IN THE MATTER OF THE ESTATE OF HARBHAJAN SINGH KHALSA YOGIJI, Dеceased, INDERJIT KAUR PURI, Petitioner-Appellant, v. SHAKTI PARWHA KAUR KHALSA, Respondent-Appellee.
Docket No. 31,178
IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
August 19, 2013
Barbara J. Vigil, District Judge
Opinion Number: ____________
The Soni Law Firm
Surjit P. Soni
Pasadena, CA
for Appellant
Sanders & Westbrook, PC
Maureen A. Sanders
Albuquerque, NM
Wray & Girard, PC
Jane Katherine Girard
Katherine Wray
Albuquerque, NM
for Appellee
OPINION
{1} This case requires us to interpret
I. BACKGROUND
{2} Inderjit Kaur Puri (Wife), the wife of the decedent Harbhajan Singh Khalsa Yogiji (Decedent), filed a petition seeking the formal probate of her husband‘s will and appointment of a personal representative over four years after Decedent‘s death. No appointment or probate proceeding had been filed in connection with Decedent‘s estate between Decedent‘s death and the date of Wife‘s petition. The petition stated that it was brought pursuant to
{3}
A. No informal probate or appointment proceeding or formal testacy or appointment proceeding, other than a proceeding to probate a will previously probated at the testator‘s domicile or appointment proceedings relating to an estate in which there has been а prior appointment, may be commenced more than three years after the decedent‘s death, except:
. . . .
(4) an informal appointment in an intestate proceeding or a formal testacy or appointment proceeding may be commenced thereafter if no proceeding[] concerning the succession or estate administration has occurred within the three-year period after the decedent‘s death, but the personal representative has no right to possess estate assets as provided in
[NMSA 1978,] Section 45-3-709 [(1975)] beyond that necessary to confirmtitle thereto in the successors to the estate and claims other than expenses of administration may not be presented against the estate[.]
{4} Decedent‘s will, which was attached to Wife‘s petition, contained three specific devises of certain of Decedent‘s personal property to persons other than Wife and a provision requiring the residue of Decedent‘s estate to be transferred to a trust. The will recited that Decedent and Wife had “mutually agreed upon a plan of disposition of [their] assets which is set forth in this [w]ill and the [t]rust described above.” The will also nominated Shakti Parwha Kaur Khalsa, a devisee under the will, as executor.
{5} Ms. Khalsa filed objections to Wife‘s petition, stating that to the best of her knowledge, “there are no assets in the estate the title to which can be confirmed” because all assets had been transferred to the trust and were to be administered by way of the trust. Ms. Khalsa further objected on the ground that Wife‘s petition did not fall within the exception to the three-year limitation period permitted by Subsection (4).
{6} The district court held several hearings on Wife‘s petition and Ms. Khalsa‘s objections. At the hearings, the parties informed the court about a separate proceeding that could impact the proceedings in the present case. The separate proceeding was a declaratory judgment action that Ms. Khalsa and the other trustees of Decedent‘s trust had initiated against Wife before Judge James Hall to determine the validity of claims Wife was asserting against the trustees. In that case, which we refer to as the trust litigation, Wife filed counterclaims seeking an accounting and alleging that the trustees had breached their fiduciary duties.
{7} At the hearings in the present case, Ms. Khalsa urged the court to deny Wife‘s petition for appointment of a personal representative because the circumstances did not satisfy the limitations exception in Subsection (4). Ms. Khalsa claimed that there was no asset in the estate to which title could be confirmed due to the transfer of assets into the trust upon Decedent‘s death. In response, Wife argued that because there had never been a personal representative appointed, there had never been a determination of what assets belonged to Decedent at the time of his death in the form of either his separаte property or his half of the community property and, as a result, it was unclear whether Decedent had improperly disposed of any portion of Wife‘s half of the community property. Wife maintained that all assets were initially controlled by Decedent‘s will and that the residual assets should not have been transferred to the trust until all assets had first been identified. The problem, according to Wife, was that a personal representative had never been appointed, and an inventоry of assets had never occurred. Consequently, Wife urged the district court to appoint an independent personal representative to investigate what assets existed when Decedent died in order to determine what assets belonged to Decedent and which belonged to Wife.
{9} The second order was more specific. That order required Wife to identify “all entities in which [she] believes that Decedent may have, on the date of his death, owned an interest (legal or equitable), which interest has not been previously identified and distributed by the trustees.” The order further required the personal representative to make inquiry of the entities identified and determine whether an entity was a non-profit and, if it was not a non-profit, determine whether Decedent owned an interest in that entity. If there was credible information that an entity was a non-profit or that Decedent did not own an interest in the entity, the order directed the personal representative to report that entity to be a non-asset. The order required the personal representative to prepare a report of his investigation, and the parties could file objections to the report.
{10} Following an investigation, the personal representative filed a report and a supplemental report. He explained at a hearing that several of the entities investigated were non-profits, some entities were actually products owned by other entities, and one could not be identified as a separately existing entity. Of the remaining entities, the personal representative said he could not identify any of them as being entities that Decedent had any interest in.
{11} At the same hearing, Wife‘s counsel stated that while Wife had no objection to the court‘s acceptance of the personal representative‘s report, the authority given to the personal representative was too narrow. Wife maintained that, even if Decedent had no interest in the entities investigated, there was still a question as to whether the entities had possession of assets in which Deсedent had an interest. Wife argued that the probate proceeding should be stayed until things had been sorted out in the trust litigation, which would determine the distribution of identified community property.
{12} In response to Wife‘s arguments, Ms. Khalsa asserted that the personal representative had completed all of the duties ordered by the court, and there was no evidence of any asset whose title needed to be confirmed. Consequently, it would be appropriate for the court to close thе estate.
{13} The district court found that the personal representative had acted in accordance with
II. DISCUSSION
{14} Wife argues that the district court erroneously concluded that Subsection (4) prevented the personal representative from investigating what assets were owned by Decedent at the time of his death, regardless of who was in possession of the assets at that time. She further maintains that the district court improperly determined that Subsection (4) precluded the personal representative‘s investigation into the propriety of the transfer of estate assets to the trust. We agree.
{15} The interpretation of Subsection (4) is a matter of law that we review de novo. In re Estate of Baca, 1999-NMCA-082, ¶ 12, 127 N.M. 535, 984 P.2d 782. “In interpreting [statutes], we seek to give effect to the Legislature‘s intent[.]” Zuni Indian Tribe v. McKinley Cnty. Bd. of Cnty. Comm‘rs, 2013-NMCA-041, ¶ 8, 300 P.3d 133 (internal quotation marks and citation omitted).
A. Overview of Subsection (4)
{16}
{17} This subsection permits any appointment or formal testacy proсeeding to be initiated more than three years after the decedent‘s death with three limitations. First, the subsection‘s exception is not applicable if there has been any other proceeding regarding succession or estate administration during the three-year period. Second, in proceedings brought under this exception, no claims other than for the expenses of administration may be asserted against the estate. Third, the personal representative‘s right to possess estate assets is limited to the possession necessary to confirm title to the assets in the estate‘s successors. This case concerns the second and third limitations.
B. Second Limitation: Precluding Claims Against the Estate
{19} Wifе argued in the district court that she was not asserting a claim against the estate. To the contrary, she was asserting that Decedent‘s estate could only transfer to the trust those assets in which he had an interest and that it could not properly transfer to the trust the assets in which Wife had an interest. On appeal, Wife clarifies that she does not seek to recover any portion of Decedent‘s estate, nor does she want any damages from the estate. Instead, she wants to identify and confirm title in аny asset that represents her share of community property that should never have been deemed to be part of Decedent‘s estate in the first place.
{20} We conclude that Wife‘s desire to identify assets representing her share of community property is not a “claim” against Decedent‘s estate.
C. Third Limitation: Restriction on Personal Representative‘s Right to Possess Assets
{21} The third limitation on initiating a proceeding under Subsection (4) states that the personal representative “has no right to possess estate assets as provided in
Except as otherwise provided by a decedent‘s will, every personal representative has a right to, and shall take possession or control of, the decedent‘s property, except that any real property or tangible рersonal property may be left with or surrendered to the person presumptively entitled thereto unless or until, in the judgment of the personal representative,
possession of the property by the personal representative will be necessary for purposes of administration. The request by a personal representative for delivery of any property possessed by an heir or devisee is conclusive evidence, in any action against the heir or devisee for possession thereof, that the possession of the property by the personal representative is necessary for purposes of administration. The personal representative shall take all steps reasonably necessary for the management, protection and preservation of the estate in his possession. He may maintain an action to recover possession of property or to determine the title thereto.
D. Ms. Khalsa‘s Arguments
{22} Ms. Khalsa makes two primary arguments in support of her view that this limitation permitted the district court to restrict the breadth of the personal representative‘s investigation of Decedent‘s assets. She maintains (1) that Subseсtion (4)‘s limitation on the personal representative‘s possessory rights prohibited the full-scale investigation of assets sought by Wife and that this position is supported by In re Estate of Baca; and (2) the district court properly restricted the personal representative‘s investigation to only those assets that had not already been transferred to the trust because (a) it had the discretion to do so and (b) allowing a more extensive investigation would thwart Decedent‘s estate plan to avoid probate. We do not аgree.
1. First Argument: Limited Possessory Rights and In re Estate of Baca
{23} First, we see nothing in Subsection (4) that prohibits a personal representative from performing an investigation to identify with particularity what assets belonged to the decedent at the time of death. Even if Subsection (4) precludes the management or control of estate assets, as Ms. Khalsa argues, a personal representative could certainly conduct an investigation to ensure that only the decedent‘s separate property and his or her share of community prоperty were identified as estate assets, whereupon the personal representative could confirm title to those assets in the successors identified in the decedent‘s will. Such an investigation would not be inconsistent with the limitations on possession stated in Subsection (4).
{24} The goal of Subsection (4)‘s restriction on the personal representative‘s rights of possession is apparent. In cases such as the present one where no intestacy or formal testacy proceeding has bеen initiated within the first three years after a decedent‘s death, the Legislature intended to preclude the personal representative from selling or otherwise
{25} Ms. Khalsa‘s reliance on In re Estate of Baca is also misplaced. That case interpreted Subsection (4) and stated that “an estate may be settled through inaction and passage of time” consistent with the Probate Code‘s policy “to promote the speedy and efficient liquidation and distribution of estates, while allowing claimants adequate time to protect themselves.” 1999-NMCA-082, ¶ 24. This statement is correct in the context of the circumstances in In re Estate of Baca, which involved a claim asserted against an estate by a non-devisee seeking enforcement of an alleged oral agreement the decedent entered into prior to death. See id. ¶ 8-9. The present case does not involve a claim against the estate.1
{26} Furthermore, what Wife seeks—an investigation to identify what assets were properly in Decedent‘s estate—is consistent with another policy of the Probate Code, which is “to discover and make effectivе the intent of a decedent in distribution of the decedent‘s property.”
2. Second Argument: Investigation Limited to Assets Not Transferred to Trust
a. District Court‘s Discretion
{27} We see nothing in Subsection (4) and Ms. Khalsa has not cited any other portion of the Probate Code that confers discretion on the district court to restrict a personal representative‘s investigation of what assets are properly in the decedent‘s estate. Ms. Khalsa relies solely on Schwartzman v. Schwartzman Packing Co., 1983-NMSC-010, 99 N.M. 436, 659 P.2d 888, for the notion that a probate court may, in its discretion, circumscribe a personal representative‘s investigatory obligations. But Schwartzman is not helpful. In that case, our Supreme Court interpreted a statute permitting a shareholder to inspect a corporation‘s books and records ” ‘at any reasonable time or times, for any proper purpose.’ ” Id. ¶ 8 (quoting
b. Unrestricted Investigation Does Not Thwart the Estate Plan
{29} We also conclude that allowing the personal representative to investigate and identify estate assets, including assets previously transferred to thе trust, would not thwart Decedent‘s estate plan. Decedent‘s will contained several devises of specific personal property and then provided that the residue of the estate would pour over into the trust for distribution consistent with the trust documents. An investigation would allow the personal representative to identify what assets were Decedent‘s separate property or his share of the community property, and those assets would properly be the subject of the will‘s pour-over provision.
{30} If, following an investigation, the personal representative identified assets previously transferred to the trust that constituted Wife‘s share of community property, the personal representative could not take possession of those assets given Subsection (4)‘s limitations on the personal representative‘s possessory rights. However, the parties appear to agree that reallocation of community property that was improperly transferred to thе trust was the subject of the trust litigation.
III. CONCLUSION
{31} We hold that the district court improperly interpreted Subsection (4) as restricting the personal representative‘s duties to investigate and inventory the assets of Decedent‘s estate. On remand, the personal representative may conduct a complete investigation and inventory of assets in which Decedent had an interest at the time of his death. The personal representative may confirm title to any assets that are properly in the possession of a devisee, and he may inventory the assets that were properly identified as residue for transfer to the trust. Any claim Wife may have for reallocation of improperly transferred community property was the subject of the trust litigation.
{33} IT IS SO ORDERED.
CYNTHIA A. FRY, Judge
WE CONCUR:
MICHAEL D. BUSTAMANTE, Judge
MICHAEL E. VIGIL, Judge