NO. 94-601

IN THE SUPREME COURT OF THE STATE OF MONTANA

1995

APPEAL FROM: District Court of the Fourth Judicial District,

In and for the County of Missoula,

The Honorable Edward McLean, Judge presiding.

COUNSEL OF RECORD:

For Appellant:

Terry Wallace, Attorney at Law, Missoula, Montana

For Respondent:

Martin S. King; Worden, Thane & Haines, Missoula,

Montana

Submitted on Briefs: June 1, 1995

Decided: 3uly 6, 1995

Filed:
Justice W. William Leaphart delivered the Opinion of the Court.

Kenneth Firebaugh, one of the decedent's two sons, appeals

from the decision of the District Court holding that debts Kenneth

owed to his deceased mother were to be offset against his share of

her estate, despite the fact that the debts had been previously

discharged in bankruptcy. John Firebaugh cross appeals. We affirm

in part, reverse in part and remand.

Winifred Mills Firebaugh died on November 25, 1991 in

Missoula, Montana. She left a will dated April 24, 1984. Winifred

Firebaugh was survived by two sons; John Firebaugh of Missoula and

Kenneth Firebaugh of Kalispell. The two sons are named as the copersonal representatives and are the sole heirs and beneficiaries

under her will. The value of Winifred's estate at the time of her

death was $151,427.71. Of that sum, approximately $62,111.54 was

equally distributed to John and Kenneth from an Edward D. Jones

account and approximately $9,292.19 was used to satisfy estate

expenses.

In May of 1989, Kenneth sold his l/4 undivided interest in

some Kansas real estate to his mother for $42,000. His mother paid

Kenneth in cash. After receipt of the cash, Kenneth purchased a

condominium in California and filed a homestead exemption on that

property. The District Court concluded that the sales price of

$42,000 was clearly excessive; that the l/4 interest only had a

value of $30,475.

At the time of her death, Winifred's son John was indebted to

Winifred in the sum of $26,000. Her son Kenneth was indebted to

2
her in the sum of $68,695. However, in August of 1989, Kenneth

filed a petition in bankruptcy under Chapter 7 in the Eastern

District of California. In that proceeding, Kenneth listed his

mother as an unsecured creditor in the sum of $55,395. Kenneth

received a discharge in bankruptcy on January 12, 1990. Winifred,

who was Kenneth's single largest creditor, received no

distributions from that bankruptcy proceeding.

Sometime in 1991, Winifred met with Edward D. Jones account

executive Scott Wilson to discuss the distribution of her Edward D.

Jones account upon her death. At the time of that discussion, she

prepared a note which stated: "On my death, John to have top

$57,000 - rest divided equally." The District Court found that

this note evidenced her desire that the pre-bankruptcy debt of

Kenneth be considered for the purpose of calculating her sons'

respective shares of the estate.

Winifred's last will and testament provides, in part, as

follows:

If either of my two sons are indebted to me at the time

of my death, I forgive such debt or debts and direct my

personal representatives not to collect such

indebtedness, but to cancel and return any evidences

thereof to my son or sons having his indebtedness

canceled. If, at the time of my death, either of my sons

are indebted to me, but not in equal amounts, or if one

of my sons is indebted to me and the other is not, I

direct my personal representatives to pay to my son who

is not indebted the same amount of money as the amount of

indebtedness of my other son that was forgiven; or if one

son is indebted to me to a lesser extent than the other,

an amount of money sufficient to equalize the

indebtedness of my other son forgiven under this

provision, taking into consideration any indebtedness of

each son forgiven. It is my intention that each of my

sons be treated equally.

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The District Court concluded that, based on the provisions of

the will, since Kenneth was indebted in a greater amount than John,

the difference between the two debts would be paid to John. With

John indebted in the amount of $26,000 and Kenneth indebted in the

amount of $68,695, the difference was $42,695. Accordingly, from

the $112,023 (the value of the estate less the Kansas property

valued at $30,475) the first $42,695 was to be distributed to John

leaving a balance of $69,328.52 to be divided equally.

John contends that under 5 72-2-501, MCA (1991), his mother's

intent to treat her sons equally is controlling and thus the

District Court's decision to offset the debt of Kenneth should be

affirmed. Appellant Kenneth contends that, under the provisions of

§ 72-3-912, MCA, the court should have treated his debt as having

been discharged. Section 72-3-912, MCA, provides as follows:

The amount of a noncontingent indebtedness of a successor

to the estate if due, or its present value if not due,

shall be offset against the successor's interest; but the

successor has the benefit of any defense which would be

available to him in a direct proceeding for recovery of

the debt.

Standard of Review:

In determining whether the provisions of the will or § 72-3-

912, MCA, control distribution of the estate, the District Court

was making a legal conclusion. "[Wle review conclusions of law to

determine whether the district court's interpretation of the law is

correct." In re Marriage of Barnard (1994), 254 Mont. 103, 106,

870 P.2d 91, 93.

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Issue:

Whether, in light of Winifred Firebaugh's testamentary intent

to treat her sons equally, her son Kenneth's share under the will

may be offset by his indebtedness to his mother even though a

portion of said indebtedness has been discharged in bankruptcy?

Discussion:

Kenneth and John each rely upon statutory provisions in effect

at the time of their mother's death in 1991. Kenneth invokes § 72-

3-912, MCA, and contends that his discharge in bankruptcy would

constitute a valid defense to any attempt by the estate to recover

the debt. John relies on § 72-2-501, MCA (1991), (which has since

been repealed) for the proposition that the testatrix's intent is

controlling.

Kenneth is correct in claiming that his discharge in

bankruptcy qualifies as a valid defense under § 72-3-912, MCA.

However, as the District Court observed, to ignore Kenneth's prebankruptcy debt of $55,395 would thwart the clear intent of

Winifred as reflected in her will.

At the time Winifred made her will, the law provided that her

intent, as expressed in her will, would be the controlling

consideration. That statutory provision, although repealed in

1993, remained in effect at the time of her death in 1991. We must

thus assume that Winifred died believing that her intent would be

the controlling consideration. Her intent, as expressed in the

four corners of her will, is clearly to treat her two sons equally.

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If Kenneth's debt of $55,395 is not offset against his share,

Winifred's intent is subverted. Faced with a conflict between §

72-3-912, MCA, and the terms of the will, we determine that

Winifred's clear intent controls. That is, " [iln construing a will

the paramount rule is that the testator's intent gathered from the

words of the will governs the interpretation of the will." State

v. Keller (1977), 173 Mont. 523, 526, 568 P.2d 166, 168.

Similarly, in Matter of Estate of Ellison (19901, 243 Mont. 258,

260, 792 P.2d 5, 6, we held: "[Tlhat intention of a testator, as

expressed in his Will, controls the legal effect of his

disposition."

Given the clear language of the second paragraph of her will,

there is no question but that Winifred intended the sons' shares of

her estate be adjusted to reflect monies that the sons had received

from her as loans during her lifetime. We hold that as of the time

of Winifred's death in November 1991, testamentary intent takes

precedence over the provisions of § 72-3-912, MCA.

Cross Aooeal:

Issue:

Whether the District Court erred in refusing to order

disposition of an interest in real property owned by the estate but

located in the State of Kansas?

With regard to Winifred's interest in real estate located in

Kansas, the District Court concluded that Kenneth should not be

able to share equally in property that he transferred to his mother

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at an inflated price. However, the District Court declined to

order disposition of the Kansas property, instead, deferring to the

jurisdiction of the Kansas court in an ancillary probate. John

Firebaugh cross appeals contending that under Montana law the

District Court should be directed to order distribution of the

Kansas property in conformity with its Findings of Fact and

Conclusions of Law and Order dated August, 29, 1994.

We affirm the District Court's refusal to order distribution

of the Kansas property. However, in doing so, we note that the

District Court was in error in concluding that Kenneth should not

be allowed to share equally in the Kansas property since he

transferred that property to his mother at an inflated price.

Kenneth sold his share of the property to his mother in May of

1989, some two years six months before her death in November of

1991. There is nothing in the record indicating that Winifred

objected to the sales price at the time of the purchase or during

the subsequent two and one-half years of her life. Nor did she

seek to challenge the transaction in Kenneth's bankruptcy

proceeding. Accordingly, there is no basis for the District Court

to determine that Kenneth's share of the estate is (or should be)

subject to an offset as a result of that transaction.

Affirmed.

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We concur.

Justices

8
Justice James C. Nelson specially concurs and dissents as follows:

I respectfully dissent from our decision on the issue on

appeal and concur with our decision on the issue on cross-appeal.

Section 72-11-304, MCA, (1991), provides that extrinsic evidence is

inadmissible in the construction of a will unless there is some

alleged mistake or imperfection in the writing, unless the validity

of the will is in dispute, or unless it is necessary to explain the

circumstances under which the will was made or to which it relates,

to explain an extrinsic ambiguity or to establish illegality or

fraud. None of those exceptions are raised here. Winifred's will

is clear and unambiguous, and there is no need to delve into what

her supposed intention was in making her will.

Winifred's will provides at paragraph Second:

If either of my two sons are indebted to me at the time

of my death, I forgive such debt or debts and direct my

personal representatives not to collect such

indebtedness, but to cancel and return any evidences

thereof to my son or sons having his indebtedness

cancelled. If, at the time of my death, either of my

sons are indebted to me, but not in equal amounts, or if

one of my sons is indebted to me and the other is not, I

direct my personal representatives to pay to my son who

is not indebted to me the same amount of money as the

amount of indebtedness of my other son that was forgiven;

or if one son is indebted to me to a lesser extent than

the other, an amount of money sufficient to equalize the

indebtedness of my other son forgiven under this

provision, taking into consideration any indebtedness of

each son forgiven. It is my intention that each of my

sons be treated equally. [Emphasis added.1

As the language quoted from her will clearly states, Winifred

provided that a son's debts were to be offset against his share of

her estate, if and to the extent that son was indebted to her at

the time of her death. In point of fact, Kenneth was not indebted

9
to Winifred at the time of her death. His debt to her had been

discharged in bankruptcy--a proceeding in which she was listed as

the principle creditor for the debts offset here, but in which she

did not file a creditor's claim.

Section 72-11-307, MCA (1991), requires that all parts of a

will are to be construed in relation to each other so' as to, if

possible, form one consistent whole. BY improperly and

unnecessarily attempting to divine Winifred's intention in order to

achieve what appears to be a more equitable result in the

distribution of her estate, we have simply written out of her will

that language which conditions her direction that her sons be

treated equally on the provision that one or the other of her sons

be indebted to her at the time of her death.

I cannot agree in that approach. It is not the prerogative of

this or of any other court to rewrite the clear and unambiguous

provisions of a decedent's will simply because of a judicial

perception of inequity in the distribution of the testatrix'

estate. Accordingly, on the issue on appeal, I, respectfully

dissent.

Justice Karla M. Gray concurs in foregoing dis nt and special

concurrence.

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July 6, 1995

CERTIFICATE OF SERVICE

I hereby certify that the following certified order was sent by United States mail, prepaid, to the

following named:

Kenneth M. Fiebaugh

432 E. Idaho #218

Kalispell, MT 59901

Terry Wallace

Attorney At Law

P.O. Box 4763

Missoula, MT 59806-47@

Martin S. King, Esq.

Worden, Thane & Haines

P.O. Box 4747

Missoula, MT 59807

ED SMITH

CLERK OF THE SUPREME COURT

STATE OF MONTANA