Court Opinion

ID: 2727112
Source: CourtListenerOpinion
Date Created: 2014-09-08 21:11:46.419074+00
Date Added: 2024-06-11T10:03:13.163431
License: Public Domain

NO. COA13-1339

                        NORTH CAROLINA COURT OF APPEALS

                              Filed: 15 July 2014

IN THE MATTER OF THE                          Orange County
ESTATE OF PETER HEIMAN,                       No. 09 E 388

       Appeal by    Executrix from Order         entered 28 June 2013            by

Judge Robert H. Hobgood in Superior Court, Orange County.                     Heard

in the Court of Appeals 10 April 2014.

       Richard Bircher and Russell J. Hollers III, for petitioner-
       appellee.

       Levine & Stewart, by James E. Tanner III, for respondent-
       appellant.

       STROUD, Judge.

       Heidi Venier, executrix of Peter Heiman’s estate, appeals

from   an   order   entered    28    June    2013     by   the    superior    court

affirming an order of the Orange County Clerk of Superior Court

and    concluding   that    Audrey    Layden,        Mr.   Heiman’s    wife,    was

entitled to an elective share of $25,970.35 from the estate. We

reverse.

                              I.     Background

       Peter   Heiman    (“decedent”)       passed    away   on    7   July   2009.

Prior to his death, he had executed a will naming Heidi Venier,
                                             -2-
his   only   child,        the   sole    beneficiary         and     executrix         of   his

estate.      Mr. Heiman was survived by his wife, Ms. Layden, and

Ms.   Venier,        his   daughter     from   a     prior    marriage.         Ms.     Venier

applied for and received letters testamentary on 3 August 2009.

As the surviving spouse,                Ms. Layden       petitioned for a year’s

allowance       of    $10,000    and    an    elective       share    of    Mr.       Heiman’s

assets.

      On   20    October     2009,      Ms.    Venier,    as       executrix,         filed   a

complaint for declaratory judgment against Fidelity Investments.

She sought to have the estate designated as beneficiary for two

accounts,    an      individual     retirement        account       (IRA)       and    another

investment account. Mr. Heiman had designated as beneficiary for

these   accounts       a    trust   which      was    mentioned       in    a    previously

revoked will but never created.1 On or about 1 December 2009, Ms.

Venier filed an inventory for decedent’s estate. The inventory

listed $377,795.45 in total assets. That amount included the

IRA, which was valued at $38,908.99.

1
  According to the brief filed by the Estate in the appeal to the
superior court, due to the “the lapse of the Heiman Trust as the
designated beneficiary,” the “default beneficiary designation”
for the IRA was the surviving spouse, Ms. Layden. We are unable
to discern from the record how or why the “default beneficiary”
of the IRA was not included as a party to the declaratory
judgment action regarding disposition of the IRA, but she was
not.
                                       -3-
      Before Ms. Layden’s petition for elective share was heard

by the Clerk of Superior Court, the parties voluntarily attended

mediation in an effort to resolve the matter and entered into a

settlement agreement, executed by Ms. Layden on 18 May 2010 and

by   Ms.   Venier,   as   executrix,    on   19    May    2010.    The   agreement

stated that in consideration for the payment of $65,000 from the

assets owned by decedent, “the parties accept full compromise,

settlement    and    satisfaction      of,   and    the    final    release    and

discharge of all actions, claims and demands whatsoever that

each party may have against the other . . . .”                           Under the

agreement, both parties released any claims against the other

and the estate agreed that Fidelity Investments would distribute

the IRA, then worth approximately $40,000.00, directly to Ms.

Layden, and that she would receive approximately $25,000.00 from

another Fidelity account.

      After the agreement was signed, Ms. Venier dismissed her

declaratory judgment action against Fidelity.                     But Ms. Layden

refused to dismiss her petition for an elective share.                         She

argued that “the alleged ‘settlement’ was procured by a material

misrepresentation in the estate file.”               On 9 August 2012, the

Orange County Clerk of Superior Court noticed his intent to rule
                                               -4-
on the elective share petition and heard the case on 4 December

2012.

      The     Clerk     found        that      the    existence         of    the    Fidelity

declaratory judgment lawsuit was not disclosed to Ms. Layden. He

therefore          concluded       that        the      settlement           agreement       was

unenforceable as a waiver of Ms. Layden’s elective share rights.

The   Clerk    found       that    the    total      net    assets      of    decedent    were

valued   at        $363,851.50.           It    concluded        that    Ms.     Layden      was

entitled to a one-quarter share, $90,962.88. It further found

that Ms. Layden had already been paid $64,947.62 (the amount she

had   already        received      under       the    settlement        agreement).           It

therefore awarded $25,970.35 to Ms. Layden.

      Ms. Venier appealed to the superior court on 27 December

2012. By order entered 28 June 2013, the superior court fully

adopted the findings of fact made by the Clerk of Superior Court

and   affirmed       the    order.       Ms.   Venier       filed      written      notice    of

appeal to this Court on 24 July 2013.

                               II.    Standard of Review

      Ms.     Venier        appeals       from       the    superior         court’s      order

affirming      the    Clerk‘s        order     regarding         Ms.    Layden’s     elective

share petition. The superior court fully adopted the clerk’s

findings      of    fact.    Ms.     Venier      does      not   contest      any    of   these
                                         -5-
findings    on     appeal.      She    only    challenges    the    trial      court’s

conclusion that Ms. Layden was not provided fair and reasonable

disclosure of the property and obligations of decedent and that

the settlement agreement was therefore unenforceable.

    Thus, the only issue on appeal is one of law, which we

review de novo. Carolina Power & Light Co. v. City of Asheville,

358 N.C. 512, 517, 597 S.E.2d 717, 721 (2004). “Under a de novo

review,     the    court        considers     the   matter     anew      and   freely

substitutes its own judgment for that of the trial court.” In re

Estate of Pope, 192 N.C. App. 321, 331, 666 S.E.2d 140, 148

(2008) (citation, quotation marks, and brackets omitted), disc.

rev. denied, 363 N.C. 126, 673 S.E.2d 129 (2009).

                       III. Full and Fair Disclosure

    The issue for us to consider is a narrow one, but one of

first impression in North Carolina:                 what does it mean for a

surviving     spouse       to     be   “provided    a   fair       and    reasonable

disclosure    of    the    property     and    financial     obligations       of   the

decedent” for purposes of waiver under N.C. Gen. Stat. § 30-3.6

(b)(2) (2009)?

    Ms. Layden urges us to consider the required disclosure in

light of the fiduciary duty she contends that Ms. Venier owed

her as executrix of the decedent’s estate. Ms. Venier denies
                                          -6-
that she owed Ms. Layden any such duty because Ms. Venier is a

surviving spouse who has filed a claim for an elective share,

not a beneficiary under the will. We need not decide this issue

because      even    assuming      that   Ms.    Venier       owed    Ms.     Layden    a

fiduciary duty, the existence of the Fidelity lawsuit was not a

material fact and failure to disclose it was not a breach of any

duty owed—fiduciary or statutory.

A.     Elective Share Statutes

       The   elective    share     statutes     are     quite    detailed      and     the

calculation of an elective share is highly fact-dependent. In

deciding what information Ms. Layden was required to disclose,

it is necessary to understand the context. Therefore, before

addressing the issue of waiver, we will lay out the calculation

of elective share as applicable to this case.

       Under   N.C.     Gen.    Stat.     §   30-3.1,    et     seq.,     a   wife     who

survives her husband2 may choose to take an “elective share” of

the decedent’s assets rather than taking under the decedent’s

will.      The “applicable share” of the decedent’s assets to which

a surviving spouse is entitled depends on whether the decedent

had    a   prior    spouse   and    whether     the   decedent       is   survived     by

children or other lineal             descendants.       N.C. Gen. Stat. § 30-

2
    Or vice-versa.
                                        -7-
3.1(a)    (2009).   A    second   or    successive   spouse   of   a   decedent

survived by one or more lineal descendants is entitled to a

reduced share. N.C. Gen. Stat. § 30-3.1(b). Where the decedent

is survived by a second spouse and one child, the applicable

share is one-quarter of the decedent’s total net assets. See id.

    The term “total net assets” is defined by N.C. Gen. Stat. §

30-3.2(4) (2009) as the decedent’s total assets reduced by any

year’s allowances “to persons other than the surviving spouse

and claims.” “Total assets” is in turn defined as the sum of the

values listed in N.C. Gen. Stat. § 30-3.2(3f), which includes

inter alia “[b]enefits payable by reason of the decedent’s death

under any policy, plan contract, or other arrangement.” N.C.

Gen. Stat. § 30-3.2(3f)(d). Such benefits include “[i]ndividual

retirement accounts.” N.C. Gen. Stat. § 30-3.2(3f)(d)(5).

    The surviving spouse is entitled to her share of the total

net assets reduced by the value of the net property passing to

the surviving spouse. N.C.             Gen. Stat. § 30-3.1(a).         The “net

property passing to the surviving spouse” includes any property

that passes by “beneficiary designation” (except federal social

security) reduced by the amount of any death taxes or claims

payable    out      of   such     assets.     N.C.    Gen.    Stat.     §   30-

3.2(2c),(3c)(a).
                                   -8-
      Taking these statutes as a whole, if the decedent owns an

individual retirement account at the time of his death, it is

included in    the   decedent’s total net     assets for purposes of

calculation of the elective share. If someone other than the

surviving spouse is the IRA beneficiary, then the elective share

to which the surviving spouse is entitled will be her share of

the total net assets—including the IRA—without any reduction in

value. If, however, an individual retirement account owned by

the decedent passes by beneficiary designation to the surviving

spouse, her elective share will be reduced by the value of the

IRA. In either case, the total value of the decedent’s assets to

which a surviving spouse is entitled is simply the applicable

share of the total net assets of the decedent.

      A surviving spouse entitled to an elective share may waive

her right in writing. N.C. Gen. Stat. § 30-3.6(a). However, “[a]

waiver is not enforceable if the surviving spouse proves that:

(1)   The   waiver   was   not   executed   voluntarily;   or   (2)   The

surviving spouse or the surviving spouse’s representative making

the waiver was not provided a fair and reasonable disclosure of

the property and financial obligations of the decedent . . . .”

N.C. Gen. Stat. § 30-3.6(b).

B.    “Fair and Reasonable Disclosure”
                                                 -9-
       Here, Ms. Layden does not truly argue that the settlement

agreement was not a waiver of her elective share rights nor that

the    waiver    was       involuntary.            Indeed,       it    is    clear       that   the

agreement       was    intended        by    all       parties    to    fully       settle       Ms.

Layden’s elective share claim. The agreement between Ms. Venier,

as executrix of the Heiman Estate, and Ms. Layden stated that it

was    intended       to    be   the   “final          release    and       discharge      of   all

actions, claims and demands whatsoever that each party may have

against    the    other.”          Such      “claims       and    demands”         include       Ms.

Layden’s claim for elective share.

       Nevertheless,         Ms.   Layden         contends       that   the        agreement      is

unenforceable because Ms. Venier failed to provide “fair and

reasonable       disclosure”       of       decedent’s       assets         under       N.C.    Gen.

Stat. § 30-3.6(b). Ms. Layden further asserts that she relied,

to her detriment, on the “misrepresentations” of Ms. Venier and

that    therefore          the   waiver      was       unenforceable          as    a    contract

induced by fraud. Specifically, she contends that Ms. Venier

concealed       the        existence        of     the    estate’s          lawsuit       against

Fidelity. Regardless of whether the issue is considered as a

matter of common law fraud or statutory application, if the fact

Ms. Venier failed to disclose was immaterial, then the agreement

would remain enforceable. See Harton v. Harton, 81 N.C. App.
                                                    -10-
295, 297, 344 S.E.2d 117, 119 (“A cause of action for fraud [may

be]   based    on       .    .     .    a    failure       to   disclose      a    material       fact

relating      to    a       transaction            which    the    parties        had   a   duty   to

disclose.”         (citations           omitted)       (emphasis        added)),        disc.     rev.

denied, 317 N.C. 703, 347 S.E.2d 41 (1986).

      “A fact is material[] if[,] had it been known to the party,

would   have        influenced              that    party’s       decision        in    making     the

contract at all.” Carcano v. JBSS, LLC, 200 N.C. App. 162, 176-

77,   684     S.E.2d         41,       53    (2009).       As     in   any    other       settlement

negotiation, the material facts are those that allow the party

to calculate her best alternative to a negotiated agreement and

to understand the effect of the agreement.

      Ms. Layden had two alternatives:                            to proceed with her claim

for elective share and receive the amount as ordered by the

Clerk of Court, or to enter into a settlement agreement with the

estate. If the surviving spouse knows what property decedent

owned   and        what       financial            obligations         were       owed,     she    can

accurately calculate the share to which she would be entitled

absent a settlement.                   If the amount of the “total net assets” of

the estate is known, it is a simple matter to calculate 25% of

this amount, and this amount is what the surviving spouse would

receive as her elective share by order of the Clerk; the total
                                         -11-
amount paid to the surviving spouse by the estate would also be

reduced    by     any    sums    which     passed   to   her     by   “beneficiary

designation,” excluding the amount of any death taxes or claims

payable    out      of    such     assets.      N.C.     Gen.     Stat.     §     30-

3.2(2c),(3c)(a).3 But whether the funds are paid to the surviving

spouse entirely by the estate or partially by the estate and

partially as a direct distribution to the surviving spouse as

beneficiary of an account, the amount received by the surviving

spouse would be the same.

     Here, the existence of the lawsuit against Fidelity was not

a material fact because it had no relevance to the calculation

of the share of the decedent’s total net assets to which Ms.

Layden    would    be    entitled.       Decedent   owned   an    IRA    valued    at

$38,908.99. This asset           was included in the total net assets

owned by decedent, valued at $379,796.54, and disclosed on the

Inventory for Decedent’s Estate of 1 December 2009.                     The IRA was

listed in the section of the Inventory for “Stocks and Bonds In

the Sole Name of Decedent or Jointly Owned Without Right of

Survivorship” and was identified as a “Fidelity Traditional IRA”

with the correct account number listed and the value stated as

3
  Ms. Layden does not contend, and the record does not reflect,
any “death taxes or claims payable out of” the IRA assets, so
for our purposes the only relevant number is the total value of
the IRA which passed to Ms. Layden.
                                         -12-
$38,908.99.      The only difference in the Inventory, had the IRA

been listed correctly, would be that it would have been listed

under     Part    II    of       the    form,    instead      of     Part    I,     as

“Stocks/Bonds/Securities               Jointly    Owned       With        Right     Of

Survivorship or registered in beneficiary form and automatically

transferable on death.”            The value, which was the only relevant

information for purposes of calculating Ms. Layden’s elective

share, would be the same.

       Ms.    Layden,   as   a   second    spouse   to    a   decedent      with   one

living child, was entitled to one quarter of decedent’s total

net assets. This sum could easily be calculated at mediation

based upon the values of the decedent’s property which had all

been    disclosed,       although         some   expenses,         such     as     the

administrative costs, could only be estimated.                     Ultimately, the

trial court found that there were $15,945.04 in administrative

costs and reduced the total net assets by that amount, resulting

in total net assets of $363,851.50. Ms. Layden was entitled to a

one-quarter share, $90,962.88. Ms. Layden could have calculated

this amount based on the information provided to her by Ms.
          4
Venier.

4
  In addition, Ms. Layden was fully aware, based upon documents
filed in this matter, that Ms. Venier was seeking to have any
rights that she may have related to her marriage to decedent
                                                 -13-
       Even if the IRA had been distributed to Ms. Layden prior to

the mediation, based upon her status as the default beneficiary,

the total net assets would have still been the same and Ms.

Layden would still be entitled to $90,962.88 from those assets.

But she would not be entitled to receive $90,962.88 in addition

to    the       full    value    of   the       IRA.     Her    elective     share    would   be

reduced         by     the   value    of    the    IRA,        $38,908.99,    as     the    Clerk

correctly determined. So, no matter which party is designated

the beneficiary of the IRA, the total value of the assets to

which Ms. Layden               would have been            entitled remains the same.

Given the information provided, Ms. Layden fully knew the amount

to which she would be entitled if she declined to settle the

dispute. She settled it nonetheless.

       Indeed, it may seem odd that Ms. Layden and Ms. Venier had

such        a     heated        dispute         regarding        the    seemingly          simple

mathematical            calculation        of     this    elective      share      claim     that

nearly a year passed before it was resolved at mediation, an

additional two years before being heard by the Clerk, and that

this appeal would be before this Court nearly five years after

the    decedent’s            death.        The    reasons       are    not   apparent       above

because         of     the   single   legal       issue        presented     on   appeal,     but

eliminated on a theory of equitable estoppel.
                                       -14-
before    the    Clerk   and   trial    court,      the   reasons    were      clear.

Essentially, tragic circumstances surrounded decedent’s death,

and relations between Ms. Layden, as his second wife, and Ms.

Venier,    his    daughter,     were     acrimonious.       Because       of   these

circumstances,     Ms.   Venier      sought   to    prevent   Ms.    Layden     from

claiming an elective share.           Decedent and Ms. Layden had been in

the process of negotiating a separation agreement when he died.

       Before the trial court, Ms. Venier summarized her argument

as follows:

            As a matter of fundamental fairness, Mr.
            Heiman and Ms. Layden had a deal; the terms
            were certain, both of them were acting in
            accordance with these terms, and for all
            intents and purposes the deal was complete
            but for their signatures and the subsequent
            payment of a modest sum of money. Beyond its
            sheer gall and hypocrisy, it is not merely
            wrong, it’s a travesty that Ms. Layden
            should lay claim to a quarter of Mr.
            Heiman’s estate on the basis of a short,
            late in life, unhappy marriage that ended in
            separation and suicide, when she had already
            agreed to waive any claim to the estate. The
            Court must not allow such an injustice to
            occur.

       Although Ms. Venier’s attempts to avoid the elective share

were   unsuccessful      and   she     does   not    challenge      Ms.    Layden’s

entitlement to an elective share on appeal, there were other

disputed issues existing at the time of the mediation.                     In fact,
                                          -15-
the   value    of    the   decedent’s      estate      may    have    been   the      only

undisputed issue in the settlement negotiations.                       Viewed in this

light, Ms. Layden’s agreement to settle the elective share claim

for a bit less than the full amount of the statutory share—where

the value of the total net estate was known—is quite reasonable.

      The Fidelity lawsuit, as discussed above, solely concerned

the proper beneficiary of the account. It did not affect the

ownership     of    the    account   or    its     value—it     was     owned    by    the

decedent at his death and that fact is undisputed. It had no

bearing on the calculation of the share to which Ms. Layden was

entitled, so we see no reason that disclosure of that fact would

have affected in any way Ms. Layden’s decision to settle.                             Ms.

Layden has not claimed that any other material fact had been

concealed.      Moreover, Ms. Venier, as executrix, fully performed

her   part    of    the    negotiated     agreement,         allowing      two   of   the

Fidelity      accounts     to   pass      to     Ms.   Layden.       Ms.   Layden,      by

contrast, failed to perform her contractual duties by refusing

to dismiss her elective share petition.

      Given    the    immateriality       of     the   Fidelity      lawsuit     to    the

calculation of an elective share, we conclude that Ms. Venier

fully   and    fairly      disclosed      all    material     information        to   Ms.

Layden. Ms. Layden was fully aware of all of the decedent’s
                                         -16-
assets and liabilities when she decided to waive her right to an

elective share and to enter into the settlement agreement. The

settlement agreement constituted a knowing and voluntary waiver

of Ms. Layden’s elective share rights. We therefore hold that

the   superior    court   erred     in    concluding    that   the   settlement

agreement was not an enforceable waiver of Ms. Venier’s right to

an elective share. We reverse the trial court’s order affirming

that of the Clerk of Superior Court.

                              IV.        Conclusion

      For the foregoing reasons, we conclude that the existence

of the Fidelity lawsuit was not a material fact. Therefore, Ms.

Venier’s failure to disclose its existence does not make the

settlement agreement unenforceable. We hold that the superior

court   erred     in   concluding    that       the   agreement   was   not   an

enforceable waiver of Ms. Layden’s elective share rights. We

therefore reverse its order affirming the order entered by the

Clerk of Superior Court.

      REVERSED.

      Judges HUNTER, JR., Robert N. and DILLON concur.