IN RE KRAMEK ESTATE
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STATE OF MICHIGAN
COURT OF APPEALS
In re Estate of LORETTA PAT KRAMEK,
Deceased.
JUNE KATZEN,
FOR PUBLICATION
November 3, 2005
9:00 a.m.
Petitioner-Appellee,
v
No. 253895
Macomb County Probate Court
LC No. 03-176503-DE
DAVID KRAMEK,
Respondent-Appellant.
In re Estate of LORETTA PAT KRAMEK,
Deceased.
JUNE KATZEN,
Petitioner-Appellee,
v
No. 254375
Macomb County Probate Court
LC No. 03-176503-DE
DAVID KRAMEK,
Respondent-Appellant,
and
Official Reported Version
LORRAINE BROWN,
Respondent.
Before: Fitzgerald, P.J., and Cooper and Kelly, JJ.
PER CURIAM.
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In these consolidated appeals, respondent David Kramek (Kramek) appeals two orders
issued by the trial court in connection with the estate of his deceased mother, Loretta Pat
Kramek. In Docket No. 254375, he appeals the trial court's order approving an estate settlement
agreement between decedent's children: Kramek, June Katzen, and Lorraine Brown. In Docket
No. 253895, Kramek appeals the trial court's order removing him as personal representative of
the estate. We affirm the order approving the estate settlement agreement, reverse the order
removing Kramek as personal representative, and remand for proceedings consistent with this
opinion.
I. Facts
Decedent's will provided:
I direct that all real property that I own at the time of my death, in Otsego
County, be placed in trust for the use of my children, DAVID KRAMEK and
LORRAINE BROWN and their families and anyone they would wish to enjoy it.
At the time of the death of the survivor of DAVID KRAMEK AND LORRAINE
BROWN, the real property in Otsego County would then go to the surviving
child/children of DAVID KRAMEK and LORRAINE BROWN, fifty percent
(50%) to go to DAVID'S child/children and fifty percent (50%) to go to
LORRAINE's child/children.
The residue of the estate was divided equally between Kramek and Brown. The will further
provided that, if either Kramek or Brown predeceased decedent, that individual's share would go
to his or her children, to be held in trust and distributed to each child, 50 percent at age 30 and 50
percent at age 35. Decedent named Kramek as trustee of this trust. The will also nominated
Kramek as personal representative. Decedent bequeathed to Katzen $5.
Decedent died on April 7, 2003. On April 14, 2003, Kramek filed an application for
informal probate. On April 15, 2003, Kramek, Brown, and Katzen entered into an estate
settlement agreement.
On October 2, 2003, Katzen filed a petition for approval and construction of the estate
settlement agreement. Katzen also requested that a guardian ad litem (GAL) be appointed to
ensure the protection of decedent's grandchildren.
In response, Kramek asserted that the estate settlement agreement did not include the real
estate in Otsego County (the Otsego property). He also requested that the GAL be discharged
because the grandchildren were represented by another attorney, John Mabley, who also
represented Brown.
Brown asserted in response that the agreement "contemplates" that the trust for the
Otsego property not be created, but that the property instead be divided among Katzen, Kramek,
and Brown equally. Brown asserted that the agreement, "if given effect by this court," would
extinguish the rights of decedent's grandchildren. She asserted that the grandchildren were not
represented when the agreement was negotiated and executed. On this basis, Brown requested
that the court determine that the provisions of the agreement that affect the Otsego property be
held unenforceable. But she requested that the remainder of the agreement be approved.
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The trial court permitted the GAL to continue representing decedent's grandchildren.
After a hearing, the trial court entered an order approving the agreement with the Otsego
property included and holding the provision concerning it enforceable. The trial court also
entered an order removing Kramek as personal representative.
II. Analysis
Kramek first contends that the trial court either failed to apply or misapplied MCL
700.3914. We disagree. The proper application of a statute presents a question of law that we
consider de novo. Eggleston v Bio-Medical Applications of Detroit, Inc, 468 Mich 29, 32; 658
NW2d 139 (2003).
Preliminarily, we resolve whether MCL 700.3914 or MCL 700.7207 applies to this case.
MCL 700.3914 provides:
(1) Subject to the rights of creditors and taxing authorities, competent
successors may agree among themselves to alter the interests, shares, or amounts
to which they are entitled under the will of the decedent, or under the laws of
intestacy, in any way that they provide in a written agreement executed by all who
are affected by its provisions. If there is, or may be, an interested person to the
agreement who is a minor or incapacitated individual or if there is an inalienable
estate or future contingent interest, after notice to the representative of the
individual or interest as provided by supreme court rule, the court having
jurisdiction of the matter may, if the agreement is made in good faith and appears
just and reasonable for the individual or interest, direct the representative of the
individual or interest to sign and enter into the agreement. The personal
representative shall abide by the agreement's terms subject to the personal
representative's obligation to administer the estate for the benefit of creditors, to
pay all taxes and costs of administration, and to carry out the fiduciary office's
responsibilities for the benefit of a successor of the decedent who is not a party.
(2) A personal representative of a decedent's estate is not required to see
to the performance of a trust if the trustee of the trust is another person who is
willing to accept the trust. Accordingly, a trustee of a testamentary trust is a
successor for the purposes of this section. Nothing in this section relieves a
trustee of a duty owed to a trust beneficiary.
MCL 700.7207 provides:
(1) On petition of an interested person, the court may approve an
interpretation, construction, modification, or other settlement that is agreed upon
in writing by all presently identified and competent beneficiaries whose interests
in the trust may be affected to resolve a contest, controversy, or question of
construction or interpretation concerning the existence, administration, or
termination of an irrevocable trust.
(2) If the present or future interest of an unborn, unascertained, missing or
disappeared person; of a trustee or a trust beneficiary described in the trust
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document but not yet established; or of a minor or other person without legal
capacity is not represented or is not represented adequately under the provisions
of [MCL 700.1209] or [MCL 700.1403], the court may appoint 1 or more
guardians ad litem to represent the interest or interests.
(3) The court shall approve an agreement described in subsection (1) if it
appears to have been reached in good faith and its effects are just and reasonable
under all of the relevant facts and circumstances.
(4) The order in response to a petition under subsection (1) is binding on
each party who is represented in the proceeding and on others in accordance with
[MCL 700.1403(b)]. After issuance of the order, the agreement as approved by
the court shall be considered a part of the governing instrument of the trust.
Thus, although containing similar provisions, MCL 700.3914 applies when parties enter
into an agreement to alter the terms of a will, whereas MCL 700.7207 applies when parties enter
into an agreement to interpret, construe, modify, or otherwise alter the terms of a trust. In this
case, decedent executed a will in which she stated, "I direct that all real property that I own at the
time of my death, in Otsego County, be placed in trust for the use of my children, DAVID
KRAMEK and LORRAINE BROWN and their families and anyone they would wish to enjoy
it." However, a trust was not created before decedent's death or before the settlement agreement
was entered into. Therefore, the parties' agreement did not interpret, construe, modify, or
otherwise alter the terms of a trust. Rather, it altered the terms of decedent's will. Accordingly
MCL 700.3914 applies and MCL 700.7207 does not apply.
Applying MCL 700.3914, Kramek argues that the trial court was required to appoint a
GAL to represent decedent's grandchildren before the parties could execute their agreement so
that the GAL could negotiate or enter into the agreement on behalf of the grandchildren. We
disagree that MCL 700.3914 requires this. First, MCL 700.3914(1) provides that competent
successors may agree to alter interests to which they are entitled under the will. Further, it
provides that if there is an interested minor,
after notice to the representative of the individual or interest as provided by
supreme court rule, the court having jurisdiction of the matter may, if the
agreement is made in good faith and appears just and reasonable for the individual
or interest, direct the representative of the individual or interest to sign and enter
into the agreement. [Emphasis added.]
The statute does not require that the representative be appointed before the agreement is
executed. This is not to say that this course could not be followed. But the statute only requires
that a representative be appointed and be given notice of the agreement. Thereafter, the trial
court is charged with determining whether the agreement is "made in good faith and appears just
and reasonable . . . ." If it so determines, the trial court may order the representative to sign and
enter into the agreement.
The trial court complied with these requirements. Katzen filed a petition for approval
and construction of the estate settlement agreement and for appointment of a GAL for the
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interested minors. The trial court appointed a GAL for the interested minors. Kramek objected
to this appointment, contending that Mabley represented the children. Nonetheless, the GAL
remained appointed. At the hearing, both Mabley and the GAL appeared. The order granting
approval of the settlement agreement was signed by both Mabley and the GAL. Therefore, we
conclude that these proceedings were conducted in compliance with MCL 700.3914.
Kramek also contends that the trial court erred in finding that the interest conveyed in the
will was a life estate that could be "bartered . . . as Consideration for the Estate Settlement
Agreement." We agree that this was erroneous, but this error does not affect the propriety of the
trial court's ruling.
The question presented to the trial court was whether the agreement, which did not
specify the Otsego property, nonetheless included the Otsego property in the term "gross estate."
The trial court, in rationalizing why that term did include the Otsego property, stated that
Kramek and Brown were given in the will a "life estate, the right to use it as long as they're alive
. . . . They can barter that." Kramek points out on appeal that the trust contemplated by the will
would not have resulted in Brown and him having a "life estate" in the Otsego property. This is
correct pursuant to MCL 555.16. However, this error does not warrant reversal of the trail
court's ruling, which, on the basis of MCL 700.3914, was appropriate as discussed above.
Kramek also contends that the trial court erred in admitting extrinsic evidence at the
hearing. We disagree.
Generally, the decision whether to admit evidence is within the discretion of the trial
court and will not be disturbed on appeal absent an abuse of discretion. Campbell v Sullins, 257
Mich App 179, 196; 667 NW2d 887 (2003). Whether extrinsic evidence should be used in
contract interpretation is a question of law that this Court reviews de novo. See Glenwood
Shopping Ctr Ltd Partnership v K mart Corp, 136 Mich App 90, 99; 356 NW2d 281 (1984).
"The parol evidence rule may be summarized as follows: '[p]arol evidence of contract
negotiations, or of prior or contemporaneous agreements that contradict or vary the written
contract, is not admissible to vary the terms of a contract which is clear and unambiguous.'"
UAW-GM Human Resource Ctr v KSL Recreation Corp, 228 Mich App 486, 492; 579 NW2d
411 (1998), quoting Schmude Oil Co v Omar Operating Co, 184 Mich App 574, 580; 458 NW2d
659 (1990). However, "where a latent ambiguity exists in a contract, extrinsic evidence is
admissible to indicate the actual intent of the parties as an aid to the construction of the contract."
McCarty v Mercury Metalcraft Co, 372 Mich 567, 575; 127 NW2d 340 (1964).
The trial court did not err when it reviewed extrinsic evidence to help resolve a latent
ambiguity in the agreement. The agreement stated that Kramek was to marshal all of the
decedent's gross estate as that term is defined in the Internal Revenue Code (IRC), ยง 2033, and
divide it in three portions. The term "gross estate," as defined, would clearly encompass the
decedent's real property in Gaylord. The language does not, as Kramek argues on appeal,
suggest only the decedent's gross estate that was transferred to Kramek and Brown through the
will's residuary clause. Such a limitation does not comply with the IRC definition and would not
even include any of the nonprobate assets transferred to Katzen by decedent.
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As discussed above, however, Kramek could not pool the Otsego property with
decedent's other property without properly amending the will pursuant to MCL 700.3914. In
short, the apparently "clear" intent of the agreement was made unclear by the language of the
will itself and the requirements of MCL 700.3914. This resulted in a latent ambiguity in that the
language employed is clear and intelligible and suggests but a single meaning, but extrinsic
factors created a necessity for interpretation. McCarty, supra at 575. Therefore, the trial court
properly resorted to extrinsic evidence to determine whether the parties intended to include the
Otsego property in their agreement.
Kramek also contends that the trial court erred in finding that there was a conflict of
interest that warranted his removal as personal representative. We agree. Appointment of a
personal representative is within the trial court's discretion. See In re Powell Estate, 160 Mich
App 704, 715; 408 NW2d 525 (1987).
Kramek contends that the trial court erred in removing him as personal representative for
two reasons: (1) because Katzen was not a "party" and, therefore, could not request the removal
and (2) there was no basis for his removal. We disagree that Katzen was precluded from
petitioning for removal of a personal representative. However, we agree that the trial court did
not cite a proper basis for Kramek's removal as personal representative.
The Estates and Protected Individuals Code, MCL 700.1100 et seq., governs the
circumstances in which a personal representative may be removed. MCL 700.3611 provides, in
pertinent part:
(1) An interested person may petition for removal of a personal
representative for cause at any time. . . .
(2) The court may remove a personal representative under any of the
following circumstances:
(a) Removal is in the best interests of the estate.
(b) It is shown that the personal representative or the person who sought
the personal representative's appointment intentionally misrepresented material
facts in a proceeding leading to the appointment.
(c) The personal representative did any of the following:
(i) Disregarded a court order.
(ii) Became incapable of discharging the duties of office.
(iii) Mismanaged the estate.
(iv) Failed to perform a duty pertaining to the office.
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Accordingly, any "interested person" may petition for removal of a personal
representative. Here, Katzen was an "interested person" because she was a party to the
settlement agreement. Therefore, the trial court did not err in considering her petition.
However, the trial court nonetheless abused its discretion in removing Kramek as
personal representative. After the court ruled that Kramek be removed, Kramek's counsel asked
whether Kramek had done something in violation of his statutory obligations. The trial court
answered:
No. There's a conflict of interest here; that's why I think an outsider will
be able to handle this bickering. It costs the estate so much money to have
lawyers with all the bickering that's going on. I think we should have a personal
representative with no interest in it, has no conflict. That it will expedite and
won't cost the estate all this money. Over the years I've seen estates get eaten up
because families fight amongst themselves and lawyers get it all.
Although MCL 700.3611 broadly permits the trial court to remove a personal
representative if it is "in the best interests of the estate," after reviewing the record, we conclude
that the trial court did not cite any legitimate basis for removal that was in the best interests of
the estate. First, a disagreement on the meaning of the terms of a settlement agreement is a fairly
ordinary occurrence. Resolving such a dispute is a part of the normal function of the probate
court. Even when a will is contested, it is a normal occurrence for a "party" to the will to serve
as personal representative. Therefore, Kramek's role as personal representative was not tainted
by a conflict of interest merely because he disputed the terms of the settlement agreement.
Further, there is no basis for the trial court's conclusion that Kramek's role as personal
representative was complicating the dispute or costing the estate too much money. The
application for informal probate was filed on April 14, 2003. On October 2, 2003, Katzen filed
her petition for approval and construction of the estate settlement agreement. Kramek and
Brown each filed a response to this petition. A hearing was held on January 27, 2004. The trial
court's order approving the settlement agreement was entered on February 20, 2004. After
reviewing the record, we are left with the impression that there was nothing other than an
ordinary dispute that was handled expeditiously by the parties and the trial court. Kramek's
serving as a personal representative did not complicate this dispute or cause the estate to be
unduly burdened. Because there was no basis for concluding that Kramek's removal as a
personal representative was in the best interests of the estate, we reverse the trial court's order
removing him.
We affirm the order approving the estate settlement agreement, reverse the order
removing Kramek as personal representative, and remand for proceedings consistent with this
opinion.
/s/ E. Thomas Fitzgerald
/s/ Jessica R. Cooper
/s/ Kirsten Frank Kelly
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