No. 8 6 - 5 2
IN THE SUPREME COURT OF THE STATE OF MONTANA
1986
IN THE MATTER OF TFE ESTATE OF
JIMMIF L. ROGERS, Deceased.
APPEAL FROM: District Court of the Fifth. Judicial District,
In and for the County of Jefferson,
The Honorable Frank Davis, Judge presiding.
For Appellant:
Jackson & Rice; James A. Rice, Jr., Helena, Montana
For Respondent:
Jardine, McCarthy & Grauman; John H. Ja-rdine,
Whitehall, Montana
Submitted on Briefs: May 30, 1 9 8 6
Decided: August 26, 1986
Mr. Justice John Conway Harrison delivered the Opinion of the
Court.
This is an appeal by the decedent's children from an
order and judgment of the District Court of the Fifth
Judicial District, Jefferson County, Montana. The court
awarded certain estate property to the decedent's wife. We
affirm.
The facts of the case are basically undisputed by the
parties.
In October, 1982, Jimmie L. Rogers (decedent) had
executed and delivered to his present wife, Patricia A.
Rogers (wife) a legal and valid power of attorney which
contained a so-called "durable power of attorney clause."
This clause permitted the wife to act as Rogers' attorney in
fact if he became incompetent. This power of attorney was
used by the wife on one or more occasions with regard to the
handling of Rogers' business affairs.
Rogers and his wife jointly borrowed money necessary to
construct a new home in Jefferson County. Construction began
in March, 1983, and was completed in June, 1983, at a total
cost of approximately $60,000.
During the course of the construction of the home,
Rogers discovered he was afflicted with a terminal illness.
After he became aware of his illness, he began to make
arrangements to have his interests in certain California
notes and deeds of trust assigned to his wife t.o insure that
she would be able to keep their new home.
For a variety of reasons (none of which were the fault
of Rogers, his wife, or their local counsel), the assignments
of the notes and deeds of trust were not prepared until the
latter part of June, 1983, after Rogers had been confined to
a hospital just prior to his death. Rogers was mentally
competent when he was presented with the assignments in the
hospital, but, because of his weakened condition, could not
physically affix his signature to the documents. The record
shows that several witnesses in the hospital were aware of
Rogers' desire to make the assignments to his wife.
Faced with Rogers' inability to physically execute the
assignments, the wife, two days before Rogers' death,
executed the assignments to herself, pursuant to the
above-described power of attorney. The assignments assigned
all of Rogers' right, title and interest in the notes and
deeds of trust to the wife.
Rogers died in Silver Bow County, Montana, on June 22,
1983. At the time of his death he was a bona fide resident
of Jefferson County, Montana, where he had resided since
July, 1 9 7 9 .
The decedent left a last will and testament dated.
February 16, 1 9 8 3 . This will was admitted to probate in the
Jefferson County District Court and provided, in pertinent
part, as follows:
... I give, devise and bequeath in
equal undivided shares to my three chil-
dren per stirpes, Jimmie L. Rogers, Jr.,
Pamela K. Rice and Deborah A. Riccabuono,
all property located in the state of
California at the time of my death, real,
personal or mixed, of which I may die
possessed ...
The will further provided, in part, as follows:
... I give, devise and bequeath all of
the rest, residue and remainder of my
property, real, personal or mixed, to my
wife, Patricia A. Rogers ...
The children who were mentioned in the will were born
of a prior marriage of the decedent. They have no blood
relationship to the decedent's present wife.
After the decedent's will was admitted to probate in
Jefferson County, the children began a separate and
non-ancillary probate proceeding in the state of California.
They wished to establish that certain contested items of
property from the decedent's estate had its situs in the
state of California and therefore would pass to them under
the terms of the decedent's will. The items of contested
property consisted of four notes which were secured by deeds
of trust on California real property. The appraised
aggregate value of these notes was $82,590.82.
Prior to any further action in the Montana probate
proceeding, the California Probate Court ruled that the notes
and deeds of trust were personal in character and therefore
were under the exclusive jurisdiction of the Montana courts.
Consequently, the California court refused to decide any
issues relating to the distribution of the contested
property.
In June, 1985, the District Court held a hearing to
determine which parties were entitled to Rogersf estate
property. In September, 1985, the court issued its order and
judgment that the assignment of the California notes and
deeds of trust by the wife, pursuant to her power of
attorney, was a valid transfer of all of Rogers' right, tit1.e
and interest in such property. The District Court determined
that the assignments were made to carry out Rogers' purpose
and intent and did not constitute a violation of trust on the
part of the wife. Further, the court reasoned that even if
the assignments were not valid (which they were), the notes
and deeds of trust would pass to the wife under the terms of
Rogers' will. They were personal in nature with a situs in
the state of Montana, the place of Rogers' residence at the
time of his death. The District Court stated that California
law and Montana law agree that contracts, such as the ones in
the instant case, are personal property with a situs in the
state where the decedent was domiciled at the time of his
death.
It is from this order and judgment of the District
Court that the children, through Jimmie Rogers, Jr., appeal.
They present the following issues for review by this Court:
(1) Whether the District Court committed reversible
error when it refused to allow the children to complete
discovery;
(2) whether the District Court erred in upholding the
assignment of the California notes and deeds of trust made by
the wife to herself, pursuant to a power of attorney given to
her by the decedent;
(3) whether the District Court erred in ruling that
the California notes and deeds of trust were Montana property
and, as such, pass to the wife under the will of the
decedent.
The children argue that following the June, 1985,
hearing to determine which parties were entitled to estate
property, their counsel discovered two witnesses not previ-
ously deposed. These witnesses had information relating to
the matters raised during the hearing. After learning of
this evidence, their counsel moved for additional time to
cornplete discovery of these parties so that their testimony
coilld be included in the court record and available for the
coilrt's decision. The District Court Judge then contacted
the children's counsel and asked him to submit a summary of
the proposed testimony. Counsel complied with this request.
Af-ter reviewing the summary, the District Court Judge issued
an order denying counsel's request to complete discovery of
these witnesses, ruling that the proposed testimony appeared
to be inadmissible (i.e. hearsay). The children now argue
that this decision by the District Court was prejudicial to
th'em and was an abuse of the court's discretion. We
disagree.
The children readily admit that all trial courts in
Mo:ntana have the inherent discretionary power to control
discovery. State ex rel. Guarantee Insurance Co. v. District
Court (Mont. 1981), 634 P.2d 648, 38 St.Rep. 1682.
Therefore, based on this standard, we do not need to address
the children's contention.
It is necessary to note, however, there was no
objection raised on this aspect of the case until the present
appeal. We agree with the wife that the record contains no
reference, directly or indirectly, regarding the children's
claim of error that their discovery rights were prejudiced by
the District Court's denial of their motion to extend
discovery. The proposed findings of fact, conclusions of law
and memorandum submitted by the children did not mention the
District Court's denial of their motion. Further, no
objection was made, nor was the District Court asked to amend
its findings and conclusions. Now, for the first time, this
issue is asserted by the children on appeal. Under these
circumstances, this Court has made it clear that we will
consider for review only those issues raised in the pleadings
or otherwise before the District Court. Rustics of Lindbergh
Lalce, Inc. v. Lease (Mont. 1984), 690 P.2d 440, 41 St.Rep.
2092; and Huggans v. Weer (Mont. 1980), 615 P.2d 922. In the
instant case, the children failed to follow this general rule
and consequently their first issue must be disregarded by
this Court.
With regard to the second issue, the children claim
that the assignment of the contracts by the wife, made to
herself pursuant to a power of attorney, are invalid under
Montana law. First, the children point out that the wife, as
the attorney in fact for Rogers, was acting as his agent.
A power of attorney is an instrument in
writing by which one person, as princi-
pal, appoints another as his agent and
confers upon him the authority to perform
certain specified acts or kinds of acts
on behalf of the principal . . .
3 Am.Jur.2df S 23, Agency.
Next, the children point out that SS 28-10-401, et
seq., MCA, outline the authority of an agent in Montana.
Specifically, the children direct this Court's attention to
S 28-10-407, which provides in pertinent part as follows:
Statutory exceptions -
to general
authority.
An authority expressed in general terms,
however broad, does not authorize an
agent to :
(3) do any act which a trustee is for-
bidden to do by Title 72, Chapter 20,
Part 2.
Thus, the children argue, the restrictions upon the authority
of an agent actually are contained in the statutes which
outline the obligations of a trustee.
Under this analysis, the children assert §§ 72-20-201,
et seq., MCA, contain many provisions which would have pro-
hibited the actions of the wife in assigning the contracts to
herself. For example, S 72-20-201 obligates a trustee
(agent) to act in the "highest good faith" toward his benefi-
ciary (principal). Also, S 72-20-202 states that a trustee's
influence may not be used to his advantage in his dealings
with the beneficiary. Further, 5 72-20-203 states that a
trilstee may not use or deal with trust property for his own
benefit. But most important, the children argue, there is a
statutory presumption that the assignments made by the wife
to herself were done without sufficient consideration and
under undue influence. The children direct our attention to
§ 72-20-208 which reads as follows:
All transactions between a trustee and
his beneficiary during the existence of
the trust or while the influence acquired
by the trustee remains by which he ob-
tains any advantage from his beneficiary
are presumed to be entered into by the
latter without sufficient consideration
and under undue influence.
Under this statute, the children argue it must be
presumed that the transfers made by the wife were done
without sufficient consideration and under undue influence.
Considering the medical condition of Rogers and the expressed
intentions found in his will, the children argue the pre-
su~nption that the wife acted while Rogers was under undue
influence is even greater. The children strongly assert that
the wife did not show sufficient evidence to overcome this
presumption against her, and the District Court must declare
the assignments of property, made by the wife to herself, to
be null and void.
While the children's argument is legally correct and
persuasively written, we find, as did the District Court,
that there is sufficient evidence to uphold the transfer of
the notes and deeds of trust to the wife.
The child.ren correctly point out that as a general rule
under 5 72-20-208, all transactions between an agent and his
principal during the existence of an agency relationship are
presumed to be null and void. However, there are some
exceptions to this general rule. The recognized exception,
stated by the Supreme Court of Washington, is as follows:
And the agent has the burden of proving
in every case that his principal not only
had knowledge that the agent was to be
the buyer or seller, but also the burden
of showing that all information in pos-
session of the agent had been communicat-
ed to his principal prior to the giving
of consent.
Moon v. Phipps (Wash. 19661, 411 P.2d 157, 161.
An exception exists when there is an expressed and
explicit understanding between the principal and his agent
that a transaction between them is valid. This exception has
been recognized in Montana. This Court stated:
This principle is set forth in comment A
to Restatement of Law, Agency 2d, Section
390, in the following language:
". . .Before dealing with the principal
on his own account, however, an agent has
a duty, not only to make no misstatements
of fact, but also to disclose to the
principal all relevant facts fully and
completely ..."
First Trust Company of Montana v. McKenna (1980), 188 Mont.
534, 539, 614 P.2d 1027, 1030. Cited with approval in Myer
v. Miller (Wyo. 1981), 631 P.2d 441, 444.
In the case at bar, the agent was the principal's wife.
It is undisputed that the husband desired to make assignments
of the notes and deeds of trust to his wife in order to
inisure that she could remain in the home they had recently
built and jointly mortgaged. For several months prior to his
death, the husband had been trying to do precisely what was
ultimately done--assign the notes and deeds of trust to his
wife. In eventually performing this task, the wife was
merely her husband's alter ego. We conclude that the wife
acted in the highest good faith, without any concealment, and
accomplished that which her husband originally had desired to
accomplish. For these reasons, we affirm the District Court
in its approval of the transfer of the notes and deeds of
trust to the wife.
In the third issue, the children claim the court erred
in ruling that the notes and deeds of trust were Montana
property and so passed under the will of the husband. We
have affirmed the conclusion of the District Court that the
assignment of the notes and deeds of trust to the wife was
effective for all purposes. Consequently, nothing remained
to pass under the will, and this issue need not be decided.
The order and judgment of the District Court is
affirmed.