In re the Estate of Sheldon K. Beren, deceased. David Beren, Zev Beren, Jonathan Beren, and Daniel Beren, v. Robert M. Goodyear, Jr., as Personal Representative of the Estate of Sheldon K. Beren; Miriam Beren; and Generation Skipping Trust and the Trustees of said trust, and Joshua Beren, Dena Beren Grossman, and the Estate of Cheryl Beren Feldberger
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COLORADO COURT OF APPEALS
2012 COA 203 M
______________________________________________________________________________
Court of Appeals No. 10CA2120
City and County of Denver Probate Court No. 96PR401
Honorable C. Jean Stewart, Judge
______________________________________________________________________________
In re the Estate of Sheldon K. Beren, deceased.
David Beren, Zev Beren, Jonathan Beren, and Daniel Beren,
Appellants and Cross-Appellees,
v.
Robert M. Goodyear, Jr., as Personal Representative of the Estate of Sheldon K.
Beren; Miriam Beren; and Generation Skipping Trust and the Trustees of said
trust,
Appellees,
and
Joshua Beren, Dena Beren Grossman, and the Estate of Cheryl Beren
Feldberger,
Appellees and Cross-Appellants.
______________________________________________________________________________
ORDERS AFFIRMED, REVERSED IN PART,
AND CASE REMANDED WITH DIRECTIONS
Division I
Opinion by JUDGE WEBB
Loeb, J., concurs
Taubman, J., concurs in part and dissents in part
Opinion Modified and
Petitions for Rehearing DENIED
Announced November 21, 2012
______________________________________________________________________________
Blain Myhre LLC, Blain D. Myhre, Englewood, Colorado, for Appellant and
Cross-Appellee David Beren
Fairfield and Woods, P.C., Charles F. Brega, Scott T. Rodgers, Lee Katherine
Goldstein, Denver, Colorado, for Appellants and Cross-Appellees Zev Beren,
Jonathan Beren, and Daniel Beren
Horowitz/Forbes, LLP, Peter C. Forbes, Jay S. Horowitz, Denver, Colorado, for
Appellee Robert M. Goodyear, Jr.
Hale Westfall LLP, Richard A. Westfall, Peter J. Krumholz, Matthew W.
Spengler, Denver, Colorado; The Moore Law Firm, P.C., Theresa M. Moore,
Denver, Colorado, for Appellee Miriam Beren
Paula Constantakis Young, P.C., Paula C. Young, Denver, Colorado, for
Appellee Generation Skipping Trust
Sweetbaum Sands Anderson PC, Alan D. Sweetbaum, Denver, Colorado, for
Appellees and Cross-Appellants
OPINION is modified as follows:
Page 32, line 19 - page 33, line 16 currently reads:
Accordingly, we reverse the probate court’s order to the extent
that it approved distribution of the two classes of shares, and we
remand for further proceedings. Cf. In re Estate of Holmes, 821
P.2d 300, 305 (Colo. App. 1991) (remanding when the court does
not make a specific finding that personal representative followed
relevant factors in determining future attorney fees and the
personal representative’s decision is disputed). On remand, the
court shall require Goodyear (or his successor) to either present
evidence of value concerning the two classes of stock, which the
four brothers shall be allowed to dispute, or propose a modified
plan concerning distribution of stock in Berenergy. If that plan
provides for cancellation of the two share classes and distribution
pro rata to the children of a single class of shares equal in all
regards, the court shall approve the plan and issue any orders
necessary to implement it. If that plan provides for distribution of
additional value to the four brothers, as compensation for the
inferior voting rights of the class A shares, at the request of any
party the court shall hold a hearing on value.
Opinion now reads:
Accordingly, we reverse the probate court’s order to the extent
that it approved distribution of the two classes of shares, and we
remand for further proceedings. Cf. In re Estate of Holmes, 821
P.2d 300, 305 (Colo. App. 1991) (remanding when the court does
not make a specific finding that personal representative followed
relevant factors in determining future attorney fees and the
personal representative’s decision is disputed). On remand, the
court shall require Goodyear (or his successor) to either present
evidence of value concerning the two classes of stock, which any
party shall be allowed to dispute, or propose a modified plan
concerning distribution of stock in Berenergy. By remanding
generally, we take no position on what form a modified plan should
take. See Musgrave v. ICAO, 762 P.2d 686, 688 (Colo. App. 1988)
(“A general remand authorizes the trial court to make new findings
and conclusions so long as there is no conflict with the ruling of the
appellate court.”). However, if the modified plan cancels the two
share classes and, instead, distributes pro rata a single class of
shares that the probate court determines are identical, the court
shall approve the plan and issue any orders necessary to implement
it. Any party may request a hearing to dispute whether the shares
are identical. And if the plan provides for distribution of additional
value to the four brothers, as compensation for the inferior voting
rights of the class A shares, at the request of any party the court
shall hold a hearing on value.
The following new section has been added to the opinion
at page 71, line 3:
XI. Petitions for Rehearing
¶1
In a protracted probate proceeding during which the value of
the estate significantly increases, does the probate court’s equitable
power include making a compensatory increase to the surviving
spouse’s elective share? Addressing a question of first impression
in Colorado, we conclude that the probate court erred in making
such an equitable adjustment, which is the primary issue in this
appeal. We also remand for further proceedings on the corporate
governance (Part IV) and the disputed leases (Part IX.B) issues. In
all other respects, the probate court’s orders are affirmed.
I. Introduction
¶2
Sheldon Beren, who died testate in 1996, was the founder and
sole shareholder of Berenergy Corporation. He had four sons with
his first wife, who predeceased him: appellants David Beren, Zev
Beren, Jonathan Beren, and Daniel Beren (four brothers).
Decedent then married appellee, Miriam Beren (Mrs. Beren, who
survived him), and adopted her two children: appellees and crossappellants, Joshua Beren and Cheryl Beren Feldberger (who is now
deceased). Decedent and Mrs. Beren had one biological child,
appellee and cross-appellant Dena Beren Grossman (collectively,
Miriam’s children).
1
¶3
Decedent’s will provided a life estate for Mrs. Beren and left
the residuary estate to the seven children. It designated her and
appellee Robert M. Goodyear, Jr. (who was the chief financial officer
(CFO) of Berenergy) as co-personal representatives. After Mrs.
Beren petitioned under section 15-11-205, C.R.S. 2012, to take an
elective share in lieu of the life estate, Goodyear became the sole
personal representative and continues in that capacity.1
¶4
In 2001, Mrs. Beren petitioned the court to determine the
value of the augmented estate and based on that value the amount
of her elective share. The four brothers objected to her proposed
calculation. This issue was tried in 2002 and 2003.
¶5
The probate court issued two orders in 2003. The first order
primarily addressed what assets were to be included in the
augmented estate and the value of those assets. The second order
reaffirmed a prior ruling that, as a matter of law, Mrs. Beren was
not entitled to interest on her elective share. However, the court
found that “because the estate has experienced earnings during the
pendency of this litigation,” Mrs. Beren was entitled to an equitable
A guardian ad litem was appointed to represent the minor and
unborn issue of decedent because the will established a generation
skipping trust.
1
2
adjustment, which would be allocated against the remaining
beneficiaries pro rata.
¶6
The next six years of litigation focused on Goodyear’s
computation of the augmented estate and the elective share; the
methodology for computing the equitable adjustment; the amount
of the equitable adjustment; and his proposed plan for distribution.
Several issues in this appeal arise from the plan. In 2009,
Goodyear filed his closing petition, which included his final
compensation request. After several hearings, the probate court
approved the plan and Goodyear’s requested compensation. This
appeal followed closure of the estate.
II. Disqualification
¶7
David Beren contends the probate court judge erred by not
recusing from the entire case after having referred a single motion
to a senior judge. This contention calls into question most of the
probate court’s rulings at issue. It is without merit.
¶8
A judge’s decision whether to recuse will be reversed only for
an abuse of discretion. Spring Creek Ranchers Ass’n v. McNichols,
165 P.3d 244, 245 (Colo. 2007). Upon recusing, a judge loses
3
jurisdiction to make any further rulings in the case. See Beckord v.
District Court, 698 P.2d 1323, 1330 (Colo. 1985).
¶9
Here, David Beren moved for an order directing the court
reporter to prepare a transcript of the hearing on Mrs. Beren’s
elective share. The probate judge referred the motion to a senior
judge because “the reporter referred to . . . was an employee of this
court prior to her retirement and because the court had
conversations with said reporter about any preparation of
transcripts prior to her retirement.” Then David Beren moved the
judge to recuse from the case completely, relying on Beckord. The
judge denied the motion. We discern no abuse of discretion.
¶ 10
Beckord involved a judge who had recognized an appearance of
impropriety and reassigned part of a consolidated action to another
judge. The supreme court concluded that the judge had erred “in
transferring only those parts of the actions which he perceived
would be improper,” because the “appearance of impropriety
effectively disqualified him from . . . deciding any issue in any of the
cases.” 698 P.2d at 1329.
¶ 11
In contrast, here the probate judge made no finding that ruling
on the referred motion would have been improper. See People v.
4
Lanari, 926 P.2d 116, 120 (Colo. App. 1996) (no recusal required
where “[e]ven though he could have decided the motion . . . he,
nevertheless, acting out of an abundance of caution, requested that
the chief judge rule on this motion”); see also Comiskey v. District
Court, 926 P.2d 539, 542 (Colo. 1996) (“referral of the motion to the
chief judge for decision does not require recusal of the trial judge”).
¶ 12
Nor did the probate judge here find an appearance of
impropriety. Comiskey, 926 P.2d at 542 (distinguishing Beckord
because trial judge made no findings of impropriety); Lanari, 926
P.2d at 120 (same). Further, unlike in Beckord, here the court
reporter’s production of a transcript in no way implicated the merits
of this case.
¶ 13
Accordingly, the probate court did not abuse its discretion by
declining to recuse.
III. Equitable Adjustment to the Elective Share
¶ 14
The four brothers contend the probate court erred by awarding
Mrs. Beren an equitable adjustment to her elective share based on
appreciation and income to the estate during the prolonged
administration. She responds that because the Colorado Probate
Code (Code), sections 15-10-101 to -17-103, C.R.S. 2012, does not
5
expressly preclude augmentation of a surviving spouse’s elective
share based on appreciation of, or income or interest earned by, the
estate, the adjustment was within the probate court’s broad
equitable power under section 15-10-103, C.R.S. 2012 (“[u]nless
displaced by the particular provisions of this code, the principles of
law and equity supplement its provisions”). We conclude that the
adjustment was at odds with Code provisions which provide a
precise and detailed mechanism for calculating the elective share,
without regard to increases or decreases in the estate’s value during
administration, and another provision which addresses payment of
probate income. Therefore, it must be set aside.
¶ 15
The probate court’s interpretation of the Code is reviewed de
novo. In re Estate of Reed, 201 P.3d 1264, 1267 (Colo. App. 2008).
¶ 16
In 1999, the probate court rejected Mrs. Beren’s request for
interest on her elective share, because “requiring interest on the
elective share is a legislative prerogative and it is improper for the
court to graft onto legislative provisions specific instances that
could have been addressed but were not.” However, the court noted
that it would “retain” its “equitable power to award moratory
interest.”
6
¶ 17
In 2003, the court observed that “because the estate has
experienced earnings during the pendency of this litigation, equity
requires the court provide Mrs. Beren an award of interest.” Then
in 2009, applying “principles of equity,” the court awarded Mrs.
Beren $24,501,457 based on a 17.46 percent “investment rate of
return,” compounded monthly on the undistributed balance of her
elective share.
¶ 18
The court explained that it had directed the personal
representative to:
[D]etermine values of the estate on May 1, 2000 and
December 31, 2007 and calculate a rate of return during
that period. It was the Court’s intention that the
calculation account for appreciation of assets and income
to the estate over the selected period. The Court also
intended that the calculation would result in a single
sum that would be awarded to [Mrs. Beren] to adjust for
the inequities occasioned by the delays in final
distribution to her of the entire elective share.
(Emphasis added.) It observed that “decedent’s children would be
enriched at the expense of their mother” by delaying distribution of
the elective share, forcing distribution of cash to Mrs. Beren, and
reducing the value of the elective share “by increasing
administrative expenses through delay and distribution.” However,
recognizing that the phrase “moratory interest” had “created
7
confusion in the proceedings,” the court used the phrase “equitable
adjustment,” which “more accurately reflects my intent.”
¶ 19
The parties present opposing views of the equities underlying
this award. Before turning to principles of equity for guidance,
however, a court must determine if any provision of the Code
displaces its authority to make such an award. Because in our
view this authority has been displaced, we decline to address the
equities.
¶ 20
“The General Assembly provided guidance in determining the
legal standards that apply to situations not covered by the statutory
scheme . . . .” Lunsford v. Western States Life Ins., 908 P.2d 79, 85
(Colo. 1995). Citing section 15-10-103, Lunsford held that a
probate court should “look to principles of common law and equity
for guidance” only in the absence of an applicable statutory
provision. Lunsford, 908 P.2d at 85.
¶ 21
As pertinent here, the Code includes comprehensive provisions
concerning the elective share. No provision expressly prohibits an
equitable elective share adjustment. Nevertheless, we conclude that
two sections of the Code displace a probate court’s discretion to
8
augment an elective share based on appreciation of and income to
an estate during administration.
¶ 22
First, under section 15-11-201(1), C.R.S. 2012, “[t]he surviving
spouse of a decedent . . . has a right of election . . . to take an
elective-share amount not greater than one-half of the value of the
augmented estate . . . .” The Code defines “value” as “fair market
value as of the decedent’s date of death.” § 15-11-202(1)(a)(XII),
C.R.S. 2012. Thus, computing the elective share under section 1511-201 results in a set dollar amount, or pecuniary amount,
calculated as of the date of death, rather than a fraction of the
estate when the assets are distributed and the estate is closed.2
¶ 23
Whether the surviving spouse’s interest is a pecuniary amount
or a fractional interest is important because:
If pecuniary -- that is to say, a fixed dollar amount -- the
bequest will be unaffected by fluctuation of asset values
In contrast, the prior version of section 15-11-201 provided “the
surviving spouse has a right of election to take a fraction of the
augmented estate designated by the surviving spouse . . . .” Ch.
186, sec. 1, § 15-11-201(1), 1981 Colo. Sess. Laws 911. Such a
share was “valued on the date or dates of distribution,” Ch. 186,
sec. 1, § 15-11-207(3)(b), 1981 Colo. Sess. Laws 913, and not as of
the decedent’s death. See In re Estate of Cole, 491 A.2d 770, 775
(N.J. Super. Ch. Ct. 1984) (explaining that a “date-of-death
valuation” converts a fractional elective share into a pecuniary
share).
2
9
during probate. If . . . fractional -- that is to say, a
percentage of the decedent’s property on the date of
distribution -- the widow’s interest will be affected by
appreciation or depreciation of asset values during
probate.
In re Parker’s Estate, 180 N.W.2d 82, 85 (Mich. Ct. App. 1970); see
Estate of McKee, 132 Misc. 2d 562, 563, 504 N.Y.S.2d 394, 395
(N.Y. Sur. Ct. 1986) (“If it is pecuniary, the beneficiary does not
share in increases during administration; if it is fractional, then it
does share.”); Smail v. Smail, 617 S.W.2d 889, 892 (Tenn. 1981)
(spouse not entitled to appreciation of stock value occurring after
testator’s death, where bequest in marital trust was a pecuniary
amount rather than a fraction); cf. Hanna v. Hanna, 619 S.W.2d
655, 658 (Ark. 1981) (pecuniary bequest is “unaffected by
appreciation or depreciation of the assets”).
¶ 24
Section 15-11-201 protects the spouse who elects against a
will from a decrease in the value of the estate during
administration. As a corollary, in our view, such a spouse should
not benefit from an increase in the value of the estate during
administration. Therefore, the probate court’s explanation that its
equitable adjustment prevented the value of the elective share from
10
being “frozen in time” ignores the protection against declining estate
value achieved by a surviving spouse who elects against the will.
¶ 25
Had the legislature intended to allow augmentation of the
elective share based on appreciation in estate value, as occurred
here, the expected location for such a provision would be in section
15-11-202(2), C.R.S. 2012. This section reflects a legislative
judgment to avoid injustice to the surviving spouse by restoring
certain assets or their value to the augmented estate. See In re
Estate of Smith, 718 P.2d 1069, 1071 (Colo. App. 1986) (“one of the
purposes of the augmented estate provisions is to allow a surviving
spouse, deprived of a share in the decedent spouse’s estate by inter
vivos transfers to third parties or other means, to claim an elective
share of property deemed includible in the augmented estate”).
However, none of the specific augmentation provisions uses a value
after the date of the decedent’s death, which would encompass
appreciation. Further, the lengthy comment to title 15, article 11,
part 2, does not address inequity to the surviving spouse who has
chosen an elective share resulting from appreciation in estate value,
although the comment recognizes several other inequities and
describes the remedies provided.
11
¶ 26
Second, under section 15-1-467(1), C.R.S. 2012, the “executor
shall, at the time of distribution, pay over” any net probate income
to trustees and legatees. The definition of “net probate income”
would include the income to the estate that here the probate court
directed the personal representative to calculate. See § 15-1453(1)(c), C.R.S. 2012. Neither any provision of the Code nor any
Colorado case suggests that a spouse who has elected against a will
is a trustee or a legatee. See Black’s Law Dictionary 980 (9th ed.
2009) (a legatee is “[o]ne who is named in a will to take personal
property; one who has received a legacy or bequest”). Therefore,
under section 15-1-467, a spouse who choses an elective share is
not entitled to any net probate income. See Sheridan
Redevelopment Agency v. Knightsbridge Land Co., 166 P.3d 259,
263 (Colo. App. 2007) (“We are not free to add language to a
statute.”); see also Williams v. Harrington, 460 So. 2d 533, 537 (Fla.
Dist. Ct. App. 1984) (rejecting claim for equitable adjustment to
elective share because, “For us to embark upon the task -- and to,
in effect, call upon trial courts in like situations to embark upon the
task -- of adjusting the statutory scheme to accommodate perceived
equities would, we believe, not be a proper judicial role.”). Thus,
12
insofar as the probate court’s equitable adjustment included
“income to the estate over the selected period,” that portion of the
award is contrary to section 15-1-467 because by paying income to
Mrs. Beren, the court precluded paying it to the children, who were
“legatee[s] of a present, legal, possessory interest in any portion of
the residue.” § 15-1-467(1)(c), C.R.S. 2012.
¶ 27
Both of these provisions indicate that an elective share is a set
pecuniary amount which neither increases nor decreases based on
changes in the value of the estate during administration. The
resulting protection of an electing spouse against post-death
decreases in estate value would be difficult to reconcile with an
implied power to award an equitable adjustment based on increases
in the estate value. This anomaly might be avoided by recognizing a
correlative power to make an equitable adjustment that decreased
the elective share to reflect declining estate value. But such a fluid
approach would render the “date of death” limitation on value
meaningless.
¶ 28
Equitable adjustments would also frustrate “ease of
administration and predictability of result,” which “are prized
features of the probate system.” Tit. 15, art. 11, pt. 2 gen. cmt.,
13
C.R.S. 2012. Here, the equitable adjustment made by the probate
court illustrates problems as to both.
¶ 29
First, the adjustment expanded the proceedings below, and is
the core of this appeal. The court had to decide on a date range for
the adjustment, without any statutory reference points. The factors
for determining appreciation and income, which also lack any
statutory basis, were and are disputed. Second, the multifaceted
nature of the adjustment leaves the amount of Mrs. Beren’s elective
share, and as a consequence the value to be realized by the
residuary beneficiaries, unknown and unknowable from 2003,
when the court first discussed the adjustment, until final resolution
of proceedings on remand arising from this appeal.
¶ 30
Mrs. Beren’s emphasis on Lunsford is unpersuasive. There,
the supreme court held that the so-called “slayer statute,” now
codified at section 15-11-803, C.R.S. 2012, did not shield an
insurer from a common law claim that it had been negligent in
paying life insurance proceeds, under suspicious circumstances, to
a beneficiary who turned out to have killed the insured. The court
relied on two established common law principles: a slayer cannot
benefit from a wrongful act and an insurer owes a duty of care in
14
disbursing policy proceeds. The court discerned no contradiction
between these principles and the slayer statute, which prohibits an
insurer from paying policy proceeds only if, before payment, a
contingent beneficiary gives the insurer notice that the primary
beneficiary has been convicted of or pled guilty to murder or
manslaughter of the insured. Construing the statute strictly, the
court concluded that because it “is silent regarding a [primary]
beneficiary’s entitlement to insurance proceeds in other situations,”
908 P.2d at 83, the court recognized “the duty of an insurer to
disburse policy proceeds reasonably absent explicit legislative
direction to the contrary.” 908 P.2d at 87.
¶ 31
Here, in contrast, the Code is not “silent” concerning
calculation of the elective share. Nor are the elective share
provisions subject to strict construction.3
In re Estate of Perry, 33 P.3d 1235 (Colo. App. 2001), also cited by
Mrs. Beren, is similarly distinguishable. There, the division held
that the probate court must determine whether the decedent’s
missing will was lost or had been knowingly destroyed, and
therefore revoked, by the decedent. It recognized the common law
presumption of destruction where a will last seen in the possession
of the decedent cannot be found, explaining, “because neither
[section] 15-12-407 nor [section] 15-12-402 addresses the burden
of proof when a will is lost or destroyed, this presumption continues
3
15
¶ 32
Several other states have held that where the elective share is
a fractional interest, the electing spouse will share in the increases - and sometimes be vulnerable to decreases -- in estate value
occurring between death and distribution. See Charles C. Marvel,
Annotation, Extent of Rights of Surviving Spouse Who Elects to Take
Against Will in Profits of or Increase in Value of Estate Accruing After
Testator’s Death, 7 A.L.R. 4th 989 (1981). However, two states
whose statutes, like the Code, provide pecuniary amounts for
elective shares have rejected adjusting the elective share to account
for such increases. See Paredes v. McLucas, 561 So.2d 439, 440
n.1 (Fla. Dist. Ct. App. 1990) (“The elective share is computed as an
amount based upon the fair market values on date of death,
therefore, once determined, this amount does not increase or
decrease as the estate asset values change during administration.”
(quoting Platt, Administration of the Estate, Basic Probate and
Guardianship Practice Seminar § V (Elective Share), at 3.14)); In re
Kasenetz, 196 Misc. 2d 318, 321, 765 N.Y.S.2d 216, 218 (N.Y. Sur.
Ct. 2003) (“the elective share is a pecuniary amount computed at
to apply.” 33 P.3d at 1236. But here, valuation of an elective share
has been addressed, and in detail.
16
the time of death, it does not participate in increases and decreases
to the estate during administration”).
¶ 33
Mrs. Beren’s reliance on Estate of Smith, 718 P.2d at 1074, as
recognizing the probate court’s discretion to make an equitable
adjustment to an elective share, is misplaced. There, the estate of
the surviving spouse, who had died during the probate proceedings,
sought compensation “for increases accruing to the value of estate
property from the date of [decedent’s] death.” Id. The trial court
“provided such compensation in the form of an award of interest,”
based on its equitable powers. Id. Estate of Smith is
distinguishable, for two reasons.
¶ 34
First, when Estate of Smith was decided, Colorado’s elective
share statute did not provide for a pecuniary amount. Instead, as
discussed above, the prior version of section 15-11-201 provided
“the surviving spouse has a right of election to take a fraction of the
augmented estate,” which was valued on the date of distribution.
See Ch. 186, sec. 1, §§ 15-11-201(1), 15-11-207(3)(b), 1981 Colo.
Sess. Laws 911, 913.
¶ 35
Second, in Estate of Smith, the parties did not dispute the
probate court’s authority to adjust the elective share. Instead, they
17
contested only the date range for the interest calculation. 718 P.2d
at 1074 (“Ruth’s estate agrees that an award of interest is proper,
but argues that . . . interest should have run from the date of . . .
death”).
¶ 36
In sum, we conclude that the probate court erred when it
made an equitable adjustment to Mrs. Beren’s elective share to
compensate her for income to, and appreciation in the value of, the
estate.
¶ 37
Nevertheless, and despite the probate court’s clarification that
it was awarding an equitable adjustment rather than moratory
interest, Mrs. Beren argues that her award was proper as moratory
interest. We reject this argument, for the following reasons.
¶ 38
In Colorado, interest is “a creature of statute.” Farmers
Reservoir & Irrigation Co. v. City of Golden, 113 P.3d 119, 132 (Colo.
2005). Under section 15-12-904, C.R.S. 2012, “General pecuniary
devises bear interest at the legal rate beginning one year after the
first appointment of a personal representative until payment . . . .”
(Emphasis added.) “Devise” means “a testamentary disposition of
real or personal property.” § 15-10-201(12), C.R.S. 2012. A
surviving spouse’s elective share is an alternative to a will, and thus
18
cannot be a “testamentary disposition.” 4 Cf. Cobb v. Estate of
Stratton, 56 Colo. 278, 284, 138 P. 35, 38 (1913) (rejecting common
law award of interest on legacy, because, “The subject of interest is
governed in this state by statute, and in no case where interest is
not so provided is it recoverable, unless specially contracted for,
except in the nature of damages, where a refusal to pay has been
willful, wrongful, fraudulent or without reasonable cause, and no
such claim is advanced in this case.”).
¶ 39
Although Colorado law recognizes interest as damages or
“moratory interest,” even where -- as here -- not recoverable under a
statute, such an award usually constitutes damages for the
wrongful withholding of money. Farmers Reservoir, 113 P.3d at
133; see § 5-12-102, C.R.S. 2012; see generally Davis Cattle Co. v.
Great W. Sugar Co., 393 F. Supp. 1165, 1186 (D. Colo. 1975)
(discussing annotations and Colorado case law permitting moratory
interest), aff’d, 544 F.2d 436 (10th Cir. 1976). Even where the
The 2008 amendments to the Uniform Probate Code included
section 2-209(e), which treats the “unsatisfied balance of the
elective share” as a “general pecuniary devise” entitled to interest.
Colorado has not adopted this amendment, although the legislature
has adopted other provisions of the 2008 amendments. See, e.g.,
§ 15-11-201(2), C.R.S. 2012.
4
19
award is equitable, it “deters further wrongful delay of payment.”
Safeco Ins. Co. v. Westport Ins. Corp., 214 P.3d 1078, 1080 (Colo.
App. 2009) (internal quotation omitted). But here, the probate
court did not find that any of the parties had wrongfully withheld
the elective share and it rejected the idea that its award of moratory
interest was “some sort of punitive sanction[] (targeting the ‘bad
people’ and rewarding the ‘good people’).”
¶ 40
Moreover, other than Estate of Smith, no Colorado case has
awarded moratory interest absent a wrongful withholding. In this
regard, Estate of Smith relied on Heller v. First National Bank, 657
P.2d 992 (Colo. App. 1982), as support for probate court discretion
to award interest independent of a statute. However, Heller was a
breach of trust action that necessarily involved wrongful conduct.
And to the extent Estate of Smith, 718 P.2d at 1074, upheld an
award of moratory interest on an elective share -- notwithstanding
20
lack of wrongful withholding -- the case is distinguishable for the
reasons set forth above.5
¶ 41
Accordingly, we conclude that the probate court erred in
awarding Mrs. Beren an equitable adjustment to her elective share
for appreciation of and income to the estate during its
administration.6 Even if the better policy may be recognizing a
probate court’s power to make such an equitable adjustment under
unusual circumstances, an appropriate statutory change could be
made in language that can be “quickly and easily understood.”
People v. District Court, 161 Colo. 14, 24, 420 P.2d 236, 241 (1966).
However, “[c]ourts must avoid making decisions that are
intrinsically legislative. It is not up to the court[s] to make policy or
Other states are divided on whether a spouse is entitled to interest
on the elective share. Compare Price v. Florida Nat’l Bank, 419 So.
2d 389 (Fla. Dist. Ct. App.1982) (spouse not entitled to interest
accruing to his elective share notwithstanding a substantial lapse of
time between the date of decedent's death and the date of
distribution), with In re Kasenetz, 196 Misc. 2d at 321, 765
N.Y.S.2d at 218 (elective share is entitled to interest under a New
York statute).
5
Given this conclusion, we need not address the parties’ additional
arguments on the equitable adjustment, including the rate of
interest; whether it was an administrative expense; and whether it
should have been apportioned on a pro rata basis.
6
21
to weigh policy.” Town of Telluride v. Lot Thirty-Four Ventures,
L.L.C., 3 P.3d 30, 38 (Colo. 2000).
IV. Corporate Governance Plan
¶ 42
The four brothers next contend the probate court erred in
approving that portion of the distribution plan which modified the
corporate structure of Berenergy by creating two classes of stock:
4,000 shares of class A to be distributed to the four brothers and
3,000 shares of class B to be distributed to Miriam’s children. We
conclude, as a matter of law, that the two classes are unequal in
voting rights. Because the plan did not offset this inequality with
additional monetary or in-kind distributions, and Goodyear did not
present any evidence showing that the actual difference in value
from this legal inequality was de minimis, we reverse the approval
of that portion of the plan.
A. Standard of Review
¶ 43
The probate court “has jurisdiction to determine every legal
and equitable question arising in connection with decedents’ . . .
estates . . . [and to] partition any of the real or personal property of
any estate in connection with the settlement thereof.” § 13-9103(3)(c), C.R.S. 2012; see also In re Estate of Stoiber, 101 Colo.
22
192, 199-200, 72 P.2d 276, 279 (1937) (referencing that suits
against the administrator of a decedent’s estate are suits in equity).
Equitable remedies fashioned by a court are reviewed for an abuse
of discretion. McNamara v. Mossman, 230 P.3d 1286, 1288 (Colo.
App. 2010). A court abuses its discretion when its ruling is
“manifestly arbitrary, unreasonable, or unfair, or based on an
erroneous view of the law.” People v. Mollaun, 194 P.3d 411, 416
(Colo. App. 2008). Interpretations of law are reviewed de novo.
McIntire v. Trammell Crow, Inc., 172 P.3d 977, 979 (Colo. App.
2007).
B. Law
¶ 44
If a will does not specify how to distribute a class gift among
class members, the Code requires distribution as if the class
members took in intestacy. § 15-11-708, C.R.S. 2012. Under
intestacy, a decedent’s children inherit “per capita at each
generation,” § 15-11-103(2), C.R.S. 2012, requiring that each child
receive an “equal share” of the estate. § 15-11-106(2), C.R.S. 2012.
Provided that this underlying equality is maintained, the residuary
estate may be distributed in cash or in kind. § 15-11-906(2), C.R.S.
2012.
23
¶ 45
The Code uses fair market value to determine the value of in-
kind distributions. While neither section 15-11-106(2) nor section
15-11-906(2) specifies the method of valuation, as noted, the Code
defines the value of an augmented estate as its “fair market value,”
§ 15-11-202(1)(a)(XII), and a fiduciary is empowered to make inkind distributions in accordance with “fair market value.” § 15-1804(2)(u), C.R.S. 2012. Throughout the Code, fair market value is
the default method of valuation. See § 15-12-706(1), C.R.S. 2012
(“[A] personal representative . . . shall prepare an inventory of
property owned by the decedent and subject to disposition by will or
intestate succession at the time of his death, listing . . . its fair
market value . . . .”); § 15-12-1402(8), C.R.S. 2012 (defining “value”
under part fourteen of the Probate Code as “fair market value”);
Pueblo Bancorporation v. Lindoe, Inc., 63 P.3d 353, 362 (Colo. 2003)
(using the Code as an example of the General Assembly defining
“value” as “fair market value”). Interpreting statutory provisions to
be consistent with the legislative scheme as a whole, Devora v.
Strodtman, 2012 COA 87, ¶ 9, we conclude that sections 15-11106(2) and 15-11-906(2) likewise require in-kind distributions to be
valued according to their fair market value.
24
¶ 46
Fair market value refers to “the price that would be agreed
upon by a willing seller and willing buyer under no compulsion to
sell or buy.” Walter S. Cheesman Realty Co. v. Moore, 770 P.2d
1308, 1311-12 (Colo. App. 1988); accord Lindoe, 63 P.3d at 362.
When applying this standard, courts have recognized the difficulty
in valuing assets where no market exists, as with close
corporations. See, e.g., Van Schaack v. Van Schaack Holdings, Ltd.,
856 P.2d 15, 23 (Colo. App. 1992), aff’d, 867 P.2d 892 (Colo. 1994).
In these cases, “[a] proper determination of the fair market value of
a corporation’s shares depends upon the particular circumstances
of the corporation involved. The court must consider all relevant
value factors . . . .” Id.; cf. Lindoe, 63 P.3d at 361 (stating that
discounts based on factual circumstances are appropriate when
determining fair market value that would not be appropriate
otherwise).
C. Application
¶ 47
Decedent’s will gave his residuary estate, including Berenergy,
to his “issue that survive[d]” him. However, the will did not
apportion the residuary estate among the class members, all of
25
whom were of the same generation. Thus, Goodyear created the
distribution plan to divide this residuary estate equally.
¶ 48
Under the plan, the estate would be distributed pro rata to the
residuary beneficiaries -- the seven children -- but “subject to a
corporate governance structure intended to insure that neither of
what has turned out to be two ‘sides’ of the family is placed in a
minority position.” All shares of stock to be distributed would
participate equally in profits and liquidation proceeds. However,
the voting rights differed because the 4,000 class A shares could
elect one director and the 3,000 class B shares could elect one
director. Those directors would then choose a third, or “neutral,”
director.
¶ 49
At the hearing on the plan, the four brothers argued that the
distribution was unequal, as a matter of law, because their shares
would have lesser voting rights. However, they presented no
evidence of how, if at all, the lesser rights affected the value of these
shares. Nor did Goodyear present any such evidence. Instead, he
explained that because the four brothers were allied with each
other, as were Miriam’s children, this structure prevented the four
26
brothers from using their collective control of the company to
disadvantage Miriam’s children.
¶ 50
In approving the Plan, the probate court made no specific
findings concerning either the change in corporate structure or the
difference in value, if any, between shares in the two classes.
However, the court found that the plan complied with both the will
and the Code.
1. Consideration of Minority Interest Oppression
¶ 51
The four brothers argue that neither Goodyear nor the probate
court has any power to manipulate voting rights to protect any
group of minority shareholders from oppression by the majority.
We have not found any Colorado authority empowering a personal
representative or a probate court to consider possible oppression of
minority interests, nor has Goodyear or Miraim’s children cited any
such authority. The absence of authority weighs against departing
from the Code’s requirement of equality in distribution to mitigate
the risk of oppression.
¶ 52
Further, here the oppression concern may be ephemeral.
While during much of the estate administration, the four brothers
would take one position and Miriam’s children would take the
27
opposite position, the probate court did not hear any evidence that
these alignments would continue. Alone, each child will always be
a minority shareholder. And however the children may align in the
future, four or more of them will always constitute the majority and
three or fewer of them will always be in the minority. Thus, if the
alignment changes, the corporate structure designed to prevent
oppression of Miriam’s children will cease to be effective.
¶ 53
Therefore, because the will requires equal distribution of the
residuary estate to the seven children, and does not mention
protecting minority shareholders, we conclude, as a matter of law,
that inequality in voting rights is not justifiable based on concerns
over oppression of minority shareholders, for which other remedies
may exist. See generally Polk v. Hergert Land & Cattle Co., 5 P.3d
402, 404-05 (Colo. App. 2000) (“The definition of oppressive
conduct is intended to be broad and flexible. In the context of a
close corporation, oppressive conduct of those in control is closely
related to breach of the fiduciary duty owed to minority
shareholders.”).
28
2. Inequality of Shares’ “Fair Market Value”
¶ 54
The four brothers argue that the distribution was unequal
because the class A shares have lesser voting rights than the class
B shares. While the difference in voting rights is indisputable, both
Goodyear and Miriam’s children respond that this difference does
not affect value. Addressing the value question is confounded
because no evidence of value was presented and the probate court
made no findings concerning value. Nevertheless, we conclude, also
as a matter of law, that because the difference in voting rights
affected the fair market value of the shares, thus making shares in
the two classes unequal, further proceedings are required.
¶ 55
The probate court found that the distribution plan followed
both the will and the Code, both of which require division into
shares of equal fair market value. See supra Part IV.B. As the
shares differ only with respect to their voting rights, the probate
court necessarily considered the difference in voting rights
irrelevant to fair market value under the Code, as a matter of law.
Absent any evidence of value, this application of the fair market
value standard is incorrect.
29
¶ 56
When deciding fair market value, courts must look to all
factors relevant to a hypothetical willing buyer and a willing seller.
See supra Part IV.B. If two items are of equal fair market value, a
willing buyer would be ambivalent as to which item the buyer
received for the price. Conversely, a willing seller would request the
same price for both items. If two items differ in a way that would
cause a willing buyer to prefer one over the other, or a willing seller
to price them differently, the two items do not have equal fair
market values.
¶ 57
The voting rights associated with a particular share of stock
could impact the price assigned by a hypothetical willing buyer and
seller because courts have recognized that a share’s voting rights
have value. See Hertz Drive-Ur-Self Sys. v. Doak, 94 Colo. 200, 203,
29 P.2d 625, 626 (1934) (finding mandamus an appropriate
extraordinary remedy, given the “importance and value of the right
to vote corporate stock”). Both the professional community, see,
e.g., American Society of Appraisers, ASA Business Valuation
Standards 47 (2009) (urging consideration of the impact various
factors have on “degree of control” when valuing partial interests in
corporations), and federal tax authorities, see Treas. Regs. 20.203130
1(b), 20.2031-2(f)(2); Rev. Ruls. 59-60, 83-120, also consider voting
rights to be a part of a share’s fair market value. Thus, a difference
in voting rights of shares is a relevant factor that should be
considered when determining fair market value. As it was not here,
the probate court abused its discretion in approving this portion of
the plan by misapplying the law.
¶ 58
Nevertheless, Goodyear argues that value should be
determined strictly according to proportionate interest in the
corporation. But proportionate interest in a company is not
synonymous with “fair market value” because the latter is broader
than the former. See Lindoe, 63 P.3d at 360-61 (declining to apply
discounts appropriate under “fair market value,” as the particular
statute called for valuing according to proportionate interest, and
the two terms have different meanings). Thus, “fair market value”
considers more than proportionate interest in the corporation.
¶ 59
Furthermore, whether a minority discount may apply here is
irrelevant. Goodyear argues that courts should only apply minority
discounts when one stockholder has a controlling interest in the
corporation, which is not present in Berenergy. However, we need
not consider which particular discounts are applicable, nor do we
31
suggest the respective values of the two classes of stock. We hold
only that because voting rights are a component of “fair market
value” in the market place, and hence under the Code, providing no
compensation reflecting the difference in these rights rendered the
in-kind distribution of shares among the children unequal, as a
matter of law.
¶ 60
Nor are we willing to resolve this question based on Goodyear’s
assertion that, as objectors, the four sons bore the burden of
proving that unequal value was more than de minimis, given that
Berenergy is a close corporation and each child holds a minority
interest. The Code is silent on whether a personal representative,
as proponent of a distribution plan, or an objector, bears the
burden of proving equal value. However, even if we assume the four
brothers bore that burden, cf. § 15-12-407, C.R.S. 2012
(“Contestants of a will have the burden of establishing . . .”), we
conclude that they met this burden with their legal argument that
the shares were unequal, as a matter of law, thus shifting the
burden of going forward with evidence of value to Goodyear.
¶ 61
Accordingly, we reverse the probate court’s order to the extent
that it approved distribution of the two classes of shares, and we
32
remand for further proceedings. Cf. In re Estate of Holmes, 821
P.2d 300, 305 (Colo. App. 1991) (remanding when the court does
not make a specific finding that personal representative followed
relevant factors in determining future attorney fees and the
personal representative’s decision is disputed). On remand, the
court shall require Goodyear (or his successor) to either present
evidence of value concerning the two classes of stock, which any
party shall be allowed to dispute, or propose a modified plan
concerning distribution of stock in Berenergy. By remanding
generally, we take no position on what form a modified plan should
take. See Musgrave v. Indus. Claim Appeals Office, 762 P.2d 686,
688 (Colo. App. 1988) (“A general remand authorizes the trial court
to make new findings and conclusions so long as there is no conflict
with the ruling of the appellate court.”). However, if the modified
plan cancels the two share classes and, instead, distributes pro rata
a single class of shares that the probate court determines are
identical, the court shall approve the plan and issue any orders
necessary to implement it. Any party may request a hearing to
dispute whether the shares are identical. And if the plan provides
for distribution of additional value to the four brothers, as
33
compensation for the inferior voting rights of the class A shares, at
the request of any party the court shall hold a hearing on value.
V. Personal Representative Compensation
¶ 62
David Beren next contends the probate court erred by
approving Goodyear’s compensation request because it was “based
on the value of the estate, rather than on the work actually
performed.” We discern no abuse of discretion.
¶ 63
Determining the reasonableness of compensation for services
performed by a personal representative is within the sound
discretion of the probate court, and its award will be disturbed only
for an abuse of discretion. In re Estate of Musso, 932 P.2d 853, 857
(Colo. App. 1997).
¶ 64
“A personal representative is entitled to reasonable
compensation for his or her services.” Ch. 249, sec. 5, § 15-12719(1), 2001 Colo. Sess. Laws 888. In reviewing the reasonableness
of a compensation request, a probate court should consider:
(a) The time and labor required, the novelty and difficulty
of the questions involved, and the skill requisite to
perform the service properly; (b) The likelihood, if
apparent to the personal representative, that the
acceptance of the particular employment will preclude
the person employed from other employment; (c) The fee
customarily charged in the locality for similar services;
34
(d) The amount involved and the results obtained; (e) The
time limitations imposed by the personal representative
or by the circumstances; . . . [and] (g) The experience,
reputation, and ability of the person performing the
services.
§ 15-12-721(2)(a)-(e) & (g), C.R.S. 1973 (repealed in 2011); see In re
Estate of Painter, 39 Colo. App. 506, 508, 567 P.2d 820, 822 (1977)
(factors are not exclusive).
¶ 65
Here, at the onset of the administration, Goodyear set his
compensation at $375,000 annually -- $125,000 over his prior
salary as the CFO of Berenergy. In approving Goodyear’s annual
compensation, the probate court indicated that it would consider a
retrospective increase. By 2010, Goodyear had received
compensation of approximately $5,500,000, to which the parties
did not object.
¶ 66
Goodyear sought additional compensation of $10,250,000 for
his services from 1996 through June 30, 2010, and an annual
salary of $1,553,908.32 from July 1, 2010 to the date of discharge.
David Beren objected to any additional compensation. As the
probate court observed, the other parties held a “nearly unanimous
position” that Goodyear should “receive substantial additional
compensation.”
35
¶ 67
Following an evidentiary hearing at which only Goodyear
presented expert testimony, the probate court approved Goodyear’s
compensation request. It concluded:
[T]he additional final compensation approved herein is
unique precisely because this estate administration was
unique. Thus application of the factors set forth in § 1512-721 to the unique facts of this case, along with
consideration of the other unique factors identified above
. . . leads the Court to find that, in the circumstances of
this case, the approved additional final compensation,
while undeniably material, is both appropriate and
reasonable.
The court noted its “equitable powers to compensate a PR who
devotes the most productive years of his career to the successful
administration of an estate.” It explained that “[t]o the extent that
the statute allows the Court to give weight to this factor, the Court
has given considerable weight to this one,” adding:
This estate has no parallel in the Court’s experience to
which it can be compared to determine “similar services”
or “customary charges.” . . . The fact that the PR
maintained Berenergy and the other closely-held
business interests for 14 and a half years while
withstanding the unrelenting abuse of the Decedent’s
heirs and that the results of his management have been
successful or wildly successful, depending on whose
opinion one accepts, cannot be understated in
considering that he is now requesting a fee in the range
of fees customarily charged in the locality for similar
services.
36
See In re Estate of Breeden v. Gelfond, 87 P.3d 167, 173 (Colo. App.
2003) (personal representative entitled to requested fee because it
was “reasonable based on time and amounts typical in the
community”).
¶ 68
David Beren did not present evidence contrary to the probate
court’s findings that:
• “Goodyear has devoted the entirety of his working life for 14
and a half years to this estate administration, including the
day-to-day management of Berenergy and the other oil and
gas interests and entities that make up this estate.”
• Goodyear “by virtue of his acceptance of the appointment as
PR and employment as CEO of Berenergy, has had no
opportunity to engage in any other meaningful employment for
the last 14 and a half years.”
• “By accepting this appointment [Goodyear] was precluded from
any other employment.”
¶ 69
Instead, relying on Estate of Painter, David Beren argues that
Goodyear’s compensation was improperly based on a percentage of
the estate’s value rather than on services performed. In support of
this argument, he correctly points out that Goodyear requested
37
compensation of .9 percent of the estate’s value, and that the expert
report presented by Goodyear included compensation schedules
from several Denver institutional asset managers, all based on
varying percentages of the assets under management.
¶ 70
In Estate of Painter, 39 Colo. App. at 508, 567 P.2d at 822, the
division rejected the “percentage method” of calculating
compensation, which is “based upon the premise that the amount
of work required in estate administration is directly proportional to
the value of the assets.” It explained “that the duties of a personal
representative . . . vary greatly depending upon numerous factors,
only one of which is the monetary value of the estate”; and a court
“must consider and weigh all of the factors” in section 15-12-721 to
determine reasonable compensation. Id. at 508-09, 567 P.2d at
822-23.
¶ 71
Here, the probate court’s order approving Goodyear’s
compensation conformed to Estate of Painter. The court
acknowledged:
• “[P]robate courts in Colorado cannot simply order a valuation
of the estate, apply a fee schedule, and order that a percentage
or share of the estate be paid to the PR as a fee.”
38
• “Instead, in Colorado, the Court must review the factors set
out in § 15-12-721 and apply those factors to the estate
administration to determine the reasonableness of the
compensation determined by the personal representative for
his own services.”
Then the court “applied and analyzed each of the § 15-21-721
factors in the context of this case, plus a myriad of other relevant
considerations, to determine if the total compensation requested by
[Goodyear] is reasonable.”
¶ 72
The report of Goodyear’s expert supported the court’s
approach by providing an analysis of how these factors applied to
this estate. Although the report also included institutional fee
schedules based on “a percentage-of-assets formula,” it noted that
application of such a formula “produces a dollar amount to consider
along with the other statutory factors.” The probate court relied on
the expert report only in considering the third statutory factor -- the
fee customarily charged in the locality for similar services. And it
did not adopt any of the fee schedules from the report.
¶ 73
Thus, although the probate court approved Goodyear’s total
compensation as a percentage of the estate, it did not arbitrarily
39
base this compensation on a percentage calculation. Nor did
Goodyear present such an arbitrary request. Rather, after
explaining in detail his activities on behalf of the estate, he
presented a range of percentages from which his compensation
could be calculated. See In re Estate of Santarelli, 74 P.3d 523, 526
(Colo. App. 2003) (fees based solely on a percentage of the estate’s
assets are improper only “absent further justification”).
¶ 74
Nevertheless, David Beren argues that the probate court
should have used a lodestar calculation -- the number of
Goodyear’s hours multiplied by a reasonable hourly rate -- to
determine Goodyear’s compensation. Although this method is
commonly used to determine reasonable attorney fees, see Payan v.
Nash Finch Co., 2012 COA 135, ¶ 17, David Beren cites no
authority, nor have we found any in Colorado, applying it to
determine the compensation of a personal representative. Doing so
here would be anomalous because Goodyear is not an attorney.
¶ 75
The probate court explained that although Goodyear did not
“maintain[] time sheets or other records of his time spent on estate
administration tasks including management of Berenergy,” this
occurred “because [Goodyear] has had no other occupation.” Thus,
40
the “time and labor required” for Goodyear to act as the personal
representative “was complete.” The court also found that it would
be “impossible to calculate or estimate what portion of the last
decade alone has been devoted to the conflict among the family
members . . . .” Because the record supports these findings, we
agree with the court’s conclusion that a lodestar calculation was
unworkable.
¶ 76
In sum, because the probate court evaluated each of the
appropriate statutory factors and made specific factual findings
regarding the reasonableness of the fees, which are supported by
the record, we may not reweigh the evidence on appeal. See In re
Estate of Romero, 126 P.3d 228, 231 (Colo. App. 2005) (a probate
court’s factual findings supported by the record are invulnerable on
appeal). Accordingly, the probate court did not abuse its discretion
in approving Goodyear’s compensation request.
VI. Contribution Liability
¶ 77
David Beren next contends the probate court erred by
approving the distribution plan because, allegedly contrary to a
prior settlement, his $1,000,000 bequest was subject to
contribution for liabilities including but not limited to the equitable
41
adjustment to the elective share. We decline to review this
contention because it was not sufficiently brought to the probate
court’s attention.7
¶ 78
Goodyear’s final plan of distribution contained a schedule
whereby each of the decedent’s $1,000,000 bequests to his
children, including David Beren, was subject to contribution to
fund the elective share. David Beren made numerous arguments in
his objections to the final petition, but he did not assert that the
plan improperly subjected his bequest to contribution.
¶ 79
On appeal, to show that the issue was preserved, David Beren
relies on a footnote in his objections where he “expressly reserv[ed]
all objections and challenges that he ha[d] made.” He then points
to a single sentence in a pro se filing two years earlier, where he
argued:
[I]t must also be remembered that in . . . return for
admission of the will into probate and various other
benefits, the spouse who elected against the will agreed
that the sons would receive their full million dollar
We reject Goodyear’s argument that David Beren invited this error
because we conclude that the trial brief on which Goodyear relies is
ambiguous. On the one hand, David Beren’s exhibit shows
contribution liability for the bequests. On the other hand, the brief
also argues that Mrs. Beren waived her right to contribution in the
settlement.
7
42
devises, and consequently, the spouse cannot seek
contribution against such devises.
¶ 80
The voluminous filings in this case over the course of fourteen
years made it incumbent on David Beren to raise any specific
objections he had to the final distribution plan. A vague reference
in a footnote to prior objections was not sufficient to alert the
probate court to his prior settlement argument. See Bloom v. Nat’l
Collegiate Athletic Ass’n, 93 P.3d 621, 623 (Colo. App. 2004)
(reference to a claim in a footnote “insufficient to warrant review”).8
VII. Administrative Expenses
¶ 81
David Beren next contends the probate court erred in
approving the distribution plan because it did not properly allocate
estate tax to the elective share, nor did it treat certain expenses as
administrative expenses under section 15-11-202(2)(a), which are
deducted from the augmented estate before calculating the elective
share. We discern no error.
See also SmithKline Beecham Corp. v. Apotex Corp., 439 F.3d
1312, 1320 (Fed. Cir. 2006) (“arguments raised in footnotes are not
preserved”); Wagner v. Georgetown Univ. Med. Ctr., 768 A.2d 546,
554 n.9 (D.C. 2001) (“The bare mention of [a] claim in a footnote . . .
does not suffice to preserve the argument for our consideration.”).
8
43
A. Estate Taxes
The probate court instructed Goodyear that:
No portion of estate tax is to be allocated to the elective
share. The entire estate tax is properly allocated to the
residuary estate and to the non-probate transfers
included in the gross estate that generated estate tax . . .
.
¶ 82
David Beren argues that the court should have subtracted the
estate taxes from the augmented estate before calculating the
elective share. Although somewhat unclear, his argument seems to
be that estate taxes are administrative expenses. This argument is
unpersuasive because the practical effect of treating estate taxes as
administrative expenses and deducting them from the augmented
estate, before calculating the elective share, is to apportion those
taxes to the elective share. For the following reasons, such a result
is contrary to the Code.
¶ 83
Section 15-12-916, C.R.S. 2012, governs the “Apportionment
of estate taxes.” It provides that in
instances involving [an] . . . election, if the decedent’s will
or other dispositive instrument directs a method of
apportionment of tax different from the method described
in this code, the apportionment of tax to the . . .
surviving spouse shall be in accordance with the method
described in this code, and the apportionment of tax to
the remaining persons interested in the estate shall be in
44
accordance with the method described in the will or other
dispositive instrument.
§ 15-12-916(2) (emphasis added). The Code also provides that “[i]n
making an apportionment, allowances shall be made for any
exemptions granted, any classification made of persons interested
in the estate, and for any deductions and credits allowed by the law
imposing the tax.” § 15-12-916(5)(a) (emphasis added). Further,
“[a]ny exemption or deduction allowed by reason of the relationship
of any person to the decedent . . . inures to the benefit of the person
bearing such relationship . . . .” § 15-12-916(5)(b) (emphasis added).
¶ 84
Here, Mrs. Beren’s elective share was shown as a marital
deduction on Schedule M of IRS Form 706 Estate Tax Return. See
26 U.S.C. § 2056(a) (“the value of the taxable estate shall . . . be
determined by deducting from the value of the gross estate an
amount equal to the value of any interest in property which passes
or has passed from the decedent to his surviving spouse”). David
Beren does not contest deductibility of the elective share for estate
tax purposes. Thus, because this deduction “inures to the benefit”
of Mrs. Beren under section 15-12-916(5)(b), Goodyear properly
calculated the elective share before apportioning the estate tax to
45
the remainder of the estate. See In re Estate of Shapiro, 380 N.W.2d
796, 801 n.1 (Minn. 1986) (noting that “a majority of state supreme
courts have concluded that the share of a surviving spouse should
be calculated before federal estate taxes are computed”) (collecting
cases); Bogert, The Law Of Trusts And Trustees § 286.5 (2d ed.
1993) (“Often the courts have held that the marital gift, or the
statutory share elected against the will by the surviving spouse, is
not to be reduced by payment of taxes, because the gift constituted
a deduction and did not contribute to tax liability.” (footnotes
omitted)).
¶ 85
We reject David Beren’s argument that notwithstanding this
majority rule, the General Assembly intended to apportion estate
taxes to the elective share because it eliminated the following
language from former section 15-11-207(3)(b), entitled
“Determination of elective share -- liability for contribution”:
For the purposes of this computation, no federal estate or
state tax shall be subtracted from the value of the
augmented estate. All such taxes shall be apportioned as
provided in section 15-12-916(2).
This section set forth the computations for determining a surviving
spouse’s fractional interest in the augmented estate. However, the
46
entire section was repealed in 1994 -- not just the language quoted
above -- when the General Assembly changed the elective share
from a fractional interest to a pecuniary amount, as more fully
discussed in Part III above. See generally Highlights of the Uniform
Probate Code, Article II, 23 Colo. Law. 2279 (Oct. 1994). Thus, the
repeal of this section does not allow personal representatives to
deduct estate taxes from the value of the augmented estate before
calculating the elective share, which would be contrary to section
15-12-916(2).
¶ 86
Further, when former section 15-11-207 was repealed, section
15-12-916(2) was in effect, but it was not revised. Therefore, it
continued to control the apportionment of estate taxes under the
Code. See Lamm v. Barber, 192 Colo. 511, 518, 565 P.2d 538, 543
(1977) (explaining that an amendment “must be read, not in a
vacuum, but in the context of the entire preexisting statutory . . .
scheme”), disapproved of in part by Bd. of Cnty. Comm’rs v. FiftyFirst Gen. Assemb., 198 Colo. 302, 307-08, 599 P.2d 887, 891
(1979); cf. People v. Trujillo, 251 P.3d 477, 481 (Colo. App. 2010)
(“provisions introduced by an amendatory act should be read
together with provisions of the original section that were . . . left
47
unchanged” (quoting 1A Norman J. Singer, Sutherland Statutory
Construction § 22:34 (6th ed. 2000))).
¶ 87
In addition, the structure of the Code shows that
apportionment under section 15-12-916(2) is unrelated to
identifying and allocating general administrative expenses for
purposes of the augmented estate, which are addressed in section
15-11-202. But only section 15-12-916(2) affords specific
treatment to “Apportionment of estate taxes.” Therefore, section 1512-916 negates any suggestion of treating estate taxes as a general
administrative expense. See Crandall v. City & Cnty. of Denver, 238
P.3d 659, 662 n.2 (Colo. 2010) (holding a specific statutory
provision takes precedence over a more general one).
¶ 88
Accordingly, the probate court properly concluded that estate
taxes were not allocable, directly or indirectly, to Mrs. Beren’s
elective share.
B. Allocation of Goodyear’s Compensation and Berenergy’s
Overhead Expenses to the Estate
¶ 89
The probate court ruled:
All administrative expenses that [Goodyear] determines
are properly allocable to estate administration rather
than to an entity owned by the estate, whether occurring
48
outside of the control of the surviving spouse or
reasonable and necessary to the administration of any
estate of this size and complexity, shall be included in
the computation of administrative expenses.
It directed Goodyear that “allocation of administrative costs as
between the estate and entities owned by the estate should be made
on a consistent and defined basis.”
¶ 90
In approving Goodyear’s compensation request, the probate
court found:
[Goodyear’s] proposed allocation of his compensation
between the estate and the estate-owned entities is
reasonable . . . . Accordingly, the Court hereby approves
the . . . allocation of 38 percent of the additional final
compensation approved by this Order to the estateowned entities; [and] approves allocation of the remaining
62 percent of the approved additional final compensation
to the estate as a direct administrative expense . . . .
The court also approved Goodyear’s allocation of 2.3 percent of
Berenergy’s general overhead expenses to the estate as
administrative expenses.
¶ 91
David Beren argues that all of Goodyear’s compensation
should have been classified as an administrative expense because
his management duties for Berenergy were “inextricably
intertwined” with administration of the estate. David Beren raised
49
this argument in his objection to Goodyear’s petition for additional
compensation:9
David I. Beren further objects to the allocation that
[Goodyear] has made of a significant portion of his total
requested compensation to Berenergy such that Miriam
Beren, improperly, would not bear her share of such
portion allocated to Berenergy.
However, he presented no expert testimony or other evidence that
management and estate administration were so intertwined.
¶ 92
David Beren also argues that all of Berenergy’s overhead
expenses should have been classified as administrative expenses
because Berenergy is an estate-owned entity and such expenses
benefited the estate. Again, however, he did not present evidence of
any specific expense allocated to Berenergy that was so closely
related to estate administration it should have been allocated to the
estate.
To the extent David Beren also argues “it was improper for the
court to make this allocation” because the petition only concerned
Goodyear’s compensation as a personal representative and not as a
manager of Berenergy, we decline to address arguments raised for
the first time in this court. See Estate of Stevenson v. Hollywood
Bar & Cafe, Inc., 832 P.2d 718, 721 n.5 (Colo. 1992).
9
50
¶ 93
Reviewing a probate court’s determination of administrative
expenses for an abuse of discretion, see Estate of Smith, 718 P.2d at
1074, we discern no such abuse.
¶ 94
The Code does not define “administrative expenses.” In
general, such expenses are a necessary result of administering the
estate. Compare id. at 1073 (attorney and accounting fees incurred
in defending claim to an elective share were “personal costs” and
not “costs of the estate administration”), with In re Estate of Painter,
671 P.2d 1331, 1334 (Colo. App. 1983) (fees collectable for expenses
in estate litigation must be related to services incurred in an
attempt to benefit the estate); 26 C.F.R. § 20.2053-3 (“The amounts
deductible from a decedent’s gross estate as ‘administration
expenses’ . . . are limited to such expenses as are actually and
necessarily, incurred in the administration of the decedent’s estate .
. . .”).
¶ 95
David Beren relies on three out-of-state cases: In re Peabody’s
Estate, 260 N.W. 444 (Wis. 1935) (discussing the amount of
compensation for trustee who manages estate business); Stone v.
Baldwin, 109 N.E.2d 244 (Ill. App. Ct. 1952) (trustee must account
for management compensation to the trust); and In re Witkind’s
51
Estate, 167 Misc. 885, 4 N.Y.S. 933 (N.Y. Sur. Ct. 1938) (fiduciary
must account not only for estate transactions but also for the
operations of corporation and related fiduciary acts).
¶ 96
These cases address compensation of a fiduciary who also
manages a business owned by an estate or a trust, but none of
them holds that all such expenses must be deemed administrative
expenses. Nor do any of them provide criteria for differentiating
between a fiduciary’s actions in estate or trust administration and
the fiduciary’s day-to-day responsibilities managing trust or estateowned business.
¶ 97
Such a broad holding would be difficult to reconcile with the
rationales in cases such as Estate of Smith and Estate of Painter
because it would not allow a probate court to exercise informed
discretion in allocating administration expenses. Estate of Smith,
718 P.2d at 1074. Rather, consistent with Estate of Smith and
Estate of Painter, in determining whether a management expense is
administrative, a court should look to the nexus between the
expense and administration of the estate on a case-by-case basis.
¶ 98
Here, this approach would avoid unfairness to Mrs. Beren.
Our rejection of the equitable adjustment means that she will not
52
benefit from Goodyear’s management of Berenergy while the estate
remained open. However, under David Beren’s proposed one
hundred percent allocation, her elective share would be reduced by
management expenses that resulted in a greater value for
distribution to the residuary beneficiaries. Further, David Beren
has not shown how all such expenses were related to “the collection
of assets, payment of debts, and distribution of property.” Lindberg
v. United States, 164 F.3d 1312, 1321 (10th Cir. 1999) (payment
made to descendants to settle tort claims was not an administrative
expense because it was not “incurred in administering the estate”).
¶ 99
Therefore, the probate court did not abuse its discretion in
holding that some but not all of Goodyear’s management expenses
involved “a direct administrative expense” of the estate, but most
overhead expenses were not incurred in the estate’s administration.
¶ 100 Nor are we persuaded otherwise by David Beren’s argument
that allocation of 2.3 percent of Berenergy’s overhead expenses to
estate administration was unreasonable given the 62 percent
allocation of Goodyear’s compensation to the estate. As shown in
Goodyear’s exhibit setting forth the allocation, few of the general
overhead expenses of Berenergy were incurred for estate
53
administration. And David Beren offered no specific contrary
evidence.
¶ 101 Accordingly, the probate court did not err in approving
Goodyear’s allocation of overhead expenses and his compensation
between the estate and Berenergy.
C. Berenergy Litigation Expenses
¶ 102 The probate court declined to treat expenses in connection
with separate litigation between Berenergy and the four brothers’
corporations as an administrative expense of the estate. It found:
[T]he estate was not a party to the litigation, Berenergy
was the proper plaintiff, and accordingly, the expenses
were properly borne by Berenergy, rather than by the
estate.
¶ 103 David Beren argues that the probate court’s ruling was an
abuse of discretion because the litigation benefited the estate and
assisted in administration. Again, we discern no abuse of
discretion.
¶ 104 The probate court found that Goodyear had initiated the
litigation to clarify issues regarding Berenergy’s “ownership, value,
debt and management.” As summarized in Zab, Inc. v. Berenergy
Corp., 136 P.3d 252, 254 (Colo. 2006):
54
Sheldon Beren died in 1996. At that time, his estate
obtained his stock in Berenergy and operational control
over the corporation. A dispute arose between Berenergy
and the Beren Sons’ Corporations as to whether
Berenergy had a contractual obligation to continue
charging the [reduced] $150.00 per well per month
overhead rate. . . .
To clarify its obligations, Berenergy sought a court
declaration of (1) the legal relationship between
Berenergy and the Beren Sons’ Corporations and (2)
whether Berenergy had a contractual obligation to
continue charging Petitioners the $150.00 fixed rate.
Berenergy also sought to recover the amount
undercharged since Sheldon Beren’s death.
Thus, although the litigation was connected to the estate because
the estate obtained decedent’s stock in and had operational control
of Berenergy, the litigation concerned the contractual obligations of
Berenergy, not the administration of the estate.
¶ 105 Accordingly, the probate court did not abuse its discretion in
declining to treat the litigation expenses as administrative.
VIII. Partnership Debts
¶ 106 David Beren next contends the probate court erred in denying
the Petition for Order Compelling Personal Representative to Collect
Debts that CJD Investors Ltd. Partnership (CJD) allegedly owed to
the estate for advances made by decedent to CJD, some of which
55
had been distributed to Miriam’s children, who were its limited
partners. We discern no error.
¶ 107 The probate court’s factual determinations are reviewed for
clear error, meaning a complete lack of support in the record.
Levine v. Katz, 192 P.3d 1008, 1012 (Colo. App. 2006). Its legal
determinations are reviewed de novo. Id.
¶ 108 In 1991, decedent, through Berenergy, as general partner,
along with Miriam’s children, formed CJD. Berenergy held a 1
percent interest and each of Miriam’s children held a 33 percent
interest. Immediately after the certificate of limited partnership had
been filed, decedent caused a royalty interest to be assigned to CJD.
Between mid-1992 and early 1993, decedent contributed a total of
$3 million to CJD. The limited partners received significant cash
distributions from CJD. With record support, the probate court
found that these transfers were “gifts from a generous father to his
children,” and concluded that the transfers could not “comprise
part of Berenergy or the estate on the date of Sheldon Beren’s
death.” David Beren does not dispute this finding.
¶ 109 In mid-1993, the attorney who had drafted the initial CJD
limited partnership agreement, Doug Pluss, prepared an amended
56
agreement. The amended agreement, which bore an “effective date”
of July 1, 1992 -- before decedent’s contributions -- provided that
all of the distributions would be repaid and decedent would receive
an aggregate seven percent rate of return. Decedent signed his own
name and the names of the limited partners to the amended
agreement. With record support, the probate court found that the
repayment obligation with a guaranteed rate of return in the
amended agreement had been created to avoid a contemplated gift
tax problem, and in any event, “had no economic substance but
was intended merely to attract favorable tax treatment.” David
Beren does not challenge this finding either.
¶ 110 Instead, David Beren argues that CJD is liable to repay the
contributions plus the guaranteed rate of return because the
limited partners ratified the amended agreement, which they had
not signed, primarily through receiving distributions. We reject this
argument, for two reasons.
¶ 111 First, once a donor has completed a gift by relinquishing
possession and control, the gift “is beyond the power of the donor to
recall it.” Johnson v. Hilliard, 113 Colo. 548, 554, 160 P.2d 386,
389 (1945); see also In re Estate of Heyn, 47 P.3d 724, 727 (Colo.
57
App. 2002) (citing Johnson). Thus, because decedent’s actions
concerning the amended agreement were unilateral, those actions
could not create an obligation on CJD or the limited partners to
return the gifted property to decedent.
¶ 112 Second, assuming, without deciding, that the limited partners’
alleged ratification of the amended agreement could constitute their
consent to decedent resuming control over the gifted property, the
court found that the limited partners “did not have full knowledge
of all the material facts until pre-trial in this matter and when the
facts were known to them, they promptly repudiated this
amendment.” Because David Beren recognizes this standard as
controlling, we, like the probate court, decline to address sufficiency
of the evidence of ratification. See, e.g., Hauser v. Rose Health Care
Sys., 857 P.2d 524, 529 (Colo. App. 1993); Adams v. Paine, Webber,
Jackson & Curtis, Inc., 686 P.2d 797, 801 (Colo. App. 1983)
(“Implied ratification may take place only when the principal has
full knowledge of all circumstances surrounding the transaction.”),
aff’d, 718 P.2d 508 (Colo. 1986).
¶ 113 In finding lack of full knowledge, the court credited the
testimony of Morris Werner, Mrs. Beren’s brother and her counsel
58
during a portion of the proceedings, that he was “ignorant” of the
facts surrounding the amended agreement. This finding defeats
David Beren’s reliance on correspondence from Werner, copied to
the limited partners, which David Beren asserts should have put
them on at least inquiry notice of the amended agreement and its
repayment provisions, before their alleged acts of ratification. The
court also credited testimony that CJD tax returns, on which David
Beren similarly relies for notice to the limited partners, were
prepared by Berenergy, at Goodyear’s direction, and overnighted to
the limited partners, in a package including several other tax
returns, “with ‘sign here’ stickers placed on the documents.” These
findings are sufficient to support the conclusion that the limited
partners lacked full knowledge of the amended agreement when
they received the distributions that supposedly evinced ratification.
¶ 114 “Evaluation of the credibility of witnesses, including expert
witnesses, is a matter solely within the fact finding province of the
trial court, and we will not reweigh testimony or reevaluate evidence
on appeal.” Estate of Romero, 126 P.3d at 231; see also In re Estate
of Schumacher, 253 P.3d 1280, 1287 (Colo. App. 2011). And while
here the evidence of knowledge, actual or constructive based on
59
inquiry notice, was disputed, an appellate court may not disturb a
trial court’s factual findings based on such evidence. See, e.g.,
Public Serv. Co. v. Blue River Irrigation Co., 829 P.2d 1276, 1280
(Colo. 1992).
¶ 115 Accordingly, the probate court did not err in denying the
Petition for Order Compelling Personal Representative to Collect
Debts.
IX. Cross-Appeal
A. Four Brothers’ Distributions
¶ 116 On cross-appeal, Miriam’s children first contend the probate
court erred by failing to offset against the four brothers’
distributions the value of (1) transfers made by Berenergy to
corporations owned by the brothers that were booked by Berenergy
as loans, but which the probate court determined were gifts; and (2)
oil and gas interests (Pleasant Bluell leases) that were transferred to
or for the benefit of the brothers, which the probate court found to
have been a proper compromise by the estate. We discern no error.
1. Loans to the Four Brothers
¶ 117 Transfers of property between parents and children are
presumed to be gifts until the presumption is clearly and
60
unequivocally rebutted. Mancuso v. United Bank, 818 P.2d 732,
739 (Colo. 1991).
¶ 118 Whether a rebuttable presumption has been overcome, and
whether the requirements of a gift have been met, are questions of
fact, and the trial court’s determinations, if supported by evidence
in the record, are binding on review. See Love v. Olson, 645 P.2d
861, 862-63 (Colo. App. 1982) (gift); Duston v. Duston, 31 Colo. App.
147, 149-50, 498 P.2d 1174, 1175 (1972) (presumptions).
¶ 119 Here, the probate court explained:
[B]eginning in 1985, the decedent gave . . . each of the
four [brothers] a ten percent working interest (or the
money to purchase the working interest) in certain oil
and gas properties owned or acquired by Berenergy. The
decedent advanced the four [brothers] or their respective
corporations at least $10 million during this period.
The court found that these transfers had been made by decedent
and “Berenergy was a mere instrumentality of the decedent for the
accomplishment of his transfers . . . .” It concluded that the
transfers:
[L]acked the requisite “promise to repay” . . . necessary to
characterize them as enforceable contracts, and overall
the transactions lacked sufficient substance to overcome
the presumption that they were gratuitous transfers from
a generous father to his children.
61
¶ 120 The record supports the probate court’s findings that “[e]xcept
for the accounting entries on the Berenergy books, there was no
documentation of the decedent’s transfer . . . as ‘loans.’” The record
also supports the finding that “[t]here were no promissory notes or
other evidence of the indebtedness,” such as “appraisals made of
any of the properties that could have secured the loans.”
¶ 121 This evidence supports the probate court’s conclusion that
decedent intended the loans as gifts. Because the sufficiency,
probative effect, and weight of the evidence, and the inferences and
conclusions drawn from it, were the province of the probate court,
we cannot disturb its determination here. See Estate of Romero,
126 P.3d at 231.
¶ 122 The four brothers’ later acknowledgment of a limited obligation
to repay based on production revenues to be derived from certain
specified properties -- which Miriam’s children assert shows a
nonrecourse loan -- does not require a different result. Some
evidence described decedent’s evolving concern that income derived
from the four brothers’ producing properties, apparently acquired or
developed with the funds decedent had transferred, should have
62
motivated them to reimburse him. Initially, they disagreed, but
eventually they accepted this limited reimbursement obligation.
¶ 123 If this obligation had been documented contemporaneously
with the advances, it would have suggested nonrecourse loans
rather than gifts. However, done retrospectively, the obligation only
shows that the gift finding was disputable, not that the court erred
in finding donative intent. See Johnson, 113 Colo. at 554, 160 P.2d
at 389 (once a donor has completed a gift it cannot be recalled).10
2. Pleasant Bluell Leases
¶ 124 Personal representatives are vested with broad powers to carry
out their duties under the Code. Fry & Co. v. Dist. Court, 653 P.2d
1135, 1137 (Colo. 1982). Those powers include the duty “to settle
and distribute the estate of the decedent in accordance with the
terms of any probated and effective will and [the Code], and as
expeditiously and efficiently as is consistent with the best interests
of the estate.” § 15-12-703(1), C.R.S. 2012.
Eventually, Berenergy wrote off of the loans, for reasons that
were not developed below. Regardless, Miriam’s children do not
challenge this action, which would be a matter of business
judgment.
10
63
¶ 125 To carry out such a duty, the personal representative “has the
power to perform, without court authorization, every act reasonably
necessary to administer the estate or trust, including . . . [t]o pay,
contest, or otherwise settle claims by or against the estate . . . by
compromise . . . .” § 15-1-804(2)(r), C.R.S. 2012.
¶ 126 Here, during estate administration, Goodyear caused
Berenergy to transfer its interests in the Pleasant Bluell leases to
the four brothers or their companies. The probate court found that
the interests “were transferred in the nature of a compromise.” It
explained that Goodyear’s decision “was not tainted with favoritism
towards the four [brothers].” Rather, he made the transfer because:
the lack of cooperation of the four [brothers] was an
impediment to the administration of the estate’s assets
and considering the cost in time and money of other
avenues of resolution . . . .
¶ 127 The court found credible Goodyear’s testimony “that this was
an expedient and fair resolution of a complex situation.” Based on
these findings and record support for them, we cannot say that this
compromise exceeded Goodyear’s discretion as personal
representative.
64
¶ 128 While Miriam’s children acknowledge his discretion, they
argue that the Pleasant Bluell transfer was improper because (1)
Goodyear’s dual roles as president of Berenergy and personal
representative of the estate created a conflict of interest; and (2)
Goodyear made the transfer under duress from the four brothers.
However, before the probate court, Miriam’s children argued only
that testimony regarding the compromise was not credible and the
transfer was made without any consideration or compromise by the
four brothers. Because they did not argue either duress or conflict
of interest below, we will not consider those arguments. See Estate
of Stevenson v. Hollywood Bar & Cafe, 832 P.2d 718, 721 n.5 (Colo.
1992) (declining to address argument not made before probate
court). And because the record supports the finding that the
compromise was fair and not tainted with favoritism, it shows that
Goodyear acted consistent with his fiduciary duties to both the
estate and Berenergy.
¶ 129 Accordingly, the probate court did not err by failing to offset
the four brothers’ distributions.
65
B. Disputed Leases
¶ 130 Finally, Miriam’s children contend that because a “Conveyance
and Assignment” recorded in 1991 unambiguously shows decedent
conveyed all of Berenergy’s interest in the Moyer A and B leases
(disputed leases) to CJD, the probate court erred by allowing
Goodyear to determine whether decedent had intended to convey
CJD only a royalty interest, and if so, to reduce their distribution by
the difference in value between the interest that was conveyed and
a royalty interest. We conclude that because the court did not find
ambiguity in the conveyance, this ruling improperly delegated the
court’s judicial power to Goodyear.
¶ 131 Section 15-12-703(1) provides that a personal representative’s
power is conferred “by this code, the terms of the will, if any, and
any order in proceedings to which he is a party . . . .” (Emphasis
added.) Under section 15-1-805, C.R.S. 2012,
The court having jurisdiction of the estate or trust may
authorize the fiduciary to exercise any power not
otherwise held by the fiduciary which, in the judgment of
the court, is necessary for the proper collection, care,
administration, and protection of the estate or the trust.
¶ 132 Here, a dispute arose during administration as to whether
decedent had transferred to CJD only a royalty interest in
66
production from the disputed leases. Miriam’s children argued that
decedent had transferred a working interest and moved for an order
“that any and all property and sums attributable to those interests
be transferred to them.” They relied on the conveyance, which
unambiguously transferred to CJD “[w]ithout limitation . . . all
other rights, titles and interests of whatever kind or character, of
[decedent] in and to the oil, gas and other minerals in and under
that may be produced from lands.”
¶ 133 The probate court did not find the conveyance ambiguous.
Nevertheless, it ordered that:
[Goodyear] has discretion to both determine whether the
decedent intended to convey to [CJD] only the mineral interest
owned in the lands encompassed by the Moyer A and B leases
or whether he intended to convey the working interest in the
property, if such a determination can be made based on the
information available to [Goodyear].
The court explained that Goodyear was “in the best position to
make this factual determination.”
¶ 134 Following the court’s order, Goodyear concluded that decedent
had “only intended to transfer . . . the royalty interest held on these
leases,” and that “[t]he transfer of the working interests was made
in error and should be reassigned . . . .” Ultimately, Goodyear
67
determined that CJD should retain the disputed leases, but the
distributions to Miriam’s children, as 99 percent owners of CJD,
would be set off for the difference between the value of the working
interest conveyed and that of the royalty interest, which he
concluded decedent had intended to convey.
¶ 135 We reject the argument of David Beren and Goodyear that
Goodyear’s decision was within his broad discretion to effectuate a
compromise. Unlike the compromise concerning the Pleasant Bluell
leases -- from which both the four brothers and Berenergy received
a benefit -- Goodyear’s resolution of the disputed leases only
benefitted Berenergy. CJD received nothing.
¶ 136 Further, neither section 15-1-804 nor 15-12-703 empowers a
personal representative to resolve such disputes after they have
been raised in the probate court. Nor has any case cited section
15-1-805 as authorizing such a delegation of judicial powers.
¶ 137 Where, as here, a recorded conveyance is unambiguous, the
court must enforce its terms unless the instrument is voidable or
subject to reformation on grounds such as mistake. See O’Brien v.
Village Land Co., 794 P.2d 246, 249 (Colo. 1990); see also Boyer v.
Karakehian, 915 P.2d 1295, 1300 (Colo. 1996). Thus, when
68
Miriam’s children asked the probate court to resolve this dispute,
Goodyear’s discretion was limited to deciding whether the estate
would accede or seek reformation of the conveyance for mistake. If
he chose the latter, the court was obligated to take evidence and
either enforce the conveyance as written or decide that it should be
reformed.
¶ 138 Instead, the court empowered Goodyear to decide the mistake
issue and then to implement that decision by offsetting the
distribution to Miriam’s children. By treating his action as an
exercise of discretion rather than itself deciding the mistake issue,
the court effectively deprived Miriam’s children of the interest in the
disputed leases that had been conveyed to CJD without judicial
process. See generally Sapero v. State Bd. of Med. Exam’rs, 90 Colo.
568, 577, 11 P.2d 555, 558 (1932) (“[C]ourts cannot delegate their
judicial duties.”).
¶ 139 Accordingly, this portion of the order approving the plan of
distribution must be set aside. On remand, Goodyear (or his
successor) may exercise discretion under section 15-1-805 to seek
reformation of the conveyance for mistake. In that event, the
probate court shall allow Miriam’s children, Goodyear (or his
69
successor), and David Beren to present evidence on the
conveyance.11 Then the court shall decide whether the conveyance
is subject to reformation because decedent mistakenly transferred a
working interest to CJD. If the court so concludes, it shall again
approve that portion of the plan. If it does not, then the plan must
be revised to restore the offset to Miriam’s children.
X. Conclusion
¶ 140 The probate court’s order augmenting the elective share in the
amount of $24,501,457 is reversed. This sum, plus interest at the
statutory rate from the date of distribution to Mrs. Beren, shall be
returned to the estate and distributed to the residuary beneficiaries
according to the will.
¶ 141 The probate court’s order approving the final plan of
distribution is vacated in part, as to the issuance of Class A and
Class B shares in Berenergy, and as to the reduction of the
distribution to Miriam’s children based on the value of the working
interest in the Moyer A and B leases. The probate court shall
conduct further proceedings on these two aspects of the plan in
Zev Beren, Jonathan Beren, and Daniel Beren do not dispute this
issue in their Answer/Reply brief.
11
70
accordance with this opinion. In all other respects, all of the
probate court’s orders are affirmed.
XI. Petitions for Rehearing
¶ 142 All petitions for rehearing are denied. In response to the
petitions, ¶ 61 above has been modified, and the opinion is further
modified as follows.
¶ 143 In reversing the probate court’s order augmenting the elective
share in the amount of $24,501,457, we ordered Mrs. Beren to
repay this sum “plus interest at the statutory rate from the date of
distribution.” In her petition for rehearing, Mrs. Beren contends
that her obligation to repay should be reduced by the taxes that she
had paid on this amount, should not be subject to interest, and
remains subject to the same equitable considerations that she
argued support the probate court’s equitable adjustment.
A. Taxes
¶ 144 Mrs. Beren cites no authority, nor have we found any in
Colorado, holding that a party ordered to repay a judgment is
entitled to a credit for taxes. We decline to adopt this broad
principle, which could lead to collateral inquiries, and expert
testimony, such as whether Mrs. Beren should have sought to defer
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payment of the tax pending final resolution of the proceeding or
could have disputed some of the taxes she instead paid. Cf. Hoyal
v. Pioneer Sand Co., Inc., 188 P.3d 716, 720 (Colo. 2008) (“we
decline to follow decisions that allow the consideration of potential
taxes in calculating economic damages”); Rego Co. v. McKown-Katy,
801 P.2d 536, 539 (Colo. 1990) (holding improper giving an
instruction on nontaxability of damages in a personal injury case).
¶ 145 Nevertheless, on remand, the probate court may, in its
discretion, hear evidence concerning the amount of taxes paid by
Mrs. Beren on the equitable adjustment, the steps she has taken or
will take to seek a refund, and the estimated time to obtain a
decision from the taxing authorities. Based on that evidence, the
court may, in its discretion, stay Mrs. Beren’s repayment obligation,
to the extent of the taxes she has paid, for a reasonable time.
However, the court may not reduce her total obligation, if she is
unable to obtain a refund within a reasonable time.
B. Interest
¶ 146 The parties cite no Colorado authority, nor have we found any,
directly addressing the obligation of a judgment creditor to pay
interest on sums received under a judgment, where the judgment
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has been reversed. The responses to Mrs. Beren’s petition rely on
section 5-12-106(1)(b), C.R.S. 2012, C.A.R. 37, and the Restatement
(First) of Restitution § 74. We conclude that Mrs. Beren’s obligation
to pay interest on the amount of the equitable adjustment,
including the appropriate interest rate, shall be determined by the
probate court on remand, based on equitable considerations.
¶ 147 Mrs. Beren first argues that no party who challenged the
equitable adjustment asked that repayment include interest. She is
correct. However, she cites no Colorado authority holding lack of
such a request to be preclusive. To the contrary, in Town of
Breckenridge v. Golforce, Inc., 851 P.2d 214, 217 (Colo. App. 1992),
the division held that “if a court finds that a claimant is entitled to
statutory interest under § 5–12–102, the court should award it,
even in the absence of a prayer for such relief.”
¶ 148 While noting that some statutes, such as section 13-21-101,
C.R.S. 2012, “mandate a request in the pleadings for interest,” the
division relied on the broad language in C.R.C.P. 54(c) that “every
final judgment shall grant the relief to which the party in whose
favor it is rendered is entitled, even if the party has not demanded
such relief in his pleadings.” See Town of Breckenridge, 851 P.2d at
73
217. The division also cited federal authority under the comparable
federal rule awarding interest.12 Id.; see also Karg v. Mitchek, 983
P.2d 21, 27 (Colo. App. 1998).
¶ 149 The question before us is more nuanced because, unlike in
Town of Breckenridge (and as explained below), here the basis for
interest is restitution. Nevertheless, we find the analysis in that
case equally persuasive and follow it.
¶ 150 Mrs. Beren next argues that interest in Colorado is “a creature
of statute,” see, e.g., Farmers Reservoir & Irrigation Co. v. City of
Golden, 113 P.3d 119, 132 (Colo. 2005); the general interest
statute, section 5-12-102 does not apply for lack of any “wrongful
withholding”; and C.A.R. 37 is limited to “whatever interest is
allowed by law.” Because the responses rely on section 5-12106(1)(b), not on section 5-12-102, we need not address wrongful
withholding.
¶ 151 Section 5-12-106(1)(b), cited in the responses, provides:
Newburger, Loeb & Co. v. Gross, 611 F.2d 423 (2d Cir. 1979)
(award of prejudgment interest proper even if party had not asked
for such relief at any time in trial or appellate court); Roth v.
Fabrikant Bros., 175 F.2d 665 (2d Cir. 1949); see generally Annot.,
16 A.L.R. Fed. 748 (1973).
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If a judgment for money in a civil case is appealed by a
judgment debtor and the judgment is modified or
reversed with a direction that a judgment for money be
entered in the trial court, interest, as set out in
subsections (2) and (3) of this section, shall be payable
from the date a judgment was first entered in the trial
court until the judgment is satisfied and shall include
compounding of interest annually. This interest shall be
payable on the amount of the final judgment.
The terms of this section do not apply here because a judgment
debtor has not appealed and we have not directed that a money
judgment be entered upon remand. The latter reason also
precludes reliance on C.A.R. 37 (“If a judgment is modified or
reversed with a direction that a judgment for money be entered in
the trial court, the mandate shall contain instructions with respect
to allowance of interest.”).
¶ 152 Restatement (First) of Restitution § 74 provides:
A person who has conferred a benefit upon another in
compliance with a judgment, or whose property has been
taken thereunder, is entitled to restitution if the
judgment is reversed or set aside, unless restitution
would be inequitable . . . .
According to Comment d, “upon reversal of the judgment the payor
is entitled to receive from the creditor the mount thus paid with
interest.”
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¶ 153 In Tuscany, LLC v. Western States Excavating Pipe & Boring,
LLC, 128 P.3d 274, 281 (Colo. App. 2005), a judgment debtor
sought to recover the fair market value of its property, sold at a
sheriff’s sale, from the judgment creditor upon reversal of the
underlying judgment. Citing section 74, the division concluded that
the debtor could recover only what “was paid as proceeds from the
sheriff's sale, plus statutory interest.”13 Id. at 281; see also Berger
v. Dixon & Snow, P.C., 868 P.2d 1149, 1153 (Colo. App. 1993) (“a
person who has paid money to another in compliance with a
judgment which is reversed or set aside is entitled to restitution”);
see generally Arkadelphia Milling Co. v. St. Louis Southwestern Ry.
Co., 249 U.S. 134, 145–46 (1919) (“a party against whom an
erroneous judgment or decree has been carried into effect is
entitled, in the event of a reversal, to be restored by his adversary to
that which he has lost thereby”).
¶ 154 Notwithstanding that interest is a “creature of statute”
language in several Colorado cases, we find the division’s
application of section 74 in Tuscany LLC persuasive and apply it
here. Awarding interest under restitution principles would restore
13
The opinion does not identify the interest statute.
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the estate to the position it would have been absent the erroneous
equitable adjustment. See Arkadelphia Milling Co., 249 U.S. at
145–46 (restitution is based on the principle “that a party against
whom an erroneous judgment or decree has been carried into effect
is entitled, in the event of a reversal, to be restored by his adversary
to that which he has lost thereby”); see generally Berger, 868 P.2d
at 1153 (“a person who has paid money to another in compliance
with a judgment which is reversed or set aside is entitled to
restitution”). Nevertheless, we must address Mrs. Beren’s
alternative argument that any interest obligation is subject to
equitable considerations, which should be considered on remand.
¶ 155 Section 74 provides for restitution “unless restitution would be
inequitable.” Although the opinion in Tuscany, LLC does not
mention equity, the division’s explanation that judgment creditors
should not “risk[] liability for damages exceeding return of the
execution sale proceeds, which rarely constitute fair market value,”
reflects the equities. 128 P.3d at 281. Other courts have
emphasized the equitable nature of restitution. See, e.g., Munoz v.
MacMillan, 195 Cal. App. 4th 648, 657-58, 124 Cal. Rptr. 3d 664,
672 (2011); Hitchcock v. Delaney, 86 P.3d 73, 75 (Or. Ct. App.
77
2004); Ehsani v. McCullough Family Partnership, 159 P.3d 407, 40910 (Wash. 2007).
¶ 156 Therefore, on remand, the probate court shall consider, and
may, in its discretion, take additional evidence on, whether
equitable considerations reduce or eliminate Mrs. Beren’s obligation
to repay interest on the equitable adjustment.
C. Other Equitable Considerations
¶ 157 Mrs. Beren also raises several other equitable arguments,
including whether she bore any fault for the protracted probate
proceedings and attendant increase in administrative expenses;
whether payment of her elective share would have included in-kind
assets, subject to substantial appreciation; and whether the net
effect of the remand order will leave her with considerably less than
what she would have received as her elective share, had it been
paid in 2000. The responses dispute these assertions.
¶ 158 These arguments are inextricably intertwined with the probate
court’s rationale for the equitable adjustment, which we have set
aside. To consider them on remand, as Mrs. Beren urges, would
allow her to accomplish indirectly that which we have held she
should not have been allowed to accomplish directly. Therefore, we
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decline to revisit them, nor shall the probate court do so on
remand, except concerning interest as set forth in the preceding
subsection.
JUDGE LOEB concurs.
JUDGE TAUBMAN concurs in part and dissents in part.
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JUDGE TAUBMAN concurring in part and dissenting in part.
¶ 159 Although I agree with most of the majority opinion, I
respectfully dissent with regard to part IV, in which the majority
reverses the probate court’s approval of the corporate governance
plan. In my view, Robert Goodyear, Jr., the personal
representative, acted within the terms of the will and within the
scope of his statutory duties, in creating two classes of stock to
divide the assets of the Berenergy Corporation. I similarly conclude
that the probate court properly approved that part of the
distribution plan. Finally, I conclude that even if the trial court
erred, the error was harmless because neither Goodyear nor the
four brothers presented evidence showing any actual inequality in
the value of the shares to be distributed to the four brothers
compared to the shares to be distributed to Mrs. Beren’s children.
I. Standard of Review
¶ 160 I agree with Goodyear that whether the corporate governance
structure improperly diminished the value of the four brothers’
interest in Berenergy is a mixed question of fact and law. We review
the probate court’s findings of fact for clear error, and we review its
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legal conclusions de novo. See E-470 Public Highway Auth. v. 455
Co., 3 P.3d 18, 22-23 (Colo. 2000).
II. Applicable Law
¶ 161 As the majority notes elsewhere in its opinion, personal
representatives are vested with broad powers to carry out their
duties under the Probate Code. Fry v. Dist. Court, 653 P.2d 1135,
1137 (Colo. 1982). Specifically, under section 15-12-703(1), C.R.S.
2012, a personal representative is charged with distributing the
estate of a decedent under the terms of the will and the Code “as
expeditiously and efficiently as is consistent with the best interests
of the estate.” In addition, a personal representative “shall use the
authority conferred upon him by this code, the terms of the will, if
any, and any order in proceedings to which he is party for the best
interests of successors to the estate.” Id.
¶ 162 Because Mrs. Beren took her elective share against the will
and disclaimed interest in the testamentary marital trust, she is
treated as if she predeceased decedent, with the result that the
residuary estate must be divided equally among the seven children
under Article 1-2.3 of the will. See § 15-11-801(4), C.R.S. 2012. I
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agree with the majority that the value of each child’s interest should
be based on fair market value. See § 15-12-906(2), C.R.S. 2012.
III. Analysis
¶ 163 Here, Goodyear’s distribution plan provided that the estate
should be distributed pro rata to the seven children as residual
beneficiaries, “subject to a corporate governance structure intended
to assure that neither of what has turned out to be the two ‘sides’ of
the family is placed in a minority position.” Under the distribution
plan, the four sons would each own 1,000 shares of class A stock,
while Mrs. Beren’s children would each own 1,000 shares of class B
stock. In its September 2, 2010 order, the probate court approved
Goodyear’s plan for distribution of the estate’s assets, including the
corporate governance plan.
¶ 164 Neither Goodyear nor any of the children presented any
evidence indicating that the value of the four brothers’ shares is
less than the value of the shares of Miriam’s children, or that any
difference in value was other than de minimis.
¶ 165 Instead, on appeal, the four brothers argue, and the majority
agrees, that the probate court erred as a matter of law in
establishing the two classes of stock. I disagree.
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¶ 166 In my view, Goodyear acted in accordance with his statutory
obligations under section 15-12-703(1) to distribute the assets of
the estate under the will “as expeditiously and efficiently as is
consistent with the best interests of the estate.” His actions were
consistent with the Code’s provisions that it be liberally construed
to, among other things, “promote a speedy and efficient system for
settling the estate of the decedent and making distribution to his
successors.” § 15-10-102(2)(c), C.R.S. 2012; see also § 15-10-103,
C.R.S. 2012 (principles of law and equity supplement Code’s
provisions).
¶ 167 Under these provisions, Goodyear could create two classes of
Berenergy stock to prevent Miriam’s children from being in a
minority position. This action was appropriate in light of the
protracted, continuing divisions between the four sons and Mrs.
Beren’s children in litigating virtually every aspect of the
distribution of the estate for more than fifteen years. Under these
circumstances, the probate court acted well within its authority in
approving Goodyear’s corporate governance plan.
¶ 168 I disagree with the majority that Goodyear was obligated to
present evidence that the corporate governance plan did not create
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two classes of stock with different values. Rather, I agree with his
view that “where shares of common stock are not part of either a
control block or a minority block, there is typically no value
accorded to their associated voting rights.”
¶ 169 In any event, I conclude that even if the probate court erred in
approving the corporate governance plan, any error was harmless.
See C.R.C.P. 61 (courts should ignore harmless errors that do not
affect the substantial rights of the parties). Given the litigiousness
of the parties to this case, one may wonder why the four brothers
did not present evidence to establish that their class A shares were
worth less than the class B shares allocated to Mrs. Beren’s
children.
¶ 170 In the absence of evidence presented by any party on this
issue, I would conclude that any error by the probate court in
approving the corporate governance structure was harmless.
¶ 171 For the above reasons, I would affirm the corporate
governance plan approved by the probate court.
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