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Nebraska State Bar Association NE Law Express for January 25, 2008

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Case Summaries
Power of Attorney, Powers to Distribute, Self-Distribution

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The Nebraska Supreme Court here dealt with the plenary power with regard to the powers of an attorney in fact set forth in the Nebraska Short Form Act. In particular they dealt with the question of whether that act changed the rule with regard to the fiduciary duty that an agent owes to the principal.

Archbold v. Reifenrath, 274 Neb. 894 (2008)

Supreme Court Headnotes

Equity:

1.  Appeal and Error. In an appeal of an equity action, an appellate court tries the factual questions de novo on the record and reaches a conclusion independent of the findings of the trial court, provided, however, that where credible evidence is in conflict on a material issue of fact, an appellate court considers and may give weight to the fact that the trial judge heard and observed the witnesses and accepted one version of the facts rather than another.

Principal and Agent.

1.  A power of attorney is an instrument in writing authorizing another to act as one’s agent. ••• An agent holding a power of attorney is termed an “attorney in fact” as distinguished from an attorney at law. ••• An agency is a fiduciary relationship resulting from one person’s manifested consent that another may act on behalf and subject to the control of the person manifesting such consent and, further, resulting from another’s consent to so act. ••• An agent and principal are in a fiduciary relationship such that the agent has an obligation to refrain from doing any harmful act to the principal, to act solely for the principal’s benefit in all matters connected with the agency, and to adhere faithfully to the instructions of the principal, even at the expense of the agent’s own interest. ••• Powers of attorney are by necessity strictly construed, and broad encompassing grants of power are to be discounted.

Agency:

1.  Principal and Agent. Because of the agency relationship created by a power of attorney, the authority and duties of an attorney in fact are governed by the principles of the law of agency, including the prohibition against an agent profiting in transactions in which the agent represents the principal.

Prejudgment Interest:

1.  Prejudgment interest may be awarded only as provided in Neb. Rev. Stat. § 45-103.02(2) (Reissue 2004). ••• Under Neb. Rev. Stat. § 45-103.02(2) (Reissue 2004), prejudgment interest is recoverable only when the claim is liquidated, that is, when there is no reasonable controversy as to the plaintiff’s right to recover and the amount of such recovery. This determination requires a two-pronged inquiry. There must be no dispute as to the amount due and to the plaintiff’s right to recover.

2.  Appeal and Error. Whether prejudgment interest should be awarded is reviewed de novo on appeal.

Date Filed and Case No.: January 25, 2008. No. S-06-1124.

Internet Address: http://www.supremecourt.ne.gov/opinions/2008/january/jan25/s06-1124.pdf

Court Appealed From: District Court for Cedar County: William Binkard, Judge.

Attorneys for the Appeal: David A. Domina and Claudia L. Stringfield-Johnson for Joseph F. Reifenrath and Donna Reifenrath, appellants. Thomas H. DeLay for Steven L. Archbold, Successor Personal Representative of The Estate of Alphons Reifenrath, Deceased, appellee.

Justices: Heavican, C.J., Wright, Connolly, Gerrard, Stephan, McCormack and Miller-Lerman, J.J.

Authored By: McCormack, J.

Summary: Steven L. Archbold, successor personal representative of the estate of Alphons Reifenrath. Alphons was diagnosed with terminal cancer in August 2002 and died shortly thereafter on November 1, 2002. Alphons was a bachelor and was survived by one brother, Joseph; one sister, Angela Gubbels (Angela); and his nieces and nephews. During his life, Alphons owned various parcels of real estate, some of which he retained in his name as sole owner and some of which he sold to Joseph. In addition, prior to September 2002, Alphons owned various bank accounts and certificates of deposit. Archbold, brought the present action against Joseph F. Reifenrath and his wife, Donna Reifenrath (collectively the appellants), to recover assets formerly belonging to Alphons. Archbold alleged that Joseph abused his fiduciary duty as Alphons’ attorney in fact by making gifts to himself and his family. Archbold alleged that the appellants wrongfully retained funds from Alphons’ estate, commingled funds from Alphons or Alphons’ estate, paid personal debts with those funds, and purchased property with those funds. Under the power of attorney (POA), Joseph was appointed Alphons' attorney in fact and was given plenary powers as well as all the specific and general powers set forth in the Nebraska Short Form Act (the Act), Neb. Rev. Stat. § 49-1501 et seq. (Reissue 1998). Archbold further alleged that Joseph exercised undue influence over Alphons and that the appellants wrongfully took property from Alphons and Alphons’ estate. The district court found that Joseph, while acting as Alphons’ POA, did not have authorization to make substantially gratuitous transfers of Alphons’ assets to himself and members of his family. The district court further found that any oral authorization by Alphons for Joseph to make such transfers was the result of undue influence exercised by Joseph. The appellants appealed to the Nebraska Supreme Court.

Was Joseph authorized to make substantially gratuitous transfers of Alphons’ property to himself and members of his family? The Court said that the appellants’ first three assignments of error could be consolidated into one broad question: Does the plenary power in the Act change the rule with regard to the fiduciary duty that an agent owes to the principal? The appellants argue that under the plenary power bestowed upon Joseph, Joseph was expressly provided the authorization to make substantially gratuitous transfers of Alphons’ property to himself and his family. Nebraska case law provides that in situations involving an attorney in fact, a prima facie case of fraud is established if the plaintiff shows that the defendant held the principal's power of attorney that the defendant, using the power of attorney, made a gift to himself or herself. The burden of going forward under such circumstances falls upon the defendant to establish by clear and convincing evidence that the transaction was made pursuant to power expressly granted in the power of attorney document and made pursuant to the clear intent of the donor. The Court found that the appellants misconstrue the breadth of plenary power under the Act. Because the POA in this case does not contain a specific authorization for the making of gratuitous transfers by Joseph to himself or his immediate family, the Court determined that Joseph failed to meet his burden. The Court there, affirmed the district court’s findings. As for the real estate sold to Joseph’s son, Alphons directed in his will that his real estate be sold, preferably to a family member. Here, Joseph did that by selling the property to his son. The Court determined, however, that the proceeds of that sale should not have been retained by the appellants. Rather, the proceeds should have been remitted to Alphons’ estate.

Did the district court err in awarding prejudgment interest? In their final assignment of error, the appellants contend that the district court erred in awarding prejudgment interest. Whether prejudgment interest should be awarded is reviewed de novo on appeal. The determination of prejudgment interest requires a two-pronged inquiry. There must be no dispute as to the amount due and to the plaintiff’s right to recover. While appellant did not dispute the district court’s determination that no reasonable controversy existed as to the amount of damages, the appellants argued that a reasonable controversy existed regarding Joseph’s rights to retain Alphons’ assets. The Court disagreed. They concluded that a reasonable controversy did not exist as to Joseph’s rights to retain Alphons’ assets.

Conclusion: For the reasons discussed, the Court affirmed the judgment of the district court. AFFIRMED.


Sentencing, Double Jeopardy, Habitual Criminal

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In this disciplinary proceeding, the Nebraska Supreme Court finds and adopts the referee’s findings of misconduct where an attorney had accepted money for a representation which the attorney never filed and where the attorney did not immediately return the client’s money. Due to the attorney’s failure to respond to inquiries from the counsel for discipline the Court rejected the referee’s recommendation that the discipline be a 30 day suspension, but because of positive mitigating factors imposed a 120 day suspension.

State ex rel. Counsel for Dis. v. Zendejas, 274 Neb. 829 (2008)

Supreme Court Headnotes

Disciplinary Proceedings.

1.  A proceeding to discipline an attorney is a trial de novo on the record. ••• Violation of a disciplinary rule concerning the practice of law is a ground for discipline. ••• The basic issues in a disciplinary proceeding against an attorney are whether discipline should be imposed and, if so, the type of discipline appropriate under the circumstances. ••• Each attorney discipline case must be evaluated individually in light of its particular facts and circumstances. ••• For purposes of determining the proper discipline of an attorney, the Nebraska Supreme Court considers both the attorney’s acts underlying the events of the case and throughout the proceeding. The determination of an appropriate penalty to be imposed on an attorney in a disciplinary proceeding also requires the consideration of any aggravating or mitigating factors.

2.  Proof. To sustain a charge in a disciplinary proceeding against an attorney, a charge must be supported by clear and convincing evidence.

3.  Appeal and Error. When no exceptions to the referee’s findings of fact are filed by either party in an attorney discipline proceeding, the Nebraska Supreme Court may, in its discretion, consider the referee’s findings final and conclusive.

Date Filed and Case No.: January 18, 2008. No. S-06-269.

Internet Address: http://www.supremecourt.ne.gov/opinions/2008/january/jan18/s06-269.pdf

Court Appealed From: Original action.

Attorneys for the Appeal: Kent L. Frobish for State of Nebraska ex rel. Counsel for Discipline of the Nebraska Supreme Court, relator. Edouardo Zendejas, respondent, pro se.

Justices: Heavican, C.J., Wright, Connolly, Gerrard, Stephan, McCormack and Miller-Lerman, J.J.

Authored By: Per Curiam.

Summary: On August 3, 2006, the office of the Counsel for Discipline of the Nebraska Supreme Court filed formal charges against respondent, Edouardo Zendejas. Zendejas was admitted to the practice of law in the State of Nebraska in 1991 and is authorized to practice law in several tribal courts. The formal charges set forth that Zendejas had violated the Code of professional responsibility, in particular Canon 1, DR 1-102(A)(1) (violating disciplinary rule); Canon 6, DR 6-101(A)(3) (neglecting legal matter); Canon 9, DR 9-102(b)(3) (failing to render appropriate account records to client); and DR 9-102(b)(4) (failing to promptly pay as requested by client funds that client is entitled to receive). The formal charges also alleged that Zendejas violated Neb. Ct. R. of Prof. Cond. 8.4(d) (rev. 2005) (engaging in conduct prejudicial to administration of justice), as well as his oath of office as an attorney. In his answer, Zendejas disputed these allegations and a referee’s hearing was held. After evidence was adduced, the referee found that in November 2003, Zendejas was retained by William Zuck to represent Zuck in a postconviction action in district court (Zendejas had not previously handled a postconviction action.) Zuck paid Zendejas $14,000 but Zendejas failed to file a postconviction action. The Counsel for Discipline received a letter from Zuck regarding Zendejas’ representation, in which Zuck sought a refund from Zendejas of moneys paid. After a number of letters were exchanged between Zendejas and the Counsel for Discipline over three years (including broken promises to refund the payments to Zuck and failures by Zendejas to answer questions from the Counsel for Discipline) Zuck finally was refunded. The referee concluded Zendejas’ conduct was in violation of DR 1-102(A)(1), DR 6-101(A)(3), DR 9-102(b)(3) and (4), rule 8.4(d), and his oath as an attorney. The referee recommended that Zendejas be temporarily suspended from the practice of law for a period of 30 days. No exceptions to this report were filed and on April 18, the Counsel for Discipline filed a motion for judgment on the pleadings, requesting that this court accept the referee’s recommendation and enter judgment thereon.

What discipline did the Court impose? The Nebraska Supreme Court noted that as neither party filed any written exceptions to the referee’s report, based upon the undisputed findings of fact in the referee’s report (which they considered to be final and conclusive), the Court ruled that the formal charges were supported by clear and convincing evidence. Regarding discipline, the Court considered the applicable law as well as the referee’s report and recommendation that Zendejas should be suspended from the practice of law for 30 days. However, they disagreed as Zendejas failed for nearly 2 years to file a postconviction action on Zuck’s behalf. “Such neglect is of serious concern to this court. in addition, we express concern with Zendejas’ failure to ‘promptly pay’ to Zuck funds that Zuck was entitled to receive.” Further, Zendejas repeatedly ignored requests from the Counsel for Discipline regarding his representation of Zuck. The Court noted that they have held that an attorney’s failure to respond to inquiries and requests for information from the office of the Counsel for Discipline is considered to be a grave matter and a threat to the credibility of attorney disciplinary proceedings. The Court took note that the referee did not note any aggravating factors with regard to the imposition of discipline, but did note some factors with respect to mitigation. In particular, that Zendejas’ attitude at the hearing was one of regret and remorse. The referee also stated that Zendejas has provided commendable service to his tribal community and to the legal community. Based upon its consideration of the record in this case, the Court found that Zendejas “should be and hereby is suspended from the practice of law for a period of 120 days, effective immediately.”

Conclusion: The Nebraska Supreme Court said that the motion of the Counsel for Discipline is sustained in part and in part overruled. The Court adopted the referee’s findings of fact and concluded that Zendejas has violated DR 1-102(A)(1), DR 6-101(A)(3), and DR 9-102(b)(3) and (4) of the Code of professional responsibility, and rule 8.4(d) of the Nebraska rules of professional Conduct, as well as his oath of office as an attorney. “It is the judgment of this court that Zendejas should be and hereby is suspended from the practice of law for 120 days, effective immediately.” JUDGMENT OF SUSPENSION.


Workers' Compensation, Intervention by Insurer, Timeliness

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Can an insurer intervene in a Workers’ Compensation case after it has already been decided at trial and in on appeal to the review panel of the Workers’ Compensation Court? On the facts of this case, the Nebraska Supreme Court says no.

Risor v. Nebraska Boiler, 274 Neb. 906 (2008)

Supreme Court Headnotes

Interventions.

1.  Whether a party has the right to intervene in a proceeding is a question of law. ••• It is a general principle that intervention is not authorized after trial.

Constitutional Law:

1.  Due Process. The determination of whether the procedures afforded an individual comport with constitutional requirements for procedural due process presents a question of law.

Workers’ Compensation:

1.  Appeal and Error. An appellate court is obligated in workers’ compensation cases to make its own determinations as to questions of law.

2.  Insurance: Parties. The employer’s workers’ compensation insurer is a proper party defendant in a workers’ compensation action, but it is not a necessary party to the action.6. Workers’ Compensation: Equity: Jurisdiction. No Nebraska statute grants equity jurisdiction to the Workers’ Compensation Court.

3.  Intent. The principal purpose of the Nebraska Workers’ Compensation Act is to provide an injured worker with prompt relief from the adverse economic effects caused by a work-related injury or occupational disease.

Due Process:

1.  Words and Phrases. Due process defies precise definition, but it embodies and requires fundamental fairness.

2.  Notice. Due process requires notice and an appropriate opportunity to be heard when a significant property interest has been shown.

3.  Judgments: Parties. It is a violation of due process for a judgment to be binding on a litigant who was not a party or a privy and therefore has never had an opportunity to be heard.

Actions:

1.  Parties. privity requires, at a minimum, a substantial identity between the issues in controversy and a showing that the parties in the two actions are really and substantially in interest the same.

Date Filed and Case No.: January 25, 2008. No. S-07-269.

Internet Address: http://www.supremecourt.ne.gov/opinions/2008/january/jan25/s07-269.pdf

Court Appealed From: Workers’ Compensation Court.

Attorneys for the Appeal: Joseph W. Grant for Twin City Fire Insurance Co., appellant. Brenda Spilker and Cynthia R. Lamm for Nebraska Boiler, appellee. Martin V. Linscott for James E. Risor appellee.

Justices: Heavican, C.J., Wright, Connolly, Gerrard, Stephan, McCormack and Miller-Lerman, J.J.

Authored By: McCormack, J.

Summary: Twin City Fire Insurance Co. (Twin City) appeals from the denial of its motion to intervene in a workers’ compensation action while the appeal to the review panel of the underlying award is pending. Although the review panel recognized that, through error, Twin City had only recently been notified of the action, it concluded that it lacked authority to grant the motion to intervene. Twin City appealed to the Nebraska Supreme Court.

Did the review panel err as a matter of law in refusing to grant Twin City’s request for leave to intervene? The Court said that the only issue in this case was whether Twin City had a right to intervene in the appeal of the award to the review panel when Twin City had no notice of Risor’s action prior to that time. Twin City argued that the power to allow its intervention should be inferred from § 48-168(1) and the beneficent purposes of the Workers Compensation Act. Most often, § 48-168(1) is cited for the proposition that within the confines of the Due Process Clause, the compensation court has flexibility in the admission and consideration of evidence relating to the employee claim. The Court said that this is clearly the focus of § 48-168(1), which states in full:

The Nebraska Workers’ Compensation Court shall not be bound by the usual common-law or statutory rules of evidence or by any technical or formal rules of procedure, other than as herein provided, but may make the investigation in such manner as in its judgment is best calculated to ascertain the substantial rights of the parties and to carry out justly the spirit of the Nebraska Workers’ Compensation Act.

Nevertheless, Twin City pointed out that the Act is generally to be given a liberal construction in order to carry out justly its beneficent purposes and that § 48-168(1) should be construed to allow postaward intervention by an insurer despite the fact that no other provision specifically grants this power. The Court said it was unconvinced that either § 48-168(1) or the Act’s beneficent purposes, either alone or in conjunction with one another, authorize a postaward intervention of the insurer in this case. The beneficent purposes of the Act do not concern themselves with an insurer’s interests in intervention. In the case currently before us, Fireman’s Fund believed, albeit incorrectly, that it was Nebraska Boiler’s insurer during the period in which the court ultimately determined Risor was injured. Fireman’s Fund, representing Nebraska Boiler, vigorously defended against Risor’s claim. Twin City failed to make any argument that there was fraud or collusion against it. Rather, the evidence is that Nebraska Boiler’s interests, represented by attorneys provided by Fireman’s Fund, were substantially the same as Twin City’s. As such, the Court did not find a violation of Twin City’s right to procedural due process from the fact that Twin City was not notified of Risor’s action against Nebraska Boiler and was not made a party to the proceedings before the review panel. The Court wrote that whether indemnification or any other remedy is available to Twin City was not before them in this appeal. But Risor, who was under no obligation to join insurers in his action against Nebraska Boiler, should not now have to wait for the resolution of insurance policy and other disputes regarding coverage to establish his award for workers’ compensation. “As a practical matter, an insurer is notified of the proceedings against an insured because the insured would have an interest in its insurer’s providing representation in the insured’s behalf, and because the failure to provide such notice would be a breach of its policy with the insurer. Thus, normally, the insurer’s representatives participate in the workers’ compensation action, even though the insurer may not be a party” wrote the Court. “And the date of the injury is usually not a surprise to the parties of the action, including, as alleged in this case, the employee himself. Thus, we recognize that the circumstances surrounding Twin City’s request for intervention are unique.” Nevertheless, the Court said there is no statutory or constitutional authority for allowing Twin City to intervene in a review proceeding. The review panel was correct in denying Twin City’s motion to intervene.

Conclusion: For the foregoing reasons, the Court affirmed the judgment below.

AFFIRMED.