Court Opinion

ID: 2718762
Source: CourtListenerOpinion
Date Created: 2014-08-19 13:03:02.726901+00
Date Added: 2024-06-11T09:55:55.758092
License: Public Domain

In the Missouri Court of Appeals
                                        Western District

IN THE ESTATE OF SHIRLEY J.      )
MERRIOTT, Deceased,              )
CITIZENS-FARMERS BANK OF COLE    )
CAMP,                            )
                        Appellant,
                                 )
v.                               )                              WD76938
                                 )
THOMAS SIDNEY MERRIOTT,          )                              FILED: August 19, 2014
TIMOTHY SCOTT MERRIOTT and       )
TAMRA SUE MERRIOTT WILSON,       )
                    Respondents. )

       APPEAL FROM THE CIRCUIT COURT OF MORGAN COUNTY
                THE HONORABLE KEVIN P. SCHEHR, JUDGE

           BEFORE DIVISION ONE: MARK D. PFEIFFER, PRESIDING JUDGE,
            LISA WHITE HARDWICK AND KAREN KING MITCHELL, JUDGES
        Citizens-Farmers Bank of Cole Camp ("Appellant") appeals from the probate

court's judgment in an action for accounting pursuant to Section 461.300, RSMo Cum.

Supp. 2013,1 against Thomas Merriott, Timothy Merriott, and Tamra Merriott Wilson

(collectively, "Respondents"), who are the children and heirs of Shirley Merriott

("Merriott"). Appellant had filed the action for accounting to allow Merriott's estate to

recover the value of all nonprobate transfers that Merriott had made to Respondents in

order to discharge Appellant's unpaid claim against the estate.

1
 All statutory references are to the Revised Statutes of Missouri 2000, as updated by the 2013
Cumulative Supplement.
       On appeal, Appellant contends the probate court misapplied the law regarding

the proper remedy for an accounting action under Section 461.300 when it ordered

Respondents to sell Merriott's residence and give Appellant any sales proceeds

remaining after the mortgage was paid. Appellant further contends the court erred in

valuing the residence at the time of trial instead of at the time it was transferred to

Respondents and in assigning a value to the residence that was not supported by

substantial evidence. Because (1) the proper remedy under Section 461.300 was a

money judgment in favor of Merriott's estate and against Respondents for the value of

the recoverable transfers to the extent necessary to discharge Appellant's claim against

the estate; and (2) the court should have determined the value of Merriott's residence at

the time of her death instead of at the time of trial, we reverse and remand this case to

the probate court for further proceedings.

                            FACTUAL AND PROCEDURAL HISTORY

       Merriott died on March 5, 2008. Shortly after Merriott's death, the personal

representative of her estate filed an "Affidavit to Establish Title of Distributees of

Decedent Where Total Estate is Less Than $40,000." The affidavit listed real and

personal property valued at $16,497.59, and Respondents were named as the

distributees of the property. The probate court executed the certificate of clerk portion

of the affidavit, which indicated that each of the Respondents was to receive an

undivided one-third interest in the estate property.

       In March 2009, Appellant filed a claim against Merriott's estate for $370,479.38,

which it alleged was the unpaid balance plus accrued interest on loans that Merriott and

                                              2
her husband2 had obtained from Appellant. These loans included one unsecured

promissory note and several promissory notes secured by rental properties owned by

Merriott and her husband. Contemporaneously, Appellant also filed a petition to require

administration of the estate. In its petition, Appellant alleged that, as a creditor, it was a

person interested in the estate. Appellant further alleged that substantial assets passed

to Respondents and that those assets were subject to its claim under the provisions of

Section 461.300. This statute provides that recipients of nonprobate and other transfers

outside of the administration of a decedent's estate are liable to account for the value of

such transfers to the extent necessary to discharge statutory allowances and claims that

remain unpaid after application of the decedent's estate. § 461.300.1. The probate

court sustained Appellant's petition to require administration of Merriott's estate and

appointed Thomas Merriott as personal representative.

        In July 2009, Appellant filed a demand for the personal representative of

Merriott's estate to bring an action under Section 461.300 against the recipients of

transfers of her property. In the demand, Appellant alleged that substantial assets had

been transferred to Respondents under Missouri's nonprobate laws and that the

transfers were subject to an action for accounting under Section 461.300.3 Appellant

asked that the personal representative commence such an action.

2
  Merriott's husband predeceased her.
3
  As discussed infra, an "action for accounting" under Section 461.300.2 is a procedure by which qualified
claimants can recover the value of nonprobate and other recoverable transfers to satisfy unpaid claims. It
is not the same as an "action for an accounting," in which a party seeks "detailed financial and
transactional information from various fiduciaries." Robert J. Selsor, Fattening Up the Skinny Estate --
The Non-Probate Transfer Statute's Remedies for Pursuing a Decedent's Assets, 67 J. Mo. B. 286, 288
(Sept.-Oct. 2011).

                                                    3
        In August 2009, Appellant foreclosed on the rental properties that secured

Merriott's loans. After the foreclosure sales, the total amount of the deficiencies on the

notes was $159,827.20.

        After Thomas Merriott, as personal representative of the estate, failed to file an

action for accounting under Section 461.300, Appellant filed such an action. Appellant

alleged that Respondents had received Merriott's personal property, her three bank

accounts via a transfer on death designation, and her residence and rental property via

beneficiary deeds. Appellant asked that the court enter judgment requiring each of the

Respondents to deliver "all assets or a sufficient portion thereof on a pro rata basis to

the extent determined by the Court to be necessary to discharge" Appellant's claim

against Merriott's estate.

        The probate court removed Thomas Merriott as personal representative of the

estate and appointed the Morgan County Public Administrator to serve as personal

representative. In October 2011, the court held a hearing. Following the hearing, the

court ordered Respondents to make an accounting4 to the personal representative "as

to all property received by them through non-probate transfers."

        In February 2012, Appellant filed a motion for judgment on its petition for

accounting under Section 461.300. In the motion, Appellant alleged that Respondents

had a total of $60,762.99 in nonprobate assets, which consisted of the remaining

proceeds from the sale of real and personal property after expenses were paid, funds

from Merriott's Edward Jones account and three bank accounts, and $34,000 in equity

4
  When the court ordered Respondents to make an "accounting" of all nonprobate transfers to them, it
was not granting Appellant relief on its "action for accounting" under Section 461.300. Instead, it was
ordering Respondents to file detailed financial and transactional information concerning the nonprobate
transfers they received.

                                                    4
on Merriott's residence. Appellant requested that the court enter a money judgment in

favor of Merriott's estate and against Respondents for the entire $60,762.99 to

discharge Appellant's claim against the estate.

       In April 2012, Respondents filed their accounting, or detailed financial and

transactional information, regarding the nonprobate transfers. Respondents asserted

that they had received income and assets totaling $32,365.05 and expenses totaling

$22,267.91. They stated that, after deducting the expenses from the income and

assets, they used the remaining funds to pay off the loan on Merriott's residence.

Respondents further stated that the estate was "void of cash" and that they had incurred

a new mortgage on Merriott's residence to a third-party bank in the amount of

approximately $50,000. Appellant filed a response, in which it disputed the amount of

Respondents' claimed income, assets, and expenses.

       The probate court held a hearing on Appellant's motion for a judgment on its

petition for accounting. Following the hearing, the court entered its judgment finding

that Appellant had an unpaid claim of $164,279.10 plus interest from September 17,

2010, against Merriott's estate and that the estate was insufficient to pay Appellant's

claim and the expenses of administration. The court further found that Respondents

had received personal property, three bank accounts through transfer on death

designations, rental homes that were transferred to them through beneficiary deeds and

later sold by them, Merriott's residence that was transferred through a beneficiary deed,

and assets transferred under the "Affidavit to Establish Title of Distributees of Shirley J.

Merriott."

                                              5
       The court stated that Appellant was requesting that it be awarded the sum of

$53,154 from Respondents based upon the value of these transfers. The evidence at

trial showed that the requested amount included, among other things, $30,000 in equity

from Merriott's residence, which Appellant had valued at $80,000 and which was subject

to a mortgage of approximately $47,000. The court rejected the asserted $80,000 value

and found that the value of Merriott's residence was only $50,000. The court subtracted

the asserted $30,000 in equity from the $53,154 that Appellant was trying to recover.

The court concluded that Appellant was entitled to recover only $23,154.

       The court stated that the "equitable remedy" to satisfy this amount was to order

Respondents to list Merriott's residence for sale for not less than $50,000. The court

ordered that, once the property was sold, Respondents were to distribute the sale

proceeds first to the third-party bank to pay off its approximate $47,000 mortgage, and

then to Appellant to satisfy its claim under Section 461.300. Appellant appeals.

                                   STANDARD OF REVIEW

       We will affirm the probate court's judgment unless there is no substantial

evidence to support it, it is against the weight of the evidence, it erroneously declares

the law, or it erroneously applies the law. In re Estate of Hayden, 258 S.W.3d 505, 508

(Mo. App. 2008) (citing Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976)). Two of

Appellant's three points concern the interpretation of Section 461.300. The

interpretation of a statute is a question of law, which we review de novo. Id.

                                         ANALYSIS

       In Point I, Appellant contends the probate court misapplied the law regarding the

proper remedy under Section 461.300 when it ordered Respondents to sell Merriott's

                                             6
residence and give Appellant any sales proceeds remaining after the mortgage to the

third-party bank was paid. Appellant asserts that Section 461.300 provides for the

recovery of the value of the property received in the nonprobate transfers and for the

personal representative to administer the recovered sums as part of the decedent's

estate. We agree.

       The use of various nonprobate transfers can result in a probate estate having

insufficient assets to pay allowed claims against the estate. In Section 461.300, the

legislature provides a mechanism for recovering the value of such nonprobate transfers

under certain circumstances to satisfy some or all of these claims. Section 461.300.1

provides, in pertinent part:

               Each recipient of a recoverable transfer of a decedent's property
       shall be liable to account for a pro rata share of the value of all such
       property received, to the extent necessary to discharge the statutory
       allowances to the decedent's surviving spouse and dependent children,
       and claims remaining unpaid after application of the decedent's estate,
       including expenses of administration and costs as provided in subsection
       3 of this section . . . . No proceeding may be brought under this section
       when the deficiency described in this subsection is solely attributable to
       costs and expenses of administration.

A "recoverable transfer" is defined, in pertinent part, as "a nonprobate transfer of a

decedent's property under sections 461.003 to 461.081 and any other transfer of a

decedent's property other than from the administration of the decedent's probate estate

that was subject to satisfaction of the decedent's debts immediately prior to the

decedent's death[.]" § 461.300.10(4).

       The purpose of Section 461.300 has been described as follows:

               In summary, this statute allows a person entitled to certain statutory
       allowances and, more often, creditors, to reach out and recover the value
       of assets formerly owned by a decedent but that have not been made a
       part of the probate estate. Certain recoverable transfers, most notably

                                             7
       transfers to a trust, beneficiary deed conveyances or jointly held property,
       can be pulled back into probate and then used to pay these obligations. . .
       . This remedy is distinct from a discovery of assets action that would seek
       to retitle assets outside of a probate estate that allegedly should be part of
       the estate ab initio.

Robert J. Selsor, Fattening Up the Skinny Estate -- The Non-Probate Transfer Statute's

Remedies for Pursuing a Decedent's Assets, 67 J. Mo. B. 286, 286 (Sept.-Oct. 2011).

       Section 461.300 does not specifically state the form of the recovery allowed. A

review of the provisions of Section 461.300 indicates, however, that a judgment entered

pursuant to the statute should be in the form of a money judgment in favor of the

decedent's probate estate. Looking first at subsection 1 of the statute, we note that it

states: "Each recipient of a recoverable transfer of a decedent's property shall be liable

to account for a pro rata share of the value of all such property received[.]" § 461.300.1

(emphasis added). This provision requires recipients of recoverable transfers to

account for the value of the property received, not the actual property. Second,

subsection 2 of the statute states: "Sums recovered in an action for accounting under

this section shall be administered by the personal representative as part of the

decedent's estate." § 461.300.2 (emphasis added). This provision references the

recovery and administration of sums, not property. Both subsections 1 and 2 indicate

that the legislature intended to allow the recovery, in favor of the estate, of the value of

the property received through nonprobate and other recoverable transfers. Recovery of

the value of property received would be through a money judgment.

       This interpretation of Section 461.300 is supported by subsection 6 of the statute,

which states: "This section does not create a lien on any property that is the subject of

a recoverable transfer, except as a lien may be perfected by the way of attachment,

                                              8
garnishment, or judgment in an accounting proceeding authorized by this section." §

461.300.6. Section 461.300 does not create a lien because it does not directly affect

the ownership of the property involved in the recoverable transfers. Instead, the statute

makes the recipients of the recoverable transfers liable for the value they received when

the estate does not have sufficient assets to discharge statutory allowances and unpaid

claims.

       Case law also supports this interpretation. As we noted in Cook v. Barnard, 100
S.W.3d 924, 927 (Mo. App. 2003), Section 461.300 provides "a rule of liability, not of

ownership. It allows the estate to recover the value of non-probate assets, among other

things, when the estate's assets (the probate assets) are inadequate to cover its debts."

We discussed the concept further in In re Estate of Jones, 280 S.W.3d 647, 655 (Mo.

App. 2009). In Jones, the recipients of a nonprobate transfer appealed a judgment for

accounting allowing the estate to recover a money judgment for as much of the value of

the transfer needed to satisfy the State's claim for reimbursement of the decedent's

Medicaid benefits. Id. at 649-50. In rejecting the recipients' claim that the State's

attempt to recover under Section 461.300 expanded the definition of "estate" by

bringing the transferred asset into the estate, this court explained:

       A proceeding under section 461.300 is not an action to bring nonprobate
       assets into the probate estate, because the substance of section 461.300
       "is a rule of liability, not of ownership." Cook v. Barnard, 100 S.W.3d 924,
       927 (Mo. App. 2003). Instead, a proceeding under section 461.300 allows
       the decedent's estate to recover the value of nonprobate assets when the
       assets already in the estate are insufficient to cover the claims of the
       decedent's creditors. Id. . . . [T]he judgment recovered in a section
       461.300 action for accounting is a monetary judgment for the value of the
       nonprobate asset, which becomes part of the decedent's estate as defined
       by section 472.010(11). This monetary judgment is then distributed by the
       personal representative, just as all other assets in the estate are
       distributed.

                                             9
Id. at 655 (emphasis added).

           The confusion regarding the proper remedy under Section 461.300 arises

because the statute describes the suit as an "action for accounting" and does not

explicitly state the form of recovery intended. As one commentator explained:

                  Section 461.300.2 allows for a cause of action known as an "action
           for accounting." This is confusing because an action for an accounting is
           also a well-known action seeking detailed financial and transactional
           information from various fiduciaries. But they are obviously not the same.
           This action for accounting seeks recovery of a money judgment.
Selsor, supra, 67 J. Mo. B. at 288 (emphasis added).5

           In this case, the court's judgment indicates that it found the value of the

recoverable transfers to Respondents to be $23,154,6 and that Appellant was entitled to

this amount because of its unpaid claim of $164,279.10 against Merriott's estate.

Instead of awarding the estate a money judgment for $23,154 to discharge Appellant's

claim, however, the court ordered Respondents to sell Merriott's residence for at least

$50,000, pay off the approximately $47,000 mortgage to the third-party bank, and give

Appellant any remaining sale proceeds. This was error. The court should have entered

a money judgment in favor of Merriott's estate and against Respondents in the amount

of the value of the recoverable transfers, to the extent necessary to discharge

Appellant's unpaid claim against the estate. Point I is granted.

5
 We recognize that the court in Hayden, 258 S.W.3d at 507, affirmed the probate court's holding that the
decedent's estate could recover certain real estate under Section 461.300 for the purposes of satisfying
creditors' claims against the estate. The issues on appeal in that case, however, did not concern the form
of recovery but instead the right of recovery. Id. Consequently, the court neither addressed nor decided
whether recovery of the actual property, as opposed to a money judgment for the value of the transfer,
was the appropriate remedy under Section 461.300.
6
    We address whether this value is correct in our discussion of Point II, infra.

                                                        10
       In Point II, Appellant contends the probate court erred in valuing Merriott's

residence. In its judgment, the court found that Merriott's residence was transferred to

Respondents by beneficiary deed. Hence, it was a "recoverable transfer" under Section

461.300.10(4). With regard its value, the probate court found that, after Merriott's death,

"the real estate market suffered a down turn in value and the value of real estate

received by [Respondents] sustained a decline in value through no fault of [Appellant] or

[Respondents]." Therefore, the court rejected the Appellant's asserted value of $80,000

for the residence and assigned it a value of $50,000.

       Appellant argues that the court erred in valuing the residence as of the date of

trial rather than the date of its transfer to Respondents, which was Merriott's death on

March 5, 2008. Section 461.300 does not explicitly state the time for valuing

recoverable transfers. Nevertheless, because Section 461.300.1 provides that

recipients of recoverable transfers are "liable to account for a pro rata share of the value

of all such property received," (emphasis added), the implication is that the value of the

property is determined at the time it is transferred to the recipients, which is the date of

the decedent's death.

       One commentator explained why practical reasons support such an

interpretation:

               Valuation of a transfer would seem to be straightforward if the
       transfer involves liquid funds. But a transfer involving a volatile asset may
       raise other issues, including the time for fixing the value of the asset and,
       of course, disputes over its value. For example, stock and land values
       can change dramatically during a recession and the value at the owner's
       death may vary greatly from the value six months before death or on the
       day of a later accounting action trial. Arguably, value should be
       determined at the time of the transfer -- the date of death -- since
       § 461.300 is primarily focused on that event. The only temporal reference
       in the statutory definition of a "recoverable transfer" is to the time

                                             11
        "immediately prior to the decedent's death." It follows that focusing on the
        value of a transferred asset at that instant for purposes of gauging the
        value for a money judgment against a transferee is the only logical answer
        to this question.

Selsor, supra, 67 J. Mo. B. at 290 (footnote omitted).

        Indeed, there are two provisions in Section 461.300 that reference the time

"immediately prior to the decedent's death." As noted, the definition of "recoverable

transfer" includes "any other transfer of a decedent's property other than from the

administration of the decedent's probate estate that was subject to satisfaction of the

decedent's debts immediately prior to the decedent's death." § 461.300.10(4)

(emphasis added). Additionally, Section 461.300.8 refers to the same time period:

               The recipient of any property held in trust that was subject to the
        satisfaction of the decedent's debts immediately prior to the decedent's
        death, and the recipient of any property held in joint tenancy with right of
        survivorship that was subject to the satisfaction of the decedent's debts
        immediately prior to the decedent's death, are subject to this section, but
        only to the extent of the decedent's contribution to the value of the
        property.

(Emphasis added.) Because these provisions indicate that the focus of Section 461.300

is on property that could have been used to satisfy the decedent's debts "immediately

prior to the decedent's death," the time for valuing such property should be the date of

the decedent's death.7

        The circumstances of this case demonstrate why the value of recoverable

transfers should be determined at the time the property is transferred to the recipients.

7
  If these assets had been included in the probate estate, they would have been valued as of the date of
the decedent's death. Several sections of the Probate Code explicitly provide that the relevant time for
valuing estate assets is the date of the decedent's death. See, e.g., §§ 473.017.1(4), 473.233.2, 473.793,
473.797, 473.800, and 474.163.4. When interpreting statutes, "'it is appropriate to take into consideration
statutes involving similar or related subject matter when such statutes shed light upon the meaning of the
statute being construed, even though the statutes are found in different chapters and were enacted at
different times.'" Jones, 280 S.W.3d at 654 (quoting Lane v. Lensmeyer, 158 S.W.3d 218, 266 (Mo. banc
2005) (internal quotations omitted)).

                                                    12
There was evidence at trial that the fair market value of the property as of Merriott's

death on March 5, 2008, was $80,000. Trial did not begin until October 2011, and was

not concluded until August 2013. As the court noted in its judgment, between the date

of Merriott's death and the time of trial, "the real estate market suffered a down turn in

value and the value of real estate received by [Respondents] sustained a decline in

value." If Merriott's residence had been included in the estate, the estate would have

had the opportunity to sell the property, possibly before it declined in value. Similarly,

other types of property, such as vehicles, naturally depreciate over time, and any delay

in valuing could create a windfall for the recipients. Other property might suffer damage

or destruction during a delay.

       It is also possible that some assets, such as real estate or securities, could

increase in value, either as a result of market forces or the recipients' efforts, during the

delay between the decedent's death and trial. Consequently, the date that the property

is transferred to the recipients, which is the date of the decedent's death, provides a

clear and fair date for determining the value of the recoverable transfers. Recipients of

such transfers would be entitled to any gain that occurs after the transfer but would also

be responsible for any loss that occurs.

       The probate court erred in valuing Merriott's residence as of the date of trial.

Therefore, we reverse the probate court's judgment and remand the case for the court

to determine the value of the residence as of the date of Merriott's death. Because the

probate court has determined that the transfer of the residence to Respondents was a

recoverable transfer under Section 461.300 and Respondents have not appealed that

determination, the court must further determine the equity in the property as of the date

                                             13
of Merriott's death and include such amount in a money judgment in favor of Merriott's

estate, to the extent necessary to discharge Appellant's unpaid claim against the estate.

Point II is granted.8

8
  Because we have found that the court erroneously valued the residence at the time of trial and are
remanding the case for the court to determine the residence's value at the time of decedent's death, we
need not address Appellant's claim in Point III that the value the court assigned to the residence was not
supported by substantial evidence.

                                                    14
                                      CONCLUSION

      We reverse the probate court's judgment and remand the case for further

proceedings consistent with this opinion.

                                            ___________________________________
                                            _
                                            LISA W HITE HARDWICK, JUDGE

ALL CONCUR.