CAROLYN STEPP, EXECUTRIX OF THE ESTATE OF EDGAR DAILY STEPP, DECEASED v. BOB HALSEY; SHIRLEY COOK; JONES A. HALSEY; ROSE PERKINS; HAZEL EAKINS; BLANCHE COOK; GENEVA BOGLE; ELLIS HALSEY; CLAY HALSEY; LESTER HALSEY; WADE HALSEY; AND GENEVA BOGLE, AS EXECUTRIX OF THE ESTATE OF BEULAH STEPP
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RENDERED: August 8, 2003; 10:00 a.m.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2002-CA-000879-MR
CAROLYN STEPP, EXECUTRIX
OF THE ESTATE OF EDGAR
DAILY STEPP, DECEASED
APPELLANT
APPEAL FROM PULASKI CIRCUIT COURT
HONORABLE WILLIAM T. CAIN, JUDGE
ACTION NO. 98-CI-00120
v.
BOB HALSEY; SHIRLEY
ROSE PERKINS; HAZEL
GENEVA BOGLE; ELLIS
LESTER HALSEY; WADE
AS EXECUTRIX OF THE
COOK; JONES A. HALSEY;
EAKINS; BLANCHE COOK;
HALSEY; CLAY HALSEY;
HALSEY; AND GENEVA BOGLE,
ESTATE OF BEULAH STEPP
APPELLEES
OPINION
AFFIRMING
** ** ** ** ** ** ** **
BEFORE:
BUCKINGHAM, DYCHE, AND JOHNSON, JUDGES.
DYCHE, JUDGE:
Carolyn Stepp, the executrix of the estate of
Edgar Daily Stepp (Daily),1 appeals from an order of the Pulaski
Circuit Court dismissing a complaint seeking to invalidate the
will of Daily’s deceased wife, Beulah Stepp (Beulah).
The case
was previously before this Court and, on that occasion, was
1
The complaint in this case was originally filed by Daily. Daily died on
April 20, 2001, and Carolyn was subsequently substituted as plaintiff.
remanded for trial on Daily’s claim that the appellees exerted
undue influence upon Beulah when she executed a will effectively
disinheriting Daily and leaving her individual property to her
siblings.
Upon remand appellant sought to amend the complaint to
include additional allegations of undue influence associated
with (1) the appointment of Bob Halsey as Beulah’s attorney in
fact, and (2) the transfer of financial assets held jointly by
Daily and Beulah with a right of survivorship to individual
property accounts which would be distributed to Beulah’s
siblings under the will.
Because appellant was not entitled to
amend her complaint to state new causes of action on remand, and
because if her challenge to the will were successful the estate
would not receive any additional distribution above what has
already been distributed to Daily and/or the estate pursuant to
Daily’s prior renunciation of the will, we affirm.
Daily and Beulah were married in 1942.2
No children
were born of the marriage. Over the course of the marriage,
Daily and Beulah built savings amounting to more than two and a
half million dollars.
The bulk of this money was invested in
certificates of deposit (CDs) at three banks in Somerset,
Kentucky.
They also had a joint checking account with a balance
2
In setting forth the facts and early procedural history of the case we rely
heavily upon the Opinion from the prior appeal. See Stepp v. Halsey, Case
No. 1999-CA-001625-MR, Opinion rendered January 19, 2001.
2
of approximately $22,000.00 as of November 3, 1997.
The
accounts were held jointly by Daily and Beulah with a right of
survivorship.
In addition, Daily and Beulah owned residential
property in Somerset and a farm in Indiana.
For nearly all of
the marriage, neither Daily nor Beulah had wills.
Beulah was 78
years old as of the date of her death, while Daily was 93.
In May 1997, Beulah was diagnosed with a cancerous
tumor in her brain.
She underwent surgery to remove the tumor
and at that time her physicians thought the operation had been a
success.
Initially, Beulah returned home after the operation,
but soon after, she went to stay with her step-niece, Shirley
Cook.
In late October 1997, Beulah’s health began to decline
again.
Following several tests, her physicians advised Beulah
and her family members to get her affairs in order.
Several
significant transactions occurred shortly thereafter.
First, on
November 5, Beulah executed a durable power of attorney naming
her brother Bob Halsey as her attorney in fact.
On the same
day, she executed a will and named her sister Geneva Bogle as
executrix.
The will specifically excepted any property which
was held jointly with another person with a right of
survivorship.
The will left Daily the sum of $1.00 and
3
requested that he not contest the will.
Beulah left the
remainder of her estate to her brothers and sisters.3
Immediately following his appointment as Beulah’s
attorney in fact, among other things, Bob Halsey visited several
Somerset banks and removed approximately half of the funds that
were held in the CDs.
These funds were transferred to new CDs
held solely by Beulah with no survivorship.
The new CDs and
Beulah’s will were placed in a safe deposit box, with access
provided only to Beulah and Bob Halsey.
Beulah’s health continued to deteriorate and she died
on December 26, 1997.
Pursuant to the will, Geneva Bogle was
named as executrix of the estate, and the will was admitted to
probate shortly thereafter.
On February 11, 1998, Daily
renounced Beulah’s November 5, 1997, will and elected to receive
the share of his deceased wife’s estate as provided by KRS4
392.020 and KRS 392.080.
Also on February 11, 1998, Daily instituted this
action to challenge the will based upon undue influence and lack
of testamentary capacity.
He also asserted three other causes
of action against Cook and the beneficiaries under the will:
(1) interference with a contractual relationship; (2)
interference with a prospective economic advantage; and (3)
3
Jones A. Halsey, Rose Perkins, Hazel Eakins, Blanche Cook, Geneva Bogle,
Ellis Halsey, Clay Halsey, Bob Halsey, Lester Halsey, and Wade Halsey.
4
Kentucky Revised Statutes.
4
conversion. Following discovery, the action was set for a jury
trial. However, at the close of Daily’s case, the trial court
granted a motion for directed verdict and dismissed all of the
counts.
Daily subsequently appealed to this Court.
On January 19, 2001, in Case No. 1999-CA-001625-MR,
this Court rendered an Opinion affirming the trial court’s
dismissal of Daily’s claims alleging interference with a
contractual relationship, interference with a prospective
economic advantage, and conversion, and the will contest claim
alleging lack of testamentary capacity.
We reversed and
remanded for a new trial, however, on the issue of whether
Beulah’s siblings had persuaded her to execute the will by means
of undue influence.
Significant to the issues in this appeal,
the Opinion also stated, in dicta, “[it] is not clear why Daily
chose to assert these claims [the claims of interference with a
contractual relationship, interference with a prospective
economic advantage, and conversion], rather than to seek to set
aside the transfer of assets based upon undue influence.”
On April 20, 2001, Daily died.
Carolyn Stepp, the
wife of Daily’s nephew, was named executrix of his estate.
By
order entered May 29, 2001, Carolyn was substituted as the
Plaintiff in the case.
On May 10, 2001, Carolyn filed a motion to amend her
complaint.
On May 29, 2001, over appellees’ objection, the
5
trial court granted appellant’s motion to amend, but further
granted the appellees twenty days following the filing of the
amended complaint to respond.
On June 14, 2001, appellant filed her amended
complaint.
The amended complaint, among other things, for the
first time asserted a claim alleging that Bob Halsey’s
appointment as attorney in fact had been procured by undue
influence and that, consequently, the November 1997 transfers of
assets pursuant to the power of attorney should be declared
void.
Alternatively, the amended complaint alleged that Beulah
had made or approved the transfers as a result of undue
influence.
By bringing these claims appellant sought to restore
the financial assets transferred to Beulah’s individual asset
accounts, which would pass to the siblings under the will, back
to the status of joint survivorship accounts, which would have
passed to Daily upon the death of Beulah.
On July 2, 2001, appellees filed their answer
objecting to the amended complaint insofar as the amendments
sought to litigate issues in addition to a challenge to the will
based on undue influence.
Appellees argued that this Court’s
January 19, 2001, Opinion limited the proceedings on remand to
the sole issue of whether Beulah’s will was a result of undue
influence.
6
On October 19, 2001, pursuant to CR5 12.02(f),
appellees filed a motion to dismiss for failure to state a claim
upon which relief can be granted.
The motion again alleged that
the only issue remaining for litigation on remand was
appellant’s claim of undue influence as relates to the validity
of Beulah’s November 5, 1997, will.
The motion further asserted
that in light of Daily’s renunciation of the will, no relief
could be granted even if Beulah’s will were to be declared
invalid because, in that event, pursuant to the intestate
distribution rules as set forth in KRS Chapter 91, Daily’s share
of the estate would be exactly the same distribution as he had
already collected as a result of his renunciation of the will.
On January 2, 2002, the trial court entered an order
granting appellees’ motion to dismiss.
The order agreed with
appellees that the only issue before the trial court was whether
Beulah’s will was a product of undue influence.
As there was no
dispute that if the will were invalidated Daily’s estate would
be entitled to the same amount of Beulah’s estate that Daily had
already received as a result of his renunciation of the will,
the trial court granted appellees’ motion to dismiss.
The trial
court subsequently overruled appellant’s motion to alter amend
or vacate.
5
This appeal followed.
Kentucky Rules of Civil Procedure.
7
Appellant contends that the trial court erroneously
granted appellees’ motion to dismiss for failure to state a
claim upon which relief can be granted because, following
remand, it was permissible for her to pursue a claim that the
appointment of Bob Halsey as Beulah’s attorney in fact and the
November 1997 transfer of assets had been procured by undue
influence.
Appellant contends that if this claim succeeds, then
the result of invalidating the will would not be the same as the
effect of Daily’s renunciation of the will because the
nullification of the asset transfers would result in the
restoration of the assets to joint survivorship account status
resulting in no estate for distribution to Beulah’s siblings
under the will.6
Citing Schrodt’s Ex’r v. Schrodt, 189 Ky. 457, 225
S.W. 151 (1920), appellees argue that, following remand,
appellant was not entitled to amend her complaint to allege
undue influence with respect to the appointment of the attorney
in fact and the asset transfers because, with reasonable
diligence, appellant’s predecessor, Daily, could have raised the
issue on the occasion of the first trial.
We agree.
Schrodt’s Ex’r placed squarely before the former Court
of Appeals the issue in this case – the circumstances under
6
Appellant agrees that unless the November 1997 transfers are nullified, the
mere invalidation of the will would not result in additional distributions to
the estate above the amounts already collected by Daily as a result of his
renunciation of the will.
8
which a party may interject new issues into the case following a
remand by an appellate court.
Schrodt’s Ex’r set forth the rule
as follows:
[W]hen a case goes back from this court for
a new trial, the situation of the parties
and the condition of the case is the same as
if the trial court, in place of this court,
had granted a new trial, subject, however,
to such directions as this court may have
given concerning the manner in which the
case shall be retried, and so the action of
the trial court in permitting either of the
parties to introduce into the case for the
first time a new and material issue will not
be interfered with by this court unless it
appears that in so doing the trial court
abused its broad discretion. Enc. Pleading
& Practice, vol. 1. p. 489.
But the right of the trial court to permit
new issues to be brought into the case after
it has been sent back by this court for a
retrial or when a new trial is granted
should not be extended to the party who
succeeds in obtaining a new trial or in
securing a reversal with directions for a
retrial unless it is made to appear that the
new issues sought by such party to be
brought into the case could not in the
exercise of reasonable diligence on his part
have been put into the case on the first
trial.
If the rule were otherwise, litigation would
be interminable and new trials or retrials
would be without number, first upon one
ground and then upon another, and parties
would be encouraged to split up their rights
of action or causes of defense, presenting
only some of them in one trial, while
holding back the other for service at a
future time.
. . . .
9
When the parties go to trial in the circuit
court, each should put into the case every
cause of action or defense that in the
exercise of reasonable diligence is
available, and that he desires to rely on,
and the one failing to do this cannot, when
a new trial or a retrial is secured on his
motion, thereafter inject into the case a
new issue that in the exercise of reasonable
diligence on his part might have been
disposed of on the first trial.7
Schrodt’s Ex’r, 189 Ky. at 463-464, 225 S.W. at 153 –
154 (emphasis added).
Here, appellant’s predecessor, Daily, brought the
first appeal and won a new trial over the objection of
appellees.
Because Daily, with reasonable diligence on his
part, could have raised the undue influence issue with respect
to the power of attorney and the transfer of assets upon the
occasion of the first trial, the above rule prohibits appellant
from bringing in those issues upon retrial.
Appellant seeks to avoid the rule by arguing that the
claims of undue influence with respect to the naming of an
attorney in fact and the November 1997 asset transfers are not
new issues but rather, in actuality, were raised in the original
complaint.
However, this argument is inconsistent with
arguments appellant herself presented to the trial court when
7
While Schrodt’s Ex’r, 225 S.W. at 152, refer to the now superceded Section
134 of the Civil Code of Procedure, the current Rules of Civil Procedure
applicable to amending pleadings do not contain provisions inconsistent with
Section 134 so as to raise doubt about the continued precedential soundness
of the holding in Schrodt’s Ex’r. See CR 15.01, CR 15.02, and CR 15.04.
10
arguing against appellees’ motion to dismiss.
In her
“Plaintiff’s Response to Defendant’s Motion to Dismiss” filed on
November 26, 2001, appellant stated as follows:
However, t[he] Amended Complaint did assert
a “new” cause of action suggested by the
Court of Appeals. That cause being a cause
of action of “undue influence” in the
procurement of the power of attorney to Bob
Halsey and an action to set aside the
transfer of assets based upon undue
influence. . . . However, the “new” cause
of action can be asserted so long as it is
not prohibited by the relevant statute
related to limitation of actions.
Specifically, the provision of the decision
of the Court of Appeals entered in this
action on January 19, 2001 upon which the
plaintiff relies is the first full paragraph
on page 7 and reads as follows:
“It is not clear why Daily chose to assert
these claims, rather than to seek to set
aside the transfer of assets based upon
undue influence.”
This sentence is certainly an indication
that an appropriate cause of action related
to the facts, events and occurrences of this
action is to seek to set aside the transfer
of assets based upon undue influence. This
is exactly what the Amended Complaint seeks
to do. As the Court of Appeals has
observed, this cause of action was not
asserted or litigated in the previous
litigation. Therefore, unless it is
prohibited to be asserted by a limitation of
action, it is appropriate to be litigated
now.
(Emphasis added.)
11
Similarly, in her motion to alter, amend, or vacate
filed on January 7, 2002, appellant argued as follows:
The plaintiff’s claim is directly described
in the decision of the Court of Appeals on
page 7 of the decision wherein the court
said, “It is not clear why Daily Chose [sic]
to assert these claims rather than to seek
to set aside the transfer of assets based
upon undue influence.”
This cause of action described by the Court
of Appeals was not litigated before this
court previously, was not dismissed by this
court, was not an issue in the Court of
Appeals (who specifically found by
implication that it was not litigated in the
trial court) and has now been raised in the
Amended Complaint as a “new” cause of
action. As previously indicated as a new
cause of action the only basis upon which
the plaintiff should not be able to raise
such a claim is the applicable statute of
limitations. KRS 413.120 or KRS 413.160 are
the appropriate statutes to look to in this
matter and reference thereto clearly
indicates that this new cause of action is
not barred by time.
(Emphasis added.)
After appellees cited Schrodt’s Ex’r, supra, in their
response to appellant’s motion to alter, amend, or vacate,
appellant, for the first time, after having previously argued
just the opposite, adopted the position she now assumes upon
appeal, namely, that her amendments to the complaint did not
amount to a new cause of action.
12
In support of this argument appellant cites us to
paragraph 17 of the original complaint.
However, that
paragraph, while alleging that appellees “exercise[d] undue
influence to obtain absolute control over Beulah Stepp’s
business and personal affairs,” does not specifically seek to
nullify either the appointment of Bob Halsey as attorney in fact
or the November 1997 transfers.
Moreover, appellant concedes in
her brief that “[u]nfortunately the plaintiff did not argue this
undue influence in the creation of Beulah’s Estate as a separate
cause of action [in the original complaint].”
We agree with this Court’s Opinion of January 19,
2001, and appellant’s original position before the trial court,
that the amended complaint, in seeking to challenge the power of
attorney and asset transfers on the basis of undue influence,
states new causes of action.
As previously noted, pursuant to
Schrodt’s Ex’r, this is not permissible.
Appellant concedes that, absent the restoration of the
November 1997 transfers to right of survivorship accounts, the
effect of invalidating the will would result in the same
distribution as the distribution received by Daily as a result
of his renunciation of Beulah’s will.
As the November 1997
transfers cannot now be litigated, it would serve no purpose to
litigate the validity of the will.
13
The trial court dismissed appellant's complaint for
failure to state a claim upon which relief can be granted
pursuant to CR 12.02.
A motion for dismissal for failure to
state a claim should only be granted if it appears the pleading
party could not prove any set of facts in support of his claim
that would entitle him to relief.
Pari-Mutuel Clerks' Union of
Kentucky, Local 541, SEIU, AFL-CIO v. Kentucky Jockey Club, Ky.,
551 S.W.2d 801, 803 (1977).
Since upon retrial, even if appellant succeeded in
invalidating Beulah’s will the estate would not be entitled to
any more than has already been distributed as a result of
Daily’s renunciation of the will, the trial court properly
dismissed the case for failure to state a claim upon which
relief can be granted.
For the foregoing reasons, the judgment of the Pulaski
Circuit Court is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEES:
Ralph D. Gibson
Burnside, Kentucky
Susan J. Ham
Benny E. Ham
Somerset, Kentucky
14
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