Court Opinion

ID: 859220
Source: CourtListenerOpinion
Date Created: 2013-04-26 19:45:43.190266+00
Date Added: 2024-06-11T09:06:42.646650
License: Public Domain

SUPREME COURT OF ARIZONA
                            En Banc

In re the ESTATE OF MARY A.       )   Arizona Supreme Court
RILEY, aka MARY AGNES RILEY, aka  )   No. CV-12-0007-PR
MARY AGNES REILLY.                )
                                  )   Court of Appeals
                                  )   Division Two
                                  )   No. 2 CA-CV 10-0149
                                  )
                                  )   Pima County
                                  )   Superior Court
                                  )   No. P26266
                                  )
_________________________________ )   O P I N I O N

          Appeal from the Superior Court in Pima County
            The Honorable Charles V. Harrington, Judge

                            REMANDED
________________________________________________________________

          Opinion of the Court of Appeals, Division Two
            228 Ariz. 382, 266 P.3d 1078 (App. 2011)

                             VACATED
 ________________________________________________________________
JONATHAN W. REICH, P.C.                                    Tucson
      By   Jonathan W. Reich
Attorneys for R. J. Riley, Regina M. Riley,
F. Martin Riley, Neysa Kalil, Nora J. Simons,
Cecelia Riley, Jude S. Riley, Loretta LaCorte,
and Julia Riley

MESCH, CLARK & ROTHSCHILD, P.C.                               Tucson
     By   J. Emery Barker
          Scott H. Gan
Attorneys for John D. Barkley

LAW OFFICE OF DWIGHT M. WHITLEY, JR., P.L.L.C.              Benson/
     By   Dwight M. Whitley, Jr.                             Tucson
Attorneys for Mary Benge

LAW OFFICE OF TERRENCE A. JACKSON                         Tucson
     By   Terrence A. Jackson
Attorneys for Joseph H. Riley, Jr.
________________________________________________________________
B E R C H, Chief Justice

¶1            We granted review to decide whether A.R.S. § 14-3952(1)

requires beneficiaries of an estate to unanimously approve a

settlement agreement.              We hold that the statute requires all

beneficiaries to execute the agreement if it affects beneficial

interests     in    the    estate      and   the   settling   parties      seek    court

approval pursuant to A.R.S. § 14-3951.

                      I.    FACTS AND PROCEDURAL HISTORY

¶2            Mary A. Riley (“Decedent”) died in 1996, leaving her

estate to her thirteen children and appointing her two oldest,

Joseph      Riley   and    Mary    Benge,     as   co-personal    representatives.

The   family    settled      the       estate’s    distribution     scheme    in    1997

through a Family Compromise Agreement that divided the estate

among the thirteen children.                 Nine years later, in March 2006,

Joseph and Mary filed a petition to distribute and close the

estate.      The petition included an accounting of the amounts they

had spent administering the estate.

¶3            One of Decedent’s other children, R. J. Riley, objected

to    the    accounting.          He    asserted    that   Joseph    and     Mary    had

breached their fiduciary duties, and he sought the appointment

of a successor personal representative (“PR”).                      Joseph and Mary

resigned, and the probate court appointed John Barkley as the

new PR.        The court ordered Joseph and Mary to file another

accounting.         After reviewing it, Barkley objected, citing the

                                             2
“lack of supporting documentation and inaccuracies apparent on

the face of the document.”                 The court scheduled a hearing on the

PR’s objection.

¶4          While         awaiting        the     hearing,           Barkley       settled      the

estate’s     claims        against        Joseph       and        Mary.1         The   settlement

agreement        required      Joseph      to        pay     $15,000       and     disclaim     his

interest in the estate; Mary was to pay $50,000, but retain her

interest    in     the     estate.         In    exchange,          the    estate      agreed    to

release all claims against Joseph and Mary relating to their

activities as co-PRs.            The agreement also required the “parties

signatory [t]hereto” to present the agreement to the probate

judge for approval under A.R.S. §§ 14-3951 and -3952.                                     Although

only   Barkley,      Joseph,        and    Mary       had     signed       the    agreement,     it

provided    that     “[t]his        Agreement         shall        bind    and    inure    to   the

benefit     of     the     heirs,     assignees             and    distribute[e]s          of   the

Parties.”        Their goal was to prevent further litigation stemming

from Joseph and Mary’s administration of the estate.

¶5          Nine of Decedent’s thirteen children (the “Objectors”),

none   of    whom        had   executed         the        agreement,       objected       to   the

settlement.         Nonetheless,           after       an     evidentiary          hearing,     the

probate court approved the agreement, finding that it settled a

good faith dispute and its terms were reasonable.

1
     The agreement also resolved the estate’s claims                                       against
Kathryn Riley. That settlement is not at issue here.
                                                 3
¶6         The    Objectors       appealed.           The   court    of   appeals         sua

sponte ordered the parties to brief whether the agreement was

“void for failing to be executed by all the necessary parties

under § 14-3952(1).”           In re Estate of Riley, 228 Ariz. 382, 384

¶ 5, 266 P.3d 1078, 1080 (App. 2011).

¶7         Following oral argument, the court concluded that the

statute required all estate beneficiaries to sign the settlement

agreement.      Id. at 386 ¶ 10, 266 P.3d at 1082.                  The court voided

the agreement because not all beneficiaries had signed it.                                Id.

at 384-86 ¶¶ 6-10, 266 P.3d at 1080-82.

¶8         We granted Barkley’s petition for review because this

case presents an important issue of first impression.                            We have

jurisdiction     under        Article   6,       Section    5(3)    of    the    Arizona

Constitution and A.R.S. § 12-120.24.

                                  II.   DISCUSSION

¶9         We    review       statutory      interpretation         issues      de    novo.

Duncan v. Scottsdale Med. Imaging, Ltd., 205 Ariz. 306, 308 ¶ 2,

70 P.3d 435, 437 (2003).            Because the probate statutes have not

materially changed during the pendency of this action, we cite

the current version of each.

¶10        A.R.S. § 14-3952 sets forth a procedure for securing

court   approval    of    a    compromise        of   disputed     interests         in   the

estate.   It imposes the following requirements:

                                             4
      1.   The terms of the compromise shall be set forth in
      an agreement in writing which shall be executed by all
      competent persons . . . having beneficial interests or
      having claims which will or may be affected by the
      compromise.
      . . . .
      3.   After notice to all interested persons . . ., if
      [the court] finds that the contest or controversy is
      in good faith and that the effect of the agreement
      upon the interests of persons . . . is just and
      reasonable, [the court] shall make an order approving
      the agreement . . . .    Upon the making of the order
      and the execution of the agreement, all further
      disposition of the estate is in accordance with the
      terms of the agreement.

A.R.S. § 14-3952.        If these statutory procedures are satisfied

and the court formally approves the agreement, A.R.S. § 14-3951

provides   that   the    compromise   “is        binding   on   all   the   parties

thereto including those unborn, unascertained or who could not

be located.”      Sections 14-3951 and -3952 thus act together to

permit parties to resolve estate controversies with finality.

¶11        Sections 14-3951 and -3952 mirror §§ 3-1101 and -1102

of the 1969 Uniform Probate Code, see 1973 Ariz. Sess. Laws, ch.

75, § 4 (1st Reg. Sess.), which, in turn, were based on §§ 93

and 94 of the 1946 Model Probate Code.                See Unif. Probate Code

§ 3-1102 cmt. (1969).       Sections 14-3951 and -3952 allow parties

to enter into settlement agreements that, upon court approval,

bind all interested parties, even if interested parties are not

competent or available to enter into the agreement.                    See A.R.S.

§ 14-3951;   Unif.      Probate   Code       §   3-1102    cmt.   (stating     that

“[t]his section and the one preceding it outline a procedure”

                                         5
for “resolving controversy concerning the estate”); see also In

re Estate of Ward, 200 Ariz. 113, 116 ¶ 12, 23 P.3d 108, 111

(App. 2001) (providing that “[§] 14-3952 authorizes the probate

court to approve a compromise under [§] 14-3951 only if” the

procedures in § 14-3952 are met); accord Matter of Estate of

Hedstrom, 472 N.W.2d 454, 456 (N.D. 1991) (to same effect).

¶12        The parties disagree whether § 14-3952(1) requires all

beneficiaries          to    execute       the        agreement   at   issue.         Barkley

contends that §§ 14-3951 and -3952 distinguish disputes over the

administration of the estate from “disputes over the structure

and distribution of the estate.”                        He concedes that the statutes

“clearly require[] all the beneficiaries to agree to modify the

structure or distribution scheme.”                       He argues, however, that the

statutes     do    not           require    all        beneficiaries     to     execute     a

compromise        if        it     merely        resolves     a    dispute       over     the

administration of the estate.                         For such an agreement, Barkley

asserts, the statutes require only those directly involved in

the controversy to execute the agreement.                         He maintains that the

agreement here settled merely an administrative dispute — the

estate’s claims against its former co-PRs — and thus required

signatures only from him, Joseph, and Mary.

¶13          Barkley mischaracterizes the agreement, however.                              In

it, Joseph disclaimed his interest in the estate, which altered

the   distribution           scheme    by    dividing       the   estate      among   twelve

                                                  6
beneficiaries instead of the thirteen who took under the 1997

Family Compromise Agreement.                The agreement thus affected the

“beneficial     interests”       of   the   remaining     twelve     beneficiaries,

and § 14-3952(1) therefore required all of the beneficiaries to

execute the agreement before the court could properly approve it

under the statute.2          See In re Estate of Sullivan, 724 N.W.2d
532, 535 (Minn. Ct. App. 2006) (holding that an agreement that

altered the distribution scheme required the signatures of all

those   with    a   beneficial        interest);   cf.    Matter     of   Estate   of

Outen, 336 S.E.2d 436, 436-37 (N.C. Ct. App. 1985) (noting that

an    agreement     adding   a    beneficiary      affected    the     distribution

scheme).       Thus, because only Barkley, Joseph, and Mary signed

the agreement, the probate court’s approval under § 14-3952 was

invalid to make the agreement binding on those who did not sign

it.

¶14         Barkley contends that the settlement did not affect

the   distribution     scheme     because       “[n]one   of   the    other   twelve

beneficiaries . . . had their one-thirteenth distributive share

2
     Because the agreement here affected all of the devisees’
beneficial interests, we need not decide whether § 14-3952(1)
always requires the beneficiaries to unanimously agree or
whether   it  requires   only  the   affected  beneficiaries   to
unanimously agree.    Compare S.C. Code Ann. § 62-3-1102 cmt.
(interpreting nearly identical statute to mean that only those
whose beneficial interests will be affected must execute the
agreement), with In re Estate of Sullivan, 724 N.W.2d 532, 535
(Minn. Ct. App. 2006) (reading nearly identical statute to
require execution by every person with a beneficial interest).
                                            7
diminished in any way.”              But § 14-3952(1) does not distinguish

based     on    whether     a     beneficial      interest         is   positively       or

adversely affected.             To adopt such a position would require us

to add words to the statute that are not there.3

¶15            Barkley    argues     that      requiring     all    beneficiaries        to

sign     compromises      like     the    one    at    issue     here    would    impede

resolution       of      disputes,       add     expense,      and      delay     estate

administration.          We agree.       But nothing in this opinion or the

statutory probate scheme requires Barkley to use §§ 14-3951 and

-3952    to    compromise       disputes.       The    probate      statutes     allow    a

beneficiary to disclaim his interest without court approval, see

A.R.S. § 14-10005, and permit the PR to settle a variety of

claims without court approval, see, e.g., A.R.S. § 14-3715(17),

(27); A.R.S. § 14-3813.             If in doubt about how to proceed, the

PR also “may invoke the jurisdiction of the court . . . to

resolve questions concerning the estate or its administration.”

A.R.S.    § 14-3704;       see    also,     e.g.,      §§   14-3105,     -3401,    -3414

(authorizing proceedings to resolve a variety of issues).

¶16            Here, however, Barkley sought court approval to bind

all     beneficiaries      and     insulate      the    settlement       from    further

challenge – and himself from potential future liability as PR –

3
     The Objectors argue that the losses caused by Joseph and
Mary exceeded the settlement amount, and, therefore, despite
Joseph’s relinquishment of his interest in the estate under the
settlement, the Objectors’ interests were adversely affected.
                                            8
by invoking §§ 14-3951 and -3952.                             Although nothing precludes

attempting such a course of action, it requires compliance with

§ 14-3952’s procedures, including, in this case, obtaining the

signatures of “all competent persons . . . having beneficial

interests.”

¶17            The        failure        to     secure         the     signatures        of     all

beneficiaries did not, however, make the agreement void for all

purposes, as the court of appeals concluded.                                  See Riley, 228

Ariz. at 384-85 ¶ 6 & n.2, 266 P.3d at 1080-81 & n.2.                                    Rather,

the   failure        to    comply    with       §       14-3952      simply   means     that    the

probate court’s approval was not effective to make the agreement

binding on all beneficiaries.                       See In re Estate of Grimm, 784
P.2d 1238, 1242-43 (Utah Ct. App. 1989) (discussing statutes

nearly    identical         to   Arizona’s              and   stating    that    they    “merely

outline[]       the       procedures          for   securing         court    approval”;       they

“do[]    not    invalidate          an    otherwise           valid    compromise     agreement

between the parties prior to court approval”).

                                     III.       CONCLUSION

¶18            For the reasons set forth above, we vacate the opinion

of the court of appeals and remand to the superior court for

further proceedings consistent with this opinion.

                                                __________________________________
                                                Rebecca White Berch, Chief Justice

                                                    9
CONCURRING:

__________________________________
Scott Bales, Vice Chief Justice

__________________________________
A. John Pelander, Justice

__________________________________
Robert M. Brutinel, Justice

__________________________________
Peter J. Cahill, Judge*

*    Pursuant  to   Article  6,   Section   3  of   the  Arizona
Constitution, the Honorable Peter J. Cahill, Presiding Judge of
the Superior Court in Gila County, was designated to sit in this
matter.

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