Dreher v. Dreher

• Decision Date: 21 August 2006
• Docket Number: No. 26205.,26205.
• Citation: 634 S.E.2d 646
• Court: South Carolina Supreme Court
• Parties: Anna Martha DREHER, Appellant, v. J. Clarence DREHER, III, as Personal Representative of the Estate of Julius Clarence Dreher, Jr., and as Trustee of the J.C. Dreher, Jr. Trust, Respondent.

634 S.E.2d 646

Anna Martha DREHER, Appellant, v. J. Clarence DREHER, III, as Personal Representative of the Estate of Julius Clarence Dreher, Jr., and as Trustee of the J.C. Dreher, Jr. Trust, Respondent.

No. 26205.

Supreme Court of South Carolina.

Heard June 20, 2006.

Decided August 21, 2006.

Kenneth B. Wingate and Paul D. Kent, both of Sweeny, Wingate & Barrow, P.A., of Columbia, for Appellant.

Pope D. Johnson, III, of McCutchen, Blanton, Johnson & Barnette, L.L.P., of Columbia, for Respondent.

Justice BURNETT:

Anna Martha Dreher (Appellant) filed a claim for an elective share of her husband's probate estate and alleged her husband's revocable inter vivos trust should be included in the calculation of her elective share because the trust was illusory. The probate court granted Appellant's request for an elective share but found the trust was not illusory pursuant to S.C.Code Ann. § 62-7-112 (Supp.2004). Appellant contests the probate court's construction and application of § 62-7-112 and Seifert v. Southern National Bank of South Carolina, 305 S.C. 353, 409 S.E.2d 337 (1991), to the trust. We reverse and remand.

FACTUAL AND PROCEDURAL BACKGROUND

The parties agree to the following stipulated facts and undisputed findings of fact made by the probate court:

Julius Clarence Dreher, Jr., (Decedent) and Appellant were married on March 21, 1968. On April 4, 1988, Decedent established the J.C. Dreher, Jr. Trust (Dreher Trust). Decedent and his son were designated as co-trustees. During his lifetime, Decedent received disbursements from the Dreher Trust as a beneficiary. Also on April 4, 1988, Decedent executed his Last Will and Testament, in which he devised the rest and residue of his estate to the Dreher Trust. Decedent devised to Appellant all the personal property acquired subsequent to their marriage and a bequest of $10,000. Prior to his death, Decedent designated Appellant as the beneficiary of all but one of his Individual Retirement Accounts.

Decedent died on June 28, 1997. Appellant timely and properly filed her claim for an elective share of Decedent's probate estate. Appellant sought a court order granting her an elective share, declaring the Dreher Trust invalid as illusory and thus includable in the calculation of her elective share, and removing the personal representative. J. Clarence Dreher, III, as Personal Representative of the Estate of Decedent and as Trustee of the Dreher Trust, (Respondent) denied the claim and requested, among other things, that S.C.Code Ann. § 62-2-201 (Supp.2005) (the elective share statute) be declared unconstitutional.

After a merits hearing, the probate court granted Appellant's request for her elective share of Decedent's probate estate.¹ Pursuant to S.C.Code Ann. § 62-7-112, the probate court found the Dreher Trust was not illusory and thus could not be used to calculate or fund the elective share. Further, the probate court found the elective share statute was constitutional and refused to remove the personal representative.

The parties agreed to appeal directly to this Court pursuant to S.C.Code Ann. § 62-1-308(g) (Supp.2005).

ISSUES

I. Did the probate court err in its construction of S.C.Code Ann. § 62-7-112 (Supp.2004)?

II. Did the probate court err in its application of S.C.Code Ann. § 62-7-112 (Supp.2004) and Seifert v. Southern National Bank of South Carolina, 305 S.C. 353, 409 S.E.2d 337 (1991), to the Dreher Trust?

III. Did the probate court err in finding S.C.Code Ann. § 62-2-201 (Supp. 2005) constitutional?

STANDARD OF REVIEW

"When an appeal involves stipulated or undisputed facts, an appellate court is free to review whether the trial court properly applied the law to those facts." J.K. Constr., Inc. v. W. Carolina Reg'l Sewer Auth., 336 S.C. 162, 166, 519 S.E.2d 561, 563 (1999). "In such cases, the appellate court owes no particular deference to the trial court's legal conclusions." Id.

The issue of interpretation of a statute is a question of law for the court. Charleston County Parks and Rec. Comm'n v. Somers, 319 S.C. 65, 67, 459 S.E.2d 841, 843 (1995) (holding the determination of legislative intent is a matter of law). This Court is free to decide questions of law with no particular deference to the lower court. Moriarty v. Garden Sanctuary Church of God, 341 S.C. 320, 327, 534 S.E.2d 672, 675 (2000).

LAW AND ANALYSIS

I. Construction of S.C.Code Ann. § 62-7-112

Appellant argues the probate court erred in construing S.C.Code Ann. § 62-7-112 (Supp.2004). We agree.

In Seifert v. Southern National Bank of South Carolina, 305 S.C. 353, 409 S.E.2d 337 (1991), a widow sought a declaratory judgment that her husband's revocable inter vivos trust was void because the trust was illusory. The Court found the husband as settlor retained extensive control of the trust during his lifetime and the trustee's powers were "custodial." Id. at 355-56, 409 S.E.2d at 338. The Court concluded the trust was illusory and held "where a spouse seeks to avoid payment of the elective share by creating a trust over which he or she exercises substantial control, the trust may be declared invalid as illusory, and the trust assets will be included in the decedent's estate for calculation of the elective share." Id. at 357, 409 S.E.2d at 339.

After Seifert, the legislature enacted S.C.Code Ann. § 62-7-112 (effective June 23, 1992).² This statute provided:

A revocable inter vivos trust may be created either by declaration of trust or by a transfer of property and is not rendered invalid because the trust creator retains substantial control over the trust including, but not limited to, (1) a right of revocation, (2) substantial beneficial interests in the trust, or (3) the power to control investments or reinvestments. Nothing herein, however, shall prevent a finding that a revocable inter vivos trust, enforceable for other purposes, is illusory for purposes of determining a spouse's elective share rights under Section 62-2-201 et seq. A finding that a revocable inter vivos trust is illusory and thus invalid for purposes of determining a spouse's elective share rights under Section 62-2-201 et seq. shall not render that revocable inter vivos trust invalid, but would allow inclusion of the trust assets as part of the probate estate of the trust creator only for the purpose of calculating the elective share and would make available the trust assets for satisfaction of the elective share only to the extent necessary under Section 62-2-207.

The cardinal rule of statutory construction is to ascertain and effectuate the intent of the legislature. Burns v. State Farm Mut. Auto. Ins. Co., 297 S.C. 520, 522, 377 S.E.2d 569, 570 (1989). If a statute's language is plain, unambiguous, and conveys a clear meaning, then "the rules of statutory interpretation are not needed and the court has no right to impose another meaning." Hodges v. Rainey, 341 S.C. 79, 85, 533 S.E.2d 578, 581 (2000). The words of the statute must be given their plain and ordinary meaning without resorting to subtle or forced construction to limit or expand the statute's operation. Hitachi Data Sys. Corp. v. Leatherman, 309 S.C. 174, 178, 420 S.E.2d 843, 846 (1992).

The probate court construed 62-7-112 to prohibit a finding that a revocable inter vivos trust was illusory when a settlor retained substantial control of the trust, and the court concluded the statutory provision accordingly modified the Seifert holding. The probate court also determined that unless a revocable inter vivos trust was declared illusory for a reason other than the settlor's retained substantial control, then the trust assets could not be included in the elective share calculation.

The probate court's construction was erroneous. Section 62-7-112 confirms the validity of revocable inter vivos trusts by providing such trusts shall not be declared completely invalid because the trust creator or settlor retained substantial control over the trust. The statutory provision then provides, "Nothing herein, however shall prevent a finding that a revocable inter vivos trust, enforceable for other purposes, is illusory for purposes of determining a spouse's elective share rights . . . ." The second sentence clearly conveys that no part of the statute, including the first sentence, should be construed to prevent a finding that a revocable inter vivos trust is illusory for purposes of the elective share. This construction of the second sentence does not cause the first sentence to be superfluous because of the third sentence in the statute. The third sentence specifically provides that a revocable inter vivos trust found to be illusory and thus invalid for elective share purposes will not be rendered completely invalid. Further under § 62-7-112, if a revocable inter vivos trust is illusory for elective share purposes, the trust assets become a part of the probate estate only for the calculation of the elective share and are available to satisfy the elective share to the extent necessary under 62-2-207.

Section 62-7-112 uses the word "invalid" in two contexts. A revocable inter vivos trust which is illusory is invalid for purposes of determining a surviving spouse's elective share rights. However, under the terms of the statute, a revocable inter vivos trust, which is illusory and thus invalid for elective share purposes, is not completely invalid. Section 62-7-112 overruled Seifert to the extent that Seifert held a revocable inter vivos trust which had been declared illusory was completely invalid.

II. Application of S.C.Code Ann. 62-7-112 and Seifert

Appellant contends the probate court erred in applying § 62-7-112 and Seifert to the Dreher Trust. We agree.

The probate court found the co-trustees paid income to Decedent; filed tax returns; and invested, monitored, and reported the assets of the Dreher Trust. The probate court also found § 62-7-112 specifically prohibited invalidation of the Dreher Trust because Decedent retained...