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HomeMy WebLinkAbout05-17-91 IN THE ESTATE OF ROBERT M. MUMMA, DECEASED IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA : No. 21-86-398 ORPHANS' COURT DIVISION BRIEF OF PETITIONER, ROBERT M. MUMMA, II IN OPPOSITION TO THE EXCEPTIONS OF THE GUARDIAN AD LITEM Procedural History/Statement of the Case Petitioner, Robert M. Mumma, II, is one of four adult surviving children of Robert M. Mumma, Deceased ("the Testator") . The Testator died on April 12, 1986, leaving a Last Will and Testament dated May 19, 1982, together with a Codicil dated October 12, 1984 ("the Will"). The Testator was also survived by his wife, Barbara McK. Mumma. She, together with another surviving child, Lisa Mumma Morgan ("the Executrices/Trustees") is a personal representative of the estate of the Testator, as well as a trustee of the two testamentary trusts created by the Will. On January 6, 1987, Robert M. Mumma, II executed a document prepared for him by Arthur Klein, Esquire, a partner in the Philadelphia law firm of Morgan, Lewis & Bockius. This firm was then representing the Executrices/Trustees and providing professional services in the administration of the Testator's estate. Mr. Klein and his firm also represented Mr. Mumma on several matters. The document was called "Disclaimer by Robert M. Mumma, II." It recited the provisions of the trusts created 749 in the seventh and eighth articles of the Will. Those provisions in each article were similar, directing that principal be held in trust for the benefit of the Testator's wife during her lifetime and, upon her death, be paid over to the Testator's children, share and share alike, per stirpes and not per capita. The disclaimer was filed with the Register of Wills of Cumberland County on January 12, 1987. On June 20, 1989, Robert M. Mumma, II filed a Petition to Revoke Disclaimer. This Honorable Court issued a rule to show cause returnable August 28, 1989. Answers to the rule were filed by the Executrices/Trustees, by Robert M. Frey, Esquire, guardian ad Ii tern of Robert M. Mumma, II's minor children, and by Linda Roth, an adult surviving child of the Testator. At the hearing on August 28, 1989, no testimony was taken and the Orphans' Court directed that briefs be filed. In an Order and Opinion dated November 17, 1989, this Court granted Robert M. Mumma, II's motion to revoke disclaimer. The guardian ad Ii tern timely filed a Notice of Appeal with the Superior Court of Pennsylvania on December 12, 1989, which appeal was joined by Barbara McK. Mumma and Lisa M. Morgan, individually and as Executrices of the Estate of Robert M. Mumma, Deceased. After briefing and argument, the Superior Court vacated this Court's Order and remanded for consideration of the guardian ad Ii tern's exceptions. Upon remand, by Order and Opinion dated 2 750 March 21, 1991, this Court again held that Mr. Mumma may revoke his disclaimer. The guardian ad litem has again filed exceptions. This brief is in opposition to those exceptions. Counter statement of the Questions Involved A. WHETHER THE DECISION OF THE ORPHANS' COURT PERMITTING ROBERT M. MUMMA, II TO REVOKE HIS DISCLAIMER IN ORDER TO GIVE EFFECT TO THE INTENTION EXPRESSED IN THE WILL OF THE TESTATOR COMPORTS WITH ESTABLISHED PENNSYLVANIA LAW? Suggested answer in the affirmative. B. WHETHER THE DECISION OF THE ORPHANS' COURT DOES NOT NULLIFY THE LEGISLATIVE INTENT OF SECTION 6201, ET SEQ. OF THE PROBATE, ESTATES AND FIDUCIARIES CODE? Suggested answer in the affirmative. C. WHETHER THE DISCLAIMER IS INVALID AND INEFFECTIVE BECAUSE IT FAILS TO SATISFY THE STATUTORY REQUIREMENT TO "DESCRIBE THE INTEREST DISCLAIMED" AND BECAUSE IT WAS MADE UNDER THE WRONG SECTION OF THE PROBATE, ESTATE AND FIDUCIARY CODE? Suggested answer in the affirmative. 3 751 Counterargument A. THE DECISION OF THE ORPHANS' COURT PERMITTING ROBERT M. MUMMA, II TO REVOKE HIS DISCLAIMER IN ORDER TO GIVE EFFECT TO THE INTENTION EXPRESSED IN THE WILL OF THE TESTATOR COMPORTS WITH ESTABLISHED PENNSYLVANIA LAW. As Your Honorable Court properly noted, "[t]he basic premise around which all of trusts and estates law revolves is that absent certain extenuating circumstances, the Testator's desires and intentions must be fulfilled." (p.3 of Opinion), For this fundamental reason, the analysis of whether a disclaimer may be revoked commences with the effect the disclaimer has on the Testator's desires and intentions. Because the effect of the instant disclaimer is that Robert M. Mumma, II's children (the Testator's grandchildren) will not be treated equally under the will, to refuse its revocation would serve to frustrate that which the Testator had actually desired and intended. Thus, the Orphans' Court correctly granted Robert M. Mumma, II's motion to revoke disclaimer. The will of the Testator provided for a gift-over to children of any children who predeceased him. The relevant language of Article EIGHTH is as follows: In the event any of my said children shall predecease me leaving issue (including adopted children) surviving, then and in that event their share above provided shall pass to such issue. The give-over is designated to be made per stirpes and not per 4 '752 capita. Section 6205 of the Pennsylvania Probate, Estates and Fiduciary Code spells out the effect of Robert M. Mumma, II's disclaimer. It reads, in relevant part, as follows: (a) In general - A disclaimer relates back for all purposes to the date of the death of the decedent or the effective date of the inter vivos transfer or third-party beneficiary contract as the case may be. The disclaimer shall be binding upon the disclaimant and all persons claiming through or under him. (b) Rights of other parties - Unless a testator or donor has provided for another disposi tion, the disclaimer shall, for purposes of determining the rights of other parties, be equivalent to the disclaimant's having died before the decedent in the case of a devolution by will or intestacy or before the effective date of an inter vivos transfer or third-party beneficiary contract, except that, when applying section 2104( 1) (relating to rules of succession) or analogous provisions of a governing instrument, the fact that the disclaimant actually survived shall be recognized in determining whether other parties take equally or by representation, and except that if, as a result of a disclaimer, property passes to a fund in which the disclaimant has an interest or power which he has not disclaimed, the disclaimant shall retain his interest or power in the fund as augmented by the disclaimed property. (emphasis added) (20 Pa.C.S.A. 6205). Because the effect of a valid disclaimer is to treat the disclaimant as having predeceased the decedent, if Robert M. Mumma, II is not permitted to revoke his disclaimer, his two 5 753 living children will not inherit his share of the remaining principal in the two testamentary trusts. One of these children was born in 1987, after the date of death of the Testator and, if Robert M. Mumma, II is considered to have died before the Testator (whose date of death was April 12, 1986), only the child born in 1982 will receive a share of the principal remaining in the trusts. It follows, then, that if Robert M. Mumma, II has any more children, either natural or adopted, they will not receive a share of the trust principal. This is contrary to the intention expressed by the Testator in his will. It is clear that the Testator intended the gift-over of principal to be shared by all grandchildren who actually survived their parent. The Testator did not intend that one living grandchild (and all after-born grandchildren) would not receive a share of the trust principal because of determination (as required by the law of disclaimers) that Robert M. Mumma, II died prior to April 12, 1986 and, therefore, was survived only by his child who was born in 1982. Again, for purposes of the disclaimer, the Testator's second child was born a year and a half after his decease. The Superior Court has held that "[ a] Court's responsibility is not to protect the family's interest but to give effect to the testator's intention." Estate of Stewart, 325 Fa. Super. 545, 473 A.2d 572, 575 (1984). The Testator obviously wished to provide for all of Robert M. Mumma's 6 754 living children in the event a gift-over was necessary. Only by permi tting the revocation of the disclaimer can an unfair result, certainly not intended by the Testator, be avoided. The Testator's clear intention was to benefit all his children and grandchildren. Moreover, it is a reasonable assumption that all of Robert M. Mumma, II's children are the natural objects of his bounty. Equally reasonable is the assumption that all of his children were the objects of the Testator's bounty under the provisions of the two trusts. The way to achieve the intended result is to permit Robert M. Mumma, II to revoke the disclaimer. For then he may receive his one-quarter share of the two testamentary trusts and, thereafter, have the ability to treat all of his children equally in his own estate plan. Effectuation of the Testator's intent in itself is sufficient reason for permitting revocation of a disclaimer. Zepps Estate, 4 Fiduc.Rep. 281 (Montgomery Co. 1984). The instant case presents an even stronger case for allowing Robert M. Mumma, II to revoke his disclaimer. Failure to allow the revocation of disclaimer can work a very real hardship on one-- or more -- of his children, who will be left with nothing from their grandfather's estate because of the effective date of the disclaimer. As this Court wrote, "[nlot only is such a result manifestly unjust, but, as both sides agree, it is not what the 7 755 Testator intended nor desired, which was to treat all his in terms of their share of the estate." The will should be given full force and grandchildren equally (p. 5 of Opinion). effect. The argument of the guardian ad litem to the contrary is based on a misunderstanding of the dual nature of vested remainders in the law of future interests as it is applied in pennsylvania. Prior to the filing of the disclaimer, the nature of the future interest held by the children of Robert M. Mumma, II was vested subject to open and, at the same time, vested subject to divestment. In other words, the class could expand in number by virtue of the birth of additional children of Robert M. Mumma, II; but the class could also be divested by the fact that Robert M. Mumma, II survived his mother, Barbara McK. Mumma, the first and life beneficiary under the trusts created by Articles Seventh and Eighth of the Testator's will. It is obvious that either of these possibilities was contemplated in the dispositive scheme devised by the Testator, and either of these possibilities would have the effect of treating the children of Robert M. Mumma, II equally. If Robert M. Mumma, II survived his mother, each of his children would receive the same share: nothing at all. And if Robert M. Mumma, II predeceased his mother, each of his children would receive an equal share on a per stirpes basis. 8 '756 It is where effect is given to Robert M. Mumma, II's disclaimer that an unfair and unequal result is reached. Since the effect of the disclaimer is to treat Robert M. Mumma, II as though he predeceased the Testator, the class of his children must necessarily be determined as of this admittedly fictitious occurrence. Robert M. Mumma, II had one child before and one child after his disclaimer-induced decease. The latter child therefore is divested as are any other children born to or adopted by Robert M. Mumma, II. The first-born child, however, is fully vested unless said child predeceases its grandmother. Because it is clear from the will that the Testator did not intend to allow for such a disparate result, the Orphans' Court correctly decided to permit Robert M. Mumma, II to revoke his disclaimer and prevent that result. The guardian ad litem also contends that the enforceability of a disclaimer should be read in light of cases dealing with the enforceability of an inter vivos gift. The validity of a gift rests on two essential elements: "An intention to make an immediate gift, and such an actual or constructive delivery to the donee as to divest the donor of all dominion and control . "Post Estate v. Commonwealth Bank and Trust Co., 500 Pa. 420, 422, 456 A.2d 1360 (1983). Even assuming that Robert M. Mumma, II intended to make an immediate gift which, given his allegations as to the manner in which he 9 757 executed the disclaimer, is highly questionable, the fact that no delivery whatsoever was made to the donee (his child) renders invalid this purported "gift." For it is not the language of the disclaimer that acts to divest the donor of all dominion and control, but rather an actual or constructive delivery to the donee. No such delivery having taken place, it follows that Robert M. Mumma, II had not been divested of all his dominion and control. Finally, the guardian ad litem claims that the Orphans' Court order conflicts with the law of third-party beneficiaries of contractual gifts. This contention is likewise undermined for the very simple reason that a disclaimer is not and cannot possibly construed as a contract in that its execution is accomplished by the disclaimant alone absent any consideration. 10 758 B. THE DECISION OF THE ORPHANS' COURT DOES NOT NULLIFY THE LEGISLATIVE INTENT OF SECTION 6201, ET SEQ. OF THE PROBATE, ESTATES AND FIDUCIARIES CODE. Allowing Robert M. Mumma, II to revoke his disclaimer in order to implement the Testator's intentions as set forth in the will has nothing to do with the legislative intent of Section 6201 et seq. of the Probate, Estates and Fiduciaries Code. Belatedly realizing that his children will be treated unequally under the will (another indication that the attorney for the estate, who was also acting as Robert M. Mumma, II's personal attorney, failed to advise Robert M. Mumma, II adequately and that Robert M. Mumma, II disclaimed without full knowledge of all ramifications of his act), Robert M. Mumma, II then chose to forego the tax advantages of the disclaimer precisely to avoid a manifest injustice to his children. Since the intent of the Disclaimer Law is to permit the transfer of estate sums without payment of estate taxes, if Robert M. Mumma, II elects to incur the tax and revoke his disclaimer, how is the intent of the Disclaimer Law possibly frustrated thereby? 11 759 C. THE DISCLAIMER IS INVALID AND INEFFECTIVE BECAUSE IT FAILS TO SATISFY THE STATUTORY REQUIREMENT TO "DESCRIBE THE INTEREST DISCLAIMED" AND BECAUSE IT WAS MADE UNDER THE WRONG SECTION OF THE PROBATE, ESTATE AND FIDUCIARY CODE. The Register of Wills docket shows that the Federal estate tax return in this estate was filed July 13, 1987 and that the Pennsylvania inheritance tax return was filed July 20, 1987. The latter return lists a gross estate in excess of Fifteen (15) Million Dollars. The vast bulk of the Testator' s would be held in the two trusts created by the will, the principal of which was purportedly disclaimed by Robert M. Mumma, II in the document dated January 6, 1987 and filed January 12, 1987. Can there be any doubt that Robert M. Mumma, II was not fully knowledgeable of the value of the two trusts he purportedly disclaimed in January of 1987 if the supposedly reliable information concerning value which he had at that time was a statement from the estate attorney that said estate would be worth only Nine (9) Million Dollars? Even comparing that stated value with the subsequent, post-disclaimer inheritance tax return valuation demonstrates that Robert M. Mumma, II did not make his disclaimer with full knowledge of the facts. And furthermore, if the estate's value will be even higher, approximately Forty (40) to Seventy (70) Million Dollars (which increased value is admi tted in part in the answer to petition filed by the Executrices/Trustees, paragraph 10), it is even more apparent 12 760 that Robert M. Mumma, II lacked full knowledge of the facts and could not satisfy the requirements of the disclaimer statute to: "( 1) describe the interest disclaimed; and, (2) declare the disclaimer and extent thereof." It almost goes without saying that there is a great difference between disclaiming a one-fourth (1/4) interest in Nine (9) Million Dollars and disclaiming a one-fourth (1/4) interest in Fifteen (15) Million or Forty-Three (43) Million or seventy (70) Million Dollars. In the first instance, Robert M. Mumma, II would be disclaiming Two and One-Quarter (2-1/4) Million Dollars and his older minor child would have the distinct possibili ty of inheriting One and One-Eighth (1-1/8) Million Dollars on his eighteenth birthday. If the value of the estate falls in the high end of the range, the minor child's share could exceed Eight (8) Million Dollars. It is reasonable to assume that Robert M. Mumma, II, as a concerned father, would have refused to sign the disclaimer if he had known that the Testator's estate was worth far more than Nine (9) Million Dollars. He would have wished to exert more control and guidance over his children' s separate estates at their moment of majority. In the analogous situation of an election to take against a will, the prevailing view has been that an election to take against a will may be revoked or set aside where it was made 13 761 through ignorance or mistake as to a material fact affecting the rights of the electing party. See Woodburn Estate, 138 Pa. 606, 21 A. 16 (1891). A widow's election can be wi thdrawn, even absent fraud, if not made with full knowledge of all essential facts. See McCutcheon's Estate, 283 Pa. 157, 125 A. 843 (1925). This was the reasoning employed by the lower court in Day's Estate, 22 Fiduc.Rep. 662 (Delaware Co. 1971), one of the few reported cases dealing with the question of revoking a disclaimer or renunciation. Revocation of a disclaimer and renunciation was allowed based in part upon the following finding of fact: 1. The disclaiming parties did not know the extent of their interest in the decedent's estate or the value of the decedent's estate at the time the instrument was executed. Id. at 663. It is reasonable to suggest that the Legislature intended that a disclaimant should know not only the nature, but also the value of the interest to be disclaimed. The language in the second statutory requirement which mandates that the disclaimant declare "the extent" of his disclaimer demonstrates that some reasonable approximation of value be stated in the disclaimer document. This requirement acts to ensure that the disclaimant knows what he is doing and that he knows what value of money or property he is giving up when he signs the disclaimer. 14 762 In addition, the disclaimer was made under the wrong section of the Probate, Estates and Fiduciaries Code ("the PEF Code" ). Two different section of the PEF Code deal with the subject of releases. Section 6103, which is referenced in the disclaimer here, is entitled "Release or disclaimer of power or interests." The relevant part of that section reads as follows: (a) Powers and interest releasable. -- Any power of appointment, or power of consumption, whether general or special, other than a power in trust which is imperative, and any interest in, to, or over real or personal property held or owned outright, or in trust, or in any other manner which is reserved or given to any person by deed, will or otherwise, may be released or disclaimed, either with or wi thout consideration by written instrument signed by the person possessing the power or the interest and delivered as hereinafter provided, This section shall not apply to an interest that may be disclaimed under Chapter 62 (relating to disclaimers.) (emphasis added) What is clear from the language of this section is that it applies to present interests, not to future interests. It is equally clear that Articles SEVENTH and EIGHTH of the will created, at least insofar as Robert M. Mumma, II was concerned, future interests, that is, interests to come into his possession or enjoyment at a future time (after his mother's death.) The other part of the PEF Code concerned with disclaimers is Chapter 62 of Title 20, added by Act 1976, P.L. 562, No. 136, sections 2 and 3. Chapter 62 contains detailed 15 763 sections stating who may disclaim, what a disclaimer must contain, what interests are subject to disclaimer, how a disclaimer is filed, delivered and recorded, the effect of a disclaimer and what may constitute a bar to a disclaimer. Section 6201 gives the right to disclaim to any "person to whom an interest in property would have devolved by whatever means, including a beneficiary under a will " Section 6203 on "Interests subject to disclaimer" specifies the following: A disclaimer in whole or in part may be made of any present or future interest, vested or contingent, including a possible future right to take as an appointee under an unexercised power of appointment or under a discretionary power to distribute income or principal. Since Robert M. Mumma, II has no present interest in the principal of either of the trusts created by the will, he had no interest which he was capable of disclaiming under Section 6103 and he should be permitted to revoke said disclaimer. This conclusion is supported by the fact that Section 6103 was amended in 1976 (at the time Chapter 62 was enacted) to add as its last sentence: "This section shall not apply to an interest that may be disclaimed under Chapter 62 (relating to disclaimers)." Because Robert M. Mumma, II has only a future interest in the trusts, and because Chapter 62 specifically applies to future interests, to make a valid and effective disclaimer of such interest, he would have to make the disclaimer pursuant to 16 764 the provisions of Chapter 62. That Robert M. Mumma, II did not do in the document dated January 6, 1987 and filed January 12, 1987. The disclaimer, which the Orphans' Court properly permitted to be revoked, was invalid and ineffective facially. Finally, for the purpose of preserving the record, Peti tioner would note that this Honorable Court's decision was undertaken on the pleadings alone, absent the taking of any testimony. In his petition, Mr. Mumma also alleged that he was fraudulently induced to disclaim his interest in the estate and that the disclaimer was executed under a mistaken assumption as to the true value of the estate based on information supplied and advice given by his attorney at the time, Mr. Klein. Although Mr. Mumma maintains that the guardian ad litem's exceptions to the decree nisi must be denied, should this Court or a subsequent appellate court decide otherwise, Mr. Mumma respectfully submits that the proper remedy would be the holding of a hearing to make a factual record as opposed to an outright dismissal of the petition to revoke the disclaimer. 17 765 Conclusion WHEREFORE, Petitioner, Robert M. Mumma, II, based on the foregoing, respectfully requests that Your Honorable Court overrule and dismiss the exceptions of the guardian ad litem filed to the Decree Nisi of March 21, 1991, and enter a final order permitting him to revoke the disclaimer he filed on January 12, 1987. RESPECTFULLY SUBMITTED: ~ ? Williar:& -(stOPOUlOS, Esquire KOLLAS, COSTOPOULOS, FOSTER & FIELDS 831 Market Street/P.O. Box 222 Lemoyne, PA 17043 Phone: (717) 761-2121 1.D. No. 22354 ATTORNEY FOR PETITIONER 18 766 , . CERTIFICATE OF SERVICE I, Nicholas Ressetar, Law Clerk, do hereby certify that a true and correct copy of this BRIEF was served upon the Guardian ad litem by placing same in the United States Mail, first-class postage prepaid, at Lemoyne, Pennsylvania, on May 17, 1991, addressed as follows: Robert M. Frey, Esquire 5 South Hanover Street Carlisle, PA 17013 BY: N1j,~~,~ ~ Law Clerk ------ 19 767 r:;b) V':- ,/ ____'1'/,...,' ffi ti o u. ~ o .... ~ en 3;....< g (Jl3~~ ::> o,<\j;~ 2.irl"'t:.~ O-t~2' u. % "Z tioll~~~ g S~~ en b <( ~ -' UJ -' -' o '>to \'" ._. ;;_., -..J :i<>