Opinion ID: 2823814
Heading Depth: 3
Heading Rank: 2

Heading: Forms of Equitable Relief Available

Text: Â¶28Â Â Â Â Â Â We decline to adopt the three sonsâ extreme position that the Probate Code displaces all equitable authority in an elective-share proceeding. The Probate Code explicitly provides for situations where equity may supplement its provisions. See Â§ 15-10-103. But the three sonsâ argument contravenes both the letter and intent of this provision by preventing a probate court from ever exercising equity in an elective-share case. We must give effect to all provisions of a statute whenever feasible. See Young, Â¶ 16, 325 P.3d at 577. The Probate Code recognizes the unique nature of the marital relationship, and its elective-share provisions are intended to put the decedentâs spouse in a privileged position, with greater rights than residual beneficiaries. Yet the Probate Code cannot anticipate every possible scenario, and for that reason, the statute reserves the probateâs courtâs traditional equitable authority. See Lunsford, 908 P.2d at 85 (explaining that in section 15-10-103, â[t]he General Assembly provided guidance in determining the legal standards that apply to situations not covered by the statutory scheme of the Colorado Probate Codeâ). We emphasize that cases meriting such an exercise of equity will be rare, because the Code normally operates in favor of prompt disposition of estate matters. This case is an exceptional one where failure to invoke equity would lead to injustice. Â¶29Â Â Â Â Â Â The probate court correctly determined that use of its equitable authority was necessary to the disposition of this case. During the lengthy course of the proceedings,Â the court made numerous findings supporting an exercise of equity. The court found that âboth the accumulation of excessive administration costs, as well as the passage of excessive time, have distorted the value of the elective share in this estate.â In 2009, following a two-day evidentiary hearing to determine calculation of the equitable adjustment, the court made three specific findings that the âdecedentâs children would be enriched at the expense of their motherâ if they were allowed to (1) âdelay the distribution of the full elective share for over a decade,â (2) âforce distribution of cash to their mother while they took âin kindâ distributions,â 10 and (3) âcontinually reduce the value of the elective share by increasing administrative expenses through delay and obstruction.â Â¶30Â Â Â Â Â Â Thus, the unique nature of the Beren estate, combined with inordinate delay, excessive administrative expenses, and difficulties associated with evenly distributing corporate assets, created a situation where mechanistic application of the elective-share statutes in isolation would lead to a highly inequitable outcome. Although the probate court erred by tying Mrs. Berenâs equitable adjustment to increases in value of the entireÂ augmented estate after her husbandâs death, there is ample factual support in the record supporting the probate courtâs ability to exert the authority granted to it under section 15-10-103 to fashion an equitable remedy consistent with the Probate Codeâs plain language. The probate court has a range of equitable tools at its disposal to avoid the injustice that would result from excluding all equitable remedies in this case as a matter of law. These tools include the following for the probate courtâs consideration on remand from our decision when crafting an appropriate remedy.
Â¶31Â Â Â Â Â Â In dealing with administrative expenses, the probate court determined that â[a]ll administrative expensesâ would be included in the general computation of administrative expenses, regardless of whether they were âoccurring outside of the control of the surviving spouse or reasonable and necessary to the administration of any estate of this size and complexity.â The court acknowledged that this would âdistort[]â the value of the elective share as it existed on the decedentâs date of death, but it intended to address that distortion through the equitable adjustment. Therefore, the courtâs decision to apportion the estate administration costs in this way hinged on the critical assumption that it had authority to award an equitable adjustment to the statutory elective share. Â¶32Â Â Â Â Â Â Specifically, section 15-11-203 dictates that the value of the augmented estate includes the value of the decedentâs probate estate, reduced by administrative and certain other expenses. In other words, an electing spouse receiving fifty percent of the augmented estate will also be responsible for fifty percent of the administrativeÂ expenses. Administrative expenses in this case totaled $276,225.20 in 1996 but had ballooned to $16,783,615.50 by final distribution of the estate in 2010. Importantly, although the Probate Code provides that the property comprising the augmented estate is valued at the time of death, the administrative expenses component continues to increase during probateâi.e., its value is not, and cannot, be determined based upon the date of death. In this extremely prolonged case, the estateâs rising administrative expenses consumed a significant portion of the augmented estate, thereby reducing Mrs. Berenâs elective share by over $8 million compared to its value on the date of her husbandâs death. Â¶33Â Â Â Â Â Â No particular provision in the Probate Code displaces a probate courtâs authority to grant an equitable adjustment based on excessive administrative expenses not attributed to a spouseâs actions in an elective-share proceeding. While the phrase âdate of deathâ in the statutory definition of value, Â§ 15-11-201(11), displaces a probate courtâs ability to grant an equitable remedy based upon appreciation and income to the augmented estate, there is no evidence that the administrative expenses here were connected to the increase in value of the estate. Further, while the value of the property comprising the augmented estate must be ascertained based upon date of deathâand therefore the estateâs performance after that date cannot be considered in an elective-share proceedingâadministrative fees cannot be ascertained as of date of death because they continue to increase during estate administration. Â¶34Â Â Â Â Â Â While the statuteâs plain language dictates that administrative costs must be deducted from the augmented estate, as they were in this case, nothing in the CodeÂ precludes a probate court from granting an equitable adjustment based upon excessive administrative fees when justice so requires. The record supports the probate courtâs finding that excessive administrative expenses unfairly impacted Mrs. Berenâs elective share. Under the extraordinary circumstances of this case, the probate court retains equitable authority to account for the unfair burden of administrative expenses. Â¶35Â Â Â Â Â Â On remand, the probate court may award Mrs. Beren an equitable remedy based upon the excessive administrative expenses in this case.
Â¶36Â Â Â Â Â Â The probate courtâs equitable authority can also include an award to compensate a surviving spouse for delay in the elective shareâs distribution. The Probate Code plainly indicates the General Assemblyâs policy choice in favor of prompt distribution of the elective share. However, final disposition of an estate may involve delay caused by the necessity to address issues other beneficiaries raise in the case. Here, the delay in calculating and distributing the elective share prevented Mrs. Beren from utilizing the cash and/or in-kind assets to which she was legally entitled. While interest is usually a creature of statute, the probate court may use its equitable authority to ensure that a party receives the true value of her or his elective share when distribution has been unduly delayed. Â¶37Â Â Â Â Â Â In this case, the probate court was justified in concluding that an exercise of equity was necessary to âcompensate a party for an inordinate delay in receiving a distribution to which she is entitled.â If not for the objections and ensuing litigation, theÂ court found the estate âcould have been administered and distributed after 4 yearsâ but instead took almost fifteen years. 11 The court specifically recognized the delay caused by the four sons in its orders addressing its exercise of equity. For example, in its December 15, 2003 order, the court found that âthe lack of cooperation of the [four sons] was an impediment to the administration of the estateâs assets.â The court concluded that â[i]t would represent a windfall to the other devisees, all of whom participated in the litigation that has delayed the final settlement and distribution, to have the entire benefit of [the estateâs appreciation and income] allocated to their distributions.â Notably, the court never found that the delay was the result of any action on the part of Mrs. Beren. Â¶38Â Â Â Â Â Â If the estate had been settled on a timely basis, there would not have been sufficient cash to fulfill Mrs. Berenâs elective share. The means that her elective share could have been satisfied through a combination of cash and oil and gas assets that would have shared in the same appreciation and income the estate experienced during probate. Because years of litigation concerning the elective-share calculation delayed its distribution, Mrs. Beren was not able to benefit from investing the cash and/or enjoying the benefit of the in-kind assets she would have received. Her elective share was not separated from the rest of the estate, so she was a de facto investor, whoâunder the court of appealsâ analysisâwould have been unable to reap the benefit of herÂ investment. The record supports the probate courtâs finding that, without an equitable remedy, the children would have been unjustly enriched at the expense of their mother because they hindered the distribution of her elective share and then used that amount to further benefit the estateâs assets and, ultimately, their own financial well-being. Â¶39Â Â Â Â Â Â Coloradoâs Probate Code is based on uniform law. Case law from other jurisdictions that have also adopted the UPC informs our decision regarding the probate courtâs equitable authority to award interest on an elective share when distribution has been unduly delayed. For example, a New York court concluded that its law authorized an award of interest to compensate a surviving spouse for delay in the distribution of her elective share, relying on principles of equity to reach the just result. See In re Kasenetz, 196 Misc. 2d 318, 320 (N.Y. Sur. Ct. 2003) (â[T]he delay in distribution [of the elective share] inures to the benefit of the residuary beneficiaries and the loss of use of the money inures to the detriment of the spouse. There is neither equity in this position nor is there incentive for the fiduciaries to distribute to the surviving spouse what the law determines to be hers in an expeditious fashion . . . .â). That court reasoned that refusing to supplement the pecuniary elective-share amount with statutory interest âwould unjustly enrich the estate and diminish the value of the elective share.â Id. at 321.Â Â¶40Â Â Â Â Â Â In the case before us, the Probate Code does not provide for statutory interest on a delayed elective-share distribution. 12 But the probate courtâs authority to ensure that a party receives the full value of the money it is legally due is not restricted to an award of statutory interest. See, e.g., Farmers Reservoir & Irrigation Co. v. City of Golden, 113 P.3d 119, 132â33 (Colo. 2005) (observing that the doctrine of moratory interest relied on the concept of interest as damages and unjust enrichment as a basis for awarding common law interest rather than statutory interest); Bankers Trust Co. v. Intâl Trust Co., 113 P.2d 656, 665 (Colo. 1941) (allowing interest to be assessed as damages when interest was not recoverable by statute). The court of appeals determined that the equitable adjustment was not justified as an award of moratory interest because the probate court did not make the requisite finding of wrongful withholding. Estate of Beren, Â¶ 39. However, even in the absence of a wrongful withholding, the probate courtÂ made sufficient findings to justify an equitable remedy to compensate for the excessive delay that deprived her of property to which she was legally entitled. Â¶41Â Â Â Â Â Â The statutory interest rate has traditionally functioned as a legislative policy choice regarding the value of money, in order to avoid prolonged factual disputes in each and every case coming before our courts. See Rodriguez v. Schutt, 914 P.2d 921, 929 (Colo. 1996) (recognizing that statutory interest is meant to preserve the time value of money). The 17.46% interest rate the probate court selected as an equitable adjustment was based on the overall performance of the augmented estateâs assets during probate administration and, therefore, cannot be the basis for an equitable remedy on remand. This does not mean, however, that the probate court cannot make an equitable award based on the reasonable rate of return on the undistributed portion of Mrs. Berenâs elective share during probate administration. Tying an equitable award to the statutory rate of interest that the General Assembly already recognizes is within the trial courtâs discretion. See, e.g., Roberts v. People, 130 P.3d 1005, 1010 (Colo. 2006) (noting that the criminal restitution statute did not require any specific prejudgment interest rate, but that the civil interest rate of eight percent, while not controlling, appeared reasonable and appropriate under the circumstances). Accordingly, on remand, the probate court may grant Mrs. Beren an equitable award based on a reasonable rate of return on the assets to which she was entitledâthe undistributed portion of her elective share.