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Estate of Kuhling v. Glaze

Supreme Court of Vermont

July 27, 2018

Estate of Emil Kuhling by Richard W. Kuhling
v.
Taylor Glaze

          On Appeal from Superior Court, Rutland Unit, Civil Division Helen M. Toor, J.

          James B. Anderson of Ryan Smith & Carbine, Ltd., Rutland, for Plaintiff-Appellee.

          Andre D. Bouffard of Downs Rachlin Martin PLLC, Burlington, for Defendant-Appellant.

          PRESENT: Reiber, C.J., Skoglund, Robinson, Eaton and Carroll, JJ.

          HELEN M. TOOR, J.

         ¶ 1. This appeal arises out of a dispute between Taylor Glaze, a surviving niece of Emil Kuhling, and Emil Kuhling's Estate (Estate) over two agreements between Taylor and Emil, one concerning the transfer of Emil's home and another about Emil's life care. Following a bench trial, the court concluded that Taylor owed and breached a fiduciary duty to Emil regarding the sale of Emil's home and awarded damages but concluded there was no breach of the life-care contract. Taylor appeals both the court's determination that she owed and breached a fiduciary duty to Emil and the court's award of damages and prejudgment interest to Emil Kuhling's Estate. On appeal, Taylor also argues that the Estate lacks standing to assert the breach-of-duty and breach-of-contract claims. The Estate cross-appeals the court's determination regarding a contractual agreement for life care between Taylor and Emil. Because we conclude that there was no breach of any fiduciary duty by Taylor regarding the sale of the house, we reverse the award to the Estate and remand to the trial court to enter judgment. We affirm the court's determination regarding the life-care contract.

         ¶ 2. The evidence, in the light most favorable to the court's judgment, is as follows. Emil, a lifelong New Yorker, owned a two-story home in Brooklyn, New York, where he resided throughout his life until 2006. At that time, Emil was ninety-three years old and determined he would need additional care as he aged. Emil lived alone and had no children. Emil's remaining relatives consisted of his brother's children, Taylor Glaze, Suzan Hardin, and Richard Kuhling. Taylor, Suzan, and Richard discussed prospective options for Emil's care, and agreed that Taylor would take Emil into her home in Vermont to provide him with a safe environment surrounded by family. Emil moved to Killington to live with Taylor and her husband in October 2006.

         ¶ 3. Emil's move to Vermont raised questions about what to do with Emil's New York property. Emil found management of the property from afar to be stressful, and he worried "obsessively" about property maintenance. Emil determined that he would like to sell the property and approached Taylor, a formerly licensed real estate agent, to help him sell the property to a third party. Taylor agreed to do so, and Emil they agreed to compensate her for her time. The court did not find that any compensatory payments were ever made to Taylor for efforts on her part to sell the property.

         ¶ 4. As early as 2006, Taylor indicated an interest in purchasing the property from Emil-either as a real estate investment that she and her brother Richard could develop together or on her own. The one-story warehouse next to Emil's property had been developed into a five-story apartment in recent years. Richard, however, was not interested in participating in developing the property. In early 2007, a neighboring church offered to purchase the house. The church conducted an appraisal of some nature on the property, which valued the house at $615, 000. Based on this appraisal, which was provided to Emil, the church offered to purchase the property for $570, 000. Emil rejected the offer.

         ¶ 5. During the time the church appraised and made an offer on the property, Taylor told Emil that she was also interested in purchasing the house. Taylor informed her sister and brother that she wanted to buy Emil's house. Emil and Taylor discussed her purchase at length and decided to move forward with transferring the property[1] to Taylor instead of selling it to a third party. There is no dispute that Emil was fully mentally competent at all times during the discussions concerning the disposition of his house and its transfer and was capable of understanding his actions. Unlike Taylor, Emil did not have experience in real estate transactions. However, Emil had always maintained that he wanted to split his estate evenly among his nieces and nephew, and he wanted to ensure that the transfer to Taylor resulted in an equitable distribution of his assets amongst the three siblings.

         ¶ 6. Once Emil and Taylor had agreed that Taylor would acquire the property, she found an attorney to help Emil with the transaction and to prepare all of the necessary paperwork for the transfer. Although Taylor sought out the attorney, all concerned were aware, and it is undisputed, that the attorney represented Emil. The attorney met in private with Emil on two separate occasions and was confident that Emil understood the transaction and "what he was doing." The attorney discussed the possibility of seeking a second appraisal on the property with Emil. Emil did not wish to have the property appraised. Richard Kuhling had previously recommended to Taylor that she should have an appraisal conducted by a Member of the Appraisal Institute (MAI) to understand what the New York property would be worth if sold as commercial real estate. MAI appraisals are estimates generated by appraisers who are experienced in the valuation and evaluation of commercial, industrial, residential, and other types of properties. After the church's offer, which Taylor considered to be a "lowball offer," Taylor promised to investigate the "real market value" of the property for Emil. There is limited evidence of Taylor's additional research, and she did not have a second appraisal-MAI or other-conducted on the property. Emil believed the value of the house was between $600, 000 and $800, 000, but the basis for his opinion was never established. Emil agreed to sell the house to Taylor for $600, 000 because-as he told his attorney-he believed that, considering the life care Taylor was giving him, it would "all [equal] out."

         ¶ 7. Based on Emil's estimate of the property value-without getting a second appraisal-Emil and Taylor entered into an agreement to transfer ownership of the property to Taylor. The agreement was as follows: Taylor would assume full responsibility and ownership of the property, removing Emil's concerns for caring for the property and his liability; Taylor would grant Emil a life estate in the property so that he could remain a "New Yorker" in name, if not in actual residence, and Taylor could gain tax benefits in the form of a stepped-up basis for tax purposes when full ownership of the property passed to her as an inheritance upon Emil's death; Taylor "paid" a sum of $600, 000 to Emil through an upfront payment of a $300, 000 "gift" for Emil to put in an account for Richard and Suzan, a $200, 000 advance on her inheritance from Emil, and a $100, 000 credit from Emil towards the cost of his end-of-life care in Taylor's home.[2]The $300, 000 payment by Taylor had been increased at Emil's insistence from the $250, 000 she had originally offered to pay because Emil thought $300, 000 was fairer to Richard and Suzan. Between the upfront payment of $300, 000 and the credit of $300, 000 from Emil ($200, 000 from Taylor's future inheritance and $100, 000 from credit towards Emil's end-of-life care), Taylor acquired title to the property subject to a life estate to Emil for $600, 000 on May 7, 2007. Between the date of the transfer in 2007 and Emil's death in 2013, no one questioned Emil's intent to transfer the property to Taylor or whether there was anything about the transaction that was against his wishes, or raised any concern with him that he was being treated unfairly.

         ¶ 8. The Estate does not dispute that Taylor provided excellent care for Emil during the seven years from the time he moved into her home until he passed away. Despite Emil's advance of $100, 000 toward his end-of-life care in the 2007 transaction, his medical and living expenses ultimately cost $173, 000-an additional $73, 000 that he paid to Taylor as "rent." Upon Emil's death, Richard Kuhling-as executor of Emil Kuhling's Estate-brought suit alleging: (1) Taylor owed a duty of care to Emil as his agent in selling the property, which she breached by acquiring the property herself without providing Emil with a second appraisal; and (2) Taylor breached the life-care contract that she made with Emil in 2007. The Estate sought damages for both claims. No claim that Taylor exercised undue influence over Emil was made.

         ¶ 9. Based on the facts outlined above, the court determined the following. First, regarding the Estate's breach-of-fiduciary-duty claim, the court concluded that Taylor acted as Emil's agent because she agreed to sell the property to a third party for Emil in exchange for compensation. It further held that she breached her duty as Emil's agent when she purchased the property herself and failed to obtain a second appraisal of the property's value, thereby withholding material information from Emil. Due to the breach, the court awarded damages and prejudgment interest to the Estate. Second, the court concluded there was no breach of the life-care contract with Emil because the parties had modified the contract, creating a new agreement, and Taylor's actions were consistent with the modified terms.

         ¶ 10. Taylor appeals the court's judgment, asserting that: (1) the Estate lacks standing to bring claims of breach of duty and breach of contract because these claims expired upon Emil's death; (2) the court erred in determining that an agency relationship existed between Taylor and Emil and that a breach of fiduciary duty occurred; and (3) the court's award of damages and prejudgment interest was "excessive" and "speculative." The Estate cross-appeals, challenging the trial court's determination there had been no breach of the life-care contract.

         ¶ 11. On appeal, we review the trial court's findings of fact for clear error, and its legal conclusions de novo. See N.A.S. Holdings, Inc. v. Pafundi, 169 Vt. 437, 438-39, 736 A.2d 780, 783 (1999). We conclude that: (1) the Estate had standing to assert the breach-of-duty and breach-of-contract claims; (2) the court erred in concluding that Taylor breached any fiduciary duty to Emil; and (3) no breach of contract occurred. We consider each in turn.

         I. Survival Statute and Standing

         ¶ 12. The first issue is whether the Estate's claim for breach of fiduciary duty is covered by Vermont's survival statute, 14 V.S.A. § 1451.[3] We determine that the claim survives Emil's death and the Estate has standing to bring a claim for breach of fiduciary duty.

         ¶ 13. Under Vermont common law, personal tort actions expire with the death of "the person of the plaintiff or the defendant." Whitchurch v. Perry, 137 Vt. 464, 468, 408 A.2d 627, 630 (1979). However, an executor of an estate may "commence [or] prosecute . . ., in the right of the deceased, actions which survive . . . and are necessary for the recovery and protection of the property or rights of the deceased . . . ." 14 V.S.A. § 1401; see id. § 1451 (listing specific causes of action that survive person's death). The surviving actions include:

Actions . . . of tort on account of the wrongful conversion of personal estate and actions of tort on account of a trespass or for damages done to real or personal estate shall survive, in addition to the actions which survive by common law, and may ...

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