Opinion ID: 900869
Heading Depth: 1
Heading Rank: 1

Heading: facts

Text: [¶ 4.] Walter L. Brownlee (Walter) died testate on August 17, 1997. Walter executed his Last Will and Testament and a Revocable Trust Agreement on March 10, 1997. Three provisions of those documents are important: Article I of the Will provides: I direct that all federal estate taxes chargeable to my taxable estate, including any taxes arising from the transfer or receipt of assets which are not part of my probate estate, shall be paid from the balance of my estate remaining after complying with the hereinafter sections of my Will. Any South Dakota inheritance tax that is charged against a beneficiary shall be the obligation and responsibility of the individual as to the assets they are to receive. Article III of the Will provides: [d]uring my lifetime I have established a Trust for the benefit of individual parties and they are to receive those assets as set forth in the said Trust. Walter's Trust provides in part: I direct that all inheritance tax, estate and other similar taxes of the United States, or any state thereof, assessed against my taxable estate or recipients thereof, whether passing by this Trust or otherwise, shall be charged to the principal of my Trust without reimbursement or contribution from any person. [¶ 5.] The conflict between the provisions of the Will and Trust concerning the payment of estate and inheritance taxes are the heart of this dispute. The trial court found that the Will and Trust provisions were unambiguous and irreconcilable. He also determined that the Will provision controlled the apportionment of federal estate and state inheritance taxes. [¶ 6.] The parties were unable to come to an agreement as to the order of abatement. According to South Dakota's abatement statute, SDCL 29A-3-902, the trial court held that abatement would proceed in the following order: 1) intestate property; 2) property held in the residuary of the estate; 3) property that was not specifically devised; 4) property specifically devised; 5) the Trust, joint tenancy accounts and individual retirement accounts; and 6) multiple party bank accounts. [¶ 7] Randy is Walter's son. He began working for Walter's gravel crushing business in 1971. Walter retired in 1989 and Randy continued the business. Apparently, they had an agreement whereby Randy retained possession of the business equipment and paid Walter whatever he wants each year, plus whenever he wanted a car ... it all depended on how good a year we had. There was no written agreement. Walter structured the transaction as a lease to avoid the tax consequences of an outright sale of the equipment. However, Randy argues on appeal that Walter's actual intent was that the transaction was a sale. [¶ 8.] Three days before drafting his Will and Trust, Walter executed a Bill of Sale to Randy which described certain construction equipment. Walter left the Bill of Sale with his attorney for delivery to Randy after Walter died. Three of the items described in the Bill of Sale were certificates of title to vehicles which had already been transferred into Randy's name. These three items were labeled exhibits A, B and C. The trial court held that they were effectively transferred to Randy, but that the remaining items in the Bill of Sale were an attempt to gift the property to Randy which failed due to lack of delivery. [¶ 9.] Richard Bohls, the CPA for Walter and Randy, testified on behalf of Randy at the hearing. After Bohls was dismissed as a witness, counsel for Weekley cross-examined Randy on whether he had any gift tax returns to support his contention that some of the property had already been gifted to him. Randy's counsel asked for a continuance so that Bohls could be recalled to testify as to three gift tax returns. However, these gift tax returns did not include property involved in this estate, but referred to other property which had previously been gifted to Randy and his family. The court refused to continue the proceeding but stated that if Bohls could be in court before the close of the proceeding, it would consider taking him out of order. Counsel for Weekley rested, the hearing was concluded and Bohls was not re-called. The next morning Randy found the gift tax returns although he had previously stated were unobtainable because they were iced in. Randy's counsel filed a motion to reopen the hearing. The trial court entered findings of fact and conclusions of law denying the motion. [¶ 10.] Weekley appeals two issues: 1. Whether the trial court erred in determining that the Will and Trust provisions regarding apportionment of taxes could not be reconciled and that the Will controls apportionment. 2. Whether the trial court erred in interpreting South Dakota's abatement statute, SDCL 29A-3-902. [¶ 11.] By notice of review, Randy appeals two issues: 3. Whether the trial court erred in determining that the Bill of Sale was an ineffective gift and that the construction equipment remained in the residuary estate. 4. Whether the trial court abused its discretion in denying Randy's motion to reopen the hearing to allow him to present evidence of previous gifts from Walter to Randy and others. [¶ 12.] We affirm the trial court on Issues 3 and 4, modify Issue 1, and need not decide Issue 2.