DocketNumber: Nos. 36206-6-II; 36213-9-II; 36603-7-II
Citation Numbers: 146 Wash. App. 309
Judges: Bridgewater, Brintnall, Houghton, Quinn
Filed Date: 8/5/2008
Status: Precedential
Modified Date: 8/12/2021
¶1 David Frank appeals from the trial court’s order declaring that article VII, section 2 of Kenneth
FACTS
¶2 Kenneth and Catherine Frank established the Foundation on December 30, 1993, as a Washington nonprofit corporation, organized under chapter 24.03 RCW. Initially, Kenneth and Catherine sat on the Foundation’s board of directors. The Foundation qualified under Internal Revenue Code (IRC) section 501(c)(3) and thus was exempt from federal income tax under IRC section 501(a). There is some evidence that Kenneth and Catherine established the Foundation for the tax benefits. Nonetheless, the articles of incorporation indicate that Kenneth and Catherine estab
¶3 At the time they established the Foundation, Kenneth and Catherine Frank, together with their son David, owned a full section (640 acres) of Mason County land, commonly known as Cranberry Lake.
¶4 Meanwhile, on August 30, 1996, Kenneth and Catherine executed substantially identical wills.
All of my interest in Section 28, Township 21 North, Range 3 West, commonly known as Cranberry Lake, I give to my wife, provided she survives me by a period of thirty (30) days. In the event that she fails to survive me, or survives me and dis*315 claims, my interest in this property shall be distributed to the Frank Family Foundation referenced in Article VIII below.
CP (No. 36206-6-II) at 240.
¶5 Kenneth and Catherine properly executed a first codicil dated October 2, 2000, a second codicil dated July 8, 2002, and a third codicil dated August 20, 2003. The codicils made substantial changes to the wills, including provisions affecting distribution of other items of real property, but none of the codicils affected distribution of Cranberry Lake. Kenneth and Catherine named David as their personal representative should they not survive each other by 30 days. They also named David to be the residual beneficiary.
¶6 At some point, the Internal Revenue Service (IRS) and the Foundation’s attorneys began corresponding about the Foundation’s tax classification. It is unclear how or why this correspondence began. But the correspondence clarified certain requirements under the IRC that the Foundation had to comply with to qualify under its intended tax-exempt classification. One such requirement involved personal use of Cranberry Lake. To qualify as a private foundation under the IRC, the Foundation had to restrict personal use of the property.
¶7 In light of this information from the IRS, the Foundation board began to think about how to deal with management of the cabin and property after Kenneth’s and Catherine’s eventual deaths. Kenneth and Catherine were pondering the same question. In 2003, Kenneth sent a letter to the board, inquiring about the legal use of the cabin after his eventual death. The board responded that the Frank family would likely be able to use the property if there was some reciprocal benefit to the Foundation. It stated that the family could continue to use the property, but they would have to deal with the board in terms of access and such.
¶8 Kenneth and Catherine, who had already sought independent counsel to investigate the Foundation’s tax status and ramifications, became even more concerned. In
¶9 On December 14, 2003, Kenneth and Catherine sent a letter addressed to the Foundation directors, requesting their resignation.
¶10 David presented the board with two powers of attorney, one that Kenneth executed and one that Catherine executed. The board then provided David an opportunity to speak at the meeting. According to board members, David expressed that the Foundation was not in the best interest of the Frank family; he sought to redeem Cranberry Lake from the Foundation; and he hoped to retire on the property and run it as a tree farm. The board was concerned that David was exercising influence over his elderly parents, that he desired to oust the board, and that he sought to redeem Cranberry Lake for his personal benefit.
¶11 On June 11, 2004, the Foundation held another board meeting and provided notice to all the directors, including Kenneth and Catherine. Kenneth and Catherine did not attend, nor did their counsel or David. Nevertheless, the board unanimously voted to remove Kenneth and Catherine from their positions as directors. In doing so, the board members expressed concern that Kenneth and Catherine could not continue to function effectively as board members due to their advanced age. At the time, Kenneth was in his late 90s and Catherine was in her late 80s.
¶13 In the negligence action, the Franks alleged that the professional defendants assisted Kenneth and Catherine in the conveyance of Cranberry Lake to the Foundation. They further alleged that through breach of duty, misrepresentation, or otherwise, the professional defendants induced Kenneth and Catherine to create the Foundation and convey Cranberry Lake to it. The Franks sought damages against the professional defendants for their alleged negligent misconduct.
¶14 The Franks additionally sought rescission of the deeds conveying Cranberry Lake to the Foundation. They alleged that the Foundation breached fiduciary duties owed, for example, by allegedly failing to comply with state law disclosure obligations, failing to timely qualify as a private operating foundation under federal law, and failing to carry on significant charitable activities. The Franks sought damages from the Foundation for these alleged breaches of fiduciary duties. They also sought an order to remove the Foundation directors from the board.
¶15 Kenneth died on November 15, 2005. Catherine died a few weeks later, on December 3, 2005. On December 30, 2005, David offered Kenneth’s last will and testament, dated August 30, 1996, for probate in Mason County, including the three codicils. On January 20, 2006, he offered Catherine’s last will and testament, also dated August 30,1996, and the three codicils to Mason County for probate. The court appointed David personal representa
¶16 On November 13, 2006, the Foundation filed petitions in both Kenneth’s and Catherine’s probates under the Trust and Estate Dispute Resolution Act (TEDRA),
¶17 In a consolidated hearing on February 5, 2007, the trial court heard arguments on the probate and negligence matters. It granted the Foundation’s petitions, declaring that Cranberry Lake would vest in the Foundation under article VII, section 2 of the wills. Based on the probate decision, the trial court granted the Foundation’s motion for summary judgment, finding that David, as personal representative and as an individual and/or marital community, lacked standing to seek a rescission of the Cranberry Lake conveyances. The trial court denied all other motions.
¶18 David, as personal representative, timely filed a notice of appeal in the probate matters on April 4, 2007. Thereafter, he filed a motion for entry of final judgment
ANALYSIS
¶19 David appeals the trial court’s order granting the Foundation’s petition in the probate matter. He also appeals the trial court’s order granting summary judgment dismissing his rescission claims against the Foundation in the negligence action. We address each claim in turn.
I. Probate Matter and Ademption
¶20 The trial court granted the Foundation’s petition, finding that article VII, section 2 of Kenneth and Catherine’s wills were not adeemed as a matter of law. We review rulings on issues of law de novo. Bank of Am., NA v. Prestance Corp., 160 Wn.2d 560, 564, 160 P.3d 17 (2007).
¶21 “Ademption” occurs when a testator parts with the specific subject of a legacy during his lifetime, rendering the legacy inoperative. In re Estate of York, 133 Ohio App. 3d 234, 239, 727 N.E.2d 607 (1999). It has two distinct meanings in modern jurisprudence. 6 William J. Bowe & Douglas H. Parker, Page on The Law of Wills § 54.1, at 265 (rev. treatise 2005). First, ademption by satisfaction occurs when a testator, during his lifetime, makes a gift or provides a substitute for a bequeathed item, evidencing an intention to revoke or cancel the bequest.
A. Timing of the Foundation’s Interest in Cranberry Lake
¶23 David first focuses on the timing and execution of the wills and inter vivos deeds conveying Cranberry Lake to the Foundation. He contends that article VII, section 2 of the wills adeemed because the Franks transferred a significant portion of Cranberry Lake to the Foundation on December 23, 1997, 15 months after Kenneth and Catherine Frank executed their wills. But this argument disregards the facts and ignores the relevant after-acquired-property clause included in the 1994 deed.
¶24 Washington’s after-acquired-title statute permits a grantor to convey its future interest in property through a deed containing an after-acquired-title clause. RCW 64.04-.070; see Erickson v. Wahlheim, 52 Wn.2d 15, 17, 319 P.2d 1102 (1958). After-acquired-title clauses allow a grantor to convey a future title even though he does not hold title when he executes the deed. 17 William B. Stoebuck & John W. Weaver, Washington Practice: Real Estate: Property Law § 7.8, at 485 (2d ed. 2004). This is a well-established principle in Washington; it is also precisely what happened in this case.
¶26 The fact that Kenneth and Catherine later recorded another deed conveying the remaining interest to the Foundation in December 1997 is irrelevant. The Foundation had already acquired the Franks’ interest in Cranberry Lake as of January 1995. Thus, the Foundation had already acquired 100 percent interest in Cranberry Lake before Kenneth and Catherine executed their wills, including the Cranberry Lake devise contained in article VII, section 2, on August 30, 1996. It is on this basis that we hold article VII, section 2, devising Cranberry Lake to the Foundation, was not adeemed.
B. Ademption Prior to Execution of Wills
¶27 David alternatively contends that “ademption must occur before the will is made.” Br. of Appellant (No. 36206--6-II) at 20. He therefore reasons that the Cranberry Lake devise, under article VII, section 2 of the wills, adeemed.
¶28 Generally, a legacy is not adeemed by events that occur before the testator executes the will. W.W. Allen, Annotation, Satisfaction or Ademption of General Legacy by Inter Vivos Gift, Transfer, or Payment to the Legatee or Another, 26 A.L.R.2d 9, 21 (1952) (citing cases). But a few courts have applied ademption to cases in which the facts claimed to have destroyed the bequest occurred before execution of the will at issue. Frequently, these cases involve a mistake, wherein the testator attempts to make a
¶29 In Keegan, the ademption issue involved shares of stock. The testatrix’s brother died intestate, leaving her, among other assets, 39 shares of stock in American Telephone and Telegraph Company. Keegan, 322 Mass, at 159. The personal representative transferred the shares into the testatrix’s name and subsequently sold them. Keegan, 322 Mass, at 159. The testatrix endorsed the check for the proceeds to the personal representative, who then put the cash in his deposit box. Keegan, 322 Mass. 159. Months later, the testatrix executed her will, wherein she bequeathed “ ‘all my stock in the American Telephone and Telegraph Company.’ ” Keegan, 322 Mass, at 159. The testatrix then died within three months of executing her will. Keegan, 322 Mass, at 159.
¶30 The highest court in Massachusetts impliedly held that the legacy of the American Telephone and Telegraph Company stock had adeemed. Keegan, 322 Mass, at 160. The testatrix owned no shares of the stock at the time of her death, nor did the legatee acquire an interest under the will in the stock or proceeds of the sale. Keegan, 322 Mass, at 160. The court emphasized that the estate should be administered and settled in accordance with the will provisions, even though the testatrix may have forgotten that she did not own the shares at the time she executed her will. Keegan, 322 Mass, at 160. In other words, the court applied ademption because it was likely that she mistakenly bequeathed the stock in her will, given that she had little to no control over the stocks during her lifetime. Keegan, 322 Mass, at 160.
¶31 Likewise, in In re Pearson’s Will, 182 N.Y.S.2d 129 (Sur. Ct. 1958), petition denied, 19 Misc. 2d 833,185 N.Y.S.2d 971 (Sur. Ct. 1959), the surrogate’s court invoked ademption because the testatrix mistakenly bequeathed shares of stock she did not own when she executed her will. There, the testa
¶32 The surrogate’s court held that the stock from the first insurance company bequeathed to the first legatee was specific. It found that the testatrix owned no such stock when she executed her will. Pearson, 182 N.Y.S.2d at 131. The surrogate’s trial court then noted that despite arguments asserted, there was insufficient evidence showing that the testatrix actually executed the will before the time she sold the first company’s stock. Pearson, 182 N.Y.S.2d at 131. The surrogate’s court strongly implied that the testatrix bequeathed the stock in the first insurance company by mistake. See Pearson, 182 N.Y.S.2d at 131. Accordingly, the surrogate court held that the devise of the stock in the first insurance company was adeemed; the legacy failed. Pearson, 182 N.Y.S.2d at 131.
¶33 Here, the record does not contain any evidence, nor does David assert, that Kenneth and Catherine mistakenly bequeathed Cranberry Lake to the Foundation. Moreover, as stated above, the majority view is that ademption applies in circumstances where the facts destroying the legacy occur after the will is executed. 6 Bowe & Parker, supra, § 54.1, at 266 (citing cases). This proposition is clearly supported by a leading ademption case, Buder v. Stocke, 343 Mo. 506, 121 S.W.2d 852 (1938).
¶34 In Buder, the Missouri Supreme Court addressed whether a testator’s bequest of all his holdings in a certain company had adeemed. Buder, 343 Mo. at 519. The court ultimately held that the bequest had not adeemed because the company did not exist when the testator executed his will. Buder, 343 Mo. at 519. In reaching this holding, the court distinguished ademption by satisfaction from ademption by extinction. Buder, 343 Mo. at 519. It further stated
¶35 Washington has adopted the majority view that, for an ademption to occur, the facts destroying the legacy occur after the will is executed. See In re Estate of Gherra, 44 Wn.2d 277, 286, 267 P.2d 91 (1954) (stating that circumstances that arise subsequent to the execution of a will that revoke or render it inoperative include ademption); In re Estates of Doepke, 182 Wash. 556, 47 P.2d 1009 (1935).
¶36 In Doepke, the Washington Supreme Court addressed the character of a bequest of “ ‘the sum of $3[,]000, being the amount of life insurance left by my husband to me.’ ” Doepke, 182 Wash, at 558. In determining that the bequest was not specific and thus not adeemed, the Supreme Court characterized the doctrine of ademption, stating:
“Ademption of a specific legacy is the extinction or withdrawal of it, in consequence of some act of the testator equivalent to its revocation, or clearly indicative of an intention to revoke. The ademption is effected by the extinction of the thing or fund bequeathed, or by a disposition of it subsequent to the will, which prevents its passing by the will, from which an intention that the legacy should fail is presumed. Kenaday v. Sinnott, 179 U. S. 606, 617, 21 Sup. Ct. 233, 45 L. Ed. 339 [(1851)].”
Doepke, 182 Wash, at 563 (emphasis added) (quoting Kramer v. Kramer, 201 F. 248, 253 (5th Cir. 1912), cert. denied, 231 U.S. 753 (1913)).
¶37 The Doepke court’s characterization of ademption comports with the theory underlying most jurisdictions’ reluctance to invoke ademption. Doepke, 182 Wash, at 562. The Doepke court expanded on the underlying purpose by stating that a testator’s conveyance of property after executing his will is a presumed manifestation of his intent
¶38 Here, Kenneth and Catherine executed their wills leaving Cranberry Lake to the Foundation nearly 18 months after they conveyed their entire interest in the property to the Foundation. They executed three subsequent codicils, none of which modified the Cranberry Lake bequest in article VII, section 2 of the wills. The legal conclusion we draw from these events is that Kenneth and Catherine intended to ensure that any remaining interest in Cranberry Lake that they did not transfer to the Foundation by inter vivos deed would pass to the Foundation under their wills. Our conclusion is further supported by the majority view, adopted in Washington, that ademption applies when the facts destroying a devise occur after a testator executes his will. See Doepke, 182 Wash, at 563.
¶39 Accordingly, we hold that the trial court did not err in the probate matter. Kenneth and Catherine’s devises of Cranberry Lake to the Foundation under article VII, section 2 of their wills did not adeem.
II. Negligence Action
f 40 David also appeals the trial court’s order granting summary judgment when it dismissed his rescission claims against the Foundation in the negligence action. Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” CR 56(c). We review a summary judgment order de novo. Hisle v. Todd Pac. Shipyards Corp., 151 Wn.2d 853, 860, 93 P.3d 108 (2004). As the party seeking summary judgment, the
¶41 The trial court granted the Foundation’s summary judgment motion, reasoning that even if David successfully rescinded the inter vivos deed conveyances, Cranberry Lake would be an estate asset and pass immediately back to the Foundation under article VII, section 2 of the wills. Neither party cites relevant Washington case law, nor did we find any Washington cases on point. But a Tennessee case, Ledbetter v. Ledbetter, 188 Tenn. 44, 216 S.W.2d 718 (1949), addresses this issue and is illustrative of the proper outcome.
¶42 In Ledbetter, the plaintiffs alleged that the defendant, their brother, had wrongfully induced their incompetent mother to convey property to their brother. Ledbetter, 216 S.W.2d at 719. The siblings sought an order to set aside the deeds conveying the property. Ledbetter, 216 S.W.2d at 719. The brother responded that his mother executed a will naming him as sole beneficiary of the estate, then argued that even if the court were to set aside the inter vivos deed, the siblings would have no interest in the real property because he would inherit it under the will. Ledbetter, 216 S.W.2d at 719. He also argued that his siblings lacked standing to bring the action because they had no remedy. Ledbetter, 216 S.W.2d at 719. The court agreed and dismissed the action. Ledbetter, 216 S.W.2d at 721.
¶43 Here, as in Ledbetter, David has no remedy. Even if he were to succeed in rescinding the inter vivos deeds conveying Cranberry Lake to the Foundation, he would ultimately have no interest in the property because the Foundation would inherit it under article VII, section 2 of the wills.
ATTORNEY FEES
¶44 On appeal, the Foundation seeks attorney fees from David, as personal representative of the estates, citing RAP 18.1(a) and ROW 11.96A.150. ROW 11.96A.150(1) states:
Either the superior court or any court on an appeal may, in its discretion, order costs, including reasonable attorneys’ fees, to be awarded to any party: (a) From any party to the proceedings; (b) from the assets of the estate or trust involved in the proceedings; or (c) from any nonprobate asset that is the subject of the proceedings. The court may order the costs, including reasonable attorneys’ fees, to be paid in such amount and in such manner as the court determines to be equitable. In exercising its discretion under this section, the court may consider any and all factors that it deems to be relevant and appropriate, which factors may but need not include whether the litigation benefits the estate or trust involved.
¶45 RCW 11.96A.150 provides the court broad discretion to award necessary and reasonable fees. The party seeking attorney fees bears the burden of proving reasonableness of fees requested. In re Estate of Morris, 89 Wn. App. 431, 434, 949 P.2d 401 (1998).
¶46 Here, we find that the Foundation has met its burden. We hold that the Foundation is entitled to reasonable attorney fees and expenses incurred in this appeal. Therefore, we hold that David, as personal representative of the estates, must pay reasonable attorney fees and
¶47 Affirmed.
Review denied at 165 Wn.2d 1030 (2009).
We refer to the parties involved by their first names, in order to be clear. We mean no disrespect.
We make no ruling on whether David has a viable claim against the other professional defendants in the negligence action currently pending before the Mason County Superior Court.
Section 28, Township 21 North, Range 3 West.
The parties filed substantially identical sets of pleadings and supporting documents in the estates of both Kenneth and Catherine. By agreement, counsel has not designated clerk’s papers from Catherine’s estate, so as to avoid unnecessary copying.
As of December 2003, the Foundation directors included Kenneth, Catherine, Norm Eveleth, Bill Batstone, Ron Godwin, Lyle Coleman, Patti Case, and Laurie McClanahan.
David joined the lawsuit as “attorney-in-fact,” as an individual, and as a marital community with his wife, Patricia.
Ch. 11.96A RCW.
David filed a motion to compel mediation. The Foundation also filed a motion to remove David as personal representative of Kenneth and Catherine’s estates.
Ademption by satisfaction is sometimes regarded as an advancement, although technically, an advancement is applicable only in cases where the testator dies intestate. See 6 Bowe & Parker, supra, § 54.1, at 267.
We note that David failed to contest the validity of the wills during probate. And we see no circumstances under which we can render the unambiguous language of article VII, section 2 of Kenneth’s and Catherine’s wills inoperative.