Brewer v. Peterson

• Decision Date: 28 April 1969
• Docket Number: No. 1,CA-CIV,1
• Citation: 453 P.2d 966,9 Ariz.App. 455
• Parties: Helen Irene Rymal BREWER and the First National Bank of Arizona, Phoenix, as Executor of the Estate of Netta L. MacDonald, Deceased, Appellants, v. Francis M. PETERSON and Walda J. Peterson, his wife, Appellees. 407.
• Court: Arizona Court of Appeals

Page 966

453 P.2d 966

9 Ariz.App. 455

Helen Irene Rymal BREWER and the First National Bank of Arizona, Phoenix, as Executor of the Estate of Netta L. MacDonald, Deceased, Appellants, v. Francis M. PETERSON and Walda J. Peterson, his wife, Appellees.

No. 1 CA-CIV 407.

Court of Appeals of Arizona.

April 28, 1969.

Rehearing Denied June 3, 1969.

Review Denied June 24, 1969.

Moore, Romley, Kaplan, Robbins & Green, by Elias M. Romley and Kenneth J. Sherk, Phoenix, for appellants.

Lewis, Roca, Beauchamp & Linton, by James Moeller and Charles F. Wilkinson, Phoenix, for appellees.

MOLLOY, Judge.

This appeal attempts to abolish the 'disappearing' presumption which has been adopted by our Supreme Court in a line of cases, ¹ and to cause the adoption in this state of the 'equitable apportionment' doctrine as to the payment of succession taxes imposed by federal and state laws upon decedent's estates.

The action brought asked for a declaratory judgment that certain gifts made by Netta L. MacDonald shortly before her death to her nephew, Francis M. Peterson were void, and, if not void, that the nephew be required to bear a proportionate share of the substantial estate taxes that are likely to be imposed upon this estate.

The plaintiff, Helen Rymal Brewer, is the great grandniece of the deceased. The nephew is one of deceased's two closest blood relatives living at the time of her death, her only other surviving relative of as close a relationship being Mrs. Mark Bobo, the grandmother of the plaintiff.

The gifts to the nephew were made over a period of approximately one year, at a time when Mrs. MacDonald was around the age of 85 years. The estate of this elderly Arizona pioneer consisted primarily of ranch and farm land west of the City of Phoenix. On January 18, 1960, Mrs. MacDonald executed a warranty deed which transferred the 'River Ranch,' approximately 660 acres of land, to her nephew. The value of this ranch constituted nearly 80 per cent of her total assets. On February 18, 1960, she quitclaimed to him her interest in the MacDonald Canal,' used to serve her farm land, and transferred to him the motor vehicles and farm equipment used in connection with the ranch. Early in the year 1961, she gave to the nephew the cattle and $10,000 in cash. There remained in her estate, after these transfers, only a 155-acre parcel upon which her home was located, and miscellaneous personal property. Mrs. MacDonald died on October 7, 1961.

The value of the gifts made to the defendant is in excess of $1,200,000. Property remaining in the estate is of a value of about $386,000. The Federal Internal Revenue Service has taken the position that the gifts to the nephew were made in contemplation of death, within the purview of § 2035 of the Internal Revenue Code of 1954, 26 U.S.C.A. The evidence is undisputed that Mrs. MacDonald was prompted to make these donations by an article she read in a newspaper which emphasized the inconveniences to heirs caused by probate proceedings. Under the evidence before us, we believe any court would hold these transfers must be included in her gross estate under both the Arizona ² and Federal Estate Tax provisions. See United States v. Wells, 283 U.S. 102, 118, 51 S.Ct. 446, 452, 75 L.Ed. 867, 876 (1931); Fatter v. Usry, 269 F.Supp. 582 (D.C.E.D.La.1967). In the event this is the case, the estate taxes levied will exceed the probate assets available for distribution by a substantial amount.

To invalidate these transfers, the great grandniece, who, as a baby, had lived in Mrs. MacDonald's home along with her mother for a number of years and who remained an object of Mrs. MacDonald's affection until the time of her death, contended that, at the time of these various transfers, Mrs. MacDonald was mentally incompetent and acting under undue influence of the nephew. The case was tried to a court, without a jury, and the trial court found that the decedent was mentally competent at the times of the various transfers and that there had been no undue influence practiced. Only the finding of no undue influence is attacked on appeal.

The briefs in this court present a scholarly attack upon, and an able defense of, the vanishing presumption doctrine. The appellants' brief urges that, as a matter of law, there was a 'confidential relationship' between Mrs. MacDonald and her nephew; that, accordingly, 'the burden of proving the absence of undue influence' shifted to the defendant-nephew; and that, as a matter of law, this burden of proof was not met. The appellees rejoin that the evidence did not conclusively establish a 'confidential relationship,' but that, regardless of whether such a relationship existed, the question of whether there was undue influence was one of fact as to which the evidence was in conflict and that this conflict was resolved by the trial court. We agree with this latter position.

The evidence discloses without question that Mrs. MacDonald had been very fond of her nephew, the defendant, all of his life. After his return from the Korean War, he and his wife lived upon Mrs. MacDonald's 'River Ranch.' Until the time of her death, the nephew worked for his aunt in the operation of this farm. Mrs. MacDonald lived on her nearby 'home place' and oversaw her nephew's work.

In 1958, Mrs. MacDonald fell and broke her hip, and on January 20, 1960, two days after the conveyance of the River Ranch to her nephew, she fell and broke her arm. As the result of these two injuries, and a general weakening in mental and physical function from her advanced years, Mrs. MacDonald left more of the operation of the ranch to her nephew.

There is testimony that some years prior to these transfers, she had informed a friend that she had intended to give the River Ranch to her nephew and that she had told another friend, after she had returned home from her hospitalization for the broken arm, '* * * that she was so happy, that she had executed a deed and it was recorded and everything, the ranch and the cattle were Franky's.' On both of these occasions, the evidence indicates that the nephew was not present.

The two principal transfers, those occurring in January and February of 1960, were witnessed not only by a notary public but by two friends of the family, Mrs. Jewel Jordan, State Auditor, and by Mr. Edward Winburne, Mrs. Jordan's brother, a rancher who had rented pasture land from Mrs. MacDonald. Both of these witnesses testified that Mrs. MacDonald appeared to be in full possession of her faculties and to be pleased that the transfer of the ranch was accomplished by the warranty deed. The notary public also testified as to the mental competency of the grantor and to the apparent lack of undue influence. All witnesses agreed that Mrs. MacDonald was, by natural temperament, a strong-willed person. She continued to transact some of her important business, without any apparent advice from her nephew, until only a few months before her death.

The test of undue influence insofar as the execution of a deed is concerned has been stated by our Supreme Court to be:

'Undue influence which will justify the setting aside of an executed deed must have been of such a nature as to deprive the grantor of his free agency, and thus to render his act more the offspring of the will of another than of his own will.' Pass v. Stephens, 22 Ariz. 461, 472, 198 P. 712, 716 (1921).

In connection with a will, the latest pronouncement, as to the nature of undue influence, is:

'It is necessary for the contestants to introduce sufficient evidence to show that the testatrix' will was overpowered and the will of another substituted in its stead, in order for a jury to find that the will was a product of undue influence.' In re Estate of Harber, 102 Ariz. 285, 292, 428 P.2d 662, 669 (1967).

We see no substantial distinction between these definitions, and we unabashedly use, as have both litigants, authorities pertaining to undue influence in the execution of wills as have bearing upon a challenge to these Inter vivos gifts. We see no reason to have two sets of legal rules to govern these analogous problems.

A great portion of the briefs has been devoted to showing that one side or the other, at various stages of this trial, had the burden of proving undue influence, or lack of it, by various degrees of proof. We believe the procedural posture on appeal creates no need for us to determine whether, when, or to what degree, this burden was cast back and forth. This is a case tried to the court; hence we have no problem of jury instructions.

In re Harber's Estate, Supra, particularly 'Note 1' at 102 Ariz. 291, 428 P.2d 662, makes it clear that in a will contest, the burden of proof never shifts from the contestant to prove undue influence. As we have stated, we see no reason to have a different body of law for gift deeds; but, even if we accept the suggestion of Amado v. Aguirre, 63 Ariz. 213, 161 P.2d 117, 160 A.L.R. 1126 (1945), that, in the case of a gift deed, when there is a 'confidential relation' (63 Ariz. at 219, 161 P.2d 117) between the donor and donee, the burden is on the donee to establish by 'clear and convincing evidence' (63 Ariz. at 219, 161 P.2d 117) that there was no undue influence, the result would be the same here. Whether Mrs. MacDonald was under undue influence or not in making these transfers is a matter of determining which body of conflicting evidence to accept and which to reject. This, even when the burden of proof requires 'clear and convincing' evidence, is largely a matter for the trier of fact. Tonelson v. Haines, 2 Ariz.App. 127, 406 P.2d 845 (1965).

We believe it was proper for the trier of fact to consider all the inferences which arise from the evidence that the nephew caused the legal documents effectuating these transfers to be prepared, that Mrs. MacDonald was elderly and in poor health, that the nephew managed the River Ranch for her, that he secured no independent legal advice...