Estate of Humphrey, Matter of
| Decision Date | 22 May 1985 |
| Docket Number | Docket Nos. 53322,75589 and 75590 |
| Citation | 367 N.W.2d 873,141 Mich.App. 412 |
| Court | Court of Appeal of Michigan — District of US |
| Parties | In the Matter of the ESTATE OF Charles E. HUMPHREY, Deceased. Florence E. HUMPHREY, Petitioner-Appellant, v. DETROIT BANK & TRUST COMPANY, a Michigan Banking Corporation, Executor, Respondent-Appellee. Florence E. HUMPHREY, Petitioner-Appellant, v. DETROIT BANK & TRUST COMPANY, a Michigan Banking Corporation as Executor of the Estate of Charles E. Humphrey, Deceased, Respondent-Appellee. Florence E. HUMPHREY, Plaintiff-Appellant, v. DETROIT BANK & TRUST COMPANY, a Michigan Banking Corporation, Successor Trustee of the Thirty Trust, Charles E. Humphrey, Jr., and John N. Humphrey, Jointly and Severally, Defendants-Appellees. |
Paul M. Koch, Grosse Point Park, and Haig Avedisian, Troy, for petitioner-appellant.
Evans & Luptak by Gordon S. Gold, Detroit, for respondent-appellee.
Before DANHOF, C.J., and T.M. BURNS and BELL *, JJ.
Three cases have been consolidated on appeal in this matter. In case No. 75590, plaintiff-appellant Florence Humphrey appeals as of right from a December 6, 1983, Oakland County Circuit Court order granting the appellees' motion for accelerated judgment. In case No. 75589, she appeals by leave granted from a decision of the Oakland County Circuit Court entered on July 22, 1983, affirming an order and opinion of the Oakland County Probate Court rendered on March 5, 1980. And in case No. 53322, she appeals as of right from the probate court's allowance of respondent-appellee Detroit Bank & Trust's second annual account and from the denial of her motions to set aside the account and for a rehearing. Appellant contests the allowance of fiduciary fees, attorney fees and certain disbursements.
On August 5, 1955, Charles E. Humphrey established a revocable inter vivos trust (hereinafter referred to as the "Thirty Trust"), which consisted primarily of stock in two businesses owned by Humphrey and his brother. Humphrey controlled the trust as trustee and his brother Howard and his Ohio attorney were co-trustees. Humphrey named himself as the life beneficiary, with his two sons, Charles E. Humphrey, Jr., and John N. Humphrey, as the remaindermen. Thirty-two days later Charles Humphrey brought an action for divorce against his then-wife Betty. On February 1, 1957, a decree of divorce was entered in Wayne County Circuit Court. On or about June 1, 1957, Charles Humphrey married his second wife, Florence Humphrey, the appellant in these cases.
In 1973, Charles Humphrey amended the Thirty Trust by naming Detroit Bank & Trust Company as successor trustee in the event of his death. He also executed a will naming appellant as the sole beneficiary under the will and designating the same bank as executor.
On December 22, 1976, Charles Humphrey died and Detroit Bank & Trust Company assumed its duties as both the executor of Mr. Humphrey's estate and trustee for the Thirty Trust. On May 23, 1978, the first annual account of the bank as executor and a petition for allowance were filed in probate court. The account did not include as estate assets the inter vivos trust set up by the deceased or three GMAC bearer notes, totalling $112,000. On May 30, 1978, appellant filed objections to the first annual account based upon alleged violation of the rule against perpetuities by the Thirty Trust. The objection stated that the trust was invalid and that the trust corpus should be included as part of the estate assets. On June 27, 1978, the probate court conducted a hearing on the first account. At that time, Mrs. Humphrey's attorneys orally withdrew their objections. On July 13, 1978, an order was entered allowing the first account as stated.
After obtaining the services of her current counsel, Florence Humphrey filed a petition in the probate court to remove the bank as executor of the decedent's estate, to set aside the first annual account, and to hold the Thirty Trust invalid. She contended that the bank should be removed as executor based on a conflict of interest in the bank's acting as executor of the estate and as trustee of the Thirty Trust. She requested the first annual account be set aside, again arguing that the three GMAC bearer notes should be included in the estate inventory, not as Thirty Trust assets.
Pursuant to the petition filed by Mrs. Humphrey, numerous hearings, including evidentiary hearings, and depositions were conducted concerning the request to remove the bank as executor of the decedent's estate. Moreover, the probate court incorporated depositions taken of the bank's trust officer, Martha Runnels, into the record. As one example of the alleged conflicts of interest, Mrs. Humphrey claimed that the executor should have sought to have the GMAC notes included in the estate assets. Martha Runnels testified that the GMAC notes were correctly included as trust assets because the notes were derived from prior trust notes that had been "rolled over" by Charles Humphrey on their expiration date. Mrs. Runnels's determination was concurred in by her supervisor, William Penner.
Another reason alleged for removal of the bank as executor was that the bank was not acting properly in its handling of an IRS audit of the federal estate tax return. The IRS had indicated in March, 1978, that it was conducting an audit and informed the bank that it felt that the marital deduction on the estate return was overstated and therefore the tax submitted was deficient by approximately $30,000. The bank, however, felt that the IRS was wrong in its position and, instead of paying the alleged deficiency, asked its attorneys to contest it with the IRS.
At approximately the same time that the hearings on the petition for the bank's removal as executor were being conducted, the bank filed motions in the probate court contending that the allowance of the first account was res judicata as to the later-raised issues of the validity of the Thirty Trust and the lack of inclusion of the GMAC notes in the estate and that summary judgment should be granted against Mrs. Humphrey's claim that the Thirty Trust was invalid. After examining the briefs of both parties, Oakland County Probate Court Judge Barry M. Grant ruled in an opinion and order of March 5, 1980, that there were no conflicts of interest in the bank's acting as both executor of the estate and trustee of the Thirty Trust; that Mrs. Humphrey's pleadings failed to state a cause of action regarding the alleged invalidity of the Thirty Trust; that the allowance of the first account was res judicata as to the inclusion of the GMAC notes in the trust assets; and that the GMAC notes were properly included in the trust as trust assets. Appellant appealed the denial of her petition to this Court, but we dismissed her appeal because the orders were not "final orders" and appealable as of right. In re Humphrey Estate, 107 Mich.App. 778, 309 N.W.2d 722 (1981).
Pursuant to our prior decision that the probate court order was not appealable to this Court as of right, appellant appealed to the Oakland County Circuit Court, where, on August 12, 1983, the probate court's order was affirmed. Case No. 75589 is an appeal from the circuit court's affirmance of the probate court's order of March 5, 1980.
In the meantime, on December 18, 1978, appellant had filed an action in Oakland County Circuit Court, seeking to void the Thirty Trust. In her second amended complaint, appellant alleged that the trust was illusory in nature in that there was improper consideration, that the trust was a mere agency agreement, that it was testamentary in nature and did not comply with the statute of wills, and that it was a fraud on her to deprive her of her statutory share of her deceased husband's estate. She also alleged that, since the stated purpose of the trust was a desire of the grantor to preserve control of the family-owned businesses within the grantor's direct lineal descendents, the purpose of the trust came to an end because the grantor, Mr. Humphrey, sold the stock of the family-owned businesses. On February 20, 1979, defendants moved for accelerated judgment, pursuant to GCR 1963, 116.1(5), claiming that the allowance in the probate court of the first account of the executor of the decedent's estate, after objections thereto were withdrawn by Florence Humphrey, precluded her from contesting the validity of the Thirty Trust. After denial of this motion and several subsequent motions (to be discussed infra ), the lower court eventually granted the motion for accelerated judgment on December 6, 1983. Appellant appeals as of right from the grant of accelerated judgment (No. 75590).
Meanwhile, the saga continued. On April 16, 1978, appellee (the bank) filed a petition for allowance of the second annual account, the subject of case No. 53322. Appellee requested approval for payment of certain disbursements and fees, including the following:
(1) $400 to Farquharson & Pointon, Certified Public Accountants, for tax services;
(2) $1,500 to the Detroit Bank & Trust Company for services as executor;
(3) $16,117.50 to Evans & Luptak, attorneys for the estate, for legal services rendered; and
(4) $169.83 as reimbursement for disbursements made by Evans & Luptak.
The account also showed that appellee had paid a tax deficiency of $750.56 and $70.71 interest on that deficiency. Appellant filed objections to the second account, challenging the executor's refusal to list the GMAC bearer notes as inventory of the estate, the payment of the tax deficiency and interest, and the payment of all accountant fees, attorney fees, and executor fees.
On April 22, 1980, a hearing was held on appellee's petition. The only witness called to testify was William Penner, vice-president of the personal trust department of Detroit Bank & Trust Company. Following his...
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