In re Estate of Mumby

• Decision Date: 03 September 1999
• Docket Number: No. 23133-6-II.,23133-6-II.
• Citation: 982 P.2d 1219,97 Wash. App. 385
• Parties: In the Matter of the ESTATE OF Samuel C. MUMBY, Deceased. Darlene Wood, Appellant, v. James Caldwell and Erma Caldwell, and their martial community, Respondents.
• Court: Washington Court of Appeals

982 P.2d 1219

97 Wash. App. 385

In the Matter of the ESTATE OF Samuel C. MUMBY, Deceased.

Darlene Wood, Appellant, v. James Caldwell and Erma Caldwell, and their martial community, Respondents.

No. 23133-6-II.

Court of Appeals of Washington, Division 2.

September 3, 1999.

Mark Stephen Beaufait, Mark S. Beaufait, Ps, Port Townsend, for Respondents.

Joanne Henry, Vandeberg, Johnson & Gandara, Tacoma, for Appellant.

ARMSTRONG, J.

Darlene Wood, the daughter of Dr. Samuel Mumby, petitioned to invalidate his living trust on grounds that James Caldwell, the executor and a beneficiary, exerted undue influence. Caldwell counterclaimed that the "no contest" clause barred Wood from taking as a beneficiary. The trial court held that the trust was properly executed and enforced the no contest provision. The court also concluded that the trust provided for estate taxes to be paid from the estate, rather than charged to each beneficiary. On appeal, Wood argues the trial court erred in: (1) concluding the trust was not the product of fraud;¹ (2) enforcing the no contest provision of the trust; and (3) concluding that the trust provides for estate taxes to be paid from the estate, rather than apportioned among beneficiaries. Finding no error, we affirm.

FACTS

Dr. Samuel Mumby, Jr., died on January 12, 1997, at the age of 94. His only daughter, Darlene Wood, and four grandchildren survived him. James and Erma Caldwell were long-time friends and next door neighbors of Dr. Mumby.

At the time of his death, Dr. Mumby possessed a substantial estate consisting of 44 acres of property on Marrowstone Island and liquid assets of approximately one-half million dollars. In January 1992, Dr. Mumby executed a will, a quit claim deed, and a durable power of attorney. The quit claim deed conveyed approximately 38 acres of wooded property to the Caldwells. The will left the balance of the estate to Wood. In November 1995, Dr. Mumby executed a living trust and pour-over will.² The trust again provided that the Caldwells would receive the 38-acre parcel of property, in addition to a $20,000 cash bequest. Dr. Mumby left his residence, a six-acre waterfront parcel, and the residue of the estate to his daughter, Wood.³ The pour-over will and trust named James Caldwell as executor and trustee.

In May 1997, Wood filed a petition to rescind the trust, alleging that James Caldwell exercised undue influence over Dr. Mumby. The Caldwells counterclaimed that the no contest provision in the trust barred Wood from taking as a beneficiary. At trial, the deadman's statute precluded the Wood family and the Caldwells from testifying as to conversations and transactions with Dr. Mumby. But numerous witnesses testified about Dr. Mumby's relationships, the circumstances surrounding the execution of the will and trust, and his expressed intentions regarding his property.

Wood had limited contact with her father during her youth, but their relationship became close during the last several years of his life. Dr. Mumby, Wood, and her children traveled as a family on numerous occasions and spent holidays together. From 1992 until Dr. Mumby's death, Wood visited her father approximately once a week to help around the house, run errands, and take him to lunch.

Although Wood testified that she had a close relationship with her father, there was evidence of some tension. Dr. Mumby told numerous people that he was angry with Wood and her husband for asking him to co-sign a $250,000 promissory note needed to refinance a FmHA loan on their farm. Because he did not want to be placed in financial jeopardy, Dr. Mumby refused to sign the note. The attorney who prepared his trust documents testified that Dr. Mumby did not feel his daughter supported, visited, or cared for him as much as he would like. Finally, Dr. Mumby apparently believed that his daughter would clear-cut the timber if she received the 38-acre parcel of wooded property.

Dr. Mumby was very close with the Caldwells, his next door neighbors. In 1976, Dr. Mumby sold his neighboring property to the Caldwells. Thereafter, James Caldwell regularly helped Dr. Mumby with chores such as splitting wood, mowing grass, assembling paperwork, cutting his hair, and driving him into town. Erma Caldwell was also helpful and friendly with Dr. Mumby. She visited him about once a week, cooking for him, providing him with desserts, and mending his clothes.

In addition to his family and the Caldwells, Dr. Mumby had a close friendship with Carl Johnson. From 1990 until Dr. Mumby's death, Johnson and his son Jake lived in the upper portion of Dr. Mumby's home. The Johnsons checked in with Dr. Mumby each day, often made him lunch, and kept him company. Over the years, the Johnsons helped Dr. Mumby maintain his house to contribute to their "rent." Because of the combined assistance of the Caldwells and the Johnsons, Dr. Mumby was able to live in his own home up to the time of his death.

In summer 1995, the Caldwells referred Dr. Mumby to Earnest Dill for "asset management" services. After several meetings, Dr. Mumby purchased a living trust from Dill. The dispositive provisions of the trust were identical to Dr. Mumby's 1992 estate plan. Dill testified that Dr. Mumby's primary purpose for executing the trust was to "tighten up his estate plan" against a challenge by Wood. To this end, the trust contained a no contest clause, which was virtually identical to the no contest clause in his 1992 will. Dill's associate, attorney Thomas Brothers, prepared the trust package. Because of Dr. Mumby's advanced age, Brothers was initially concerned about his competence. But Brothers testified that Dr. Mumby spoke lucidly and clearly and understood the nature and extent of his assets. Dr. Mumby signed his living trust on November 29, 1995.

Shortly after the execution of the trust, Wood was informed of Dr. Mumby's planned gift of the property to the Caldwells. Wood then contacted her cousin, John Sangster, to investigate and attempt to disinherit the Caldwells. Wood hired an attorney and a private investigator with a view to initiating a will contest and a guardianship proceeding against her father.

Beginning in early 1996, Sangster met with Dr. Mumby eight times in an attempt to persuade him to change his estate plan. Once it became clear that Dr. Mumby did not intend to change his mind about giving the property to the Caldwells, Sangster tried to help him with his estate planning. Because Dr. Mumby's estate faced substantial estate taxes, Sangster suggested placing a "conservation easement" on the wooded property, which involved deeding the logging and development rights to the Jefferson Land Trust. Sangster explained that the easement would reduce the value of the property, save approximately $150,000 in estate taxes, and protect the property from logging. Although Sangster arranged a meeting with Jefferson Trust representatives, Dr. Mumby ultimately decided against encumbering the property.

Dr. Mumby remained firm in his expressed intention to leave the 38-acre parcel to the Caldwells, even without the conservation easement in place. Four days before his death, Wood persisted, "Father it's not too late to change your Will[,]" but Dr. Mumby stated that he did not wish to change anything.

The trial court ruled that there was no undue influence and that Dr. Mumby was competent to execute the living trust and pour-over will. Finding no valid basis for Wood's challenge, the court applied the no contest clause and ruled that Wood should take nothing under the trust document. Consequently, the property that would have gone to Wood under the trust was distributed to her children. Finally, the court concluded that the trust specifically directed that estate taxes be paid from the estate, rather than apportioned among beneficiaries.

Wood moved for reconsideration and raised, for the first time, the issue of fraudulent inducement. Although the issue was not pled, briefed, nor argued at trial, the court nevertheless considered the issue. The court denied the motion, finding that "[t]he testimony did not begin to establish that theory."

ANALYSIS

A. Fraud

Wood argues that the trial court erred in failing to find that Caldwell fraudulently induced Dr. Mumby into leaving him the 38-acre parcel of property. We disagree.

"The right of testamentary disposition of one's property as an incident of ownership, is by law made absolute." In re Estate of Martinson, 29 Wash.2d 912, 913, 190 P.2d 96 (1948). Thus, to establish fraud and set aside a will, the contestant must present "clear, cogent, and convincing" evidence of all of the elements of fraud. In re Estate of Lint, 135 Wash.2d 518, 533, 957 P.2d 755 (1998). "To sustain an order premised upon clear, cogent and convincing evidence, the ultimate fact in issue must be shown by evidence to be `highly probable.'" In re Estate of Pfleghar, 35 Wash.App. 844, 847, 670 P.2d 677 (1983) (citations omitted).

"[W]here a will is attacked because allegedly induced by fraud, it may be avoided, not because the testator's mind was coerced, but because his mind was deceived." In re Estate of Bottger, 14 Wash.2d 676, 701, 129 P.2d 518 (1942). In the context of a testamentary disposition, the elements of fraudulent inducement are:

(1) representation of an existing fact; (2) materiality of the representation; (3) falsity of the representation; (4) knowledge of the falsity or reckless disregard as to its truth; (5) intent to induce reliance on the representation; (6) ignorance of the falsity; (7) reliance on the truth of the representation; (8) justifiable reliance; and (9) damages.

Lint, 135 Wash.2d at 533 n. 4, 957 P.2d 755 (citing Farrell v. Score, 67 Wash.2d 957, 958-59, 411 P.2d 146 (1966)).

Wood contends that Caldwell made two false statements to Dr. Mumby that induced him to create the trust and leave the property to the Caldwells. First, Wood argues that Caldwell falsely told Dr. Mumby that, if he...