In Re the Guardianship & Conservatorship of Nelson

#26375-aff & rem-JKK

2013 S.D. 12

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

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IN THE MATTER OF THE
GUARDIANSHIP AND CONSERVATORSHIP
OF MARGARET “PEGGY” NELSON,
A PERSON IN NEED OF PROTECTION

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APPEAL FROM THE CIRCUIT COURT OF
THE FOURTH JUDICIAL CIRCUIT
LAWRENCE COUNTY, SOUTH DAKOTA

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THE HONORABLE WARREN G. JOHNSON
Judge
****

TIMOTHY J. VANDER HEIDE
KENNETH E. BARKER of
Barker Wilson Law Firm, LLP
Belle Fourche, South Dakota Attorneys for appellant
John Rice.

LESTER NIES of
Hood & Nies, PC
Spearfish, South Dakota

and

DAVID S. BARARI of
Goodsell Quinn, LLP
Rapid City, South Dakota Attorneys for appellee and
conservator Pioneer Bank &
Trust.
****

CONSIDERED ON BRIEFS
ON JANUARY 8, 2013

OPINION FILED 01/30/13
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KONENKAMP, Justice

[¶1.] In this guardianship and conservatorship action, we examine a

challenge to the circuit court’s jurisdiction brought by an individual accused of

plundering the protected person’s estate by misuse of a power of attorney.

Background

[¶2.] Margaret “Peggy” Nelson and her husband owned and operated a

ranch near Aladdin, Wyoming. They had no children. After Peggy’s husband died,

she became the sole owner and operator of the ranch. Susan Rice is a great niece of

Peggy’s late husband. In the late 1990s, Susan and her husband, John Rice, moved

close to Peggy’s ranch. They claimed that as Peggy aged and was able to do less,

they helped her manage the ranch and her personal needs. On August 21, 2007,

when Peggy was 91 years old, she executed a durable power of attorney giving John

Rice (Rice) numerous powers over her personal and financial affairs. The

circumstances surrounding the execution of the power of attorney are not developed

in the record.

[¶3.] At some point, possibly in 2008, Peggy moved into an assisted living

center in Aladdin and later to a facility in Spearfish, South Dakota. Rice continued

to manage the ranch and take care of Peggy’s needs as her power of attorney. But

Peggy’s relatives began to suspect that Rice was taking advantage of Peggy and

plundering her estate.

[¶4.] In March 2010, Peggy’s nephew, John Corbett, learned that Peggy’s

dementia required her transfer to a care facility in Spearfish. Corbett and Peggy’s

niece, LaQuita Allison, decided to examine Rice’s activities more closely. According

to Corbett and Allison, Rice used his position as Peggy’s power of attorney to
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become (1) the joint owner of over $300,000 in certificates of deposit previously

owned solely by Peggy, (2) the joint owner with right of survivorship of Peggy’s

ranch, valued at $3,860,530, and (3) the owner of certain bank accounts previously

owned solely by Peggy, which allowed Rice to pay for personal loans and make

payments to himself.

[¶5.] On August 10, 2010, when Peggy was 94 years old, Allison and Corbett

petitioned the circuit court to appoint a guardian and conservator for Peggy and her

estate. The petition asserted that Peggy suffers from dementia and is unable to

take care of her needs or finances. But the bulk of the petition related to Rice’s

actions and the risk to Peggy’s estate because of his “handling of Peggy’s financial

and personal affairs.” The petitioners requested leave to file the petition without a

report evaluating Peggy’s need for a guardian and conservator, which is required by

SDCL 29A-5-306, and asked the court to waive the requirement in SDCL 29A-5-307

that the petitioners file a financial statement. The petitioners proposed the

appointment of Pioneer Bank & Trust in Belle Fourche, South Dakota, as Peggy’s

conservator and attorney Michael Trump as her guardian.

[¶6.] On August 16, 2010, the circuit court issued a notice of hearing to be

held on September 22, 2010, to address the petition for guardianship and

conservatorship. Notice was personally served on Peggy. On September 16, 2010,

Rice objected to the petition, “by and through his attorney, Scott J. Odenbach[.]”

Rice requested that the court continue the hearing “to allow Respondent to fully

address Petitioners’ claims and mount a defense thereto[.]” In Rice’s verified

objection, he insisted that he had “carefully and thoughtfully assisted [Peggy] in

safeguarding and protecting her assets[.]” Rice requested that if the court decided
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to appoint a guardian and conservator, it appoint him, “as per paragraph twenty-

one (21) of the durable power of attorney.”

[¶7.] At the hearing, Peggy did not appear, and neither the court nor the

parties discussed her absence. Rice moved for a continuance and argued that the

allegations made against him “are false,” as he had “safely, carefully, and prudently

taken care of [Peggy’s] finances.” He insisted that Peggy was competent to execute

the power of attorney and that there was no emergency necessitating an

appointment. He further claimed that Peggy would oppose the appointment of

Pioneer Bank & Trust, as she fired the bank years earlier.

[¶8.] The court denied Rice’s request for a continuance. Much of the hearing

related not to the procedural framework governing the appointment of a guardian

and conservator under SDCL chapter 29A-5, but to what could be done at that

moment to protect Peggy’s estate from Rice. Counsel for the petitioners maintained

that a guardianship and conservatorship was warranted because “we’ve made a

prima facie case to establish the guardianship — in that a power of attorney cannot

self-deal as a matter of law in South Dakota.” Ultimately, the court determined

that an appointment of a temporary guardian and conservator would best protect

Peggy. The petitioners agreed, asserting that “[i]t doesn’t have to be permanent. At

this point in time if you just look at the prima facie evidence . . . it shows self-

dealing and it shows that this property has been improperly transferred either right

now in terms of the land or will upon the death of [Peggy].”

[¶9.] On October 1, 2010, the circuit court issued an order appointing a

temporary emergency guardian and conservator for Peggy “in order to protect her

personal and financial interests.” The court declared that Peggy “lacks the capacity
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to meet her essential requirements for her health, care, safety, habilitation and

therapeutic needs without the assistance and protection of a guardian, and lacks

the capacity to manage her property and other financial affairs in order to provide

her support or defend her property from claims[.]” The court cited SDCL 29A-5-315

and appointed Pioneer Bank & Trust as her temporary conservator and Michael

Trump as her temporary guardian. The court waived the requirement that either

post a bond or security.

[¶10.] Indicating that it did not follow the “regular procedures for

appointment of a guardian or conservator,” the court found that such “may result in

significant harm to [Peggy’s] estate.” The court waived the “[o]ngoing requirements

of annual accounting and reports by the Guardian and Conservator,” but ordered

that the guardian and conservator “provide the court with monthly reports detailing

their charges to the estate for provision of their services.” 1 The court granted the

1. The record indicates that on December 22, 2010, Guardian Trump filed a
report with the court on Peggy’s current mental, physical, and social
condition. Over the next couple months, the court received and then granted
a contested motion for approval of conservator expenses, a motion for
guardianship fees, and a motion for appraisal fees, and received a contested
motion to have funds deposited with the court. Then, on March 15, 2011, the
attorney for Conservator Pioneer Bank & Trust moved for attorney’s fees in
the sum of $16,304.80. No hearing was held and no objections were received.
The court granted the request. The next major filing occurred almost a year
later when the conservator submitted its annual accounting. It requested the
following expenses for the 2011 calendar year: $13,319.80 in fiduciary fees,
$28,011.97 in attorney’s fees (which included the $16,304.80 previously
granted), $24,977.35 in attorney’s fees for the litigation against the Rices,
$5,000 in an attorney retainer for the litigation against the Rices, $4,635.73
in accounting fees (including a portion previously granted), $4,770.00
appraisal fee (previously approved), $2,337.30 in guardianship fees, and
$611.10 owed to Attorney Max Main.

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petitioners leave to file their petition without the report required by SDCL 29A-5-

306, but ordered that “a report shall now be prepared and filed with this court.”

Also waived was the requirement that petitioners file a financial statement

mandated by SDCL 29A-5-307. Finally, the court declared that the powers granted

to Rice by the power of attorney would be superseded by the order of the court.

[¶11.] On December 10, 2010, the court entered an order extending the

appointment of the temporary emergency guardian and conservator. Nothing in the

record indicates that a hearing was held before the court granted this extension.

But the order declares that the parties stipulated to the extension, and that the

court ordered the extension “for good cause shown.” Then, on February 25, 2011,

LaQuita Allison, John Corbett, Pioneer Bank & Trust, and Michael Trump

stipulated with John and Susan Rice that a permanent guardian and conservator be

appointed for Peggy, namely Pioneer Bank & Trust as the conservator and Trump

as the guardian. The court entered an order approving the stipulation and

agreement on March 1, 2011. Peggy was served with notice of the order on March

2, 2011.

[¶12.] A year later, on March 13, 2012, Rice petitioned the circuit court to

remove the appointed guardian and conservator under SDCL 29A-5-504 and

requested the court to set aside its previous orders as void under SDCL 15-6-

60(b)(4). Rice asserted that the court’s orders were without jurisdiction because no

evaluation report was filed as required by SDCL 29A-5-306. He faulted the court

for not requiring the filing of a financial statement under SDCL 29A-5-307, for not

identifying what good cause existed to support extending the temporary

appointment, for not appointing an attorney or a court representative for Peggy,
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and for eliminating the requirement that the conservator and guardian file reports

and documents as part of their appointments.

[¶13.] A hearing was held on April 9, 2012. Counsel for Pioneer Bank &

Trust conceded that no evaluation report had been filed with the court, but insisted

that the failure did not deprive the court of jurisdiction. Counsel further argued

that the court did not need to appoint an attorney to represent Peggy because Peggy

never objected to anything in these proceedings. Counsel claimed that Rice’s

petition to remove the guardian and conservator was a “red herring,” as Rice was

merely attempting to thwart the civil suit against him.

[¶14.] On May 7, 2012, the court issued findings of fact and conclusions of

law denying Rice’s petition for removal. It found that it had jurisdiction over Peggy

and her estate. It determined that Peggy was represented by Rice and Attorney

Odenbach through the agency of Rice. It recognized that an evaluation report,

required by SDCL 29A-5-306, remained to be filed. It concluded that Rice, in his

role as Peggy’s power of attorney, was empowered to stipulate to the permanent

appointments. It found that it had “the authority to waive the filing of a financial

statement referred to in SDCL 29A-5-307,” and “[t]he delay or failure by the

conservator to file a separate inventory within 90 days after appointment or to file

monthly reports with the court [was] harmless error[.]” Finally, the court found

that Rice’s removal petition “was filed to stay the proceedings” in the civil suit

against him and was “not in the best interest of [Peggy].”

[¶15.] On appeal, Rice contends that the court never acquired jurisdiction

over Peggy or the subject matter due to the court’s failure to comply with the

mandates of SDCL chapter 29A-5. Although a court’s decision to appoint a
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guardian and conservator is ordinarily reviewed for an abuse of discretion, see In re

Guardianship of Blare, 1999 S.D. 3, ¶ 9, 589 N.W.2d 211, 213, this appeal

challenges the court’s subject matter and personal jurisdiction; therefore, our review

is de novo. See Reaser v. Reaser, 2004 S.D. 116, ¶ 27, 688 N.W.2d 429, 437 (citation

omitted).

Analysis and Decision

[¶16.] Rice contends that the court’s failure to follow the mandates of the

South Dakota Guardianship and Conservatorship Act, SDCL chapter 29A-5,

extinguished the court’s “authority to bring a person alleged to be in need of

protection before the court and to take control of that person and her property.” In

particular, Rice asserts that under SDCL 29A-5-308, a court acquires jurisdiction

only when, before the hearing, the “person alleged to need protection” is served with

all three of the following: (1) the notice; (2) a copy of the petition; and (3) a copy of

the evaluation report. Because the notice given to Peggy before the hearing did not

include an evaluation report, Rice maintains that all subsequent actions by the

court were without authority or jurisdiction and must be vacated. Rice further

points to the court’s failure to appoint Peggy a lawyer or court representative under

SDCL 29A-5-309 and the lack of an evidentiary hearing under SDCL 29A-5-312.

[¶17.] “Subject matter jurisdiction is conferred solely by constitutional or

statutory provisions.” In re Koch Exploration Co., 387 N.W.2d 530, 536 (S.D. 1986).

Here, SDCL 29A-5-108 gives the court of the county in which the action is first

commenced exclusive jurisdiction over the action. Therefore, the circuit court had

subject matter jurisdiction over the guardianship and conservatorship action

concerning Peggy. The court also had personal jurisdiction when, under SDCL 29A-
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5-308, Peggy was served with notice of the petition and the hearing. The court’s

jurisdiction was not extinguished because the evaluation report was not served on

Peggy before the hearing. Under SDCL 29A-5-306, the court may grant a petitioner

leave to file the petition without the evaluation report, which was done in this case.

[¶18.] Rice claims that the court was required to remove Peggy’s guardian

and conservator under SDCL 29A-5-504. He directs us to no specific statutory

ground warranting the removal of Peggy’s guardian or conservator. Thus, the court

did not abuse its discretion when it refused to remove Michael Trump as Peggy’s

guardian and Pioneer Bank & Trust as her conservator.

[¶19.] Although the substance of Rice’s appeal is without merit, the record

before us raises many concerns over the manner in which the court and the parties

conducted these proceedings. “The appointment of a guardian and conservator is an

extraordinary intervention in a person’s life and affairs, and the [Guardianship and

Conservatorship] Act lays out standards and procedures that are designed to ensure

careful consideration [of] and respect for the rights of the subject of the

proceedings.” In re Orshanksy, 804 A.2d 1077, 1080 (D.C. 2002). It is undisputed

that neither the circuit court nor the parties followed the mandates of SDCL

chapter 29A-5. Consequently, Peggy’s rights and interests were not protected to the

extent the law requires. See generally Sally Balch Hurme & Erica Wood, Guardian

Accountability Then and Now: Tracing Tenets for an Active Court Role, 31 Stetson

L. Rev. 867 (2002). Therefore, we affirm the circuit court’s assumption of

jurisdiction and remand for the court to follow SDCL chapter 29A-5 consistent with

this opinion.

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[¶20.] An appointment may be requested by the filing of a petition “by an

interested relative, . . . or by any other interested person[.]” SDCL 29A-5-305. The

petition “shall” include specific information, see SDCL 29A-5-305, and “shall include

a report evaluating the condition of the person alleged to need protection[.]” SDCL

29A-5-306 (providing a list of required information). “[F]or good cause shown,” a

court “may grant leave to file the petition without an evaluation report.” Id. But,

after that leave is granted, “the court shall order the appropriate assessments or

examinations and shall order that a report be prepared and filed with the court.”

Id.

[¶21.] Here, interested relatives filed a petition and were granted leave to file

the petition without an evaluation report. Yet to date, no evaluation report has

been filed with the court. Had there been full statutory compliance, the court would

have learned about “the nature, type, and extent of the person’s incapacity,

including the person’s specific cognitive and functional limitations[.]” See SDCL

29A-5-306(1). Moreover, the report would have included “[e]valuations of the

person’s mental and physical condition and, . . . a description of the services, if any,

currently being provided for the person’s health, care, safety, habilitation, or

therapeutic needs and a recommendation as to the most suitable living

arrangement and, if appropriate, treatment or habilitation plan and the reasons

therefor.” SDCL 29A-5-306(2), (3). Finally, the report would have included a

“signature of a physician, psychiatrist or licensed psychologist, and the signatures

of any other individuals who made substantial contributions toward the report’s

preparation,” and “[t]he date of any assessment or examination upon which the

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report is based[.]” SDCL 29A-5-306(8), (9). An evaluation report meeting the

mandates of SDCL 29A-5-306 must be filed with the court.

[¶22.] The petitioners were also required to “file a statement of the financial

resources of the person alleged to need protection which shall, to the extent known,

list the approximate value of the real and personal estate and the anticipated

annual gross income and other receipts.” SDCL 29A-5-307. Without any statutory

authority, the court waived the filing of this financial statement. At this point,

however, Peggy’s estate has been under the management and control of her

conservator, Pioneer Bank & Trust. As her conservator, Pioneer Bank & Trust was

required to “file with the court an inventory of the real and personal estate of the . .

. protected person which has come into the conservator’s possession or knowledge.”

SDCL 29A-5-407 (listing the specific details to be included in the inventory). If this

inventory has not been filed to date, the court should order the inventory be filed

and a copy mailed to the individuals and entities specified in SDCL 29A-5-410.

[¶23.] After a petition and an evaluation report are filed, “the court shall

promptly issue a notice fixing the date, hour, and location for a hearing to take

place within sixty days.” SDCL 29A-5-308. Although the evaluation report was not

submitted with the petition, the court did fix the time and place for the hearing in

compliance with the statute. Moreover, the court gave Peggy notice of the hearing

as required by the statute.

[¶24.] But merely giving Peggy notice of the hearing is insufficient. Because

Peggy did not contest the petition and was not represented by an attorney, the court

should have “either appoint[ed] a court representative to make an investigation and

recommendation concerning the relief requested in the petition,” or “order[ed] the
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person alleged to need protection to attend the hearing on the petition.” SDCL 29A-

5-309; see SDCL 29A-5-310 (listing the duties of the court representative). The

entire proceeding was conducted in Peggy’s absence. From the record, it appears

little if any effort was made to ascertain her wishes. Yet SDCL 29A-5-312 provides

that “[t]he person alleged to need protection is entitled to attend the hearing, to

oppose the petition, to be represented by an attorney of his own choice, to demand a

jury trial, to present evidence, to compel the attendance of witnesses and to confront

and cross-examine all witnesses.”

[¶25.] The circuit court declined full compliance with SDCL 29A-5-309

because Peggy (1) did not express any desire to contest the petition, (2) did not

personally attend the hearings, (3) did not request an attorney or court

representative, and (4) was represented throughout the proceedings by Rice (who

held her power of attorney) and Attorney Odenbach, who appeared as Rice’s

attorney. During the April 2012 hearing, the court also remarked that Peggy was

represented by an attorney because Guardian Trump is a lawyer. Trump, however,

is Peggy’s guardian, appointed to protect her best interests despite her wishes. See

SDCL 29A-5-402 (responsibilities of a guardian). He is not her lawyer, who would

advocate for her wishes despite what might be in her best interests. See In re

Guardianship and Conservatorship of Stevenson, 2013 S.D. 4, ¶ 16, ___ N.W.2d ___,

___, 2013 WL 125334; In re M.R., 638 A.2d 1274, 1285 (N.J. 1994) (citing Note, The

Role of Counsel in Guardianship Proceedings of the Elderly, 4 Geo. J. Legal Ethics

855, 863 (1991)).

[¶26.] The mandates of SDCL 29A-5-309 are clear. If the protected person is

not represented by an attorney, the court shall order that the protected person
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attend the hearing or appoint a court representative to investigate the matter.

Peggy never attended the hearing and there is no evidence to support that Attorney

Odenbach represented her. Odenbach was hired by Rice to challenge the claims

made against him over his alleged actions against Peggy. The court must follow the

mandates of SDCL 29A-5-309.

[¶27.] A hearing is an essential part of a guardianship action. 2 Before an

appointment of a guardian and conservator can be made, there must exist clear and

convincing evidence of a need. SDCL 29A-5-312. Once a need is established, it is

for the court “alone” to determine “whether a guardian or conservator will be

appointed, the type thereof, and the specific areas of protection, management and

assistance to be granted[.]” Id. The “court shall consider the suitability of the

proposed guardian or conservator, the limitations of the person alleged to need

protection, the development of the person’s maximum feasible self-reliance and

independence, the availability of less restrictive alternatives, and the extent to

which it is necessary to protect the person from neglect, exploitation, or abuse.” Id.

[¶28.] Here, although Peggy’s need for a guardian and conservator seems

apparent, the stipulation to appoint a permanent guardian and conservator entered

into by the petitioners, the conservator, and the guardian along with the alleged

exploiter of Peggy’s estate, Rice, does not satisfy the court’s responsibility under

SDCL 29A-5-312. The Legislature made it the court’s duty “alone to decide”

2. In this case, the circuit court extended the temporary appointments for “good
cause shown,” without evidence of what good cause was shown. There is no
motion to extend the appointments in the record, transcript of a hearing, or
evidence to indicate that the extension was anything other than convenience.

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whether to make the appointment, to determine the type of appointment necessary,

the powers to be granted, the specific areas in need of protection, management, and

assistance, and the suitability of the proposed guardian and conservator. See id.

That SDCL 29A-5-312 was not followed in this case is further established by the

letters of guardianship and conservatorship issued by the court with respect to

Peggy. The letters state that the guardian and conservator are appointed “as set

forth in the Order of Oct 1, 2010.” Yet SDCL 29A-5-314 requires that the letters

inform Peggy of “the specific areas of protection or assistance granted to [the]

guardian” and the “specific areas of management and assistance granted” to the

conservator. Moreover, the parties’ stipulation does not identify the powers of the

guardian or conservator. Instead, the stipulation provides that the powers of the

guardian “shall remain in full force and effect,” and the powers of the conservator

“shall become full and permanent and shall continue until revoked by this court[.]”

The court must comply with SDCL 29A-5-312 and administer the guardianship to

ensure future compliance with SDCL chapter 29A-5.

[¶29.] Ultimately, we take no issue with the court’s finding that Rice’s

petition to remove the guardian and conservator was an effort to thwart the civil

suit against him. Indeed, if Rice’s petition were granted and the orders of the court

vacated, Peggy’s multimillion dollar ranch, among other assets, would ostensibly

pass to Rice and his wife upon Peggy’s death under the deed he made using his

position as Peggy’s power of attorney. But this does not excuse compliance with the

mandates of SDCL chapter 29A-5. Thus, the matter is remanded for the court to

fulfill the requirements of SDCL chapter 29A-5, including its continued

administration of the guardianship and conservatorship.
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[¶30.] Affirmed and remanded with instructions.

[¶31.] GILBERTSON, Chief Justice, and ZINTER, SEVERSON, and

WILBUR, Justices, concur.

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