In Re the Estate of Mary A. Riley , 231 Ariz. 330 ( 2013 )

SUPREME COURT OF ARIZONA
En Banc
In re the ESTATE OF MARY A. ) Arizona Supreme Court
RILEY, aka MARY AGNES RILEY, aka ) No. CV-12-0007-PR
MARY AGNES REILLY. )
) Court of Appeals
) Division Two
) No. 2 CA-CV 10-0149
)
) Pima County
) Superior Court
) No. P26266
)
_________________________________ ) O P I N I O N
Appeal from the Superior Court in Pima County
The Honorable Charles V. Harrington, Judge
REMANDED
________________________________________________________________
Opinion of the Court of Appeals, Division Two
228 Ariz. 382, 266 P.3d 1078 (App. 2011)
VACATED
________________________________________________________________
JONATHAN W. REICH, P.C. Tucson
By Jonathan W. Reich
Attorneys for R. J. Riley, Regina M. Riley,
F. Martin Riley, Neysa Kalil, Nora J. Simons,
Cecelia Riley, Jude S. Riley, Loretta LaCorte,
and Julia Riley
MESCH, CLARK & ROTHSCHILD, P.C. Tucson
By J. Emery Barker
Scott H. Gan
Attorneys for John D. Barkley
LAW OFFICE OF DWIGHT M. WHITLEY, JR., P.L.L.C. Benson/
By Dwight M. Whitley, Jr. Tucson
Attorneys for Mary Benge
LAW OFFICE OF TERRENCE A. JACKSON Tucson
By Terrence A. Jackson
Attorneys for Joseph H. Riley, Jr.
________________________________________________________________
B E R C H, Chief Justice
¶1 We granted review to decide whether A.R.S. § 14-3952(1)
requires beneficiaries of an estate to unanimously approve a
settlement agreement. We hold that the statute requires all
beneficiaries to execute the agreement if it affects beneficial
interests in the estate and the settling parties seek court
approval pursuant to A.R.S. § 14-3951.
I. FACTS AND PROCEDURAL HISTORY
¶2 Mary A. Riley (“Decedent”) died in 1996, leaving her
estate to her thirteen children and appointing her two oldest,
Joseph Riley and Mary Benge, as co-personal representatives.
The family settled the estate’s distribution scheme in 1997
through a Family Compromise Agreement that divided the estate
among the thirteen children. Nine years later, in March 2006,
Joseph and Mary filed a petition to distribute and close the
estate. The petition included an accounting of the amounts they
had spent administering the estate.
¶3 One of Decedent’s other children, R. J. Riley, objected
to the accounting. He asserted that Joseph and Mary had
breached their fiduciary duties, and he sought the appointment
of a successor personal representative (“PR”). Joseph and Mary
resigned, and the probate court appointed John Barkley as the
new PR. The court ordered Joseph and Mary to file another
accounting. After reviewing it, Barkley objected, citing the
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“lack of supporting documentation and inaccuracies apparent on
the face of the document.” The court scheduled a hearing on the
PR’s objection.
¶4 While awaiting the hearing, Barkley settled the
estate’s claims against Joseph and Mary.1 The settlement
agreement required Joseph to pay $15,000 and disclaim his
interest in the estate; Mary was to pay $50,000, but retain her
interest in the estate. In exchange, the estate agreed to
release all claims against Joseph and Mary relating to their
activities as co-PRs. The agreement also required the “parties
signatory [t]hereto” to present the agreement to the probate
judge for approval under A.R.S. §§ 14-3951 and -3952. Although
only Barkley, Joseph, and Mary had signed the agreement, it
provided that “[t]his Agreement shall bind and inure to the
benefit of the heirs, assignees and distribute[e]s of the
Parties.” Their goal was to prevent further litigation stemming
from Joseph and Mary’s administration of the estate.
¶5 Nine of Decedent’s thirteen children (the “Objectors”),
none of whom had executed the agreement, objected to the
settlement. Nonetheless, after an evidentiary hearing, the
probate court approved the agreement, finding that it settled a
good faith dispute and its terms were reasonable.
1
The agreement also resolved the estate’s claims against
Kathryn Riley. That settlement is not at issue here.
3
¶6 The Objectors appealed. The court of appeals sua
sponte ordered the parties to brief whether the agreement was
“void for failing to be executed by all the necessary parties
under § 14-3952(1).” In re Estate of Riley, 228 Ariz. 382, 384
¶ 5, 266 P.3d 1078, 1080 (App. 2011).
¶7 Following oral argument, the court concluded that the
statute required all estate beneficiaries to sign the settlement
agreement. Id. at 386 ¶ 10, 266 P.3d at 1082. The court voided
the agreement because not all beneficiaries had signed it. Id.
at 384-86 ¶¶ 6-10, 266 P.3d at 1080-82.
¶8 We granted Barkley’s petition for review because this
case presents an important issue of first impression. We have
jurisdiction under Article 6, Section 5(3) of the Arizona
Constitution and A.R.S. § 12-120.24.
II. DISCUSSION
¶9 We review statutory interpretation issues de novo.
Duncan v. Scottsdale Med. Imaging, Ltd., 205 Ariz. 306, 308 ¶ 2,
70 P.3d 435, 437 (2003). Because the probate statutes have not
materially changed during the pendency of this action, we cite
the current version of each.
¶10 A.R.S. § 14-3952 sets forth a procedure for securing
court approval of a compromise of disputed interests in the
estate. It imposes the following requirements:
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1. The terms of the compromise shall be set forth in
an agreement in writing which shall be executed by all
competent persons . . . having beneficial interests or
having claims which will or may be affected by the
compromise.
. . . .
3. After notice to all interested persons . . ., if
[the court] finds that the contest or controversy is
in good faith and that the effect of the agreement
upon the interests of persons . . . is just and
reasonable, [the court] shall make an order approving
the agreement . . . . Upon the making of the order
and the execution of the agreement, all further
disposition of the estate is in accordance with the
terms of the agreement.
A.R.S. § 14-3952. If these statutory procedures are satisfied
and the court formally approves the agreement, A.R.S. § 14-3951
provides that the compromise “is binding on all the parties
thereto including those unborn, unascertained or who could not
be located.” Sections 14-3951 and -3952 thus act together to
permit parties to resolve estate controversies with finality.
¶11 Sections 14-3951 and -3952 mirror §§ 3-1101 and -1102
of the 1969 Uniform Probate Code, see 1973 Ariz. Sess. Laws, ch.
75, § 4 (1st Reg. Sess.), which, in turn, were based on §§ 93
and 94 of the 1946 Model Probate Code. See Unif. Probate Code
§ 3-1102 cmt. (1969). Sections 14-3951 and -3952 allow parties
to enter into settlement agreements that, upon court approval,
bind all interested parties, even if interested parties are not
competent or available to enter into the agreement. See A.R.S.
§ 14-3951; Unif. Probate Code § 3-1102 cmt. (stating that
“[t]his section and the one preceding it outline a procedure”
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for “resolving controversy concerning the estate”); see also In
re Estate of Ward, 200 Ariz. 113, 116 ¶ 12, 23 P.3d 108, 111
(App. 2001) (providing that “[§] 14-3952 authorizes the probate
court to approve a compromise under [§] 14-3951 only if” the
procedures in § 14-3952 are met); accord Matter of Estate of
Hedstrom, 472 N.W.2d 454, 456 (N.D. 1991) (to same effect).
¶12 The parties disagree whether § 14-3952(1) requires all
beneficiaries to execute the agreement at issue. Barkley
contends that §§ 14-3951 and -3952 distinguish disputes over the
administration of the estate from “disputes over the structure
and distribution of the estate.” He concedes that the statutes
“clearly require[] all the beneficiaries to agree to modify the
structure or distribution scheme.” He argues, however, that the
statutes do not require all beneficiaries to execute a
compromise if it merely resolves a dispute over the
administration of the estate. For such an agreement, Barkley
asserts, the statutes require only those directly involved in
the controversy to execute the agreement. He maintains that the
agreement here settled merely an administrative dispute — the
estate’s claims against its former co-PRs — and thus required
signatures only from him, Joseph, and Mary.
¶13 Barkley mischaracterizes the agreement, however. In
it, Joseph disclaimed his interest in the estate, which altered
the distribution scheme by dividing the estate among twelve
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beneficiaries instead of the thirteen who took under the 1997
Family Compromise Agreement. The agreement thus affected the
“beneficial interests” of the remaining twelve beneficiaries,
and § 14-3952(1) therefore required all of the beneficiaries to
execute the agreement before the court could properly approve it
under the statute.2 See In re Estate of Sullivan, 724 N.W.2d
532, 535 (Minn. Ct. App. 2006) (holding that an agreement that
altered the distribution scheme required the signatures of all
those with a beneficial interest); cf. Matter of Estate of
Outen, 336 S.E.2d 436, 436-37 (N.C. Ct. App. 1985) (noting that
an agreement adding a beneficiary affected the distribution
scheme). Thus, because only Barkley, Joseph, and Mary signed
the agreement, the probate court’s approval under § 14-3952 was
invalid to make the agreement binding on those who did not sign
it.
¶14 Barkley contends that the settlement did not affect
the distribution scheme because “[n]one of the other twelve
beneficiaries . . . had their one-thirteenth distributive share
2
Because the agreement here affected all of the devisees’
beneficial interests, we need not decide whether § 14-3952(1)
always requires the beneficiaries to unanimously agree or
whether it requires only the affected beneficiaries to
unanimously agree. Compare S.C. Code Ann. § 62-3-1102 cmt.
(interpreting nearly identical statute to mean that only those
whose beneficial interests will be affected must execute the
agreement), with In re Estate of Sullivan, 724 N.W.2d 532, 535
(Minn. Ct. App. 2006) (reading nearly identical statute to
require execution by every person with a beneficial interest).
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diminished in any way.” But § 14-3952(1) does not distinguish
based on whether a beneficial interest is positively or
adversely affected. To adopt such a position would require us
to add words to the statute that are not there.3
¶15 Barkley argues that requiring all beneficiaries to
sign compromises like the one at issue here would impede
resolution of disputes, add expense, and delay estate
administration. We agree. But nothing in this opinion or the
statutory probate scheme requires Barkley to use §§ 14-3951 and
-3952 to compromise disputes. The probate statutes allow a
beneficiary to disclaim his interest without court approval, see
A.R.S. § 14-10005, and permit the PR to settle a variety of
claims without court approval, see, e.g., A.R.S. § 14-3715(17),
(27); A.R.S. § 14-3813. If in doubt about how to proceed, the
PR also “may invoke the jurisdiction of the court . . . to
resolve questions concerning the estate or its administration.”
A.R.S. § 14-3704; see also, e.g., §§ 14-3105, -3401, -3414
(authorizing proceedings to resolve a variety of issues).
¶16 Here, however, Barkley sought court approval to bind
all beneficiaries and insulate the settlement from further
challenge – and himself from potential future liability as PR –
3
The Objectors argue that the losses caused by Joseph and
Mary exceeded the settlement amount, and, therefore, despite
Joseph’s relinquishment of his interest in the estate under the
settlement, the Objectors’ interests were adversely affected.
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by invoking §§ 14-3951 and -3952. Although nothing precludes
attempting such a course of action, it requires compliance with
§ 14-3952’s procedures, including, in this case, obtaining the
signatures of “all competent persons . . . having beneficial
interests.”
¶17 The failure to secure the signatures of all
beneficiaries did not, however, make the agreement void for all
purposes, as the court of appeals concluded. See Riley, 228
Ariz. at 384-85 ¶ 6 & n.2, 266 P.3d at 1080-81 & n.2. Rather,
the failure to comply with § 14-3952 simply means that the
probate court’s approval was not effective to make the agreement
binding on all beneficiaries. See In re Estate of Grimm, 784
P.2d 1238, 1242-43 (Utah Ct. App. 1989) (discussing statutes
nearly identical to Arizona’s and stating that they “merely
outline[] the procedures for securing court approval”; they
“do[] not invalidate an otherwise valid compromise agreement
between the parties prior to court approval”).
III. CONCLUSION
¶18 For the reasons set forth above, we vacate the opinion
of the court of appeals and remand to the superior court for
further proceedings consistent with this opinion.
__________________________________
Rebecca White Berch, Chief Justice
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CONCURRING:
__________________________________
Scott Bales, Vice Chief Justice
__________________________________
A. John Pelander, Justice
__________________________________
Robert M. Brutinel, Justice
__________________________________
Peter J. Cahill, Judge*
* Pursuant to Article 6, Section 3 of the Arizona
Constitution, the Honorable Peter J. Cahill, Presiding Judge of
the Superior Court in Gila County, was designated to sit in this
matter.
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