McGathy/Waldow v. LaPorta – 12/2/2010

December 8, 2010

Arizona Supreme Court Holds That In An Unsupervised Probate Administration Final Distribution of the Estate Is Not Required To Appeal a Court Order.

The personal representative for the estate of Rosanne McGathy filed a petition in the superior court seeking instructions on the allocation of taxes among the beneficiaries.  The superior court issued an order requiring nonprobate beneficiaries to pay a pro-rata share of the taxes and included findings and entry of final judgment pursuant to Rule 54(b) of the Arizona Rules of Civil Procedure.  James LaPorta, a non-probate beneficiary, appealed the order.

The court of appeals dismissed the appeal sua sponte for lack of jurisdiction.  Citing Ivancovich v. Meier, 122 Ariz. 346, 595 P.2d 24 (1979), the court held that the order was not appealable under A.R.S. § 12-2101(J) because there had not yet been a final decree distributing the estate.

The Arizona Supreme Court reversed the court of appeals in an opinion recounting the development of probate law in Arizona since the adoption of the Uniform Probate Code in 1973.  The Court noted the difference between a supervised administration of an estate under A.R.S. § 14-3501 and an unsupervised administration under A.R.S. § 14-3704.  In a supervised administration, the estate is settled in one continuous proceeding of the court and remains under the court’s authority until entry of an order for final distribution of the estate.  When an estate is under supervised administration, as was the case in Ivancovich, all orders entered before a final decree distributing the estate are interlocutory and non-appealable.

In an unsupervised administration, on the other hand, the personal representative has the power to distribute assets without a court order and resorts to formal proceedings only when necessary.  After an order disposing of a formal proceeding, the personal representative may distribute the assets without further court involvement.  In such cases, a nonappealability rule makes no sense because any order disposing of a formal proceeding could turn out to be the last order in the case.  In fact, such a rule undermines the purpose of unsupervised administration by requiring the court to get involved in final distribution before the intermediate ruling may be appealed.  Therefore an appeal is permissible from any final ruling in an unsupervised administration, even if no final distribution has been made.

In a footnote, the Court also disapproved language from In re Estate of Kerr, 137 Ariz. 25, 27-28, 667 P.2d 1351, 1353-54 (App. 1983), which held that an order may not be appealed unless it is at least “of the same general importance” as a list of appealable orders contained in A.R.S. § 12-2101(J) before the statute was amended by the 1973 adoption of the Uniform Probate Code.  No such “importance” requirement exists for unsupervised administrations, and the requirement would not apply to supervised administrations which restricts appeals until after a final distribution.

Justice Hurwitz authored the opinion for the unanimous Court.