In re Estate of Kirsch, 2004
| Decision Date | 07 June 2017 |
| Docket Number | No. 2004,2004 |
| Parties | IN THE MATTER OF THE ESTATE OF DIANE Z. KIRSCH |
| Court | Court of Special Appeals of Maryland |
UNREPORTED
Wright, Arthur, Shaw Geter, JJ.
Opinion by Arthur, J.
*This is an unreported opinion, and it may not be cited in any paper, brief, motion, or other document filed in this Court or any other Maryland Court as either precedent within the rule of stare decisis or as persuasive authority. Md. Rule 1-104.
Before her death, Diane Kirsch attempted to convey a partnership interest to a trust for the benefit of her companion, Wayne Cullen. A federal district court determined that the partnership agreement prohibited the transfer to Mr. Cullen and that the attempted transfer became void upon Ms. Kirsch's death. The Fourth Circuit affirmed that determination.
In the aftermath of those rulings, the Orphans' Court for Montgomery County concluded that Ms. Kirsch could not transfer the partnership interest to Mr. Cullen through her will. The orphans' court directed Mr. Cullen, as the personal representative of Ms. Kirsch's estate, to distribute the interest in kind to Ms. Kirsch's brother and heir-at-law, Paul V. Zehfuss.
Mr. Cullen noted an appeal from that order, solely in his capacity as personal representative of the estate. When a question arose as to Mr. Cullen's standing to appeal as personal representative, he moved to dismiss his own appeal, contending that he had not appealed from a final judgment.
For the reasons explained in this opinion, we conclude that the order directing the distribution of the asset was a final judgment within the meaning of the statute concerning appeals from the orphans' court. Nonetheless, we also conclude that, in his capacity as personal representative, Mr. Cullen lacks standing to challenge the order to the extent that it directs the distribution of the asset. Although Mr. Cullen has standing to challenge other aspects of the order in his capacity as personal representative, we conclude that he has identified no error.
The Lee Graham Shopping Center is a business located in Falls Church, Virginia. Dr. Paul E. Zehfuss and a co-founder established the business in 1969 as a general partnership. In 1984, they converted the business into a limited partnership under Virginia law.
Dr. Zehfuss, who died in 1985, conveyed some of his interest in the partnership to family members, including his daughter, Ms. Kirsch. As a limited partner, Ms. Kirsch accumulated a 21 percent interest in the partnership.
A written partnership agreement governed the partners' rights and obligations. The agreement provided that a limited partner could assign a partnership interest in only one of two ways.
First, a partner could transfer an interest, "whether inter vivos or by will," to a limited class of close family members: a "spouse, parent, descendant, or spouse of a descendant, or [] a trust of which any of [those] persons are beneficiaries."
Second, a partner could sell an interest upon receiving a "bona fide offer" from a third-party purchaser. Before accepting such an offer, however, the partner was required to give the other partners and the partnership the opportunity to match the offer - in effect, a right of first refusal. If no party exercised the right of first refusal and matched the offer within specified time periods, the selling partner would be free to complete the sale.
Under either of the two methods, the assignee could not become a partner withoutthe approval of the other partners.
On October 5, 2010, Ms. Kirsch executed a will and amended a trust agreement for a revocable trust of which she was the trustee. The combined purpose of these instruments was to make Mr. Cullen the primary recipient of her assets upon her death.1
An asset of Ms. Kirsch's revocable trust was her 21 percent interest in the limited partnership. Upon Ms. Kirsch's death, the trust directed that Mr. Cullen would succeed her as trustee and that the bulk of the trust's assets, including the partnership interest, would pass to a separate trust that had been created for Mr. Cullen's benefit.
Ms. Kirsch's will recited that she was unmarried and had no children. She appointed Mr. Cullen as the personal representative of her estate and empowered him to control estate assets during its administration. She devised all of her tangible personal property to Mr. Cullen. In the residuary clause of the will, she devised the remainder of her property to her revocable trust (and ultimately, therefore, to the trust that she had created for Mr. Cullen's benefit).
By 2011, Ms. Kirsch had been diagnosed with terminal cancer. She died on January 22, 2012.
Several months after Ms. Kirsch's death, Mr. Cullen, as successor trustee of Ms. Kirsch's revocable trust, purported to assign the 21 percent partnership interest from her trust to the trust that was created for his benefit. In addition, Mr. Cullen asked the partnership to make him a limited partner. The partnership responded by informing Mr. Cullen of the transfer restrictions from the 1984 partnership agreement, including the restriction on Ms. Kirsch's ability to assign an interest to anyone besides a "spouse, parent, descendant, or spouse of a descendant, or [] a trust of which any of [those] persons are beneficiaries."
In June 2012, Mr. Cullen filed a petition for administrative probate of Ms. Kirsch's will in Montgomery County. The petition identified three interested persons: (1) Mr. Cullen, as the personal representative and as a legatee; (2) Mr. Cullen, as the successor trustee of Ms. Kirsch's revocable trust; and (3) Mr. Zehfuss, as the only potential heir-at-law. The Register of Wills sent notice of the proceedings to Mr. Zehfuss.
At the end of 2012, Mr. Zehfuss and the other partners converted their business into a limited liability company: Lee Graham Shopping Center, LLC. Much like the 1984 partnership agreement, the LLC's new operating agreement prohibited members from assigning their interests in the company, except through a gift to certain permitted family members or through the process by which the other partners and the partnership could match any bona fide offer from someone other than a permitted family member.
In February 2013, Lee Graham Shopping Center, LLC, filed suit in the UnitedStates District Court for the Eastern District of Virginia. The company sought a declaration that under the partnership agreement Ms. Kirsch did not have the authority to transfer her interest to a revocable trust for Mr. Cullen's benefit and that Mr. Cullen had no authority to transfer the partnership interest from the revocable trust to his own trust. As defendants, the company named the Kirsch estate, Ms. Kirsch's revocable trust, and Mr. Cullen's trust. Mr. Cullen counterclaimed against the company and raised additional claims against the partnership, Mr. Zehfuss, and the other members of the company.
The federal district court granted summary judgment in favor of the company. Lee Graham Shopping Ctr., LLC v. Estate of Kirsch, 2013 WL 11740208 (E.D. Va. Oct. 3, 2013). The court determined that, "under the clear terms" of the partnership agreement, the "transfer of a limited partner's interest to a non-family member is only possible . . . pursuant to the procedure for bona fide offers." Id. at *1. Because Mr. Cullen was not one of the family members to whom Ms. Kirsch could assign her interest, and because there had been no bona fide offer to purchase the interest, the court reasoned that Ms. Kirsch could not assign her interest to Mr. Cullen's trust through her revocable trust. Id. The court concluded that "[Ms. Kirsch's] transfer of her partnership interest to the Trust became void on the date of [her] death," and "[t]herefore, upon [her] death, . . . her limited partnership interest was a personal asset that is now a part of the Estate of Diane Z. Kirsch." Id.2
Shortly after the federal district court's decision, Mr. Cullen submitted an inventory and first account for the estate in Montgomery County, and Mr. Zehfuss filed exceptions. Mr. Zehfuss contended that because of the transfer restrictions in the partnership agreement, the interest could not pass to Mr. Cullen under the will. Therefore, Mr. Zehfuss contended, the interest should pass to him by intestate succession. He excepted to Mr. Cullen's failure to list the partnership interest as an estate asset, his failure to indicate the value of that asset, and his failure to include Mr. Zehfuss on an "updated" list of interested persons that Mr. Cullen had filed a few months earlier.
Mr. Cullen, as the personal representative, opposed the exceptions. He contended that Mr. Zehfuss lacked standing to take exceptions, because, he said, Mr. Zehfuss was no longer an "interested person" under Maryland estate law. See generally Md. Code , § 1-101(i)(4) of the Estates and Trusts Article ("E&T") ( that an heir is an interested person "even if the decedent dies testate, except that an heir of a testate decedent ceases to be an 'interested person' when the register has given notice" to the heir as required by statute). At Mr. Cullen's request, the orphans' court stayed the matter pending the outcome of his appeal of the district court judgment in the United States Court of Appeals for the Fourth Circuit.
Meanwhile, Mr. Cullen submitted a second account. Mr. Zehfuss filed exceptions to the second account, which incorporated his earlier exceptions to the first account.
In February 2015, the Fourth Circuit affirmed the district court's judgment. LeeGraham Shopping Center, LLC v. Estate of Kirsch, 777 F.3d 678 (4th Cir. 2015). The appellate court upheld the district court's conclusion that the partnership agreement prohibited a partner from transferring his or her interest...
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