In The Matter Of The Estate of Leland E. Thurston v. Thurston
| Decision Date | 12 December 2000 |
| Docket Number | No. 1 CA-CV 99-0629.,1 CA-CV 99-0629. |
| Parties | In the Matter of the ESTATE OF Leland E. THURSTON, Deceased. Roberta L. Keller, Appellant, v. John Thurston and Bess Thurston Foster, in their individual capacities; John Thurston and Bess Thurston Foster, in their official capacities as co-personal representatives of the Estate of Leland Thurston, Appellees. |
| Court | Arizona Court of Appeals |
Beneficiary filed motion to set aside court-approved first accounting in her father's estate and petition to remove co-personal representatives, alleging that co-personal representatives fraudulently failed to disclose documents concerning classification of estate assets. Following a bench trial, the Superior Court, Coconino County, No. PB 88-9073, J. Michael Flournoy and Robert B. Van Wyck, JJ., denied beneficiary's motion to set aside accounting and petition for removal, and denied beneficiary's motion to alter or amend the judgment. Beneficiary appealed. The Court of Appeals, Ehrlich, J., held that: (1) evidence supported probate court's finding that co-personal representatives did not engage in extrinsic fraud that prevented beneficiary from timely objecting to the first accounting, and (2) probate court did not abuse its discretion in allowing estate's attorney to testify at evidentiary hearing.
Affirmed.
Blunt & Associates, P.C. by A. Paul Blunt, Scottsdale, Attorneys for Appellant.
Mariscal, Weeks, McIntyre & Friedlander, P.A. by William Novotny and D. Samuel Coffman, Phoenix, Attorneys for Appellees as Co-Personal Representatives.
Ulrich & Anger, P.C. by Paul G. Ulrich, Phoenix and Thomas J. Shumard, Phoenix, Attorneys for Appellees in their individual capacities.
¶ 1 Roberta Keller is attempting to set aside the court-approved first accounting in her father's estate; she claims that the personal representatives fraudulently failed to disclose documents concerning the classification of assets in the estate. The probate court found that Roberta failed to prove even a prima facie case of such extrinsic fraud and denied her motion to set aside the accounting. We agree and thus affirm the judgment.
1¶ 2 Leland and Bonnie Thurston were married in 1964. Leland had five children from previous marriages, and Bonnie had a child from a previous marriage. Together, Leland and Bonnie had three children: John Thurston, Clarinda Thurston Vail and Bess Thurston Foster.
¶ 3 Bonnie died on May 14, 1987, and, until his death on July 10, 1988, Leland was the personal representative ("PR") of her estate. After Leland died, Bess became the PR of Bonnie's estate, and John and Bess were appointed co-personal representatives of Leland's estate ("Co-PRs").
¶ 4 The beneficiaries of Leland's estate are John, Bess, Clarinda and Leland's three daughters from previous marriages, Roberta Keller, Sandra Herron and DeLyle Covey. The beneficiaries of Bonnie's estate are John, Bess, Clarinda and Bonnie's daughter from her previous marriage.
¶ 5 At the time of his death, Leland held interests in Red Feather Properties Limited Partnership ("Red Feather"), parcels of land in Yavapai County and Mohave County, stock in the Aspen Corporation and five promissory notes. All of these interests were described as the community property of Leland and Bonnie in the inventory and appraisement filed by the Co-PRs on July 11, 1989 (original inventory) and supplemented on February 12, 1991 (amended inventory). Copies of the original inventory and the amended inventory were served on Roberta and the other heirs.
¶ 6 In 1990, the probate court was asked to approve the settlement of a lawsuit concerning Red Feather. Petitions for orders approving the settlement along with exhibits and notices of hearing were filed in the proceedings for the estates of both Leland and Bonnie; all of these documents were served on Roberta and the other heirs. The settlement, which was approved in both estates by separate orders, provided that Leland's estate and Bonnie's estate each owned one-half of a 30.7 percent interest in Red Feather. Roberta neither objected to the Red Feather settlement, nor did she request any further documentation at that time.
¶ 7 Between December 1988, when Roberta, Sandra and DeLyle petitioned to set aside the informal probate, and July 1991, Roberta was represented in the proceedings by counsel. One of the attorneys for the two estates, Rudolph Mariscal, gave Roberta's attorney all of the information the attorney requested and invited him to review the complete records of the estates. Included in the materials sent to Roberta's attorney upon his request were documents indicating that Leland and Bonnie had held their interest in Red Feather as community property. In response, Roberta's attorney made no further effort to accept Mariscal's invitation to review the full records but thanked Mariscal for his "generous cooperation" in giving him copies of the documents he had requested and the opportunity for review.
¶ 8 On July 26, 1994, the Co-PRs petitioned the probate court to approve their first accounting, which was based on the original inventory and the amended inventory. The petition and notice of hearing on the petition were served on Roberta and the other heirs, none of whom objected, and the accounting was approved.
¶ 9 In November 1996, the Co-PRs petitioned the probate court for approval of receipts and disbursements and for a partial distribution of personal property. At the hearing on the petition, Sandra appeared and objected to the accounting on behalf of herself and Roberta.
¶ 10 Months later, Roberta's new attorney brought to her attention certificates of shares in Red Feather issued to Leland and Bonnie: one certificate, dated August 15, 1983, was issued to "L. E. Thurston and/or Bonnie Thurston;" another certificate was dated June 16, 1981, and issued to "Leland E. and Bonnie Thurston," and the third was issued on July 1, 1980, to "Leland E. or Bonnie Thurston."2
¶ 11 Sandra then filed a written objection to the Co-PRs' petition for approval of their accounting. She maintained that the shares of Red Feather had been incorrectly characterized as community property and thus divided evenly between the estates of Leland and Bonnie rather than having been allocated in their entirety to Leland's estate.
¶ 12 In an amended objection, Roberta apparently joined Sandra's objection. The two also alleged that five notes receivable should have been allocated entirely to Leland's estate instead of being divided between the two estates.
¶ 13 Bess and John moved for summary judgment, arguing that Sandra and Roberta were precluded from seeking to reclassify assets of the estate because they had failed to object to the classifications in 1989, when the inventory was filed, and in 1994, when the first accounting was filed and approved. Roberta responded that the stock certificates showed that Leland and Bonnie had held their shares in Red Feather in joint tenancy rather than as community property and that the Co-PRs had breached their fiduciary duty by operating on a contrary basis and by failing to disclose the stock certificates to the other beneficiaries of the estates.
¶ 14 Roberta also filed a petition to remove and surcharge the Co-PRs and a motion to set aside the first accounting. Sandra and DeLyle joined in these filings.
¶ 15 The trial court denied the motion for summary judgment, and the matter proceeded to trial with Mariscal and Roberta as the only witnesses. Mariscal testified that he and other attorneys at Mariscal, Weeks, McIntyre & Friedlander, P.A., the firm representing the Co-PRs and the estates, made the decisions about the filings for the estate. He further testified that the inventory and accounting had more description and detail than in a typical estate and that at no time inthe administration of the estate was any information about estate assets concealed from anyone.
¶ 16 The court found that Roberta had the burden to prove fraud by the Co-PRs by clear and convincing evidence and that she had failed to carry that burden. It ruled that the Co-PRs had not committed extrinsic fraud, and it denied the motion to set aside the first accounting and the petition for removal of the Co-PRs.
¶ 17 Roberta filed a motion to alter or amend the judgment, arguing, in part, that the court had improperly placed the burden of proof on her and that it had erred in allowing Mariscal to testify. The motion was denied, and Roberta appealed.3
¶ 18 Roberta attempted to have the first accounting set aside on the basis that the Co-PRs' failure to disclose known, relevant information-particularly the stock certificates showing the interests of Leland and Bonnie in Red Feather-denied her the information she needed to object to the accounting. She argues that this breach of fiduciary duty constitutes extrinsic fraud.
23¶ 19 Arizona long ago established that the court's approval of an estate administrator's accounting bars an attempt to reopen consideration of items presented in the accounting. In re Sullivan's Estate, 51 Ariz. 483, 494, 78 P.2d 132, 136-37 (1938). In other words, the judicial settlement of interim accountings "as to persons who receive notice and are subject to the court's jurisdiction bars subsequent litigation seeking to raise defaults or defects with respect to the matters shown or disclosed." Estrada v. Arizona Bank, 152 Ariz. 386, 389, 732 P.2d 1124, 1127 (App.1987).
45¶ 20 Despite the finality of the approval of an accounting, however, the accounting may be reconsidered if the administrator has engaged in fraudulent concealment or misrepresentation in presenting the accounting or in obtaining the approval of the court. In re Estate of Terman, 135 Ariz. 453, 455, 661 P.2d 1154, 1156 (App.1983), citing RESTATEMENT (SECOND) OF TRUSTS § 220, cmt. a (1959). Thus,
[i]f it appears that the executors or...
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