. * * *
    She wrote her own checks.
    {¶23} Kimberly acknowledged that when asked in the prior deposition
    whether Anderson was taking care of her own financial affairs in 2010 at the time
    that Michael sought guardianship, she had responded, “Yes,” and had testified that
    she thought that Anderson did not need a guardian.
    {¶24} Barbara Brewer, Ph.D., testified that she first evaluated Anderson on
    April 2, 2009, because Michael was concerned that Anderson was experiencing a lot
    of confusion. Dr. Brewer testified that Anderson performed a Mini Mental Status
    Exam (“MMSE”), and scored 19 out of 30, which meant that she “was on the edge of
    the mild” range of cognitive impairment.
    {¶25} Dr. Brewer testified that she evaluated Anderson again about a year
    later on March 11, 2010, and that Anderson scored 17 out of 30 on an MMSE, which
    indicated “severe cognitive impairment.” Dr. Brewer used a scoring instrument for
    the MMSE that interpreted a score of 24-30 as “No cognitive impairment,” a score of
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    OHIO FIRST DISTRICT COURT OF APPEALS
    18-23 as “Mild cognitive impairment,” and a score of 0-17 as “Severe cognitive
    impairment.”
    {¶26} In conjunction with Michael’s 2010 guardianship application, Dr.
    Brewer completed a “Statement of Expert Evaluation,” which recommended that
    Michael’s application for guardianship be granted. In that statement, Dr. Brewer
    noted that Anderson was mentally impaired by reason of “Dementia, NOS,” and that
    her prognosis was “poor.”
    {¶27} Dr. Brewer testified that she prepared an opinion letter for Kimberly’s
    counsel dated March 23, 2018, in which she gave the following opinions:
    The answer to your first question: “On February 25, 2009, was Betty
    Anderson mentally impaired by reason of Dementia, NOS?” is YES.
    ***
    Based on my 2009 (and later, 2010), evaluation of Betty Anderson, it
    is my opinion that she suffered significant impairments in cognitive
    comprehension and judgment that make it extremely unlikely that she
    was able to read or comprehend the Client Relationship Agreement
    she signed on February 25, 2009.1
    {¶28} At the conclusion of the trial, the magistrate entered judgment in favor
    of Michael. The magistrate pointed out that a diagnosis of dementia is not enough to
    declare Anderson’s 2009 beneficiary designation invalid because there must be
    evidence that the dementia actually affected Anderson’s ability to make the
    designation. The magistrate concluded, therefore, that Dr. Brewer’s opinion that
    Anderson suffered from dementia at the time she made the beneficiary designation
    was not, in and of itself, determinative of whether the dementia actually affected
    Anderson’s ability to make the designation. The magistrate found no evidence that
    1 Dr. Brewer did not comment on Anderson’s ability to comprehend the power-of-attorney form
    or the account-transfer form.
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    OHIO FIRST DISTRICT COURT OF APPEALS
    Michael manipulated Anderson into making the beneficiary designation.                 In
    addition, the magistrate found no evidence that Michael unduly influenced Anderson
    in making the beneficiary designation or that Michael acted out of self-interest when
    he assisted her with the transfer of her IRA to UBS.
    {¶29}   Kimberly    objected    to   the   magistrate’s   decision,   specifically
    challenging the magistrate’s conclusion that Kimberly did not present sufficient
    evidence for the court to declare the 2009 beneficiary designation void.
    {¶30} The trial court overruled Kimberly’s objections and adopted the
    magistrate’s decision as the judgment of the court.       The court determined that
    Kimberly failed to prove that Anderson lacked the mental capacity to execute the
    2009 beneficiary designation. Kimberly now appeals.
    {¶31} In a single assignment of error, Kimberly argues that the trial court
    erred in finding that she failed to present clear and convincing evidence of
    Anderson’s lack of mental capacity to contract. She argues that the court applied the
    wrong test for mental capacity to contract and that the court’s decision was against
    the manifest weight of the evidence.
    Mental Capacity
    {¶32} First, Kimberly asserts that the trial court erred by applying the test for
    testamentary capacity to its determination that Anderson possessed the mental
    capacity to contract to open the IRA with a transfer-on-death beneficiary
    designation. She argues that under the Ohio Uniform Transfer-on-Death Security
    Registration Act, the transfer on Anderson’s death was not testamentary so the test
    for testamentary capacity did not apply to a determination of her capacity to enter
    into the contract. Rather, she argues that the general test for capacity to enter into a
    contract governs.
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    OHIO FIRST DISTRICT COURT OF APPEALS
    {¶33} The Ohio Uniform Transfer-on-Death Security Registration Act
    provides for “designation of a beneficiary to take ownership of the security at the
    time of the death of the owner.” R.C. 1709.04; Kropf v. Kropf, 6th Dist. Erie No. E-
    09-068, 
    2010-Ohio-4207
    , ¶ 43. IRA proceeds transfer by virtue of the Act, which
    provides:
    Any transfer-on-death resulting from a registration in beneficiary form
    is effective by reason of the contract regarding the registration between
    the owner of the security and the registering entity by reason of
    sections 1709.01 to 1709.11 of the Revised Code and is not
    testamentary.
    R.C. 1709.09(A); LeBlanc v. Wells Fargo, 
    134 Ohio St.3d 250
    , 
    2012-Ohio-5458
    , 
    981 N.E.2d 839
    , ¶ 31. The Act establishes that upon the death of the owner, ownership of
    the security shall pass to the designated beneficiary. R.C. 1709.07; LeBlanc at ¶ 31.
    “Accordingly, the Act removes such transfers on death from the decedent’s
    testamentary estate, and also from the purview of Ohio’s Statute of Wills, which
    outlines the formalities that apply to testamentary dispositions.”          (Emphasis
    omitted.) Bielat v. Bielat, 
    87 Ohio St.3d 350
    , 351, 
    721 N.E.2d 28
     (2000).
    {¶34} The test for mental capacity to enter a contract is whether the person
    understood the nature of the transaction and the effects of her or his own actions and
    is similar to the test used to determine testamentary capacity. Giurbino v. Giurbino,
    
    89 Ohio App.3d 646
    , 658, 
    626 N.E.2d 1017
     (8th Dist.1993).            Even though the
    transfer on death of IRA proceeds to a designated beneficiary is contractual and not
    testamentary, Ohio courts have held that “the test of testamentary capacity can also
    be used as a standard for mental capacity to execute a beneficiary designation.”
    Stanek v. Stanek, 2d Dist. Greene No. 2018-CA-39, 
    2019-Ohio-2841
    , ¶ 38, quoting In
    re Estate of Flowers, 
    2017-Ohio-1310
    , 
    88 N.E.3d 599
    , ¶ 84 (6th Dist.). Similarly,
    courts have applied the test for testamentary capacity to determine whether a
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    OHIO FIRST DISTRICT COURT OF APPEALS
    decedent possessed the mental capacity to create a contract for a payable-on-death
    bank account because such an account provides a vehicle for a person to make
    dispositions similar to those made under a will. Giurbino at 658; Davis v. Marshall,
    10th Dist. Franklin No. 94APE02-158, 
    1994 WL 425169
    , *3 (Aug. 4, 1994); see
    Schiavoni v. Roy, 9th Dist. Medina No. 11CA0108-M, 
    2012-Ohio-4435
    , ¶ 17
    (annuities). Accordingly, we find no error in the trial court’s application of the test
    for testamentary capacity in the case at bar.
    {¶35} The test for testamentary capacity is whether the person “has sufficient
    mind and memory: First, to understand the nature of the business in which he is
    engaged; Second, to comprehend generally the nature and extent of his property;
    Third, to hold in his mind the names and identity of those who have natural claims
    upon his bounty; [and] Fourth, to be able to appreciate his relation to the members
    of his family.” Flowers at ¶ 84, quoting Niemes v. Niemes, 
    97 Ohio St. 145
    , 
    119 N.E. 503
     (1917).
    {¶36} To prove a contract or beneficiary designation is voidable on the
    ground that a party lacked the mental capacity to enter into it, the complaining party
    must establish the lack of mental capacity by clear and convincing evidence. Flowers
    at ¶ 84; Giurbino at 658.    Evidence that a person had dementia is insufficient by
    itself to establish the person’s lack of testamentary capacity; there must be evidence
    that dementia actually affected the person’s capacity to make the testamentary
    disposition. Flowers at ¶ 86; Stewart v. Boland, 
    2015-Ohio-1712
    , 
    33 N.E.3d 551
    , ¶ 15
    (1st Dist.).
    {¶37} Kimberly argues that the court improperly limited its review of
    Anderson’s mental capacity to her designation of a beneficiary and not the seven-
    page “Client Relationship Agreement” as a whole, which incorporated the 60-plus
    page “New Account Booklet.” Kimberly’s complaint, however, sought a declaration
    striking only the beneficiary designation, not the entire contract, as void. And her
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    OHIO FIRST DISTRICT COURT OF APPEALS
    objections to the magistrate’s decision were limited to the magistrate’s refusal to
    declare the beneficiary designation void. Although Kimberly now asserts that the
    trial court’s review should have taken into consideration the entire “Client
    Relationship Agreement,” she really only challenges the beneficiary designation.
    {¶38} Kimberly points to Dr. Brewer’s testimony that it was highly unlikely
    that Anderson was capable of reading and comprehending the entire agreement,
    filled with legal clauses and detailed technical information. However, as the trial
    court pointed out, Dr. Brewer’s testimony failed to address the elements of
    testamentary capacity and whether Anderson’s dementia actually affected her ability
    to make beneficiary designations. And neither the test for testamentary capacity nor
    the test for capacity to contract generally requires that a person understand each
    provision of a 60-page agreement.
    {¶39} Here, the trial court properly applied the test for testamentary capacity
    in determining whether Anderson lacked the mental capacity to designate a
    beneficiary on her IRA. The court determined that (1) Anderson contacted Lee to
    move her IRA because the institution holding her account was having financial
    difficulty; (2) Anderson met with Lee independently to open the account; (3)
    according to Lee, Anderson appeared sharp and confident and knew what she
    wanted to do; and (4) Anderson’s selection of Michael as beneficiary was not
    inconsistent with at least one of Anderson’s prior estate plans and it continued to
    fulfill Anderson’s objective of protecting Kimberly’s government benefits. The court
    concluded that the factors supported a finding of testamentary capacity. Therefore,
    even though there was evidence that Anderson may not have understood all of the
    terms of the transfer documents, there was ample evidence that she was capable of
    knowingly and competently executing the beneficiary designation.
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    OHIO FIRST DISTRICT COURT OF APPEALS
    {¶40} Even applying the test for competency to contract generally, we reach
    the same result. It is clear that Anderson understood the nature of the transaction in
    opening the UBS IRA and the effects of her actions in doing so.
    Weight of the Evidence
    {¶41} Kimberly next argues that the trial court’s decision was against the
    weight of the evidence because Dr. Brewer’s expert opinion testimony outweighed
    the lay opinion testimony of Lee.     When reviewing the manifest weight of the
    evidence in a civil case, “[w]e weigh the evidence and all reasonable inferences,
    consider the credibility of the witnesses, and determine whether in resolving
    conflicts in the evidence, the trial court clearly lost its way and created such a
    manifest miscarriage of justice that its judgment must be reversed and a new trial
    ordered.” United States Fire Ins. v. Am. Bonding Co., Inc., 1st Dist. Hamilton Nos.
    C-160307 and C-160317, 
    2016-Ohio-7968
    , ¶ 16, citing Eastley v. Volkman, 
    132 Ohio St.3d 328
    , 
    2012-Ohio-2179
    , 
    972 N.E.2d 517
    , ¶ 20.
    {¶42} Here, the trial court’s decision makes clear that the court gave careful
    consideration to the testimony of both Dr. Brewer and Lee. As the court pointed out,
    while Dr. Brewer testified that she believed it was highly unlikely that Anderson was
    capable of comprehending the “Client Relationship Agreement,” an MMSE
    administered by Dr. Brewer five weeks after the agreement was signed indicated that
    Anderson scored in the range of having only mild cognitive impairment. The court
    also noted Dr. Brewer’s acknowledgement that a person with dementia may have
    periods of lucidity. In addition, the court noted that Dr. Brewer’s opinion relied in
    part on her second evaluation of Anderson, which was conducted more than a year
    after the signing.
    {¶43} The trial court noted Lee’s testimony that, in assisting Anderson with
    the opening of the UBS IRA, Anderson was sharp, confident, strong in her will, and
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    OHIO FIRST DISTRICT COURT OF APPEALS
    knew what she wanted to do. The court noted Lee’s testimony that Anderson relayed
    to him that she needed to move her IRA because the company that currently held the
    account was having financial difficulty. The court pointed to Lee’s testimony that if
    he had believed Anderson was not aware of what she was doing, he would have
    referred the matter to their legal compliance department.
    {¶44} We cannot say that the trial court clearly lost its way in evaluating the
    evidence. Therefore, we hold that the court reasonably concluded that Kimberly
    failed to prove by clear and convincing evidence that Anderson lacked the mental
    capacity to open the IRA and to make the beneficiary designation. See Flowers,
    
    2017-Ohio-1310
    , 
    88 N.E.3d 599
    , at ¶ 96 (where conflicting evidence was presented as
    to the decedent’s testamentary capacity and there was a difference of opinion as to
    the weight to be given lay and expert witness evidence, the probate court, as the trier
    of fact, did not lose its way in resolving those conflicts).
    {¶45} Consequently, we overrule the assignment of error and affirm the trial
    court’s judgment.
    Judgment affirmed.
    BERGERON and CROUSE, JJ., concur.
    Please note:
    The court has recorded its own entry on the date of the release of this opinion.
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