Woerth v. Reese (In re Gottier)

• Decision Date: 22 September 2020
• Docket Number: No. 1 CA-CV 19-0797,1 CA-CV 19-0797
• Citation: 250 Ariz. 104,475 P.3d 1144
• Parties: IN RE: the Matter of the ESTATE OF: Tobin Daniel GOTTIER, deceased. Aileen M. Woerth, Petitioner/Appellant, v. Jack P. Reese, et al., Respondents/Appellees.
• Court: Arizona Court of Appeals

250 Ariz. 104

475 P.3d 1144

IN RE: the Matter of the ESTATE OF: Tobin Daniel GOTTIER, deceased.Aileen M. Woerth, Petitioner/Appellant,

v.Jack P. Reese, et al., Respondents/Appellees.

No. 1 CA-CV 19-0797

Court of Appeals of Arizona, Division 1.

FILED September 22, 2020

Goodman Law Firm PC, Prescott, By Mark N. Goodman, Counsel for Petitioner/Appellant

Rahnema Law PLLC, Lake Havasu City, By Richard C. Rahnema, Counsel for Respondents/Appellees

Presiding Judge Samuel A. Thumma delivered the opinion of the Court, in which Judge D. Steven Williams and Judge David D. Weinzweig joined.

THUMMA, Judge:

¶1 This appeal turns on whether life insurance proceeds paid to a decedent's estate, as specified in the life insurance contract, are exempt from claims by the estate's creditors. Because the proceeds are property of the estate, and not exempt from creditors’ claims under Arizona Revised Statutes (A.R.S.) Section 20-1131 (2020),¹ the judgment is affirmed.

FACTS AND PROCEDURAL HISTORY

¶2 Tobin Daniel Gottier and his wife Jamie had a daughter, Hannah. Gottier owned a life insurance policy on his life, where he designated Jamie as the primary beneficiary and Hannah the contingent beneficiary. The policy's payment provision states that, "[i]f no beneficiary is living when the insured dies, we [the insurance company] will pay the proceeds to the owner or to the owner's estate."

¶3 In September 2018, Gottier apparently killed Jamie and Hannah. Less than an hour after they died, Gottier killed himself.

¶4 Appellant Aileen M. Woerth, Gottier's mother, is the personal representative of Gottier's estate. Because no beneficiary or owner of the policy was living when Gottier died, the life insurance company was required to pay the proceeds to Gottier's estate under the policy's payment provision.² Jamie's parents, Jack and Judith Reese, filed a claim against the estate for the deaths of their daughter and granddaughter. Woerth, as personal representative, denied the claim. The Reeses also filed a separate wrongful death action that remains pending.

¶5 Woerth filed a petition in probate court seeking a declaration that the life insurance proceeds are exempt from the claims by Gottier's creditors, including the Reeses, under A.R.S. § 20-1131(A). The court denied the petition, concluding that A.R.S. § 20-1131(A) does not exempt life insurance proceeds when, as here, they are paid to the estate under the terms of the insurance policy and are property of the estate. This court has jurisdiction over Woerth's timely appeal from the resulting partial final judgment. See A.R.S. § 12-2101(A)(9) ; Brumett v. MGA Home Healthcare, L.L.C. , 240 Ariz. 420, 428 ¶ 13, 380 P.3d 659, 667 (App. 2016) ; see also In re Estate of McGathy , 226 Ariz. 277, 280 ¶ 17, 246 P.3d 628, 631 (2010) (concluding A.R.S. § 12-2101(A)(9) [formerly A.R.S. § 12-2101(J) ] permits appeal of the final disposition of each formal proceeding instituted in an unsupervised probate administration).

DISCUSSION

¶6 Woerth argues the life insurance proceeds are exempt from creditors’ claims under A.R.S. § 20-1131(A), a legal issue subject to de novo review. In re Estate of King , 228 Ariz. 565, 567 ¶ 9, 269 P.3d 1189, 1191 (App. 2012). "[T]he best and most reliable index of a statute's meaning is its language and, when the language is clear and unequivocal, it is determinative of the statute's construction." State ex rel. Montgomery v. Harris , 234 Ariz. 343, 344 ¶ 8, 322 P.3d 160, 161 (2014) (quoting State v. Hansen , 215 Ariz. 287, 289 ¶ 7, 160 P.3d 166, 168 (2007) ). "Words and phrases shall be construed according to the common and approved use of the language." A.R.S. § 1-213. The court must give effect to each word in a statute and, when interpreting statutes that relate to the same subject, construe them together. In re Estate of Butwin , 239 Ariz. 338, 340 ¶ 10, 371 P.3d 666, 668 (App. 2016).

I. The Life Insurance Proceeds at Issue Are Estate Assets and Are Not Exempt from the Estate's Creditors Under Section 20-1131(A).

¶7 An " ‘Estate’ includes the property of the decedent ... as originally constituted and as it exists from time to time during administration." A.R.S. § 14-1201(22). Gottier owned the insurance policy at the time of his death and Jamie and Hannah died before Gottier. As a result, the policy's payment provision required the proceeds to be paid to "the owner's estate," here, Gottier's estate. Accordingly, unless exempt , the life insurance proceeds are property of Gottier's estate subject to claims by the estate's creditors. Id. This is true regardless of whether, to date, the insurance company has actually paid the proceeds to Gottier's estate. See A.R.S. § 14-3709(A) (personal representative "shall take possession or control of, the decedent's property"); A.R.S. § 14-6102(A) ("Except as otherwise provided by law, a transferee of a nonprobate transfer is subject to liability to the decedent's probate estate for allowed claims against the decedent's probate estate.").

¶8 Woerth argues the proceeds are exempt under Section 20-1131(A), also relying on May v. Ellis , 208 Ariz. 229, 92 P.3d 859 (2004) and In re Estate of King , 228 Ariz. 565, 269 P.3d 1189 (App. 2012). Section 20-1131(A) is not a model of clarity and is dense:

If a policy of life insurance is effected by any person on the person's own life or on another life in favor of another person having an insurable interest in the policy, or made payable by assignment, change of beneficiary or other means to a third person, the lawful beneficiary or such third person, other than the person effecting the insurance or the person's legal representatives, is entitled to its proceeds against the creditors and representatives of the person effecting the insurance.

A.R.S. § 20-1131(A). The two cases Woerth relies on that construe Section 20-1131(A) do not resolve the issue presented here.

¶9 Unlike this case, May v. Ellis applied Section 20-1131(A) where the insurance proceeds were paid to the decedent's widow (who survived his death), not the decedent's estate. 208 Ariz. at 230 ¶¶ 1–6, 92 P.3d at 860. In May , under the terms of the policy, the insurance proceeds were paid directly to the surviving spouse who was the named beneficiary in the insurance policy, meaning the proceeds never became an asset of the estate. Id . at 232 ¶ 13, 92 P.3d at 862. May did not, as Woerth suggests, hold that life insurance proceeds are never subject to claims by an estate's creditors. Id . Instead, May turned on how the proceeds were paid under the designation made in the insurance policy. Although Gottier could have designated additional contingent beneficiaries in the insurance policy so that the proceeds would not be paid to his estate, he failed to do so. Thus, May does not apply here.³

¶10 Woerth also relies on dicta from In re Estate of King for the proposition that the exemption in Section 20-1131(A) should "be construed liberally" to encourage individuals to protect their heirs from creditors’ claims. 228 Ariz. at 568 ¶ 12, 269 P.3d at 1192 (citing cases from other states). Estate of King , however, found that Section 20-1131(A) "is not ambiguous," meaning the court "must give it effect without resorting to any rules of statutory construction." 228 Ariz. at 569 ¶¶ 18–19, 269 P.3d at 1193 (citations omitted); accord, e.g. , Glazer v. State , 244 Ariz. 612, 614 ¶ 9, 423 P.3d 993, 995 (2018) ; State v. Gates , 243 Ariz. 451, 453 ¶ 7, 410 P.3d 433, 435 (2018) ; State ex rel. Dep't Econ. Sec. v. Pandola , 243 Ariz. 418, 419 ¶ 6, 408 P.3d 1254, 1255 (2018). Therefore, Estate of King negates Woerth's argument that Section 20-1131(A) should be liberally construed. Instead, the issue is whether the express terms of Section 20-1131(A) exempt the insurance proceeds at issue here from claims against Gottier's estate.

¶11 Section 20-1131(A) provides that the beneficiary of a life insurance policy or another person to whom the policy proceeds are made payable may receive the proceeds without potential liability to the policy owner's creditors or representatives, so long as the recipient is not the owner of the policy or the owner's legal representative. See In re Estate of King , 228 Ariz. at 569 ¶ 19, 269 P.3d at 1193. The statute does not, as Woerth contends, exempt all life insurance proceeds from creditors’ claims, and this court will not read a statute contrary to its express terms. Estate of Braden ex rel. Gabaldon v. State , 228 Ariz. 323, 325 ¶ 9, 266 P.3d 349, 351 (2011). Section 20-1131(A) provides that such proceeds are exempt only when (1) they are paid or to be paid to a named "beneficiary or ... third person" and (2) that named beneficiary or third person is not the policy owner (the "person effectuating the insurance") or the policy owner's "legal representatives."

¶12 Woerth admits that there was no named beneficiary living at the time of Gottier's death. Woerth, however, argues Gottier's estate is a "third person" under Section 20-1131(A). As Woerth concedes, "[t]he word ‘estate’ has different meanings in different contexts." The dispositive question is whether, in the context of Section 20-1131(A), "third person" includes "estate."

¶13 Under Arizona's Probate Code, which is contained in A.R.S. Title 14, "[a]n estate is a collection of the decedent's assets and liabilities." Ader v. Estate of Felger , 240 Ariz. 32, 39 ¶ 22, 375 P.3d 97, 104 (App. 2016) (citing A.R.S. § 14-1201(17) (defining "estate" as "the property of the decedent") and In re Johnson's Estate , 129 Ariz. 307, 310, 630 P.2d 1039, 1042 (App. 1981) ). Indeed, Woerth acknowledges that "an estate is a non-jural entity," a concession that undercuts her claim that an estate is a person.

¶14 Section 20-1131(A) does not appear in the Probate Code and, instead, is part of Arizona's Insurance Code, contained in A.R.S. Title 20. Title 20 defines "person" in a way that does not include an estate. As used in Title 20, " ‘Person’ includes an individual, company, insurer,...