Estate of Bell, Matter of

• Decision Date: 22 November 1988
• Docket Number: No. 87-258,87-258
• Parties: In the Matter of the ESTATE OF Marie J. BELL, Deceased. DePAUL HOSPITAL, Appellant (Crossclaim Defendant), v. FIRST NATIONAL BANK AND TRUST COMPANY OF WYOMING, a/k/a Norwest Bank Cheyenne, N.A., as Personal Representative and Testamentary Trustee of the Estate of Marie J. Bell, deceased; and Blade Jordan and Teresa Jordan, Appellees (Counterclaim Defendant and Crossclaim Defendants).
• Court: Wyoming Supreme Court

Page 689

764 P.2d 689

In the Matter of the ESTATE OF Marie J. BELL, Deceased.

DePAUL HOSPITAL, Appellant (Crossclaim Defendant), v. FIRST NATIONAL BANK AND TRUST COMPANY OF WYOMING, a/k/a Norwest Bank Cheyenne, N.A., as Personal Representative and Testamentary Trustee of the Estate of Marie J. Bell, deceased; and Blade Jordan and Teresa Jordan, Appellees (Counterclaim Defendant and Crossclaim Defendants).

No. 87-258.

Supreme Court of Wyoming.

Nov. 22, 1988.

Thomas N. Long of Hirst & Applegate, Cheyenne, for appellant.

Frederick G. Loomis (argued) of Loomis, Lazear, Wilson & Pickett, Cheyenne, for Norwest Bank.

Sherrill A. Veal (argued) of Carmichael, McNiff & Patton, Cheyenne, for the Jordans.

Before CARDINE, C.J., and THOMAS and MACY, JJ., and GUTHRIE and BROWN, JJ., Retired.

CARDINE, Chief Justice.

In this probate case, appellant DePaul Hospital, a residuary legatee of the estate of Marie Bell, appeals from the district court's Second Supplemental Final Decree denying its objection to apportionment of federal estate tax among the residuary legatees. The issues presented for our review are whether litigation of the tax apportionment issue is precluded by res judicata or collateral estoppel and, if not, whether the intra-residual federal estate tax apportionment method proposed by appellee Norwest, personal representative of the estate, was erroneous.

We affirm.

Appellant DePaul Hospital (DePaul) is a residuary legatee of Marie J. Bell's estate. The other residuary legatees are Memorial Hospital (not a party to this appeal) and appellees Blade Jordon and Teresa Jordan. Appellee Norwest is the personal representative and testamentary trustee of the estate. The residuary clause of Marie Bell's fifth codicil directs the distribution of the residuary estate as follows:

"After payment of the devises and bequests and the distribution of the assets provided for in ITEM 4(12)(a), (b) and (c), I direct that all remaining principal of the estate, either after conversion to cash or by distribution in kind as solely determined by the Trustee, shall be distributed in the proportionate parts as follows:

"(a) An undivided five-eighths ( 5/8ths) part unto Teresa Jordan, provided that if she shall not survive me said devise shall lapse.

"(b) An undivided one-eighth ( 1/8th) part unto Blade Jordan, provided that if he shall not survive me said devise shall lapse.

"(c) An undivided one-eighth ( 1/8th) part unto DePaul Hospital of Cheyenne, Wyoming.

"(d) An undivided one-eighth ( 1/8th) part unto Memorial Hospital of Laramie County, Wyoming."

Estate taxes are discussed in Item 2 of Marie Bell's will, which states:

"I direct that my co-executors pay out of my estate my funeral expenses, the expenses of administering my estate, the expenses of my last illness, and all of my just debts, but such payments shall not include any payments for estate and inheritance taxes. All estate taxes, federal and state, imposed by reason of my death, with respect to any property (whether disposed of by this will or not) required to be included in my gross estate for estate tax purposes, and interest or penalties thereon, shall be borne by my residuary estate. All legacy, succession, inheritance and like taxes (as distinguished from estate taxes), imposed by reason of my death on any property (whether disposed of by this will or not), and interest or penalties thereon, shall be borne by my residuary estate. So far as practicable and reasonable, my Executors shall pay as soon as convenient after my death any of the taxes referred to in the preceding sentence on future or contingent interests." (emphasis added)

In Matter of Estate of Bell, Wyo., 726 P.2d 71 (1986), we concluded that the effect of this tax clause was to impose the burden of estate taxes upon the residuary estate. The substantive question now raised by DePaul is how the tax burden should be divided among the residuary distributees.

DePaul contends that after pre-residual distribution and payment of taxes attributable to the pre-residual dispositions, the residue should be divided among the residuary distributees, each of whom must bear that share of tax which is generated by its own residuary bequest. If the taxes are apportioned in this manner, which is consistent with the statutory apportionment scheme, DePaul and Memorial would bear no tax attributable to the residuary estate because they are charitable organizations, and the significant burden of the tax would fall on the Jordans. See W.S. 2-10-103 and 2-10-106. In response, appellees argue that after pre-residual distribution, all taxes, including those attributable to the residuary estate, should be taken out of the residue and the amount remaining should be distributed to the beneficiaries according to their respective shares as described in the will, without regard to their charitable or non-charitable status. This method would result in a much greater net share for the Jordans.

Before we reach this substantive question, we must address appellees' contention that the issue is res judicata. In Estate of Bell, supra, we reviewed a single district court order entered in two cases that had been consolidated for trial. One of the consolidated cases was the probate of Marie Bell's will, and the other was a related declaratory judgment action. In the order, and the letter opinion which it incorporated, the district court concluded that Marie Bell's will directed that all estate taxes would be borne by her residuary estate. The court found that the language of the will in this regard was sufficiently clear to override the apportionment scheme of the Uniform Estate Tax Apportionment Act, W.S. 2-10-101 through 2-10-110. Estate of Bell, supra; see Matter of Estate of Stratton, Wyo., 756 P.2d 1342 (1988). We affirmed the district court's ruling. Estate of Bell, supra.

After remand, Norwest filed its final report, accounting and petition for distribution of Marie Bell's estate. On January 2, 1987, DePaul filed an objection contending that Norwest's method of intra-residuary tax apportionment was incorrect and that the charitable residuary distributees, including DePaul, should not pay tax attributable to the residuary bequests. DePaul argued that even if the language of the will contained a general direction that estate taxes should be borne by the residuary estate, the issue of "intra-residuary" apportionment among the residuary distributees was not addressed by the will and therefore the provisions of the Uniform Estate Tax Apportionment Act controlled the issue. In response, Norwest contended that the question of tax apportionment had already been decided in the court's earlier final order which was affirmed by this court.

The district court entered a final decree of distribution on March 17, 1987, which expressly disposed of all matters pertaining to the Marie Bell estate except tax apportionment and two other issues not relevant to this appeal. In a "Second Supplemental Final Decree," the court concluded that the tax apportionment issue raised by DePaul's objection had been decided in the earlier order and DePaul was therefore precluded from raising it again. DePaul now appeals from the district court's second supplemental final decree.

The district court erred in concluding that the issue was precluded. Under general principles of issue preclusion, a party is precluded from relitigating an issue only if it was actually litigated and actually decided in an...