In re the Estate of: John G. O'Neil, Decedent.

In re the Estate of: John G. O'Neil, Decedent. A06-1224, Court of Appeals Unpublished, April 24, 2007.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2006).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A06-1224

 

In re the Estate of:

 

John G. O'Neil, Decedent.

 

Filed ­­­April 24, 2007

Reversed

Dietzen, Judge

 

Isanti County District Court

File No. 30-P5-04-1488

 

David K. Snyder, Joshua D. Christensen, Eckbert, Lammers, Briggs, Wolff & Vierling, P.L.L.P., 1809 Northwestern Avenue, Suite 110, Stillwater, MN 55082 (for appellant Doris O'Neil)

 

Travis D. Stottler, Jonathan R. Cuskey, Miller Law Office, P.A., 26357 Forest Boulevard, Suite 6, P.O. Box 807, Wyoming, MN 55092 (for respondents Donald Larson and Michael O'Neil)

 

            Considered and decided by Dietzen, Presiding Judge; Randall, Judge; and Hudson, Judge.

U N P U B L I S H E D   O P I N I O N

 

DIETZEN, Judge

 

            Appellant challenges the district court's judgment, which denied her objection to the inventory and final account of the estate, arguing that the district court erred in allowing payment of the expenses of administration from the homestead and awarding respondents attorney fees.  Because homestead assets are statutorily exempt, we reverse.

FACTS

            Decedent, John G. O'Neil, died with a will in November 2004.  Appellant, Doris O'Neil, is the natural guardian of Amy O'Neil, who is decedent's only child.  Because the marriage had been dissolved, decedent had no surviving spouse.  Amy O'Neil was not mentioned in decedent's will, but by operation of the laws of intestacy, she is the sole heir of decedent and the sole beneficiary of the estate.  The will designates decedent's sister, Mary Ann Hunstad, as the personal representative of the estate; and the decedent's brother, Michael O'Neil, is the designated alternative.[1]

            In November 2004, appellant, who was unaware that decedent had a will, filed a petition to adjudicate the intestacy of decedent and appoint herself as the personal representative of the estate.  In December 2004, respondent Michael O'Neil filed a petition objecting to appellant's appointment as personal representative and filed a petition to probate decedent's will.  In February 2005, the district court appointed respondents Donald Larson and Michael O'Neil as co-personal representatives of the estate.  In June 2005, the representatives sold decedent's home and later submitted an inventory of the estate. 

Appellant objected to the inventory and final account of the estate, asserting, inter alia, that respondents lacked authority to pay expenses of the estate from the proceeds of the homestead sale, that the inventory improperly included decedent's pickup truck and other personal property, that the personal representative was not entitled to compensation,

and that the attorney fees were excessive.  Following a hearing, the district court issued findings of fact, conclusions of law, and an order for judgment denying appellant's objection to inventory and final account.  The district court held that the personal representatives acted in accordance with "[d]ecedent's intentions as expressed in his last will and testament" and the statute by "selling the real property of the estate for the benefit of interested persons" and ordered the estate to pay the attorney fees and other administrative expenses.  This appeal follows.

D E C I S I O N

I.

Appellant argues that the district court erred in allowing the payment of administrative expenses from assets that are statutorily exempt under the homestead exemption of Minn. Stat. § 524.2-402 (2006).

Statutory interpretation is a question of law, which this court reviews de novo.  Brookfield Trade Ctr., Inc. v. County of Ramsey, 584 N.W.2d 390, 393 (Minn. 1998).  The goal of statutory interpretation is to effectuate the legislative intent.  Minn. Stat. § 645.16 (2006).  The district court's findings of fact are given great deference and shall not be set aside unless clearly erroneous.  Minn. R. Civ. P. 52.01; Fletcher v. St. Paul Pioneer Press, 589 N.W.2d 96, 101 (Minn. 1999).   

Minn. Stat. § 524.2-402(c) provides:

If the homestead passes by descent or will to the spouse or decedent's descendants, it is exempt from all debts which were not valid charges on it at the time of decedent's death except that the homestead is subject to a claim filed pursuant
to section 246.53 for state hospital care or 256B.15 for medical assistance benefits.

 

The statute is consistent with Minnesota common law, which states that a decedent's homestead is not considered part of the estate for purposes of administration.  In re Estate of Van Den Boom, 590 N.W.2d 350, 353 (Minn. App. 1999), review denied (Minn. May 26, 1999); see also Bengtson v. Setterberg, 227 Minn. 337, 359, 35 N.W.2d 623, 634 (1949) (stating that the homestead is not part of the estate for the purposes of administration); Dills v. Axberg (In re Anderson's Estate), 202 Minn. 513, 517, 279 N.W. 266, 268 (1938) (homestead passes free of debts); Christianson v. Olson, 191 Minn. 166, 169, 253 N.W. 661, 662 (1934) (stating that homestead never, for an instant, becomes part of estate for purposes of administration).  Courts are to liberally construe homestead laws.  In re Estate of Riggle, 654 N.W.2d 710, 714 (Minn. App. 2002).

A.        Application of the Statute

Respondents argue that the homestead exemption does not apply because the homestead was not specifically devised to Amy O'Neil.  But the statute exempts homesteads from most categories of debt, whether received "by descent or will."  Thus, the statute does not differentiate between a homestead that passes by a specific devise and one that passes as a part of the residuary estate. 

Here, Amy O'Neil is entitled to take by the operation of the laws of intestacy.  Thus, the homestead should have passed to her "exempt from all debts which were not valid charges on it at the time of decedent's death[.]"  Minn. Stat. § 524.2-402(c).  The administrative expenses at issue were expenses that were incurred as a result of decedent's death.  Such administrative expenses are not chargeable against the homestead, absent written agreement of the interested parties.  Van Den Boom, 590 N.W.2d at 353 n.2.  In Van Den Boom, the court held that a surviving spouse could sell her interest in the homestead, but could not defeat the homestead exemption rights of the remaindermen by directing the personal representative to sell the homestead.  Id. at 354.  We conclude that Van Den Boom also precludes a personal representative from encumbering a child's right to the homestead by charging administrative expenses against the homestead. 

B.        Intent of the Will

Respondents argue that the will specifically authorizes payment of administrative expenses from the proceeds from the sale of the homestead. The will provides:

My personal representative shall pay from the residue of my estate the expenses of my last illness and funeral, valid debts including any taxes owed by me at my death, expenses of administering my estate, including non-probate assets, and any estate and other death taxes, except any generation skipping transfer tax, which become due because of my death, including any interest and penalties.  There shall be no apportionment of any such taxes, and I waive on behalf of my estate any right to recover any part of them from any person, including any recipient of property passing apart from this will.

 

The will also gives the personal representative "the power, exercisable without authorization of any court . . . to sell at private or public sale . . . any or all of the real or personal property of my estate."  

  The intention of a testator is to be followed, if it is not inconsistent with the rules of law.  In re Tuthill's Will, 247 Minn. 122, 126, 76 N.W.2d 499, 502 (1956) (quoting In re Trusteeship of Ordean, 195 Minn. 120, 125, 261 N.W. 706, 708 (1935).  This intent is to be gathered from within the four corners of the will, read in light of the surrounding circumstances.  Id. 

But general provisions of a will authorizing the payment of debts are not sufficient to authorize payment from homestead proceeds.  Overvold v. Nelson (In re Estate of Overvold), 186 Minn. 359, 366, 243 N.W. 439, 442 (1932) (holding that debts are not chargeable against homestead if will includes general provision for the payment of debts); Larson v. Curran (In re Norseth's Estate), 121 Minn. 104, 140 N.W. 337 (1913); see In re Estate of Chase, 182 Minn. 271, 275, 234 N.W. 294, 295 (1931) (permitting charges against homestead if will included direction to pay debts and express provision that the homestead be sold for the purpose of carrying out the provisions of the will).    In Larson, the decedent's will stated, "It is my will and I hereby direct that all my just debts shall be paid out of my estate as soon as the same can be determined after my decease."  121 Minn. at 106, 140 N.W. at 337.  The court found that the direction in the will to pay his debts did not indicate intent to charge the exempt homestead property with payment of such debts.  Id. at 110, 140 N.W. at 339. 

            Here, decedent's will repeats "purely formal phrase[s]," which are not sufficient to show an intent to forfeit the homestead protections.  Larson, 121 Minn. at 110, 140 N.W. at 339.  Thus, the will does not specifically contemplate sale of the homestead to pay administrative or other expenses.  See also Riggle, 654 N.W.2d at 714 (prohibiting decedent from forfeiting spouse's or child's interest when law governing homestead protections are not met). 

C.        Authorization of Homestead Sale

            Respondents further argue that the statutory authority to sell the homestead contemplates the authority to use the proceeds to pay expenses of the estate.  Respondents rely heavily on the 2006 amendment to Minn. Stat. § 524.3-715, subd. 23 (2004), which authorizes the personal representative to:

sell, mortgage, or lease any real or personal property of the estate or any interest therein, including the homestead, exempt or otherwise, for cash, credit, or for part cash and part credit, with or without security for unpaid balances, and without the consent of any devisee or heir unless the property has been specifically devised to a devisee or heir by decedent's will, except that the homestead of a decedent when the spouse takes any interest therein shall not be sold, mortgaged or leased unless the written consent of the spouse has been obtained. 

 

(Emphasis added).[2] 

            Appellant concedes that the sale of the homestead was authorized by Minn. Stat. § 524.3-715, but argues that statute does not authorize or address the use of proceeds from the homestead to cover expenses of administration.  Respondents argue that the statute's authority to sell the homestead necessarily includes the right to use the proceeds to pay the administrative expenses.

            The legislature clearly intended if there is a surviving child of the decedent, the proceeds of a sale of a homestead would be exempt from the reach of creditors.  Minn. Stat. § 524.2-402(c).  When interpreting statutes, we seek to harmonize potentially conflicting provisions and give effect to all provisions.  See Minn. Stat. §§ 645.16, 645.17(2) (2006) (directing courts to give effect to all statutory provisions, where possible). 

We see no conflict between Minn. Stat. § 524.3-715, which gives the personal representative the right to sell the homestead, and Minn. Stat. § 524.2-402, which exempts the homestead from the estate for purposes of administration.  AccordMinn. Stat. § 510.07 (2006) (providing that the proceeds from sale of a homestead are exempt from creditors for one year).[3] Minn. Stat. § 524.3-715 authorizes the personal representative to sell the property; it does not authorize conversion of an exempt asset to a nonexempt asset or authorize the use of the proceeds from an exempt asset to pay administrative costs.

This result is further supported by our state's expressed policy of protecting the interests and expectations of surviving spouses and children.  See Riggle, 654 N.W.2d at 714 (noting that courts are to liberally construe homestead laws).  If a personal representative was permitted to unilaterally sell exempt property and then treat the proceeds of the sale as non-exempt, the protections of the homestead exemption would be wholly eviscerated.  Thus, in order to give effect to the homestead provision, we interpret Minn. Stat. § 524.3-715 to authorize only the sale of a homestead and do not read into it any authority to convert the proceeds of the sale to a non-exempt asset. 

Respondents further argue that Amy O'Neil failed to timely object and, therefore, impliedly authorized the sale and use of the proceeds to pay the costs of administration.  A waiver of an existing property or legal right is not favored and must be clearly shown. Overvold, 186 Minn. at 367, 243 N.W. at 442. On this record, we see no evidence of waiver.

II.

Appellant argues that certain personal property of the estate is exempt under Minn. Stat. § 524.2-403 (2006).  The estate included personal property valued in the final inventory at $11,000. 

By statute, if there is no surviving spouse and the decedent's children were not intentionally omitted from the will, such children are entitled to "(1) property not exceeding $10,000 in value in excess of any security interests therein, in household furniture, furnishings, appliances, and personal effects . . .; and (2) one automobile, if any, without regard to value."  Minn. Stat. § 524.2-403(a), (b).  For adult children, the statute permits certain claims against these assets, including administrative expenses, funeral expenses, and taxes.  Minn. Stat. §§ 524.2-403(f), 524.3-805 (2006).

            Because Amy O'Neil was a minor, the personal property is exempt from
administrative expenses.  The personal property listed in the final account totaled $11,000, including a truck.  The truck itself is an exempt asset, without regard to its value.  Minn. Stat. § 524.2-403(a)(2), (b).  After reducing the total value of personal property by the value of the truck (estimated by appellant to be $6,000), the remaining value of the personal property is below the $10,000 threshold.  Minn. Stat. § 524.2-403(a)(1).  Thus, the personal property is not available to satisfy administrative expenses, including attorney fees.

III.

 Appellant argues that the district court erred in awarding attorney fees, and that the fees incurred by respondents and paid out of the sale of the homestead were not reasonable or necessary.  A district court's determination of attorney fees and costs in a probate matter is reviewed for abuse of discretion.  In re Estate of Martignacco, 689 N.W.2d 262, 271 (Minn. App. 2004), review denied (Minn. Jan. 26, 2005).  The reasonable value of attorney fees is a question of fact, which must be upheld by a reviewing court unless clearly erroneous.  Amerman v. Lakeland Dev. Corp., 295 Minn. 536, 537, 203 N.W.2d 400, 400-01 (1973).  Because we reverse the district court's order allowing administrative expenses to be paid from the proceeds of the homestead, and respondents concede that all other assets of the estate are also exempt, the amount and reasonableness of the fee award is moot.

            Reversed.

[1] Mary Ann Hunstad declined the appointment as personal representative.

[2] Both before and after amendment, the statute permitted the sale of "any real . . . property."  With amendment, "any real . . . property" has been clarified to include the homestead.  See 2006 Minn. Laws ch. 221 (describing the amendments as "clarifying the administrative powers of personal representatives to sell, mortgage, or lease property of a decedent").  Therefore, the amendment does not give the personal representatives any more authority than they had under the previous version of the statute and applying it to the case at hand does not constitute prohibited retroactive application.  See Nardini v. Nardini, 414 N.W.2d 184, 196 (Minn. 1987) (stating "a clarifying act is to be read into statutory law retrospectively"); 2006 Minn. Laws ch. 221, § 24 (stating that the 2006 amendment applies "to every conveyance by a personal representative made before, on or after the effective date of this section" with limited exceptions).

[3] This general statute is not part of the probate code and is instead codified in the statutory chapter addressing property interests and liens.  But when the probate statutes are lacking, "Minnesota courts have looked to the legal principles in the debtor-creditor area for guidance."  Riggle, 654 N.W.2d at 714.