Shimp v. Huff

In his treatise, The Law of Wills, § 34 at 69 (3rd ed. 1947), George W. Thompson warns that “[a]s a general rule, joint wills are not regarded with much favor by the courts, and are ... apt to invite litigation.” The joint will of Lester and Clara Shimp has fulfilled Thompson’s prediction by causing this Court for a second time to resolve conflicts arising from that will. In Shimp v. Shimp, 287 Md. 372, 412 A.2d 1228 (1980) (Shimp I), we addressed the issue of whether Lester and Clara’s joint will could operate as a binding contract and thereby limit the survivor’s right to dispose of property by a testamentary plan which differed from that contained in the joint will. In the present case, the issue is.whether Lester Shimp’s second wife, upon his death, is entitled to receive an elective share and a family allowance under Maryland Code (1974, 1988 Cum.Supp.) § 3-203 and § 3-201 of the Estates and Trusts Article when Lester had previously contracted, by virtue of a joint will with his first wife, to will his entire estate to others.

Sections 3-203 and 3-201 of the Estates and Trusts Article are codified under Subtitle 2 of Title 3, which is entitled: “Family Allowance and Statutory Share of Surviving Spouse.” As to the latter, § 3-203(a) provides that *627 “[ijnstead of property left to him by will, the surviving spouse may elect to take a one-third share of the net estate if there is also a surviving issue, or a one-half share of the net estate if there is no surviving issue.” As to the family allowance, § 3-201 provides in part, that a surviving spouse is entitled to “an allowance of $2000 for his personal use.” 1

I.

Lester Shimp married his first wife, Clara, in 1941. At the time of their marriage, neither Lester nor Clara possessed any property of consequence. Subsequently, in 1954, they acquired a farm which they sold in 1978; thereafter they bought a home. Lester and Clara took title to both the farm and the home as tenants by the entireties.

On May 8, 1974, in Washington County, the couple executed an instrument titled “Last Will and Testament of Clara V. Shimp and Lester Shimp.” It stated in relevant part:

WE, CLARA V. SHIMP AND LESTER SHIMP, of Washington County, Maryland, being of sound and disposing mind, memory and understanding, and capable of making a valid deed and contract, do make, publish and declare this to be our Last Will and Testament, hereby revoking all other Wills and Codicils by each of us made.

After the payment of all just debts and funeral expenses, we dispose of our estate and property as follows:

ITEM I. A. MUTUAL BEQUEST — We mutually give to whichever of us shall be the survivor the entire estate of which we may respectfully own at our death.

B. SURVIVOR’S BEQUEST — The survivor of us gives the entire estate of his or her property which he or she may own at death as follows:

*628 1) Unto James Shimp, if he is living at the death of the survivor of us, the sum of One Thousand ($1,000.00) Dollars.

2) Unto Emma Plotner, if living at the death of the survivor of us, the sum of One Thousand ($1,000.00) Dollars.

3) Unto Mary Virginia Huff and Betty Jane Moats all household goods and machinery to do with as they desire. This bequest is made unto them due to the care that they have given us.

4) All of the rest and residue of the estate of the survivor is hereby devised unto Mary Virginia Huff, Betty Jane Moats, Paul R. Mijanovieh and Ruth C. Thomas to be divided equally among them. In the event of the death of any of said persons, their children shall inherit the share to which the parent would have been entitled, if living.

ITEM III. We, the Testators, do hereby declare that it is our purpose to dispose of our property in accordance with a common plan. The reciprocal and other gifts made herein are in fulfillment of this purpose and in consideration of each of us waiving the right, during our joint lives, to alter, amend or revoke this Will in whole or in part, by Codicil or otherwise, without notice to the other, or under any circumstances after the death of the first of us to die. Unless mutually agreed upon, this Last Will and Testament is an irrevocable act and may not be changed.

Clara died in 1975 in Washington County. At the time of her death she did not own property solely in her name and possessed no probate estate. Lester did not offer the will for probate following his wife’s death. He did, however, file a petition in the Circuit Court for Washington County seeking declaratory relief and requesting the right to execute a new last will and testament. The court found that the will was revocable, but that the contract under which the will was executed might be specifically enforced in equity or damages recovered upon it at law. Lester appeal *629 ed to the Court of Special Appeals, see Shimp v. Shimp, 43 Md.App. 67, 402 A.2d 1324 (1979), and ultimately, by writ of certiorari, the case came before us.

In Skimp I, we found that the Shimps had executed their joint will pursuant to and in accordance with a valid, binding contract. 287 Md. at 387, 412 A.2d 1228. We held that Lester was “entitled to a declaratory decree stating that he may revoke his will but that an enforceable contract was entered into between him and his wife.... [and that] [a]t his death it may be specifically enforced in equity or damages may be recovered upon it at law.” Id. at 388, 412 A.2d 1228. Thereafter, Lester did not execute another will or otherwise disturb the testamentary plan set forth in the joint will.

On April 4, 1985, in Washington County, Lester married Lisa Mae; they remained married until his death on January 11, 1986. Lester was not survived by any children.

Following Lester’s death, Clara and Lester’s joint will was admitted to probate in Washington County. Mary Virginia Huff and Wallace R. Huff were appointed Personal Representatives of the Estate on January 30, 1986. Lisa Mae and Lester had not entered into any marital agreement waiving Lisa Mae’s marital rights, and she sought payment of a family allowance and filed an election for her statutory share of Lester’s estate. On June 4, 1986, the Personal Representatives declined to pay Lisa Mae either her family allowance or her elective share. On July 10, 1986, Lisa Mae filed suit for a declaratory judgment in the Circuit Court for Washington County, requesting that the court pass an order that she was entitled to both a family allowance and an elective share of Lester’s estate.

The court (Corderman, J.) framed the issue before it as “whether, under Estates and Trusts Article 3-203, the plaintiff has a right to an elective share of an estate previously devised under a valid contract.” While noting the absence of Maryland cases addressing this specific issue, the court, nevertheless, found precedent in decisions *630 of this Court regarding the relationship between dower interests and contractual obligations. It observed that under rules pertaining to dower rights, a widow, absent fraud, has no dower rights or interest in lands disposed of prior to marriage. The court placed emphasis upon the early case of Cowman v. Hall, 3 G. & J. 398 (Md.1831). It said that this case established the principle that, a widow is not entitled to dower in land for which her husband was only a trustee by virtue of his having made a contract with his mother prior to the marriage to dispose of the land by will. After drawing an analogy between dower rights and a claim for an elective share, the court applied the principles concerning dower to the present case. It found that because Lester, before his marriage to Lisa Mae, had entered into a binding contract to devise all of his estate, he was not seized of an estate of inheritance at the time of his second marriage, but rather was merely a trustee of that estate. Because a widow is entitled to no part of her husband’s estate except that of which he dies seized or possessed, the court concluded that since Lester was merely a trustee for the property, there was no estate from which Lisa Mae could take an elective share. Similarly, the court found that Lisa Mae could not claim a family allowance because there were no estate assets from which the allowance could be paid. Lisa Mae appealed to the Court of Special Appeals; we granted certiorari prior to a decision by that court to resolve the important issues raised in the case.

II.

In Skimp I, we focused upon the issue of whether Lester and Clara entered into a binding contract when they executed a joint will and the effect of that contract on Lester’s ability to alter the testamentary plan contained in that joint will. We reviewed the law pertaining to contracts to make a will. We noted that both courts and commentators have tended to blend the will and contract components of an instrument, as a result of which they have found that wills — which are by their nature ambulatory — are in some *631 instances irrevocable, and that contracts, which by their nature trigger liability upon breach, are rescindable in some cases. 287 Md. at 377-78, 412 A.2d 1228. We indicated that Moats v. Schoch & Berry, 24 Md.App. 453, 332 A.2d 48 (1975) set forth the correct principles of law regarding the contractual nature of a joint will, namely, that a joint will may be revoked in the manner provided by statute; that a subsequent validly executed will shall be admitted to probate; but that “ ‘the contract upon which the prior will was executed, upon proof of its validity, may be specifically enforced in equity, or damages recovered upon it at law.’ ” 287 Md. at 381, 412 A.2d 1228, quoting, 24 Md.App. at 465, 332 A.2d 43. Thus, we determined that the central issue in Skimp I was not the revocability of the will, but whether Lester entered into a binding contract with his wife to devise property according to a stated plan. 287 Md. at 381, 412 A.2d 1228.

Citing Bertel Sparks’ treatise, Contracts to Make Wills (1956), we noted that while the mere presence of either joint or mutual wills does not raise any presumption that they were executed in pursuance of a contract, a contract to devise may be established where there is clear and convincing proof. Id. at 381, 383, 412 A.2d 1228. In examining Lester and Clara’s joint will, we found that the terms of the contract were clear and unambiguous. Id. at 383, 412 A.2d 1228. We indicated that consideration sufficient to prove the existence of a contract might be established by each testator having agreed “by the joint will or other contract to make a particular testamentary disposition in return for a like promise from the other testator.” Id. at 386, 412 A.2d 1228. We determined that adequate consideration existed in Skimp I because the parties had stated in their will that they made both the reciprocal and third party bequests in exchange for each other’s agreement to waive the right to change the will. Id. at 387, 412 A.2d 1228. Thus, we found that the evidence in the case established that a valid contract existed and that this contract was the basis for the making of the joint will Id. at 387, 412 A.2d *632 1228. We concluded that Lester was “entitled to a declaratory decree stating that he may revoke his will but that an enforceable contract was entered into between him and his wife____ [and that] [a]t his death it may be specifically enforced in equity or damages may be recovered upon it at law.” Id. at 388, 412 A.2d 1228.

While Shimp I focused primarily upon the effect of the joint will and contract upon Lester’s ability to alter the testamentary plan contained therein, we considered the contract’s possible effect upon the rights of any future wife of Lester’s; we said:

It may be if Shimp remarries that his then wife may be placed in a disadvantageous position by the contract with the first wife. If by reason of a prior marriage he was under a burdensome requirement to pay a substantial sum to a prior wife by way of alimony and for support of minor children, the second wife might regard herself as in a disadvantageous position. However, as Dean Evans so forcefully stated, “A woman who marries a spouse after the latter has so bound himself by contract undertakes the marriage constrained by all obligations then existing. No legislative purpose has been discovered by the courts which should avoid in this way existing rights and duties.” 287 Md. at 388, 412 A.2d 1228, quoting, 33 Ky.L.J. at 86.

The Personal Representatives contend that this statement in Shimp I is determinative of the issue raised in the present case. They argue that we were “not speaking primarily about alimony” but rather indicated that Lester’s “prior contractual obligations could preclude recovery by a subsequent spouse to that portion of the estate covered in the contract.” Our statement, however, makes no reference to a surviving spouse’s claim for an elective share in an estate which by contract must be devised to others, and thus cannot reasonably be interpreted to bar a subsequent spouse’s claim.

The Personal Representatives also argue that Cowman v. Hall, supra, is dispositive of the issues raised in this case. *633 As earlier observed, the circuit court found that Cowman established that a widow is not entitled to dower in land to which her husband held title only as a trustee at the time of the marriage when he had previously made an agreement to dispose of the property by will. We think the circuit court misread Cowman, 2 In that case, the contract which the husband executed was not one to make a will devising the property but was a contract to convey the property by deed. Specifically, Richard Hall, entered into a contract with his mother, Martha Hall, on January 14, 1789, by which Martha agreed to convey to Richard certain lands previously owned by her husband, Edward Hall, Sr. In consideration for this conveyance, Richard agreed “ ‘to convey to her, the said Martha Hall, or to her heirs or to such of the younger children, brothers or sisters to the said Richard, as she shall from time to time direct and appoint,____ [t]he same conveyance to be made either in separate deeds or otherwise ... according to the directions of the said Martha,____[a]nd if no such direction in her life-time, then agreeably to such disposition as she shall make thereof, amongst the said children, by her last will and testament.’ ” 3 G. & J. at 401. By virtue of this contract, Richard received a fee simple interest in the property, but his interest was subject to a power of appointment exercisable by Martha by deed during her life or by will at her death in favor of Richard’s brothers and sisters.

Subsequent to the execution of this contract, Richard married Sarah. On July 13, 1807, Martha executed a deed, exercising her power of appointment in favor of Richard’s younger brothers, Edward Hall, Jr., Thomas Hall, and John Hall, and Richard Hall executed deeds conveying the property in accordance with his mother’s directions. Richard died in January 1823, and on August 11, 1826, Sarah, his *634 widow, claimed dower rights in the land previously owned by her husband.

The Court found that by executing the January 14, 1789 contract and by performing her obligations under this agreement, Martha became “entitled herself to a conveyance, in pursuance of the agreement, whenever she might choose to require it.” These facts, coupled with the fact that Martha remained in actual possession of the property following the execution of the contract, indicated to the Court that Martha was entitled to the beneficial interest in the property, while Richard “became in equity a trustee for his mother, of all the lands embraced by th[e] agreement.” Id. at 404-05.

Having determined the interests of Richard and Martha under the agreement, the Court next addressed Sarah’s claim for dower in the property. It noted that ordinarily “[a] widow is not dowable in equity of lands, which were held by her husband in the character of a trustee.” Id. at 405. The Court found that because Richard had entered into the contract with his mother prior to his marriage, he held the lands in which Sarah claimed dower merely as a trustee. Consequently, the Court held that, as Richard’s widow, Sarah was “not entitled to dower in any of the lands embraced ... [by the agreement], and of which her husband was at the time of their marriage and afterwards seized only as a trustee.” Id. at 406.

Cowman thus involved a contract to convey property by deed and not a contract to devise property by will. It, therefore, differs substantially from the present case. Under a contract to make a will devising property, the right to convey property by will is not absolute. As this Court has often recognized “the right of a person to transfer property upon his death to others, or the right of a person to receive property by will or inheritance, is not a natural right but a privilege granted by the State.” Safe Dep. & Tr. Co. v. Bouse, 181 Md. 351, 355, 29 A.2d 906 (1943). Thus, the transferee’s rights under a contract to make a will may be limited by statutes, which require the decedent to pay, inter *635 alia, taxes, administration fees, and funeral expenses, before satisfying any bequests made in the will. The likelihood that a contract beneficiary’s interest will be reduced is even greater where there is a contract to devise an entire estate because before such a contract can be fulfilled the estate must be reduced by the payment of the obligations set forth by statute. While in Cowman the contract beneficiaries enjoyed the full range of rights afforded transferees under a contract for an inter vivos conveyance, rights accruing under the contract to make a will may be limited by statutes affecting a decedent’s ability to convey property under the will.

III.

While we have not previously addressed the issue of a surviving spouse’s right to take an elective share in conflict with claims under a contract to convey by will, courts in other jurisdictions have examined the issue under varying factual situations. See, e.g., Owens v. McNally, 113 Cal. 444, 45 P. 710 (1896); In Re Estate of Banner, 364 So.2d 742 (Fla.Dist.Ct.App.1978); In Re Estate of Bonner, 364 So.2d 753 (Fla.Dist.Ct.App.1978), cert. denied, 373 So.2d 457 (Fla.), appeal dismissed sub nom. 444 U.S. 958, 100 S.Ct. 442, 62 L.Ed.2d 371 (1979); Bedal v. Johnson, 37 Idaho 359, 218 P. 641 (1923); Dillon v. Gray, 87 Kan. 129, 123 P. 878 (1912); Wides v. Wides’Ex’r, 299 Ky. 103, 184 S.W.2d 579 (1944); Rubenstein v. Mueller, 19 N.Y.2d 228, 225 N.E.2d 540, 278 N.Y.S.2d 845 (1967); In Re Estate of Dunham, 36 A.D.2d 467, 320 N.Y.S.2d 951 (1971); In Re Tanenbaum’s Estate, 258 A.D. 285, 16 N.Y.S.2d 507 (1939), reh’g and appeal denied, 258 A.D. 1054, 17 N.Y.S.2d 1021 (1940); Gall v. Gall, 64 Hun. 600, 19 N.Y.S. 332 (N.Y.Sup.Ct.1892); In Re Erstein’s Estate, 205 Misc. 924, 129 N.Y.S.2d 316 (N.Y.Surr.Ct.1954); In Re Lewis’ Will, 4 Misc.2d 937, 123 N.Y.S.2d 859 (N.Y.Surr.Ct.1953); In Re Hoyt’s Estate, 174 Misc. 512, 21 N.Y.S.2d 107 (N.Y.Surr.Ct.1940); Patecky v. Friend, 220 Or. 612, 350 P.2d 170 (1960); In Re Estate of Beeruk, 429 Pa. 415, 241 A.2d 755 (1968); Budde v. Pierce, *636 135 Vt. 152, 375 A.2d 984 (1977); Fields v. Fields, 137 Wash. 592, 243 P. 369 (1926); In Re Arland’s Estate, 131 Wash. 297, 230 P. 157 (1924); In Re McLean’s Estate, 219 Wis. 222, 262 N.W. 707 (1935); see also B. Sparks, Contracts to Make Wills 167-78 (1956); Lilly, Will Contracts: Contract Rights in Conflict With Spousal Rights, 20 Tulsa L.J. 197 (1984).

In a number of these cases one spouse, after entering into a divorce or separation agreement which requires that spouse to leave part or all of the estate to the first spouse, remarries and then dies. See, e.g., Donner, supra; Wides, supra; Tanenbaum, supra; Dunham, supra; Erstein, supra; Hoyt, supra; Lewis, supra; Budde, supra. In other cases, the decedent has contracted to make a will leaving property to children or other relatives. See, e.g., Rubenstein, supra; Patecky, supra; Arland, supra. Still other cases have arisen where the decedent had remarried after entering into an agreement to will property in exchange for services, see, e.g., Owens, supra, or for forbearance from legal action, see, e.g., McLean, supra, or to facilitate an adoption, see, e.g., Bedal, supra; Fields, supra. In some cases, the decedent has executed a will conforming to the contract, while in others he has breached the contract by executing a nonconforming will or by dying intestate. 3

*637 A.

The majority of these cases arise from the decedent having breached a contract to devise property by executing a nonconforming will or by dying intestate. In these cases, the claimants under the contract generally proceed on a theory of specific performance. 4 While the rights of beneficiaries of a contract vest after the contract is made, nevertheless, where suit is brought for specific performance of the contract, “the after-acquired rights of third parties are equitable considerations to be regarded in adjudicating the questions.” Owens, supra, 45 P. at 713. In determining whether to award specific performance to contract beneficiaries, courts have considered several different factors, including whether the surviving spouse had notice of the contract prior to the marriage, see, e.g., Patecky, supra, 350 P.2d at 175, the length of the marriage and the natural affection shared between the decedent and the surviving spouse, see, e.g., Arland, supra, 230 P.2d at 158, whether the surviving spouse would be deprived of the entire estate by enforcement of the contract, see, e.g., Wides, supra, 184 S.W.2d at 584, and the public policy concerning the marriage relationship and the rights of surviving spouses, see, e.g., Wides, supra, 184 S.W.2d at 584; Budde, supra, 375 A.2d at 986-87. In a great many cases consideration of these factors has led the court to determine that the superi- or equities were with the surviving spouse, see, e.g., Owens, supra, 45 P. at 713; Bedal, supra, 218 P. at 649; Wides, supra, 184 S.W.2d at 584; Patecky, supra, 350 P.2d at 177; Fields, supra, 243 P. at 371-72; Arland’s Estate, supra, 230 P. at 159, while in other cases it has not, see, e.g., Dillon, supra, 123 P. at 880.

*638 B.

In those cases where the decedent has executed a will conforming to the contract, the claimants cannot seek specific performance, and courts, therefore, do not use equitable powers in resolving these cases. 5 Instead, courts have analyzed the conflicting claims by characterizing the competing claimants as either creditors or legatees and evaluating their claims under the applicable priority rules. In a number of cases involving divorce settlements, the courts have found that where the decedent executes a will, which conforms to the terms of a contract, the beneficiaries take as legatees under the will and not as contract creditors. See, e.g., Donner, supra, 364 So.2d at 755; Dunham, supra, 320 N.Y.S.2d at 954; Tanenbaum, supra, 16 N.Y.S. 2d at 510; Lewis, supra, 123 N.Y.S.2d at 862-63; Hoyt, supra, 21 N.Y.S.2d at 111. Consequently, because the applicable statutes give a higher priority to a surviving spouse’s elective share than to testamentary bequests, the courts upheld the surviving spouse’s claim over the claims of the contract beneficiaries. As the court explained in In Re Hoyt’s Estate

... [we] hold that the claimants are not creditors under paragraph seventh of the separation agreement, but that the agreement merely created an enforceable obligation to make a testamentary provision for the benefit of the first wife of the testator and his children after her death. The testator performed that agreement. He undertook to do no more. The status of the claimants is therefore that of legatees or beneficiaries under the will. As such legatees or beneficiaries they take subject to the operation of the statutes relating to testamentary dispositions, *639 including the right of the surviving widow to take her intestate share under Section 18 of the Decedent Estate Law. Their rights are also subordinate to all true creditors of the estate. The widow of the testator is therefore entitled to a one-third share of the net estate. The respective interests of the claimants as legatees or beneficiaries must be satisfied out of the balance. 21 N.Y.S.2d at 111.

At least one court, however, has suggested that analyzing the competing claims under the applicable priority statutes should be limited to cases involving divorce settlement agreements. In Rubenstein, supra, which involved an ordinary contract to devise property 6 rather than a separation agreement, the court distinguished those cases involving marital separation agreements, under which husbands covenanted to make a will, noting that different equitable considerations control in the two situations. The court explained:

Separation agreements are usually attended by a present division of any jointly held property, and any provision for a future legacy is usually but an incident to the over-all settlement to be made with respect to the husband’s individual property and his obligation of support. In the case of the joint will, however, this instrument typically represents the sole attempt by the signatories to effect a distribution of their collective property in a fashion agreeable to both. Most importantly, in those separation agreements there was no irrevocable obligation concerning the collective property. The husband did not ... become sole owner of jointly owned property by virtue of surviving the former wife. As the divorced *640 husband’s property after the agreement remains his own individual property, to which he holds beneficial as well as legal title, his widow’s right of election may be asserted against such assets. 225 N.E.2d at 544, 278 N.Y.S.2d at 850.

Thus, the court suggests that in these cases whether the surviving spouse’s claim is given priority does not depend upon whether the contract beneficiaries are characterized as contract creditors or legatees. Instead the court reasoned that this priority is based upon the decedent having held both the legal and beneficial title to the property completely independent of the first spouse as a result of the property division effectuated by the separation agreement —a division which does not occur when one spouse acquires rights in the property pursuant to a joint will.

Courts have cited other reasons for rejecting the practice of categorizing contract beneficiaries as legatees where the decedent has executed a conforming will. These courts acknowledge that technically the contract beneficiary becomes a creditor of the estate only after the decedent breaches the contract by dying intestate or executing a nonconforming will; and that where the decedent executes a conforming will the contract beneficiaries take as legatees under the will. Nevertheless, they note that this analysis leads to the anomalous result that the contract beneficiaries are in a better position where the decedent breaches the contract than where the decedent fully and properly performs in accordance with it. See In Re Erstein’s Estate, supra, 129 N.Y.S.2d at 321 (“[i]t would be anomalous if the rights of the promisees would be substantially greater in the case of intestacy than they would be had the testator left a will which carried out his promise”).

C.

Other courts