Strasburg v. Clark

RODOWSKY, Judge. In this case the trial court denied a surviving spouse who had elected an intestate share in the deceased spouse’s estate equitable enforcement of an oral contract to devise an interest in realty. After concluding that the contract did not limit the electing spouse, the Court of Special Appeals reversed. Clark v. Strasburg, 79 Md.App. 406 , 556 A.2d 1167 (1989).

As explained below, we agree with the chancellor. ⁵⁸⁵ Petitioner, Anne H. Strasburg, is the personal representative of the estate of her mother, Margaret H.S. Clark (Margaret), who died May 19,1986. Margaret was survived by her husband, the respondent, W. Edward Clark (Edward), and by three children. Margaret and Edward had married in 1960. It was the second marriage for each.

Margaret’s surviving children were children of her first marriage. Edward had two sons by his prior marriage. Among the Clarks’ principal assets as of the autumn of 1970 was jointly held realty in Montgomery County, Maryland, consisting of a residence at 6671 McArthur Boulevard (the Residence) and a thirty-six unit apartment building at 4570 McArthur Boulevard (the Apartments). The case now before us involves Edward’s claim to a life estate in the Residence based upon an oral agreement made with Margaret in 1970.

Edward was precluded from testifying about this transaction by the “Dead Man’s statute,” Md.Code (1974, 1989 Repl.Vol.), § 9-116 of the Courts and Judicial Proceedings Article. Edward’s prime witness for establishing the oral agreement was David Horgan (Horgan), who testified that he was present when the oral agreement was made on the night before Thanksgiving 1970. Horgan is a chartered life underwriter. Beginning as early as 1965, he and the Clarks had been discussing estate planning with insurance funding for tax payments.

By the fall of 1970 Horgan had developed a “comprehensive plan” the goals of which he described as: “One, to aim the bulk of the properties in the estates, both Margaret’s and Ed’s, at ... their respective children,” and, secondly, to achieve maximum estate tax savings. Horgan “recommended that the joint titles be broken apart and that the [Residence be titled in Margaret’s name alone and that the [A]partment[ ] be titled in Ed Clark’s name alone, but with a retained life estate in the income from that apartment house for Margaret Clark and a retained life estate in the house as a residence for Ed, in the event Margaret should die before him.” The agreement was to “be reduced in some fashion to writing” by Walter N. Tobriner, Esq. (Tobriner), counsel ⁵⁸⁶ for the Clarks. “[Ultimately the properties that were Ed’s were to go to his two children and the properties that were Margaret’s, after the death of both of them, were to go to Margaret’s three children.” Horgan also testified that the Clarks agreed that, absent mutual agreement, neither would substantially change that spouse’s will, even if they were divorced. He testified that, should the Clarks be divorced and Edward then predecease Margaret, Edward was willing for Margaret to have the income from the Apartments, or from the proceeds of any sale of the Apartments, for her life, because Margaret’s income from assets in her own name was insufficient to maintain her standard of living.

Horgan further testified that, should the Clarks be divorced and then Margaret predecease Edward, Margaret was willing for Edward to have a life estate in the Residence, because he would need a place to live. Horgan said that he and Tobriner had agreed not to use mutual marital deduction wills, but to effect the estate tax saving by retitling the two pieces of realty. 1 In December 1970 Margaret revoked her will, executed in 1966, but did not contemporaneously execute a new will. Horgan explained that it would be less costly from a tax standpoint were Margaret to die intestate than to have her then will become effective. By deeds dated January 15, 1971, fee simple title to the Residence was conveyed to Margaret and fee simple title to the Apartments was conveyed to Edward.

That same date the Clarks each executed wills. Margaret’s will devised the Residence in trust to permit Edward to occupy it “rent free and free from taxes and costs of repairs” for his life. The Residence could be sold with Edward’s consent in which event he would receive the income from the proceeds for life. The residue of Margaret’s estate, including the remainder after the life estate, was devised in trust in equal ⁵⁸⁷ shares for the benefit of Margaret’s three children and their issue.

Edward’s January 1971 will devised the Apartments in trust for the benefit of Margaret for life and thereafter to Edward’s two sons. Edward left the residue of his estate to Margaret. Edward apparently made a new will on August 31, 1977. This will created a trust which would operate the Apartments for 540 days after Edward’s death.

If, during that period, Edward’s sons paid Edward’s sister Edward’s indebtedness to her and also paid Margaret $55,000 (a figure expressly inclusive of Edward’s indebtedness to Margaret), then the Apartments were to be conveyed free of trust to Edward’s sons and the wife of one of them. If Edward’s sons did not pay the sums as provided, the trustees were to convey the Apartments outright to Margaret. 2 Margaret also executed, on August 31, 1977, a new will prepared for her by Tobriner. Under this will, in the event Edward survived Margaret, Margaret devised the Residence in trust to permit Edward to live in it “rent free, for as long as he shall desire.” The property could be sold only with the consent of Edward who would then receive for life the income on the sale proceeds. Upon Edward’s death the trustees were to convey the Residence absolutely to Margaret’s three children in equal shares.

In 1979 Edward converted the Apartments to a condominium regime. He invested the proceeds from the sales of the ⁵⁸⁸ units in limited partnerships engaged in oil and gas exploration. For approximately three months during 1979, while Margaret was in Europe with one or more of her children, Edward had an affair with a woman who resided at the Apartments. Edward broke off the relationship and told Margaret about it.

In October 1981 the Clarks again respectively executed new wills which were prepared by Janet Brenner, Esq. Under Margaret’s will, dated October 13, Edward received nothing. Margaret’s entire estate, but for $6,000 in specific bequests, was left to, or for the benefit of, her children. Her trustee, the petitioner, was directed to sell the Residence “as soon as is reasonably possible, at least within two years[.]” Edward’s will, dated October 14, made specific bequests of $50,000 to each of his two sons, made other bequests totalling approximately $40,000 and gave the residue to Margaret in fee simple, conditioned on her surviving Edward.

Otherwise, the residue was given to Edward’s sons. On August 19,1982, Margaret, bearing all of the relevant documents, and unaccompanied by Edward, was in the Washington, D.C. offices of Hogan and Hartson consulting with Richard J.M. Poulson, Esq. (Poulson) concerning both her and Edward’s wills. She left with Poulson the Clarks’ financial statements as of May 31, 1981.

Edward’s net worth was approximately $1.3 million. His assets included $426,000 in oil and gas leases and $328,000 secured by a mortgage on the Apartments, which was due to him from his wholly owned corporation which was the vehicle for the condominium conversion. Margaret’s assets totaled $785,-000, of which $500,000 represented the valuation placed on the Residence. Her $35,000 in liabilities consisted entirely of the mortgage on the Residence.

On November 8, 1982, the Clarks respectively executed new wills in Poulson’s offices. This 1982 will became Margaret’s operative will on her death on May 19, 1986. ⁵⁸⁹ That will followed substantially the disposition scheme of the 1981 will. Edward was cut off. Margaret’s estate, including the Residence, was given to or for the benefit of her children.

That plan was contrary to the advice of Poulson set forth in a September 13, 1982, memorandum to the Clarks which was hand delivered to Margaret. In that memorandum Poulson warned that if Edward survived Margaret significant federal estate tax liability would be incurred. Poulson also testified that the memorandum and draft wills which accompanied it were discussed at a meeting of the Clarks, himself and his associate at Hogan and Hartson on October 21, 1982. In his 1982 will Edward reduced the special bequests for his children to $25,000 each.

If Edward predeceased Margaret the residue of Edward’s estate was to be divided into two trusts. The first, consisting of an amount equal to the maximum marital deduction, was for Margaret for life with the residue subject to a testamentary power of appointment in Margaret and, in default of appointment, to Edward’s issue. The second share, consisting of the balance of the residue, was given in trust for Margaret for life and thereafter to such of Edward’s surviving issue as Margaret might designate by a testamentary power of appointment. At the November 8,1982, meeting at which the wills were signed Edward and Margaret each also executed and acknowledged waivers of their respective rights, conferred by Md.Code (1974), § 3-203 of the Estates and Trusts Article (ET), to renounce the other’s will and to elect a spouse’s share in intestacy. 3 Edward testified that he had not seen ⁵⁹⁰ Margaret’s 1982 will, or the September memorandum from Hogan and Hartson, and that Margaret did not discuss her will with him.

He further said that he had never heard of a spousal election and had had no discussions with any attorney regarding spousal waivers. This testimony was contradicted. Between 1982 and 1985 the value of Edward’s oil and gas investments declined, as he characterized it, to “almost nothing.” Edward made another will on April 8, 1985. It was prepared by Poulson.

That will reduced the specific bequests to Edward’s sons to $10,000 each. The 1985 will is a marital deduction will following the disposition plan of Edward’s 1982 will. Edward’s 1985 will, however, contains a new paragraph at the end of the article setting forth specific bequests. That paragraph reads: “I acknowledge that neither I nor any heir of mine nor any person claiming through me has any interest whatsoever in the residence and adjoining real estate located in Bethesda, Maryland, titled in the name of my wife, MARGARET H.S. CLARK.” The instructions to counsel for Edward’s 1985 will included longhand interlineations on a draft of what became Edward’s 1982 will.

Edward testified that he made, or at least signed his name next to, each of the interlineations which indicated reduced amounts for specific bequests. He testified, however, that the longhand version of the above-quoted provision which appears on that same draft was written in Margaret’s handwriting. Edward gave evidence that, when he executed the 1985 will, he read only the paragraphs in which the changes in specific bequests were made and that he did not notice the above-quoted language. ⁵⁹¹ After Margaret’s death, Edward remained in the Residence. Petitioner brought an action in the District Court of Maryland against Edward for repossession of the premises.

Edward removed that action to the Circuit Court for Montgomery County by a demand for jury trial. In the circuit court Edward counterclaimed, seeking, inter alia, equitable enforcement of the oral contract and damages for its breach. Hostilities also broke out in the Orphans’ Court for Montgomery County where Edward filed a renunciation of Margaret’s will and elected to take a spousal share — in this case, one-third of the estate. Petitioner countered the renunciation with Edward’s written waiver of any right to renounce, and Edward replied that the waiver was invalid.

Issues were framed by the orphans’ court and transmitted for trial before a jury in the circuit court. The issues from the orphans’ court and the repossession action, with counterclaim, were consolidated for trial. 4 Edward’s demand for jury trial in the District Court case was effective "as to all issues triable of right by a jury,” including his claims asserted in the counterclaim. Maryland Rule 2-325(c) and (e). On the issues from the orphans’ court the jury found that Edward’s waiver of the right to renounce was ineffective due to undue influence and false representation of a material fact.

In addition to the transmitted issues the trial judge submitted certain special interrogatories to the jury. Among the answers to those interrogatories the jury found that there was in effect between Edward and Margaret at the time of Margaret’s death a contract which provided for a life estate for Edward in the Residence. ⁵⁹² Any possibility of conflict between the jury’s finding of this contract and any finding which the chancellor might have made with respect to Edward’s claim for equitable relief was mooted when the chancellor agreed that there was a contract. Cf. Md. Rule 2-301; Higgins v. Barnes, 310 Md. 532 , 530 A.2d 724 (1987).

The trial court further found that there was sufficient part performance to permit enforcement of the oral contract, even though it was within the