Stephens' Estate, Matter of

• Decision Date: 10 January 1978
• Docket Number: CA-CIV,No. 1,1
• Citation: 574 P.2d 67,117 Ariz. 579
• Parties: In the Matter of the ESTATE of Dick STEPHENS, Deceased. Kate GARDNER, Appellant, v. Betty AMATOR, Appellee. 3423.
• Court: Arizona Court of Appeals

Page 67

574 P.2d 67

117 Ariz. 579

In the Matter of the ESTATE of Dick STEPHENS, Deceased.

Kate GARDNER, Appellant, v. Betty AMATOR, Appellee.

No. 1 CA-CIV 3423.

Court of Appeals of Arizona, Division 1, Department A.

Jan. 10, 1978.

Cunningham, Goodson & Tiffany, Ltd. by John F. Goodson and James W. Ryan, Phoenix, for appellant

Jay M. Abbey, Pinetop, for appellee; Hill & Savoy by John E. Savoy and Cheryl K. Hendrix, Phoenix, on brief.

OPINION

NELSON, Judge.

This is an appeal from the Superior Court's approval of the final accounting and decree of distribution in the Estate of Dick Stephens, the administration of which has been plagued by disharmony since its inception. Mr. Stephens died on March 19, 1972, and the Valley National Bank was subsequently appointed executor of his estate. The decedent's brother died in close proximity to decedent, and his will also sought the Valley National Bank as executor. Both being ranch owners in the same area, there were numerous potential conflicts, and the bank declined both positions. For this reason, Betty Jean Amator (Betty) and Katherine L. Gardner (Kate), the testator's daughters, were appointed as co-administratrices of the estate in June of 1972. The two administratrices served with varying degrees of discord, which included Betty locking Kate off the estate property, opening a separate estate checking account that would not require Kate's signature, and filing a First Account and Report without Kate's concurrence.

This complete incompatibility resulted in Fannie Stephens, the decedent's widow and administratrices' mother, obtaining the court's removal of the two women as administratrices and her appointment to the position of administratrix. It is from her final accounting for the estate and its approval by the trial court that Kate now appeals.

Most of the issues raised on appeal are a result of the two administratrices' inability to concur on their decisions and failure to bring the matter before the trial court prior to the complete breakdown of administration.

Appellant claims that the trial court erred in approving Fannie Stephens' final account in six important respects. She alleges: (1) the interpretation of the will which gave the ranch cattle to Fannie Stephens was incorrect; (2) the estate's attorney should have been surcharged for the estate tax penalties incurred through late filing; (3) the acts of one co-administratrix without the concurrence of the other co-administratrix should be invalidated; (4) the court should have made an equal division of administratrices' fees; (5) Kate should have been allowed her separate attorneys' fees; (6) the court should not have approved payments to Betty's husband for his services in maintaining the estate's ranching property.

Since the trial court did err in some of its interpretations, we must reverse its decision and remand the case for further proceedings in accord with this decision.

WILL INTERPRETATION

Appellant's first allegation of error stems from her contention that the trial court improperly interpreted two paragraphs of the will. The disputed sections are as follows:

"FIFTH : I direct that all my interest in the ranch owned by my wife and me, located on the Sandy, Mohave County, Arizona, together with all improvements and appurtenances, including any and all other items used in connection therewith, also ranch equipment, livestock, etc., in other words, the complete going ranch, except personal belongings, be sold as soon as conveniently possible for the best price and upon the best terms obtainable, but subject to approval by my wife, FANNIE STEPHENS, provided she is then alive, otherwise subject to the approval of our children, and if neither my wife nor both of our children are alive then the one child remaining. And, it is my recommendation to my wife that she join in such sale if the price and terms are satisfactory.

SIXTH : If she shall survive me by a period of six (6) months, I give, devise and bequeath to my wife, FANNIE STEPHENS, whatsoever real property, free from any and all encumbrances thereon, which we may own and occupy as a home or homes at the time of my death, together with all articles, goods and effects of personal, household and domestic use or ornament, including domestic livestock and motor vehicles. If my wife shall not survive me by a period of six (6) months, I direct that all of the foregoing described property shall form a part of my residuary estate and pass as hereinafter provided with respect thereto; provided, however, that my Executor may sell any or all of such property after the death of my wife as it may deem advisable under the circumstances. " (Emphasis added)

The trial court determined that these sections devised outright to Fannie Stephens all the ranch cattle. We must disagree with that interpretation.

There are several well-established rules which have been repeatedly followed by the Arizona courts in their construction of wills. The most pertinent of these to our situation was succinctly stated in In re Estate of Gardiner, 5 Ariz.App. 239, 425 P.2d 427 (1967) as follows:

"The basic rule for the interpretation of all wills and trusts is to ascertain the intent of the settlor or testator. The intent is to be ascertained from the contents within the four corners of the instrument, including the general plan or scheme thereof, and when necessary or appropriate, the circumstances under which the will was made. Newhall v. McGill, 69 Ariz. 259, 212 P.2d 764 (1949)." 5 Ariz.App. at 240, 241, 425 P.2d at 428, 429.

In Pass v. Stephens, the Arizona Supreme Court said: "Every clause, and even every word, should, when possible, have assigned to it some meaning." 22 Ariz. 461 at 466, 198 P. 712 at 714 (1921).

We believe that viewing these paragraphs of the will together, there can be no doubt as to what is meant. In Paragraph Fifth the testator directed that the going ranch including "livestock" be sold. In Paragraph Sixth he bequeathed the family home, personal belongings, motor vehicles and "domestic livestock". The context makes these words clear. The testator did not intend a dictionary reading of livestock he meant for the ranching operation, including cattle, to be sold, while all personal possessions, including household pets and family horses, were to go to his wife outright. Any other reading would make the addition of the word "domestic" by the testator meaningless in direct contradiction of his intent.

We therefor find the award to Fannie Stephens of the proceeds of sale of the ranch cattle erroneous. Those proceeds should be considered as a part of the sale of the "going ranch" and distributed accordingly.

ESTATE TAX PENALTIES; ATTORNEY'S LIABILITY

Appellant asks us to determine on this review whether the estate's attorney John Savoy, should be held liable for failure to timely file the estate tax return. Further, appellant seeks to have us rule that the estate tax liability should be assessed against his attorney's fees.

The estate was assessed a considerable sum ($13,851.00 for late filing and $5,023.49 interest) by the Internal Revenue Service due to its failure to have an estate tax return filed within the allotted time period, which included one extension.

Several cases hold administratrices, accountants and estate attorneys liable for tax penalties incurred by failure to file or incorrectly filed tax returns. In re Estate of Lohm, 440 Pa. 268, 269 A.2d 451 (1970); In re Estate of Jones, 400 Pa. 545, 162 A.2d 408 (1960). See also : 47 A.L.R.3d 507 and Surcharging an Executor for Negligent Administration of Tax Responsibilities, 45 Temple Law Quarterly 42 (1971-72).

During the period of estate tax return preparation, it appears that at least an attorney, an accountant and two administratrices (Betty and Kate) all had fiduciary responsibilities to the estate. See cases cited in 47 A.L.R.3d 507, supra. Although some evidence was offered in the trial court on who was at fault in failing to file, the issue of fiduciary negligence was not specifically tried there and thus cannot be determined by us now on this appeal. While we are aware that some jurisdictions have held estate fiduciaries liable for tax penalties imposed due to their negligence, we cannot from the facts here determine upon whom liability may be imposed. If one of these fiduciaries breached their duty to the estate, further litigation is warranted to determine who is liable and to what extent that liability exists.

In oral argument, the attorneys expressed some concern that the trial court judgment would foreclose by res judicata an action by the estate against any of the fiduciaries for negligence. We hold that the trial court judgment does not include an adjudication on the matter and therefore cannot preclude further litigation on the negligence issue. The record before us does not properly elucidate this claim and we cannot decide it prior to it being heard in the trial court. ¹

LEGALITY OF A CO-ADMINISTRATRIX ACTING ALONE

Appellant's third allegation of error charges that the trial court circumvented the law when it failed to assess damages against Betty for her extra-legal administration of the estate.

At the outset we note that the probate of this estate was commenced in 1972 prior to the January 1, 1974 effective date of Arizona's version of the Uniform Probate Code. The note following the present section, A.R.S. § 14-1102, provides:

"2. (T)he Act applies to . . . any proceedings in Court then pending except to the extent that in the opinion of the Court the former procedure should be made applicable in a particular case in the interest of justice or because of infeasibility of application of the procedure of this Act;

3. (E)very personal representative, guardian, or conservator holding an appointment on that date continues to hold the appointment but has only the powers conferred by this Act and is subject to the duties and liabilities imposed with respect to...