Treviño v. Treviño (In re Treviño)
| Decision Date | 20 August 2020 |
| Docket Number | Court of Appeals No. 19CA0199 |
| Citation | 474 P.3d 223 |
| Parties | IN RE the ESTATE OF Gerardo TREVIÑO, deceased. Esteban Treviño, Appellant, v. Victoria Treviño, in her capacity as Personal Representative, Appellee. |
| Court | Colorado Court of Appeals |
Holder & Associates, PC, Michael D. Holder, J. David Taunton, Colorado Springs, Colorado, for Petitioner-Appellant
No Appearance for Appellee
Brown & Crona, LLC, Spencer J. Crona, Denver, Colorado, for Amicus Curiae Colorado Bar Association Amicus Brief Committee
Opinion by JUDGE BERGER
¶ 1 The principal question in this case is whether and to what extent Gerardo "Jerry" Treviño's payable on death (POD) certificate of deposit account (the account) was subject to the authority of his personal representative on Jerry's death. Usually, POD accounts automatically pass under Colorado law to the named beneficiary and do not become part of the probate estate or subject to the authority of the decedent's personal representative. § 15-15-214, C.R.S. 2019.
¶ 2 Here, however, Jerry pledged the POD account as collateral for a loan and, under the terms of the pledge agreement Jerry signed, no beneficiary or personal representative had the right to receive "any rights in the Collateral in the event of Debtor's death or incapacity until the obligations secured hereby are paid in full." Jerry and his wife, Victoria Treviño, were jointly and severally liable on the loan.
¶ 3 When Jerry died, the amount in the account exceeded the amount secured by the pledge agreement. We hold that appellee, Victoria Treviño, as personal representative of Jerry's estate, held authority over only those funds in the account necessary to pay the loan in full, but held no authority over the remaining funds. As to the amount over which she had authority as personal representative, she owed statutory duties of good faith and impartiality to the beneficiary of the account. She violated these duties when she paid the loan solely from funds in the account without first paying down the loan from other liquid assets of the estate.
¶ 4 Victoria's actions harmed the beneficiary of the account because she paid an outstanding debt from monies to which the beneficiary was legally entitled, rather than using other liquid estate assets available for that purpose.
¶ 5 We thus partially reverse the trial court's order that Victoria did not violate her fiduciary duties, and remand for further proceedings consistent with this opinion.
¶ 6 The account Jerry opened was payable on death to his son, Esteban "Tony" Treviño, the appellant. Later, Jerry and his wife, Victoria, obtained an $80,000 secured loan from Wells Fargo Bank. Jerry and Victoria were jointly and severally liable on the loan, for which Jerry pledged the account as collateral. Victoria never had any rights in the account. The pledge agreement provided "that no joint owner, beneficiary, surviving spouse or representative of Debtor's estate gets any rights in [the account] in the event of Debtor's death or incapacity until the obligations secured hereby are paid in full."
¶ 7 In a separate transaction, Jerry and Victoria sold residential real property in Texas on an installment loan basis to a family member. Victoria testified that the monthly loan payments from the sale of the Texas property were used to pay down the Wells Fargo loan before Jerry's death and that the payments on the real property sale were roughly equivalent to the periodic payments due to Wells Fargo.
¶ 8 Jerry's will designated Victoria as his personal representative, and she assumed that role on Jerry's death. In her capacity as personal representative, Victoria, through her attorneys, sent a letter to Wells Fargo directing it to use the account to pay the $77,212.03 balance on the loan and to distribute the remaining $27,246.52 in the account to Tony, as POD beneficiary. The estate (and then Victoria, as the residual beneficiary of Jerry's estate) continued to receive monthly payments from the sale of the Texas property after Jerry's death.
¶ 9 About a year after Jerry's death, Tony filed a petition asserting that Jerry's will was invalid based on Victoria's alleged undue influence. Later, Tony claimed that Victoria had misused the account and breached her fiduciary duties when her lawyer directed Wells Fargo to use the account to pay the Wells Fargo loan in full.1 Tony sought a surcharge judgment of $71,711.81 plus interest.2
¶ 10 In a written order, the trial court rejected Tony's challenge to the will, finding that Tony did not meet his burden of proving undue influence. Tony does not appeal this part of the court's order. The trial court also rejected Tony's claim that Victoria breached her fiduciary duties in using the account to pay Jerry's debt to Wells Fargo. The court found that Victoria acted reasonably in directing Wells Fargo to use the account because the estate did not otherwise have the ability to pay the loan. Specifically, the court found that the gross value of the estate was $69,516.61, with only $2415.61 in liquid assets.
¶ 11 The court also noted that there was "a question whether Tony's ‘claim’ against the [personal representative] was timely filed" because Tony made the claim several months after the statutory expiration for creditor claims against the estate under section 15-12-803, C.R.S. 2019. The court did not decide that question because it ruled against Tony on the merits.
¶ 12 Tony appeals.3
¶ 13 We review the trial court's legal conclusions de novo but defer to the court's findings of fact when they are supported by the record. In re Estate of Owens , 2017 COA 53, ¶ 19, 413 P.3d 255. Whether an asset is part of a decedent's estate is a question of law that we review de novo. Sandstead-Corona v. Sandstead , 2018 CO 26, ¶ 69, 415 P.3d 310.
¶ 14 Loan pledge agreements are contracts, see Amos v. Aspen Alps 123, LLC , 298 P.3d 940, 959 (Colo. App. 2010), aff'd in part and rev'd in part , 2012 CO 46, 280 P.3d 1256, and we review de novo questions of contract interpretation. Ad Two, Inc. v. City & Cty. of Denver , 9 P.3d 373, 376 (Colo. 2000). "[A] court must give effect to the plain and ordinary meaning of [a contract's] terms." Emenyonu v. State Farm Fire & Cas. Co. , 885 P.2d 320, 323 (Colo. App. 1994).
¶ 15 POD designations are authorized by statute. § 15-15-203(1), C.R.S. 2019. Section 15-15-201(8), C.R.S. 2019, defines "POD designation," in pertinent part, as "the designation ... in an account payable on request to one party during the party's lifetime and on the party's death to one or more beneficiaries...."
¶ 16 A POD account is not ordinarily an asset of the estate or subject to probate because, by operation of law, at the instant of the account owner's death, the named beneficiary becomes the owner of the account. §§ 15-15-212, - 214, C.R.S. 2019; In re Estate of Owens , ¶ 11. Thus, ordinarily a personal representative would not have authority over a POD account because it never becomes an asset of the probate estate.4 Indeed, section 15-15-214 expressly provides that POD accounts are nontestamentary and not subject to estate administration. See also § 15-15-101(1), C.R.S. 2019 ().
¶ 17 Tony argues that the account, though encumbered by and subject to the terms of the pledge agreement, became his property when Jerry died. Thus, he argues that Victoria never had authority over the account because it was never part of the estate.
¶ 18 Under the plain language of the pledge agreement, however, no beneficiary or personal representative "gets any rights in the Collateral ... until the obligations secured hereby are paid in full."5 (Emphasis added.) This leaves the question of who gained authority over the account when Jerry died.
¶ 19 Neither Colorado case law nor statutes address a personal representative's authority over a POD account that is subject to a pledge agreement. Outside Colorado, authority on this topic is sparse. In Oklahoma, by statute, a POD beneficiary is entitled to the funds in a POD account only "after payment of account proceeds to any secured party with a valid security interest in the account." Tinker Fed. Credit Union v. Grant , 391 P.3d 766, 770 (Okla. Civ. App. 2016) (quoting Okla. Stat. Ann. tit. 6, § 901(B)(2) (West 2020)). But the Oklahoma court did not specifically address authority over a POD account before satisfaction of the pledge.
¶ 20 Ohio takes a different approach: a beneficiary of a POD account "receive[s] only an encumbered interest" in the account upon the decedent's death. Jamison v. Soc'y Nat'l Bank , 66 Ohio St.3d 201, 611 N.E.2d 307, 310 (1993). The creditor, however, "has an immediate right to satisfy the debt from the proceeds of the P.O.D. C.D. without first seeking payment from the decedent's estate, and the beneficiary of the P.O.D. C.D. is entitled only to the surplus." Id. at 309 ; see also In re Estate of Gullett , 36 Ohio Misc.2d 8, 521 N.E.2d 14, 15-16 (Ohio Ct. C.P. 1987).
¶ 21 We do not follow the Ohio approach because it could create a situation in which a creditor uses a POD account to satisfy obligations that should have been paid from the decedent's estate. At the same time, we see no justification for submitting an entire POD account to the authority of a personal representative when only a portion of the account is required to cover the amount owed under the pledge agreement. And while the pledge agreement in this case provided that neither the account's beneficiary nor the representative of the decedent's estate would have any interest in the account until the pledge agreement was satisfied, someone must have the authority to decide the extent to which the account should be used to cover the pledge agreement.
¶ 22 The personal representative, owing fiduciary duties to the named beneficiary (as discussed below) and governed by probate law, sits in the best position to do so. Accordin...
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