Estate of Firebaugh v. Firebaugh

NO. 94-601
IN THE SUPREME COURT OF THE STATE OF MONTANA
1995
APPEAL FROM: District Court of the Fourth Judicial District,
In and for the County of Missoula,
The Honorable Edward McLean, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Terry Wallace, Attorney at Law, Missoula, Montana
For Respondent:
Martin S. King; Worden, Thane & Haines, Missoula,
Montana
Submitted on Briefs: June 1, 1995
Decided: 3uly 6, 1995
Filed:
Justice W. William Leaphart delivered the Opinion of the Court.
Kenneth Firebaugh, one of the decedent's two sons, appeals
from the decision of the District Court holding that debts Kenneth
owed to his deceased mother were to be offset against his share of
her estate, despite the fact that the debts had been previously
discharged in bankruptcy. John Firebaugh cross appeals. We affirm
in part, reverse in part and remand.
Winifred Mills Firebaugh died on November 25, 1991 in
Missoula, Montana. She left a will dated April 24, 1984. Winifred
Firebaugh was survived by two sons; John Firebaugh of Missoula and
Kenneth Firebaugh of Kalispell. The two sons are named as the co-
personal representatives and are the sole heirs and beneficiaries
under her will. The value of Winifred's estate at the time of her
death was $151,427.71. Of that sum, approximately $62,111.54 was
equally distributed to John and Kenneth from an Edward D. Jones
account and approximately $9,292.19 was used to satisfy estate
expenses.
In May of 1989, Kenneth sold his l/4 undivided interest in
some Kansas real estate to his mother for $42,000. His mother paid
Kenneth in cash. After receipt of the cash, Kenneth purchased a
condominium in California and filed a homestead exemption on that
property. The District Court concluded that the sales price of
$42,000 was clearly excessive; that the l/4 interest only had a
value of $30,475.
At the time of her death, Winifred's son John was indebted to
Winifred in the sum of $26,000. Her son Kenneth was indebted to
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her in the sum of $68,695. However, in August of 1989, Kenneth
filed a petition in bankruptcy under Chapter 7 in the Eastern
District of California. In that proceeding, Kenneth listed his
mother as an unsecured creditor in the sum of $55,395. Kenneth
received a discharge in bankruptcy on January 12, 1990. Winifred,
who was Kenneth's single largest creditor, received no
distributions from that bankruptcy proceeding.
Sometime in 1991, Winifred met with Edward D. Jones account
executive Scott Wilson to discuss the distribution of her Edward D.
Jones account upon her death. At the time of that discussion, she
prepared a note which stated: "On my death, John to have top
$57,000 - rest divided equally." The District Court found that
this note evidenced her desire that the pre-bankruptcy debt of
Kenneth be considered for the purpose of calculating her sons'
respective shares of the estate.
Winifred's last will and testament provides, in part, as
follows:
If either of my two sons are indebted to me at the time
of my death, I forgive such debt or debts and direct my
personal representatives not to collect such
indebtedness, but to cancel and return any evidences
thereof to my son or sons having his indebtedness
canceled. If, at the time of my death, either of my sons
are indebted to me, but not in equal amounts, or if one
of my sons is indebted to me and the other is not, I
direct my personal representatives to pay to my son who
is not indebted the same amount of money as the amount of
indebtedness of my other son that was forgiven; or if one
son is indebted to me to a lesser extent than the other,
an amount of money sufficient to equalize the
indebtedness of my other son forgiven under this
provision, taking into consideration any indebtedness of
each son forgiven. It is my intention that each of my
sons be treated equally.
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The District Court concluded that, based on the provisions of
the will, since Kenneth was indebted in a greater amount than John,
the difference between the two debts would be paid to John. With
John indebted in the amount of $26,000 and Kenneth indebted in the
amount of $68,695, the difference was $42,695. Accordingly, from
the $112,023 (the value of the estate less the Kansas property
valued at $30,475) the first $42,695 was to be distributed to John
leaving a balance of $69,328.52 to be divided equally.
John contends that under 5 72-2-501, MCA (1991), his mother's
intent to treat her sons equally is controlling and thus the
District Court's decision to offset the debt of Kenneth should be
affirmed. Appellant Kenneth contends that, under the provisions of
§ 72-3-912, MCA, the court should have treated his debt as having
been discharged. Section 72-3-912, MCA, provides as follows:
The amount of a noncontingent indebtedness of a successor
to the estate if due, or its present value if not due,
shall be offset against the successor's interest; but the
successor has the benefit of any defense which would be
available to him in a direct proceeding for recovery of
the debt.
Standard of Review:
In determining whether the provisions of the will or § 72-3-
912, MCA, control distribution of the estate, the District Court
was making a legal conclusion. "[Wle review conclusions of law to
determine whether the district court's interpretation of the law is
correct." In re Marriage of Barnard (1994), 254 Mont. 103, 106,
870 P.2d 91, 93.
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Issue:
Whether, in light of Winifred Firebaugh's testamentary intent
to treat her sons equally, her son Kenneth's share under the will
may be offset by his indebtedness to his mother even though a
portion of said indebtedness has been discharged in bankruptcy?
Discussion:
Kenneth and John each rely upon statutory provisions in effect
at the time of their mother's death in 1991. Kenneth invokes § 72-
3-912, MCA, and contends that his discharge in bankruptcy would
constitute a valid defense to any attempt by the estate to recover
the debt. John relies on § 72-2-501, MCA (1991), (which has since
been repealed) for the proposition that the testatrix's intent is
controlling.
Kenneth is correct in claiming that his discharge in
bankruptcy qualifies as a valid defense under § 72-3-912, MCA.
However, as the District Court observed, to ignore Kenneth's pre-
bankruptcy debt of $55,395 would thwart the clear intent of
Winifred as reflected in her will.
At the time Winifred made her will, the law provided that her
intent, as expressed in her will, would be the controlling
consideration. That statutory provision, although repealed in
1993, remained in effect at the time of her death in 1991. We must
thus assume that Winifred died believing that her intent would be
the controlling consideration. Her intent, as expressed in the
four corners of her will, is clearly to treat her two sons equally.
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If Kenneth's debt of $55,395 is not offset against his share,
Winifred's intent is subverted. Faced with a conflict between §
72-3-912, MCA, and the terms of the will, we determine that
Winifred's clear intent controls. That is, " [iln construing a will
the paramount rule is that the testator's intent gathered from the
words of the will governs the interpretation of the will." State
v. Keller (1977), 173 Mont. 523, 526, 568 P.2d 166, 168.
Similarly, in Matter of Estate of Ellison (19901, 243 Mont. 258,
260, 792 P.2d 5, 6, we held: "[Tlhat intention of a testator, as
expressed in his Will, controls the legal effect of his
disposition."
Given the clear language of the second paragraph of her will,
there is no question but that Winifred intended the sons' shares of
her estate be adjusted to reflect monies that the sons had received
from her as loans during her lifetime. We hold that as of the time
of Winifred's death in November 1991, testamentary intent takes
precedence over the provisions of § 72-3-912, MCA.
Cross Aooeal:
Issue:
Whether the District Court erred in refusing to order
disposition of an interest in real property owned by the estate but
located in the State of Kansas?
With regard to Winifred's interest in real estate located in
Kansas, the District Court concluded that Kenneth should not be
able to share equally in property that he transferred to his mother
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at an inflated price. However, the District Court declined to
order disposition of the Kansas property, instead, deferring to the
jurisdiction of the Kansas court in an ancillary probate. John
Firebaugh cross appeals contending that under Montana law the
District Court should be directed to order distribution of the
Kansas property in conformity with its Findings of Fact and
Conclusions of Law and Order dated August, 29, 1994.
We affirm the District Court's refusal to order distribution
of the Kansas property. However, in doing so, we note that the
District Court was in error in concluding that Kenneth should not
be allowed to share equally in the Kansas property since he
transferred that property to his mother at an inflated price.
Kenneth sold his share of the property to his mother in May of
1989, some two years six months before her death in November of
1991. There is nothing in the record indicating that Winifred
objected to the sales price at the time of the purchase or during
the subsequent two and one-half years of her life. Nor did she
seek to challenge the transaction in Kenneth's bankruptcy
proceeding. Accordingly, there is no basis for the District Court
to determine that Kenneth's share of the estate is (or should be)
subject to an offset as a result of that transaction.
Affirmed.
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We concur.
Justices
8
Justice James C. Nelson specially concurs and dissents as follows:
I respectfully dissent from our decision on the issue on
appeal and concur with our decision on the issue on cross-appeal.
Section 72-11-304, MCA, (1991), provides that extrinsic evidence is
inadmissible in the construction of a will unless there is some
alleged mistake or imperfection in the writing, unless the validity
of the will is in dispute, or unless it is necessary to explain the
circumstances under which the will was made or to which it relates,
to explain an extrinsic ambiguity or to establish illegality or
fraud. None of those exceptions are raised here. Winifred's will
is clear and unambiguous, and there is no need to delve into what
her supposed intention was in making her will.
Winifred's will provides at paragraph Second:
If either of my two sons are indebted to me at the time
of my death, I forgive such debt or debts and direct my
personal representatives not to collect such
indebtedness, but to cancel and return any evidences
thereof to my son or sons having his indebtedness
cancelled. If, at the time of my death, either of my
sons are indebted to me, but not in equal amounts, or if
one of my sons is indebted to me and the other is not, I
direct my personal representatives to pay to my son who
is not indebted to me the same amount of money as the
amount of indebtedness of my other son that was forgiven;
or if one son is indebted to me to a lesser extent than
the other, an amount of money sufficient to equalize the
indebtedness of my other son forgiven under this
provision, taking into consideration any indebtedness of
each son forgiven. It is my intention that each of my
sons be treated equally. [Emphasis added.1
As the language quoted from her will clearly states, Winifred
provided that a son's debts were to be offset against his share of
her estate, if and to the extent that son was indebted to her at
the time of her death. In point of fact, Kenneth was not indebted
9
to Winifred at the time of her death. His debt to her had been
discharged in bankruptcy--a proceeding in which she was listed as
the principle creditor for the debts offset here, but in which she
did not file a creditor's claim.
Section 72-11-307, MCA (1991), requires that all parts of a
will are to be construed in relation to each other so' as to, if
possible, form one consistent whole. BY improperly and
unnecessarily attempting to divine Winifred's intention in order to
achieve what appears to be a more equitable result in the
distribution of her estate, we have simply written out of her will
that language which conditions her direction that her sons be
treated equally on the provision that one or the other of her sons
be indebted to her at the time of her death.
I cannot agree in that approach. It is not the prerogative of
this or of any other court to rewrite the clear and unambiguous
provisions of a decedent's will simply because of a judicial
perception of inequity in the distribution of the testatrix'
estate. Accordingly, on the issue on appeal, I, respectfully
dissent.
Justice Karla M. Gray concurs in foregoing dis nt and special
concurrence.
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July 6, 1995
CERTIFICATE OF SERVICE
I hereby certify that the following certified order was sent by United States mail, prepaid, to the
following named:
Kenneth M. Fiebaugh
432 E. Idaho #218
Kalispell, MT 59901
Terry Wallace
Attorney At Law
P.O. Box 4763
Missoula, MT 59806-47@
Martin S. King, Esq.
Worden, Thane & Haines
P.O. Box 4747
Missoula, MT 59807
ED SMITH
CLERK OF THE SUPREME COURT
STATE OF MONTANA