Court Opinion

ID: 890269
Source: CourtListenerOpinion
Date Created: 2013-06-05 06:34:19.908035+00
Date Added: 2024-06-11T09:05:26.289037
License: Public Domain

April 30 2013

                                         DA 12-0512

                 IN THE SUPREME COURT OF THE STATE OF MONTANA

                                         2013 MT 114

DOUGLAS P. ECTON, Personal Representative
of the Estate of Zales N. Ecton, Jr.,

              Applicant and Appellant,

         v.

ZALES N. ECTON, III,

              Respondent and Appellee.

APPEAL FROM:           District Court of the Eighteenth Judicial District,
                       In and For the County of Gallatin, Cause No. DP-06-132A
                       Honorable Holly Brown, Presiding Judge

COUNSEL OF RECORD:

                For Appellant:

                       Lynda S. White, Berg, Lilly & Tollefsen, P.C., Bozeman, Montana

                       William E. McCarthy, Reid J. Perkins, Worden Thane, P.C.,
                       Missoula, Montana

                For Appellee:

                       Cindy E. Younkin, Younkin Law, PLLC, Bozeman, Montana

                       Cory J. Swanson, Attorney at Law, Helena, Montana

                                                   Submitted on Briefs: March 6, 2013

                                                              Decided: April 30, 2013

Filed:

                       __________________________________________
                                         Clerk
Justice Patricia O. Cotter delivered the Opinion of the Court.

¶1     Douglas P. Ecton (Doug), the personal representative of the estate of Zales N.

Ecton, Jr. (Decedent), appeals from a final distribution order of the Eighteenth Judicial

District Court, Gallatin County, which interpreted Decedent’s last will and testament to

devise the entirety of Decedent’s real property known as the “Home Ranch” to Zales N.

Ecton, III (Zales). We affirm.

                                         ISSUES

¶2     Doug raises the following two issues on appeal:

¶3     1. Did the District Court err in interpreting the requirement in the Decedent’s last

will and testament that I.R.C. § 2032A property be distributed as part of the residuary

estate, as requiring a specific devise of the I.R.C. § 2032A property to Zales rather than a

devise to the residuary beneficiaries?

¶4     2. Did the District Court err in allowing Zales to raise an objection to the personal

representative’s decision to award the income from the I.R.C. § 2032A property to the

residuary beneficiaries more than thirty days after the proposed distribution was

submitted for approval?

                 FACTUAL AND PROCEDURAL BACKGROUND

¶5     This case involves a dispute between siblings over who was entitled to receive

farm and ranch land owned by their parents. The real property at issue, the Home Ranch,

consisted of over 1900 acres located near Amsterdam, Montana.

¶6     On October 26, 1990, Decedent executed his last will and testament. Decedent’s

last will and testament was a reciprocal will with his wife, Patricia Ecton (Patricia).

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Decedent and Patricia had three children: Zales, of Amsterdam, Montana; Doug, of

Spokane, Washington; and Elaine E. Fulton (Elaine), of Spokane, Washington. Zales

operated the farm and ranch business on the Home Ranch for nearly forty years.

¶7    Decedent’s last will and testament contained the following pertinent provisions:

      FIVE: (C)(1) Upon the death of my wife, the trust shall terminate. If the
      “Home Ranch” described in subparagraph (C)(3) or any portion of that
      ranch is then an asset of the trust estate, the trustee shall distribute the
      “Home Ranch” or so much of it as is part of the trust estate to my son
      ZALES N. ECTON III if (i) he is then living and (ii) if he pays Twenty-five
      Thousand Dollars ($25,000) each to my son DOUGLAS B. ECTON and
      my daughter ELAINE E. FULTON. Such may be paid on a deferred basis
      in annual installments for a period not to exceed ten (10) years with interest
      at the lowest I.R.S. permissible interest rate. If DOUGLAS is not then
      living, ZALES may receive the trust’s interest in the “Home Ranch”
      without any payment to DOUGLAS’ estate or distributees. If ELAINE is
      not then living, ZALES may receive the trust’s interest in the “Home
      Ranch” without any payment to ELAINE’s estate or distributees. If
      ZALES is not then living, the provisions of this paragraph concerning the
      distribution of the “Home Ranch” will not apply.
             (2) All of the then-remaining assets then contained in the trust shall
      be divided into equal separate shares, so as to provide one share for each
      child of mine, then living, and one share for the then-living descendants,
      collectively, of each then deceased child of mine. The trustee shall
      distribute each share set aside for a living child of mine to each such child.
      Additionally, the trustee shall distribute the share for the then-living
      descendents of any deceased child of mine to those descendants by right of
      representation.
             (3) The term “Home Ranch” refers to that land (and improvements
      thereon) that I have used for farming purposes located near Amsterdam in
      Gallatin County, Montana, and which consists of approximately 1,902
      deeded acres of land and 480 acres of state leases.

      SIX: If my wife fails to survive me, my personal representative shall
      dispose of my residuary estate in the same fashion as provided for in
      Article FIVE (C).

      SEVEN: Notwithstanding the foregoing, if my personal representative
      concludes in good faith to elect special use valuation provided for in I.R.C.
      § 2032A, all devises of farm property to any child and to any descendent of

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       any deceased child are contingent upon said beneficiaries [sic] execution of
       the agreement required by I.R.C. § 2032A(d)(2). The failure of any
       beneficiary who has an interest in such farm property to timely execute
       such an agreement shall cause the devise to such beneficiary to lapse.
       Further, those who would otherwise take such a lapsed share, shall also be
       subject to the requirements of this Article.

       EIGHT: I recognize that my personal representative may elect special use
       valuation provided for in I.R.C. § 2032A. My personal representative shall
       confine such election to such tracts or fractional interests in real estate as
       shall be the minimum of the same necessary to produce the maximum
       reduction from fair market value allowable under § 2032A. I direct that my
       personal representative distribute such property as part of my residuary
       estate (Articles FIVE or SIX) and not as part of the marital deduction
       pecuniary devise (Article FOUR).

¶8     Decedent executed three codicils to his last will and testament:        the first on

December 20, 1990; the second on October 13, 1994; and the third on January 27, 2004.

The first codicil added a provision that excluded adopted children from the definition of

“descendants.” The second codicil changed the order of persons to be elected as trustee

and personal representative of Decedent’s trust and estate by moving Doug from third to

second priority, swapping his position with Zales.

¶9     Patricia died on March 13, 1998. At the time of her death, Patricia owned an

undivided one-half interest in the Home Ranch as a tenant in common with Decedent.

Patricia’s will created a trust and transferred her interest in the Home Ranch to the trust

upon her death. Decedent was the sole income beneficiary of the trust. Patricia’s will

dictated that the trust was to terminate upon the death of Decedent.          A reciprocal

provision of Patricia’s will provided that upon Decedent’s death, any portion of the Home

Ranch that was an asset of the trust estate was to be distributed to her son, Zales.

                                             4
Decedent remarried in 2000, but did not add any specific provision to his will or

subsequent codicils providing for his new wife.

¶10   Decedent executed his third codicil on January 27, 2004.         The third codicil

provided that Doug was to be appointed as the personal representative of Decedent’s

estate, with Elaine as next in line to fill the role of personal representative. The third

codicil amended Article 5(C) of Decedent’s will to include the following language:

      FIVE: (C)(1) Upon my death, the trust shall terminate. If the “Home
      Ranch” described in subparagraph (C)(3) or any portion of that Ranch is
      then an asset of the trust estate, the trustee shall distribute the “Home
      Ranch” or so much of it as is part of the trust estate to my son ZALES N.
      ECTON III if he is then living.
             (2) All of the then-remaining assets then contained in the Trust shall
      be divided equally between my son, DOUGLAS B. ECTON and my
      daughter, ELAINE E. FULLTON [sic]. It is my intent that my son ZALES
      N. ECTON, III receive the “Home Ranch” and that my other son,
      DOUGLAS B. ECTON and my daughter ELAINE E. FULLTON [sic]
      receive the remaining residuary assets of my estate. If either DOUGLAS
      B. ECTON or ELAINE E. FULLTON [sic] pre-decease me there [sic] share
      shall be distributed to any of their respective decedents [sic] by right of
      representation.
             (3) The term “Home Ranch” consists of approximately 1,920 deeded
      acres of land.

¶11   Decedent died on November 3, 2006.          Doug was appointed to serve as the

personal representative of Decedent’s estate and successor trustee to Patricia’s trust.

Doug surveyed and partitioned the Home Ranch so that one half of the real estate could

be separately deeded to the trust beneficiary, Zales. The remaining acreage of the Home

Ranch was subject to probate. Because the date of death valuations for all of Decedent’s

assets exceeded the $2,000,000 exemption for federal estate tax purposes, Doug utilized a

special valuation statute for farm property, I.R.C. § 2032A, to reduce the estate’s value

                                            5
by classifying 528 acres of the Home Ranch as farm property. This alternative land

valuation method allowed the 528 acres to be valued at its productive value instead of its

fair market value.

¶12    On July 7, 2009, Doug filed a final accounting with the District Court. Relying on

Article EIGHT of Decedent’s will, which states that “I direct that my personal

representative distribute such property [property valued pursuant to I.R.C. § 2032A] as

part of my residuary estate,” the final accounting proposed to distribute equally between

Doug and Elaine the 528 acres of the Home Ranch that was subject to the I.R.C. § 2032A

special use valuation. On July 31, 2009, Zales filed an objection to the final accounting.

Zales argued that devising any portion of the Home Ranch to Doug and Elaine was

contrary to Decedent’s testamentary intent as demonstrated by the express language of

Decedent’s will. Doug and Zales briefed their respective positions before the District

Court and each filed proposed distribution orders.

¶13    On March 29, 2011, the District Court issued its order of final distribution. The

District Court determined that Article EIGHT of Decedent’s will did not require the land

subject to the I.R.C. § 2032A election to be distributed as part of the residuary estate to

Doug and Elaine in light of the mandates of Article FIVE as revised by the third codicil.

The District Court determined that Decedent clearly intended to devise the entire Home

Ranch to Zales.

¶14    Following the District Court’s entry of its order of final distribution, Doug

submitted an amended final accounting. The amended final accounting distributed the

2009, 2010, and 2011 income from the I.R.C. § 2032A property to Doug and Elaine.

                                            6
Zales filed an objection to the amended final accounting on December 16, 2011, arguing

that he was entitled to the income associated with the I.R.C. § 2032A portion of the

Home Ranch. On May 11, 2012, the District Court issued its order on Zales’ objection to

the amended final accounting. The District Court determined that its order of final

distribution, which directed distribution of “all the property known as the ‘Home Ranch,’

in its entirety” to Zales, would necessarily include any associated income and proceeds

from the property. Therefore, the District Court granted Zales’ objection to the amended

final accounting and awarded the 2009, 2010, and 2011 income from the I.R.C. § 2032A

property to Zales. Doug appeals.

                              STANDARDS OF REVIEW

¶15    “The judicial interpretation and construction of a will presents a question of law.”

In re Estate of Ayers, 2007 MT 155, ¶ 12, 338 Mont. 12, 161 P.3d 833; In re Estate of

Snyder, 2007 MT 146, ¶ 18, 337 Mont. 449, 162 P.3d 87 (Snyder II). We review a

district court’s conclusions of law for correctness. Ayers, ¶ 12; Snyder II, ¶ 18.

                                      DISCUSSION

¶16    Did the District Court err in interpreting the requirement in the Decedent’s last
       will and testament that I.R.C. § 2032A property be distributed as part of the
       residuary estate, as requiring a specific devise of the I.R.C. § 2032A property to
       Zales rather than a devise to the residuary beneficiaries?

¶17    The object of a judicial interpretation of a will is to ascertain the intention of the

testator.   In re Estate of Bolinger, 284 Mont. 114, 121, 943 P.2d 981, 985 (1997)

(citations omitted). The testator’s intent controls the distribution of assets pursuant to a

will. Snyder v. Snyder, 2000 MT 113, ¶ 10, 299 Mont. 421, 2 P.3d 238 (Snyder I); In re

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Estate of Evans, 217 Mont. 89, 94, 704 P.2d 35, 38 (1985). When construing a will, we

interpret the words used in the will according to their ordinary and grammatical sense,

unless a clear intention to use them in another sense can be ascertained. Ayers, ¶ 14;

Snyder I, ¶ 10. Where the language of the will is unclear, the testator’s intent must be

ascertained from a consideration of the instrument as a whole, and a comparison of its

various parts in light of the circumstances surrounding the drafting of the will. Ayers,

¶ 14; Snyder I, ¶ 10.

¶18    The District Court determined that Decedent’s intent, as demonstrated by the

language of his will, was to devise the entire Home Ranch to Zales. Doug argues that the

District Court erred in interpreting Decedent’s will because the Decedent did not intend

to devise the 528 acres of the Home Ranch subject to special value under I.R.C. § 2032A

to Zales. Instead, Doug maintains that he and Elaine were entitled to receive this portion

of the Home Ranch as part of the residuary estate.

¶19    Since Doug, as personal representative of Decedent’s estate, elected to pursue

estate valuation pursuant to I.R.C. § 2032A, Article EIGHT of Decedent’s will took

effect. Article EIGHT of Decedent’s will provides as follows:

       I recognize that my personal representative may elect special use valuation
       provided for in I.R.C. § 2032A. My personal representative shall confine
       such election to such tracts or fractional interests in real estate as shall be
       the minimum of the same necessary to produce the maximum reduction
       from fair market value allowable under § 2032A. I direct that my personal
       representative distribute such property as part of my residuary estate
       (Articles FIVE or SIX) and not as part of the marital deduction pecuniary
       devise (Article FOUR).

                                             8
Article FIVE (C)(2), as amended by Decedent’s third codicil, controls the distribution of

Decedent’s property and reads as follows:

       It is my intent that my son ZALES N. ECTON, III receive the “Home
       Ranch” and that my other son, DOUGLAS B. ECTON and my daughter
       ELAINE E. FULLTON [sic] receive the remaining residuary assets of my
       estate.

Though we recognize that Article EIGHT does in fact state that the property subject to

special valuation shall be distributed as part of Decedent’s residuary estate, when read

together with Article FIVE, it is clear that Decedent did not intend to divide that portion

of the Home Ranch between Doug and Elaine.

¶20    The Decedent’s testamentary intent is clearly ascertainable from the express

language of Article FIVE (C)(2). In Article FIVE (C)(2), Decedent stated that: “It is my

intent that my son ZALES N. ECTON receive the ‘Home Ranch.’ ” This Article goes on

to state that Doug and Elaine are to receive the “remaining residuary assets” of

Decedent’s estate. By including the word “remaining” in a description of the residuary

assets directly following the Decedent’s stated intent to devise the Home Ranch to Zales,

it is clear that the residuary estate divided between Doug and Elaine does not include any

portion of the Home Ranch.        Any contrary interpretation would ignore the clear,

unambiguous, express intent of the Decedent to devise the Home Ranch to Zales.

¶21    Accordingly, we conclude that the District Court did not err in interpreting

Decedent’s will to determine that Decedent intended to devise to Zales the 528 acres

subject to special farm property valuation.

                                              9
¶22    Did the District Court err in allowing Zales to raise an objection to the personal
       representative’s decision to award the income from the I.R.C. § 2032A property to
       the residuary beneficiaries more than thirty days after the proposed distribution
       was submitted for approval?

¶23    It is undisputed that Zales filed a timely objection to the July 7, 2009 final

accounting. However, Doug argues that Zales only objected to the proposed distribution

of the real property subject to the I.R.C. § 2032A election, and therefore failed to timely

object to the distribution of income from that property to Doug and Elaine.               Doug

contends that any objection to the final accounting must have been made within 30 days

of the July 7, 2009 final accounting pursuant to § 72-3-903, MCA. Section 72-3-903(2),

MCA, provides as follows:

       The right of any distributee to object to the proposed distribution on the
       basis of the kind or value of asset the distributee is to receive, if not waived
       earlier in writing, terminates if the distributee fails to object in writing
       received by the personal representative within 30 days after mailing or
       delivery of the proposal.

Doug maintains that Zales waived his right to object to the distribution of income from

the I.R.C. § 2032A property because he did not object on that basis until after the

amended final accounting was drafted.

¶24    The District Court’s March 29, 2011 order of final distribution did not specifically

address the distribution of income from the I.R.C. § 2032A property, although it directed

that Zales was entitled to receive the entirety of the I.R.C. § 2032A property. Doug

subsequently drafted an amended final accounting to reflect that the entire Home Ranch

must be distributed to Zales. Upon receiving the amended final accounting, Zales filed

an objection to the distribution of income from the I.R.C. § 2032A property to Doug and

                                             10
Elaine. The District Court determined that its order of final distribution, which directed

distribution of “all the property known as the ‘Home Ranch,’ in its entirety” to Zales,

would necessarily include any associated income and proceeds from the I.R.C. § 2032A

property. Accordingly, the District Court granted Zales’ objection to the amended final

accounting and awarded the 2009, 2010, and 2011 income from the I.R.C. § 2032A

property to Zales. We agree with the District Court’s decision.

¶25    Section 72-34-428(1), MCA, provides that “If property is specifically given to a

beneficiary, by will or trust, the fiduciary of the estate or of the terminating income

interest shall distribute the net income and principal receipts to the beneficiary who is to

receive the property. . . .” “A specific devise differs from a general devise in that it is not

intended by the testator to be paid out of the estate generally, but is to be paid solely by

delivering to the devisee that specific article given by the will.” Holtz v. Deisz, 2003 MT

132, ¶ 25, 316 Mont. 77, 68 P.3d 828. Since the Home Ranch is a specific piece of

property defined in Decedent’s will, Decedent’s language in his will stating that “It is my

intent that my son ZALES N. ECTON, III receive the ‘Home Ranch’ ” plainly constitutes

a specific devise. As such, § 72-34-428(1), MCA, controls the distribution of income

from the Home Ranch and mandates that such income must be distributed to Zales. Zales

timely objected to the final accounting that proposed to distribute the I.R.C. § 2032A

property to Doug and Elaine. Once the District Court concluded that Zales was entitled

to receive the I.R.C. § 2032A property, it follows that Zales was entitled to receive the

income from such property.

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¶26   We hold that the District Court did not err in allowing Zales to object to the

personal representative’s proposed distribution of income from the I.R.C. § 2032A

property.

                                   CONCLUSION

¶27   For the foregoing reasons, we affirm the District Court.

                                                      /S/ PATRICIA COTTER

We Concur:

/S/ MIKE McGRATH
/S/ BETH BAKER
/S/ LAURIE McKINNON
/S/ JIM RICE

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