Russ Ex Rel. Schwartz v. Russ

734 N.W.2d 874 (2007)

Purchase the Printed Copy at bsmsphd.com

Nature of the Case

To access this section all you need to do is click here and register.

Facts

Johnnie suffered a stroke and had health problems. She moved in with her son, D, and his wife, Doris, where she remained for the next nine years. Johnnie and D opened a joint bank account into which they agreed to deposit all of Johnnie's income. This was monthly social security benefits, a City of Milwaukee pension payments, and a small amount of oil royalties. On February 26, 1999, Johnnie executed a durable Wisconsin Basic Power of Attorney for Finances and Property. D was her agent. Johnnie granted D all the powers on the first page of the form, authorizing him to pay her bills and manage her bank accounts. The second page was left blank. She did not authorize D to be compensated for his services or to have general authority, which would allow him to make gifts. She also did not require D to provide her with a periodic accounting. In March of 2001, Johnnie was admitted to a hospital, and later a nursing home. On October 10, 2002, the circuit court declared Johnnie incompetent, appointed P as Johnnie's guardian, and terminated the durable POA. The durable POA was terminated. P sued D seeking recovery of funds that D withdrew from the joint account between March 1999 and April 2002, while he was her POA agent, for expenses related to himself, his business, and his wife. P alleged that D breached his fiduciary duty as her POA agent. During the contested period, $45,172.44 of Johnnie's funds were deposited into the joint account. The total amount of checks written from the joint account for the benefit of D was $ 34,379.91. P claimed that because the POA did not authorize D to make gifts or be compensated, it did not permit him to self-deal. D argued that because the funds in a joint account belong to all account holders under Wis. Stat. § 705.03, he was entitled to spend the money, regardless of his role as Johnnie's POA agent. D argued that any money he used for his own benefit was offset by the value of the care he had provided Johnnie. The court ruled that D had a fiduciary duty to prevent Johnnie's funds from being deposited into a joint account to which another party had access. The court altered the decision by setting aside the summary judgment and dismissing Johnnie's claim on the merits. D had assumed the fiduciary duty 'to take care of' Johnnie, and that he had not breached this duty. Johnnie had willingly agreed to her living arrangement, including D's use of the joint account. The court recognized that the parties failed to execute a POA document that accurately reflected their intentions. The court applied the equitable doctrine of mutual mistake to reform the POA document to authorize D to have free use of Johnnie's money in the joint account. P appealed. The court of appeals certified the following three issues to this court: (1) Whether the fiduciary duty of a POA agent, pursuant to Wis. Stat. § 243.10, prevents the agent from using the principal's funds for the agent's personal use when such funds have been deposited into a joint checking account, inasmuch as joint account holders do not owe each other any duty under Wis. Stat. § 705.03, and whether a POA constitutes 'clear and convincing evidence of a different intent' under § 705.03? (2) Whether a POA document may be reformed on grounds of mutual mistake, based on: (1) extrinsic evidence of the principal's intent; (2) the lack of an accounting requirement in the POA; or (3) the fact that the principal and agent lived in the same household in a familial relationship, to effectively overcome the fiduciary duty inherent in the POA? (3) Whether a POA principal may be equitably estopped from enforcing the agent's fiduciary duty not to self-deal because the principal and agent lived in the same household in a familial relationship?