Matter of Murphy

• Court: Montana Supreme Court
• Decided: August 9, 1979
• Docket: 14347
• Status: Published

Opinion

No. 14347

I N THE SUPREME COURT O THE STATE OF M N A A F OTN

19 79

I N THE MATTER O THE ESTATE O F F MAURICE D. MURPHY, Deceased.

Appeal from: D i s t r i c t Court of t h e F i f t e e n t h J u d i c i a l D i s t r i c t , H o n o r a b l e M. James S o r t e , J u d g e p r e s i d i n g . < C o u n s e l o f Record:

For Appellant:

T r a y n o r and H o v e r s l a n d , S c o b e y , Montana Kenneth W. H o v e r s l a n d a r g u e d , Scobey, Montana R o b e r t L. S t e p h e n s , J r . , B i l l i n g s , Montana David B. K i n n a r d a r g u e d , B i l l i n g s , Montana

For Respondents:

James Gardner a r g u e d , Dept. L a b o r , H e l e n a , Montana James McCann a r g u e d , Wolf P o i n t , Montana E a r l C. G r o s s , H a r d i n , Montana James A. T o r s k e , H a r d i n , Montana K r o n m i l l e r and S e y k o r a , H a r d i n , Montana J o h n M. D i e t r i c h , B i l l i n g s , Montana Douglas Freeman, H a r d i n , Montana L o r e n J . O ' T o o l e , Plentywood, Montana

Submitted: F e b r u a r y 5 , 1979

Decided: m 6 - 9 1979 Filed: AuG 3 1379 - Mr. Justice Daniel J. Shea delivered the Opinion of the Court.

This is an appeal from a probate proceeding in the District Court, Daniels County. A number of Maurice D.

Murphy's creditors have appealed from a June 1, 1978 order, which authorized the personal representative of Maurice Murphy's estate to take all cash and personal property in the personal representative's possession and deliver the same to respondent, Northeast Montana Production Credit Association of Wolf Point (hereafter PCA). Technically, this appeal only involves an order entered June 1, 1978; however, to understand why we must remand without a decision on the merits, it is necessary to briefly review the convoluted history of Maurice D. Murphy's estate. Maurice D. Murphy died testate on December 7, 1973. At the time of his death, Murphy was heavily in debt; his principal creditors were: (1) W. 3 D Graham, et a1.-- . $464,392.28--this balance was due under a contract for deed executed by the decedent prior to his death; (2) PCA-- $305,687.24--this was a secured debt incurred by decedent to finance his ranching operations; and (3) Citizenti State

Bank of Scobey, Montana (hereafter Bank)--$72,667.75--this is an unsecured debt owed by decedent on a personal note to the Bank. Decedent also owed approximately $100,000 to other unsecured creditors.

On December 20, 1973, Ralph Shiell was appointed personal representative of Maurice D. Murphy's estate. Shiell's first act was to apply for authorization to continue the decedents ranching business; at the same time, Shiell applied for authority to borrow $91,077 from PCA for the estate and to be allowed to secure such a loan by executing mortgages on the estate's livestock, equipment and feed. The District Court routinely granted all of Shiell's requests and specifically found that such action

"is in the best interests of the estate." On February 26, 1974, after all of the money from the

first loan had been expended, Ralph Shiell petitioned the District Court for authorization to borrow an additional

$138,500 from PCA to enable Shiell to continue operating the Murphy ranch and to allow him to pay off certain creditors

of the estate. This request was also routinely granted. Thus, during the first three months after his death, Maurice

Murphy's estate became indebted to PCA for an additional $229,577 with all loans purportedly secured by mortgages on

the estate's livestock, machinery and feed. On March 29, 1974, Ralph Shiell filed his notice of

resignation with the District Court and requested that his accounts be approved and his responsibility to the estate

terminated. A hearing on this matter was set for August 9, 1974, and at that time Shiell's resignation was accepted,

his accounts approved, and Gary Murphy, decedents son, was appointed to succeed Shiell as administrator.

Gary Murphy administered the estate from August 9, 1974 until September 20, 1976, the date he filed his resignation with the District Court. During his term as

administrator, Murphy was authorized by the District Court to borrow the following sums from PCA: AMOUNT DATE SECURITY GIVEN

September 26, 1974 Mortgage on livestock, machinery and feed

March 13, 1975 Mortgages on livestock, machinery, feed - and real estate

August 22, 1975 Mortgage on livestock, machinery and feed $ 18,000 October 30, 1975 Mortgage on livestock, machinery and feed $ 85,000 December 10, 1975 Mortgage on livestock, machinery and feed $ 25,000 March 10, 1976 Mortgage on livestock, - machinery and feed $336,767 TOTAL On March 29, 1976, Loren O'Toole, one of the attorneys

for the estate, petitioned the District Court for authority

to sell 1,017 head of estate cattle (all of the cattle were pledged as security for the various PCA loans). The authori- zation to sell was granted by the District Court and OIToole was able to sell the cattle to John Wycoff, James Wycoff,

and Richard Redland for a consideration of $263,120. Thereafter, OIToole filed a second petition (August 9,

1976b This petition asked the District Court to determine which creditors should receive payment from the funds held

for the estate. OIToole's petition stated that the estate currently had $286,545 on hand, and that "with the exception

of $22,500.00 all of the sums above came from the sale of cattle, which were mortgaged to the Production Credit

Association of Wolf Point, Montana." The District Court set O'Toole's petition for hearing

on September 3, 1976; however, because of various delays, the court did not hold the hearing until September 20, 1976. At that time, the court held an informal, unrecorded con-

ference in the judge's chambers. Apparently, the parties attending the informal conference agreed to submit written briefs detailing their theories on how the $286,545 should be distributed. On November 22, 1976, after receiving a number of

written briefs and after entertaining further arguments ( a l s o n o t recorded) t h e D i s t r i c t Court e n t e r e d t h e following

order :

"Payments from t h e e s t a t e o f t h e above named d e c e d e n t a r e ORDERED a s f o l l o w s and i n t h i s o r d e r of p r i o r i t y : " 1 . The c o n t r a c t f o r deed e n t e r e d i n t o on t h e 1 0 t h day o f J u l y , 1973 by and between W. J. D. Graham and Ruth M. Graham, husband and w i f e ; William S. Graham and Lavere C. Graham, husband and w i f e , a s s e l l e r s , and Lalon F l a d a g e r and Daryl F l a d a g e r , and t h e assignment made t h e r e u n d e r ;

"2. Secured and unsecured o b l i g a t i o n s owing t o t h e P r o d u c t i o n C r e d i t A s s o c i a t i o n , Wolf P o i n t , Montana t h a t e x i s t e d a s of t h e d a t e of d e a t h and any advances made upon p e t i t i o n and approved by s p e c i f i c c o u r t o r d e r a f t e r t h e d a t e of d e a t h ;

"3. S t a t u t o r y A t t o r n e y s f e e s , and f e e s of t h e P e r s o n a l R e p r e s e n t a t i v e s , and A c c o u n t a n t s ' f e e s a s d e t e r m i n e d by t h e C o u r t ; ( P u b l i c p o l i c y c o m p e l l s t h a t a t t o r n e y s f e e s must r e c e i v e a p r i o r i t y i n e s t a t e s of questionable solvency o r insolvent e s t a t e s would n o t be p r o p e r l y a d m i n i s t e r e d w i t h t h e a d v i c e of c o u n s e l . If there are insufficient f u n d s f o r f u l l payment of P a r a g r a p h s 1, 2 and 3 , t h e n t h e payment a s p r o v i d e d i n P a r a g r a p h s 2 and 3 w i l l be p r o - r a t a ) .

"4. E x t r a o r d i n a r y f e e s of t h e a t t o r n e y s , a c c o u n t a n t s , and t h e p e r s o n a l r e p r e s e n t a t i v e s a s d e t e r m i n e d by t h e Court;

"5. C r e d i t o r s a s of t h e d a t e o f d e a t h ;

"6. Any c l a i m o f t h e second p e r s o n a l r e p r e s e n t a t i v e , Gary Murphy, f o r monies expended, and d e t e r m i n e d t o be n e c e s s a r y and r e a s o n a b l e , f o r t h e p r e s e r v a t i o n of t h e e s t a t e a s s e t s ;

"7. B e n e f i c i a r i e s under t h e t e r m s of t h e W i l l o r o t h e r w i s e ; and

"8. Any o t h e r f u n d s advanced by t h e P r o d u c t i o n C r e d i t Association a f t e r t h i s d a t e , f o r purposes n e c e s s a r y f o r t h e p r e s e r v a t i o n of t h e e s t a t e a s s e t s , and approved by an Order of C o u r t , w i l l be p a i d i n a c c o r d a n c e w i t h P a r a g r a p h 2 of t h i s O r d e r , and s u b j e c t o n l y t o t h e Graham c o n t r a c t r e f e r r e d t o i n Paragraph 1 and, i f necessary, pro-rated a s provided i n Paragraph 3."

Gary Murphy, a p a r t y d e s i g n a t e d t o r e c e i v e payment i n no. 6 of t h e November 22, 1976 o r d e r , f i l e d a p e t i t i o n f o r

w r i t of s u p e r v i s o r y c o n t r o l w i t h t h i s C o u r t . T h i s Court

h e a r d o r a l arguments on October 6, 1977, and l a t e r d e c l i n e d

j u r i s d i c t i o n f o r t h e following reasons: "(1) This is a fragmented appeal without the necessary record to support a review. " (2) This matter comes to this Court on brief only. There is no evidence of a proper hearing in the District Court due to the absence of a transcript record.

" (3) If a hearing was had, we cannot be sure that all interested parties were represented.

"(4) We find no evidence in the court record of a determination of validity of the claims involved. "For these reasons the application of Petitioner Relator is dismissed without prejudice." Murphy v. District Court (1977), Mont . , 571 P.2d 803, 804, 34 St.Rep. 1365, 1366. From the time this Court issued its November 17, 1977

decision until February 1, 1978, the District Court file reflects little activity the part of the Murphy estate

administrators. The most activity we can discern occurred on February 1, 1978, when PCA filed a petition seeking an order directing the personal representative to pay over the estate assets in partial satisfaction of the PCA claim. A hearing on the PCA petition was held on March 1, 1978, in

Wolf Point, Montana. A transcript of that proceeding was kept, and it indicates that the PCA, the Bank, Gary Murphy and the attorneys for the estate were present, and presented oral argument to the court. It also indicates that Douglas

Freeman, attorney for the administrator, Erle C. Gross, had notice of the hearing, but was unable to attend due to bad

weather. After hearing oral arguments, the District Court entered the following one page order on June 1, 1978: "Northeast Montana Production Credit Association having on the 31st day of January, 1978, filed its petition herein directing payment to it of $499,686.37 together with interest; and following hearing on said petition on March 1, 1978; "IT IS HEREBY ORDERED, ADJUDGED AND DECREED that the personal representative is authorized and directed to take all cash and personal property now in his hands as belonging to decedent's estate and to deliver the same to Northeast Montana Production Credit Association to payment of its claim. Items of personal property may be sold and converted to cash prior to such delivery at the discretion of personal representative." Citizens State Bank of Scobey, a creditor with an

ante mortem debt, filed a notice of appeal from the June 1 order on June 8, 1978. The Bank claims it has first

priority over all other estate claims, and therefore the District Court erred in awarding PCA first priority.

The notices of appeal filed by Gary Murphy and the State Department of Labor do not appear in the record

transmitted to this Court; however, the District Court Clerk has informed this Court that timely notices were filed on

behalf of the Department and Murphy. Accordingly, we shall assume that Murphy and the Department have complied

with Rule 4, M0nt.R.App.Civ.P. The Department and Murphy claim to be entitled to a pro rata share of the funds and personal property in the personal representative's possession. They allege their claims are costs of administration and are in the same class

as PCA's claim. The June 1, 1978 order is an appealable order under

Rule 1, M0nt.R.App.Civ.P. That rule specifically provides that "an order directing the delivery, transfer, or surrender of property" may be appealed by an aggrieved party. Thus, the parties are properly before this Court. Unfortunately, this Court is still not in a position to finally dispose of the matter on the merits. The order entered by the District Court states simply "that the personal representative is authorized and directed to take his all cash and personal property now in/hands .. . and to deliver the same to Northeast Montana Production Credit Association to (sic) payment to its claim." There is no memorandum opinion or other explanation of the basis for

entry of the order. The parties and this Court are left to speculate as to why the District Court found PCA entitled to the proceeds in the possession of the personal representative. Briefs and oral arguments before this Court clearly assert that the parties are not certain which law the District Court judge applied (the old probate provisions or the provisions of the Uniform Probate Code), which claims are valid, and which classification was given to the various claims. As

a result, this Court is not in a position to enter a binding decision on the merits.

Although Rule 52, M0nt.R.Civ.P. is seldom used in probate proceedings, we feel that it must be applied to

the present fact situation so that this Court will know precisely the questions presented for appellate review.

We recently defined the underlying reasons for findings of fact and conclusions of law:

"The purpose of requiring findings of fact is three-fold: 1) as an aid in the trial judge's process of adjudication; 2) for purposes of res judicata and estoppel by judgment; and 3) as an aid to the appellate court on review. 5A Moore's Federal Practice Yl52.06 [I]." Marriage of Barron (1978), Mont . , 580 P.2d 936, 938, 35 St.Rep. 891, 894. For purposes of this opinion, reason no. 3 is most important. As the record now stands, we can only speculate on the factors which went into the District Court's decision. The facts of this case require a remand to the District Court so that a proper order can be entered. The District Court is directed to enter findings and conclusions or a memorandum

clarifying the order it entered June 1, 1978. This cause is remanded for action consistent with

9+g-A this opinion.

We Concur:

Chief Justice