No. 8 6 - 1 4 8
IN THE SUPREME COURT OF THE STATE OF MONTANA
1986
IN THE MATTER. OF THE ESTATE OF
ROBERT EMRRSOK STONE, Deceased.
APPEAL FROM: District Court of the Fifth Judicial District,
In and for the County of Madison,
The Honorable Frank Davis, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
David N. Niklas, Helena, Montana
For Respondent:
Jardine, McCarthy & Grauman; Daivd A. Grauman,
Whitehall, Montana
Submitted on Briefs: August 7, 1 9 8 6
Decided: October 1, 1986
Mr. Justice Fred J. Weber delivered the Opinion of the Court.
The District Court for Madison County denied a petition
to terminate the appointment of R. Thomas Garrison as the
personal representative of this estate. We reverse and
remand to the district court.
The issue is whether the District Court abused its
discretion by refusing to remove the personal representative.
Robert Emerson Stone died in December 1980. His will
designated his attorney, R. Thomas Garrison, as personal
representative for the estate and as trustee for any benefi-
ciary who was a minor. Mr. Stone's daughter and son, then 21
and 13, were named as devisees. The will was admitted to
informal probate in January 1981. Mr. Garrison acted both as
personal representative and as the attorney for the estate.
In September 1985 the children and the son's great uncle
petitioned the District Court for Mr. Garrison's removal as
personal representative. They asked for an accounting and
for the appointment of Sherrie Schandelmeier, the daughter,
and Sam Wonderly, the great uncle, as successor co-personal
representatives. The petition stated that over 4% years had
elapsed and the estate was not yet closed; that neither an
Inventory and Appraisement nor an Application for Determina-
tion of Inheritance Tax had been filed with the State of
Montana; that the personal representative had failed to
provide the children's aunt, a major creditor of the estate,
with a requested accounting of the estate proceedings; that
the personal representative had failed to keep the children
and the aunt reasonably informed of the status of estate
proceedings; and that the personal representative failed to
timely file the Federal Estate tax return.
A hearing was held before the District Court. Mr.
Garrison testified that the chief asset of the estate is a
ranch in the Ruby Valley valued at $496,950. The ranch is
without livestock or equipment and was encumbered by a renew-
able five year lease. There was also a bank account contain-
ing approximately six hundred dollars, and a Chrysler car.
As of the date of the hearing Mr. Garrison had not mailed an
inventory and appraisement to the Department of Revenue, nor
mailed one to the parties interested in the estate or filed
one with the Court. A personal representative is required by
statute to take these steps within three months of his ap-
pointment. Section 72-3-607, MCA. Furthermore, Mr. Garrison
had not filed an Application for Determination of Inheritance
Tax with the Department of Revenue, as required by
$ 72-16-401, MCA. Neither had he paid any portion of the
Montana taxes owing. If the total amount owing is paid
within 18 months, a discount of 5% of the amount owing is
granted to the estate. - 5 72-16-440, MCA.
See No portion of
the federal inheritance taxes had been paid, although Mr.
Garrison had obtained an extension of time in which to pay.
Interest was, and is, accruing on these unpaid taxes.
During the administration of the estate, Mr. Garrison
collected approximately $100,000 in income from leasehold
payments and timber sales. At the time of the hearing Mr.
Garrison had expended approximately $60,000, which included
among other things the discharging of a mortgage on the
estate property. He had on hand approximately $40,000 in
estate funds. These funds were not placed in an interest
bearing account. Since the hearing, Mr. Garrison has depos-
ited with the State the amount due as Montana inheritance
tax, plus interest.
In addition to the failure to administer the estate in a
timely and judicious fashion, Sherrie Schandelmeier testified
that Mr. Garrison failed to provide her with written account-
ings though she asked him to do so several times. The son's
mother testified that she had requested financial statements
on behalf of her son, and none had been provided.
Petitioners also maintain that Sherrie was deliberately
misled by a letter from Mr. Garrison dated April 23, 1985.
That letter stated:
As you know further, there was no livestock upon
the premises or any revenue or income except the
lease he had made of the ranch to Max Miller for an
annual income of $17,500. This lease, as you are
well aware, was subject to a renewal this February
which was exercised by Max, leasing the property
until 1990 and subjecting any sale of all or part
of the property to the terms of the lease.
The letter failed to inform Sherrie that Mr. Garrison had
terminated the lease by an agreement with the lessee one
month before. As part of the termination agreement, Mr.
Garrison conveyed approximately 75 acres of ranch land to the
lessee. Following the termination of the lease, Mr. Garrison
placed the ranch on the market for sale without notice to the
devisees. The petitioners contend all these actions by Mr.
Garrison constitute a breach of the fiduciary duty which Mr.
Garrison owes to the estate and to themselves as devisees.
- 5 72-3-610, MCA.
See
Mr. Garrison testified that the devisees wish to retain
the ranch, which has been in their family for four genera-
tions, but that they have not come up with a concrete plan
which would allow them to do so. He stated that the renew-
able lease encumbered the property and discouraged any poten-
tial mortgage or sale of the property. Mr. Garrison
testified he was unable to find a mortgagor who would lend
enough to pay the estate taxes and provide operating capital
for a ranch devoid of cattle or equipment. He stated he
didn't put the estate's funds in an interest bearing account
because the amount had vacillated back and forth. He testi-
fied that he had prepared the inventory and appraisement in
March 1981. However, through an oversight, he failed to file
it with the Montana Department of Revenue. Mr. Garrison
further testified he had not filed the application for deter-
mination of Montana estate taxes because the estate did not
have the funds to pay the tax in full. Mr. Garrison did file
an extension on the federal estate taxes owing. He testified
that his office records indicate he mailed copies of these
forms to the devisees. Mr. Garrison testified that although
he had not provided formal written accountings to the peti-
tioners, he had provided informal oral accountings in his
office. Finally, Mr. Garrison testified concerning communi-
cation with the devisees:
And knowing the way they felt about the ranch, not
to sell it ... or make any arrangements to dis-
charge any of it, I didn't think it was advisable
to do so [contact or communicate with the
devisees].
The District Court found "substantial compliance by the
personal representative with the probate law in the discharge
of his fiduciary duties, and no omissions which in any way
adversely affected the estate, or those interested therein."
It ordered Mr. Garrison to proceed with all deliberate speed
with the sale of the property, subject to prior approval of
the court and notice to the devisees.
The removal of a personal representative for cause is
authorized "when removal would be in the best interest of the
estate. " Section 72-3-526 (2) (a), MCA. This Court's review
of the District Court's decision is limited to whether the
District Court abused its discretion. Matter of Estate of
Counts (Mont. 1985), 704 P.2d 1052, 1055, 42 St.Rep, 1243,
1246.
In examining the record, we see that the estate bank
account contained at least $1700 at all times since it was
opened in January 1981, and that at most times it contained
much more than that amount, exceeding $18,000 in January
1983. There has been no adequate reason given for the fail-
ure to invest this money, in a period when interest rates
have gone as high as 15% or more. We conclude that Mr.
Garrison was not a-cting in the best interest of the estate in
this regard.
Nonpayment for over four years of any portion of the
Montana inheritance tax or the federal estate tax while money
was available in the estate account has not been adequately
explained. Mr. Garrison's explanation that he was waiting
until he could pay the taxes in full is unpersuasive, given
the discount available for prompt payment of the Montana tax
and the interest charges on both the Montana and federal
taxes owing. We conclude that Mr. Garrison's inaction was
not in the best interest of the estate, and that he has not
redeemed himself by paying the Montana tax subsequent to the
hearing.
The failure to file the inventory and appraisement with
the State of Montana within 3 months after Mr. Garrison's
appointment as personal representative was explained as a
clerical error. That this omission was not discovered by Mr.
Garrison until this action was brought, over 4 years after
his appointment, does not speak well for the diligence of his
monitoring of this matter.
Also, Mr. Garrison's misleading of the daughter in his
April 1985 letter mentioning the "renewed" lease of the land
has not been shown as an act even remotely in the best inter-
est of the estate. We do not condone this apparent misrepre-
sentation to a devisee with a half-interest in the estate.
Mr. Garrison's argument that the devisees have not made
a concrete proposal which would allow them to retain the
ranch and pay the inheritance taxes is irrelevant. At issue
is whether Mr. Garrison's actions as a personal representa-
tive justify a conclusion that his termination would be in
the estate's best interest. While we do not negate the
District Court's expression of confidence in Mr. Garrison,
that does not address the problems which have been disclosed
in the administration of this estate.
We conclude that the District Court abused its discre-
tion in disregarding the uncontraverted evidence before it
and refusing to remove Mr. Garrison as personal representa-
tive. We therefore reverse the decision of the District
Court and remand for appointment of a successor personal
representative or personal representatives, and for a deter-
mination of what fee is due Mr. Garrison for his services as
personal representative.
We Concur:
Y
Mr. Justice William E. Hunt, Sr., dissenting:
I dissent. In this case the testator chose the personal
representative of his estate. That act should not be
annulled by this Court except under the most extreme
circumstances.
An order of removal of [a personal representative]
is harsh and severe; and irregularities not
directly harmful in the management of the estate
will be overlooked. If the court can remedy a
matter of the complaint, no removal will be
ordered.
Tice's Estate v. Tice (1962), 140 Mont. 28, 367 ~ . 2 d771,
In this case, I agree with the District Court that there
has been certain technical omissions, but there is no
evidence of fraud, gross carelessness, or even indifference
to duty. The District Court sympathized with the
beneficiaries and heirs who are frustrated with the long
wait, but noted that given the problems confronting the
personal representative in this difficult estate, it was not
shown that the estate could have been administered otherwise.
The District Court held the personal representative's plan to
sell the ranch land to pay the debts of the estate is the
only feasible alternative although it is not what the heirs
prefer. The District Court took the only steps available to
complete the administration of this estate. This Court's
action now transfers all of the problems to a new
administration, not of the testator's choosing, which has the
same problems as the prior administration with no clear
solution available to them.
I do not believe the District Court abused its
discretion in these findings of fact and conclusions of law.
The judgment of the District Court should be affirmed.
Mr. Justice John C. Sheehy concurs in the above dissent.