In re Estate of McElveny , 2015 NMCA 80 ( 2015 )

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New Mexico Compilation
Commission, Santa Fe, NM
'00'04- 10:49:35 2015.09.01
Certiorari Granted, July 17, 2015, No. 35,349
IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
Opinion Number: 2015-NMCA-080
Filing Date: May 11, 2015
Docket No. 33,568
IN THE MATTER OF THE
ESTATE OF EDWARD K.
McELVENY, Deceased,
MICHAEL PHILLIPS, as
Personal Representative of the
Estate of Edward K. McElveny,
Petitioner-Appellee,
v.
STATE OF NEW MEXICO, ex rel.
DEPARTMENT OF TAXATION
AND REVENUE,
Respondent-Appellant.
APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY
Raymond Z. Ortiz, District Judge
Law Office of Cristy J. Carbón-Gaul
Cristy J. Carbón-Gaul
Albuquerque, NM
Starace Law
Carmela D. Starace
Albuquerque, NM
for Appellee
Hector H. Balderas, Attorney General
Peter A. Breen, Special Assistant Attorney General
Santa Fe, NM
1
for Appellant
OPINION
VIGIL, Chief Judge.
{1} This case presents a question of first impression: whether the district court in a
formal proceeding under the Uniform Probate Code (UPC), NMSA 1978, §§ 45-1-101 to -
404 (1975, as amended through 2011) has jurisdiction to order the Department of Taxation
and Revenue (Department) to deliver estate assets to a personal representative when the
assets are in the Department’s custody pursuant to the Uniform Unclaimed Property Act
(UPA), NMSA 1978, §§ 7-8A-1 to -31 (1975, as amended through 2006). We conclude that
the district court has jurisdiction to do so, and affirm the order of the district court.
BACKGROUND
{2} Edward McElveny (Decedent) died intestate in 1991, and his heirs consist of seven
adult grandchildren and one adult great-grandchild. In 2013, Michael Phillips, one of the
adult grandsons, filed an application in the Santa Fe probate court to open an informal
probate for his grandfather and to be appointed personal representative of Decedent’s estate
(Estate). The remaining heirs renounced their right to be appointed personal representative
and nominated Michael Phillips to be appointed personal representative of the Estate. The
application states that Decedent “has property which was transferred to the . . . Department
as unclaimed property” and that “[a]s part of the probate administration, Applicant will claim
the unclaimed property for Decedent’s Estate.” It is undisputed that the Department is
holding property in the name of Decedent valued at “a little less than $70,000” pursuant to
the UPA. The probate court issued an order appointing Mr. Phillips personal representative
(PR) of the Estate and ordered the Department to “release the unclaimed property of the
Decedent to Applicant as [PR] of the Estate of Decedent.”
{3} The PR attached a copy of the probate court order to a blank claim form used by the
Department under the UPA and submitted it to the unclaimed property office of the
Department, demanding that the money be released to the PR to be administered under the
UPC and distributed to the heirs. The Department rejected the claim as “incomplete” on the
grounds that “[w]e do not have appropriate documentation showing that the property in
question would devolve to Mr. Phillips alone under the applicable law of heirship” and that
“the application should be made directly to [the] Department as unclaimed property
custodian rather than probate.” The Estate responded by pointing out that the demand was
not made on behalf of Mr. Phillips personally, but in his capacity as PR of the Estate so the
money could be distributed to the heirs. In addition, the Estate disputed that the exclusive
method for acquiring estate assets in the custody of the Department under the UPA is
through the Department’s own administrative process rather than the UPC. The Estate
therefore contended that the application was “complete” and demanded that the funds be
delivered to the PR no later than ninety days after the claim was initially submitted to the
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Department, or the Estate would return to court and seek enforcement of the probate court
order in addition to sanctions.
{4} The Department failed to respond to the Estate’s demand, and the probate court
thereupon transferred the probate case to the district court “for determination of all disputed
issues” subject to being remanded back to the probate court for completion after resolution
of the disputed issues. See N.M. Const. art. VI, § 23 (stating that the probate court “shall not
have jurisdiction in civil causes in which the matter in controversy shall exceed in value
three thousand dollars ($3,000.00) exclusive of interest and cost[.]”). The Estate then filed
a motion in the district court to enforce the probate court order and for sanctions, with notice
to the Department. The Department responded by moving to dismiss on the ground that the
district court had no jurisdiction to grant the relief requested. First, the Department asserted
that the UPA is the “exclusive mode” for disbursing unclaimed property and that a court
order issued under the UPC is ineffective. Second, the Department asserted the district court
lacked jurisdiction because the Estate failed to exhaust its administrative remedies under the
UPA before it obtained the order from the probate court. Finally, the Department asserted
that because it was not served with process, the probate court failed to obtain jurisdiction
over the Department.
{5} Following a hearing at which the Department appeared, the district court denied the
Department’s motion to dismiss, enforced the order of the probate court, and ordered the
Department to deliver the personal property of Decedent to the PR of the Estate. The
Department appeals.
DISCUSSION
{6} As a prelude to our analysis, we provide a brief overview of the UPA and how it
generally operates. Property is “presumed abandoned” if it is “unclaimed” by its apparent
owner for a specified period of time. Section 7-8A-2. A “holder” of property that is
“presumed abandoned” is required to send written notice to the apparent owner stating that
the holder is in possession of property that is subject to the UPA, make a report to the
Department that it is in possession of such property and, ultimately, deliver custody of the
property to the Department. Sections 7-8A-4; 7-8A-7; 7-8A-8. Upon payment or delivery
of property to the Department, “the state assumes custody and responsibility for the
safekeeping of the property.” Section 7-8A-10(b). The Department is then required to
publish a notice stating in part that “property of the owner is presumed to be abandoned and
has been taken into the protective custody of the [Department.]” Section 7-8A-9(a)(3). The
notice must also state that “information about the property and its return to the owner is
available to a person having a legal or beneficial interest in the property, upon request to the
[Department].” Section 7-8A-9(a)(4). The property does not escheat to the State. The
Department is required to deposit all money and proceeds from the sale of abandoned
property, minus expenses, into the tax administration suspense fund and retain it in an
unclaimed property fund containing at least one hundred thousand dollars ($100,000) from
which the Department “shall pay claims duly allowed.” Section 7-8A-13.
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{7} Against this general background, the Department contends that the order of the
district court must be reversed, arguing: (1) the district court had no jurisdiction, apart from
the UPA, to order the Department to release the unclaimed property to the Estate; (2) the
district court order is void because the Department was not served with process; and (3) for
additional reasons, which we address summarily.
Standard of Review
{8} Arguments made by the Department require us to engage in statutory interpretation,
which requires de novo review. Oldham v. Oldham, 2011-NMSC-007, ¶ 10, 149 N.M. 215,
247 P.3d 736. In addition, whether a district court has subject matter jurisdiction likewise
presents a question of law, with de novo review. State v. Chavarria, 2009-NMSC-020, ¶ 11,
146 N.M. 251, 208 P.3d 896. Finally, questions relating to sufficiency of service of process
are also reviewed de novo. See Edmonds v. Martinez, 2009-NMCA-072, ¶ 8, 146 N.M. 753,
215 P.3d 62. We now turn to the arguments made by the Department.
Subject Matter Jurisdiction
{9} We first address whether the district court had jurisdiction, independent of the UPA,
to order the Department to deliver the property of Decedent to the PR of the Estate. When
the probate case was opened and the PR was appointed for the Estate, the PR was
automatically granted certain powers and obligations. The PR acquired “the same power
over the title to property of the estate that an absolute owner would have” which could be
exercised “without notice, hearing or order of the court.” NMSA 1978, Section 45-3-711
(1975). In addition, the UPC directs that “every personal representative has a right to, and
shall take possession or control of, the decedent’s property” and the PR “may maintain an
action to recover possession of property[.]” NMSA 1978, Section 45-3-709 (1975). Thus,
the PR acted in accordance with his statutory obligation in seeking an order from the probate
court directing the Department to deliver Decedent’s property to the Estate. After the
Department refused to honor the order, the case was transferred to the district court for
enforcement of the probate court order. When the hearing was held in the district court with
notice to the Department, it was a “formal proceeding” under the UPC. Section 45-1-
201(A)(19) (defining “formal proceedings” under the UPC as “proceedings conducted before
a district judge with notice to interested persons”). Section 45-1-302(B) then expressly
provides:
The district court in formal proceedings shall have jurisdiction to determine
title to and value of real or personal property as between the estate and any
interested person, including strangers to the estate claiming adversely thereto.
The district court has full power to make orders, judgments and decrees and
to take all other action necessary and proper to administer justice in matters
that come before it.
On its face, Section 45-1-302(B) expressly and unambiguously grants jurisdiction to the
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district court to do exactly what it did here.
{10} The UPC notwithstanding, the Department asserts that the district court lacked
subject matter jurisdiction because the UPA contains an express declaration that the Estate
must utilize its procedure to acquire Decedent’s property. The sole authority cited to us is
Subsection (a) of Section 7-8A-15. This statute provides:
A person, excluding another state, claiming property paid or delivered to the
[Department] may file a claim on a form prescribed by the [Department] and
verified by the claimant.
The Department argues that because an estate is included in the definition of a “person” in
the UPA under Section 7-8A-1(12), the Legislature expressed its intent that an estate must
follow the Department’s procedures to the exclusion of the UPC in collecting estate assets
in its custody under the UPA. At oral argument the Department added that it contends the
word “may” in the statute really means “shall.”1 We are not persuaded.
{11} Our task in construing a statute is to give effect to the intent of the Legislature.
Oldham, 2011-NMSC- 007, ¶ 10. To ascertain the Legislature’s intent, we look first to the
plain language of the statute, unless the Legislature indicates that a contrary meaning was
intended. Id. “[W]hen a statute contains language which is clear and unambiguous, we must
give effect to that language and refrain from further statutory interpretation.” Bank of N.Y.
v. Romero, 2014-NMSC-007, ¶ 40, 320 P.3d 1 (internal quotation marks and citation
omitted). Here, there is nothing to indicate that the Legislature intended the word “may” to
mean anything other than what it plainly means. Plainly, the word “may” is permissive and
not mandatory. See Webster’s Third New Int’l Dictionary 1396 (unabridged ed. 2002).
Moreover, the Legislature has specifically stated in the Uniform Statute and Rule
Construction Act, NMSA 1978, §§ 12-2A-1 to - 20 (1997), that when “may” is used in a
statute, it “confers a power, authority, privilege or right” but when “shall” or “must” are used
in a statute, they “express a duty, obligation, requirement or condition precedent.” Sections
12-2A-4(A) and (B).
{12} Because the words “may” and “shall” have such different meanings, “a fundamental
rule of statutory construction states that in interpreting statutes, the words ‘shall’ and ‘may’
should not be used interchangeably but should be given their ordinary meaning.” Thriftway
Mktg. Corp. v. State, 1992-NMCA-092, ¶ 9, 114 N.M. 578, 844 P.2d 828. Thus, “[w]here
the terms ‘shall’ and ‘may’ have been juxtaposed in the same statute, ordinarily it must be
concluded that the [L]egislature was aware of and intended different meanings.” Id. In this
1
The Department also repeatedly asserted at oral argument that its procedures for
determining whether a person is entitled to property in its custody under the UPA are
superior to a district court’s. We do not comment further on this assertion, as it is not
supported by reference to any facts or legal authorities.
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regard, we note that in Section 7-8A-15(b), which immediately follows Subsection (a) on
which the Department relies, the Legislature used these words in just this fashion.2 We
therefore conclude that the Legislature intentionally used “may” and “shall” in Sections 7-
8A-15(a) and (b) to respectively convey permissive and mandatory meanings. See Vaughn
v. United Nuclear Corp., 1982-NMCA-088, ¶ 23, 98 N.M. 481, 650 P.3d (stating that a
statutory amendment “substituting ‘may’ for ‘shall’ manifests a clear intent to make the act
referred to permissive instead of mandatory”).
{13} Here, Section 7-8A-15(a) unambiguously states that a claim “may” be filed with the
Department; it does not state that a claim “must” be filed with the Department. Moreover,
we conclude that the UPA and the UPC can operate together and that no intent was
expressed by the Legislature that the UPA supersede the UPC in the circumstances of this
case. Thus, in the exercise of its duty to act “for the best interests of [the] successors to the
estate” under Section 45-3-703(A), the PR had discretion to either file a claim with the
Department under Section 7-8A-15(a) or invoke the jurisdiction of the district court under
Section 45-1-302(B). We therefore reject the Department’s argument and hold that the
district court had jurisdiction to act as it did. See In re Estate of Harrington, 2000-NMCA-
058, ¶ 17, 129 N.M. 266, 5 P.3d 1070 (concluding, on the basis of the language in Section
45-1-302, that “the Legislature intended to confer upon district courts general civil
jurisdiction in formal probate proceedings”).
Service of Process
{14} The Department contends that the order of the probate court directing it to deliver
Decedent’s property to the Estate and the order of the district court enforcing the order was
ineffectual and void because the Department was never served with process as required by
Rule 1-004 NMRA. For the following reasons, we disagree.
{15} Probate proceedings are in rem special statutory proeedings. See In re Estate of
Harrington, 2000-NMCA-058, ¶ 14 (stating that probate proceedings are special statutory
proceedings); In re Estates of Salas, 1987-NMCA-018, ¶ 11, 105 N.M. 472, 734 P.2d 250
(“The procedure for probating wills and testaments in New Mexico is strictly statutory and
is an action in rem.”), abrogated on other grounds by In re Estate of Harrington, 2000-
NMCA-058; In re Hickok’s Will, 1956-NMSC-035, ¶ 30, 61 N.M. 204, 297 P.2d 866 (“A
probate proceeding is a special, statutory proceeding.”). Here, the PR opened an informal
probate for his deceased grandfather pursuant to the UPC, and the probate court properly
2
Section 7-8A-15(b) states: “Within ninety days after a claim is filed, the
[Department] shall allow or deny the claim and give written notice of the decision to the
claimant. If the claim is denied, the [Department] shall inform the claimant of the reasons
for the denial and specify what additional evidence is required before the claim will be
allowed. The claimant may then file a new claim with the [Department] or maintain an
action under Section [7-8A-16].” (Emphasis added.)
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issued an order directing the PR to collect the Estate’s assets so they could be administered
through probate. Property of Decedent was in the custody of the Department and, in keeping
with the UPC, the Department was properly ordered to deliver the property to the PR. In this
respect, the Department stands in the same shoes as any other custodian of property
belonging to an estate, such as a bank. The Estate did not sue the Department, nor did it
attempt to obtain personal jurisdiction over the Department for the purpose of stating a claim
against the Department. Thus, the district court was not required to obtain personal
jurisdiction over the Department by service of process. All that was required was that it have
in rem jurisdiction over Decedent’s estate property—and there is no argument that it did not.
Nowhere does the UPC require service of process upon a custodian of a decedent’s property
in such circumstances.
{16} Under the UPC, “each proceeding before the district court or probate court is
independent of any other proceeding involving the same estate” unless it is a supervised
administration. Section 45-3-107. When a hearing is held, “the petitioner shall cause notice
of the time and place of hearing of any petition to be given to any person having an interest
in the subject of the hearing.” Section 45-1-401(A). As custodian of Decedent’s property,
the Department had an interest in the subject of the hearing, and it was entitled to notice of
the hearing and an opportunity to be heard. That is precisely what was done here. At oral
argument, the Department conceded it had notice of the proceedings and that it had a full and
fair opportunity to be heard in the district court. If the Department had any concerns about
whether the Estate was the rightful owner of the property, it had a full and fair opportunity
to present those concerns to the court. The public policy of New Mexico, as expressed in the
UPA, is to locate and restore property to its owner rather than to claim it by escheat. See In
re Estate of Tischler, 97 Cal. Rptr. 510, 516 (Ct. App. 1971) (stating that by adopting the
UPA, California’s public policy is to restore property to the owner rather than claim it by
escheat). By ordering the property to be delivered to the Estate, the district court acted in
conformance with our public policy. And the district court properly ordered the property to
be delivered to the Estate to be administered in accordance with the UPC so title could pass
to Decedent’s heirs. See Clovis Nat’l Bank v. Callaway, 1961-NMSC-129, ¶ 17, 69 N.M.
119, 364 P.2d 748 (stating that before title to personal property of a decedent passes, there
must be a determination of heirship and an order of distribution in a probate case).
Remaining Arguments
{17} The Department asserts that the district court had no jurisdiction because the Estate
did not exhaust its administrative remedies. The short answer to this argument is that the
Estate was not required to proceed under the UPA, and exhaustion of administrative
remedies is not a prerequisite for enforcing a probate court order in the district court.
{18} Finally, the Department argues that the Estate’s claim to the property is insufficient
to overcome the statutory presumption that the property is abandoned. We disagree. The
Estate made a claim to the property pursuant to the UPC, and despite having been given the
opportunity to contest the Estate’s ownership of the property, the Department chose not to.
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Moreover, in its brief, the Department concedes that it “has roughly $70,000 of unclaimed
property in its custody . . . which colorably belonged to [Decedent].” There is no factual
dispute that the property belongs to the Estate, and we therefore reject the Department’s
argument.
CONCLUSION
{19} The order of the district court is affirmed.
{20} IT IS SO ORDERED.
____________________________________
MICHAEL E. VIGIL, Chief Judge
WE CONCUR:
_________________________________
CYNTHIA A. FRY, Judge
_________________________________
RODERICK T. KENNEDY, Judge
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