Estate of Winter, Matter of, 86-332

• Decision Date: 05 March 1987
• Docket Number: No. 86-332,86-332
• Citation: 226 Mont. 24,44 St.Rep. 430,734 P.2d 178
• Parties: In the Matter of the ESTATE OF James J. WINTER.
• Court: Montana Supreme Court

Page 178

734 P.2d 178

226 Mont. 24

In the Matter of the ESTATE OF James J. WINTER.

No. 86-332.

Supreme Court of Montana.

Submitted on Briefs Dec. 31, 1986.

Decided March 5, 1987.

Mike Greely, Atty. Gen., Clay R. Smith, Asst. Atty. Gen., Helena, for appellant.

William M. Kebe, Jr., Butte, for respondent.

HUNT, Justice.

The Montana Department of Revenue (DOR) appeals the order of the District Court, Second Judicial District, County of Silver Bow, determining the amount of inheritance tax computed upon the estate of James Winter, deceased.

We reverse.

DOR raises two issues on appeal:

1. Whether DOR is barred from issuing an amended certificate of inheritance tax by § 72-16-402, MCA, laches or estoppel?

2. Whether an inheritance tax is computed based upon the distribution scheme of the probated will or of the will-contest settlement agreements?

James Winter died on March 17, 1983, in Butte, Montana. The personal representative of the estate, Rita Harrington, filed a petition for formal probate of the decedent's will in the District Court on March 24, 1983. The will, dated February 1, 1983 bequeathed $1,000 to each of the decedent's four living grandchildren and the remainder of the estate to Mrs. Harrington, decedent's niece. Objections to the formal probate of the February, 1983 will were filed by Michael Hirschberg, one of the decedent's grandchildren, and Marie Richardson, a non-relative of the decedent. Mr. Hirschberg and Mrs. Richardson had jointly initiated a probate proceeding in Utah on March 21, 1983, based on a will of the decedent dated March 4, 1978. The 1978 will appointed Mrs. Richardson as personal representative, bequeathed $5,000 to Mrs. Harrington and Mrs. Richardson's husband, and the remainder of the estate to the decedent's grandchildren.

On April 15, 1983, the District Court entered an order admitting the 1983 will to probate, finding that this will had not been revoked and was in all respects valid. On that same date, Mrs. Harrington and Mr. Hirschberg executed an agreement whereby Mr. Hirschberg consented to the probate of the 1983 will and Mrs. Harrington agreed to assign and transfer to him one half of her net distributive share due under the 1983 will. A second agreement was entered into between Mrs. Harrington and Mrs. Richardson, whereby Mrs. Richardson was recognized as a joint tenant in three savings accounts of the decedent and whereby she also withdrew her Utah petition for the probate of the 1978 will.

In November, 1983, Mrs. Harrington submitted an application to DOR for a determination of inheritance tax due. The application distributed the shares of the estate according to the terms of the 1983 will and the settlement agreements. A copy of the 1983 will was received by DOR on December 6, 1983. On December 8, a DOR tax examiner called the attorney for the estate and inquired about the difference between the distribution set forth in the will and the distribution set forth in the application. The attorney explained that the application's distribution scheme was based in part on the settlement agreements, and he thereafter mailed a copy of the agreements to DOR.

The District Court issued a decree of distribution and an order approving final account of the estate on April 16, 1984. On April 19, the DOR issued a certificate of inheritance tax due based on the following calculations:

                                Distributive              Net Taxable  Amount of
                Distributee     Share          Exemption  Share        Tax
                --------------  -------------  ---------  -----------  ---------
                R. Harrington   $50,214.32     $1,000.00  $49,214.32   $2,937.15
                M. Hirschberg    50,214.32      7,000.00   43,214.32    1,278.57
                J. Hirschberg     1,000.00      7,000.00      -            -
                P. Hirschberg     1,000.00      7,000.00      -            -
                S. Hitchman       1,000.00      7,000.00      -            -
                M. Richardson    27,080.00        -        27,080.00    2,332.80
                                                                       ---------
                                                                       $6,498.52
                

[sic (exemption amounts) ]

On April 20, the estate's attorney telephoned the DOR tax examiner and objected to the inclusion of the entire amount of Mrs. Richardson's joint savings account as taxable, adding that the estate would not pay the additional amount of tax. The tax examiner notified her supervisor of this conversation, and the supervisor thoroughly reviewed the files for the estate. This review of the files led the supervisor to believe that the distributive scheme of the will, rather than the distributive scheme of the settlement agreements, should control the incidence of inheritance tax liability. A revised findings for the amount of inheritance tax due was completed, and an amended inheritance tax certificate was issued May 18, 1984. The amended certificate apportioned tax liability as follows:

                               Distributive             Net Taxable  Amount of
                Distributee    Share         Exemption     Share        Tax
                -------------  ------------  ---------  -----------  ----------
                S. Hitchman    $  1,000.00   $1,000.00      $ -         $ -
                M. Hirschberg     1,000.00    1,000.00         -           -
                J. Hirschberg     1,000.00    1,000.00         -           -
                P. Hirschberg     1,000.00    1,000.00         -           -
                M. Richardson    24,380.56     -          24,380.56    1,950.44
                R. Harrington   102,128.08      690.00  $101,438.08    9,230.09
                                                                     ----------
                                                                     $11,180.53
                                                                     ----------
                

The estate appealed the amended certificate to the District Court. The court held that DOR was in violation of § 72-16-402, MCA, which states DOR "shall with reasonable diligence" ascertain the amount of inheritance tax due. By failing to act with reasonable diligence, DOR was estopped from amending its certificate of inheritance tax liability. The court also held that the inheritance tax should be based upon the distributive share actually received, rather than on the share set forth in the 1983 will.

The District Court found DOR's issuance of the amended tax certificate was barred by laches. The court reasoned that since DOR had in its possession a copy of the settlement agreement since December 9, 1983, its decision to amend the amount of the tax due was not reasonably diligent.

Laches is negligence in the assertion of a right; "it exists when there has been unexplained delay of such duration or character as to render the enforcement of the asserted right inequitable." Montgomery v. First National Bank of Dillon (1943), 114 Mont. 395, 408-09, 136 P.2d 760, 766, (quoting Riley v. Blacker (1915), 51 Mont. 364, 370, 152 P. 758, 759). We hold that the doctrine of laches is not applicable to the case at bar.

A review of the record discloses an ongoing conflict with the correct determination of inheritance tax. Mrs. Harrington first submitted an application for determination of inheritance...