In re Estate of Riley

• Decision Date: 09 December 2011
• Docket Number: No. 2 CA–CV 2010–0149.,2 CA–CV 2010–0149.
• Parties: In re the ESTATE OF Mary A. RILEY, aka Mary Agnes Riley, aka Mary Agnes Reilly.
• Court: Arizona Court of Appeals

228 Ariz. 382

266 P.3d 1078

623 Ariz. Adv. Rep. 12

In re the ESTATE OF Mary A. RILEY, aka Mary Agnes Riley, aka Mary Agnes Reilly.

No. 2 CA–CV 2010–0149.

Court of Appeals of Arizona, Division 2, Department A.

Dec. 9, 2011.

Jonathan W. Reich, P.C. By Jonathan W. Reich, Tucson, Attorney for Appellants R.J. Riley, Regina M. Riley, F. Martin Riley, Neysa Kalil, Nora J. Simons, Cecelia Riley, Jude S. Riley, Loretta LaCorte, and Julia Riley.

Mesch, Clark & Rothschild, P.C. By J. Emery Barker and Scott H. Gan, Tucson, Attorneys for John D. Barkley, Successor Personal Representative.

Law Office of Terrence A. Jackson By Terrence A. Jackson, Tucson, Attorney for Joseph H. Riley, Jr.Law Office of Dwight W. Whitley, Jr. By Dwight W. Whitley, Jr., Tucson, Attorney for Mary C. Benge.John A. Baade, Tucson, Attorney for Kathryn Riley.

OPINION

ECKERSTROM, Presiding Judge.

¶ 1 Appellants R.J. Riley, Regina Riley, F. Martin Riley, Neysa Kalil, Nora Simons, Cecelia Riley, Jude Riley, Loretta LaCorte, and Julia Riley (hereinafter “the objectors”) appeal from the probate court's order approving a compromise between the personal representative of their mother's estate, John Barkley, and two of their siblings, Joseph Riley and Mary Benge, as well as a separate compromise between Barkley and their sibling, Kathryn Riley. Because the compromise between Barkley, Joseph, and Mary was not executed by all beneficiaries of the estate, as required by A.R.S. § 14–3952, it is void, and the probate court erred when it approved that compromise. But we will not disturb the court's approval of the compromise between Kathryn and Barkley because the objectors stipulated to its approval. Accordingly, we affirm the probate court's order in part and vacate it in part.

Compromise with Joseph and Mary¹

¶ 2 Joseph and Mary were appointed co-personal representatives of their mother's estate in February 1996. In an effort to close the estate, they filed a proposal for its distribution in March 2006. A few months later, after receiving a draft of the estate accounting, R.J. Riley filed a petition to remove Joseph and Mary as co-personal representatives and to appoint a successor personal representative. In the petition, R.J. alleged Mary and Joseph had breached their fiduciary duties and had administrated the estate improperly. R.J. also moved the probate court to appoint John Barkley as the successor personal representative of the estate. Joseph and Mary resigned as co-personal representatives, and the court granted the motion to appoint Barkley as their successor.

¶ 3 Pursuant to the probate court's order, Joseph and Mary filed an accounting for the estate, covering the period from February 1996 to July 2006. Barkley objected to the accounting, enumerating concerns about the lack of supporting documentation and inaccuracies apparent on the face of the document. Barkley requested a bench trial on the objection, which the court granted.

¶ 4 While the trial was pending, Barkley reached agreements with Mary, Joseph, and Kathryn. The agreement between Barkley, Mary, and Joseph contained a term stating it would be presented to the court for approval under A.R.S. §§ 14–3951 and 14–3952, and Barkley filed a “petition for approval of compromise of controversies” pursuant to those statutes in June 2009 for both of the agreements. Nine of the estate's thirteen beneficiaries (the objectors) filed an objection to the petition. After an evidentiary hearing, the court approved the compromises. The objectors moved for a new trial and for the court to reconsider its ruling. The court denied the motions, and this appeal followed.

¶ 5 We sua sponte reach the threshold question of whether the compromise agreement with Joseph and Mary is void for failing to be executed by all the necessary parties under § 14–3952(1). See Nat'l Union Indem. Co. v. Bruce Bros., 44 Ariz. 454, 467–68, 38 P.2d 648, 653–54 (1934) (where illegality of contract appears on face of contract or appears from evidence necessary to prove contract, court has duty to declare contract void); see also Clark v. Tinnin, 81 Ariz. 259, 263, 304 P.2d 947, 950 (1956) (waiver and estoppel cannot be invoked against void contract); cf. Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 83, 102 S.Ct. 851, 70 L.Ed.2d 833 (1982) (federal court has duty to determine whether contract violates federal law before enforcing it). Because the issue was not addressed in the parties' original briefs, we ordered them to submit supplemental briefing on whether the compromise agreement is void. Cf. State v. Curry, 187 Ariz. 623, 626–27, 931 P.2d 1133, 1136–37 (App.1996) (deciding issue raised sua sponte without benefit of supplemental briefing implicates due process concerns). Barkley has not argued, either in his supplemental brief or at oral argument, that the objectors waived the right to challenge the agreement on this ground by not raising it below. See Van Loan v. Van Loan, 116 Ariz. 272, 274, 569 P.2d 214, 216 (1977) (failure to raise issue in appellate briefs constitutes waiver); Fid. Nat'l Title Co. v. Town of Marana, 220 Ariz. 247, n. 2, 204 P.3d 1096, 1099 n. 2 (App.2009) (affirmative defenses of waiver and estoppel can be waived if not argued below).

¶ 6 A compromise agreement is void unless executed in compliance with the governing statute.² See Clark, 81 Ariz. at 263, 304 P.2d at 950 (agreement in violation of state's public policy as reflected in statutes “void as against public policy”); cf. W. Corr. Grp. v. Tierney, 208 Ariz. 583, ¶ 13, 96 P.3d 1070, 1073 (App.2004) (public contract entered in violation of statute void). Section 14–3952(1) requires the compromise to be “executed by all competent persons ... having beneficial interests or having claims which will or may be affected by the compromise.” We interpret statutes according to their plain meaning if the language is clear. Nordstrom, Inc. v. Maricopa Cnty., 207 Ariz. 553, ¶ 10, 88 P.3d 1165, 1168–69 (App.2004). And, the plain language of § 14–3952(1) provides that a compromise that has not been executed by all of the persons with beneficial interests in the estate is void.³ See, e.g., In re Estate of Sullivan, 724 N.W.2d 532, 535–36 (Minn.Ct.App.2006) (analyzing identical provision to § 14–3952); cf. Wilmot v. Wilmot, 203 Ariz. 565, ¶ 18, 58 P.3d 507, 512 (2002) (discussing § 14–3952(1) by analogy and noting it requires consent of all beneficiaries and claimants by formal agreement); In re Estate of Leathers, 19 Kan.App.2d 803, 876 P.2d 619, 620 (1994) (mediation agreement resulting from disputes over administration of will unenforceable for lacking signature of one of beneficiaries as required by statute); In re Estate of Outen, 77 N.C.App. 818, 336 S.E.2d 436, 437 (1985) (family settlement agreements generally “invalid unless all who receive under the will join in the agreement”); In re Estate of Webb, 266 S.W.3d 544, 550–51 (Tex.App.2008) ( “A family settlement agreement generally requires that all the beneficiaries of a will be included in the agreement.”).⁴

¶ 7 Barkley counters neither the general proposition that a compromise agreement not in compliance with the statute is void, nor the contention that this court must vacate a trial court's order approving a void agreement. Rather, Barkley argues he complied with § 14–3952, which, he maintains, only requires “the signatures of parties to the proposed settlement and not the agreement of all beneficiaries of the probate estate.” But, “[t]he plain language of the statute dictates that a valid proposed agreement must be signed by every member of two classes of persons—those with a beneficial interest and those with claims that will or may be affected by the proposed compromise.” Estate of Sullivan, 724 N.W.2d at 535. Barkley concedes that the objectors as heirs have a beneficial interest in the estate, but he attempts to distinguish Sullivan and avoid its interpretation of the Uniform Probate Code on the ground the compromise in that case affected the estate's distribution scheme. However, the terms of the compromise here also affect the distribution of the estate. They require Joseph to disclaim his interest in the estate, Joseph and Mary to partially reimburse the estate for its losses, and the estate to withdraw its objections to Joseph and Mary's 2006 accounting. See Estate of Leathers, 876 P.2d at 620 (mediation agreement among beneficiaries over disputes arising from administration of estate was family settlement agreement because it “distribute[d] property in a manner different from the will”).

¶ 8 Barkley further contends that broad application of the signature requirement set forth in § 14–3952(1) “would not only be impractical, it would also render the notice and approval requirements contained in A.R.S. § 14–3952(3) superfluous.” Section 14–3952(3) requires that before the court approves a settlement, notice must be given to “all interested persons or their representatives.” “Interested person” is defined to “include[ ] any trustee, heir, devisee, child, spouse, creditor, beneficiary, person holding a power of appointment and other person who has a property right in or claim against a trust estate or the estate of a decedent.” A.R.S. § 14–1201(26). Further, what constitutes an interested person “may vary from time to time and must be determined according to the particular purposes of, and matter involved in, any proceeding.” Id.

¶ 9 We disagree that a plain application of § 14–3952(1) would render the requirements of § 14–3952(3) superfluous. Section 14–3952(1) imposes the signature requirement only for those “having beneficial interests or having claims which will or may be affected by the compromise.” By contrast, § 14–3952(3) creates notice requirements for all “interested persons or their representatives.” As noted, the definition of “interested persons” encompasses not only those with “beneficial interests or ... claims which will or may be affected by the compromise,” §...