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In Re Estate of Rosta

OPINION FILED DECEMBER 28, 1982.

IN RE ESTATE OF VIOLA ROSTA, A/K/A THERESA ROSTA, DECEASED. — (GERARD E. DEMPSEY, EX'R OF THE ESTATE OF VIOLA ROSTA, PETITIONER-APPELLEE AND CROSS-APPELLANT,

v.

RUTH HOLSEN ET AL., RESPONDENTS — FRANK R. HLADNIK ET AL., RESPONDENTS-APPELLANTS AND CROSS-APPELLEES.)



Appeal from the Circuit Court of Cook County; the Hon. Frank R. Petrone, Judge, presiding.

JUSTICE PERLIN DELIVERED THE OPINION OF THE COURT:

Viola Rosta, also known as Theresa Rosta, died testate on April 20, 1980, leaving an estate of $670,903.36. The estate consists of both probate and non-probate assets. The non-probate assets, a joint tenancy savings account and 18 Totten Trust accounts, amount to $368,594.18. The joint tenant in the savings account was Thomas J. Anderson; the beneficiaries of the Totten Trust accounts were Anderson, Frank R. Hladnik, Katherine M. Hladnik, Carol L. Hladnik, Ruth Holsen, decedent's niece, and Ruth's mother, Helen Holsen, decedent's sister-in-law. The probate assets amount to $302,309.18. In her will, decedent provided legacies of $35,000 to Laszlone Rosta, another sister-in-law; $24,432.95 to Helen Holsen; and $2,000 to the pastor of a church. Testatrix directed that the residue be paid in equal shares to Helen Holsen and Ralph Holsen, a nephew. Gerard Dempsey was named as executor.

The principal issue in this appeal concerns the ultimate burden of the Federal estate taxes assessed against the estate. These taxes amount to $149,952.14. The executor petitioned the trial court for an order requiring equitable apportionment of the Federal estate tax liability between probate and non-probate assets. The petition named all of the non-probate beneficiaries as respondents and indicated their respective shares. The court ordered the executor to serve copies of the petition together with summons upon each of the non-probate beneficiaries. Summons was issued to the Hladniks and Richard Anderson, the personal representative of the estate of Thomas J. Anderson, deceased. No summons was served on Ruth Holsen or Helen Holsen, two of the non-probate beneficiaries, or on Ralph Holsen, a residuary legatee.

In their answers opposing the executor's petition, respondents argued that in sections I and VI of her will, testatrix had manifested an intent to preclude equitable apportionment. Section I states: "I direct that all of my just debts, funeral expenses and any other proper charges against my estate be paid in due course during the administration of my estate." Section VI provides: "If at the time of my decease I have any bank or other savings account, which is in joint tenancy with myself and another person, such account shall not be considered an asset of my estate, but shall pass to such other person as surviving joint tenant." In seeking to establish the intent of the testatrix, respondents also relied on certain letters (designated as respondents' exhibits B, C and D) which the scrivener of the will, Gerard Dempsey (the executor herein), sent to the testatrix in the course of preparing her will. Following receipt of the answers, the executor moved for summary judgment on the issue of equitable apportionment and moved to strike respondents' exhibits B, C and D. The trial court denied these motions.

The trial court held that Illinois law requires equitable apportionment of the Federal estate tax burden between probate and non-probate assets of an estate unless the decedent has directed otherwise. The court found that no such direction was expressed in the testatrix' will. The court also found that the letters written by the scrivener to the testatrix did not impart to the will any direction or intent on the testatrix' part that her non-probate assets should not bear their proportionate share of the Federal estate tax liability. Accordingly, the court ordered the Hladniks and Richard Anderson, the personal representative of Thomas J. Anderson, deceased, to pay to the executor that portion of the Federal estate tax liability which was generated by the value of the assets each had received. Specifically, Frank R. Hladnik was ordered to pay $4,789.02; Katherine M. Hladnik and Carol L. Hladnik were each ordered to pay $3,575.89; and the estate of Thomas J. Anderson was ordered to pay $25,904.72.

Respondents have appealed the trial court's order requiring equitable apportionment. The executor has cross-appealed the court's denial of his motion for summary judgment and his motion to strike respondents' exhibits. We will address respondents' arguments first.

I

Respondents initially contend that the trial court's order was void because the court lacked jurisdiction over three indispensable parties: Ruth Holsen, a non-probate beneficiary; Helen Holsen, another non-probate beneficiary who is also a specific legatee and one of the two residuary legatees; and Ralph Holsen, the other residuary legatee. Petitioner (the executor) concedes that the court lacked jurisdiction over these persons but disputes whether they were indispensable parties.

• 1 In the view we take of this issue, it is unnecessary to determine whether these parties were indispensable. While an order entered without jurisdiction over an indispensable party is null and void (People ex rel. Meyer v. Kerner (1966), 35 Ill.2d 33, 38, 219 N.E.2d 617), an exception to this ordinarily inflexible rule has been developed in the "doctrine of representation." (Tri-Mor Bowl, Inc. v. Brunswick Corp. (1977), 51 Ill. App.3d 743, 747, 366 N.E.2d 941.) Under this doctrine, the rule requiring joinder of indispensable parties is not applied when a party, though not before the court in person, is so represented by others that his interest receives actual and efficient protection. This so-called "doctrine of representation" applies where persons are before the court who have the same interests and will be equally certain to bring them forward and protect them, as those of persons not before the court. Moore v. McDaniel (1977), 48 Ill. App.3d 152, 158, 362 N.E.2d 382, and see also the authorities cited therein.

• 2 The executor in this cause petitioned the trial court for an order requiring equitable apportionment of the Federal estate tax burden between probate and non-probate assets. The effect of such an order is to enhance the value of the residuary estate. It is apparent, therefore, that the executor has the same interests as Ralph Holsen and Helen Holsen, the residuary legatees, and has protected those interests by virtue of his petition for equitable apportionment. *fn1 (See Moore v. McDaniel (1977), 48 Ill. App.3d 152, 158, 362 N.E.2d 382, where the court observed that the doctrine of representation has been most frequently applied in cases holding that the executor is an adequate representative of the beneficiaries under a will.) Respondents are non-probate beneficiaries who have opposed the executor's petition for equitable apportionment. Their interests are identical with those of Ruth Holsen, who is also a non-probate beneficiary. In light of these facts, we conclude that the doctrine of representation is applicable in this case. *fn2 For that reason, the failure of the trial court to obtain jurisdiction over the Holsens does not render the court's order void.

II

• 3 Respondents next contend that non-probate assets in a testate estate need not bear their proportionate share of the Federal estate tax burden when the probate assets are sufficient to pay all of the Federal estate taxes, all of the decedent's debts and costs of administration, and all general and specific legacies, and there is a "substantial balance" left for distribution to the residuary legatees. Respondents characterize this as a case of first impression. The executor replies that respondents' argument ignores the rationale of the equitable apportionment rule, i.e., that it is unfair to require probate assets to pay the Federal estate taxes generated by non-probate transfers.

The equitable apportionment doctrine *fn3 was first applied in Illinois in In re Estate of Van Duser (1974), 19 Ill. App.3d 1022, 313 N.E.2d 228. In Van Duser, the decedent died intestate, leaving a gross probate estate of approximately $65,000. In addition, there was approximately $170,000 in joint tenancy property which was not part of the probate estate but was included in decedent's estate for purposes of determining the Federal estate tax liability. The total Federal estate tax on decedent's estate was $39,667 of which $30,623 (or 77.2% of the tax liability) was generated by the property passing in joint tenancy. One of the two heirs at law filed a motion to apportion payment of the Federal estate tax due by reason of decedent's death so that the surviving joint tenants would be directed to pay their equitable shares. This motion was allowed and two of the surviving joint tenants appealed. The question on appeal was whether the Federal estate tax was to be paid proportionately by all persons who received property from the decedent both as heirs at law and as surviving joint tenants, or whether the tax was to be paid entirely from the probate assets.

The appellate court, noting that if the tax were paid only out of the probate estate most of the entire estate would be depleted, stated that, "logic, reason, and simple justice dictate that, unless there is a contrary intention expressed by the decedent, as in a will in testate estates, the doctrine of equitable contribution should be invoked as to non-probate assets to fairly distribute the Federal estate tax burden." (In re Estate of Van Duser (1974), 19 Ill. App.3d 1022, 1024.) The court concluded:

"* * * since the amount of the non-probate assets [property held in joint tenancy] was included in the gross estate in determining the amount of Federal tax liability and thus contributed to the assessment of that tax, impelling justice and fairness dictate, and equity provides, that the recipients of those assets contribute in paying the Federal estate ...


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