IN MATTER OF ESTATE OF MARCELJA, 30555-1-II (Wash.App. 7-27-2004)

No. 30555-1-IIThe Court of Appeals of Washington, Division Two.
Filed: July 27, 2004 UNPUBLISHED OPINION

Appeal from Superior Court of Pierce County. Docket No: 01-4-00074-1. Judgment or order under review. Date filed: 05/30/2003. Judge signing: Hon. Marywave Van Deren.

Counsel for Appellant(s), Howard Mark Goodfriend, Edwards Sieh Smith Goodfriend PS, 1109 1st Ave Ste 500, Seattle, WA 98101-2988.

Rebecca Gatchet Kenison, Attorney at Law, 2208 NW Market St. Ste 513, Seattle, WA 98107-4098.

Counsel for Respondent(s), James A. Krueger, Attorney at Law, 1201 Pacific Ave Ste 1900, Tacoma, WA 98402-4315.

ARMSTRONG, J.

Melody Marcelja, the personal representative of Walter Robert Marcelja’s estate, appeals an order and judgment requiring her to distribute a bequest from Marcelja’s estate without deducting the beneficiary’s share of estate taxes. Because Walter Marcelja’s will does not relieve the beneficiary of paying her estate tax share, we reverse.

FACTS
Walter Robert Marcelja executed his last will and testament in February 2000. He died 10 months later.

Marcelja nominated his daughter, Melody Marcelja, as personal representative of his estate. He devised $200,000 cash, real property located at 4918 North 24th Street, Tacoma, Washington, and a fenced-in area located at 2202 N. Ferdinand Street, Tacoma, Washington to Emilie Rhoads.[1] He devised $30,000 to Walt and Peggy Susanj, provided the net value of the remaining personal property in his estate exceeded $1,500,000. He left the remainder equally to his three children.

Melody distributed $50,000 to Rhoads in April 2001. In August and September 2001, Melody’s attorney wrote Rhoads an explanation of her portion of the estate taxes. In December 2002, Melody sent Rhoads a check for the remainder of her cash bequest less the calculated taxes and other expenses.

In April 2003, Rhoads moved for an order compelling Melody to distribute an additional $150,000 to her `free and clear of any estate or inheritance taxes.’ Clerk’s Papers (CP) at 178. A commissioner granted the motion, requiring Melody to distribute the remaining $150,000 of the bequest to Rhoads. The court denied Melody’s motion to revise and entered a judgment against her for $150,000 plus interest.

ANALYSIS
The interpretation of a will is a question of law, which we review de novo. In re Estate of Curry, 98 Wn. App. 107, 112-13, 988 P.2d 505
(1999).

I. Testator’s Intent
Melody argues the trial court erred by shifting the burden of estate taxes from the individual beneficiaries to the residuary. Rhoads contends that Marcelja intended to exempt her bequest from paying a share of the estate taxes.

When construing a will, we attempt to carry out the testator’s intent. In re Estate of Bergau, 103 Wn.2d 431, 435, 693 P.2d 703 (1985) (citing In re Estate of Riemcke, 80 Wn.2d 722, 728, 497 P.2d 1319 (1972)). We look for such intent by considering and giving effect to the entire testamentary language. Bergau, 103 Wn.2d at 435-36.

The fourth section of Marcelja’s will, in sub-section B, provides for the payment of death taxes:

My Personal Representative shall pay all state and federal death and inheritance taxes (including any penalties and interest) payable by reason of my death with respect to assets included in this calculation of the taxes, whether passing under this Will or otherwise, from funds as provided in Schedule `B’ of this Will.

CP at 2. But schedule B is blank.

The fifth section, pertaining to distributions, states:

After paying any debts and expenses, and death and inheritance taxes, my Personal Representative is directed to make such distributions as indicated in the enclosed Schedule `A’ of this Will, if such is attached, which shall be a listing of personal property items detailing specific bequests to specific individuals. Further, I direct my Personal Representative to make the following distributions of my entire estate.

CP at 2. But schedule A states no specific bequests. Instead, it simply lists financial accounts, including bank accounts. The fifth section is followed by the specific bequests to Rhoads and Walter and Peggy Susanj.

In 1986, Washington adopted the Uniform Estate Tax Apportionment Act, RCW 83.110.010-.0904. Under the Act, estate taxes are apportioned to and paid out of each beneficiary’s share of the estate unless the testator specifies another source of payment. RCW 83.110.020; In re Estate of Mumby, 97 Wn. App. 385, 395, 982 P.2d 1219 (1999). Thus, a testator may require certain beneficiaries to carry the tax burden and exempt others if he does so specifically in the will. Mumby, 97 Wn. App. at 396 (citing In re Estate of Wilson, 8 Wn. App. 519, 522, 507 P.2d 902 (1973)).

In Mumby, the document stated:

Upon the death of the original Trustor, the Trustee is directed to pay all legal debts (except unmatured mortgages and/or Trust Deeds on real estate) and all expenses of the last illness, funeral and burial as well as all estate, inheritance, succession or other death taxes imposed upon, or in relation to any property required by any tax law to be included in the gross Estate, and then distribute the remaining assets of the Estate including any accumulation thereon in the following manner.

Mumby, 97 Wn. App. at 396. We upheld the trial court’s ruling that the testator intended with this language that estate taxes be paid from the general estate rather than apportioned among the beneficiaries. Mumby, 97 Wn. App. at 400.

But Marcelja did not intend the executor to pay estate taxes from the entire estate before paying specific bequests. Instead, he intended that taxes be paid from funds provided in schedule B. And he then failed to fund schedule B. Thus, he did not specify an alternative source of payment that would overcome the statutory direction to apportion taxes among the beneficiaries. His direction to make the distributions listed in schedule A after paying expenses and taxes does not alter this result for two reasons: (1) he still failed to fund the source of tax payments, and (2) he specified no distributions in schedule A. Thus, he failed either to fund or list those distributions that would be exempt from statutory apportionment. We conclude that the language of Marcelja’s will is not sufficient to overcome the statutory direction to apportion taxes among his beneficiaries.

II. Attorney Fees
Melody asks us to charge Rhoads with the estate’s attorney fees and expenses in litigating the apportionment dispute. She argues that she acted in good faith, and that this litigation arose because Rhoads reneged on her agreement to pay a portion of the estate taxes.

RCW 83.110.030(3) states:

The expenses reasonably incurred by any fiduciary and by other persons interested in the estate in connection with the determination of the amount and apportionment of the tax shall be apportioned as provided in RCW 83.110.020 and charged and collected as a part of the tax apportioned. If the court finds it is inequitable to apportion the expenses as provided in RCW 83.110.020, it may direct apportionment thereof equitably.

RCW 11.96A.150(1) provides:

Either the superior court or the court on appeal may, in its discretion, order costs, including reasonable attorneys’ fees, to be awarded to any party: (a) From any party to the proceedings; (b) from the assets of the estate or trust involved in the proceedings; or (c) from any nonprobate asset that is the subject of the proceedings. The court may order the costs to be paid in such amount and in such manner as the court determines to be equitable.

We find it inequitable to award attorney fees to Melody. Marcelja clearly intended to award the home to his mother-in-law together with sufficient funds for her to continue to live there. If we award attorney fees and costs against Rhoads, this intent could be frustrated. In addition, Melody on behalf of the estate has not been consistent in apportioning taxes. Walt and Peggy Susanj received their $30,000 specific bequest without any deduction for taxes. As a result, the remaining beneficiaries’ shares of taxes and costs may have been increased by the amount the Susanjs’ did not pay. Although the increase may not be large, we conclude it would be inequitable to charge Rhoads with attorney fees and costs for challenging Melody’s decision to deduct taxes from some beneficiaries’ shares but not all. Accordingly, we decline to award Melody attorney fees and costs.

We reverse the order and judgment requiring Melody to distribute Rhoads’ full share of Marcelja’s bequest; Melody is entitled to deduct from Rhoads’ bequest her proportionate share of estate taxes. We remand for further proceedings consistent with this opinion.

Reversed.

A majority of the panel having determined that this opinion will not be printed in the Washington Appellate Reports, but will be filed for public record pursuant to RCW 2.06.040, it is so ordered.

SEINFELD, J.P.T. and ELLINGTON, J.P.T., concur.