Opinion
No. A06-97.
January 9, 2007.
Appeal from the District Court, Carver County, File No. 10-CV-04-470.
Arlo H. Vande Vegte, (for appellants Wilson, Bretzke, and Pieper)
Harvey N. Jones, (for respondent Mary Ann Sudheimer)
Dale J. Schoonover, Fredrickson Byron, P.A., (for respondent U.S. Trust)
Considered and decided by KLAPHAKE, Presiding Judge, KALITOWSKI, Judge, and WRIGHT, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2004).
UNPUBLISHED OPINION
Appellants, three beneficiaries of the trust of Robert G. Sudheimer, successfully brought suit against Sudheimer's widow, Mary Ann Sudheimer, the named personal representative in Sudheimer's will and named trustee of the trust, for breach of fiduciary duty and conversion of trust assets. They now challenge the district court's posttrial order directing apportionment of estate taxes under Minn. Stat. § 524.3-916 (2004), and refusing to award them attorney fees from the estate under Minn. Stat. § 524.3-720 (2004). Because we observe no error in the district court's decision to determine estate tax apportionment by reference to Minn. Stat. § 524.3-916, when Sudheimer's will and trust contained conflicting and irreconcilable provisions on estate tax apportionment, we affirm on that issue. But because the district court abused its discretion by refusing to award attorney fees to appellants consistent with the provisions of Minn. Stat. § 524.3-720, when they successfully maintained an action against the personal representative and trustee that resulted in a benefit to the estate, we reverse and remand for further proceedings on that issue.
DECISION
1. Apportionment of Estate Taxes
In general, this court reviews questions of law de novo. Frost-Benco Elec. Ass'n v. Minn. Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn. 1984); see In re Trusts A B of Divine, 672 N.W.2d 912, 917 (Minn.App. 2004) (where question of testator's intent involves interpretation of language that is not ambiguous and not dependent on extrinsic evidence, appellate review is de novo).
"The primary purpose of construing a will is to discern the testator's intent." In re Estate Trust of Anderson, 654 N.W.2d 682, 687 (Minn.App. 2002), review denied (Minn. Feb. 26, 2003). Where an estate plan is formed by a will and a trust, "they must be construed together." Id. And where a will and a trust are executed on the same day, and are interdependent as shown by the language of the documents, they "should be construed as parts of a single, well-considered estate plan." Id. at 688.
Here, Robert G. Sudheimer's will and trust were executed on the same day, approximately nine months prior to his death, but the trust was not funded during Sudheimer's lifetime, nor did some of the conditions precedent for certain property gifts envisioned in the trust ever occur. After Sudheimer's death, appellants, three of his cousins who were to receive assets as remaindermen under the terms of the trust, successfully brought an action on behalf of the estate against Mary Ann Sudheimer for breach of fiduciary duty for her conversion of trust property and other misdeeds.
The issue of apportionment of property taxes was considered posttrial by the district court. The will provided that estate taxes "shall be apportioned among the persons receiving . . . property as provided by law[.]" The trust provided for payment of estate taxes but stated that "[t]here shall be no apportionment of any taxes[.]" The court evaluated the provisions of the will and trust and found them to be irreconcilable. Appellants contend that these provisions are reconcilable because the will language providing for apportionment of estate taxes among beneficiaries "as provided by law" is open to interpretation and is therefore ambiguous and subject to reconciliation with the allocation provisions of the trust. We reject this tortured construction of the will and trust provisions and find those provisions to be, on their face, wholly contradictory.
We note that the district court did not consider extrinsic evidence of Robert G. Sudheimer's intent in determining apportionment of estate taxes, and neither party urged this court to do so on appeal. In reaching its decision in the underlying action, the jury rejected the testimony of Mary Ann Sudheimer and the attorney who advised both her and Robert G. Sudheimer, the two parties who could have testified as to Robert G. Sudheimer's intent with regard to estate tax apportionment.
Minn. Stat. § 524.3-916(e) (2004) provides for estate tax apportionment and allows a spouse's or any charitable organization beneficiary's portion of an estate to be excluded from apportionment of estate taxes, consistent with federal law, as provided:
(1) In making an apportionment, allowances shall be made for any . . . deductions and credits allowed by the law imposing the tax.
(2) Any exemption or deduction allowed by reason of the relationship of any person to the decedent, by reason of the purposes of the gift, or by allocation to the gift (either by election by the fiduciary or by operation of federal law), inures to the benefit of such person bearing such relationship or receiving the gift[.]
Applying this statute, the district court ordered that any property subject to the federal estate tax marital or charitable deduction be excluded from estate tax allocation and that estate taxes be paid by the remaining beneficiaries in the proportion that their share bore to the total amount subject to estate taxes. Because this ruling was a proper application of the statute, we observe no error in the district court's estate tax apportionment decision.
2. Attorney Fees
In probate matters, the district court may apply its discretion in determining whether to award attorney fees. In re Estate of Martignacco, 689 N.W.2d 262, 271 (Minn.App. 2004), review denied (Minn. Jan. 26, 2005). "Generally, [an appellate] court will not reverse a district court's denial of attorney fees unless there has been an abuse of discretion." In re Estate of Van Den Boom, 590 N.W.2d 350, 354 (Minn.App. 1999), review denied (Minn. May 26, 1999).
Here, the basis for an award of attorney fees is controlled by statute. Minn. Stat. § 524.3-720 (2004) provides for payment of attorney fees in probate litigation, as follows:
[A]ny interested person who successfully opposes the allowance of a will, is entitled to receive from the estate necessary expenses and disbursements including reasonable attorneys' fees incurred. When after demand the personal representative refuses to prosecute or pursue a claim or asset of the estate or a claim is made against the personal representative on behalf of the estate and any interested person shall then by a separate attorney prosecute or pursue and recover such fund or asset for the benefit of the estate, or when, and to the extent that, the services of an attorney for any interested person contribute to the benefit of the estate, as such, as distinguished from the personal benefit of such person, such attorney shall be paid such compensation from the estate as the court shall deem just and reasonable and commensurate with the benefit to the estate from the recovery so made or from such services.
In applying this statute, the district court ruled that each party should be responsible for his or her attorney fees because "each of them were fundamentally representing themselves and not the Estate/Trust," any benefit to the estate was "ancillary at best," and an award of attorney fees to appellants would be "a windfall."
Appellants claim that they were entitled to attorney fees from the estate because their actions benefited the estate. They enumerate nine separate benefits to the estate occasioned by their efforts, most notably including the return to the estate of certain real property valued at $2.3 million. Our reading of Minn. Stat. § 524.3-720 supports appellants' claim. Appellants were "interested person[s]" within the meaning of the statute who "recovered an asset" "for the benefit of the estate." While appellants' successful litigation increased the amount of their individual shares as trust beneficiaries, their actions also preserved the estate by preventing Mary Ann Sudheimer from converting a sizeable portion of estate assets to her own use in contravention of the interests of all beneficiaries of the trust. Four beneficiaries who did not join in appellants' litigation benefited from appellants' actions because the litigation resulted in a significant increase in the amount of their trust shares without their having to incur any attorney fees. Because appellants' actions benefited the estate and other named beneficiaries, as well as appellants, we reject the district court's narrow interpretation of Minn. Stat. § 524.3-720, and conclude that the district court abused its discretion by declining to award attorney fees to appellants. See Van Den Boom, 590 N.W.2d at 354 (reversing district court's denial of attorney fees to will remainderman where remainderman kept a "major asset intact" by blocking the sale of decedent's family homestead to pay will administration costs).
Affirmed in part, reversed in part, and remanded.