No. 89-605 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1990 

IN THE MATTER OF THE 

ESTATE OF RALPH M. ELLISON, 

Deceased. 

APPEAL FROM: District Court of the Tenth Judicial District, 

In and for the County of Fergus, 

The Honorable Peter L. Rapkoch, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Carl A. Hatch, Small, Hatch, Doubek & Pyfer, Helena, 

Montana 

For Respondent: 

Leonard H. McKinney, Lewistown, Montana 

William E. Berger, Wilkins and Berger, Lewistown, 

Montana 

Submitted: April 5, 1990 

Decided: May 8, 1990 
Justice John C. Sheehy delivered the Opinion of the Court. 

Appellants, Nora Jean Scott, Gary Ellison, Larry Ellison, 

Scott Ellison and Pat Ellison appeal from an order of the Tenth 

Judicial District, Fergus County, construing the terms of the Will 

of Ralph M. Ellison. We affirm the District Courtls order. 

Appellants raise one issue on appeal: Whether the District 

Court erred in construing the phrase "tax-free municipal bondsv1 

found in the decedent's Will? 

Ralph M. Ellison, a resident of Lewistown, Montana, died 

August 19, 1988. On August 31, 1988, his Will was admitted to 

probate by the Fergus County District Court. The Will provides the 

following in Paragraph 11: 

I have invested money in tax-free Municipal Bonds. I 

give, devise and bequeath one-half of all Municipal Bonds 

that I own at the time of my death to SCOTT ELLISON, GARY 

ELLISON, LARRY ELLISON, PAT ELLISON and NORMA JEAN SCOTT, 

in equal shares, share and share alike. I direct that 

any inheritance tax attributable to any of these people 

is to be paid by them from their individual bequests. 

The remaining one-half of the tax-free Municipal Bonds passed 

to Erma M. Ellison, his surviving spouse, as part of the rest, 

residue and remainder of the estate under Paragraph IV: 

I give, devise and bequeath all of the rest, residue and 

remainder of my property of whatever nature, kind or 

description, whether real, personal or mixed, wheresoever 

situated, belonging to me or in which I am possessed, or 

to which I may have an interest, or to which I may be 

entitled at the time of my death, to my wife, ERMA M. 

ELLISON. 

Ralph Ellison was a knowledgeable investor, with a large 

portfolio of municipal bonds, mutual funds and trusts. The 

estate's Schedule B Inventory and Appraisement list sets forth 60 

such investments. The question arises, "What did Ralph Ellison 
intend by using the term "tax-free Municipal Bonds?11 Everyone 

concerned with the estate agrees that items 1-45 on the estate's 

inventory list are tax-free bonds issued by various local 

government units of the state of Montana. However, with regard to 

items 50-60 of the estate's inventory list there is no agreement 

between the devisees. Those are securities found with names or 

designations other than municipal bonds, but which have some, 

though not all, of the characteristics of municipal bonds. They 

represent municipal obligations, but are not free of Montana 

inheritance tax, though they are of federal estate tax. 

Accordingly, the personal representative filed a petition 

requesting the District Court to construe the language "tax-free 

Municipal Bonds. After a full hearing on the matter, the District 

Court issued its order on November 13, 1989, concluding that items 

50-60 on the inventory list are not "tax-free Municipal Bondst1 to 

be distributed under paragraph I1 of the Will. The beneficiaries 

named in paragraph 11, Scott Ellison, Gary Ellison, Larry Ellison, 

Pat Ellison and Nora Jean Scott, who under the court's construction 

of the Will have been deprived of a total of $125,499.63, appeal 

the District Court's order. 

I. 

Whether the District Court erred in construing the phrase 

"tax-free municipal bondsv1 found in the decedentls Will? 

The nieces and nephews contend that items 50-60 in the 

inventory list have the character of tax-free municipal bonds, are 

for all practical purposes municipal bonds, and therefore, 50 
percent of the bonds should pass to them. In contrast, Erma 

Ellison, feels that these items, although having some 

characteristics attributable to tax-free municipal bonds, are in 

fact different from tax-free municipal bonds and should be 

distributed according to the Will's residuary clause. 

This Court must determine: 1) If the items 50-60 on the 

inventory list are tax-free; and, 2) whether those securities fall 

under the definition of "municipal bonds." 

The testator specifically stated that the securities devised 

in paragraph I1 of his Will must be "tax-free." It is clear from 

reviewing the record that items 50-60 of the estate's inventory 

list are not tax-free. Larry Van Atta, Ralph Ellison's stockbroker 

and investment counselor, testified that these securities were only 

partially tax-free. Unlike the securities in items 1-45, which 

were income tax-free both under federal law and Montana law, items 

50-60 were exempt only from federal income tax. The appellants 

agree the securities are income tax-free only under federal law, 

but continue to argue that the testator still intended items 50- 

60 to be devised as tax-free municipal bonds under paragraph I1 of 

his Will. It is well settled that intention of a testator, as 

expressed in his Will, controls the legal effect of his 

disposition. Section 72-2-501, MCA; In Re the Estate of DeLong 

(Mont. 1990), - P.2dI 47 St.Rep. 496, 498; In Re the Estate 

of Erdahl (Mont. 1981), 630 P.2d 230, 231; State Fish & Game 

Comm'n. v. Keller, Etc. (1977), 173 Mont. 523, 526, 568 P.2d 166, 

168. The facts are inescapable, the Will states tax-free municipal 
bonds, not partially tax-free municipal bonds. Thus, we adopt the 

District Court finding that items 50-60 are only partially taxfree, and therefore fail to meet the intention of the testator as 

set forth in Paragraph I1 of his Will. 

Even if we consider fixed items 50-60 as tax-free, the 

securities fail to qualify as Municipal Bonds. Van Atta, at the 

hearing, described the following principle characteristics of 

municipal bonds. 

QUESTION: Can you tell me and the Court, what is the 

principle characteristic of a municipal bond? 

ANSWER (MR. VAN ATTA) : A municipal bond would be a bond 

issued by a municipality, it could be a state government 

or it could be I. D.R. bonds, which are things that are 

not allowed by law now. The bonds are an obligation by 

that issuer to pay principal and interest, bank at a 

certain percent, it has a fixed maturity rate, and it has 

a fixed amount that they are to pay you back. So those 

are three characteristics that are very much a part of 

municipal bonds. 

As Mr. Van Atta testified to at the hearing, the securities 

found in items 50-60 are not municipal bonds, but mutual funds or 

mutual bond trusts. Mr. Van Atta explained the differences between 

the municipal bonds and mutual fund or mutual bond trusts. 

QUESTION: Okay. Items 50-60, are they municipal as 

defined by the term municipal bonds? 

ANSWER (MR. VAN ATTA) : In my opinion, they're not 

because - the reason being is that you dont t have a fixed 

interest rate, you dontt have a fixed maturity, and you 

don't have a fixed amount that you're going to get back. 

The only thing you have in common is tax-free from 

federal, and that's the only requirement or the only 

thing that's similar. 
The evidence is overwhelming that items 50-60 are not 

Municipal Bonds but were investments in mutual funds, or municipal 

bond trusts. The only expert called in this case, stockbroker 

Larry Van Atta, testified that items 50-60, Schedule B, Inventory 

and Appraisement, are not municipal bonds. It is also undisputed 

that the Testator was a shrewd investor and knew the difference 

between a municipal bond and mutual fund or mutual trust. When he 

made his Will he chose the words gvmunicipal bonds." If the 

testator had meant to include in his devise to the appellants the 

proceeds of the mutual funds or mutual bonds trusts, items 50-60, 

he, a knowledgeable investor, could have used other terms, or 

simply said mutual funds or mutual bond trusts. 

The testator executed his Will on June 28, 1988, and died 

shortly thereafter on August 19, 1988. The testator at the time 

of executing his Will already had his portfolio completed and knew 

his investments; he used the words "municipal bondsg1 knowing he had 

items 50-60 which were not municipal bonds. On June 28, 1988, the 

date of the Will, the only conclusion is that he employed the words 

vvmunicipal bondsvv in their ordinary sense and therefore, did not 

intend to include items 50-60 of Schedule B of the Inventory and 

Appraisement in paragraph I1 of his Will. To decide otherwise 

would side-step the intent of the testator as set forth in his 

Will. 

Accordingly, we affirm the District Court. 

U*1Vc P..&Lk 

Justice 
We Concur: ,4 

Justices