In re Estate of Bernard

• Decision Date: 04 August 2014
• Docket Number: Nos. 69608–4–I, 69702–1–I.,s. 69608–4–I, 69702–1–I.
• Citation: 332 P.3d 480
• Court: Washington Court of Appeals
• Parties: In re the ESTATE OF J. Thomas BERNARD, Deceased.

332 P.3d 480

In re the ESTATE OF J. Thomas BERNARD, Deceased.

Nos. 69608–4–I, 69702–1–I.

Court of Appeals of Washington,

Division 1.

Aug. 4, 2014.

Karolyn Ann Hicks, Stokes Lawrence PS, Karen R. Bertram, Kutscher Hereford Bertram Burkart PLLC, Ann Terese Wilson, Law Offices of Ann T. Wilson, Kim D. Stephens, Tousley Brain Stephens PLLC, Bruce Andrew McDermott, Teresa R. Byers, Garvey & Schubert Barer, Seattle, WA, for Appellants.

Michael L. Olver, Christopher C. Lee, Kameron Lee Kirkevold, Helsell Fetterman LLP, Seattle, WA, for Respondents.

COX, J.

¶ 1 A court's paramount duty in construing a testamentary instrument is to give effect to the maker's intent.¹ We determine that intent from the instrument as a whole.² Similarly, “[t]he ‘touchstone of contract interpretation is the parties' intent.’ ” ³ We follow “the objective manifestation theory of contracts, imputing an intention corresponding to the reasonable meaning of the words used.” ⁴

¶ 2 Generally, a personal representative of an estate has the right to appeal an adverse decision in a will contest, as it is the duty of the executor to take all legitimate steps to uphold the testamentary instrument. ⁵ Likewise, a trustee may appeal an adverse ruling that goes to the validity of the trust itself.⁶

¶ 3 Here, a trial court judge decided on reconsideration of a motion for partial summary judgment that the First Codicil to the Will of J. Thomas Bernard, dated August 27, 2009, and the First Amendment to the J. Thomas Bernard Revocable Trust Agreement of even date were null and void as a matter of law. We conclude from our de novo review of these and other material documents that this was error.

¶ 4 We also conclude that a different trial court judge erred in deciding that the personal representative of the estate and the trustees of the trust did not have the right to appeal the adverse ruling we described in the previous paragraph. The circumstances of this case do not warrant that ruling.

¶ 5 We reverse and remand for further proceedings.

¶ 6 In 2008, James Bernard filed a petition for guardianship of his father, J. Thomas Bernard, and his father's estate. James alleged in the petition that Tom suffered from dementia and short-term memory loss.⁷ James also alleged that Tom's reasoning and judgment were impaired and that Tom was vulnerable to financial exploitation.

¶ 7 The following year, Tom executed the Will of J. Thomas Bernard and the J. Thomas Bernard Revocable Trust Agreement, both of which are dated March 25, 2009. On advice of counsel, Tom used a revocable living trust “to avoid any negative tax consequences along with a notice requirement to [James] if Tom wanted to modify the Trust.” ⁸

¶ 8 On March 27, 2009, the superior court dismissed the guardianship petition that James filed the previous year.

¶ 9 The trust agreement provided that the residue of Tom's estate would pass to James or his issue. It also provided that if James predeceased Tom and left no issue, the estate would pass to Tom's niece and nephews, Rose Linger, Larry Emery, and Richard Emery (the “Linger Beneficiaries”), and to various organizations. Under this instrument, each of the Linger Beneficiaries was to receive a 20 percent share.

¶ 10 Tom reserved in this revocable trust the power to revoke, withdraw property from, or modify the trust. These rights are stated in Article 3.1 of the trust instrument. Additionally, the instrument included provisions about exercising these rights:

3.2 Effectiveness. Any revocation, withdrawal of property, or modification shall be valid and fully effective whenever Trustee shall receive from Trustor written notice thereof, except that the powers and duties of Trustee shall not be changed without Trustee's written consent. In the case of revocation or withdrawal of property, Trustee shall have a reasonable time to transfer or deliver the property.

3.3 Rights Personal to Trustor Subject to Binding Non–Judicial Agreement. The rights reserved by the Trustor are personal to Trustor and may not be exercised by Trustor's attorneys-in-fact appointedunder a duly executed durable power of attorney or by any guardian of Trustor's estate absent court order of a court of competent jurisdiction. Notwithstanding any other provision of this Agreement, such rights are subject to that certain Non–Judicial Agreement regarding the J. Thomas Bernard Revocable Living Trust Agreement (“TEDRA”) of even date herewith and are not exercisable by Trustor unless and until Trustor obtains the court order required by such agreement and otherwise satisfies all of the requirements imposed by the TEDRA. If and to the extent such TEDRA is determined to be unenforceable for any reason, the restrictions on Trustor's right to revoke, modify, and/or withdraw property from this Trust as stated therein shall be incorporated in this Agreement by reference and shall remain fully enforceable against the Trustor.⁹

¶ 11 Tom and James also executed the “Non–Judicial Agreement Re Trust Pursuant to RCW 11.96A,” effective as of March 27, 2009 (the “March TEDRA agreement”). ¹⁰ They were the only parties to this agreement.

¶ 12 The agreement stated that it was “a compromise to certain disputes that have arisen between Tom and James regarding the current management and future disposition of Tom's assets.” ¹¹ It also stated that the parties “agree that establishing the Trust and agreeing to the terms of this Agreement is a mutually acceptable less restrictive alternative to a guardianship of the estate and James will forgo filing for a guardianship of Tom's estate so long as this Trust is in force and functional.” ¹²

¶ 13 The agreement further provided three requirements to be met before Tom exercised his modification powers:

[A]lthough both the Trust and the Will remain revocable and/or modifiable by Tom during his lifetime, the Parties agree that no exercise of Tom's Modification Powers over either or both of the Trust and/or the Will shall be effective unless and until:

i. Tom files a petition for a hearing under RCW 11.96A in King County Superior court which clearly and specifically sets forth a particular proposal for an exercise of his Modification Powers,

ii. timely provides James with a summons for such hearing pursuant to RCW 11.96A.100 (and otherwise complies with the substantive and procedural provisions of RCW 11.96A), and

iii. as a result of such a hearing, the court issues an order approving the exercise of some or all of the particular Modification Power(s) expressly requested in Tom's petition.

Accordingly, the Parties expressly acknowledge and agree that any exercise by Tom of his Modification Powers over the Trust and/or the Will without first obtaining such a court order (and otherwise complying with the terms of this Agreement) shall be null and void.¹³

¶ 14 In June 2009, Tom's attorney filed with the superior court a memorandum summarizing the terms of the March TEDRA agreement.

¶ 15 Tom's relationship with his niece, Rose Linger, deteriorated. In July 2009, the trustees for the trust sued Linger and her husband to collect outstanding loans.

¶ 16 In August 2009, Tom and his son, James, executed a second “Non–Judicial Agreement Pursuant to RCW 11.96A,” effective as of August 27, 2009 (the “August TEDRA agreement”). They were the only parties to this second agreement.

¶ 17 This August TEDRA agreement acknowledged the three modification requirements set out in the March TEDRA agreement. It also stated that “this Amended Agreement will satisfy the [March TEDRA] Agreement's requirement to obtain a court order prior to any exercise of Tom's Modification Powers.”

¶ 18 The August TEDRA agreement included, as attached exhibits, unexecuted copies of the First Amendment to the J. Thomas Bernard Revocable Trust Agreement and the First Codicil to the Will of J. Thomas Bernard.

¶ 19 The first amendment to trust and the first codicil state that they are also effective as of August 27, 2009.

¶ 20 The substance of the changes from the March 2009 trust was to reduce the shares of the Linger Beneficiaries from 20 percent each to $20,000 each. Moreover, the first amendment to trust added additional contingent beneficiaries: Leah Karp, Diane Viars, and Daniel Reina (collectively the “Karp Beneficiaries”). These beneficiaries are also to receive shares of the trust estate, two of them receiving 15 percent shares each, and one receiving a 25 percent share.

¶ 21 This record indicates that the trust estate is substantial. Thus, the distributive scheme—shares of $20,000 or percentages of the trust estate—has a substantial impact on the amounts that the contingent beneficiaries may receive from the estate.

¶ 22 In February 2010, Tom's attorney filed with the superior court a memorandum summarizing the terms of the August TEDRA agreement.

¶ 23 James predeceased Tom in September 2010, leaving no issue. Tom died in January 2011.

¶ 24 After the filing of Tom's testamentary documents with the court, the Linger Beneficiaries, by amended petition, contested the March TEDRA agreement, the Will of J. Thomas Bernard dated March 25, 2009, the J. Thomas Bernard Revocable Trust Agreement dated March 25, 2009, the First Codicil to the Will of J. Thomas Bernard, dated August 27, 2009,¹⁴ and the First Amendment to the J. Thomas Bernard Revocable Trust Agreement, dated August 27, 2009.

¶ 25 The Linger Beneficiaries moved for partial summary judgment. They requested that the court invalidate the “March Agreement.” They identified this agreement as including the March TEDRA agreement, the will, and the revocable trust. They also sought to invalidate the “August Agreement.” They identified this agreement as including the August TEDRA agreement, the first codicil, and the first amendment to trust.

¶ 26 Alternatively, the Linger Beneficiaries argued that the “August 2009 Amendment”—the first amendment to trust and the first codicil—was void. The personal representative of the estate, the trustees of the...