In re Admin. of the Lee R. Wintersteen Revocable Trust Agreement

907 N.W.2d 785

IN RE: the Administration of the Lee R. WINTERSTEEN REVOCABLE TRUST AGREEMENT.

28167

Supreme Court of South Dakota.

CONSIDERED ON BRIEFS ON NOVEMBER 6, 2017

OPINION FILED February 7, 2018

ERIC R. KERKVLIET, DANA VAN BEEK PALMER of Lynn Jackson Shultz & Lebrun, PC Sioux Falls, South Dakota, Attorneys for petitioner and appellant, Charlotte A. Wintersteen.

JASON KW KRAUSE, MATTHEW J. ABEL of Dorothy & Krause Law Firm, PC Sioux Falls, South Dakota, Attorneys for respondents and appellees, Trustees, and First National Bank of Sioux Falls.

KERN, Justice

[¶1.] Charlotte A. Wintersteen (Charlotte), widow of Lee R. Wintersteen (Lee), filed a petition for court supervision of the Lee R. Wintersteen Revocable Trust Agreement (the Trust) on February 10, 2016, after learning she had been removed as a beneficiary in a subsequent amendment to the Trust. The circuit court granted her petition and assumed supervision of the Trust pursuant to SDCL 21-22-9. On September 20, 2016, Charlotte filed a motion to amend her petition to include a claim challenging the validity of the most recent amendment to the Trust. After a hearing, the circuit court denied her request, concluding her amended petition would be futile because it was time-barred under SDCL 55-4-57(a)(1) as more than one year had passed since the date of Lee’s death. Charlotte appeals the denial of her motion to amend the original petition. We affirm.

Facts and Procedural History

[¶2.] Charlotte married Lee on May 23, 2010. Both had children from previous marriages and executed a prenuptial agreement prior to their marriage. On May 3, 2011, Lee created a Trust, providing Charlotte with a lifetime income benefit of $2,000 a month upon Lee’s death as well as a lump sum financial payment.

[¶3.] However, Lee amended the Trust several times during his lifetime. The Trust was first amended on March 1, 2012, removing Charlotte as a beneficiary. Lee later reinstated Charlotte as a beneficiary by executing a second amendment to the Trust on November 22, 2013. The second amendment provided Charlotte with benefits similar to those originally contemplated but increased Charlotte’s lifetime income benefit to $3,000 a month upon Lee’s death. The Trust was amended a third and final time on March 5, 2014, again removing Charlotte as a beneficiary.

[¶4.] After executing the third amendment, Lee was evaluated by Dr. Timothy Hurley on May 15, 2014, to address problems with his memory. Dr. Hurley performed a mental examination on Lee and concluded he suffered from moderate dementia, which had progressed over the course of the preceding four years. During this examination, Lee indicated that he wanted his son Tom to handle his financial affairs, and he wanted Charlotte to handle his medical decisions. On April 13, 2015, Tom and Charlotte were appointed as Lee’s conservator and guardian, respectively.

[¶5.] Lee passed away on May 26, 2015, and the Trust became irrevocable upon his death. While Charlotte was aware of the Trust and its subsequent first and second amendments, she claims that Lee never discussed the third amendment with her and that she first learned of its existence on September 21, 2015. On February 10, 2016, Charlotte filed a petition seeking court supervision of the Trust, alleging that "[c]ourt supervision [was] necessary to ensure proper administration of the Trust and to prevent any further irreparable damage to the Trust."¹

[¶6.] The Trustees² opposed court supervision, and the circuit court set the matter for hearing on April 11, 2016. At the hearing, the court inquired of Charlotte’s counsel regarding the objective of the petition. Charlotte’s counsel replied that she sought court supervision to obtain accounting obligations and an inventory from the Trust. While Charlotte’s counsel admitted the existence of a potential claim challenging the validity of the third amendment, she explained that the value of the Trust’s assets, once known, would inform Charlotte’s decision about what course of action to pursue in the future. The circuit court found Charlotte was a "beneficiary" per SDCL 21-22-1(1)³ and assumed supervision over the Trust pursuant to SDCL 21-22-9.⁴

[¶7.] On September 20, 2016, Charlotte, having changed counsel, filed a motion to amend the petition to include a claim alleging the third amendment was invalid. The proposed claim alleged that Lee lacked the capacity to execute the third amendment and that he was unduly influenced. The circuit court held a hearing on Charlotte’s motion to amend on November 29, 2016. The Trustees opposed Charlotte’s motion, arguing that the amended claim was time-barred under SDCL 55-4-57(a)(1). In response, Charlotte’s counsel alleged that SDCL 21-22-13 permitted an amendment to a petition at any time during court supervision of a trust. In the alternative, Charlotte argued that even if SDCL 55-4-57 controlled, the amended petition was not time-barred because she contested the validity of the third amendment in her original petition and the affidavit filed in support thereof—allowing her amended claim to relate back to the filing of the original petition.

[¶8.] The circuit court issued a memorandum opinion and order on February 14, 2017, denying Charlotte’s proposed amendment as futile. The court, applying SDCL 55-4-57(a)(1) to Charlotte’s claim, held that because she did not commence a judicial proceeding to contest the validity of the third amendment within the required one-year period from Lee’s death, her claim was now time-barred. Additionally, the court found that SDCL 55-4-57(a)(1) is a statute of repose, which prohibits the relation-back doctrine from applying to Charlotte’s proposed amendment.

[¶9.] Charlotte appeals, asserting the following issues:⁵

1. Whether the circuit court erred in concluding SDCL 55-4-57 applied to Charlotte’s proposed claim.

2. Whether the circuit court erred in concluding a "judicial proceeding" challenging the validity of the third amendment was not timely commenced.

3. Whether the circuit court erred in holding that SDCL 55-4-57(a)(1) is a statute of repose.

4. Whether the circuit court erred in concluding the relation-back doctrine is not applicable to SDCL 55-4-57(a)(1).

Analysis and Decision

[¶10.] 1. Whether the circuit court erred in concluding SDCL 55-4-57 applied to Charlotte’s proposed claim.

[¶11.] Charlotte first contends that the limitation period set forth in SDCL 55-4-57(a)(1) is inapplicable to her proposed claim because the circuit court assumed supervision of the Trust under SDCL 21-22-9. Charlotte’s argument is premised on SDCL 21-22-31, which states that "[a] proceeding brought pursuant to this chapter is considered an action for purposes of title 15...." SDCL 15-6-15(a) provides that "a party may amend his pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires." Thus, in Charlotte’s view, her claim challenging the validity of the third amendment could be filed at any time under the unlimited time frame found in SDCL 21-22-13. However, a court "may appropriately deny leave to amend ‘where there are compelling reasons such as ... futility of the amendment,’ even when doing so will necessarily prevent resolution on the merits." Ash v. Anderson Merchandisers, LLC , 799 F.3d 957, 963 (8th Cir. 2015) (quoting Horras v. Am. Capital Strategies, Ltd. , 729 F.3d 798, 804 (8th Cir. 2013) ); see Foman v. Davis , 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962).

[¶12.] Whether SDCL 21-22-13 or SDCL 55-4-57 governs Charlotte’s proposed claim is a matter of statutory interpretation.⁶ "[W]hen the question is which of two enactments the legislature intended to apply to a particular situation, terms of a statute relating to a particular subject will prevail over the general terms of another statute." Martinmaas v. Engelmann , 2000 S.D. 85, ¶ 49, 612 N.W.2d 600, 611 (quoting Moss v. Guttormson , 1996 S.D. 76, ¶ 10, 551 N.W.2d 14, 17 ). As such, "we begin with the plain language and structure of the statute." Pitt-Hart v. Sanford USD Med. Ctr. , 2016 S.D. 33, ¶ 10, 878 N.W.2d 406, 410 (quoting Magellan Pipeline Co., LP v. S.D. Dep’t of Revenue & Regulation , 2013 S.D. 68, ¶ 9, 837 N.W.2d 402, 404 ). "When the language in a statute is clear, certain and unambiguous, there is no reason for construction, and the Court’s only function is to declare the meaning of the statute as clearly expressed." Larson v. Krebs , 2017 S.D. 39, ¶ 18, 898 N.W.2d 10, 17. "When we must, however, resort to statutory construction, the intent of the legislature is derived from the plain, ordinary and popular meaning of the statutory language." R.B.O. v. Congregation of Priests of Sacred Heart, Inc. , 2011 S.D. 87, ¶ 22, 806 N.W.2d 907, 914 (quoting State Auto Ins. Cos. v. B.N.C. , 2005 S.D. 89, ¶ 18, 702 N.W.2d 379, 386 ).

[¶13.] SDCL 21-22-13 provides in relevant part:

The trustor, a fiduciary, or a beneficiary of any trust under court supervision may at any time petition the court for its action as to any matter relevant to the administration of the trust , including particularly the requiring of special reports from a fiduciary, the exercise of any discretion vested in a fiduciary, and as to any matter as to which courts of equity have heretofore exercised jurisdiction over fiduciaries.

(Emphasis added.) While Charlotte points to the emphasized language above to support her claim that she could challenge the validity of the third amendment at any time, a plain reading of the statute focuses our inquiry on whether Charlotte’s proposed claim was a "matter relevant to the administration of the trust." See SDCL 21-22-13.

[¶14.] Although the Legislature has not defined administration in the context of trusts, the "[w]ords used in the South Dakota Codified Laws are to be understood in their ordinary sense." Pitt-Hart , 2016 S.D. 33, ¶ 10, 878 N.W.2d at 410 (quoting SDCL 2-14-1). Administration means "[t]he management and disposal of a...