In re: Hayes (COA 22-1058) 7/16/2024
Implicit Waiver of Elective Share
Chris Burti, Vice President and Senior Legal Counsel

Robert Hayes ("Decedent") and wife Susan Hayes ("Petitioner") separated. After separating, Decedent executed a Will devising Petitioner "the smallest portion of [Decedent's] estate, if any, required to be given . . . under applicable law." Petitioner and her husband, consented to a judicial Memorandum of Judgment "MOJ" as a court order in their pending equitable distribution case, and then the Decedent died a few days later before the formal judgment was submitted. Petitioner then claimed an elective share pursuant to N.C.G.S. Section 30-3.1 and the Executrix of his estate, "Respondent", appealed from an order granting summary judgment in favor of Petitioner entitling her to have the elective share calculated.

The opinion states that the MOJ "contained a complete division of their property and debts, including benefits to be paid after death of the husband, and a provision that 'all claims of the parties or either of them for the division of property, spousal support or costs, including counsel fees, are hereby waived and dismissed[,]'" The Respondent's argument on appeal was that the MOJ implicitly waived Petitioner's right to an elective share, and that the trial court erred by granting summary judgment for Petitioner.

The opinion notes that North Carolina General Statute Section 30-3.1(a) provides that:

The surviving spouse of a decedent who dies domiciled in this State has a right to claim an "elective share", which means an amount equal to

(i) the applicable share of the Total Net Assets, as defined in G.S. 30-3.2(4), less
(ii) the value of Net Property Passing to Surviving Spouse, as defined in G.S. 30-3.2(2c).

And North Carolina General Statute Section 30-3.6(a) provides that:

"The right of a surviving spouse to claim an elective share may be waived, wholly or partially, before or after marriage, with or without consideration, by a written waiver signed by the surviving spouse[.]"

As the MOJ is a contract between the parties, the opinion notes: "[t]he object of all interpretation is to arrive at the intent and purpose expressed in the writing, looking at the instrument from its four corners, and to effectuate this intent and purpose unless at variance with some rule of law or contrary to public policy." In re Estate of Sharpe, 258 N.C. App. 601, 607, 814 S.E.2d 595, 599 (2018) (citation and quotation marks omitted). Further,

[i]f the language of a contract is clear and unambiguous, construction of the contract is a matter of law for the court. It must be presumed the parties intended what the language used clearly expresses, and the contract must be construed to mean what on its face it purports to mean. Id. (citation and quotation marks omitted). Where a contract is clear and unambiguous, the court is not permitted to rely on extrinsic evidence to determine the parties' intent. Contrast Patterson v. Taylor, 140 N.C. App. 91, 96, 535 S.E.2d 374, 378 (2000) (concluding where the term "joint custody" in a separation agreement is ambiguous, "the trial court may consider extrinsic evidence to determine the intent of the parties at the time of the execution of the separation agreement" (citation omitted)).

Here, the MOJ was entered as an order of the trial court and stated that the parties had reached an agreement to settle certain matters as set forth specifically. The memorandum incorporated a spreadsheet setting out the agreed division of numerous items of property and debts, including mortgaged real estate, bank accounts, credit card debts, 401K, pensions, and personal property. The spreadsheet also indicated which items of property or debt were marital property distributed the respective parties, property being equally divided, and separate property of either party. The MOJ also listed numerous provisions specifying details about the assets and intentions of the parties.

Executrix argued on appeal that three North Carolina cases: Lane v. Scarborough, 284 N.C. 407 (1973); In re Sharpe, 258 N.C.App. 601(2018) and In re Cracker, 273 N.C. App. 534 (2020), all supported her contention that:

"[l]egal precedent makes clear that the right to claim an elective share can be waived implicitly by mediated settlement agreement, consent judgment, premarital agreement, or separation agreement" and to conclude "[b]y executing the MOJ, Petitioner in this case implicitly waived her right to claim an elective share."

The Court of Appeals discusses all three cases. In each case the parties had entered into one form of marital agreement or another, the husband had died while the couple remained married and the surviving spouse had petitioned for a marital share of the estate.

In Lane, the parties had entered into a separation agreement which included numerous provisions listed in the opinion, but most significantly, a provision that they:

"...agreed that each of the parties may from this date, and at all times hereafter purchase, acquire, own, hold, possess, dispose of, and convey any and all classes and kinds of property, both real and personal, as though free and unmarried, without the consent or joinder of the other party, and each party does hereby release the right to administer upon the estate of the other."

The North Carolina Supreme Court in Lane concluded that:

"In this case the intention of each party to release his or her share in the estate of the other is implicit in the express provisions of their separation agreement, their situation and purpose at the time the instrument was executed. The law will, therefore, imply the release and specifically enforce it. We hold that [the wife], the surviving spouse of [the husband], deceased, released her right to share in his estate by the execution of the separation agreement..."

In In re Sharpe, the parties entered into a pre-marital agreement and the opinion sets out numerous provisions of the agreement in detail including a provision that stated that:

"...each party agrees that the separate property shall include, but not be limited to, the property described hereafter, and that the separate property of the party shall remain the separate property of the other party."

The agreement also stated that:

"each would have the "sole and exclusive right at all times to manage and control their respective separate property to the same extent as if each were unmarried" and each "specifically waives, relinquishes, renounces, and gives up any claim that he or she may have or otherwise had or may have made to the other's separate property under the laws of this state."

The trial court concluded that the premarital agreement did not include a "clause waiving her right to claim an elective share of his estate," and therefore, the wife was entitled to the elective share. The Court of Appeals in that case reversed the trial court, concluding that the premarital agreement implicitly waived the wife's rights to the husband's estate because:

"...the unambiguous language of the uncontested and valid pre-marital agreement plainly establishes the parties['] intention, prior to their marriage, that Alma G. Seward waived any rights in Thomas S. Sharpe's separate property and that Thomas S. Sharpe waived any rights in Alma G. Seward's separate property. The pre-marital agreement also clearly and unambiguously states "each party has the sole and exclusive right at all times to manage and control their respective separate property to the same extent as if each were unmarried," and "each party specifically waives, relinquishes, renounces, and gives up any claim that he or she may have or otherwise had or may have made to the other's separate property under the laws of this state."

This opinion then discusses In re Cracker and declares that the case; "presents the type of agreement most similar to the MOJ in this case, as Lane addressed a separation agreement and Sharpe addressed a premarital agreement." In Cracker, the parties "executed a Mediated Settlement Agreement and Consent Judgment ("MSA") and although the MSA did not explicitly address rights of inheritance or elective share, that Court of Appeals panel held that the MSA implicitly waived the right to an elective share:

As in Lane and Sharpe, the specific terms of the MSA are totally inconsistent with an intention that the parties would each retain the right to share in the estate of the other if he or she were to become the surviving spouse. The MSA resolved all financial claims between the parties by exhaustively identifying the particular property that each spouse would hold as his or her "sole and separate property."... The MSA also completely dismissed [the p]etitioner's claims for post-separation support, alimony, and attorneys' fees. ... Although the MSA does not expressly refer to the parties' rights to claim upon each other's estate, "the plain and unambiguous language does not permit us to read the agreement to mean the parties intended to waive rights to each other's separate property while they were alive, but not after one of them had pre-deceased the other." (Citations Omitted - Ed.)

The opinion moves through an extensive discussion of the arguments of the Petitioner attempting to distinguish the language in the MOJ in this case from the MSA in Cracker in order avoid the implication. The Court of Appeals essentially concluded that they were distinctions without a difference concluding that upon "de novo review of the language of the MOJ, we hold Petitioner implicitly waived her right to claim an elective share in Decedent's estate by execution of the MOJ."

This case is only the most recent in a line of opinions where our appellate courts have given a broad reading to what may be considered less than precise language in marital waivers. This broad view is also reflected by our Legislature in changes to N.C.G.S. Section 29-30(a) which explicitly eliminate the requirement for spousal joinder to waive the elective life estate where the surviving spouse "has executed a written declaration permitting the deceased spouse to convey or encumber the real estate without the consent or joinder of the surviving spouse." This trend may provide a comfort level to title underwriters in transactions where separated spouses will not be joining and the marital waivers use only broad language. Never the less, preciseness in language will continue to remain a best practice for those drafting agreements with free trader language as it remains expensive to litigate these matters...especially at the appellate level.