Hein v. Zoss
2016 S.D. 73
| S.D. | 2016Background
- In 2005 Margaret Zoss executed a power of attorney naming Fred Zoss as attorney-in-fact; Fred lived with Margaret as caretaker until her death in 2013.
- Margaret owned life estates in land with Hein and Burnham holding remainder interests; Fred leased land from Margaret without paying rent before her death.
- Hein and Burnham sued in 2014 alleging breach of farm lease; the Estate (Margaret’s estate) claimed breach of fiduciary duties by Fred, including self-dealing and gifts to Fred.
- The circuit court partially granted summary judgment on fiduciary duties but sent actual breach questions to the jury; a trial occurred in May 2015.
- Before trial, a motion in limine barred extrinsic evidence of Margaret’s intent regarding the power of attorney; the court prohibited stating intent to self-deal or gifts.
- Jury awarded Hein and Burnham breach of contract damages; the Estate awarded fiduciary-duty damages and punitive damages; Fred moved for a new trial.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the in limine exclusion of extrinsic intent evidence was proper | Zoss argues Bienash allowed limited extrinsic evidence to show intent to self-deal. | Estate argues Bienash bars such evidence absent explicit power to self-deal. | The court abused discretion by excluding admissible intent evidence. |
| Whether evidence about pre- and post-POA rent practices and joint account formation should have been admitted | Zoss sought to show good faith and lack of self-dealing. | Estate contends such evidence is not relevant to loyalty under the POA. | The court abused discretion; evidence should have been admitted to show intent and fiduciary loyalty. |
| Whether the joint account creation and use affected fiduciary duties | Zoss used funds to pay Margaret’s living expenses; transactions not self-dealing if for the benefit. | Trustee owes loyalty; self-dealing prohibited and separate from preexisting accounts. | The exclusion of circumstances around the joint account was error; could affect duty of loyalty. |
| Whether Margaret's will should have been admitted | Will provides context for Margaret’s intent regarding the POA and debts. | Will constituted an affirmative defense not pled under SDCL 15-6-8(c). | The will should be considered for remand; the exclusion was reversible error given lack of prejudice and potential amendment under 15-6-15(a). |
Key Cases Cited
- Bienash v. Moller, 721 N.W.2d 431 (S.D. 2006) (bright-line rule: no self-dealing unless power expressly authorizes it; writing may raise issues)
- Estate of Duebendorfer, 721 N.W.2d 438 (S.D. 2006) (fiduciary relationship exists with POA; abuse of discretion standard for evidentiary rulings)
- Kunewa v. Joshua, 924 P.2d 559 (Haw. Ct. App. 1996) (bright-line restriction against extrinsic evidence of intent to self-deal)
- In re Estate of Stevenson, 605 N.W.2d 818 (S.D. 2000) (fiduciary duties require utmost good faith and avoidance of conflicts)
- Adkins v. American State Bank, 458 N.W.2d 807 (S.D. 1990) (duty of loyalty and limitations on trustee/agent dealings)