Ecton v. Ecton ( 2013 )

April 30 2013
DA 12-0512
IN THE SUPREME COURT OF THE STATE OF MONTANA
2013 MT 114DOUGLAS P. ECTON, Personal Representative
of the Estate of Zales N. Ecton, Jr.,
Applicant and Appellant,
v.
ZALES N. ECTON, III,
Respondent and Appellee.
APPEAL FROM: District Court of the Eighteenth Judicial District,
In and For the County of Gallatin, Cause No. DP-06-132A
Honorable Holly Brown, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Lynda S. White, Berg, Lilly & Tollefsen, P.C., Bozeman, Montana
William E. McCarthy, Reid J. Perkins, Worden Thane, P.C.,
Missoula, Montana
For Appellee:
Cindy E. Younkin, Younkin Law, PLLC, Bozeman, Montana
Cory J. Swanson, Attorney at Law, Helena, Montana
Submitted on Briefs: March 6, 2013
Decided: April 30, 2013
Filed:
__________________________________________
Clerk
Justice Patricia O. Cotter delivered the Opinion of the Court.
¶1 Douglas P. Ecton (Doug), the personal representative of the estate of Zales N.
Ecton, Jr. (Decedent), appeals from a final distribution order of the Eighteenth Judicial
District Court, Gallatin County, which interpreted Decedent’s last will and testament to
devise the entirety of Decedent’s real property known as the “Home Ranch” to Zales N.
Ecton, III (Zales). We affirm.
ISSUES
¶2 Doug raises the following two issues on appeal:
¶3 1. Did the District Court err in interpreting the requirement in the Decedent’s last
will and testament that I.R.C. § 2032A property be distributed as part of the residuary
estate, as requiring a specific devise of the I.R.C. § 2032A property to Zales rather than a
devise to the residuary beneficiaries?
¶4 2. Did the District Court err in allowing Zales to raise an objection to the personal
representative’s decision to award the income from the I.R.C. § 2032A property to the
residuary beneficiaries more than thirty days after the proposed distribution was
submitted for approval?
FACTUAL AND PROCEDURAL BACKGROUND
¶5 This case involves a dispute between siblings over who was entitled to receive
farm and ranch land owned by their parents. The real property at issue, the Home Ranch,
consisted of over 1900 acres located near Amsterdam, Montana.
¶6 On October 26, 1990, Decedent executed his last will and testament. Decedent’s
last will and testament was a reciprocal will with his wife, Patricia Ecton (Patricia).
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Decedent and Patricia had three children: Zales, of Amsterdam, Montana; Doug, of
Spokane, Washington; and Elaine E. Fulton (Elaine), of Spokane, Washington. Zales
operated the farm and ranch business on the Home Ranch for nearly forty years.
¶7 Decedent’s last will and testament contained the following pertinent provisions:
FIVE: (C)(1) Upon the death of my wife, the trust shall terminate. If the
“Home Ranch” described in subparagraph (C)(3) or any portion of that
ranch is then an asset of the trust estate, the trustee shall distribute the
“Home Ranch” or so much of it as is part of the trust estate to my son
ZALES N. ECTON III if (i) he is then living and (ii) if he pays Twenty-five
Thousand Dollars ($25,000) each to my son DOUGLAS B. ECTON and
my daughter ELAINE E. FULTON. Such may be paid on a deferred basis
in annual installments for a period not to exceed ten (10) years with interest
at the lowest I.R.S. permissible interest rate. If DOUGLAS is not then
living, ZALES may receive the trust’s interest in the “Home Ranch”
without any payment to DOUGLAS’ estate or distributees. If ELAINE is
not then living, ZALES may receive the trust’s interest in the “Home
Ranch” without any payment to ELAINE’s estate or distributees. If
ZALES is not then living, the provisions of this paragraph concerning the
distribution of the “Home Ranch” will not apply.
(2) All of the then-remaining assets then contained in the trust shall
be divided into equal separate shares, so as to provide one share for each
child of mine, then living, and one share for the then-living descendants,
collectively, of each then deceased child of mine. The trustee shall
distribute each share set aside for a living child of mine to each such child.
Additionally, the trustee shall distribute the share for the then-living
descendents of any deceased child of mine to those descendants by right of
representation.
(3) The term “Home Ranch” refers to that land (and improvements
thereon) that I have used for farming purposes located near Amsterdam in
Gallatin County, Montana, and which consists of approximately 1,902
deeded acres of land and 480 acres of state leases.
SIX: If my wife fails to survive me, my personal representative shall
dispose of my residuary estate in the same fashion as provided for in
Article FIVE (C).
SEVEN: Notwithstanding the foregoing, if my personal representative
concludes in good faith to elect special use valuation provided for in I.R.C.
§ 2032A, all devises of farm property to any child and to any descendent of
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any deceased child are contingent upon said beneficiaries [sic] execution of
the agreement required by I.R.C. § 2032A(d)(2). The failure of any
beneficiary who has an interest in such farm property to timely execute
such an agreement shall cause the devise to such beneficiary to lapse.
Further, those who would otherwise take such a lapsed share, shall also be
subject to the requirements of this Article.
EIGHT: I recognize that my personal representative may elect special use
valuation provided for in I.R.C. § 2032A. My personal representative shall
confine such election to such tracts or fractional interests in real estate as
shall be the minimum of the same necessary to produce the maximum
reduction from fair market value allowable under § 2032A. I direct that my
personal representative distribute such property as part of my residuary
estate (Articles FIVE or SIX) and not as part of the marital deduction
pecuniary devise (Article FOUR).
¶8 Decedent executed three codicils to his last will and testament: the first on
December 20, 1990; the second on October 13, 1994; and the third on January 27, 2004.
The first codicil added a provision that excluded adopted children from the definition of
“descendants.” The second codicil changed the order of persons to be elected as trustee
and personal representative of Decedent’s trust and estate by moving Doug from third to
second priority, swapping his position with Zales.
¶9 Patricia died on March 13, 1998. At the time of her death, Patricia owned an
undivided one-half interest in the Home Ranch as a tenant in common with Decedent.
Patricia’s will created a trust and transferred her interest in the Home Ranch to the trust
upon her death. Decedent was the sole income beneficiary of the trust. Patricia’s will
dictated that the trust was to terminate upon the death of Decedent. A reciprocal
provision of Patricia’s will provided that upon Decedent’s death, any portion of the Home
Ranch that was an asset of the trust estate was to be distributed to her son, Zales.
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Decedent remarried in 2000, but did not add any specific provision to his will or
subsequent codicils providing for his new wife.
¶10 Decedent executed his third codicil on January 27, 2004. The third codicil
provided that Doug was to be appointed as the personal representative of Decedent’s
estate, with Elaine as next in line to fill the role of personal representative. The third
codicil amended Article 5(C) of Decedent’s will to include the following language:
FIVE: (C)(1) Upon my death, the trust shall terminate. If the “Home
Ranch” described in subparagraph (C)(3) or any portion of that Ranch is
then an asset of the trust estate, the trustee shall distribute the “Home
Ranch” or so much of it as is part of the trust estate to my son ZALES N.
ECTON III if he is then living.
(2) All of the then-remaining assets then contained in the Trust shall
be divided equally between my son, DOUGLAS B. ECTON and my
daughter, ELAINE E. FULLTON [sic]. It is my intent that my son ZALES
N. ECTON, III receive the “Home Ranch” and that my other son,
DOUGLAS B. ECTON and my daughter ELAINE E. FULLTON [sic]
receive the remaining residuary assets of my estate. If either DOUGLAS
B. ECTON or ELAINE E. FULLTON [sic] pre-decease me there [sic] share
shall be distributed to any of their respective decedents [sic] by right of
representation.
(3) The term “Home Ranch” consists of approximately 1,920 deeded
acres of land.
¶11 Decedent died on November 3, 2006. Doug was appointed to serve as the
personal representative of Decedent’s estate and successor trustee to Patricia’s trust.
Doug surveyed and partitioned the Home Ranch so that one half of the real estate could
be separately deeded to the trust beneficiary, Zales. The remaining acreage of the Home
Ranch was subject to probate. Because the date of death valuations for all of Decedent’s
assets exceeded the $2,000,000 exemption for federal estate tax purposes, Doug utilized a
special valuation statute for farm property, I.R.C. § 2032A, to reduce the estate’s value
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by classifying 528 acres of the Home Ranch as farm property. This alternative land
valuation method allowed the 528 acres to be valued at its productive value instead of its
fair market value.
¶12 On July 7, 2009, Doug filed a final accounting with the District Court. Relying on
Article EIGHT of Decedent’s will, which states that “I direct that my personal
representative distribute such property [property valued pursuant to I.R.C. § 2032A] as
part of my residuary estate,” the final accounting proposed to distribute equally between
Doug and Elaine the 528 acres of the Home Ranch that was subject to the I.R.C. § 2032A
special use valuation. On July 31, 2009, Zales filed an objection to the final accounting.
Zales argued that devising any portion of the Home Ranch to Doug and Elaine was
contrary to Decedent’s testamentary intent as demonstrated by the express language of
Decedent’s will. Doug and Zales briefed their respective positions before the District
Court and each filed proposed distribution orders.
¶13 On March 29, 2011, the District Court issued its order of final distribution. The
District Court determined that Article EIGHT of Decedent’s will did not require the land
subject to the I.R.C. § 2032A election to be distributed as part of the residuary estate to
Doug and Elaine in light of the mandates of Article FIVE as revised by the third codicil.
The District Court determined that Decedent clearly intended to devise the entire Home
Ranch to Zales.
¶14 Following the District Court’s entry of its order of final distribution, Doug
submitted an amended final accounting. The amended final accounting distributed the
2009, 2010, and 2011 income from the I.R.C. § 2032A property to Doug and Elaine.
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Zales filed an objection to the amended final accounting on December 16, 2011, arguing
that he was entitled to the income associated with the I.R.C. § 2032A portion of the
Home Ranch. On May 11, 2012, the District Court issued its order on Zales’ objection to
the amended final accounting. The District Court determined that its order of final
distribution, which directed distribution of “all the property known as the ‘Home Ranch,’
in its entirety” to Zales, would necessarily include any associated income and proceeds
from the property. Therefore, the District Court granted Zales’ objection to the amended
final accounting and awarded the 2009, 2010, and 2011 income from the I.R.C. § 2032A
property to Zales. Doug appeals.
STANDARDS OF REVIEW
¶15 “The judicial interpretation and construction of a will presents a question of law.”
In re Estate of Ayers, 2007 MT 155, ¶ 12, 338 Mont. 12, 161 P.3d 833; In re Estate of
Snyder, 2007 MT 146, ¶ 18, 337 Mont. 449, 162 P.3d 87 (Snyder II). We review a
district court’s conclusions of law for correctness. Ayers, ¶ 12; Snyder II, ¶ 18.
DISCUSSION
¶16 Did the District Court err in interpreting the requirement in the Decedent’s last
will and testament that I.R.C. § 2032A property be distributed as part of the
residuary estate, as requiring a specific devise of the I.R.C. § 2032A property to
Zales rather than a devise to the residuary beneficiaries?
¶17 The object of a judicial interpretation of a will is to ascertain the intention of the
testator. In re Estate of Bolinger, 284 Mont. 114, 121, 943 P.2d 981, 985 (1997)
(citations omitted). The testator’s intent controls the distribution of assets pursuant to a
will. Snyder v. Snyder, 2000 MT 113, ¶ 10, 299 Mont. 421, 2 P.3d 238 (Snyder I); In re
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Estate of Evans, 217 Mont. 89, 94, 704 P.2d 35, 38 (1985). When construing a will, we
interpret the words used in the will according to their ordinary and grammatical sense,
unless a clear intention to use them in another sense can be ascertained. Ayers, ¶ 14;
Snyder I, ¶ 10. Where the language of the will is unclear, the testator’s intent must be
ascertained from a consideration of the instrument as a whole, and a comparison of its
various parts in light of the circumstances surrounding the drafting of the will. Ayers,
¶ 14; Snyder I, ¶ 10.
¶18 The District Court determined that Decedent’s intent, as demonstrated by the
language of his will, was to devise the entire Home Ranch to Zales. Doug argues that the
District Court erred in interpreting Decedent’s will because the Decedent did not intend
to devise the 528 acres of the Home Ranch subject to special value under I.R.C. § 2032A
to Zales. Instead, Doug maintains that he and Elaine were entitled to receive this portion
of the Home Ranch as part of the residuary estate.
¶19 Since Doug, as personal representative of Decedent’s estate, elected to pursue
estate valuation pursuant to I.R.C. § 2032A, Article EIGHT of Decedent’s will took
effect. Article EIGHT of Decedent’s will provides as follows:
I recognize that my personal representative may elect special use valuation
provided for in I.R.C. § 2032A. My personal representative shall confine
such election to such tracts or fractional interests in real estate as shall be
the minimum of the same necessary to produce the maximum reduction
from fair market value allowable under § 2032A. I direct that my personal
representative distribute such property as part of my residuary estate
(Articles FIVE or SIX) and not as part of the marital deduction pecuniary
devise (Article FOUR).
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Article FIVE (C)(2), as amended by Decedent’s third codicil, controls the distribution of
Decedent’s property and reads as follows:
It is my intent that my son ZALES N. ECTON, III receive the “Home
Ranch” and that my other son, DOUGLAS B. ECTON and my daughter
ELAINE E. FULLTON [sic] receive the remaining residuary assets of my
estate.
Though we recognize that Article EIGHT does in fact state that the property subject to
special valuation shall be distributed as part of Decedent’s residuary estate, when read
together with Article FIVE, it is clear that Decedent did not intend to divide that portion
of the Home Ranch between Doug and Elaine.
¶20 The Decedent’s testamentary intent is clearly ascertainable from the express
language of Article FIVE (C)(2). In Article FIVE (C)(2), Decedent stated that: “It is my
intent that my son ZALES N. ECTON receive the ‘Home Ranch.’ ” This Article goes on
to state that Doug and Elaine are to receive the “remaining residuary assets” of
Decedent’s estate. By including the word “remaining” in a description of the residuary
assets directly following the Decedent’s stated intent to devise the Home Ranch to Zales,
it is clear that the residuary estate divided between Doug and Elaine does not include any
portion of the Home Ranch. Any contrary interpretation would ignore the clear,
unambiguous, express intent of the Decedent to devise the Home Ranch to Zales.
¶21 Accordingly, we conclude that the District Court did not err in interpreting
Decedent’s will to determine that Decedent intended to devise to Zales the 528 acres
subject to special farm property valuation.
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¶22 Did the District Court err in allowing Zales to raise an objection to the personal
representative’s decision to award the income from the I.R.C. § 2032A property to
the residuary beneficiaries more than thirty days after the proposed distribution
was submitted for approval?
¶23 It is undisputed that Zales filed a timely objection to the July 7, 2009 final
accounting. However, Doug argues that Zales only objected to the proposed distribution
of the real property subject to the I.R.C. § 2032A election, and therefore failed to timely
object to the distribution of income from that property to Doug and Elaine. Doug
contends that any objection to the final accounting must have been made within 30 days
of the July 7, 2009 final accounting pursuant to § 72-3-903, MCA. Section 72-3-903(2),
MCA, provides as follows:
The right of any distributee to object to the proposed distribution on the
basis of the kind or value of asset the distributee is to receive, if not waived
earlier in writing, terminates if the distributee fails to object in writing
received by the personal representative within 30 days after mailing or
delivery of the proposal.
Doug maintains that Zales waived his right to object to the distribution of income from
the I.R.C. § 2032A property because he did not object on that basis until after the
amended final accounting was drafted.
¶24 The District Court’s March 29, 2011 order of final distribution did not specifically
address the distribution of income from the I.R.C. § 2032A property, although it directed
that Zales was entitled to receive the entirety of the I.R.C. § 2032A property. Doug
subsequently drafted an amended final accounting to reflect that the entire Home Ranch
must be distributed to Zales. Upon receiving the amended final accounting, Zales filed
an objection to the distribution of income from the I.R.C. § 2032A property to Doug and
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Elaine. The District Court determined that its order of final distribution, which directed
distribution of “all the property known as the ‘Home Ranch,’ in its entirety” to Zales,
would necessarily include any associated income and proceeds from the I.R.C. § 2032A
property. Accordingly, the District Court granted Zales’ objection to the amended final
accounting and awarded the 2009, 2010, and 2011 income from the I.R.C. § 2032A
property to Zales. We agree with the District Court’s decision.
¶25 Section 72-34-428(1), MCA, provides that “If property is specifically given to a
beneficiary, by will or trust, the fiduciary of the estate or of the terminating income
interest shall distribute the net income and principal receipts to the beneficiary who is to
receive the property. . . .” “A specific devise differs from a general devise in that it is not
intended by the testator to be paid out of the estate generally, but is to be paid solely by
delivering to the devisee that specific article given by the will.” Holtz v. Deisz, 2003 MT
132, ¶ 25, 316 Mont. 77, 68 P.3d 828. Since the Home Ranch is a specific piece of
property defined in Decedent’s will, Decedent’s language in his will stating that “It is my
intent that my son ZALES N. ECTON, III receive the ‘Home Ranch’ ” plainly constitutes
a specific devise. As such, § 72-34-428(1), MCA, controls the distribution of income
from the Home Ranch and mandates that such income must be distributed to Zales. Zales
timely objected to the final accounting that proposed to distribute the I.R.C. § 2032A
property to Doug and Elaine. Once the District Court concluded that Zales was entitled
to receive the I.R.C. § 2032A property, it follows that Zales was entitled to receive the
income from such property.
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¶26 We hold that the District Court did not err in allowing Zales to object to the
personal representative’s proposed distribution of income from the I.R.C. § 2032A
property.
CONCLUSION
¶27 For the foregoing reasons, we affirm the District Court.
/S/ PATRICIA COTTER
We Concur:
/S/ MIKE McGRATH
/S/ BETH BAKER
/S/ LAURIE McKINNON
/S/ JIM RICE
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