Reynolds v. Reynolds, No. NP 2006-0063 (R.I. Super 4/2/2007)
| Decision Date | 02 April 2007 |
| Docket Number | No. NP 2006-0063,NP 2006-0063 |
| Parties | MARY H. REYNOLDS and GREGORY F. FATER, as EXECUTORS OF THE WILL OF CHARLES C. REYNOLDS v. EDWARD P. REYNOLDS, ELLEN C. REYNOLDS, and NANCY E.R. WHARTON. |
| Court | Rhode Island Superior Court |
Mark A. Sjoberg, Esq., Sjoberg & Votta Law Offices Warwick, RI, Attorneys for Appellants (Mary Reynolds and Gregory Fater)
Daniel P. McKiernan, Esq., McKiernan, Thompson & Millea Providence, RI, (Nancy E.R. Wharton), Peter J. Brockmann, Peter J. Brockmann & Associates, Ltd., Jamestown, RI, (Edward P. Reynolds and Ellen C. Reynolds), Emily J. Murphy Chamberlin, Esq., Morneau & Murphy, Jamestown, RI, for Appellees.
DECISION
This matter is before the Court on the appeal by Mary H. Reynolds and Gregory F. Fater ("Appellants"), as Executors of the Will of Charles C. Reynolds, from an Order of the Probate Court of the Town of Jamestown, filed on January 10, 2006. The Probate Court's Order, among other things, denied Appellants' petition for tax allocation and apportionment pursuant to the Uniform Estate Tax Apportionment Act, R.I. Gen. Laws § 44-23.1-1 et seq. The Court has reviewed the evidence and the applicable law, together with the parties' legal memoranda and oral arguments, and now issues this written decision.
This case involves the administration of the estate of Charles C. Reynolds ("Decedent") and the interpretation of certain provisions of his Last Will and Testament. On October 2, 2000, Decedent, with the assistance of his attorney, Gregory F. Fater, executed the will currently in dispute. In relevant part, the will provides:
"First: I direct my Executor, hereinafter named, to pay all my just debts, funeral expenses and expenses of administration, including as an expense of administration, all estate, legacy, succession and inheritance taxes.
. . .
Third: In the event that my wife, MARY H. REYNOLDS, shall survive me, I provided as follows:
(a) I give and bequeath to my said wife all household furniture and furnishings, silverware, ornaments, jewelry, automobiles, clothing and personal effects, and all other tangible personal property of every name, nature and description, which I may own at the time of my death.
(b) I give and bequeath the sum equal to one third of the personal exemption allowed on Federal Estate Taxes (currently $675,000.00) to each of my children, Nancy E. R. Wharton, Edward P. Reynolds, and Ellen C. Reynolds. I have provided a Transfer on Death Agreement for this purpose . . . .
(c) I give, devise and bequeath all the rest, residue and remainder of my property and estate, real, personal or mixed, wheresoever situated and howsoever and whensoever acquired, whether before of after the execution hereof to which I may be in any way entitled, or over which I may have any power of appointment or disposition to my daughter NANCY E. R. WHARTON and my attorney GREGORY F. FATER, as Co-Trustees, for the following uses and purposes: To hold, manage, invest and reinvest the same, receive and collect the income accruing therefrom and after paying thereform all expenses of administering this trust, which in the judgment of my Trustee are properly chargeable against income, to pay the balance of the income therefrom to my wife, MARY H. REYNOLDS, or for her benefit.
. . . Upon the death of my said wife, MARY H. REYNOLDS, the Trustee shall distribute the balance of the Trust Estate, after the payment of all expenses incidental to the distribution, in equal shares, to my children, NANCY E.R. WHARTON, EDWARD P. REYNOLDS and ELLEN C. REYNOLDS."
Decedent was survived by this wife, Mary H. Reynolds, and his three children from a previous marriage: Edward Reynolds, Ellen Reynolds, and Nancy E.R. Wharton. Through his will, which was admitted to probate in Jamestown, Rhode Island, Decedent appointed Appellants as co-executors of his estate. Upon Decedent's death, non-probate property in the amount of $1,629,235 passed to Edward Reynolds, Ellen Reynolds, and Nancy E.R. Wharton ("Appellees"), including $1,328,162 from the Transfer on Death Agreement referenced in the will. This property generated federal estate taxes in the amount of $482,878, as well as $120,493 in state estate taxes. A dispute arose among the parties as to who is responsible for paying the estate taxes.
Appellants subsequently petitioned the Probate Court to determine whether the estate taxes were to be apportioned. Appellants contended that Decedent's will provides no direction regarding the payment of estate taxes. Thus, according to them, the estate taxes were to be apportioned among all interested parties, including Appellees, pursuant to the Uniform Estate Tax Apportionment Act. Conversely, Appellees took the position that Decedent's will provided that the estate taxes were to be paid from his estate and, therefore, the apportionment statute did not apply.
In an Order dated January 10, 2006, the Probate Court, without making any findings of fact or law, denied Appellants' petition and held that the estate taxes were to be paid from the residue of Decedent's estate. Appellants filed a timely appeal to this Court pursuant to R.I. Gen. Laws § 33-23-1 et seq. The matter has been briefed extensively and the parties presented oral arguments during a hearing before this Court on January 19, 2007.
Under R.I. Gen. Laws § 33-23-1, the Superior Court may review a Probate Court's order. "Any person aggrieved by an order or decree of a probate court . . . may, unless provisions be made to the contrary, appeal to the superior court for the county in which the probate court is established . . . ." Id. at § 33-23-1 (a). When "hearing probate appeals, `the Superior Court is not a court of review of assigned errors of the probate judge, but is rather court for retrial of the case de novo.'" In re Estate of Paroda, 845 A.2d 1012, 1017 (R.I. 2004) (citing Malinou v. McCarthy, 98 R.I. 189, 192, 200 A.2d 578, 579 (1964)); see also, R.I. Gen. Laws § 33-23-1 (d). While the record of a probate court proceeding may be introduced on appeal, "the findings of fact and/or decisions of the probate court may be given as much weight and deference as the superior court deems appropriate, however, the superior court shall not be bound by any such findings or decisions."1 Section 33-23-1 (d).
The thrust of Appellants' argument on appeal is that Decedent's will does not clearly preclude apportionment of estate taxes and, thus, the provisions of the Uniform Estate Tax Apportionment Act control. Accordingly, they maintain that the Probate Court's Order must be reversed. Conversely, Appellees Edward and Ellen Reynolds contend that apportionment is not mandatory under Rhode Island law. Rather, they assert that the apportionment statute is a gap-filler, used in circumstances of intestacy or when a will makes no provision for the payment of estate taxes. Since Decedent's will contains a provision — the tax clause — pertaining to the payment of estate taxes, they argue that the apportionment statue and its terms are not applicable to this case. Finally, Appellee Nancy E.R. Wharton offers a slightly different argument than that of her co-appellees. She concedes that the apportionment act is mandatory, unless the decedent's will directs otherwise. Accordingly, she avers that the tax clause in Decedent's will directing the executors to pay all the decedent's just debts, "including all estate, legacy, succession and inheritance taxes" is sufficient to avoid statutory apportionment.
Under the version of the Uniform Estate Tax Apportionment Act adopted by the General Assembly in 1971, § 44-23.1-2 states:
Furthermore, the act defines "Person interested in the estate" as "any person, including a personal representative, guardian, or trustee, entitled to receive, or who has received, from a decedent while alive or by reason of the death of a decedent any property or interest in property included in the decedent's taxable estate[.]" Id. at § 44-23.1-1 (4). A review of relevant case law indicates that no court in this jurisdiction has been called upon to interpret this statutory scheme. Thus, many of the issues presented on this appeal are ones of first impression.
It has been noted that the principal reason and purpose of the enactment of an estate tax apportionment statute is "to avoid the result sometimes attendant upon the general rule that the burden of estate taxes . . . falls upon the residuary estate . . .[,] particularly the hardship often resulting from the applicability of that rule in regard to property not included in the probate estate of the decedent." Maurice T. Brunner, Annotation, Construction and Application of Statutes Apportioning or Prorating Estate Taxes, 71 A.L.R. 3d. 247, 268-69 (1976); see also 42 Am. Jur. 2d Inheritance, Estate, and Gift Taxes § 311 (2000) (); 1 Page on Wills § 4.23 (1960). In order to further this important public policy, commentators and other courts interpreting similar statutes have stated that such apportionment acts are mandatory in nature, and apply unless the testator directs otherwise in the will. See Brunner, supra, at 268; 42 Am. Jur. 2d Inheritance, Estate, and Gift Taxes § 312 (2000); see also In re Estate of Kyreazis, 701 P.2d 1022, 1024 (N.M. 1984); Bushee v. Bushee, 303 N.W.2d. 320, 322 (N.D. 1981); In re Estate of Huffaker, 641 P.2d 120, 121 (Utah 1982); In re Estate...
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