Hollis v. Forrester

• Decision Date: 29 October 2004
• Docket Number: 2030500.
• Citation: 914 So.2d 852
• Parties: Susan Louise Phelps HOLLIS et al. v. Howard FORRESTER, as executor of the estate of Louise Forrester; et al.
• Court: Alabama Supreme Court

Page 852

914 So.2d 852

Susan Louise Phelps HOLLIS et al. v. Howard FORRESTER, as executor of the estate of Louise Forrester; et al.

2030500.

Court of Civil Appeals of Alabama.

October 29, 2004.

Charles D. Rosser of Rosser, Marthaler & Rosser, Tuscumbia, for appellants.

William P. Gray, Jr., and Harry O. Yates, Jr., of Gray & Associates, L.L.C., Birmingham; and Douglas L. McWhorter of Dominick, Fletcher, Yeilding, Wood & Lloyd, P.A., Birmingham, for appellee Howard Forrester.

PITTMAN, Judge.

This appeal concerns the proper application, to stipulated facts, of Ala.Code 1975, § 40-15-18, which provides, in pertinent part:

"Unless the decedent directs otherwise in his will, all estate taxes, whether state or federal, payable by reason of the death of the decedent, shall be paid by the executor or other personal representative out of the estate property and shall be a charge against the residue thereof, and the executor or other personal representative shall be under no duty to recover from anyone for the benefit of the estate the pro rata portion of the estate tax attributable to inclusion in the gross estate of any property, including proceeds of policies of insurance upon the life of the decedent receivable by a beneficiary other than the executor or other personal representative, which does not pass to the executor or other personal representative as a part of the estate."

The record reveals that George Edward Lourie ("George") and Emily Barnes Lourie ("Emily"), a married couple, executed wills on January 21, 1983. George predeceased Emily, and his will was admitted to probate in Jefferson County in 1997. In addition to stating several specific bequests, George's will provided that if Emily survived him, the residue of his estate was to be divided into two parts, which were designated as the "Marital Share" and the "Family Share." George intended that all or part of the "Marital Share" would constitute estate-tax-advantaged "qualified terminable interest property" ("QTIP") under § 2056(b)(7) of the United States Internal Revenue Code should his executors make an election to that effect. George's executors made such an election, and, pursuant to the terms of George's will, the moneys allocated to the "Marital Share" were paid into two separate trusts, a non-QTIP "Exempt Marital Trust" and a QTIP "Non-Exempt Marital Trust." The effect of the executors' election was to allocate the assets in the "Non-Exempt Marital Trust" to Emily's estate for estate-tax purposes rather than subjecting them to estate taxation upon George's death; however, George's will also provided that upon Emily's death, the corpus of the "Non-Exempt Marital Trust," as well as the corpus of the "Exempt Marital Trust" and the "Family Trust," would pass to the three daughters of his sister Dorothy L. Phelps: Susan Louise Phelps Hollis, Ann Lourie Phelps Nichols, and Margaret Jo Phelps Snow ("the nieces").

Emily died in March 2001, and her will was admitted to probate in Jefferson County soon thereafter; AmSouth Bank, N.A. ("AmSouth"), as successor to the First National Bank of Birmingham, was named executor of Emily's will. In addition to various bequests of personal property and testamentary gifts of life-insurance proceeds, Emily's will provided, in pertinent part, that the residue of her estate would pass to George or, if he should die before her, to George's sister Dorothy L. Phelps (who also died before Emily). Emily's will did not contain any provision concerning the payment of estate taxes.

In June 2002, AmSouth filed a "Petition for Instructions" in the Jefferson Probate Court as to three issues, one of which concerned the disposition of Emily's residuary estate; AmSouth questioned whether, in light of Emily's having survived both of the named beneficiaries of her residual estate, that estate should be paid in accordance with Alabama's intestacy statutes. AmSouth's petition for instructions thus placed in issue the competing claims to the residue of Emily's estate of two groups of putative beneficiaries: (1) the nieces, and (2) Emily's heirs at law. AmSouth later amended its petition for instructions so as to request that the probate court determine whether the Alabama estate tax attributable to the inclusion of the "Non-Exempt Marital Trust" in Emily's estate should be paid out of the corpus of that trust or from Emily's estate.

On April 17, 2003, the probate court entered an order pursuant to Rule 12(c), Ala. R. Civ. P., with respect to the competing claims to the residue of Emily's estate, declaring that the nieces had no valid claim to that residue; the probate court also directed the entry of a final judgment, pursuant to Rule 54(b), Ala. R. Civ. P., with respect to that order. The nieces filed a motion to alter, amend, or vacate the judgment as it pertained to the disposition of Emily's residual estate; although all parties consented to allow that motion to remain pending in the probate court until October 1, 2003, the probate court did not act on that motion on or before that day. The parties filed stipulations of facts that, among other things, addressed the estate-tax-liability issue, and they filed briefs concerning their respective positions as to that issue. The probate court, on December 29, 2003, entered an order in which that court purported to deny the nieces' postjudgment motion, declared that the Alabama estate taxes attributable to the inclusion of the "Non-Exempt Marital Trust" in Emily's estate should be borne by that trust and not by the estate, and "ratified and approved" AmSouth's payment of those taxes from that trust. The nieces appealed to the Alabama Supreme Court, which transferred the appeal to this court pursuant to § 12-2-7(6), Ala.Code 1975.

Although the nieces' appellate brief raised three issues, two of those issues, both of which concerned the disposition of Emily's residual estate, were expressly waived after submission by their attorney. "[W]here an appellant expressly waives error in this court, we will disregard that error as a basis of reversal." Lary v. Flasch Bus. Consulting, 878 So.2d 1158, 1161 (Ala.Civ.App.2003) (citing Baggett v. Webb, 46 Ala.App. 666, 670, 248 So.2d 275, 278 (Civ.1971), and Rowan v. Rowan, 45 Ala.App. 505, 506, 232 So.2d 685, 686 (Civ.1970)). We therefore need not determine whether the nieces' appeal was timely as to those issues or address those issues on the merits.

The sole remaining issue concerns whether the probate court correctly ruled that Alabama estate taxes that are assessed as a consequence of including the corpus of the "Non-Exempt Marital Trust" in Emily's estate should be paid from the corpus of that trust or from the residue of Emily's estate. The nieces argue that the probate court erred in not following Cleveland v. Compass Bank, 652 So.2d 1134 (Ala.1994), the only Alabama case to address the tax-allocation issue in the context of a QTIP trust. Howard...