Title: Matter of Estate of Newell

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Matter of Estate of Newell1988 WY 156765 P.2d 1353Case Number: 88-51Decided: 12/15/1988Supreme Court of Wyoming
IN THE MATTER OF THE 
ESTATE OF ELIZABETH NEWELL, DECEASED. DONALD L. NEWELL AND EARL R. CHERRY, JR., 
PERSONAL REPRESENTATIVES OF THE ESTATE OF ELIZABETH NEWELL, DECEASED, APPELLANTS 
(PETITIONERS),

v.

JOANNE READ TRUMPER, 
DONNA I. READ DOUGLAS, AND JAMES L. READ, APPELLEES 
(PROTESTANTS).

Appeal from the District 
Court, GoshenCounty, John T. Langdon, 
J.

Donald E. Jones 
of Jones and Graham Law Offices, Torrington, for appellants.

Eric M. Alden of 
Jones, Jones, Vines & Hunkins, Wheatland, for appellees.

Before CARDINE, C.J., THOMAS, URBIGKIT and MACY, 
JJ., and BROWN, J., Retired.*

* Retired June 30, 
1988.

URBIGKIT, 
Justice.

[¶1.]     This is a second stage 
probate case appeal taken from a decree of distribution where the apportionment 
of taxes and expenses is questioned. The trial court, in an Amended Final 
Report, Accounting and Decree of Final Distribution following reversal and 
remand in Douglas v. Newell, 719 P.2d 971 (Wyo. 1986) (Newell I), determined 
that inheritance tax, estate tax, debts, charges, as well as estate operational 
and administrative expenses should be charged to the estate rather than the 
specific beneficiaries. We affirm.

[¶2.]     Appellants frame the 
issues as:

1. Does Douglas v. Newell 
require that the contract balance and interest thereon be treated as a specific 
bequest which does not abate in any manner for the payment of debts, charges, 
expenses and federal and state taxes under W.S. § 2-7-808?

2. Does the balance of a 
contract of sale substituted for a devise of real property by operation of W.S. 
§ 2-6-109(b) remain a specific devise or become a general pecuniary 
legacy?

3. Is income from the 
gift to the Read heirs exempt from the provisions of W.S. § 2-7-802, directing 
income of the estate to be first used for payment of care, management and 
settlement of the estate?

4. Is the gift to the 
Read heirs exempt from the provisions of W.S. § 2-10-103, relating to 
apportionment of federal estate taxes, and former W.S. § 39-6-806(b), relating 
to state inheritance taxes? [Footnotes omitted.]

FACTS

[¶3.]     As earlier considered 
in Newell I, 719 P.2d 971,1 the facts of this contested probate 
will only be re-examined as necessary to illuminate the particularized issues 
now presented. Originally, controversy arose over the will of Elizabeth Newell 
(decedent) between two grandsons, primary residual beneficiaries, and two nieces 
and two nephews, as then stated specific devisees. The object of litigative 
disagreement was whether the Read ranch interest in ConverseCounty, which the decedent received from 
her brother, was for probate as a specific devise to be considered property of 
the decedent at the time of her death.2 The decedent owned the land at the 
time of drafting the will, but her interest with that of other co-owners had 
been sold by a contract for deed about two years before her death. Thus, the 
status of the decedent's annual payments collected under the installment 
contract of $117,438.73 and the interest attributable to the contract payments 
is questioned. Also advanced in present appeal is apportionment of taxes and 
attribution of accrued expenses during the six years of 
administration.

[¶4.]     In first appeal, the 
parties brought a declaratory judgment seeking the proper construction of the 
will and to determine whether a will provision would lapse or adeem.3 After both sides moved for summary 
judgment, the trial court then granted partial summary judgment to each - in 
favor of the Read heirs, the nieces and nephew, finding the provision did not 
lapse, but in favor of the trustees that the devise did adeem. This court 
reversed by determining that the proviso as an enforceable specific bequest 
neither lapsed nor adeemed. Newell I, 719 P.2d  at 972.

ANALYSIS

[¶5.]     In the essence of three 
of the four issues pursued by appellants is a request for this court to 
reconsider Newell I. Two words accurately sum up this part of the case: res 
judicata.

"Res judicata is a fact 
of the Anglo-American system of unified adjudication.

`A court does not face a 
legal problem as a new, pristine blackboard "never writ upon." Decisions are 
mirrors of past decisions and in turn are reflected in the decisions of the 
future. The continuum can no more be broken than can reflecting mirrors be 
interrupted.' A. Vestal, Res Judicata/Preclusion at V-3 
(1969).

"The doctrine of res 
judicata is that a judgment, decided upon the merits by a court with 
jurisdiction, is conclusive of that cause of action and facts or issues 
litigated, both to the parties and their privies in any other action in the same 
or different court of concurrent jurisdiction on the same issues. 46 Am.Jur.2d 
Judgments § 394."

Matter of 
Swasso, 751 P.2d 887, 889-90 (Wyo. 1988) 
(quoting from CLS v. CLJ, 693 P.2d 774, 775-76 (Wyo. 1985)).4 The criteria used to determine res 
judicata's applicability to a situation are: "(1) the parties were identical; 
(2) the subject matter was identical; (3) the issues were the same and related 
to the subject matter; and (4) the capacities of the persons were identical in 
reference to both the subject matter and the issues between them." Matter of 
Swasso, 751 P.2d  at 890. All four criteria unquestionably are met as to whether 
the contract payment in the instant case should be treated as a specific bequest 
which, as determined in first appeal, will not now be 
reconsidered.

[¶6.]     Appellants also 
challenge the issue of the proper characterization of the accruing purchase 
contract interest as included in the periodic payments. They contend that the 
interest is income of the estate, while the Read heirs claimed the interest as 
part of their specific bequest. Wyoming has adopted the view set out in 6 
Bowe-Parker: Page on Wills, § 59.15 (1962) that "[i]n the absence of a provision 
to the contrary in a will, a specific bequest also carries accretions accrued 
after the testator's death." Matter of Deutsch's Estate, 644 P.2d 768, 770 
(Wyo. 1982). 
Where, as here, there is no contrary provision in the will, the interest after 
death as attributable to the contract payments is part of the specific bequest 
for estate distribution. Although W.S. 2-3-601, et seq. as the principal and 
income apportionment code may primarily address trust administration, W.S. 
2-3-605(b)(i)5 is applicable since the legacy in 
this case does include both principal and interest as asset income. See Matter 
of Deutsch's Estate, 644 P.2d  at 771 (this court found royalty payments from 
copyrights to be a kind of property involving principal and income so that W.S. 
2-3-611 and 2-3-605(b)(ii) were relevant). The record discloses that no expenses 
were attributable to the contract payments, and that the amount of income taxes 
allocable to the Read heirs was properly set off against the bequest. The trial 
court was correct in attribution decision for 
distribution.

[¶7.]     As to the first 
specifically stated issue involving abatement, we do not perceive relevance 
since the record fails to disclose that abatement is necessary with the ample 
resources in the residual estate to pay the taxes and expenses. Otherwise, this 
specific bequest in its entirety would properly fall within W.S. 
2-7-808(a)(iv)6 and take its place within the 
abatement order after the property given to the residual 
beneficiaries.

[¶8.]     The second appellate 
issue concerned transformation of the bequest into a general pecuniary legacy. 
Appellants' reliance on the definition of general bequest enunciated in Matter 
of Deutsch's Estate, 644 P.2d 768 and W.S. 2-6-109(b) is misplaced. This court 
in Matter of Deutsch's Estate, 644 P.2d  at 769, 770 looked to Justice Blume's 
articulation of specific and general bequests in State v. Underwood, 54 Wyo. 1, 
86 P.2d 707 (1939) to provide guidance.

[A] specific legacy is a 
bequest of a specific article of the testator's estate, distinguished from all 
others of the same kind, as, for example, a particular horse, or piece of plate, 
or money in a certain purse or chest, etc. Pomeroy, supra, [Equity, 4th ed.] 
Sec. 1130. A general legacy is a gift of a certain amount of money without 
pointing out any source from which the amount is to be paid, * * 
*.

Id. at 715. Clearly, the 
source of the funds was the Read ranch installment contract. Thus, from a purely 
definitional perspective, appellants have not shown us persuasive authority to 
reverse the trial court. Additionally, appellants rely on W.S. 2-6-109(b) to 
bolster their position. However, that statutory subpart does not support their 
stance, as it provides:

(b) A specific devisee 
has the right to the remaining specifically devised property 
and:

(i) Any balance of the 
purchase price together with any security interest owing from a purchaser to the 
testator at death by reason of sale of the property;

* * 
*.

[¶9.]     The unitary interest as 
the proceeds from a defined real estate installment contract constituted a 
specific devise under the will. Recitation of this statute does not convert that 
specific asset into a general legacy by legislative metamorphosis.7

[¶10.]  As to the third issue on the use of 
payments constituting the Read inheritance, appellants consider that W.S. 
2-7-802 authorizes payment of the expenses of care, management, and settlement 
of the estate to come out of this fund. However, W.S. 2-7-802(b) 
provides:

(b) Except as otherwise 
directed by the decedent's will, the expenses shall be paid first out of income of the estate received by the 
personal representative, then from the residue of the estate. [Emphasis 
added.]

The fallacy in 
appellants' claim is the characterization of these contract payments as "estate 
income." Those annually received amounts, including interest belonged to the 
defined legacy and were not estate receipts constituting 
income.

[¶11.]  As the last appellate issue, appellants 
contest the apportionment of federal estate and state inheritance taxes. 
Appellants specifically rely on W.S. 39-6-806(b) (1977 Replacement)8 relating to the apportionment of 
inheritance taxes and W.S. 2-10-1039 relating to the apportionment of 
estate taxes. However, W.S. 39-6-806(b) (1977 Replacement)10 and 2-10-10311 do not prevent the decedent from 
exercising her right to shift the statutory burden to a particular fund. Matter 
of Estate of Ogburn, 406 P.2d 655 (Wyo. 1965); Note, Federal Estate Tax and 
State Inheritance Tax - Sufficiency of a Testamentary Tax Directive to Defeat 
the Operation of the Uniform Estate Tax Apportionment Act - In re Ogburn's 
Estate, 406 P.2d 655 (Wyo. 1965), I Land & Water L.Rev. 526 (1966). See also 
Matter of Estate of Bell, 764 P.2d 689 (Wyo. 
1988) and Matter of Estate of Stratton, 756 P.2d 1342 (Wyo. 1988). The burden of 
establishing the nonapportionment intent is upon the party contending against 
the statute. In re Hilliar's Estate, 498 P.2d 1237 (Wyo. 1972); Matter of 
Estate of Ogburn, 406 P.2d  at 658.

[¶12.]  This court has analyzed the sufficiency 
of a will provision to show the required contrary intent in Matter of Estate of 
Ogburn, 406 P.2d 655. The tri-part test for sufficiency of the language as a 
stated intention against apportionment is delineation of: "`(1) what gifts or 
beneficiaries are freed of the burden of taxes, (2) what taxes are affected, and 
(3) where the burden of taxes is shifted.'" Id. at 658 (quoting from 28 Am.Jur., 
Inheritance, Estate, and Gift Taxes, § 488 at 353). Those provisions were 
addressed in Ogburn in language of: "I direct the payment of all my just debts, 
taxes, funeral expenses and expense of administration of my estate." Matter of 
Estate of Ogburn, 406 P.2d  at 657. This court in Ogburn, found the terminology 
to be sufficient to require payment of federal estate taxes without 
apportionment, but insufficient for state inheritance taxes not to be 
apportioned. Matter of Estate of Ogburn, 406 P.2d  at 660. This nuance is not 
relevant because in the instant case, the Newell provision stated: "All inheritance and estate taxes owing 
by reason of my death shall be paid from my probate estate, without 
apportionment, notwithstanding any state or federal law to the contrary, * * *." 
(Emphasis added.) This provision clearly and sufficiently expresses an intent 
that both "inheritance and estate taxes" were not to be apportioned so that the 
decedent's contrary intent under W.S. 39-6-806(b) (1977 Replacement) and 
2-10-103 was properly established to sustain the trial 
court.

[¶13.]  To conclude, the devise to the Read heirs 
remains a specific devise and does not create "income of the estate" from the 
contract payments themselves and attributable interest with which estate 
administrative and operational expenses could properly be paid. The will 
foreclosed apportionment of estate and inheritance taxes. The trial court's 
decision properly applied the facts of the case to the law and is 
affirmed.

FOOTNOTES

1 Technically, this case 
has been here twice before - once resulting in the first appeal in Newell I, and 
second in an aborted appeal to this court which was dismissed on October 6, 1987 
for lack of a final order as defined in W.R.A.P. 1.05 and Matter of Estate of 
Campbell, 673 P.2d 645 (Wyo. 1983). After final decree of distribution was 
entered on January 8, 1988, the present appeal was 
perfected.

2 The nieces and nephew 
were also given some town lots and the royalty and mineral interest income from 
the ranch. One nephew, Malcolm R. Johnson, did not contest distribution. 
However, the proper distribution of these properties was never an appellate 
issue.

3 Article X of the 
decedent's will devised the property to two nephews and two nieces in equal 
shares as providing:

[A]ll of my 
interest and title in the real estate located in Converse County, Wyoming, which 
I inherited from my deceased brother, Frederic S. Read * * 
*.

4 For other cases dealing 
with res judicata or issue preclusion, see: Matter of Estate of Bell, 764 P.2d 689 (Wyo. 
1988) and Texas West Oil and Gas Corp. v. First Interstate Bank of Casper, 743 P.2d 857 (1987), aff'd on reh'g 749 P.2d 278 
(Wyo. 
1988).

5 W.S. 2-3-605, in 
pertinent part, provides:

(b) Unless the 
will otherwise provides, income from the assets of a decedent's estate after the 
death of the testator and before distribution, including income from property 
used to discharge liabilities, shall be determined in accordance with the rules 
applicable to a trustee under this act and distributed as 
follows:

(i) To specific 
legatees and devisees, the income from the property bequeathed or devised to 
them respectively, less taxes, ordinary repairs, and other expenses of 
management and operation of the property, and an appropriate portion of interest 
accrued since the death of the testator and of taxes imposed on income 
(excluding taxes on capital gains) which accrue during the period of 
administration.

6 The order of abatement 
is addressed in W.S. 2-7-808, which provides:

(a) Except as provided in 
the will, shares of the distributees shall abate for the payment of debts and charges, federal and state 
taxes, * * * in the following order:

(i) Property not disposed 
of by the will;

(ii) Property devised to 
the residuary devisee, except property devised to a surviving spouse who takes 
under the will;

(iii) Property disposed 
of by the will but not specifically devised and not devised to the residuary 
devisee, except property devised to the surviving spouse who takes under the 
will;

(iv) Property specifically devised, except 
property devised to a surviving spouse who takes under the 
will;

(v) Property devised to a 
surviving spouse who takes under the will.

(b) If the provisions of 
the will, the testamentary plan or the express or implied purpose of the devise 
would be defeated by the order of abatement stated in subsection (a), the shares 
of distributees shall abate in the manner necessary to give effect to the 
intention of the testator. [Emphasis added.]

While we perceive that 
appellants may be contending that by applying the effect and intent of W.S. 
2-7-808(b), the statutory order of abatement is not appropriate. That intent was 
previously resolved in our prior decision that decedent intended this legacy to 
be a specific devise (bequest) for the Read heirs. Newell I, 719 P.2d  at 973, 
981-82. Thus, the statutory order of abatement is proper, if 
necessary.

7 While we note that the 
phrase "general pecuniary devise" is utilized in W.S. 2-6-109(a), that subpart 
deals with property sold by a conservator, condemned, or destroyed by some 
casualty, and is not applicable to this situation.

8 W.S. 39-6-806 (1977 
Replacement) is applicable to this case because in Newell I, 719 P.2d  at 978, 
this court held that the law in effect at the time of the decedent's death was 
controlling. This statute was in effect on May 16, 1982, the date of the 
decedent's death, although repealed by 1982 Wyo. Sess. Laws ch. 74, § 3, effective January 
1, 1983. Consequently, Wyoming does not now have a statute 
controlling the apportionment of state inheritance taxes. Matter of Estate of 
Stratton, 756 P.2d 1342 (Wyo. 1988).

9 "Tax" is defined for 
W.S. 2-10-103, which is part of the Uniform Estate Tax Apportionment Act in W.S. 
2-10-102(a)(vi) to mean "federal estate tax and interest and penalties imposed 
in addition to the tax." Thus, only the apportionment of federal estate taxes is 
statutorily mandated.

10 W.S. 39-6-806(b) (1977 
Replacement), until 1983 repeal, provided:

(b) Any person 
to whom property is transferred by any inheritance, devise, bequest, legacy or 
gift and the administrators or executors of the estate are personally liable for 
Wyoming inheritance tax and interest due thereon to the extent of the value of 
the property. Taxes and interest due from the estates of resident decedents 
shall be sued for within five (5) years after the taxes and interest are due and 
collectible or else the taxes and interest are conclusively presumed to be paid 
and cease to be a lien against the property of the estate.

11 W.S. 2-10-103 
provides:

Unless the will otherwise 
provides, the tax shall be 
apportioned among all persons interested in the estate. The apportionment shall 
be made in proportion that the value of the interest of each person interested 
in the estate bears to the total value of the interests of all persons 
interested in the estate. The values used in determining the tax shall be used 
for that purpose. [Emphasis added.]