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In re Estate of Hogen

Supreme Court of North Dakota

May 27, 2015

In the Matter of the Estate of Arline H. Hogen, Deceased;
v.
Rodney Hogen, Respondent and Appellant and Cross-Appellee Steven C. Hogen, Petitioner and Appellee and Cross-Appellant

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Appeal from the District Court of Cass County, East Central Judicial District, the Honorable John Charles Irby, Judge.

Jonathan T. Garaas, Fargo, N.D., for respondent and appellant and cross-appellee.

Michael D. Nelson, West Fargo, N.D., for petitioner and appellee and cross-appellant.

Carol Ronning Kapsner, Lisa Fair McEvers, Daniel J. Crothers, Dale V. Sandstrom. Opinion of the Court by Kapsner, Justice. I concur in the result. Gerald W. VandeWalle, C.J.

OPINION

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Kapsner, Justice.

[¶1] Rodney Hogen appeals and Steven Hogen, as personal representative of the estate of Arline Hogen, cross-appeals from an order approving a final accounting and settlement in the probate of the estate of Arline Hogen. We hold the district court did not err in concluding the devolution of real property to Rodney Hogen was subject to the personal representative's power during administration of the estate to seek a retainer for any noncontingent indebtedness Rodney Hogen owed Arline Hogen or the estate. We conclude the court erred to the extent it calculated the estate's retainer based on Barnes County conservation reserve program land, but we otherwise conclude the court did not clearly err in determining the estate's retainer against Rodney Hogen's interest in the estate. We further conclude the court did not abuse its discretion in awarding personal representative fees and attorney fees. We affirm in part, reverse in part, and we remand for recalculation of the retainer against Rodney Hogen's interest in the estate after considering the effect of the Barnes County conservation reserve program land on the cash rent for the Barnes County land and on the average per acre cost of production for the Cass County Land.

I

[¶2] Curtiss and Arline Hogen were husband and wife, and they jointly owned about 737 acres of farmland in Barnes and Cass Counties. In the late 1960s, Rodney Hogen began farming the land with his father, Curtiss Hogen. When Curtiss Hogen died in 1993, his will distributed his undivided half interest in the farmland into the Curtiss Hogen Trust B, with Arline Hogen designated as the recipient of the net income from the Trust. Curtiss Hogen's will appointed his sons, Steven and Rodney Hogen, as co-trustees of the Trust and authorized the Trust to continue the farming operation. Rodney Hogen continued farming the land under a cash rent and crop-share rental arrangement with the Trust and with Arline Hogen, the owner of the other undivided half interest in the farmland. An inventory of Arline Hogen's estate reflected the Barnes County land consisted of about 308 tillable acres and 14 non-tillable acres and the Cass County land consisted of about 393 tillable acres and about 22 non-tillable acres. Rodney Hogen initially cash rented the Barnes County land for $30 per acre and farmed the Cass County land as a crop-share tenant. According to Rodney Hogen, under the terms of the crop-share agreement for the Cass County land, he received two-thirds of the crop-share proceeds and was responsible for two-thirds of the input costs and Arline Hogen and the Trust each received one-sixth of the crop-share proceeds and were each responsible for one-sixth of the input costs. Rodney Hogen claimed he made yearly reconciliations of the cash rent and crop-share

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proceeds due to Arline Hogen against the input costs she owed for the Cass County land.

[¶3] When Arline Hogen died on March 23, 2007, she was survived by her two sons, Steven and Rodney Hogen, and her 1994 will equally devised all her property to them. In April 2007, Steven Hogen applied for informal probate of Arline Hogen's will and appointment as personal representative of her estate, and he was appointed personal representative of her estate. According to Steven Hogen, he subsequently determined Rodney Hogen had not made certain cash rent and crop-share payments to Arline Hogen before her death in March 2007, and he claimed her estate was authorized to offset the amount of Rodney Hogen's indebtedness to her against Rodney Hogen's interest in her estate.

[¶4] On March 19, 2010, Steven Hogen, as personal representative of the estate, petitioned for approval of a final accounting, for a determination of Arline Hogen's testacy status, and to formally close the probate of her estate. The personal representative sought a retainer against Rodney Hogen's share of the estate under N.D.C.C. § 30.1-20-03, claiming Rodney Hogen owed the estate about $98,000 for cash rent, crop-share payments, and conservation reserve program payments for crop years 2003 through 2009.

[¶5] Rodney Hogen opposed the personal representative's petition, denying any liability for an offset against his interest in the estate and seeking removal of Steven Hogen as personal representative of the estate and removal of the estate's counsel. Rodney Hogen also sought appointment as successor personal representative and supervised administration of the estate. After a hearing, the district court ordered the parties to proceed under N.D.C.C. § 30.1-20-03 to determine the amount of retainer or offset, if any, against Rodney Hogen's interest in the estate.

[¶6] Rodney Hogen answered the petition, asserting any debt he owed the estate was a contingent indebtedness under N.D.C.C. § 30.1-20-03. He denied " the estate [was] in a condition to be closed," and claimed he was not indebted to the estate for any unpaid rents and expenses. Rodney Hogen thereafter moved for summary judgment on the personal representative's claim for a retainer, asserting any debts he owed the estate were barred by statutes of limitations in N.D.C.C. § § 28-01-26 or 30.1-19-03. He also claimed he and Steven Hogen were co-owners of the cash rent and crop-share proceeds immediately after Arline Hogen's death and those funds were not needed for administration of her estate. The district court ruled the personal representative's claims for cash rent and crop-share proceeds before March 19, 2004, were barred by the six-year statute of limitations in N.D.C.C. § 28-01-16 and granted Rodney Hogen summary judgment dismissing the estate's claim for a retainer for the 2003 crop year. The court denied the remainder of Rodney Hogen's motion for summary judgment.

[¶7] After further proceedings, the personal representative filed an amended petition for approval of a final accounting and formal settlement of the estate in February 2013, seeking a retainer against Rodney Hogen's share of the estate for cash rent, crop-share proceeds, and conservation reserve program payments for crop years 2004 through 2012. After a protracted bench trial, the district court determined that the estate was not entitled to an offset against Rodney Hogen's share of the estate for cash rent or crop-share proceeds before Arline Hogen's death in March 2007, but that Rodney Hogen owed the estate $95,544.44 for cash rent and

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crop-share proceeds for crop years 2007 through 2013. The court further determined Rodney Hogen owed the estate for a share of conservation reserve program payments and also awarded the estate interest, which resulted in a determination that Rodney Hogen owed the estate a total of $123,387.44 to be offset against his interest in the estate. The court also approved Steven Hogen's request for the estate to pay $27,500 in personal representative fees and $333,272.23 in attorney fees, costs, and expert witness fees.

II

A

[¶8] Rodney Hogen argues the district court erred in authorizing the personal representative to pursue a retainer in this probate proceeding against his devised real property for claimed post-death cash rent and crop-share proceeds under N.D.C.C. § 30.1-20-03. He claims his share of Arline Hogen's real property vested in him immediately upon her death under N.D.C.C. § 30.1-12-01 and the common law rule stated in Stanton v. Stanton, 134 Neb. 660, 279 N.W. 336 (Neb. 1938). He asserts " North Dakota's present statutory scheme seems to follow the general common law rule . . . as to devised real property" to the effect that when a decedent dies testate, a debt owed the decedent, who failed to mention the debt in the will, is not subject to the right of retainer and the debt must be collected in a separate legal action.

[¶9] In Stanton, 279 N.W. at 341, the Nebraska Supreme Court described the common law for devolution of a decedent's property:

It must be remembered that at common law all of the property of a deceased person passed direct to his heirs upon his death, free from any debts due the deceased from the heirs. Most states, including this state, have enacted statutes providing that personal property passes to the executor or administrator upon the death of the owner. Such statutes are clearly in derogation of the common law and it is only because of them that an executor or administrator comes into possession of the personalty and may retain from the interest of a legatee or distributee the amount owing to the deceased. In this state the legislature has not changed the common law in so far as the descent of real estate is concerned. The result is that real estate descends to the devisees of a deceased free from the debts of such devisee subject only to conditions imposed by statute. Our statutes, hereinbefore cited, do not provide for advancements in testate estates, the will of testator presumably being the testator's last expression of his intention. There being nothing in the will purporting to charge the devisee with the indebtedness owing the testator, it evinces an intention to treat the notes as a simple indebtedness and to leave their enforcement to the ordinary legal methods provided by law. No charge against the land was created by the testator in the case at bar. Under such circumstances, the only remedy of the administrator or executor is to invoke the ordinary legal remedies to enforce payment. The adoption of any other rule would be equivalent to a rewriting of testator's will by us or tantamount to the passage of a statute by the court in a field where the legislature has refused to act.

[¶10] In Stenson v. H.S. Halvorson Co., 28 N.D. 151, 156, 147 N.W. 800, 801 (1913) (citing 1905 R.C. § 5186), a case involving a decedent without a will, this Court considered the effect of a statutory provision stating that both real and personal property of an intestate decedent

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passed to the decedent's heirs subject to administration. This Court sustained a right of retainer against an heir of the intestate decedent and held the heir's indebtedness constituted part of the estate's assets for which the heir should account before receiving anything out of the estate's other assets. 28 N.D. at 159-62, 147 N.W. at 802-04.

[¶11] Both Stanton and Stenson recognize the common law rule for devolution of property may be altered by statute, and Rodney Hogen's arguments require examination of relevant parts of the Uniform Probate Code (" U.P.C." ), adopted in North Dakota in 1973. See 1973 N.D. Sess. Laws ch. 257, § 1. See also N.D.C.C. § 1-01-06 (" [i]n this state there is no common law in any case in which the law is declared by the code" ).

[¶12] Statutory interpretation is a question of law, fully reviewable on appeal. Estate of Elken, 2007 ND 107, ¶ 7, 735 N.W.2d 842. The primary objective in interpreting a statute is to determine the intent of the legislation. Id. The intent of legislation must be sought initially from the statutory language. Olson v. Job Serv. N.D., 2013 ND 24, ¶ 5, 826 N.W.2d 36. Words in a statute are given their plain, ordinary, and commonly understood meaning, unless defined by statute or unless a contrary intention plainly appears. N.D.C.C. § 1-02-02. Statutes are construed as a whole and are harmonized to give meaning to related provisions. N.D.C.C. § 1-02-07. We construe statutes to give effect to all of their provisions, so that no part of a statute is rendered inoperative or superfluous. N.D.C.C. § 1-02-38(2) and (4). Statutory provisions that are part of a uniform statute must be construed to effectuate their general purpose to make uniform the law of those states enacting them. N.D.C.C. § 1-02-13. In construing the U.P.C., we may also look to the Editorial Board Comment for guidance. In re Estate of Conley, 2008 ND 148, ¶ 15, 753 N.W.2d 384.

[¶13] Section 30.1-20-03, N.D.C.C. (U.P.C. § 3-903), provides for a right of retainer or offset against a successor's interest in an estate for the amount of a noncontingent indebtedness of the successor to the estate:

The amount of a noncontingent indebtedness of a successor to the estate if due, or its present value if not due, shall be offset against the successor's interest. But, the successor has the benefit of any defense which would be available to the successor in a direct proceeding for recovery of the debt.

[¶14] Under the U.P.C., " '[s]uccessors' means persons, other than creditors, who are entitled to property of a decedent under the decedent's will or . . . [by intestate succession under N.D.C.C.] title [30.1]," and " '[p]roperty' includes both real and personal property." N.D.C.C. § 30.1-01-06(43) and (53) (U.P.C. § 1-201(38) and (49)). The language of the retainer statute applies to the " amount of a noncontingent indebtedness . . . if due, or its present value if not due," but the U.P.C. does not define a " noncontingent indebtedness."

[¶15] One source defines " contingent" as " [p]ossible; uncertain; unpredictable," or " [d]ependent on something that might or might not happen in the future; conditional." Black's Law Dictionary 387 (10th ed. 2014). Another source defines contingent as " likely but not certain to happen: possible" ; " in happening by chance or unforeseen causes." Merriam Webster's Collegiate Dictionary 270 (11th ed. 2005). Juxtaposing those definitions with the ordinary definition of " non" as the " reverse, absence of, or lacking the usual esp. positive characteristics of the thing specified" in Merriam Webster's Collegiate Dictionary at 841, results in ascribing a meaning

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to noncontingent as something that is certain to happen or is not conditioned on something that might or might not happen in the future. These sources also define " indebtedness" to mean the condition of owing money or being indebted, or something such as an amount of money that is owed. Black's Law Dictionary at 885; Merriam Webster's Collegiate Dictionary at 632.

[¶16] We conclude a " noncontingent indebtedness" means an amount owed that is certain to occur and is not subject to some future uncertain event which may or may not happen. See Graber v. Bontrager, 69 N.D. 300, 305-06, 285 N.W. 865, 868-69 (1939) (defining contingent claim as a claim for which the liability depends upon some future event which may or may not happen and which makes it uncertain whether it will ever be a liability). We further conclude cash rent and crop-share obligations a devisee owes a decedent or the estate are debts or obligations that are certain to happen and are not conditioned on something that might or might not happen in the future. We therefore conclude a devisee's cash rent and crop-share obligations to a decedent are a noncontingent indebtedness under N.D.C.C. § 30.1-20-03 (U.P.C. § 3-903).

[¶17] Moreover, the plain language of N.D.C.C. § 30.1-20-03 (U.P.C. § 3-903) authorizes an offset against a " successor's interest" and permits a successor to raise any defense to a noncontingent indebtedness which would be available to the successor in a " direct proceeding" for recovery of the indebtedness. The U.P.C. defines a " proceeding" to include an " action at law and suit in equity." N.D.C.C. § 30.1-01-06(42) (U.P.C. § 1-201(37)). We construe the phrases " successor's interest" and " direct proceeding" in N.D.C.C. § 30.1-20-03 (U.P.C. § 3-903) to give meaning to each phrase and to authorize the personal representative to allege " offsets against the successor's interest" in the context of the probate of an estate instead of requiring the personal representative to bring a separate lawsuit or direct proceeding to collect the debt. We therefore reject Rodney Hogen's argument the personal representative was required to bring a separate lawsuit to offset Rodney Hogen's indebtedness, if any, to Arline Hogen or to the estate against his successor's interest in the estate.

[¶18] Rodney Hogen nevertheless argues his share of Arline Hogen's real property vested in him immediately upon her death under N.D.C.C. § 30.1-12-01 (U.P.C. § 3-101), and the district court should have determined the estate had no right to post-death cash rent and crop-share proceeds from 2007 through 2009 because the estate made no demand, had no administrative need, and did not have possession of the land and the court should have determined the estate had no right to post-death farm rent from 2010 through 2013 because the personal ...


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