Upman v. Clarke

⁶³¹ BYRNES, Judge. This case arises out of the death of eighty-eight year old Genevieve Upman (“Genevieve”), on March 1, 1996. The will that was in effect at the time of Genevieve’s death left her estate to a revocable trust (the “Upman Trust” or “Trust”) that she created and later amended. The trust beneficiaries are Genevieve’s nephew, Kenneth Clarke, and his wife, Patricia Clarke, appellees (“the Clarkes” or “Kenneth” and “Patricia”).

On November 12, 1996, appellants, seven people who would have been the beneficiaries of the Upman Trust upon Genevieve’s death had she not amended it, brought suit against the Clarkes in the Circuit Court for Carroll County, seeking to have the amendment to the Upman Trust set aside on the ground of undue influence. 1 At the same time, they brought a caveat proceeding in the Orphan’s Court for Carroll County on the ground that Genevieve lacked capacity when she executed the will that was in force at the time of her death and that that will was a product of undue influence by the Clarkes over her. The two actions were consolidated in the Circuit Court for Carroll County. They were tried as one, from June 10 to June 12,1998, before a jury and by the court. The will caveat action was decided by the jury in favor of the Clarkes.

The Upman Trust Amendment action was decided by the court, in its equity capacity, also in favor of the Clarkes. Appellants noted an appeal from the judgment entered in the Upman Trust Amendment action only. They present the following question for review, which we have reworded: Did the Clarkes meet their burden of showing by clear and convincing evidence that the amendment to the Upman Trust was the independent and voluntary act of Genevieve Upman? ⁶³² In their brief, the Clarkes raise the following question, which we also have reworded: Given the testamentary character of the Upman Trust, did the trial court err in assigning to them the burden of persuasion on the issue of undue influence? For the following reasons, we shall affirm the judgment.

FACTS AND PROCEEDINGS Genevieve established the Upman Trust on June 3, 1994. The Upman Trust was revocable and, at first, was funded with Genevieve’s residence, located in Ellicott City, and the contents of that house. Genevieve named herself as trustee, and her nephew Kenneth and her niece Christine Healey (“Christine”) (one of the appellants) as joint successor trustees. Howard Roland, Genevieve’s attorney, testified that her purpose in creating the Upman Trust was to avoid having her assets tied up in probate.

The Upman Trust was designed to operate much like a will. During Genevieve’s lifetime, its only beneficiary was Genevieve herself. Upon her death, however, the Upman Trust provided for her assets to be distributed as they would have been distributed under her prior wills. In 1987, Genevieve executed a will that left her stocks and bonds to fourteen named nephews and nieces of her late husband, Adam Upman. 2 Under that will, half of the value of Genevieve’s residence would go to three of the appellants in this case, Lawrence Upman, Barbara Lunsford, and Mary Ann Naide, who also are nieces and nephews of Adam.

The balance of Genevieve’s assets, including her bank accounts and the other half interest in her home, were to go to members of her family. Christine was named personal representative under the 1987 will. In 1991, Genevieve executed a new will. The 1991 will added a bequest of $1,000 to her church, expanded the distribution of her stocks and bonds to a group of twenty of Adam’s ⁶³³ nephews and nieces, and provided for the distribution of the remainder of her property as under the 1987 will.

In her 1991 will, Genevieve named Kenneth and Christine personal representatives. On May 31, 1994, Genevieve executed a third will. This time, she bequeathed the majority of her stocks and bonds, previously earmarked for Adam’s nephews and nieces, to Kenneth and Christine (after deducting $1,000 for her sisters-in-law), both of whom had been helping her to maintain her home and to conduct her business affairs. Kenneth and Christine remained personal representatives under the 1994 will.

Genevieve’s other assets were to be divided as before. The Upman Trust, as executed on June 3, 1994, was drafted contemporaneous with Genevieve’s 1994 will, and contained virtually identical testamentary provisions. Although the Up-man Trust corpus initially consisted of only Genevieve’s personal residence and its contents, the Trust nevertheless contained a provision distributing stocks and bonds to Kenneth and Christine in the same manner as in the 1994 will. Additionally, as was the case in Genevieve’s prior wills, the real estate in the Trust was to be sold upon Genevieve’s death, with one half of the proceeds to go to appellants Lawrence Upman, Barbara Lunsford, and Mary Ann Naide, and the remainder of Genevieve’s property, with the exception of stocks and bonds, to be divided among those of Genevieve’s siblings who survived her, and Kenneth and Christine.

Appellants concede that Genevieve was of sound mind and was acting independently in 1994 when she established the Upman Trust and executed her 1994 will. In March 1995, Genevieve suffered a fall at home. She was hospitalized for eight days. Her physician during that hospitalization was Jerry Seals, M.D. Dr. Seals had been treating Genevieve since October 1993 for ailments primarily related to polymyositis, an inflammation of the muscles.

Over that time, Dr. Seals made several notations in his chart about Genevieve experiencing short-term memory loss, confusion, and the onset of senile dementia. Some of these notations document reports ⁶³⁴ by family members, primarily Christine, while others reflect Dr. Seals’s personal observations; When Genevieve was discharged from the hospital on March 30, 1995, Dr. Seals noted that she was to go home “to family members who understand the need for essentially 24 hour supervision due to confusion.” Genevieve was released from the hospital and into the care of the Clarkes, who took her into their home. According to several witnesses, Genevieve was especially grateful to the Clarkes for allowing her to live with them because she no longer was able to care for herself and the alternative would have been for her to move to a nursing home. After Genevieve moved in with the Clarkes, her contact with the other relatives began to diminish.

Christine, who until then had visited Genevieve twice weekly, came to the Clarkes to see Genevieve just once or twice a month. The other relatives did not visit Genevieve at all. Most of them acknowledged at trial that they had not seen Genevieve in years. Five months after Genevieve moved in with the Clarkes, she asked Patricia to contact Mr. Roland for the purpose of drafting a new will (“the 1995 will”) and amending the Upman Trust.

Mr. Roland made the requested changes and sent them to Genevieve. At trial, Mr. Roland was called by appellants as an adverse witness. He testified that the effect of Genevieve’s 1995 will was to place all of her remaining assets into the Upman Trust and that the effect of the Trust Amendment was to leave all of her assets to the Clarkes upon her death. Genevieve remained a trustee, but the Trust Amendment made Kenneth and Patricia additional trustees.

Mr. Roland explained that he did not speak with Genevieve directly about the revisions to be effected by the 1995 will and Trust Amendment. Instead, the revisions were communicated to him by Patricia. Mr. Roland testified that that was not unusual, and that Genevieve had made similar requests in the past through Kenneth and Christine. When Mr. Roland finished drafting the 1995 will and Trust Amendment, he sent them to Genevieve with a note asking her to call him if she had any questions. ⁶³⁵ Patricia testified that when the 1995 will and Trust Amendment arrived in the mail from Mr. Roland, she asked her neighbors, Lawrence and Kim Mullins, to come to the house to witness Genevieve’s signature on the will.

The Mullins each testified that they witnessed Genevieve sign her will and that she appeared to be competent when she did so. Patricia also testified that the Upman Trust Amendment was not signed by Genevieve when she executed her will because it required a notarized signature. On September 13,1995, the Clarkes took Genevieve to their bank. There, Jennifer Wright, a bank employee, witnessed Genevieve sign the Upman Trust Amendment, and notarized her signature.

Ms. Wright testified that Genevieve produced her medicare card for identification without being asked. Ms. Wright recalled being impressed by that action on Genevieve’s part, because it would not occur to most elderly people that a notary would need such proof. According to Ms. Wright, Genevieve appeared to be mentally sound and to be acting voluntarily when she signed the Trust Amendment. Dr. Seals testified by videotape.

He explained that he last saw Genevieve in March 1995. He would not express an opinion about Genevieve’s capacity to understand the 1995 will and Upman Trust Amendment. He maintained, nevertheless, that by August and September of 1995, her short term memory loss and increasing dementia likely would have made it difficult for her to keep track of her business affairs, such as paying bills and balancing her checkbook. He acknowledged that Genevieve never had any trouble remembering his name when she came to his office, however, and conceded that she had been strong willed about not wanting to move to a nursing home.

At the conclusion of the evidence and after hearing argument of counsel, the trial court ruled in favor of the Clarkes on appellants’ challenge to the Trust Amendment. The parties earlier had stipulated to the existence of a confidential relationship between Genevieve and the Clarkes. The trial court ruled that the existence of that relationship had the legal effect of shifting the burden of proof to the Clarkes to show by ⁶³⁶ clear and convincing evidence that the Trust Amendment was not the product of undue influence by them over Genevieve. After reviewing factors relevant to that assessment, as set forth in Midler v. Shapiro, 33 Md.App. 264, 273-74 , 364 A.2d 99 (1976), and applying those factors to the evidence, the trial judge concluded that “[ejverything points to the [Clarkes] providing for [Genevieve], and ... certainly, the inferences that could be gathered from all of the evidence is certainly not one where there has been undue influence for the profit of the [Clarkes].” We shall recount additional facts as necessary to our discussion of the issues.

DISCUSSION I. Appellants contend that the evidence at trial was insufficient to support the trial court’s finding by clear and convincing evidence that the Upman Trust Amendment did not result from undue influence by the Clarkes over Genevieve. The Clarkes counter that they presented sufficient evidence to satisfy the burden and high standard of proof assigned to them by the trial court. They argue in the alternative that the trial court erred in assigning the burden of proof to them and that when the evidence is considered in light of the proper burden (and standard) of proof, the trial court’s ruling must be affirmed. The Maryland cases that have addressed a challenge to an inter vivos transfer of property to the dominant party in a confidential relationship have held that there is a presumption against the validity of such a transfer and therefore the dominant party bears the burden of showing by clear and convincing evidence that the transaction was not the product of undue influence.

In Wenger v. Rosinsky, 232 Md. 43 , 192 A.2d 82 (1963), the Court explained: ⁶³⁷ [WJhere such a relationship does exist, and the party occupying the position of dominion or superiority ... receives a benefit from the transaction, there is a presumption against its validity, placing upon the beneficiary the burden of showing by clear and convincing evidence that there has been no abuse of the confidence, that she acted in good faith, and that the act by which she was benefited was the free, voluntary, and independent act of the other party to the relationship. Id. at 49 , 192 A.2d 82 (emphasis supplied); see also Midler v. Shapiro, supra, 33 Md.App. at 273 , 364 A.2d 99 . Appellants maintain that under these cases, the trial court properly assigned to the Clarkes the burden of proving the absence of undue influence, by clear and convincing evidence. By contrast, in will caveat cases, the existence of a confidential relationship between the testator and a person taking under the will does not give rise to a presumption of invalidity.

For that reason, the burden to prove undue influence remains with the person challenging the will. In Anderson v. Meadowcroft, 339 Md. 218 , 661 A.2d 726 (1995), the Court of Appeals explained: There is an obvious difference between a gift whereby the donor strips himself of the enjoyment of his property while living and a gift by will, which takes effect only from the death of the testator. In case of gifts by will the fact that a party is largely benefited by a will prepared by himself is nothing more than a suspicious circumstance of more or less weight according to the facts of the case. Id.

(internal quotations omitted). The Clarkes maintain that the Upman Trust, as originally established and as amended, was characteristically testamentary. It was revocable and affected only Genevieve until her death. Therefore, the existence of a confidential relationship between Genevieve, as the Trust settlor, and the Clarkes, as the Trust beneficiaries, did not give rise to a presumption of invalidity of the Trust Amendment.

The burden to prove that ⁶³⁸ the Trust Amendment was invalid as the product of undue influence therefore remained on appellants. We agree with the Clarkes that given the nature of the Upman Trust (in its original form and as amended), appellants bore the burden of proving that the Trust Amendment was the result of undue influence, even in the face of the stipulated confidential relationship. The Upman Trust did not confer an immediate benefit on anyone other than Genevieve. Indeed, as the lifetime beneficiary, Genevieve merely continued to enjoy the benefit of assets that she previously had owned outright.

The creation of the Upman Trust did not effect a transfer of assets to beneficiaries other than Genevieve herself, prior to Genevieve’s death. That remained the case after the Trust was amended. Moreover, because the Upman Trust was revocable, Genevieve retained the power to change its terms at any time, just as a testator retains the ability to change the terms of his will. In this regard, Genevieve’s decision to leave her assets to the Clarkes through the Upman Trust Amendment was the same in substance as if she had done so by will.

Appellants argue that the Upman Trust Amendment in fact conferred an immediate benefit upon the Clarkes because they became trustees. We disagree. Although Genevieve added the Clarkes as trustees, she did not resign her own trusteeship and indeed the evidence presented at trial showed that she continued to write checks on the Upman Trust checking account after the Upman Trust was amended. Appellants also misread our opinion in Midler v. Shapiro, supra, as support for their position on the burden of proof.

That case did not involve a testamentary gift. The decedent, an aunt, opened two checking accounts titled in her name and her niece’s name “as joint owners, in trust for one another, subject to the order of either and the balance upon death belong to the survivor.” Midler, 33 Md.App. at 270 , 364 A.2d 99 . The effect was to give the niece immediate access to the funds in the accounts. Under the terms of the accounts, the niece could have withdrawn the funds at any time, with or ⁶³⁹ without her aunt’s consent. 3 We explained: The creation of such a trust gives rise to a rebuttable presumption of its validity, and, usually, the burden is thrust upon the party seeking to rebut it.

When, however, a confidential relationship is shown, as in the case now before us, the burden shifts to the party seeking to uphold the trust and gift. It then becomes the duty of the donee to demonstrate “... that the donor understood the nature of the transaction and intended to make a gift.” Tribull v. Tribull, supra [ 208 Md. 490 ] at 507 [ 119 A.2d 399 (1956)]. Id. (emphasis supplied)(internal citations omitted).

We then concluded that the trial court was not clearly erroneous in finding that the niece had met the heavy burden of showing an absence of undue influence. Id. at 272, 364 A.2d 99 . In contrast to the joint checking account situation in Midler , the transfer of assets or control from Genevieve to the Clarkes did not occur until Genevieve’s death. Genevieve remained free during her lifetime to amend the Upman Trust to redesignate the ultimate beneficiary (or beneficiaries).

Accordingly, the existence of a confidential relationship between Genevieve and the Clarkes was a factor for the trial court to consider in deciding whether Genevieve was unduly influenced by the Clarkes when she executed the Upman Trust Amendment. Indeed, it was a piece of evidence indicative of a suspicious circumstance. Anderson, supra, 339 Md. at 227 , 661 A.2d 726 ; Shearer v. Healy, 247 Md. 11, 25 , 230 A.2d 101 (1967)(citing Cook v. Hollyday, 185 Md. 656, 667 , 45 A.2d 761 (1946)). The evidence of a confidential relationship did not, however, cause the burden of proof to shift to the Clarkes to prove lack of undue influence. 4 The burden of demonstrating ⁶⁴⁰ undue influence remained on