United States of America
Courts may reduce the compensation of the personal representative by an appropriate amount if the court determines the representative unreasonably delayed in distributing and closing the estate. (Cal. Prob. Code § 12205, Estate of Heller, In re Estate of Kampen)
The three elements of unreasonable delay are: (1) the time taken to administer the estate exceeds the statutorily-defined timeframes; (2) the time taken was within the control of the personal representative; and (3) the delay was not in the best interest of the estate or interested persons. (Cal. Prob. Code § 12205)
Generally, the California Probate Code requires the appraisal and inventory of estate assets to be filed with the probate court within four months of the issuance of letters, and requires the distribution and closing of the estate within one year of the issuance of letters. (Cal. Prob. Code § 8800, Cal. Prob. Code § 12200)
Once a beneficiary establishes that the statutory time period was unreasonably exceeded, the personal representative has the burden to establish that additional time was reasonably required to distribute the estate. (Estate of Justesen)
Courts have found unreasonable delay in the distribution of an estate where the statutory time allotments have been missed without justification and where such delay has occurred to the detriment of the beneficiaries without any benefit to the estate. (Estate of Justesen, Estate of Heller, In re Estate of Kampen)
Cal. Prob. Code § 12205 permits the court to reduce a personal representative's compensation if it concludes that all of the statutory elements therein establishing unreasonable delay are met. The three elements of unreasonable delay are set out in subdivision (a):
(a) The court may reduce the compensation of the personal representative or the attorney for the personal representative by an amount the court determines to be appropriate if the court makes all of the following determinations:
(1) The time taken for administration of the estate exceeds the time required by this chapter or prescribed by the court.
(2) The time taken was within the control of the personal representative or attorney whose compensation is being reduced.
(3) The delay was not in the best interest of the estate or interested persons.
(b) An order under this section reducing compensation may be made regardless of whether the compensation otherwise allowable under Part 7 (commencing with Section 10800) would be reasonable compensation for the services rendered by the personal representative or attorney.
(c) An order under this section may be made at any of the following hearings:
(1) The hearing for final distribution.
(2) The hearing for an allowance on the compensation of the personal representative or attorney.
(d) In making a determination under this section, the court shall take into account any action taken under Section 12202 as a result of a previous delay.
Cal. Prob. Code § 12200 sets out a time period of either one year or 18 months for the final distribution of an estate, or, a report on the status of the estate's administration:
The personal representative shall either petition for an order for final distribution of the estate or make a report of status of administration not later than the following times:
(a) In an estate for which a federal estate tax return is not required, within one year after the date of issuance of letters.
(b) In an estate for which a federal estate tax return is required, within 18 months after the date of issuance of letters.
Cal. Prob. Code § 8800 further requires the personal representative to file with the court an inventory of property to be administered by the estate together with an appraisal of the inventoried property within four months after letters are first issued to the personal representative:
(a) The personal representative shall file with the court clerk an inventory of property to be administered in the decedent's estate together with an appraisal of property in the inventory. An inventory and appraisal shall be combined in a single document.
(b) The inventory and appraisal shall be filed within four months after letters are first issued to a general personal representative.
The court may allow such further time for filing an inventory and appraisal as is reasonable under the circumstances of the particular case.
(c) The personal representative may file partial inventories and appraisals where appropriate under the circumstances of the particular case, but all inventories and appraisals shall be filed before expiration of the time allowed under subdivision (b).
(d) Concurrent with the filing of the inventory and appraisal pursuant to this section, the personal representative shall also file a certification that the requirements of Section 480 of the Revenue and Taxation Code either:
(1) Are not applicable because the decedent owned no real property in California at the time of death.
(2) Have been satisfied by the filing of a change in ownership statement with the county recorder or assessor of each county in California in which the decedent owned property at the time of death.
In Estate of Justesen, 77 Cal.App.4th 352, 91 Cal.Rptr.2d 574 (Cal. App. 1999) ("Justesen"), the California Court of Appeal for the Second District summarized the California Probate Code's timing requirements for the distribution and closing of an estate (at 359-361):
As a preliminary matter, a personal representative is an officer of the court and occupies a fiduciary relationship toward all parties having an interest in the estate. (§ 58; Larrabee v. Tracy (1943) 21 Cal.2d 645, 650, 134 P.2d 265; 12 Witkin, Summary of Cal. Law (9th ed. 1990) Wills and Probate, § 438(b), p. 460.) This standard governs the personal representative's obligation to comply with the time periods specified in the statutory scheme.
a One year within which to petition for an order for final distribution.
With respect to the time for closing an estate, section 12200 provides: "The personal representative shall either petition for an order for final
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distribution of the estate or make a report of status of administration not later than the following times: [¶] (a) In an estate for which a federal estate tax return is not required, within one year after the date of issuance of letters. [¶] (b) In an estate for which a federal estate tax return is required, within 18 months after the date of issuance of letters." (Italics added.)
Here, a federal estate tax return was not required and therefore the one-year period applies.
Because there were two personal representatives in this matter, the question arises as to whether the initial issuance of letters to George Wasson on August 2, 1996, or the subsequent issuance of letters to Lightell on February 5, 1997, commenced the one-year period for closing an estate. (§ 12200, subd. (a).) In view of "the established policy favoring prompt distribution of estates" (Estate of Taylor, supra, 66 Cal.2d at p. 858, 59 Cal.Rptr. 437, 428 P.2d 301), it is appropriate that the initial issuance of letters commence the one-year period. Delays attributable to a personal representative's inability to serve should not be borne by the beneficiaries awaiting distribution.
Here, the applicable one-year period to petition for an order for final distribution expired on August 2, 1997, more than six months before Sedlak's death.
b. The requirement of filing an inventory and appraisal within four months.
In addition to the one-year period under section 12200, the personal representative must also comply with certain other time requirements.
The duties of a personal representative include the filing of an inventory and appraisal with the court clerk. (§ 8800, subd. (a).) The inventory and appraisal "shall be filed within four months after letters are first issued to a general personal representative. The court may allow such further time for filing an inventory and appraisal
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as is reasonable under the circumstances of the particular case." (§ 8800, subd. (b), italics added.)
The personal representative is duly advised of this obligation at the outset. Section 8404 states: "(a) Before letters are issued, the personal representative (other than a trust company or a public administrator) shall file an acknowledgment of receipt of a statement of duties and liabilities of the office of personal representative. The statement shall be in the form prescribed by the Judicial Council."
In accordance with section 8404, the Judicial Council has adopted Form DE-147, captioned "Duties and Liabilities of Personal Representative." This
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form instructs the personal representative, in pertinent part: "When you have been appointed by the court as personal representative of an estate, you become an officer of the court and assume certain duties and obligations. An attorney is best qualified to advise you about these matters. You should clearly understand the following: [¶] ... [¶] 2. INVENTORY OF ESTATE PROPERTY [¶] ... [¶] c. File an inventory and appraisal [¶] Within four months after your appointment as personal representative, you must file with the court an inventory and appraisal of all the assets in the estate." (Italics added.)
The Court explained that once a beneficiary establishes that the statutory time period was unreasonably exceeded, the personal representative has the burden to establish that additional time was reasonably required to distribute the estate (at 361):
Section 12200, subdivision (a), provides the personal representative "shall" petition for an order for final distribution within one year after the date of issuance of letters. Similarly, section 8800, subdivision (b), provides the inventory and appraisal "shall" be filed within four months of issuance of letters. The word "shall" ordinarily is construed as mandatory or directory, as opposed to permissive. (Common Cause v. Board of Supervisors (1989) 49 Cal.3d 432, 443, 261 Cal.Rptr. 574, 777 P.2d 610; California Correctional Peace Officers Assn. v. State Personnel Bd. (1995) 10 Cal.4th 1133, 1144-1145, 43 Cal.Rptr.2d 693, 899 P.2d 79.)
The code requires the personal representative to show good cause for extending the four-month period. Section 8800, subdivision (b) states "[t]he court may allow such further time for filing an inventory and appraisal as is reasonable under the circumstances of the particular case." Further, the very point of Taylor is "that unreasonable delay cannot defeat the beneficiary's interest." (Estate of Taylor, supra, 66 Cal.2d at p. 858, 59 Cal.Rptr. 437, 428 P.2d 301.)
Based thereon, we conclude that when the moving party claiming entitlement to distribution based on unreasonable delay makes a showing the personal representative has exceeded the statutory time period, the burden shifts to the personal representative to establish that additional time is reasonable under the circumstances.
On the facts of the case, the Court held that the personal representative's delay to inventory and appraise the estate property and ultimately distribute the assets was unreasonable not only because the time periods allotted by Cal. Prob. Code § 8800 and Cal. Prob. Code § 12200 were wantonly missed by several months, but also because the personal representative was aware of the failing health of one of the beneficiaries and should not have delayed in making their distribution (at 361-363):
Respondents concede "the Administrator did not file the Inventory and Appraisal of the estate assets by June 5, 1997, within four months after Letters of Administration were issued to her on February 5, 1997." Under
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the code, the inventory and appraisal "shall be filed within four months after letters are first issued ...."(§ 8800, subd. (b), italics added.) However, even assuming it was the issuance of the second set of letters to Lightell, rather than the letters issued to George Wasson, which commenced the four-month period to file the inventory and appraisement, the four-month period was grossly exceeded. The record reflects Lightell took more than 13 months, until March 12, 1998, to file the inventory and appraisement. Sedlak, who died on February
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7, 1998, did not survive the compiling of the inventory.
Although Lightell acknowledges her delay in filing the inventory and appraisal, she asserts she acted reasonably because the circumstances were such that the inventory and appraisal could not be filed within four months. Lightell emphasizes the law does not require the administrator to proceed "`as quickly as possible,'" only to proceed without unreasonable delay. (Estate of Germond, supra, 4 Cal.3d at p. 580, 94 Cal.Rptr. 153, 483 P.2d 769.) Be that as it may, Lightell has not shown she required triple the ordinary time allowed by statute to file the inventory and appraisal.
The final inventory and appraisal, valuing the estate at $456,084.85, listed the following assets: checking and savings accounts; certificates of deposit; proceeds of an insurance policy; a single family residence valued at $117,000; shares of common stock; United States savings bonds; a 1971 automobile; and miscellaneous silver coins.
The record reflects the delay in completing the inventory and appraisal apparently was due to Lightell's efforts to locate certain items of personal property, specifically, a Danish Christmas plate collection, a Hummell collection, a railroad watch, wedding ring sets, a pearl necklace, an antique doorstop and a stamp collection. As late as December 1997, this quest was ongoing. However, none of these items was included in the final inventory.
The record further reflects a somewhat leisurely pace by Lightell in tending to this matter. On March 3, 1997, MacCarley & Rosen, counsel for Lynne Wasson, sent Lightell's attorney two folders of documents, including a summary of assets, that had been prepared by George Wasson before his death.5 Lightell's counsel, Carol Churchill, did not respond to that letter until July 17, 1997, at which time Churchill requested additional records. On September 8, 1997, MacCarley & Rosen furnished the additional requested information and records. Lightell's counsel did not respond until December
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8, 1997, at which time she inquired into the antique door stop and other omitted items mentioned above.
Although Lightell contends her conduct in inventorying the estate was reasonable, she failed to show it was "reasonable under the circumstances of [this] particular case" (§ 8800, subd. (b)), to take more than three times longer than the ordinary four-month period to file the inventory and appraisal. On this record, the delay was excessive. Given Lightell's awareness of Sedlak's failing health, Lightell's fiduciary duty to Sedlak, and Lightell's status as a contingent beneficiary, it was unreasonable for Lightell to go much beyond the four-month period simply to locate a few items of personal property and thereby create a more perfect inventory.
No merit to respondents' contention the delay in filing the inventory and appraisal was nonprejudicial.
Respondents assert that even assuming the inventory and appraisal had been timely filed, the estate could not have been closed until some time after January 12, 1998, because that was the date Lynne Wasson's entitlement petition was settled and all the beneficiaries of the Justesen estate had been identified. Therefore, a petition for final distribution could not even be filed prior to January 12, 1998, and would not be heard for four or five weeks, until some time after Sedlak's death on February 7, 1998.
This argument requires an examination of the judicial delay in entertaining Lynne Wasson's entitlement petition, and the legal effect of that delay. That discussion follows. As explained below, Lightell's delay,
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compounded by the trial court's delay, was prejudicial to Sedlak's interest and implicates the Taylor remedy.
In Estate of Heller, 7 Cal.App.4th 862, 9 Cal.Rptr.2d 274 (Cal. App. 1992), the California Court of Appeal for the Second District held that Cal. Prob. Code § 12205 empowers a court to reduce the commissions or fees paid to a personal representative by an appropriate amount where the representative fails to distribute and close the estate in a timely manner. There, the estate took over four years to close after multiple extensions and appointments of successive executors, a delay the trial court found unreasonable. The appellate court upheld the trial court's reduction of compensation to the current executor because it was based on substantial evidence (at 867-868):
In 1976, the Legislature enacted former Probate Code section 1025.5, from which Probate Code section 12205 is derived. (Stats.1976, ch. 756, § 1, p. 1791; Estate of Getty (1983) 143 Cal.App.3d 455, 461, 191 Cal.Rptr. 897; 8 Pac.L.J. (1977) 181-182.)
The legislation, which set deadlines and empowered the court to enforce them by sanctions, reflected strong public policy in favor of the prompt closing and distribution of estates. (See 2 Goddard, Cal.Practice (3d ed. 1977) Probate Court Practice,
§ 1723, pp. 653-654; Ross & Moore, Cal.Practice Guide, Probate (1991) §§ 16:77-16:86.1, pp. 16-21 to 16-22; 12 Witkin, Summary of Cal.Law (9th ed. 1987) Wills and Probate, § 712, pp. 745-746.)
Former Probate Code section 12205 applicable to this case permitted the court to "reduce the commissions or fees by an amount the court deems appropriate," which clearly indicates the exercise of this power is committed to the discretion of the trial court.
Pursuant to this provision the trial court denied any executor commissions to appellant Irving Heller or former executor Elliott Heller.
The record supports the trial court's order. Administration of this estate took four and a half years, from the May 1986 appointment of former executor Elliott Heller to the court's November 1990 final orders. Closing the estate took more than two years after the extension granted the former executor to July 1988, and more than one year following appellant Irving Heller's appointment as successor executor.
Appellant contends that after his own appointment as successor executor he performed his duties and brought the estate to a close. Much of the work, however, was done by the former executor, although some funds were [7 Cal.App.4th 868] missing. The record supports the conclusion that the further time taken was within appellant's control and was not in the best interests of the estate. Appellant's delay in attempting to trace and marshal assets of the estate, after prodding by respondent Berman's motions and court orders, may have contributed to the inability to find those assets in the estate of Elliott Heller. The escrow on the sale of the Belmont Shore property, although ultimately completed, was delayed by actions of appellant. The trial court did not abuse its discretion in denying appellant commissions under former Probate Code section 12205.
Appellant contends the court was required by section 12205 to make findings on the record and erred by failing to make them. There is no merit to this contention. Even assuming the statute requires findings if requested, there is no indication in the record that appellant requested findings. (Code Civ.Proc., § 632.) It is presumed on appeal the trial court made whatever findings were necessary to sustain the judgment. (Michael U. v. Jamie B. (1985) 39 Cal.3d 787, 792-793, 218 Cal.Rptr. 39, 705 P.2d 362.)
Similarly, in In re Estate of Kampen, 201 Cal.App.4th 971, 135 Cal.Rptr.3d 410, 11 Cal. Daily Op. Serv. 14869, 2011 Daily Journal D.A.R. 17691 (Cal. App. 2011) the California Court of Appeal for the First District upheld the probate court's reduction in compensation to the personal representative because the delay was over ten years and such delay was not in the best interest of the estate or its beneficiaries (at 982-983):
The court also noted that it had authority under Probate Code section 12205 to reduce a personal representative's compensation for failure to administer an estate in a timely fashion. The court found that the time Flickinger “took for administration of the estate exceed[ed] the time required by the Probate
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Code; the time taken was within the control of the personal representative whose compensation [was] being reduced; and the delay was not in the best interest of the estate or interested persons.” The court surcharged Flickinger the statutory compensation for services rendered in administering the estate in the amount of $7,019.81 and for services related to the sale of estate property in the amount of $7,375.27. The court stated that the Probate Code [135 Cal.Rptr.3d 419]did not provide for interest on this amount and these sums did not fall within the definition of Probate Code section 9601, subdivision (a)(1).