Nassif v. Green

ON MOTION FOR RECONSIDERATION EYLER, JAMES R., J. On March 9, 1993, Walter L. Green (the “decedent”) died testate, survived by Helen G. Nassif, his spouse, appellant; Carlton M. Green, his son; and Anne Fotos (“Ms. Fotos”), his daughter. Carlton M. Green was appointed personal representative of the estate. Carlton M. Green, individually (“Mr. Green”), and Carlton M. Green as personal representative of the estate (the “personal representative”) are the appellees on appeal. Appellant elected a statutory share in lieu of taking a bequest under the decedent’s will.

As the passage of time implies, settlement of the estate has been difficult, because of the complexity of the assets and because of litigation between the parties. This appeal is from a declaratory judgment entered by the Circuit Court for Prince George’s County, in which the court ruled on a number of issues relating to the valuation of appellant’s statutory share. We shall reverse in part and affirm in part the circuit court’s judgment. Factual and Procedural Background The estate assets, at the time of filing of inventory, and also at the time of filing a federal estate return in June, 1994, were valued at close to $30 million.

According to appellees, the estate was complex. We quote from the personal representative’s brief. The four inventories in the Maryland probate estate totaled $28,494,093 and consisted of thirty-five real properties, located in Prince George’s County, Montgomery County, Wicomico County and Worcester County; three closely held corporations, which owned real property in Florida and the District of Columbia, owned and operated a motel in Salisbury, Maryland, managed a chicken farm in Salisbury, ⁷²³ Maryland, and owned an undeveloped shopping center site in Bowie, Maryland. At the time of decedent’s death he operated a general partnership that owned a 100 room hotel near Busch Gardens in Tampa, Florida; he owned and managed a stock portfolio that consisted of eighty publicly traded corporations; two stock brokerage accounts; he owned and operated a partnership owning fifty (50) subsidized apartments in Elwood, Indiana; and what caused the major problems in this Estate, he owned a 50% interest in a general partnership known aa West Laurel Partnership that owned and operated a 205 room Best Western Hotel and a 37.5% interest in West Laurel Corporation that owned the hotel restaurant in Laurel, Maryland.

Other assets in the Maryland Estate consisted of thirteen other partnerships; eighteen separate bank accounts; thirteen escrow accounts; and various mortgages, deeds of trust, and notes receivable. In addition to the Maryland probate estate, the decedent individually owned real property interests in Delaware, Iowa, Florida, Indiana and Pennsylvania which were the subject of ancillary administrations in those states. Further complicating the administration of this Estate, at the time of the decedent’s death, the economy was in the midst of the savings and loan crisis. The Resolution Trust Corporation (hereinafter “RTC”) had been appointed receiver of many federal savings banks that failed, including Second National Savings Bank to which decedent had personal liability on outstanding loans exceeding $12 million.

Like the savings and loans, the hotel business was suffering. The $4.5 million second trust loan pertaining to the 205 room Best Western Hotel and restaurant in the hotel was in default at decedent’s death. The will, modified by a codicil, contained certain specific bequests; 1 devised one-third of the adjusted gross estate (as defined in ITEM X), to his surviving spouse, appellant, reduced by the value of other property which she received under ⁷²⁴ or outside of the will; and devised the rest and residue of the estate to the decedent’s children, Mr. Green and Ms. Fotos. On May 3, 1993, appellant made a timely election to take a statutory share (one third) of the net estate.

Maryland Code (1974, 1991 Repl.Vol., Supp.1992), § 3-203 of the Estates and Trusts Article (“ET”). At that time, claims against the estate had to be “presented” within 9 months after the decedent’s death. ET § 8-103. Timely claims in the approximate amount of $13 million were presented. 2 Most of the underlying obligations were in the nature of guarantees of loans on which there was a primary obligor.

Some of the claims were paid by the primary obligors. Some of the claims were paid by the estate, and the estate was reimbursed by the primary obligors. By 1998, after considerable time and effort in managing the estate assets, the claims were resolved. Approximately $120,000 in claims were paid and not recouped. 3 As mentioned above, this estate produced extensive litigation in various courts.

For our purposes, it is unnecessary to detail the history. The proceedings in the Orphans’ Court for Prince George’s County produced, inter alia, a 2000 opinion and order, which is relevant to the issues before us. In 2000, the personal representative distributed property and/or cash to Mr. Green and Ms. Fotos, to fulfill specific bequests. Specifically, the bequests were a Sunoco gasoline station property, a McDonald’s restaurant property, and Nations Bank stock.

The personal representative distributed appellant’s elective share of the specific bequests, after an order by the orphans’ court approving the distribution. Appellant did not appeal from the 2000 decision. In 2006, the orphans’ court ruled on a number of pending issues. Appellees noted a de novo appeal to circuit court from the 2006 decision.

That case is still in circuit court and not ⁷²⁵ before us. A copy of the 2006 decision was included in the record extract in this case. Appellees have filed a motion to strike it. In July, 2006, appellees filed the declaratory judgment action, now before us.

In the complaint, appellees alleged that the estate was ready for a final distribution and that the personal representative had calculated the amount of the elective share due appellant. Because a dispute had arisen as to whether it had been calculated properly, appellees sought a declaratory judgment. The circuit court decided some of the issues on summary judgment, in an opinion and order dated March 28, 2008 and, after a non-jury trial, decided the remaining issues, in an opinion and order dated June 30, 2009. 4 Statutory scheme in 1993 In general, the parties agree that the law in effect at the time of decedent’s death applies. Instead of property left by a will, a surviving spouse could “elect to take a one-third share of the net estate if there is also a surviving issue.... ” ET § 3-203.

The section did not expressly address the electing spouse’s right to receive income from estate assets. Net estate was defined as “the property of the decedent exclusive of the family allowance and enforceable claims against the estate.” ET § 1-101(n). The election to take an elective share had to be filed no later than 7 months after appointment of a personal representative under a will. ET § 3-206.

An electing spouse could withdraw the election at any time within 30 days after the expiration of time for filing claims against the estate. Id. Upon the election of a statutory share, all property which would have passed under the will “shall be treated as if the surviving spouse had died before the execution of the will.” ET § 3-208(a). Subsection (b) provided, in part: ⁷²⁶ If there is an election to take an intestate share, contribution to the payment of it shall be prorated among all legatees.

Instead of contributing an interest in specific property to the intestate share, a legatee may pay the surviving spouse in cash, or other property acceptable to the spouse, an amount equal to the fair market value of the interest in specific property on the date the election to take an intestate share was made by the spouse. In 1969, the law relating to the administration of estates underwent a substantial change. Since 1993, the date of decedent’s death, the law has been amended. Some of the changes are relevant to the issues presented, particularly as they relate to ET §§ 3-203 and 3-208.

We shall discuss the relevant statutes in greater detail when we discuss the issues. Circuit court decisions In circuit court, for purposes of calculating the net estate and appellant’s elective share, appellees contended that the estate assets should be valued as of the date appellant elected to receive a statutory share. Appellant contended that the assets should be valued as of the date of distribution. The court, on summary judgment, ruled in favor of appellees, relying on legislative history, while observing that the version of ET § 3-203 in effect as of the time of decedent’s death did not expressly address the issue.

Appellees also contended that the personal representative could opt to distribute appellant’s elective share in cash, pursuant to the version of ET § 3-208(b) in effect as of the time of decedent’s death. The personal representative had filed an election to do so on October 11, 2006. Appellant contended she was entitled to distribution in kind. The court, on summary judgment, ruled that the personal representative could pay appellant in cash, noting that the statute contained no time limit for making an election and, given the circumstances of the estate, finding the delay was not unreasonable.

The court also noted that appellant was paid in cash when the specific bequests were distributed in 2000. ⁷²⁷ Appellees contended the 2000 opinion and order by the orphans’ court was final and barred appellant from challenging the amount of her distribution as it related to the specific bequests to Mr. Green and Ms. Fotos. Appellant disagreed. The court ruled on summary judgment in favor of appellees. Appellees contended that the Maryland Uniform Principal and Income Act, enacted in 2000, is not applicable to this estate, see Maryland Code (1974, 1991 Repl.Vol., Supp.2000) §§ 15-501 to 15-528 of the Estates & Trusts Article (“ET Supp.2000”), and appellant disagreed.

The court, on summary judgment, ruled in favor of appellees. At trial, the issues were (1) whether the amount of the creditors’ claims, as filed, should be considered in calculating appellant’s elective share; and, (2) whether appellant was entitled to income on the final distribution of her elective share. After trial, the court ruled that the total amount of the claims, approximately $13 million, is to be included in calculating the net estate and, thus, the elective share, and further ruled that appellant is not entitled to income on the distribution of her elective share. Contentions 5 As summarized by us, appellant contends (1) claims that were timely filed but not allowed and paid were not “enforceable claims” within the meaning of the relevant statute and could not reduce the value of appellant’s interest in the estate; (2) the court permitted a double deduction of enforceable claims; (3) appellant is entitled to share in income earned by the estate, and the Uniform Maryland Principal and Income Act applies to income and distributions after Oct. 1, 2000; (4) Mr. Green and Ms. Fotos can not cash out appellant’s share pursuant to ET 3-208(b); (5) appellant’s challenge to the valuation of specific bequests used to calculate the amount of the elective share is not barred by res adjudicata because of the orphans’ court’s 2000 opinion and order; and (6) appel ⁷²⁸ lant’s elective share is to be valued as of the date of distribution.

Standard of review The standard for appellate review of a trial court’s grant of summary judgment is whether the court was legally correct. Heat & Power Corp. v. Air Prods. & Chems., Inc., 320 Md. 584, 591 , 578 A.2d 1202 (1990). The standard for appellate review of a non-jury decision is contained in Maryland Rule 8-131(c). It provides: When an action has been tried without a jury, the appellate court will review the case on both the law and the evidence.

It will not set aside the judgment of the trial court on the evidence unless clearly erroneous, and will give due regard to the opportunity of the trial court to judge the credibility of the witnesses. It is axiomatic that the predominant rule of statutory interpretation is to ascertain the intention of the legislature. In determining that intent, we consider the language of the statute, Kushell v. Dep’t of Natural Resources, 385 Md. 563, 576-77 , 870 A.2d 186 (2005); we analyze the statutory scheme as a whole to determine its specific and broad objectives, Int’l Ass’n of Fire Fighters, Local 1715 v. Mayor of Cumberland, 407 Md. 1, 10 , 962 A.2d 374 (2008); and, we consider legislative history either to explain or confirm the meaning of language. We give statutes their most reasonable interpretation in light of the above, unless the language in a statute is not clear and unambiguous that it dictates the result.

Discussion Enforceable claims The issues and the analysis overlap. In the order raised by appellant, the first issue is the meaning of “enforceable claims” as used in the definition of “net estate.” At the decedent’s death, the elective share was one-third of the “net estate.” ET § 3-203. “[N]et estate” was defined as “the property of the decedent exclusive of the family allowance and ⁷²⁹ enforceable claims against the estate.... ” ET § l-101(n). The issue before us exists because millions of dollars in claims were filed in this estate, but only a small portion were ultimately paid. The circuit court ruled that enforceable claims meant all valid claims that were filed and that were capable of being enforced, ie., potentially enforceable against the estate.

Appellant, in essence, argues that enforceable claims is the same as “allowed” claims, meaning claims recognized by the consent of a personal representative or claims which have been reduced to judgment. See ET §§ 8-107 and 8-108. An allowed claim is one that will be paid. Appellant points out that the concepts of “enforceable claims” and “net estate” first came into being in 1969, as part of the substantial revision of the law relating to the administration of estates.

Appellant observes that, prior to 1969, orphans’ courts did not have the power to enforce claims, and that their later ability to do so was part of the 1969 legislation. Appellant notes that the enforcement mechanism contained in ET §§ 8-101, et seq. was consistent with the new orphans’ court power. Thus, the use of the term “enforceable claims.” Appellees rely heavily on what they regard as the plain meaning of the statutory language. They argue that enforceable must mean something different from “allowed” or paid.

Appellees point out that, under the then existing time-lines, appellant could have withdrawn her notice of elective share after the claims were filed, and taken under the will. Appellees argue that a spouse electing a statutory share is not a residuary heir, impliedly asserting that the concept of an electing spouse is its own category and different from all other categories, or if not, the electing spouse is in the nature of an intestate heir or a specific legatee. In any event, according to appellees, an electing spouse is not entitled to share in income from estate assets during the years of administration. Appellees also point to the fact that in 2003, the legislature amended the law, including ET § 3-208(b), and while it did not address the subject of claims, the amendment is relevant ⁷³⁰ to the claims issue.

In 1993, and prior to 2003, ET § 3-208(b) provided that, instead “of contributing an interest in specific property to the intestate share, a legatee may pay the surviving spouse in cash, or other property acceptable to the spouse, an amount equal to the fair market value of the interest in specific property on the date the election to take an intestate share was made by the spouse.” The 2003 amendment changed the latter portion of the provision to “an amount equal to the fair market value of the interest in the specific property on the date or dates of distribution.” Maryland Code (2001 Repl.Vol., Supp.2003) § 3-208(b) of the Estates & Trusts Article (“ET 2001 Repl.Vol.). According to appellees, this is an indication that, prior to 2003, an electing spouse’s share was determined as of the time of election, consistent with the assertion that enforceable claims meant claims that were filed and capable of being enforced. We agree with appellant with respect to the enforceable claims issue. In pre and post 1969, a spouse’s share of an estate in intestate succession and a spouse’s statutory share, in the event of a will, to the extent pertinent, have been treated in parallel fashion.

In pre 1969, Maryland Code (1964 vol.), art. 93, §§ 133-136, provided that a surviving spouse (assuming children) took one third of an