Estate of Merriott v. Merriott

Citations: 439 S.W.3d 259; 2014 Mo. App. LEXIS 880; 2014 WL 4067180Docket: No. WD 76938

Court: Missouri Court of Appeals; August 19, 2014; Missouri; State Appellate Court

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Lisa White Hardwick, Judge, presided over an appeal by Citizens-Farmers Bank of Cole Camp from a probate court judgment regarding an accounting action under Section 461.300, RSMo Cum.Supp.2013, against Thomas Merriott, Timothy Merriott, and Tamra Merriott Wilson, the heirs of Shirley Merriott. The bank sought to recover the value of nonprobate transfers made to the heirs to satisfy an unpaid claim against the estate. The bank argued that the probate court incorrectly applied the law by ordering the heirs to sell Merriott’s residence and pay the bank from the remaining sales proceeds rather than issuing a money judgment for the value of the recoverable transfers. The bank also claimed the court erred by assessing the residence's value at the trial date instead of at Merriott’s death and that the valuation lacked substantial evidence.

The court determined that the correct remedy under Section 461.300 should have been a monetary judgment favoring Merriott’s estate against the heirs for the value of the transfers necessary to settle the bank's claim. Consequently, the court reversed the probate court’s decision and remanded the case for further proceedings, emphasizing the need to value the residence as of Merriott’s death on March 5, 2008. 

The procedural history revealed that after Merriott's death, her estate was assessed at $16,497.59, with the heirs designated to receive equal shares. The bank filed a claim for over $370,000 against the estate, citing unpaid loans secured by properties owned by Merriott and her husband. The probate court accepted the bank's petition for estate administration and appointed a personal representative. Following this, the bank demanded that the personal representative pursue an accounting action against the heirs, asserting substantial asset transfers under Missouri nonprobate laws. In August 2009, the bank foreclosed on properties securing Merriott’s loans, resulting in deficiencies totaling approximately $159,827.20.

Thomas Merriott, as the personal representative of the estate, did not initiate an action for accounting as required under Section 461.800, prompting the Appellant to file such an action. The Appellant claimed that the Respondents had received various assets from Merriott, including personal property, three bank accounts via transfer on death designations, and real estate through beneficiary deeds. The Appellant sought a court judgment requiring the Respondents to deliver assets to satisfy claims against the estate. Subsequently, the probate court removed Merriott as the estate's representative and appointed the Morgan County Public Administrator.

In October 2011, the court mandated that Respondents account for all property received through non-probate transfers. By February 2012, the Appellant filed a motion claiming that Respondents held $60,762.99 in non-probate assets, including proceeds from property sales and funds from Merriott’s accounts, and sought a monetary judgment against them. Respondents later submitted their accounting, revealing income of $32,365.05 and expenses of $22,267.91, asserting they had used remaining funds to pay off Merriott’s residence loan and incurred a new mortgage of about $50,000.

The Appellant contested the Respondents' reported figures. After hearings, the probate court found an unpaid claim of $164,279.10 against Merriott’s estate and determined the estate lacked sufficient funds to cover the claim and administrative expenses. The court acknowledged the Respondents had received various assets and valued Merriott’s residence at $50,000, contrary to the Appellant’s valuation of $80,000. Consequently, the court ruled that the Appellant was entitled to recover $23,154, directing the Respondents to sell Merriott’s residence for no less than $50,000 and distribute proceeds first to the mortgage lender, then to the Appellant to satisfy the claim.

Appellant appeals the probate court's judgment, which is subject to affirmation unless it lacks substantial evidence, is contrary to the evidence's weight, or misapplies or misinterprets the law. The case primarily involves the interpretation of Section 461.300, a legal question reviewed de novo. 

In Point I, Appellant argues that the court misapplied the law by ordering the sale of Merriott’s residence and directing that Appellant receive the remaining sales proceeds after mortgage payments. Appellant claims Section 461.300 allows recovery of the value from non-probate transfers for administration within the decedent's estate. The statute provides a mechanism to recover values from non-probate transfers under specific conditions to satisfy claims against the estate.

Section 461.300.1 establishes that recipients of recoverable transfers are liable to account for a pro rata share of the value of the property received, necessary to address claims against the estate. It defines "recoverable transfer" and clarifies that no actions may be initiated solely due to administration costs. The purpose of Section 461.300 is to enable creditors and beneficiaries to recover the value of non-probate assets to satisfy the decedent's debts, including those involving trusts and jointly held properties.

The statute does not specify the recovery form, but it indicates that judgments should be monetary in favor of the probate estate. Key provisions require recipients to account for the value of received property and state that recovered sums must be managed by the personal representative as part of the estate, not the property itself.

The legislature intended for estates to recover the value of property received through nonprobate and other recoverable transfers via a money judgment, as indicated in subsections 1 and 2 of Section 461.300. Subsection 6 clarifies that the section does not create a lien on the property involved, except through attachment, garnishment, or judgment in an accounting proceeding. The statute establishes liability for recipients of nonprobate transfers when the estate lacks sufficient assets to meet statutory allowances and claims, as supported by case law, including Cook v. Barnard, which emphasizes that Section 461.300 pertains to liability rather than ownership.

In In re Estate of Jones, the court upheld this interpretation by rejecting the notion that nonprobate assets were brought into the probate estate through a Section 461.300 action. Instead, it confirmed that such proceedings allow the estate to recover the value of nonprobate assets when probate assets are inadequate to satisfy creditor claims. The resulting monetary judgment for the value of these assets is treated like other estate assets. 

The statute's terminology, specifically referring to an "action for accounting," has led to some confusion, as it does not explicitly define the recovery form intended. The court's judgment in this case, which determined the value of recoverable transfers to be $23,154, was deemed erroneous. Instead of a monetary judgment for this amount to satisfy Appellant's claim against Merriott’s estate, the court incorrectly ordered the sale of Merriott’s residence. The proper remedy would have been to award a money judgment in favor of the estate against the Respondents for the value of the recoverable transfers necessary to discharge Appellant’s claim. Point I is granted.

Appellant argues that the probate court incorrectly valued Merriott's residence, asserting it was transferred to Respondents via a beneficiary deed, qualifying as a 'recoverable transfer' under Section 461.300.10(4). The court determined the residence's value at $50,000, down from Appellant's claimed $80,000, citing a decline in the real estate market after Merriott's death on March 5, 2008. Appellant contends the valuation should have occurred at the time of transfer (Merriott's death) rather than at trial. While Section 461.300 does not specify the timing for valuing recoverable transfers, Appellant argues that Section 461.300.1 implies valuation at the transfer date, as it focuses on property received by transferees. Further, commentary supports the idea that volatile assets should be valued at the time of transfer to avoid valuation disputes. The statute makes reference to the time 'immediately prior to the decedent’s death' in defining recoverable transfers, suggesting a focus on that point for valuation. Appellant presents evidence that the property's fair market value was $80,000 at the time of Merriott's death and highlights the adverse market conditions leading to a decline in value before trial, arguing that the estate could have sold the property before this decrease.

Vehicles and other types of property depreciate over time, and delays in valuing such assets may unfairly benefit recipients. Conversely, some assets might appreciate due to market factors or the recipients' efforts during the delay from the decedent’s death to trial. Establishing the value of property at the date of the decedent's death is crucial for fair valuation, as recipients bear the risk of losses and gain from increases post-transfer. The probate court incorrectly valued Merriott’s residence at the trial date; hence, the judgment is reversed. The case is remanded for the probate court to assess the residence's value as of Merriott’s death. The court must also determine the equity in the property to include in a money judgment favoring Merriott’s estate, addressing Appellant’s unpaid claim. The ruling underscores a distinction between an 'action for accounting' under Section 461.300.2, which allows recovery of nonprobate transfers, and other accounting actions that seek detailed financial information from fiduciaries.