Court Opinion

ID: 9787691
Source: CourtListenerOpinion
Date Created: 2023-08-31 00:22:06.523472+00
Date Added: 2024-06-11T07:36:59.700226
License: Public Domain

SUTIN, Judge (specially concurring). {38} I concur in the result, but because my analysis is a bit different than that of the majority I write separately. In order to fully comprehend the unique character of this case it is important to discuss the circumstances in some further detail. BACKGROUND {39} The instruments in question are a revocable trust and a pour-over will referencing the trust. The parties sued in tort are not trust beneficiaries, heirs, or devisees with rights in or expectancies as to the assets in the trust and estate. Neither the trustee of the trust nor the personal representative of the estate is sued in tort. The decedent’s, that is Meadows’, accountant and accounting firm are sued. {40} In July 1998 the Bank as trustee filed an interpleader action in the Eddy County, New Mexico, district court to settle the issue of the validity of Plaintiffs’ allegations regarding the validity of the 1996 trust, thus invoking principles of equity in the adjudication of the issues. {41} In March 1999 the Bank as named personal representative filed an informal probate in the same district court, seeking appointment as personal representative in an unsupervised administration to probate Meadows’ 1996 will. In March and May 1999 the court entered orders that the will “is hereby informally probated,” appointed the Bank as personal representative of Meadows’ estate in an unsupervised administration, and stayed the probate proceeding pending the determination in the interpleader action of the validity of the 1996 trust. In May 1999 Plaintiffs filed a notice of intent to file a formal testacy proceeding to contest the 1996 will based on undue influence, depending on the outcome of the interpleader action. {42} The July 1999 settlement agreement in the interpleader action settled all matters in controversy regarding the assets in the 1996 trust and Meadows’ probate estate. In regard to Plaintiffs’ claims against Fritschy, who was the decedent’s accountant, and also against her firm, the agreement states: “Jim Meadows and Lois Ann Meadows Wilson hereby reserve, and dp not release, any and all claims which they may have against Myrtle Fritschy and/or the accounting firm(s) with which she has been associated for matters in any way connected with William M. Meadows, his trusts or his estate.” The agreement was signed by the Bank as trustee, Lakeview Christian Home, Plaintiffs, and Lee Meadows. The agreement mentions that the settlement is pursuant to NMSA 1978, § 45-3-1101 (1995), of the Probate Code, encompassing “all assets comprising the probate estate of [Meadows] and all assets held in trust by [the Bank] at [Meadows’] death.” It further requires the parties to present the agreement to the court in the pending probate proceeding for approval pursuant to NMSA 1978, § 45-3-1102 (1995), of the Probate Code. {43} Shortly after the settlement agreement was signed, the court in the interpleader action entered an order approving the settlement agreement and dismissing the action with prejudice. The court found that “[p]rior to the initiation of the Interpleader action, the legality and legal sufficiency of various trust and will documents executed by William M. Meadows, deceased, had been challenged.” The court further found that “[t]he Settlement Agreement is fair and reasonable, has been approved by all interested parties, and should be approved by this Court pursuant to Section[s] 45-3-1101 and 45-3-1102, NMSA 1978.” In its order, the court stated that the action was filed by the Bank “to construe the trusts and wills at issue,” to determine “the proper settlement and distribution of the estate,” and “to fully, finally and fairly resolve, settle and distribute the Estate of William M. Meadows.” All interested parties, including Plaintiffs, obviously thought the court in the interpleader action had jurisdiction of the subject matter of the action and had the authority to construe the trust and will and to adjudicate distribution of the trust and estate assets. {44} In July 2001 the court in the informal probate proceeding approved the settlement agreement, which had been filed in that proceeding by the Bank as personal representative of Meadows’ estate. The court found that Plaintiffs claimed in the interpleader action that the 1996 trust and will were invalid due to Fritschy’s alleged undue influence, and determined that, pursuant to NMSA 1978, § 45-l-303(B) (1975), the court in the interpleader action “was the proper court to hear and decide all challenges to the validity of the 1996 [trust and will] and to approve the [settlement agreement].” The probate court’s order was approved by the Bank as personal representative of Meadows’ estate and by Plaintiffs. {45} Thus, all interested parties settled all equitable and legal issues regarding the validity of the 1996 trust and will. The settlement was court-approved under Probate Code Sections 45-3-1101 and -1102 and approved through the procedure under Probate Code Section 45-l-303(B), despite the fact no formal probate was filed. All indications are that the lack of a formal probate and testacy proceeding was unnecessary in this case for the results obtained. DISCUSSION {46} This case is unlike those cited in the majority opinion. True, the cases cited set out rules of general applicability, look with disfavor on parties who seek “two bites at the apple” or who agree in a probate proceeding to distribution of assets of the estate on the one hand, but later attack the validity of the will in a tort action. Nevertheless, the cases are not sufficiently close factually to control the outcome in the present case. The unique character of this case gives Plaintiffs a strong basis for the pursuit of a. tort remedy- {47} In this case, the district court with its probate hand stayed the probate action pending adjudication with its equity hand of the validity of the trust and will. Plaintiffs then settled with all parties having expectancies from the 1991 trust and 1991 pour-over will or the 1996 trust and 1996 pour-over will, and with the trustee of the 1996 trust. In addition, the parties obtained the agreement of the personal representative under the 1996 pour-over will. All interested parties (see NMSA 1978, § 45 — 1—201(A) (23) (1995)) understood that Plaintiffs claimed the 1996 trust and will were invalid, and all understood that Plaintiffs were settling for less with the green light to pursue Fritschy for the remainder of Plaintiffs’ expectancies. Plaintiffs did not litigate and lose on the issue of undue influence. The district court sitting as a probate court approved the parties’ settlement at the request of the personal representative and with Plaintiffs’ approval. While this may technically have been an adjudication that the will was valid under NMSA 1978, § 45-3-102 (1995), I doubt collateral estoppel would serve to bar the tort-action here. {48} After settlement and approval of the settlement by the court, the parties who had an expectancy or fiduciary role in regard to the administration of the trust and probate of the will no longer needed the protections of the Probate Code. By the time Plaintiffs sued Fritschy and her firm, all trust and estate assets were distributed or to be distributed pursuant to court approval and according to the desires and agreement of all interested parties. No harm, no foul. {49} Further, it is the pre-death established and substantially funded revocable trust that was the primary issue. Under that 1996 trust, Meadows received trust funds during his lifetime, and at his death the trust was split into A and B trusts. Trust A was a charitable remainder annuity trust under which Plaintiffs’ fathers (two of Meadows’ brothers, each of whom predeceased him) were to receive funds during their lifetimes, and at their deaths the principal and income was to be distributed to Lakeview to build a facility for Alzheimer’s residents. Trust B was a trust for Lee Meadows. Even were the availability of the tort limited to instances in which an inheritance expectancy is wrongfully defeated through an inter vivos trust, the trust at issue here, a revocable trust, funded while Meadows was alive, and also serving as the receptacle for Meadows’ remaining assets at his death, is the primary instrument. Plaintiffs in fact argue that most of Meadows’ assets were held in the 1996 trust “as the result of inter vivos transfers and a will contest would not have touched those non-testamentary assets.” {50} Moreover, it is important to note that when we adopted the tort of tortious interference with an expected inheritance in Doughty, 117 N.M. at 287, 871 P.2d at 383, we made no effort to limit its applicability. We said: “Today, we extend the line of New Mexico cases acknowledging tortious interference causes of action to include a cause of action against those who intentionally and tortiously interfere with an expected inheritance.” Id. We cited the Restatement (Second) of Torts 774B (1979) stating that it: embraces the cause of action for tortious interference with an inheritance and states, “[o]ne who by fraud, duress or other tortious means intentionally prevents another from receiving from a third person an inheritance or gift that he would otherwise have received is subject to liability to the other for loss of the inheritance or gift.” Id. at 287-88, 871 P.2d at 383-84 (alteration in original). We set out the following requirements for liability: To recover for tortious interference with an expected inheritance, a plaintiff must prove the following elements: (1) the existence of an expectancy; (2) a reasonable certainty that the expectancy would have been realized, but for the interference; (3) intentional interference with that expectancy; (4) tortious conduct involved with interference, such as fraud, duress, or undue influence; and (5) damages. Id. at 288, 871 P.2d at 384. On its face, Doughty could be read to permit Plaintiffs’ tort action. {51} Thus, in the present case, all interested parties, including Plaintiffs, and, as well, the district court entertaining both proceedings, clearly understood and agreed that the issue of undue influence was probate related, and that settlement of the issue was submitted for probate court approval under the Probate Code. All interested parties, including Plaintiffs, as well as the court sitting in equity and in probate, understood that the issue could have been litigated but chose instead to settle the issue, agree on the distribution of all assets, and then allow Plaintiffs to pursue Fritschy, a third party who was not an interested party. The Probate Code was hardly circumvented. All of the foregoing circumstances fairly open the gate to Plaintiffs’ arguable position that they should be permitted to assert a claim against Fritschy for tortious interference of their expectancies. I would be prone to agree, were it not for other circumstances and a choice of a better policy to enforce, which I now discuss. {52} The trust and estate assets were finite and undistributed at Meadows’ death. Plaintiffs had an unfettered opportunity to pursue their full 1991 trust and inheritance expectancies in the interpleader action or in a probate testacy proceeding or in both actions consolidated to set aside the 1996 trust and will. There exists no reason why resolution of the question of the validity of the revocable trust and the will in two related actions, one in equity and one in probate, is not acceptable. See Geduldig v. Posner, 129 Md.App. 490, 743 A.2d 247, 255-57 (Ct.Spec.App.1999) (recognizing an equity action attacking the distribution of trust assets and a “caveat proceeding” attacking a will). The Geduldig court stated: [W]e conclude that the Court of Appeals would recognize the tort if it were necessary to afford complete, but traditional, relief. In the case before us, no reason is given as to why recognition of the tort is necessary other than that damages are sought which are not otherwise available, specifically, damages for emotional distress, harm to reputation, and punitive damages. We decline to recognize the tort where the sole reason is an expansion of traditional remedies, as opposed to a situation, not before us, where the traditional remedy might be insufficient to correct the pecuniary loss. Id. at 257. {53} Plaintiffs could also have obtained relief just within a probate proceeding. They had standing to petition the district court for relief in a formal probate proceeding within the court’s jurisdiction. See § 45-1-201(A)(23); NMSA 1978, §§ 45-3-105, - 401 (1975). The Probate Code applies to, and the district court has jurisdiction over all subject matter relating to, trusts subject to administration in New Mexico. See §§ 45-1-301(E), -302(A)(4). A purpose of the Probate Code is “to facilitate use and enforcement of certain trusts.” NMSA 1978, § 45-1-102(B)(4) (1975). “The principles of law and equity supplement the Probate Code’s ... provisions.” NMSA 1978, § 45-1-103 (1975). The district court has “full power to make orders, judgments and decrees to take all other action necessary and proper to administer justice in matters which come before it.” Section 45-l-302(B). {54} Moreover, district courts sitting in probate have general civil jurisdiction in formal probate proceedings. In re Estate of Harrington, 2000-NMCA-058, ¶ 17, 129 N.M. 266, 5 P.3d 1070. Further, the Probate Code states that “[a] will may validly devise property to the trustee of a trust established ... during the testator’s lifetime by the testator.” Section 45-2-511(A)(l). In addition, Unless the testator’s will provides otherwise, property devised to a trust ... is not held under a testamentary trust of the testator, but it becomes a part of the trust to which it is devised and must be administered and disposed of in accordance with the provisions of the governing instrument setting forth the terms of the trust, including any amendments thereto made before or after the testator’s death. Section 45-2-511(B). The Probate Code provided adequate shelter for Plaintiffs’ claims. See also Staples v. King, 433 A.2d 407, 410-12 (Me.1981) (holding the probate court, which was granted jurisdiction in equity, had the power to void a completed inter vivos trust and impose a constructive trust); Sun Bank/Miami, N.A. v. Hogarth, 536 So.2d 263, 268 (Fla.Dist.Ct.App.1988) (stating that a “pour-over trust” for the residuary of an estate was an integral part of the will that referred to it, and that “[bjoth the will and the ... trust agreement must be read together to give effect to [the decedent’s] testamentary plan,” and holding that the probate court had jurisdiction to determine the validity of the trust); Davison v. Feuerherd, 391 So.2d 799, 802 (Fla.Dist.Ct.App.1980) (“[N]o real distinction exists between gifts of inheritance through a will and gifts through a revocable trust.”). {55} Plaintiffs agreed in the probate court-approved interpleader action to receive only a portion of their expectancies from the trust and estate assets. Plaintiffs released in the settlement agreement their claim as to all trust and estate assets not received in the settlement. Plaintiffs permitted the remainder of their expectancies to be distributed to Lakeview. And Plaintiffs released their claim that the 1996 trust and will were invalid due to undue influence. Thus, not only were the trust and estate assets completely distributed, Plaintiffs’ inheritance “expectancies” and the expectancies of the 1996 trust and will beneficiaries and devisees were fully and finally settled. What existed, if anything, after Plaintiffs’ choice of accepting less than their full expectancies and leaving what they gave up to be distributed to Lakeview, was, in essence, the following claim: Because of the tortious conduct of Fritsehy, Plaintiffs were placed in a position of having to decide whether to settle for a portion of their expectancies rather than take the risk of losing it all (due to the uncertainty of litigation) and, therefore, Fritsehy should have to compensate Plaintiffs for what they had to leave on the table when faced with a settlement option. {56} Resolution of the issue is purely policy driven: In this revocable trust with pour-over will circumstance, where the validity of the trust and will is challenged, should inheritance expectancies be exclusively determined in a probate or related equity proceeding? In line with the opinion of my learned colleagues, as a matter of policy gleaned from the Legislature’s enactment of the Probate Code and from traditional equity jurisprudence, see Geduldig, 743 A.2d at 256-57 (“Traditionally, claims attacking the distribution of estate and trust assets based on undue influence and fraud were equitable actions.”), all focused on settlement of claims involving trusts and estates in a testamentary setting, I agree the better avenue to take is that of denying Plaintiffs the availability of the tort of interference with an inheritance expectancy. {57} Despite the reasonably strong policy considerations1 here in favor of permitting the tort action to proceed, I view the better policy to forbid it. Where the assets comprising an heir’s or devisee’s expectancies remain, as here, undistributed, to be distributed at or after death, and therefore available and reachable by the victim of an unlawful interference with an inheritance expectancy, the issues of the validity of a revocable trust and pour-over will and the proper distribution of the assets should be addressed together and exclusively under equitable principles and with the application of the procedures, burdens of proof, and protections of the Probate Code. To the extent that action does not simultaneously permit a claim against the tortfeasor for consequential and/or punitive damages, perhaps legislation to permit such damages would be appropriate. {58} In order to persuade us that their tort action should be permitted, Plaintiffs had to show that the interpleader action and the probate proceeding could not have provided a full and adequate remedy with respect to the trust assets and residual assets in the estate to be transferred to the trust. They failed to do so. I agree with the majority and other jurisdictions holding that the unavailability of consequential and punitive damages in a probate proceeding does not render the remedy available in probate inadequate. See, e.g., Jackson, 44 S.W.3d at 333 (Ark.2001) (holding neither punitive damages nor legal costs to be a valid expectation); Minton, 671 N.E.2d at 163 (holding punitive damages not included in amount claimant can expect to receive); but see Peffer, 523 F.2d at 1324, 1326 (affirming award of reasonable expenses, including attorney fees); Huffey, 491 N.W.2d at 521 (permitting consequential and punitive damages where not provided upon mere setting aside of will). {59} In conclusion, I agree to affirm because Plaintiffs had a full opportunity to recover their expectancies in proceedings geared to provide that remedy using principles of equity and in conformity with the Probate Code. See Brandin, 918 S.W.2d at 840 (holding that an action in equity to set aside a trust, with a will contest, would have given the plaintiffs an adequate remedy, because, if successful, the plaintiffs could have recovered their expectancies; therefore, plaintiffs could not sue in tort). As a matter of policy, the availability of the tort of intentional interference with an inheritance expectancy should be reserved for circumstances in which traditional equity and probate-related claims and their accompanying remedies for loss of an inheritance expectancy are unavailable or inadequate.  . The policy considerations are that tort victims should be compensated and intentional tortfeasors should not go free, that settlements are favored, and that the purposes for and protections afforded by the Probate Code were not circumvented here.