Muffoletto v. Melick

WILNER, Judge. At issue here is the authority of a circuit court to extend a specific option period provided for in a Will. We shall conclude that, in the circumstances presented in this case, the Circuit Court for Baltimore County had such authority and did not err in exercising it. When C. Verne Muffoletto died on April 29, 1986, he owned 81% of the stock of Muffoletto Optical Co., Inc., having previously given 19% to certain key employees.

He dealt with his remaining shares in Item 5 of his Will as follows: “I offer the first right of refusal to purchase the remaining stock of THE MUFFOLETTO OPTICAL COMPANY, INC. to any number or all of the employees of said company. The purchase price shall be the fair market value of the company at the date of my death. If less than all of the shares of said company are purchased under this option and the remaining unpurchased shares constitute a minority interest this option shall lapse and be null and void. The said employees of the company shall have six (6) months from the date of my death to exercise this option to purchase.” (Emphasis added.) In the typed version of the Will, Mr. Muffoletto named John F. McClellan, Sr. and Mercantile-Safe Deposit and ⁵⁵³ Trust Company as personal representatives and as trustees of a marital trust and a residuary trust created in the Will.

At some point—we know not when—he added, by handwritten interlineation, the name of his daughter Diane M. Melick as a personal representative and trustee. Following Mr. Muffoletto’s death, Mr. McClellan and the bank renounced their positions as personal representative and trustee, leaving Ms. Melick as the sole appointee. In July, 1986, Mr. Muffoletto’s surviving spouse, appellant K. Lola Muffoletto, filed a caveat to the Will in which she complained about the interlineated addition of Ms. Melick. On July 22, the Orphans’ Court admitted the Will to administrative probate and appointed Ms. Melick as special administrator pending resolution of the dispute.

See Md. Code Ann.Est. & Trusts art., §§ 6-401—6-404. This proceeding commenced with a petition for declaratory relief filed by Ms. Melick, as special administrator, on September 22, 1986. Quoting the provisions of Item 5, Ms. Melick asked the court to determine (1) whether the Will granted an option or merely a first right of refusal, (2) whether the right granted, whatever it was, was a pro rata one to each employee, and (3) whether the proceeds of certain life insurance policies on Mr. Muffoletto, of which the company was the beneficiary, were to be included in the “fair market value” of the company. Additionally, and more relevant to this appeal, Ms. Melick asserted that Ms. Muffoletto, as secretary/treasurer of the company and chairman of its board of directors, had denied her and the employees access to corporate records, thereby precluding an appraisal of the company and, as a consequence, a decision by the employees as to whether to exercise their rights under Item 5.

Further, in that regard, she alleged that, “Taking into account the dilatory tactics which have been practiced by K. Lola Muffoletto thus far, it is apparent that the litigation within the Orphan[s’] Court concerning the Estate will not be settled in time for Petitioner to gain access to the records and documents of the Company, hire ⁵⁵⁴ an appraiser to appraise the Company and have the appraisal completed before October 29, 1986, the date on which the employees’ right to purchase the stock expires.” On this averment, in addition to the constructions of the language sought, Ms. Melick asked the court to “extend” the six-month period allowed to the employees by commencing it from the date of administrative probate (July 22) rather than the date of Mr. Muffoletto’s death (April 29). Ms. Muffoletto, in response, denied any wrongdoing, disputed the authority of the court to extend the option period, and asked that it not do so. The employees also answered the petition, contending that Ms. Muffoletto had indeed engaged in dilatory tactics to their prejudice. They joined Ms. Melick in seeking an extension of the option period.

The period stated in the Will was due to expire on October 29, 1986. On October 21, however, the court, by interlocutory order, found Item 5 to be ambiguous as to whether it granted an option or first right of refusal and stayed “the time frame set forth in” that Item pending a final decision on the petition for declaratory relief. The case was heard on the merits on December 11, 1986. Counsel agreed that, in lieu of independent evidence, the court could “accept as accurate the representations included in the petition for declaratory relief, that they are all conceded____” Counsel for Ms. Muffoletto, in particular, agreed that “as far as I know, the fact claims in the complaint are okay.” 1 In an opinion and order filed the next day, the court construed Item 5 as granting an option rather than a first ⁵⁵⁵ right of refusal, held that the option extended to all employees of the company, giving each the right to purchase a pro rata share of the 81%, and concluded that the insurance proceeds were to be included in the calculation of the fair market value of the company.

The court found that Ms. Muffoletto would retain control of the company if the employees failed to exercise their option and, upon the stipulation noted above, also found that both Ms. Melick and the employees “were prevented from carrying out the intent of the Testator by reason of [Ms. Muffoletto’s] interference and retention of the necessary documents and records required to ... determine the fair market value of his stock.” It further concluded: “The only party objecting to the extension of the six month period is the very party who interfer[ed] with and prevented the clear intention of the Testator from being realized. To cap such party’s interference with success would be a miscarriage of justice and would be granting relief to one with unclean hands as factually determined by this Court.” On that basis, as part of its declaratory judgment in the case, the court extended the six-month option period by commencing it on July 22, 1986—the date of administrative probate. On the last day of that extended period, the employees exercised their option. Ms. Muffoletto appealed the December 12 order.

She urges that, as the Will specifically commences the option period from the date of the testator’s death, a court may not extend the period by commencing it from the date of administrative probate. 2 ⁵⁵⁶ We begin by acknowledging the general validity of appellant’s arguments that (1) a court’s paramount duty in construing and enforcing a Will is to ascertain and effectuate the testator’s intention, 3 and (2) where the language of the Will is clear and unambiguous, it controls, and the court may not look further in ascertaining that intention. 4 The first proposition—the duty to ascertain and effectuate the testator’s intention—is virtually ironclad. The second is less so. In Robinson v. Mercantile Trust Co., 180 Md. 336, 339 , 24 A.2d 299 (1942), for example, the Court observed: “In the construction of a will, the whole effort is to ascertain the intention of the testator____ In ascertaining such intention, not only the actual words used in the will, but also the situation of the testator and his relations with the parties to whom he has devised or bequeathed his property are important elements.” See also Sabit v. Safe Deposit & Trust Co., 184 Md. 24, 37 , 40 A.2d 231 (1944). The ability—indeed the duty—of a court to look beyond the precise language of the Will in determining the testator’s intent has been recognized, in particular, in cases where that language has imposed a condition on a bequest that, for reasons apparently unforeseen by the testator, has become impossible of literal performance.

Maryland has long accepted the doctrine that a “grantee is generally relieved from the performance of [a] condition if it is impossible or if it is prevented by an act of God, or if, ⁵⁵⁷ on a contingency which arises, a reasonable construction of the will does not call for strict performance.” Keyser v. Calvary Breth. Church, 192 Md. 520, 523-24 , 64 A.2d 748 (1949). See also Kiser v. Lucas, 170 Md. 486, 504 , 185 A. 441 (1936). In Keyser , the testatrix, in 1942, left $1,000 to a church “for the building of a Church to be held in trust for a period of five years, if they do not build within five years then this returns to my estate.” The legatee established that it was unable to meet the five-year condition because of building restrictions imposed by the government during World War II.

Finding an impossibility of compliance with the expressed time limitation, the Court excused the noncompliance. As one basis for that decision, it quoted from Tiffany, Real Property, 3rd Ed., Vol. 1, § 195, p. 318: “Ordinarily, however, a condition which is referred to as impossible and as therefore void, is one which is not in itself impossible, but is merely impossible or impracticable because of the particular circumstances of the case. It would seem, however, that it is ordinarily more satisfactory to regard the grantee or devisee in such case as relieved from the necessity of performance of the condition, not because performance is impossible, but rather because, on a reasonable construction of the condition, it was not intended to call for performance in the contingency which has arisen.” This Court addressed the issue more recently in Martin v. Young, 55 Md.App. 401 , 462 A.2d 77 , cert. denied 297 Md. 418 (1983). In a 1971 codicil, the testatrix there devised her home to her longtime nurse-employee Gladys Martin “if she survives me and is in my [employ] at the time of my death; and if she predeceases me or is not in my employ at the time of my death, this devise shall lapse.” Id. at 402-03, 462 A.2d 77 .

From 1979 until her death in 1981, the testatrix was mentally incompetent and largely confined to bed. Five days before her death, her bank, acting pursuant to a power of attorney, moved the testatrix to a nursing home and discharged Ms. Martin from her employ. As a result, Ms. ⁵⁵⁸ Martin was not in the testatrix’s employ at the time of her death, and, in a declaratory judgment action filed by her to construe the Will, the issue was raised of whether the devise necessarily lapsed. As in this case, the argument was made that the language of the