Rosen v. Wells Fargo Bank Texas, N.A.

• Decision Date: 30 July 2003
• Docket Number: No. 03-01-00634-CV.,03-01-00634-CV.
• Citation: Rosen v. Wells Fargo Bank Texas, N.A., 114 S.W.3d 145 (Tex. App. 2003)
• Parties: Ricki Diann ROSEN, as Independent Executrix of the Estate of Daniel H. Rosen, Deceased, Appellant, v. WELLS FARGO BANK TEXAS, N.A., as Trustee of the Rachael Leigh Rosen Trust and the Dorian Rosen Trust, and as Guardian of the Estates of Rachael Leigh Rosen and Dorian Rosen; and Eileen Rosen as Custodian of Rachael Leigh Rosen, Appellees.
• Court: Texas Court of Appeals

114 S.W.3d 145

Ricki Diann ROSEN, as Independent Executrix of the Estate of Daniel H. Rosen, Deceased, Appellant, v. WELLS FARGO BANK TEXAS, N.A., as Trustee of the Rachael Leigh Rosen Trust and the Dorian Rosen Trust, and as Guardian of the Estates of Rachael Leigh Rosen and Dorian Rosen; and Eileen Rosen as Custodian of Rachael Leigh Rosen, Appellees.

No. 03-01-00634-CV.

Court of Appeals of Texas, Austin.

July 30, 2003.

Alvin J. Golden, Ikard & Golden, PC, Pamela Stanton Baron, Austin, for Appellant.

Gary I. Currier, Garry Vacek, Mueller, Vacek & Kiecke, L.L.P, Austin, for Eileen Rosen.

James A. Vaught, Law Office of James A. Vaught, PC, Deborah Green, Green & McCullar, LLP, Austin, for Wells Fargo Bank.

Before Justices KIDD, YEAKEL and PATTERSON.

OPINION

JAN P. PATTERSON, Justice.

The central issue in this will construction case is whether, when a testator directs that all transfer taxes be paid out of the residuary estate but the residue contains no assets, the default statutory apportionment provisions of section 322A of the probate code apply. Appellant Ricki Rosen is the widow of Daniel Rosen, independent executrix of his estate, and primary beneficiary of his will; she appeals by two issues. In her first issue, she contends that the probate court erred in allocating the tax burden to the probate assets. Under the apportionment statute, appellant argues, only the taxable assets, here specifically the non-probate life insurance proceeds passing to the children of Daniel Rosen's first marriage, incur the transfer taxes. In her second issue, she contends that the probate court erred in failing to apportion any interest and penalties on transfer taxes and failing to award the estate its costs and legal fees in pursuing this matter. For the reasons stated below, we affirm the probate court's order in part, reverse in part, render judgment that only the taxable assets of Rosen's estate bear the transfer tax burden, and remand this cause in part for further proceedings in accordance with this opinion.

FACTUAL AND PROCEDURAL BACKGROUND

Although the parties disagree about the application of the law, the facts in this case are undisputed. Daniel Rosen died unexpectedly on June 14, 2000. At the time of his death, he was married to appellant, his second wife. He also had two children, Rachael and Dorian, from his first marriage to appellee Eileen Rosen that ended in 1996. Rosen died testate, and his will executed on May 28, 1997, was admitted to probate in the Travis County Probate Court. The total value of his gross estate was approximately $2.632 million.

Article III of the will left all of Rosen's personal property, as well as his interests in all employee benefit plans and retirement accounts, to appellant. Articles IV and V placed the remainder of the estate in two trusts: the marital trust and the family trust. Rosen provided that the income of the marital trust was to be used for the benefit of appellant during her lifetime. The income of the family trust was to be used for the benefit of both appellant and Rosen's descendants. The remainder of both trusts was to be distributed to his descendants, per stirpes. Article VIII contained administrative provisions, including a directive that all transfer taxes "shall be paid out of the residue of my estate without apportionment." However, no residue existed because all of the probate assets were disposed of through other provisions in the will.

Rosen also had substantial non-probate assets, the bulk of which were designated for the benefit of his children. These included a $963,000 life insurance policy, payable to appellee Wells Fargo Bank, as trustee for Rosen's children, and a $216,000 life insurance policy, payable to Wells Fargo as guardian of the children.¹ The non-probate assets also included $54,542 held in a Uniform Gift to Minors Act (UGMA) account for the benefit of Rachael Rosen. Because Rosen was custodian of the UGMA account, it was included in his estate for tax purposes. See 26 U.S.C.A. § 2036 (West 2002).

In June 2001, appellant filed an application for declaratory judgment, seeking a declaration that, because there was no residuary estate from which to pay the taxes, the taxes should be apportioned under section 322A of the probate code. Tex. Prob. Code Ann. § 322A (West 2003). Wells Fargo and Eileen Rosen opposed the declaratory judgment, asserting that the will specifically directed that the probate assets would bear the tax burden. It is undisputed that if the probate assets bear the transfer tax burden, the total taxes will be $224,447. If the non-probate assets bear the burden, the total taxes will be $132,442.

After an evidentiary hearing in July 2001, the probate court signed an order in October 2001, directing that all transfer taxes, expenses attributable to the determination of the taxes, plus any interest and penalties on the taxes, be paid solely from the probate assets. The court further ordered that each party pay its own attorney's fees and costs for pursuing the declaratory judgment action. It is from this order that appellant appeals.

DISCUSSION

Standard of Review

We review a declaratory judgment action under the same standards as other orders, judgments, and decrees. Tex. Civ. Prac. & Rem.Code Ann. § 37.010 (West 1997); Black v. City of Killeen, 78 S.W.3d 686, 691 (Tex.App.-Austin 2002, pet. denied). We must uphold the judgment of the trial court if it can be sustained on any legal theory supported by the evidence. See Bell v. Katy Indep. Sch. Dist., 994 S.W.2d 862, 864 (Tex.App.-Houston [1st Dist.] 1999, no pet.); Oak Hills Props. v. Saga Rests., Inc., 940 S.W.2d 243, 245 (Tex.App.-San Antonio 1997, no writ). We have a duty to render the judgment the trial court should have rendered. See City of Galveston v. Giles, 902 S.W.2d 167, 172 (Tex.App.-Houston [1st Dist.] 1995, no writ); Scurlock Permian Corp. v. Brazos County, 869 S.W.2d 478, 488-89 (Tex.App.-Houston [1st Dist.] 1993, writ denied). We may only render judgment when, as here, the material facts are undisputed. See Mitchell v. Rancho Viejo, Inc., 736 S.W.2d 757, 762 (Tex.App.-Corpus Christi 1987, writ ref'd n.r.e.) (citing Donald v. Carr, 407 S.W.2d 288, 291 (Tex. Civ.App.-Dallas 1966, no writ)).

Will Construction

In addressing appellant's first issue, whether the default statutory apportionment provisions apply, we must first examine what Rosen intended in his will. Testamentary intent is the critical inquiry when construing a will. San Antonio Area Found. v. Lang, 35 S.W.3d 636, 639 (Tex.2000); Huffman v. Huffman, 161 Tex. 267, 339 S.W.2d 885, 888 (1960). In determining the testator's intent, we are limited to the language within the four corners of the will. Lang, 35 S.W.3d at 639; Shriner's Hosp. for Crippled Children of Tex. v. Stahl, 610 S.W.2d 147, 151 (Tex.1980). We focus not on what the testator intended to write, but the meaning of the words actually used. Stahl, 610 S.W.2d at 151; Rekdahl v. Long, 417 S.W.2d 387, 389 (Tex.1967). "An appellate court must give the words in a will their normal meaning, in light of the testator's intent." Barker v. Rosenthal, 875 S.W.2d 779, 781 (Tex.App.-Houston [1st Dist.] 1994, no writ). We should construe the will to give effect to every part of it, as long as the language is reasonably susceptible of that construction. See Perfect Union Lodge No. 10, A.F. & A.M. v. Interfirst Bank of San Antonio, N.A., 748 S.W.2d 218, 220 (Tex.1988); Republic Nat'l Bank of Dallas v. Fredericks, 155 Tex. 79, 283 S.W.2d 39, 43 (1955). All rules of construction must yield to the testator's basic intent and purposes as reflected by the entire instrument. Welch v. Straach, 531 S.W.2d 319, 322 (Tex.1975). However, we will not redraft the will or add provisions under the guise of construction to effectuate some presumed intent of the testator. See Perfect Union Lodge No. 10, 748 S.W.2d at 220; Stahl, 610 S.W.2d at 151; Huffman, 339 S.W.2d at 888.

The overarching intent of Rosen's will was to pay as little in transfer taxes as possible. To fulfill this intent, his will employed two common methods to avoid taxation of his estate—the unified credit and the unlimited marital deduction. Article III of the will made specific gifts of probate assets to appellant. Article IV established a marital trust for the benefit of appellant, funded by assets entitled to the marital deduction. Under the Internal Revenue Code, property passing to a surviving spouse is entitled to an unlimited marital deduction, which is deducted from the value of the decedent's taxable estate. See 26 U.S.C.A. § 2056(a) (West 2002). The gift was "intended to entitle [the] estate to the maximum marital deduction... and any provision in this Will which may conflict with or fail of this intention shall be disregarded, reconciled or amplified to accomplish this objective."

The amount of the marital trust was to be "reduced by an amount, if any, needed to increase my taxable estate as determined for Federal estate tax purposes to be the largest amount which ... will result in the least amount of Federal estate tax imposed on my estate." This clause ensured that assets would fund the unified credit, also deducted from the value of the taxable estate, before funding the marital trust. At the time of Rosen's death, the unified credit was $675,000. See 26 U.S.C.A. § 2010 (West 2000), superseded by 26 U.S.C.A. § 2010 (West 2001). The effect of Article IV was that all probate assets not otherwise devised in Article III would fund the marital trust, less the amount necessary to fund any unused portion of the unified credit. The amount of unused unified credit thus would become the residue of the estate.

Article V placed all of the residue of the estate in the Daniel Hunt Rosen Family Trust, with appellant as primary beneficiary if she survived Rosen. Article VIII directed that transfer taxes be paid out of the residue, as follows:

All estate, inheritance or similar taxes...