Estate of Miles v. Miles
| Decision Date | 15 February 2000 |
| Docket Number | No. 99-019.,99-019. |
| Citation | 994 P.2d 1139,2000 MT 41 |
| Parties | In the Matter of the ESTATE OF Charles Lauren MILES, Decedent, v. Garry Norval MILES, Lawrence Miles, Ronald Kay Miles and Kenneth Lauren Miles, Heirs to the Estate of Charles Lauren Miles, Heirs/Appellants, Ms. Patsy Joan Miles, Personal Representative/Respondent. |
| Court | Montana Supreme Court |
Brian F. Close, Bozeman, Montana for Appellant.
Kevin S. Brown, Paoli & Brown, Livingston, Montana; Karl Knuchel, Livingston, Montana, for Respondent.
¶ 1 Appellants Garry Norval Miles, Lawrence Miles, Ronald Kay Miles, and Kenneth Lauren Miles are the children of the deceased, Charles Lauren Miles. The children are appealing various rulings of the District Court for the Sixth Judicial District, Park County, in connection with their father's estate. We affirm and remand for further proceedings consistent with this Opinion.
¶ 2 The following issues are raised on appeal:
¶ 3 1. Did the District Court err as a matter of law in ruling that annuity contracts are not insurance under Montana law?
¶ 4 2. Did the District Court err as a matter of law in ruling that the decedent's children are not interested persons under § 72-1-103(25), MCA?
¶ 5 3. Should this Court, in exercising its authority over the bar, require that probate fees be charged on an hourly basis?
¶ 6 4. Did the District Court err in denying discovery of the records of the personal representative and her attorneys?
¶ 7 5. Did the District Court err as a matter of law in refusing to sanction the estate's attorneys and, instead, sanctioning the Heirs' attorney.
¶ 8 Charles Lauren Miles (Charles) died on June 10, 1997. In a will drafted in 1982, Charles provided that, in the event of his death, all of his property passes to Patsy Joan Miles (Patsy), his ex-wife. He also nominated Patsy as personal representative. Under Article II of the will, all estate expenses were to be deducted from the balance of any insurance proceeds. Article V of the will provided that 50% of the balance of any insurance proceeds payable upon death shall go to Garry Norval Miles, Lawrence Miles, Ronald Kay Miles, and Kenneth Lauren Miles (the Heirs), Charles' four children from a previous marriage, with the remaining 50% payable to Patsy.
¶ 9 Charles had purchased a $20,000 term life insurance policy through Veteran's Group Insurance Trust on March 10, 1981. A few months later, he added an additional $4,000 in term life insurance coverage to the policy. This insurance policy was in effect when Charles drafted his will in 1982.
¶ 10 On May 27, 1994, Charles paid $30,000 for a tax deferred variable annuity contract issued by Hartford Life Insurance. The annuity contract provided that the funds would be managed by Putnam Investments and the Putnam Capital Manager. Charles directed that 25% of the $30,000 be allocated to a Putnam Capital Management "Global Growth Fund" and the remaining 75% be allocated to a "Growth and Income Fund." In applying for this annuity, Charles responded "no" to a question asking whether the annuity would replace one or more existing annuity or life insurance contracts. ¶ 11 In a cover letter sent to Charles upon entering into the contract, Putnam informed Charles:
¶ 12 Under the terms of an amendatory rider, Charles had an annual withdrawal privilege, without penalty, of 10% during the first seven contract years and 100% of the contract value after year seven. In addition, Charles had the right to withdraw the balance of the contract subject to a surrender charge. The surrender charge started at 7% for amounts withdrawn in year one, sliding down to 0% for withdrawals after year seven. The annuity contract provided for a refund of any remaining balance upon Charles' death. At the time of his death, the balance in the annuity was $52,167.91.
¶ 13 Charles left a gross estate valued for Federal Estate Tax purposes at $580,351. Patsy voluntarily disclaimed $120,000 of Charles' IRA so that those proceeds could be distributed to the Heirs. Patsy also voluntarily disclaimed approximately $24,955 worth of personal property to the Heirs. Nevertheless, the Heirs demanded one half of the annuity investment claiming that they were entitled to that amount under Charles' will. The estate denied their claim on the grounds that the annuity investment funds were not "insurance proceeds payable upon death" as specified in the will.
¶ 14 On September 2, 1998, the District Court held a hearing on whether the annuity funds constituted insurance proceeds payable upon death for purposes of estate distribution. After listening to testimony from various experts, the court took the matter under advisement.
¶ 15 Although the District Court had not yet ruled on whether the annuity funds were insurance proceeds, the Heirs demanded that Patsy, as personal representative, account for any and all fees which would be paid out of the annuity fund in the event the court ruled that those funds were indeed insurance proceeds. On September 9, 1998, the Heirs' attorney, Brian Close, filed a motion and brief under Rule 11, M.R.Civ.P., accusing the estate's attorney, Kevin Brown, of making false statements of law. In addition, Close informed the court that the Heirs intended to file an action against Brown with the State Bar disciplinary committee.
¶ 16 On September 23, 1998, the estate received a discovery request from Close demanding that Brown turn over copies of his law school grades, academic transcripts and final class ranking. Brown was an associate in the Fred Paoli, Jr. law firm. Although Paoli had never appeared on behalf of the estate or billed the estate for his services, Close demanded that Paoli identify the dates he was absent from Livingston since June 10, 1997. Close also demanded that Brown, Paoli and attorney Karl Knuchel, who was assisting Brown in the case, state whether they had ever had a complaint lodged against them with any bar disciplinary committee and to give the details of any such complaint. In response, Brown sent the Heirs a letter giving them seven days to withdraw their discovery requests or face a motion for a protective order and for sanctions.
¶ 17 Rather than comply, Close submitted a brief to the District Court on September 25, 1998, wherein he claimed that Brown was "little more than a glorified paralegal." Close also accused Patsy and the estate's attorneys of converting estate funds for their own use; committing legal malpractice; cheating the estate; and "practicing in the worst traditions of the bar." Close stated that he intended to refer the estate's attorneys to the "Disciplinary Committee" at the end of the estate proceedings. Consequently, Brown filed a motion in the District Court on September 30, 1998, for a protective order and for sanctions against Close for the harassing and vexatious discovery demands and for the unfounded accusations of fraudulent and unethical behavior leveled against him by Close.
¶ 18 On October 13, 1998, Close submitted a 27-page brief wherein he openly accused opposing counsel of violating Rule 11, M.R.Civ.P., and the Rules of Professional Conduct by making knowing misrepresentations to the District Court. In his brief, Close called opposing counsel "unscrupulous members of the bar" who use the provisions of the Uniform Probate Code "as a vehicle to exploit the real client." Close also accused Paoli of abandoning his law practice.
¶ 19 By Order dated October 20, 1998, the District Court ordered that Close's brief be stricken because it exceeded the 20-page limit without prior leave of court. Close subsequently submitted a redacted reply brief wherein he again accused opposing counsel of making "knowing misrepresentations" to the District Court and acting in a manner"sanctionable and subject to disciplinary action."
¶ 20 On October 27, 1998, the District Court held a hearing regarding the estate's motion for a protective order and the cross motions for Rule 11 sanctions. The court subsequently issued an order wherein the court determined that the Heirs' request that the estate provide a copy of any documents pertaining to the decedent was vague, overly broad and unduly burdensome. The court also denied the Heirs' request for the production of every inheritance tax return filed by the estate's attorneys in the past five years and the personal logs demonstrating the daily whereabouts of attorney Paoli since June 10, 1997.
¶ 21 The District Court ordered that the estate deliver to Close copies of any documents Patsy intended to rely on to establish her fee and that the estate produce copies of any documents received or sent to the Heirs since June 10, 1997. The court ordered that the parties disclose to each other the names of any experts they intended to call at the November 25, 1998 hearing regarding the reasonableness of the fees charged.
¶ 22 In addition, the District Court granted the estate's motion for a protective order regarding the discovery of Brown's law school transcripts, final class rank, and whether any complaints had been lodged against Brown or Knuchel with the Commission on Practice. The court determined that Close's discovery requests were designed to harass and embarrass opposing counsel and needlessly increase the cost of litigation.
¶ 23 The District Court expressly denied Close's Rule 11 motion finding that the estate's attorneys had not committed...
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