Gary P. Way & Kristin Kirchner v. Marjory E. Way ( 2016 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
In Re: No. 74320-1-1
THE PETER J. AND MARJORY E. DIVISION ONE
WAY LIVING TRUST.
GARY PETER WAY and KRISTIN UNPUBLISHED
KIRCHNER,
FILED: November 28. 2016
Appellants,
v.
MARJORY E. WAY, trustee of the Peter
J. and Marjory E. Way living trust,
Respondent.
Cox, J. — Gary Way and Kristin Kirchner appeal the trial court's order
granting summary judgment to Marjory Way in this Trust and Estate Dispute
Resolution Act (TEDRA) proceeding. Gary and Kristin fail to show there are any
genuine issues of material fact over interpretation of the Peter J. and Marjory E.
Way Living Trust.1 Marjory is entitled to judgment as a matter of law. We affirm.
We adopt the naming conventions of the parties.
No. 74320-1-1/2
Peter and Marjory Way married in September 2006. Peter made his last
will and testament on February 29, 2012. On that same date, Peter and Marjory
established the trust that is the subject of this litigation. Peter passed away in
June 2012.
In June 2015, Marjory commenced this proceeding to obtain a
determination of rights under the terms of the trust. Gary and Kristin opposed
her petition and counterclaimed. Gary is Peter's son from Peter's prior marriage
to Carol Way. Kristin married Greg, Carol's son from a prior marriage. Greg
predeceased Kristin.
Gary and Kristin moved for partial summary judgment. Marjory made a
cross motion for summary judgment. The trial court granted Marjory's cross
motion and dismissed all counterclaims. The court also awarded her fees.
Gary and Kristin appeal.
SETTLOR'S INTENT
Gary and Kristin argue that Peter did not intend for the trust to create a life
estate in his property for Marjory. They claim she was only to inherit the
condominium and a 2009 Toyota that she and Peter shared. They contend they
were each to receive 50 percent of all of Peter's other property. We disagree.
Summary judgment is proper only when there is no genuine issue as to
any material fact and the moving party is entitled to judgment as a matter of law.2
"A genuine issue of material fact exists if 'reasonable minds could differ on the
2 Scrivener v.Clark Coll., 181 Wash. 2d 439, 444, 334 P.3d 541 (2014); CR
56(c).
No. 74320-1-1/3
facts controlling the outcome of the litigation.'"3 We consider "all facts and make
all reasonable factual inferences in the light most favorable to the nonmoving
party."4 We review de novo a trial court's grant of summary judgment.5
A court's paramount duty in construing a trust is to give effect to the
settlor's intent.6 That intent is determined from the instrument as a whole, and its
specific provisions must be construed in light of the entire document.7 If the
language of the instrument is unambiguous, courts ascertain the settlor's intent
from the language of the instrument itself without extrinsic evidence.8 A trust's
terms are not ambiguous unless the language is susceptible to more than one
reasonable interpretation.9 If extrinsic evidence is considered to resolve an
ambiguity regarding the settlor's intent, it may not be considered to import an
intention into the instrument that is not expressed therein.10
3 Knight v. Deo't of Labor & Indus.. 181 Wash. App. 788, 795, 321 P.3d 1275
(quoting Ranger Ins. Co. v. Pierce County. 164 Wash. 2d 545, 552, 192 P.3d 886
(2008)), review denied. 181 Wash. 2d 1023 (2014).
4 Scrivener. 181 Wash. 2d at 444.
5JU
6 In re Estate of Bernard. 182 Wash. App. 692, 697, 332 P.3d 480, review
denied. 181 Wash. 2d 1027 (2014): see also RCW 11.12.230.
7 In re Estate of Bernard. 182 Wash. App. at 704; see also Templeton v.
Peoples Nat'l Bank of Wash.. 106 Wash. 2d 304, 309, 722 P.2d 63 (1986).
8 In re Guardianship of Jensen. 187 Wash. App. 325, 331, 350 P.3d 654
(2015).
9 In re Wash. Builders Benefit Trust. 173 Wash. App. 34, 75, 293 P.3d 1206
(2013).
10 See In re Estate of Curry. 98 Wash. App. 107, 113, 988 P.2d 505 (1999)
3
No. 74320-1-1/4
Our courts attempt to give effect to every part of an instrument and must
make a reasonable effort to reconcile seemingly inconsistent provisions.11 The
principles of construction applicable to wills also apply to trusts.12
The interpretation of a trust provision is a question of law that we review
de novo.13
We start with consideration of paragraph 2 of the trust. That paragraph
creates the trust estate. The estate is comprised of all property of Peter and
Marjory, property which is described in three schedules: Schedules A, B, and C.
Schedule A describes their community property. Schedule B describes
Marjory's separate property. Schedule C describes Peter's separate property.
We next consider paragraph 6 of the trust, Trust Beneficiaries. It provides:
Husband's Beneficiaries. Upon the death of PETER J.
WAY, his portion of the Trust Estate, to include his share
of the property listed in Schedule A, as well as any
separate property listed in Schedule C, shall be
distributed in accordance with the terms and to the
Beneficiaries named in Schedule E, attached.
....[14]
SCHEDULE E, to which the above provision refers, provides:
Pursuant to Paragraph 6 of the Declaration of Trust... the Trust
Estate property of PETER J. WAY shall be distributed to the
following Specific Beneficiaries upon the following terms:
11 See In re Estate of Sherry. 158 Wash. App. 69, 76, 240 P.3d 1182 (2010);
In re Estate of Wright. 147 Wash. App. 674, 684-85, 196 P.3d 1075 (2008).
12 First Interstate Bank of Wash, v. Lindberg. 49 Wash. App. 788, 797-98,
746 P.2d 333 (1987).
13 Wash. Builders Benefit Trust. 173 Wash. App. at 75.
14 Clerk's Papers at 1573 (emphasis added).
4
No. 74320-1-1/5
SPECIFIC BEQUESTS:
In the event Marjory Way survives Peter Way then she shall inherit
the real property condominium, Parcel. . . and the vehicle..., 2009
Toyota Highlander.
Gary Peter Way son 50% of remainder, if he pre
deceases, then 50% to his
wife ... if they were still
married at the time of his
death.
Kristin Kirchner daughter-in-law 50% of remainder. Ifshe
predeceases, then 50% to
her then living children in
equal shares.[15]
Gary and Kristin contend this provision can only reasonably be interpreted
to mean that the "remainder" of Peter's property (less the condominium and
Toyota) is theirs "outright, free of trust, as their sole and separate property." To
support this argument, they rely on the fact that the Specific Bequests provision
in Schedule E "does not indicate" that their gifts of the remainder were in trust or
that they were to be transferred into Trust A. We reject this untenable argument.
We consider paragraph 7 of the trust, which makes further provisions
regarding the trust estate. It states:
Creation of Trust A and Trust B. Upon the death of the
first spouse [Peter], the surviving spouse [Marjory], as Trustee,
shall divide the entirety of the Trust Estate ... into two separate
trusts, Trust A and Trust B, and shall continue to serve as Trustee
for both Trusts.
[16]
15 jd. at 1585 (emphasis added).
16jUat1573.
5
No. 74320-1-1/6
The plain words of this provision direct the trustee to divide the "entirety of
the" trust estate into Trust A and Trust B upon Peter's death. This provision
makes clear that all of the trust estate created by paragraph 2 of the trust is to be
divided into the two trusts upon Peter's death.
This paragraph 7 further states:
Contents of Trust A. All of the property of The Peter J. & Marjory
E. Way Living Trust owned by the deceased spouse [Peter], to
include one half of the value of shared Property in Schedule A, as
well as any separate property described in Schedule B or C, as
applicable, shall be transferred to Trust A.
[17]
The plain words of this provision specify how Trust A is funded.
Specifically, one-half of the community property plus all of Peter's separate
property fund Trust A. This is his entire ownership interest in the trust estate.
The further provisions of paragraph 7 to consider are the following:
(ii) Life Beneficiary of Trust A. Upon the death of the
deceased spouse [Peter] and the creation of Trust A, the surviving
spouse [Marjory] shall become the Life Beneficiary of Trust A.
The surviving spouse's [Marjory's] life estate interest in Trust A,
entitles the surviving spouse [Marjory] receives [sic] all interest or
other income from the trust property, to use the property, and to
spend the trust property in any amount for his or her health,
education, support and maintenance, in his or her accustomed
manner of living.
.... I181
There can be no reasonable dispute that these provisions direct that
Marjory, the surviving spouse of Peter, is the lifetime beneficiary of Trust A.
Likewise, there can be no reasonable dispute that she is to receive all income
17 JU
18 Id at 1573-74 (emphasis added).
No. 74320-1-1/7
from the trust property and may spend the trust property for her health,
education, support, and maintenance, as she pleases.
Our conclusions are buttressed by further provisions of the trust. For
example, Paragraph 8, Administration of Trust A, provides as follows:
Final Beneficiaries
If PETER J. WAY is the first deceased spouse, then the
Final Beneficiaries of Trust A shall be:
50% to GARY PETER WAY, per capita
50% to KRISTIN KIRCHNER, per stirpes
Death of Life Beneficiary. Upon the death of the Life
Beneficiary, the Trustee shall distribute the property of Trust A to
the appropriate Final Beneficiaries provided in this Paragraph 8.[191
Reading these provisions together, we conclude that Peter intended to
draw distinctions between the Life Beneficiary and Final Beneficiaries. Marjory is
the former and Gary and Kristin are the latter. The plain words of the trust make
clear that Marjory is entitled to the full benefit of the property in Trust A during her
lifetime. Only after her passage are Gary and Kristin entitled to whatever may be
left over in Trust A, as Final Beneficiaries.
Both parties argue that the trust is unambiguous. But they reach different
conclusions about how to read the trust. This dispute is principally based on their
conflicting interpretations of the word "remainder" in Schedule E.
We turn, then, to the word "remainder," a primary focal point of the parties'
arguments. In determining the meaning of the word, we look to Black's Law
Dictionary. It defines remainder as:
19 Id. at 1574-75.
No. 74320-1-1/8
A future interest arising in a third person — that is, someone other
than the estate's creator, its initial holder, or the heirs of either —
who is intended to take after the natural termination of the
preceding estate.[20]
The most natural reading of this word, given the context, is that Peter's
intent was to provide to Gary and Kristin 50 percent of his property in the future,
after the expiration of Marjory's life estate ("the preceding estate"). This reading
is most consistent with the fact that the other provisions of the trust that we
discussed previously expressly provide for such a life estate for Marjory. That life
estate in Trust A is funded by all of Peter's property at the time of his death. To
read the word "remainder" otherwise, as Gary and Kristin argue, would write out
of the trust the provisions of paragraphs 2, 7, and 8 of the trust. That would be
inconsistent with the principle that we should consider all the words of this
testamentary document, giving effect to all provisions, if possible.
Our conclusion about the correct reading of the word "remainder" is
buttressed by our interpretation of the words "Specific Bequests" in paragraph 6
of the trust. These words address the disposition of the condominium and
vehicle that Schedule E identifies as going to Marjory on Peter's death. Turning
again to Black's Law Dictionary, the word "bequest" is defined as:
The money or other property that a person arranges to give to
someone or an organization upon deaths
Had Peter intended that, on his death, his property would go 50 percent
each to Gary and Kristin, he would have used some variation of the word
"bequest" to evidence that intent. But he used that word to describe part of the
20 Black's Law Dictionary 1482 (10th ed. 2014) (emphasis added).
21 Black's Law Dictionary 189 (10th ed. 2014) (emphasis added).
8
No. 74320-1-1/9
property to go to Marjory. That use is consistent with the provisions of
paragraphs 7 and 8 that give her a life estate in Trust A.
However, in using the word "remainder," a word with a different meaning,
to describe what Gary and Kristin would receive, it appears that Peter intended
that they not immediately receive any of his property on his death. Rather, they
are to receive whatever of Peter's property remains after Marjory's life estate in
Trust A. Only this view of Peter's choice of words is consistent with the
provisions of paragraphs 7 and 8 that we discussed earlier in this opinion.
In sum, adopting Gary's and Kristin's interpretation would render
paragraphs 7 and 8 of the trust meaningless, violating a basic rule of construction
applicable to such testamentary documents. Moreover, there is only one
reasonable reading of the trust, making it unambiguous.
Gary and Kristin argue that the will and trust must be considered together
and that these documents unambiguously provide that Marjory should only inherit
the condominium and a 2009 Toyota. They further argue that Marjory's
interpretation of the trust creates an inconsistency between the will and trust.
Thus, they argue that the will controls and unambiguously provides that Marjory
is only to inherit the condominium and 2009 Toyota. But these arguments rely on
an inapplicable provision in Peter's will.
The property distribution paragraph in Peter's will states:
Trust. I give all of my property and estate to the Trustee under
[the] trust... to be distributed in accordance with the terms thereof.
In the event the said trust shall have been revoked or declared
invalid for any reason, then I direct my Personal Representative
to give all of my property and estate as follows:
No. 74320-1-1/10
Condominium ... to my wife, Marjory E. Way, together with the
[2009 Toyota], to Marjory E. Way.
The rest, residue and remainder of my estate I give, devise and
bequeath 50% to my son, Gary Peter Way . .. and 50% to Kirstin
Kirchner. .. ™
Gary and Kristin erroneously rely on the property distribution required in
the event that the trust is revoked or invalidated to argue that Peter intended to
provide Marjory with only the condominium and 2009 Toyota. But that provision
is inapplicable here because the trust has not been either revoked or invalidated.
Further, the first sentence of this paragraph explicitly states that Peter's property
is to be distributed in accordance with the trust terms, which unambiguously
provides Gary and Kristin with 50 percent of Peter's property in the future, after
the expiration of Marjory's life estate. Thus, Gary's and Kristin's reliance on this
paragraph in Peter's will is misplaced.
Gary and Kristin also argue that Peter intended the common meaning of
"remainder" in the living trust as defined in the Cambridge Academic Content
Dictionary. Under that definition, remainder is "the part that is left after the other
parts are gone, used, or taken away."23 But that definition differs from the Black's
Law Dictionary definition stating that a remainder is "[a] future interest arising in
a third person—that is, someone other than the estate's creator, its initial holder,
22 Clerk's Papers at 1559 (emphasis added).
23 Cambridge Academic Content Dictionary,
http://dictionary.cambridge.org/us/dictionary/english/remainder (last visited
November 9, 2016).
10
No. 74320-1-1/11
or the heirs of either—who is intended to take after the natural termination of the
preceding estate."24
The first definition does not convincingly compare with the second
definition. This is particularly true when considering the word in context with the
other provisions of the living trust. For the reasons already discussed, we rely on
the second definition.
Gary and Kristin also request that we reinstate their breach of fiduciary
duty counterclaim against Marjory if we determine that she owed them a fiduciary
duty to distribute immediately to them the remainder of Peter's estate. We
decline to do so for the reasons stated above.
To further support their interpretation of the living trust, Gary and Kristin
make the following arguments in their reply brief that they did not make in their
opening brief.
First, Gary and Kristin argue that this court should adopt their
interpretation of the living trust because Gary would have inherited Peter's entire
estate if Peter died without a will. Second, they argue that Marjory waived her
right to inherit from Peter's estate by entering into the prenuptial agreement.
Third, they argue that the last antecedent and the ejusdem generis rules of
construction support their interpretation of the living trust. Lastly, Gary and
Kristin argue that Peter and Marjory did not have to leave any remainder for Trust
A, and did not do so, even though the living trust contains provisions for Trust A's
creation. To support this argument, they rely on other provisions in the living
24 Black's Law Dictionary 1482 (10th ed. 2014) (emphasis added).
11
No. 74320-1-1/12
trust essentially to argue that the creation of Trust A was optional. We do not
consider these arguments as Gary and Kristin failed to comply with RAP
10.3(c).25
EXTRINSIC EVIDENCE
Gary and Kristin rely on extrinsic evidence to support their interpretation of
the living trust. Because the trust is unambiguous, extrinsic evidence cannot
vary its terms. Moreover, certain extrinsic evidence is inadmissible hearsay.
Hearsay
Gary and Kristin argue that the trial court improperly rejected certain notes
by a legal assistant as inadmissible hearsay. We hold that the court properly
rejected this evidence.
ER 803(a)(3) indicates which evidence is not excluded by the hearsay
rule, even though the declarant is available as a witness, such as:
A statement of the declarant's then existing state of mind, emotion,
sensation, or physical condition (such as intent, plan, motive,
design, mental feeling, pain, and bodily health), but not including a
statement of memory or belief to prove the fact remembered or
believed unless it relates to the execution, revocation, identification,
or terms of declarant's will.
Gary and Kristin argue that the notes of a legal assistant to the attorney
who drafted Peter's will fall within this hearsay rule exception.26 They are
mistaken.
25 See also State v. Hudson. 124Wn.2d107, 120, 874 P.2d 160 (1994).
26 Brief of Appellants at 19-20.
12
No. 74320-1-1/13
The drafting attorney's legal assistant, Kathleen Matzen, made shorthand
notes during her meeting with the drafting attorney, which followed the attorney's
meeting with Peter. Matzen testified that she drafted the living trust according to
the attorney's instructions. Matzen did not attend the meeting with the Ways and
had no personal knowledge of Peter's or Marjory's meeting with the drafting
attorney. Matzen also stated that she did not "know personally what [Peter's or
Marjory's] intents were."
Gary and Kristin first argue that the notes contain hearsay statements by
Peter to "[the drafting attorney] and Matzen" regarding the terms of Peter's will.
This assertion is factually incorrect. The record shows that Matzen was never
present when Peter made any statements about his will, much less the trust that
is before us. Thus, there is no showing in this record that the relevant
"declarant," Peter, made any statements in Matzen's notes.
We note that for purposes of the rule, the relevant "declarant" is Peter, not
the drafting attorney.27 Here, Gary and Kristin attempt to use the drafting
attorney's statements, not Peter's statements, to fill the gap. This is a
misapplication of the rule.
Gary and Kristin also argue that the drafting attorney's statements of his
"intent to draft or have Matzen draft at his direction" Peter's will and the living
trust also fall within the rule. This is plainly wrong. The drafting attorney's state
27 See Hong v. Children's Mem'l Hosp.. 993 F.2d 1257, 1265 (7th Cir.
1993) (stating that the state of mind exception to Federal evidence rule against
the admission of hearsay does not authorize receipt of a statement by one
person as proof of another's state of mind).
13
No. 74320-1-1/14
of mind is not at issue. Peter's is. In short, this exception to the exclusion of
hearsay does not apply.
In any event, the trial court properly excluded Matzen's notes on the basis
that they exhibited an attempt to show an intent contrary to the unambiguous
provisions of the trust. As previously stated, extrinsic evidence may not be
considered to import an intention into the instrument that is not expressed
therein.28
Other Extrinsic Evidence
Gary and Kristin argue that the "surrounding circumstances" indicate that
Peter did not intend to create Trust A upon his death. We disagree.
Gary and Kristin rely on Peter's and Marjory's prenuptial agreement to
support this argument. But this document fails to resolve any ambiguity as to
Peter's intent in the living trust.
Gary and Kristin specifically argue that the living trust served the same
purpose as the prenuptial agreement—to protect "their testamentary wishes and
powers." The prenuptial agreement designates Peter's and Marjory's separate
property to "enable each to dispose of his or her assets as he or she wishes at
death."
But Peter and Marjory executed the living trust six years after executing
the prenuptial agreement. Due to this gap in time, the prenuptial agreement fails
to show Peter's intent in the living trust. Additionally, as previously discussed,
extrinsic evidence may not be considered to import an intention into the
28 See Curry. 98 Wash. App. at 113.
14
No. 74320-1-1/15
instrument that is not expressed.29 If the prenuptial agreement showed an
intention that is not expressed in the living trust, it cannot be considered in
resolving any ambiguity as to Peter's intent in the living trust. Accordingly, this
argument is unpersuasive.
Gary and Kristin also rely on Peter's and Marjory's unfiled petition for
dissolution of marriage, the dissolution decree, and the accompanying findings of
fact and conclusions of law, to support their argument. These documents do not
support this argument for the same reason.
Gary and Kristin first state that the petition was still pending when Peter
and Marjory signed the living trust. But they also state that Peter and Marjory
decided to execute the living trust rather than going forward with the dissolution
of marriage. Marjory testified that she and Peter decided not to go forward with
the dissolution between the time they signed the dissolution documents and the
time they signed the living trust. Marjory also testified in her declaration that she
and Peter restored their "happy marriage."
In sum, the record shows, and Gary and Kristin do not dispute, that Peter
and Marjory did not pursue the dissolution of their marriage. Rather, they
executed the living trust months later. Thus, the dissolution documents fail to
show Peter's intent in the living trust. Additionally, if the dissolution documents
showed an intention that is not expressed in the trust, they cannot be considered
in resolving any ambiguity as to Peter's intent in the living trust.
29 JU
15
No. 74320-1-1/16
COUNTERCLAIMS & ABANDONED CLAIMS
Gary and Kristin assign error to the trial court's order dismissing their
counterclaims against Marjory for breach of contract, fraud, and specific
performance. They failed to provide argument for these claims in their opening
brief. We deem them abandoned.30
ATTORNEY FEES
At Trial
Gary and Kristin request that this court reverse the award of attorneyfees
to Marjory if this court reverses the trial court's decision. Because there is no
showing that the trial court abused its discretion in awarding fees, we decline to
reverse Marjory's attorney fees award.
On Appeal
Both parties seek attorney fees on appeal under RCW 11.96A.150. We
award reasonable attorney fees to Marjory.
RCW 11.96A.150 provides this court with broad discretion to award
attorney fees in a trust dispute.31 In relevant part, the statute provides:
[A]ny court on an appeal may, in its discretion, order costs,
including reasonable attorneys' fees, to be awarded to any party; . .
. (b) from the assets of the estate or trust involved in the
proceedings; or (c) from any nonprobate asset that is the subject of
the proceedings. The court may order the costs, including
reasonable attorneys' fees, to be paid in such amount and in such
manner as the court determines to be equitable.
3° Podbielancik v. LPP Mortg. Ltd.. 191 Wash. App. 662, 668, 362 P.3d 1287
(2015).
31 Wash. Builders Benefit Trust. 173 Wash. App. at 84.
16
No. 74320-1-1/17
Here, Marjory requests reasonable attorney fees against the principal of
the living trust. This litigation benefited the trust because it clarified Peter's intent
and the parties' rights. We award Marjory reasonable attorney fees, subject to
her compliance with RAP 18.1(d).
We affirm the Order Granting Petitioner's Cross-Motion for Summary
Judgment. We also award Marjory reasonable attorney fees, subject to her
compliance with RAP 18.1(d).
(fakJ-
mix
WE CONCUR:
*L«t 0- \<£*AA^f
rv
Or"
f\.5
G
17