YIVO Institute for Jewish Research v. Zaleski

⁶⁵⁸ GREENE, J. In this case we are asked to revise the Maryland law of ademption by satisfaction and require that a testator’s intention to adeem a legacy can be proven only by a writing made contemporaneous with an inter vivos gift.. Petitioner, in its attempt to persuade us to change the law, relies in part on the assertion that the doctrine of ademption is in conflict with Md.Code (2001), § 3-106 of the Estates & Trusts Article, the Restatement (Third) of the Law of Property (Wills and Other Donative Transfers) § 5.4 (1999), and the Uniform Probate Code § 2-609 (amended 1990). In addition, petitioner assails the decision of the intermediate appellate court, YIVO Institute for Jewish Research v. Zaleski, 156 Md.App. 527 , 847 A.2d 510 (2004), and contends that the Court of Special Appeals misapplied the law of ademption in its review of the decision of the Orphans’ Court. For reasons to follow in this opinion, we decline the invitation to rewrite the law of ademption and affirm the judgment of the intermediate appellate court.

On September 25, 2002, the Orphans’ Court for Montgomery County 1 denied petitioner’s, the YIVO Institute for Jewish Research (“YIVO”), request to receive distribution of a bequest in the Will of Jan Karski (“Dr. Karski”). The Orphans’ Court concluded that Dr. Karski’s inter vivos gifts to YIVO were intended by Dr. Karski as a fulfillment of the legacy under his will. The petition was opposed by respondents, the personal representative of Dr. Karski’s estate and two residuary legatees under Dr. Karski’s Will — the American Center of Polish Culture and the Kosciusko Foundation. YIVO appealed to the Court of Special Appeals seeking reversal of the decision of the Orphans’ Court. ⁶⁵⁹ YIVO argued in the Court of Special Appeals, as they do here, that the specific bequest to YIVO in the will was not adeemed by the lifetime gifts. 2 YIVO also contends that the Orphans’ Court erred in admitting the testimony of Dr. Hanna Kaya Ploss (“Dr. Ploss”) as to oral statements made by Dr. Karski after satisfaction of Dr. Karski’s pledge to YIVO.

The intermediate appellate court affirmed the decision of the Orphans’ Court stating that the Orphans’ Court was not clearly erroneous in its conclusion that Dr. Karski intended for his bequest to YIVO to act only as security for his obligation to the organization. It also affirmed the admission of Dr. Ploss’s testimony deferring to the trial court’s evidentiary rulings and factual findings. YIVO, 156 Md.App. 527 , 847 A.2d 510 . By petition for writ of certiorari to this Court, YIVO challenges the judgment of the Court of Special Appeals asserting that the lower courts erred in failing to require written evidence of intent to adeem, misapplied the presumptions of prior case law regarding ademption by satisfaction, and improperly admitted and/or credited Dr. Ploss’s testimony.

We granted certiorari to consider YIVO’s contentions. YIVO v. Zaleski, 382 Md. 688 , 856 A.2d 724 (2004). Background Dr. Karski was a hero of the Polish underground during World War II. He reported to Allied powers on the events transpiring in Poland until he was captured by the Nazis. 3 During his confinement he was tortured and suffered greatly.

Alter attempting suicide to avoid disclosures that could have endangered the underground movement, Dr. Karski was taken to a Nazi-controlled hospital in critical condition. He was rescued from the hospital by members of the underground movement. Several lives were lost during the rescue effort ⁶⁶⁰ and one rescuer, Zofia Hanuszkiewicz (“Zofia”), spent several years in a German prison camp for her involvement. After the war, Dr. Karski emigrated to the United States and settled in Chevy Chase, Maryland.

Dr. Karski remained committed to Polish culture until his death, developing ties with several Polish organizations, including The Kosciusko Foundation (“Foundation”) and The American Center of Polish Culture (“Center”). He spent much of his life attempting to mend the relationship between Jewish and non-Jewish Poles which had been fractured by events occurring in Poland during WW II. Following the death of his wife, Pola Nirenska, Dr. Karski developed a plan to memorialize both of them by creating an award to acknowledge Jewish authors of Polish origin. 4 In 1992, Dr. Karski entered into an agreement with YIVO to establish an endowment fund to provide an annual award of $5,000 to authors whose works focused on or otherwise described contributions to Polish culture and Polish science by Poles of Jewish origin. Dr. Karski formalized his pledge in a letter dated November 25, 1992 (“Letter Agreement”).

The Letter Agreement provided, in pertinent part: The endowment will consist of a gift of $100,000.00 in cash to be made by me to YIVO in my will, or in cash and/or marketable securities of the same total market value during my lifetime. A second letter, identical to the November 25,1992, letter, was signed February 25, 1993. It is unclear from the record, however, why the second letter was executed. On October 25, 1993, eight months after writing the second Letter Agreement, Dr. Karski executed his will.

Article SECOND of the will provides: I hereby give and bequeath to YIVO — Institute for Jewish Research (tax exempt organization Dr. Lucjan Dobroszycki and Dr. Ludwik Seidenman) — all my shares of Northern ⁶⁶¹ States Power (N.St.Pw.) of which 400 share certificates are located in Riggs National Bank, Friendship Branch (4249 block of Wisconsin Avenue), Safe Deposit Box 240, and the rest approximately 1,780 shares, is held by Northern States Power as automatic reinvestment. All these shares (approximately 2,180) should be transferred (not sold) to YIVO. At the time the will was executed, Northern States Power Company shares had a value of about $100,000. At the time of Dr. Karski’s death the shares were worth $113, 527.64.

In addition, pursuant to the Third Clause of the will, stock in two other utilities, New York State Gas & Electric and Ohio Edison, was left to the Washington Performing Arts Society (“WPAS”). Most of the remaining estate was bequeathed in equal shares to the Foundation, the Center, three of Dr. Karski’s elderly relatives in Poland, and Zofia, the woman who had helped rescue him from the hands of the Nazis. During the period November 28, 1995, to January 22, 1996, Dr. Karski made a series of lifetime gifts of utility stocks to YIVO consisting of 1,809 shares of New York State Electric & Gas Corporation, 2,300 shares of Ohio Edison Company, and cash. 5 The value of these stock gifts totaled $99,997.69. On February 7, 1996, Dr. Karski made a further gift of $2.31, bringing the total value of the gifts to YIVO to exactly $100,000.

Dr. Karski did not amend his will to reflect the inter vivos transfer of utility stock and cash to YIVO. Dr. Karski died on July 12, 2000. At that time, the shares of Northern States Power Company remained an asset of his estate. Paul Zaleski, who qualified as personal representative, ⁶⁶² denied YIVO’s request for payment of the bequest on the basis that Dr. Karski’s earlier gift satisfied the legacy.

As a result, YIVO filed a Petition for Order Directing Distribution of Specific Bequest. The Orphans’ Court conducted an evidentiary hearing and rendered an oral opinion finding that Dr. Karski intended for his lifetime gifts to YIVO to satisfy the legacy under the will. Following the entry of final judgment, YIVO appealed to the Court of Special Appeals which affirmed the judgment of the Orphans’ Court. We granted YIVO’s petition for a writ of certiorari.

Standard of Review The standard of review in this action is summarized in Maryland Rule 8-131: (c) Action tried without a jury. 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. Md. Rule 8-131 (2005).

We recently discussed our review pursuant to Md. Rule 8-131. We said: “[T]he 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.” The deference shown to the trial court’s factual findings under the clearly erroneous standard does not, of course, apply to legal conclusions. When the trial court’s [decision] “involves an interpretation and application of Maryland statutory and case law, our Court must determine whether the lower court’s conclusions are legally correct under a de novo standard of review.” ⁶⁶³ Nesbit v. Government Employees Insurance Company, 382 Md. 65, 72 , 854 A.2d 879, 883 (2004) (internal citations omitted).

If there is any competent material evidence to support the factual findings of the trial court, those findings cannot be held to be clearly erroneous. Solomon v. Solomon, 383 Md. 176, 202 , 857 A.2d 1109, 1123 (2004). Furthermore, an appellate court may affirm a trial court’s decision on any ground adequately shown by the record even though the ground was not relied upon by the trial court or the parties. Offutt v. Montgomery Co. Bd. of Edu., 285 Md. 557 , 563 n. 3, 404 A.2d 281 , 285 n. 3 (1979) (citing Robeson v. State, 285 Md. 498, 403 A.2d 1221 (1979)).

Discussion At the outset, we find it important to determine the precise meaning of “ademption.” Black’s Law Dictionary defines “ademption” as “the destruction or extinction of a testamentary gift by reason of a bequeathed asset’s ceasing to be a part of the estate at the time of the testator’s death.” Black’s Law Dictionary 42 (8th ed., 2004). We have said that ademption is defined as a “revocation, recalling, or cancellation, of a legacy, according to the apparent intention of the testator, implied by law from acts done by him in his life, though such acts do not amount to an express revocation of it.” Von Steinner v. Sorrell, 259 Md. 228, 230 , 269 A.2d 604, 605 (1970) (citations omitted). The Tennessee Supreme Court discussed the doctrine of ademption and stated that, “ademption is generally defined as ‘the extinction, alienation, withdrawal, or satisfaction of the legacy by some act of the testator by which an intention to revoke is indicated: the doing of some act with regard to the subject-matter which interferes with the operation of the will.’ ” In re Estate of Hume, 984 S.W.2d 602, 604 (Tenn.1999) (quoting American Trust & Banking Co. v. Balfour, 138 Tenn. 385 , 198 S.W. 70 , 71 (1917)). As the definitions above demonstrate, there are two distinct types of ademption.

The first occurs when “the unique property that is the subject of the specific bequest has been sold, given away, or destroyed, or is not otherwise in ⁶⁶⁴ existence at the time of the testator’s death.” Black’s Law Dictionary 42 (8th ed., 2004). This is referred to as ademption by extinction. Ademption by extinction results because of “the doing of some act with regard to the subject-matter which interferes with the operation of the will.” In re Estate of Hume, 984 S.W.2d at 604 (citing American Trust & Banking Co., 198 S.W. at 71). 6 By comparison the other type of ademption occurs when the testator, while alive, has already given something of value to the beneficiary in lieu of the legacy. Black’s Law Dictionary 42 (8th ed.2004).

This is known as ademption by satisfaction. The doctrine of ademption by satisfaction “refers to the situation in which the testator gives in his lifetime to a legatee what he had left him in his will.” In re Estate of Hume, 984 S.W.2d at 604 (citing Rhodes v. Kebke, 179 Tenn. 480 , 167 S.W.2d 345, 348 (1943)). In the case before us there is no claim of ademption by extinction. The question here is whether there was an ademption by satisfaction and whether it has occurred is most certainly a matter of testator intent.

Murphy’s Will Clauses § C1, 14-54 (Matthew Bender). Under the doctrine of ⁶⁶⁵ ademption by satisfaction, the intent of the testator is “relevant to determine whether the testator’s actions regarding the legatee amounts to a withdrawal of the gift from the operation of the will.’ ” In re Estate of Hume, 984 S.W.2d at 604 . The law is established in this State that, “when a testator in his lifetime pays to a legatee the amount of money given by the will, and such payment is intended to be in satisfaction of the legacy, the legacy is thereby adeemed.” Rhein v. Wheltle, 206 Md. 1, 6 , 109 A.2d 923, 925 (1954) (citing Gallagher v. Martin, 102 Md. 115, 118 , 62 A. 247, 248 (1905)). Thus the question whether a legacy is adeemed by a gift made by a testator to a legatee after execution of the will depends upon the intention of the testator.

Rhein, 206 Md. at 6 , 109 A.2d at 925 . Therefore, if a testator intended that an inter vivos gift should abrogate the legacy, the legacy is adeemed either in whole or in part; but if a testator intended that the legatee should receive both the testamentary gift and the inter vivos benefit, the legacy is not adeemed. Id. It is a general rule that “where a testator is the parent of the legatee or in loco parentis, and after executing his will makes a gift to the same child, it will be presumed that the gift was intended to be in satisfaction of the legacy.” Rhein, 206 Md. at 6 , 109 A.2d at 926 .

The legacy will be considered adeemed unless the presumption is rebutted. Id. This principle was founded upon the equitable presumption that a parent, who has the natural obligation to provide for his children, after executing a will establishing the portion of his estate that each child should receive, would not give one of his children a double portion of his estate to the detriment of the others. Id.

(citing Selby v. Fidelity Trust Co., 188 Md. 192 , 51 A.2d 822 (1947); Wallace v. Dubois, 65 Md. 153, 159 , 4 A. 402 , 403 (1886); Richardson v. Eveland, 126 111. 37, 18 N.E. 308 (1888); Carmichael v. Lathrop, 108 Mich. 473 , 66 N.W. 350 (1896)). On the other hand, it is accepted as a general rule that where a testator is not the parent of the legatee or does not stand in loco parentis, it will be presumed that the subsequent gift did not adeem the legacy by satisfaction. Rhein, 206 Md. at 7 , 109 A.2d at 926 . ⁶⁶⁶ In Associated Professors of Loyola College v. Dugan, we said: [T]hat if the bequest is for a particular purpose, a subsequent gift to the legatee by the testator in his lifetime for the same purpose operates as a satisfaction of the legacy to the amount of the gift. This statement of the rule is subject to the qualification that the gift inter vivos must not be substantially different in kind from the legacy....

The rule we have stated is uniformly recognized and applied where the conditions make it appropriate. (Citations omitted.) Associated Professors of Loyola College v. Dugan, 137 Md. 545, 550 , 113 A. 81, 83 (1921). In Colley v. Britton, we reaffirmed the law of ademption by satisfaction. We said: It is also established law in this State that when in his lifetime a testator pays to a legatee the amount of money given by a will, and such payment is intended to be in satisfaction of the legacy, the legacy is thereby adeemed.

The question of whether a legacy is adeemed by a gift made by a testator to the legatee after the will was executed depends upon the intention of the testator. Colley v. Britton, 210 Md. 237, 246 , 123 A.2d 296, 301 (1956) (emphasis in original). Petitioner argues that a subsequent writing is necessary to show a clear intention of satisfaction. YIYO relies upon revisions to Maryland’s law in 1968 concerning advancements and intestate estates which resulted from the Governor’s Commission to Review the Testamentary Law of Maryland (“The Henderson Commission”).

The Henderson Commission recommended, and the Maryland Code now reflects, that for an inter vivos gift to be treated as an advancement, there must be written evidence of such an intent. 7 Petitioner posits ⁶⁶⁷ that there is no reason to “maintain standards for ademption of a legacy by satisfaction that differ from those applicable to advancement of an intestate share.” 8 In our view, principles governing advancement and intestate shares do not help resolve the issues in this case. In the present case, the decedent did not die intestate, he died with a will. The laws of intestate succession concern disposition of property by operation of law under circumstances where the decedent failed to declare his or her intention with regard to the disposition of his or her property at the time of death. The law of ademption by satisfaction, however, is concerned with the intention of the testator at the time the inter vivos gift was made.

See Colley, 210 Md. at 246 , 123 A.2d at 301 . Second, petitioner’s reliance upon the Henderson Commission Report is of no avail because that Commission did not recommend any changes to the common law of ademption by satisfaction. In fact, there is no mention of any discussion in the Report with regard to the general law of ademption. 9 It is ⁶⁶⁸ reasonable to infer from the Commission’s recommendations about advancements to lineal descendants and its silence about ademption that it did not see a need to modify the common law of ademption by satisfaction. Petitioner next draws from language in Selby v. Fidelity Trust Co., 188 Md. 192, 199 , 51 A.2d 822, 825 (1947), to suggest that a writing of the testator is required to show that an inter vivos gift is intended as a substitution for the legacy provided in the will.

This was not our holding in Selby and no other reported decision of this Court has interpreted Selby for that proposition. See Colley, 210 Md. 237 , 123 A.2d 296 ; Rhein, 206 Md. 1 , 109 A.2d 923 . The issue in Selby was whether payments in the form of securities and cash to Fidelity Trust Company by the testator, during his lifetime and after execution of his will, adeemed a bequest in his will to the Trust Company. We held that the inter vivos transfers to the trust were ambulatory and revocable during the testator’s lifetime and did not constitute' an outright irrevocable gift to a third party.

Selby, 188 Md. at 202 , 51 A.2d at 826 . Hence, the transfers to the trust did not adeem the testamentary trust established under Mr. Selby’s Will. In that case, the evidence was not sufficient to show that the testator’s intention was to substitute the transfers in trust for the bequest under his will.