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Estate of Dimond

December 30, 2008

ESTATE OF SCOTT W. DIMOND AKA SCOTT DIMOND, DECEASED.


APPEAL FROM THE CIRCUIT COURT OF THE SIXTH JUDICIAL CIRCUIT MELLETTE COUNTY, SOUTH DAKOTA HONORABLE LORI S. WILBUR Judge.

The opinion of the court was delivered by: Konenkamp, Justice

CONSIDERED ON BRIEFS NOVEMBER 3, 2008

[¶1.] Although never decided in South Dakota, many jurisdictions hold that, as a general rule, an unexplained transfer of money or property from a parent to a child creates a rebuttable presumption that the transfer was intended as a gift. In this case, nine months after a mother gave her son $25,000, he died. Declaring that the money was a loan, she sought reimbursement from her son's estate as an unsecured creditor. In a hearing to resolve the mother's claim, the circuit court applied the presumption of a gift and ruled that it could be rebutted only by clear and convincing evidence. We adopt the presumption, but conclude that the court erred in setting too high a standard for rebuttal. We reverse and remand.

I.

[¶2.] Scott Dimond perished in an auto accident on March 6, 2006. He left three children and assets worth $129,753.42 to cover $245,000.64 in unsecured debts. His mother, Twila Edwards, and the children's mother, Julie Dimond, petitioned the circuit court for settlement of his estate. Under the proposed settlement, Twila and Sandhill Oil Company, among other creditors, would receive a percentage of their claims. Twila claimed to have loaned her son $25,000 for "fat cattle" and listed herself as an unsecured creditor. With accrued interest at 8%, her claim totaled $27,000.

[¶3.] Sandhill objected to the proposed settlement. It asked that Twila's claim be disallowed for her failure to provide substantiation for the debt. At the hearing, Twila, her ex-husband, Mark, and Scott Dimond's daughter, Ashley, testified in support of Twila's claim. In denying the claim, the court ruled that Twila failed to rebut the presumption of a gift by clear and convincing evidence. Twila appeals asserting that the court erred when it (1) held that there was a rebuttable presumption that a gift was intended, (2) found that the transaction between Dimond and Twila was unexplained, and (3) failed to rule on her promissory estoppel claim.*fn1

II.

[¶4.] Twila argues that the circuit court erred when it held that the money she gave her son was presumptively a gift. The circuit court espoused the view, widely held in other jurisdictions, that in these circumstances a gift is presumed. Although we have never addressed the question, a considerable number of courts hold that an unexplained transfer of property from a parent to a child raises a rebuttable presumption, or inference, that a gift was intended.*fn2 See Charles C. Marvel, Unexplained Gratuitous Transfer of Property from One Relative to Another as Raising Presumption of Gift, 94 ALR3d 608 (1979) (updated 2008). Like many presumptions, this one exists to "correct the imbalance resulting from one party's superior access to the proof" and to overcome "the difficulties inherent in proving that the more probable event in fact occurred." Edward W. Cleary, McCormick on Evidence § 343, 806-807 (2ded 1972).

[¶5.] We adopt the majority view that transfers of property or money from parent to child are presumptively gifts. Consequently, as the party seeking repayment of a loan against the estate, Twila had the burden of going forward with evidence sufficient to overcome the presumption, as well as the ultimate burden of proving the validity of the loan. See Matter of Howard, 434 SE2d 254, 258 n7 (SC 1993) (citing In re Estate of Krueger, 455 NW2d 809 (Neb 1990)). Evidence offered at the hearing showed that Twila voluntarily gave her son $25,000 by personal check without notation on the check or other documentation. The check was processed at Twila's bank on June 30, 2005. Stamped on the back of the check was the following: "PAY TO THE ORDER OF WELLS FARGO BANK, NA WHITE RIVER, SD FOR DEPOSIT ONLY SCOTT DIMOND DBA DIMOND OIL. . . ."

III.

[¶6.] In its ruling, the circuit court, relying on appellate decisions from Illinois and Washington, declared that the "presumption [of a gift] can only be overcome by clear and convincing evidence." See In re Marriage of Wanstreet, 847 NE2d 716, 721 (IllCtApp 2006); In re Estate of Miller, 143 P3d 315 (WashCtApp 2006). Under this standard, courts require proof that is certain, definite, reliable, and convincing, leaving no doubt on the intention of the parties. Estate of Miller, 143 P3d at 320 (citation omitted); Daly v. Lanucha, 81 A2d 826, 828 (NJSuperCt 1951) (citations omitted). While we have said that "when a claim of a gift is not asserted until after the death of the alleged donor, the evidence must be clear and convincing of every element requisite to constitute a gift," such rule will not apply to the presumption here. See In re Estate of Fiksdal, 388 NW2d 133, 135 (SD 1986) (emphasis added) (citation omitted). Twila seeks not to prove a gift, but to overcome the presumption of one.

[¶7.] South Dakota's rule on presumptions in civil cases provides:

In all civil actions and proceedings, unless otherwise provided for by statute or by chapters 19-9 to 19-18, inclusive, a presumption imposes on the party against whom it is directed the burden of going forward with evidence to rebut or meet the presumption, but does not shift to such party the burden of proof in the sense of the risk of nonpersuasion, which remains throughout the trial upon the party on whom it was originally cast. When substantial, credible evidence has been introduced to rebut the presumption, it shall disappear from the action or proceeding, and the jury shall not be instructed thereon.

SDCL 19-11-1 (Rule 301). A subject of strong criticism, the "substantial, credible evidence" language in the last sentence was appended by South Dakota to what was essentially the federal version of Rule 301.*fn3 According to Professor Larson, this undefined phrase "injects added uncertainty into the ...


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