Wilson v. Fritschy, 21,926.

• Decision Date: 20 August 2002
• Docket Number: No. 21,926.,21,926.
• Citation: 132 N.M. 785,55 P.3d 997
• Parties: Lois Ann Meadows WILSON and Jim Meadows, Plaintiffs-Appellees, v. Myrtle B. FRITSCHY and the Accounting and Consulting Group f/k/a Friesen, Fritschy, Fritschy & Overstreet, Defendants-Appellants.
• Court: Court of Appeals of New Mexico

55 P.3d 997

132 N.M. 785

Lois Ann Meadows WILSON and Jim Meadows, Plaintiffs-Appellees, v. Myrtle B. FRITSCHY and the Accounting and Consulting Group f/k/a Friesen, Fritschy, Fritschy & Overstreet, Defendants-Appellants.

No. 21,926.

Court of Appeals of New Mexico.

August 20, 2002.

Thomas L. Johnson, George F. Koinis, Kerri L. Peck, Foster, Johnson, McDonald, Lucero & Koinis, Albuquerque, NM, for Appellees.

John M. Brant, Charles K. Purcell, Rodey, Dickason, Sloan, Akin & Robb, P.A., Albuquerque, NM, for Appellants.

OPINION

BOSSON, Chief Judge.

{1} On interlocutory appeal, we decide an issue previously left unsettled by this Court: whether we will recognize the tort of intentional interference with expected inheritance when probate proceedings are available to address the just distribution of disputed assets and can otherwise provide adequate relief. See Doughty v. Morris, 117 N.M. 284, 287, 871 P.2d 380, 383 (Ct.App.1994)

. We hold that the tort will not lie under those circumstances. The district court having denied Defendants' motion for summary judgment raising this same issue, we now reverse and remand for entry of summary judgment in Defendants' favor.

BACKGROUND

{2} William Meadows (Meadows) died on December 29, 1997, at the age of ninety-two, while residing in Lakeview Christian Home (Lakeview), a nursing home in Carlsbad, New Mexico. Meadows' testamentary plan, executed in 1996, included a pour-over will which incorporated by reference a trust agreement that provided terms for the disposition of his estate. Meadows' 1996 testamentary plan replaced an earlier trust and pour-over will, executed in 1991.

{3} Meadows, a childless widower, was the oldest of four brothers. The 1991 revocable trust had placed Meadows' assets in trust, to be used for his sole benefit during his lifetime and, thereafter, to be distributed, in three equal shares, to his brothers, Charles and Royce, and to Lee Meadows, the son of his deceased brother, Ellis. The 1991 trust provided that if any of the named beneficiaries predeceased Meadows, their surviving issue would take by representation. Charles and Royce did, in fact, predecease Meadows by a few months. Plaintiff Lois Ann Meadows Wilson, Meadows' niece, is the sole descendant of Royce Meadows. Plaintiff Jim P. Meadows, Meadows' nephew, is the sole descendant of Charles Meadows. Under the terms of the 1991 trust, Plaintiffs would have taken Charles' and Royce's shares by representation, and each would have received one-third of Meadows' estate, which was valued at approximately $1,900,000 at the time of his death. However, Plaintiffs' expectations were dramatically altered with the execution of the 1996 testamentary plan.

{4} The 1996 trust agreement and pour-over will were prepared for Meadows by an Albuquerque attorney. Meadows appointed Carlsbad National Bank (Bank) as Trustee and personal representative of his estate. The 1996 trust agreement named the same three beneficiaries: Meadows' brothers, Charles and Royce, and Meadows' nephew, Lee Meadows. Lee Meadows, or his surviving issue by representation, remained a direct distributee under the 1996 trust. However, the new trust provided that Charles and Royce would only receive a life estate, after which their shares would be distributed to Lakeview, under the terms of a charitable remainder annuity trust, for the purposes of opening an Alzheimer's wing at Lakeview. In addition to reducing Meadows' estate tax liability, the terms of the 1996 trust also had the practical effect of disinheriting Plaintiffs, the descendants of Charles and Royce.

{5} After Meadows died, the Bank received a letter from counsel for Plaintiffs, advising them that Plaintiffs were challenging Meadows' revised testamentary plan and advising the Bank not to distribute the estate under the terms of the 1996 trust. In July 1998, the Bank filed an interpleader action in the district court, naming Plaintiffs, Lee Meadows, and Lakeview as defendants, and seeking to determine the proper distribution of the estate. Upon the Bank's request, an order of informal probate issued in May 1999. Shortly thereafter, Plaintiffs filed a notice of intent to file formal testacy proceedings to contest Meadows' revised testamentary plan. This notice acknowledged that Plaintiffs had until December 28, 2000, to commence a formal testacy proceeding, which by statute must begin within a year of the informal probate, or within three years of Meadows' death. See NMSA 1978, § 45-3-108(A)(3) (1995). However, Plaintiffs never filed for a formal testacy proceeding.

{6} In July 1999, a settlement was reached in the interpleader action. Plaintiffs each received 18.7875 percent of the estate assets, less a portion of the legal and accounting fees incurred by the Bank. Lee Meadows received one-third of the estate and Lakeview received the balance. The terms of the interpleader settlement agreement expressly reserved Plaintiffs' right to bring separate claims against third-parties who were not beneficiaries of either testamentary plan. The district court, sitting in probate in the informal probate proceeding, approved the interpleader settlement agreement.

{7} In September 1999, Plaintiffs, who are residents of Texas, filed a lawsuit against Defendants in the United States District Court for the District of New Mexico, alleging diversity jurisdiction. See Wilson v. Fritschy, No. 99-984 BB/WWD (D.N.M. Sept. 1, 1999). Defendants were Myrtle Fritschy, Meadows' accountant for many years, and Fritschy's accounting and consulting group. Fritschy had advised Meadows about the estate tax consequences of the 1991 trust and suggested that he consider making charitable donations as a way of reducing the estate's potential tax liability. Fritschy also served as the auditor for Lakeview and acknowledges that she probably suggested Lakeview as an appropriate charitable beneficiary. Plaintiffs claimed that Fritschy and her firm had tortiously interfered with their prospective inheritance. Plaintiffs alleged that Meadows lacked the necessary testamentary capacity and was subject to Fritschy's undue influence when she persuaded him to execute the 1996 testamentary plan providing for a charity she favored. Upon Defendants' motion, Plaintiffs consented to a dismissal of the federal lawsuit without prejudice on the ground that the federal court lacked subject matter jurisdiction.

{8} Plaintiffs filed the present lawsuit on March 31, 2000, again alleging that Defendants tortiously interfered with their inheritance. Plaintiffs claim compensatory damages representing the difference between what they would have received under the 1991 trust and what they actually received from the settlement. Plaintiffs also seek consequential and punitive damages. Plaintiffs argue for the first time on appeal that they should also be entitled to damages for emotional distress.

{9} Defendants moved unsuccessfully for summary judgment, arguing that the tort of intentional interference with expected inheritance did not apply in these circumstances. The district court denied the motion but certified the question for interlocutory appeal, which we granted.

DISCUSSION

{10} The denial of Defendants' motion for summary judgment presents a question of law that this Court reviews de novo. See, e.g., Bartlett v. Mirabal, 2000-NMCA-036, ¶ 4, 128 N.M. 830, 999 P.2d 1062

. We are asked in this appeal to clarify the scope of the tort of intentional interference with expected inheritance as that tort is recognized in New Mexico. In particular, we are asked to determine whether this tort applies to property transfers that can otherwise be addressed through probate proceedings.

{11} In 1994, this Court first acknowledged a viable cause of action against those who intentionally interfere with an expected inheritance. See Doughty v. Morris, 117 N.M. at 287, 871 P.2d at 383

. In Doughty, the will beneficiary alleged that her brother had tortiously interfered with her inheritance by coercing their ailing mother to make certain inter vivos transfers of property, after which no property remained in their mother's estate to divide equally between her children as the will specified. Id. at 286, 871 P.2d at 382. Relying on the Restatement (Second) of Torts § 774B (1977), we recognized the following elements of the tort: (1) an expectancy; (2) a reasonable certainty that the expectancy would have been realized but for the interference; (3) intentional interference with the expectancy; (4) tortious conduct involved with the interference, such as fraud, duress, or undue influence; and (5) damages. Id. at 288, 871 P.2d at 384.

{12} In Doughty, we acknowledged that this "tort has frequently been invoked when defendant caused the decedent to transfer valuable property which would have gone to plaintiff upon decedent's death." Id. (citing Nemeth v. Banhalmi, 99 Ill.App.3d 493, 55 Ill.Dec. 14, 425 N.E.2d 1187 (1981) and Cyr v. Cote, 396 A.2d 1013 (Me.1979)). Although we noted that this tort is often applied to inter vivos transfers of property that deplete an estate and cannot be challenged in probate, the facts in Doughty did not require us to determine whether this tort should also be recognized when the interference with inheritance takes place in the context of a will or other testamentary device that can be challenged in probate. We must now answer that question.

{13} In 1999, the United States Court of Appeals for the Tenth Circuit, interpreting Doughty and applying New Mexico law, addressed a similar claim for tortious interference with inheritance in which the perpetrators allegedly used undue influence to persuade the decedent to execute a new testamentary plan that was less favorable to the beneficiary of an earlier will. Rienhardt v. Kelly, 164 F.3d 1296, 1301 (10th Cir.1999). Interpreting Doughty, the court held as a matter of New Mexico law that the tort did not apply to property passing under the decedent's testamentary...