McGarvey v. State

ADKINS, Judge. We are asked to decide whether the doctrine of equitable adoption exists in Maryland, and if it does, whether its application should result in the reduction of inheritance taxes assessed against appellant, Raymond C. McGarvey, Jr. We shall assume that the doctrine exists in this State, but hold that it does not affect the rate of inheritance tax charged to an equitably adopted person. Equitable adoption is sometimes called “adoption by estoppel,” “virtual adoption,” or “de facto adoption.” By whatever name it is known, the doctrine in general involves the notion that if an individual who is legally competent to adopt a child enters into a contract to do so, and if the contract is supported by consideration in the form of part performance that falls short of completion of statutory adoption, then a court, applying equitable principles, may accord to the child the status of a formally adopted child for certain limited purposes. ²³⁵ That the factual basis for application of the doctrine exists in this case is not disputed. The parties have agreed that appellant McGarvey, in 1939, at the age of two, was placed by his parents in the custody of his paternal aunt, Helen McGarvey Saul.

McGarvey’s parents and Mrs. Saul agreed that the latter would adopt McGarvey as her son. As set forth in a Joint Statement of Facts (Appellant’s Brief at App. 3): The natural parents completely bestowed upon Mrs. Saul all their natural rights and obligations pertaining to McGarvey. Mrs. Saul agreed to undertake and did, in fact, accept and carry out the obligations, duties, rights and privileges of raising McGarvey____ Mrs. Saul and McGarvey maintained the relationship of parent and child until the death of Mrs. Saul. Unfortunately, however, although Mrs. Saul “regularly expressed her intent to formally adopt McGarvey,” she never got around to performing that part of the contract.

When she died, she had not formally adopted her nephew. She did, nevertheless, name him sole legatee under her will. The legacy was substantial; the Register of Wills for Montgomery County assessed a substantial inheritance tax. That assessment produced this case, for the tax was calculatéd at the 10 percent rate imposed on collaterals, and not at the 1 percent rate applicable to direct lineal descendants.

Md.Code (1980 Repl.Vol., 1987 Cum.Supp.) Art. 81, §§ 150, 149. McGarvey, asserting that he was Mrs. Saul’s equitably adopted son, sought a refund. The Register denied it. The Tax Court upheld the Register, concluding that “the State of Maryland does not recognize the doctrine of ... equitable adoption.” McGarvey was able to persuade the Circuit Court for Montgomery County (Messitte, J.) to the contrary, but that success availed him naught.

Although Judge Messitte held that “[t]he doctrine of equitable adoption is recognized in this State,” [emphasis in original], he went on to rule that it “does not apply where the decedent dies with a valid will, nor does it in any event entitle an equitably adopted child to taxation as a direct heir of the ²³⁶ decedent.” McGarvey took his refund quest to the Court of Special Appeals; we granted certiorari before decision in that court. I. Maryland and Equitable Adoption In Maryland, as in other American jurisdictions, adoption did not exist at common law; it is a creature of statute, having been brought into being in this State by Ch. 244, Acts of 1892. Strahorn, “Adoption in Maryland,” 7 Md.L. Rev. 275 (1943). As a general rule, there is no method, other than the statutory procedure, by which a child can be adopted in this State.

Spencer v. Franks, 173 Md. 73 , 195 A. 306 (1937). Thus, Professor Strahorn wrote: Whether or not a private arrangement or agreement, entered into since the local statutory adoption procedure has been in force, will be given enforcement as a contract to adopt is a matter not yet passed on in Maryland adjudication. There is authority elsewhere in favor of the specific performance of such contracts____ 7 Md.L.Rev. at 278 [footnote omitted]. Professor Strahorn, however, wrote that before our predecessors decided Besche v. Murphy, 190 Md. 539 , 59 A.2d 499 (1948).

That case, says McGarvey, shows that Maryland has recognized the doctrine of equitable adoption. 1 In Besche , Stella Besche alleged facts that would have established an equitable or virtual adoption. She also al ²³⁷ leged that her purported adoptive mother had died testate. The will included a specific pecuniary bequest for Stella (as well as bequests for others) and a residuary clause giving all the rest and residue of the purported adoptive mother’s estate to “those persons who under the laws of the State of Maryland would take in case of intestacy.” Id. at 541 , 59 A.2d at 500 . Although Ms. Besche had never been formally adopted, she claimed under the residuary provision as an equitable adoptee, relying on dictum in Clayton v. Heptasophs, 130 Md. 31, 36-37 , 99 A. 949, 951-952 (1917): “the authorities very generally establish the proposition, that a parol obligation by a person to adopt the child of another as his own, accompanied by the virtual though not statutory adoption, and acted upon by both parties during the obligor’s life, may be enforced upon the death of the obligor, who dies without disposing of the property by his will____” Chief Judge Marbury, writing for the Besche court, said “[t]his dictum seems to be supported by the weight of authority in this country to the extent that the courts decree that a child so treated will be entitled to a right of inheritance from the estate of the foster parent such as a natural child would enjoy, where the child in question has faithfully and fully performed the duties of a natural child to the foster parents.” 190 Md. at 546 , 59 A.2d at 502-503 .

He then proceeded to a careful review of equitable adoption cases throughout the country, noting both the contractual performance and estoppel basis for various decisions, and that “the proof [in them] must be clear, cogent and convincing____” Id. at 548-549 , 59 A.2d at 504 . He listed at least 16 jurisdictions as adopting the doctrine and only three as rejecting it. This discussion may well suggest that the court looked with favor on the doctrine, at least to the extent that it would be applied to allow an equitably adopted child to take a distributive share of the equitably adoptive parent’s estate on intestacy. But the court did not apply the doctrine in Besche .

Intestacy was not involved; there was a will. Chief Judge Marbury reasoned: ²³⁸ It is, of course, within the power of a parent to disinherit his natural child, and if a claimed adoptive parent has made a will, leaving his property to others, there would be no practical basis upon which the one who claimed a right to be considered his adopted child, could ask the intervention of the court. He could not be declared an adopted child, as we have already shown, and he could not be given a share in an estate which had been left by will to others. He is only entitled to be placed in the position he would have been in, had he been adopted, and in that position, he would have inherited nothing.

Id. at 549-550 , 59 A.2d at 504 [emphasis supplied]. This was because the residuary clause did not create an intestacy, but created a class of persons who would take as legatees and not under the intestacy statute. Because Ms. Besche was not one of those named in the statute, she could not take under the residuary clause. Id. at 552 , 59 A.2d at 505 .

From this language we can deduce that Maryland would likely look with favor upon the doctrine to the extent of permitting an equitably adopted child to take property from an equitably adoptive parent by intestate succession. In so doing, we would align ourselves with what appears to be some 27 other jurisdictions that apply the doctrine in those circumstances. Annotation, 97 A.L.R.3d at 359-365. The fairness of applying the doctrine in that context, once the prerequisite facts have been established by clear and convincing evidence, is apparent.

And that application of the doctrine fits well within the traditional contractual and equitable estoppel notions that have been advanced to support it. Thus, we are prepared to assume that Maryland does recognize the doctrine of equitable adoption, to the extent we have indicated. But, as we now explain, that will be of no benefit to McGarvey. ²³⁹ II. Equitable Adoption and Inheritance Taxes In 1917 (Clayton) and in 1948 (Besche), the Court was aware that there was widespread support for the doctrine of equitable adoption, at least in certain limited circumstances.

As we have shown, that is still the case. But the agreement narrows considerably as we move beyond the subject of inheritance by an equitably adopted child from an equitably adoptive parent. Annotation, 97 A.L.R.3d at 354-355. Nevertheless, McGarvey would have us extend the doctrine far beyond the area of general agreement as identified in Besche .

McGarvey points to cases like Foster v. Cheek, 212 Ga. 821 , 96 S.E.2d 545 (1957), in which the Supreme Court of Georgia applied the doctrine to allow an equitably adopted child to obtain insurance benefits provided for a “child.” Clayton, supra, could be regarded as a case of this type, since it applied an estoppel theory to prevent an insurer from denying that the words “adopted child” did not include an equitably adopted child. He also cites Bower v. Landa, 78 Nev. 246 , 371 P.2d 657