Estate of Afrank , 367 Mont. 334 ( 2012 )

December 18 2012
DA 12-0202
IN THE SUPREME COURT OF THE STATE OF MONTANA
2012 MT 289IN THE MATTER OF THE ESTATE OF
DENNIS R. AFRANK, Deceased.
LESLIE AFRANK, Personal Representative,
Appellant,
v.
DEBORAH L. AFRANK,
Appellee.
APPEAL FROM: District Court of the Sixteenth Judicial District,
In and For the County of Fallon, Cause No. DP 09-10
Honorable Joe L. Hegel, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Patrick G. Begley; Attorney at Law, Miles City, Montana
For Appellee:
Michael G. Moses; Moses and Lansing, P.C., Billings, Montana
For Amicus Curiae:
Charles W. Willey; Attorney at Law, Missoula, Montana
(for Business, Estates, Trusts, Tax, and Real Property (BETTR)
Section of the State Bar of Montana)
Submitted on Briefs: November 28, 2012
Decided: December 18, 2012
Filed:
__________________________________________
Clerk
Chief Justice Mike McGrath delivered the Opinion of the Court.
¶1 Leslie Afrank, Personal Representative of the Estate of Dennis Afrank, appeals
from the District Court’s order filed March 1, 2012, allowing Deborah Afrank’s claim
against the Estate. We reverse.
¶2 Leslie Afrank presents the issue for review which we restate as follows: whether
the District Court properly allowed Deborah’s claim against the Estate for one half of the
debt on the motor home that she previously owned with Dennis Afrank as joint tenants
with rights of survivorship.
PROCEDURAL AND FACTUAL BACKGROUND
¶3 Deborah Afrank is the surviving spouse of Dennis Afrank, who died suddenly in
an accident in June 2009. Dennis is also survived by three children from a prior
marriage, one of whom is the Personal Representative Leslie Afrank. Dennis’ will was
admitted to probate in July 2009. It divided his estate among Deborah and his sons;
directed that the Personal Representative pay all of his just debts; and left to Deborah all
of their jointly-owned vehicles and other property.
¶4 At the time of Dennis’ death he and Deborah owned a motor home as joint tenants
with the right of survivorship. There was an outstanding purchase money security
interest on it of approximately $124,000. Dennis and Deborah both signed the loan
document and it specifically provided that each of them was independently obligated for
the full amount of the debt. Deborah filed a claim against the Estate for approximately
$62,000, representing one-half of the outstanding debt on the motor home.
2
¶5 The Personal Representative denied Deborah’s claim, and the issue was presented
to the District Court. The District Court determined that there was no authority on the
issue in Montana, and applied a “better reasoned” majority rule from other states. That
common-law rule provides that “absent a special reason to hold otherwise, the decedent’s
estate has an equitable duty to pay its aliquot share of debts on jointly-held property held
by the decedent’s spouse and the decedent at death.” The District Court held that the
equitable outcome in this case was to allow Deborah’s claim against the Estate for one
half the debt on the motor home. The Personal Representative appeals.
¶6 At the request of this Court, the Business, Estates, Trusts, Tax and Real Property
Section of the State Bar of Montana submitted a brief as amicus curiae. The Court
appreciates the Section’s assistance.
STANDARD OF REVIEW
¶7 This Court reviews a district court’s equitable decisions to determine whether the
findings of fact are clearly erroneous and whether the conclusions of law are correct.
Section 3-2-204(5), MCA; Baston v. Baston, 2010 MT 207, ¶ 13, 357 Mont. 470, 240
P.3d 643.
DISCUSSION
¶8 The issue on appeal is whether the District Court properly allowed Deborah’s
claim against the Estate for one-half of the debt on the motor home that she previously
owned with Dennis as joint tenants with the right of survivorship.
¶9 Some basic principles of law apply to this case. First, no interest in the motor
home passed from Dennis to Deborah under Dennis’ will. There is no dispute that
3
Dennis and Deborah held the motor home as joint tenants with the right of survivorship.
A joint tenant with the right of survivorship automatically gains the other tenant’s interest
in the property upon the other tenant’s death, as a matter of law. In re the Estate of
Ayers, 2007 MT 155, ¶ 16, 338 Mont. 12, 161 P.3d 833; Vogele v. Estate of Schock, 229
Mont. 259, 263, 745 P.2d 1138, 1140 (1987). Therefore, Deborah acquired sole interest
in the motor home immediately upon Dennis’ death, and not through any devise in his
will.
¶10 Second, even as to property that passes under a will, Montana has a statutory
policy of “nonexoneration” which provides:
A specific devise passes subject to any security interest existing at the date
of death, without right of exoneration, regardless of a general directive in
the will to pay debts.
Section 72-2-617, MCA. Application of this statute is a matter of first impression for this
Court. The Official Comments to this statute state that “[t]he common-law rule of
exoneration of the specific devise is abolished by this section, and the contrary rule is
adopted.” In the present case there was no specific directive in Dennis’ will concerning
the debt on the motor home, but only a general directive that the Personal Representative
pay Dennis’ “just debts.” Therefore, if the motor home had passed to Deborah under the
will, it would have passed to her along with the entire debt pursuant to § 72-2-617, MCA.
¶11 The District Court and both parties on appeal rely almost exclusively upon a fifty-
year-old annotation, C. C. Marvel, Right of surviving spouse to contribution, exoneration
or other reimbursement out of decedent’s estate respecting liens on estate by entirety or
4
joint tenancy, 76 A.L.R. 1004. That work cites no Montana law and no case newer than
1960. It pre-dates Montana’s adoption of the Uniform Probate Code in 1975 (see §§ 72-
1-101 and -107, MCA) and pre-dates the adoption of § 72-2-617, MCA. Therefore the
“majority” and “minority” rules discussed in that annotation have limited value, if any, in
resolving the issue in the present case.
¶12 Further, the relevant public policy in Montana can be determined from § 72-2-617,
MCA, the nonexoneration statute. While the statute does not apply to Deborah’s motor
home because Dennis’ interest in it passed to her outside the will as a matter of law, it
evidences a clear public policy adopted by the Legislature. This statement of a public
policy of nonexoneration, expressed in the Uniform Probate Code, is contrary to the
common law “majority rule” presented in the A.L.R. annotation and adopted by the
District Court. The Uniform Probate Code expressly provides that it is controlling of any
other earlier statute. Section 72-1-106, MCA. This controlling intent would also apply
as to earlier common law rules from other jurisdictions.
¶13 Courts in other states have declined to impose a contribution obligation upon an
estate when encumbered property passes to a surviving joint tenant. In Oregon a
nonexoneration statute similar to Montana’s supported a conclusion that a surviving joint
tenant with right of survivorship was not entitled to reimbursement from the estate of an
encumbrance on the property. Bonner v. Arnold, 676 P.2d 290, 291-292 (Ore. 1984)
(joint ownership with the right of survivorship is generally a form of estate planning, and
by enacting a nonexoneration statute the Oregon legislature overturned the common law
rule passing real property free from encumbrances). See also Mellor v. O’Connor, 712
5
A.2d 375 (R.I. 1998) (a surviving joint tenant who was obligated for the entire debt on
the property was not equitably entitled to contribution on the debt from the deceased co-
tenant’s estate).
¶14 Therefore, the District Court erred in concluding that Montana law would, as a
matter of equity under common law, require Dennis’ Estate to pay half of the outstanding
security interest in the motor home that became Deborah’s sole property upon Dennis’
death. The District Court’s order to the contrary is reversed and this matter is remanded
for further proceedings consistent with this opinion.
/S/ MIKE McGRATH
We concur:
/S/ JAMES C. NELSON
/S/ PATRICIA COTTER
/S/ BETH BAKER
/S/ MICHAEL E WHEAT
/S/ BRIAN MORRIS
/S/ JIM RICE
6