Opinion
C.A. No. 1895-S.
Date Submitted: June 11, 2003.
December 5, 2003.
David N. Rutt, Esquire.
Bruce A. Rogers, Esquire.
Dear Counsel:
Respondent Julia A. Utz ("Utz"), widow of Theodore Utz, Jr. (the "Decedent") brings exceptions to the Master's Final Report which concluded that certain bearer bonds rightfully belonged to Petitioners, Bradford B. Utz and Theodore N. Utz, III, as co-executors of the Decedent's estate. Utz contends that the Decedent gave the bonds to her shortly before his death. Petitioners, on the other hand, point to an antenuptial agreement between Utz and the Decedent and the Decedent's acquisition of the bonds before his marriage to Utz. In substance, Petitioners' claim is that Utz cannot demonstrate that the Decedent made a valid gift of the bonds to her. The Master rejected Utz's testimony and concluded that she had failed to prove that the bonds had been given to her. This Court, on its initial consideration of Utz's exceptions, concluded that an evidentiary hearing was necessary to resolve the substantial factual disputes surrounding Utz's acquisition of the bonds. That evidentiary hearing was held June 2, 2003, and Utz was the only witness. This letter opinion sets forth the Court's findings of fact and conclusions of law following the hearing.
The Master also concluded that the proceeds of an auction sale of certain personal property of the Decedent must be transferred by Utz to Petitioners. Utz did not take any exceptions to this determination, one that is amply supported by the record and now is adopted by this Court.
See Utz v. Utz, C.A. No. 1895-S, slip op. at 2-3 (Del.Ch. Oct. 18, 2002) (evidentiary hearing necessary because of a bona fide credibility dispute as to outcome determinative facts).
Utz married the Decedent in 1992. The Decedent was a widower at the time of the marriage; Petitioners are Decedent's children by the prior marriage. Before marrying, Utz and the Decedent entered into an antenuptial agreement (the "Agreement") by which each renounced any claim in the property of the other. Utz signed the Agreement after receiving the advice of counsel. Paragraph 2 of the Agreement states in part:
It is agreed by the parties hereto that nothing contained in this antenuptial agreement shall be construed as a bar to the act of either party in giving any property of which husband or wife may have ownership, title or possession to the other party by gift during lifetime or by will or otherwise . . .
Paragraph 4 provides in part:
The wife hereby waives, renounces, and releases any and all rights and claims of any kind, nature or description which she may acquire in the husband's separate property (whenever acquired, including income therefrom or appreciation thereon) upon his death as his surviving spouse, including, without limitation, any and all rights in intestacy, and all dower rights, and all rights to year's support, and any and all rights to serve as an administrator of the husband's estate, and all rights and claims to money or property covered by any family or similar exemption, and any and all homestead rights, and any and all rights of election to take against the estate of each and every last will and testament of husband or codicil thereto. . . .
The dispute is over title to three bearer bonds issued by a school district with a face value of $15,000. Decedent bought these bonds in 1992 before his marriage to Utz. Utz claimed that the Decedent gave the bonds to her shortly before his death from cancer in early December 1996.
The bonds have been liquidated. Thus, this is a dispute about the proceeds. In addition to principal, interest from several coupons were also collected.
Utz described the circumstances surrounding the gift of the bonds to her as follows. In November 1996, Decedent, although very ill with cancer, was able to remain at their home. Their home, near the water, was built on pilings. Thus, the main living floor was one story above ground level. The second floor which contained the master bedroom was thus the third story above ground. Because of his illness, Decedent had difficulty ascending to the second floor and was sleeping in a guest bedroom on the main floor.
Decedent kept the bonds in a safe on the second floor. Utz, although she knew the combination, was unable to open the safe. One day in November 1996, after returning from the hospital and ascending the first flight of steps to the main floor of their home, Decedent went to the second floor, opened the safe, and removed the bonds. The Decedent then gave the bonds to Utz, saying words to the effect of: "I want you to take these because you have been so good taking care of me." Utz put the bonds in a desk drawer in the master bedroom where they remained until Decedent's death.
Before turning to my assessment of Utz's credibility, it may be helpful to flesh out the principles that govern my analysis. Between spouses there is a strong rebuttable presumption in favor of gift when property is transferred. A typical example of this is that a gift is presumed when a spouse takes title to real property in the names of both spouses.
1 ALEXANDER LINDEY LOUIS I. PARLEY, LINDEY ON SEPARATION AGREEMENTS AND ANTENUPTIAL CONTRACTS § 11.05[A] (1999). See generally Hudak v. Procek, 727 A.2d 841, 843 (Del. 1999) (citing rebuttable presumption in favor of the intent to make gift to wife where husband places property in wife's name).
Husband R.T.G. v. Wife G.K.G., 410 A.2d 155, 160 (Del. 1979).
Antenuptial agreements have the effect of disturbing these gift presumptions and lead courts to consider other factors in determining whether property has been effectively transferred. For example, it has been held that where an antenuptial agreement provides a clear understanding as to the property rights of the individuals entering into the agreement, the usual presumptions are inapplicable and the language of the agreement itself will control the transaction.
See In re Marriage of Hailstone, 1992 WL 151555, at *17 (Del.Fam. Ct. 1992) (finding wife not entitled to the value of the pre-marital property by then jointly titled in both names after construing both the antenuptial agreement and the deed for the land).
Bowen v. Bowen, 547 S.E.2d 877, 881 (S.C.Ct.App. 2001), aff'd, 352 S.C. 494 (S.C. 2003).
In the absence of a presumption, the general rule is that a person claiming the existence of a gift has the burden of proving all facts essential to its validity by clear and convincing evidence. The elements of a valid gift are: (1) the donor possessed the requisite donative intent, (2) there was proper delivery of the property, and (3) the donee must accept the property.
In re Estate of Smith, 1986 WL 4873, at *5 (Del.Ch. Apr. 24, 1986).
See id.
A person's sole reliance upon interested non-corroborated testimony "to establish a gift by a person no longer in a position to rebut the testimony" is a factor to be weighed against that person in assessing the clear and convincing standard. For instance in In re Estate of Smith, where a party alleged the decedent had made a gift of certain money market certificates to her before her death, the Chancellor weighed against her the fact that all she could rely on was her testimony to try to prove the gift and found that she had not met her burden by clear and convincing evidence.
Id. at *6.
Id. "Clear and convincing evidence is a stricter standard of proof than proof by a preponderance of the evidence, which merely requires proof that something is more likely than not. To establish proof by clear and convincing evidence means to prove something that is highly probable, reasonably certain, and free from serious doubt." DEL. CIVIL PATTERN JURY INSTRUCTIONS § 4.3 (2000).
In the case at hand, Utz and the Decedent had a clear understanding of their property rights in the marriage. By the terms of the Agreement, she had "waiv[ed], renounc[ed], and releas[ed] any and all rights and claims of any kind, nature or description which she may acquire in the husband's separate property . . . upon his death." Property, however, could still be transferred to her by gift.
Utz and Decedent, as evidenced by the Agreement, chose to limit access to each other's separate property and manifested an intent to maintain their individual property separately. In short, they elected to have their property subject to standards different from the "typical" marital arrangement. Given that choice, to impose a judicially-crafted presumption in favor of marital gifts would defeat the purposes expressed in the Agreement. Thus, the marital gift presumption does not apply to any gift by the Decedent to Utz, and Utz bears the burden of proving that there was a gift by clear and convincing evidence, the standard used to measure gifts in a non-marital setting.
I find that Utz has failed to proved, with clear and convincing evidence, that the Decedent made a gift of the bearer bonds to her. I reach this conclusion for several reasons.
The Court applies a de novo standard of review to both the factual and legal conclusions of the Master. DiGiacobbe v. Sestak, 743 A.2d 180, 184 (Del. 1999). Although it was necessary to hold a fact-finding hearing to allow for potentially dispositive credibility determinations, the Court may still rely upon relevant portions of the transcript before the Master in reaching its factual conclusions, to the extent that the testimony before the Master is not in dispute.
First, Utz "relies solely upon her interested, non-corroborated testimony to establish a gift by a person no longer in a position to rebut that testimony." All evidence of donative intent, delivery and acceptance comes from her testimony. Moreover, the relationship between Utz and Petitioners was a hostile and distrusting one from well before the Decedent's death. In this atmosphere, Utz's testimony deserves even greater scrutiny.
Estate of Smith, 1986 WL 4873, at *5.
Second, the Decedent appears to have been sophisticated and the relatively careless act of taking bearer bonds, essentially the functional equivalent of cash, and not safekeeping them in the most secure location in the home — the safe — is inconsistent with his background. In addition, after entering into and carrying out the Agreement and having kept their finances separate, it is somewhat surprising that the gift was not documented in some form.
I do not give substantial weight to this consideration. The Decedent, at the time of the gift, was suffering from advanced cancer and the same attention to detail perhaps could not be reasonably expected.
Third, Utz's testimony from hearing to hearing was not consistent in some significant respects. For example, she testified before the Master that the Decedent could not go upstairs because of his illness. Before the Court, she testified that he went upstairs on a not irregular basis.
I note that Utz's explanation of the Decedent's capacity to climb the stairs to the safe was more credible before the Court than it was before the Master. The dwelling was on pilings, a fact not brought out in testimony before the Master. Thus, to reach the first (or main) floor, it was necessary for the Decedent to climb a flight of stairs from the ground. On a day when he had returned from treatment, he scaled one set of steps to the main floor; if he could climb one flight, it is not inconceivable that he could have climbed another flight to the safe. Thus, because the background testimony was better developed before me, I do not share the same degree of skepticism about Decedent's capacity to reach the safe as the Master set forth in his findings. Nonetheless, the inconsistency in her testimony remains.
Finally, the bonds were in Utz's desk when the Decedent died. She argues that this demonstrates that the Decedent must have given her the bonds because she could not open the safe. The house in which Utz and the Decedent had resided was owned by Utz and she knew the safe's combination. Because she knew the safe's combination, this argument, while certainly entitled to some weight, does not have the conclusive effect urged by Utz.
In conclusion, for the foregoing reasons, I am satisfied that Utz has not met her burden of proving the elements of a gift — and I have focused on delivery — with clear and convincing evidence. It bears remembering that the question precisely is not whether Utz's testimony would be credible under a preponderance of evidence standard, but whether her uncorroborated testimony was adequate to prove the elements of a gift under the governing standard.
Accordingly, in the absence of a valid gift, a resulting trust must be imposed upon the proceeds of the bearer bonds, including the proceeds of the coupons, for the benefit of Petitioners; the Master's Final Report is confirmed and Utz's exceptions to that report are overruled. Under the circumstances, interest should be paid to Petitioners at the same rate as received by Utz on the proceeds of the bonds. Costs are awarded in favor of Petitioners. I ask that counsel confer and submit a form of order to implement this decision.
Because the funds were held pending the outcome of this litigation, Utz did not enjoy the use of the funds which would have supported assessing interest at the legal rate.