Opinion
No. 78-040
Decided May 17, 1979. Rehearings denied June 14, 1979.
Removed co-trustee and a beneficiary in the inter vivos trust established by decedent appealed a judgment of the probate court denying the removed co-trustee's motion for declaratory judgment and the beneficiary's motion to intervene.
Affirmed
1. TRUSTS — Summary Judgment of Dismissal — Challenge to Tax Assessment — Not Timely — Wholly Independent of Bank. A summary judgment of dismissal of the then co-trustee's motion for declaratory judgment was proper since he lacked standing to challenge the inheritance tax assessment as the motion was not timely filed; additionally, the motion could not be characterized as a follow up on the objections of the bank as co-trustee, which were timely filed, because the bank, having settled the matter, no longer held objections, and the co-trustee's dispute was wholly independent of the bank.
2. Removed Trustee — May Not Continue — Prosecute An Appeal — On Behalf of Trust. A trustee may not continue to prosecute an appeal on behalf of the trust after he has been removed as trustee.
3. Compromised Tax Assessment — Court Hearing — Not Mandatory — Notice — — All Affected Persons — Not Mandatory. A court hearing on objections to a tax assessment on a trust filed pursuant to § 39-23-124, C.R.S. 1973, is not mandatory where the administrator of the trust and the taxing authority reach a compromise; notice of the compromise need not be given to all affected persons.
Appeal from the Probate Court of the City and County of Denver, Honorable Harold D. Reed, Judge.
Frank M. Cavanaugh, Myles J. Dolan, for plaintiff-appellant and intervenor-appellant.
J. D. MacFarlane, Attorney General, David W. Robbins, Deputy Attorney General, Edward G. Donovan, Assistant Attorney General, Jeffrey G. Pearson, Assistant Attorney General, for Colorado Department of Revenue.
Gorsuch, Kirgis, Campbell, Walker Grover, William C. McGehee, Robert J. Kapelke, for defendants-appellees.
Frank M. Cavanaugh and Francetta Bostwick Armour appeal from a judgment of the probate court denying appellant Cavanaugh's motion for declaratory judgment and appellant Armour's motion to intervene. We affirm.
This action concerns the administration of the estate of May C. Malone, deceased, and a Colorado Department of Revenue (Department) assessment of taxes on the estate. Before her death Malone had created an inter vivos trust; at the time of her death, her will established two testamentary trusts. Defendant Colorado National Bank (Bank) was administrator CTA of the estate, and Cavanaugh was the attorney for the Bank as administrator CTA. Both the Bank and Cavanaugh served as co-trustees for all three trusts. Appellant Armour claims a beneficial interest in the inter vivos trust.
Malone died in 1969, and on April 29, 1976, the Department entered its tax assessment in the probate court. Cavanaugh, who had been litigating the tax question at the federal level on behalf of the estate, filed a protest in the probate court to the state tax assessment, without first consulting his client, the Bank as administrator CTA. The Bank subsequently terminated Cavanaugh's employment as attorney, and the probate court dismissed the objections because they were not verified or authorized by the Bank. This judgment was not appealed. The dismissal was, however, "without prejudice to the right of any proper person representing the [Bank] from presenting further objections."
The Bank itself later filed timely objections to the tax assessment. The Department and the Bank then entered into negotiations which led to a settlement of the tax assessment. The Bank paid the agreed amount on October 15, 1976, and the Department filed an amended assessment on October 19.
Meanwhile, on October 18, Cavanaugh, in his capacity as co-trustee, filed a motion for a temporary restraining order and for declaratory judgment of the decedent's interest in the inter vivos trust, naming the Department and the Bank as defendants. By the motion Cavanaugh sought to enjoin collection of the inheritance tax which the Bank had paid three days before. The motion for temporary restraining order was denied by the court; Cavanaugh has not appealed from that ruling.
The Department and the Bank filed motions to dismiss the motion for declaratory judgment. The probate court elected to treat the motions to dismiss as motions for summary judgment and permitted the parties to file supporting affidavits. On May 17, 1977, Cavanaugh was removed as co-trustee. See In re Estate of Malone, 42 Colo. App. 353, 597 P.2d 1049, (1979). On September 15, the court granted defendants' motions for summary judgment of dismissal, and on October 11, Armour, who had not been a party in the original proceedings, filed a motion to intervene, and she and Cavanaugh filed similar motions to vacate the summary judgment. The court denied the motions to vacate, ordered Armour's pleadings stricken, and granted Armour leave to intervene for purposes of appeal only.
Appellants first contend that the court erred in granting the summary judgment of dismissal of Cavanaugh's motion for declaratory judgment. We disagree.
The court's decision was based on several grounds including mootness, lack of standing, and failure to follow statutory procedure. Because we agree that Cavanaugh lacked standing to challenge the inheritance tax assessment, we need not examine the court's other grounds for dismissal.
[1] Cavanaugh, in his capacity as co-trustee, filed his motion for declaratory judgment nearly six months after the Department had filed its original assessment. Therefore, even if the motion could be characterized as a protest within the meaning of § 39-23-124, C.R.S. 1973 (1978 Cum. Supp.) and § 39-23-142(2), C.R.S. 1973 (1978 Cum. Supp.), it was not timely because it was filed more than 90 days after the filing of the report of assessment. Section 39-23-124, C.R.S. 1973 (1978 Cum. Supp.) and § 39-23-142(2), C.R.S. 1973 (1978 Cum. Supp.). In addition, the motion could not be characterized as a follow-up on the Bank's objections, which were timely filed, because the Bank, having settled the matter, no longer held objections, and Cavanaugh's dispute was wholly independent of the Bank. See Smith v. County of El Paso, 42 Colo. App. 316, 593 P.2d 979, (1979).
[2] Cavanaugh would have been unable to initiate any objections after he was dismissed both as attorney for the Bank and as co-trustee of the trusts. The remaining question is whether after his removal as co-trustee, he could continue an action he had commenced before his removal. Though we find no Colorado case in point, it has been held that after an executor has been removed, he has no authority to prosecute an appeal on behalf of the estate. See, e.g., People ex rel. Peoria County v. Harrigan, 291 Ill. 206, 125 N.E. 903 (1919). And, after removal, a trustee is no longer acting on behalf of the beneficiaries; thus, he no longer has any interest in the subject matter of the action, even if he initiated the matter. Cf. Kehaya v. Axton, 32 F. Supp. 266 (S.D. N.Y. 1940) (removed director of corporation had no standing to maintain action he began before his removal as director). We believe this position to be sound and therefore hold that a trustee may not continue to prosecute an appeal on behalf of the trust after he has been removed as trustee. Thus, the court did not err in dismissing Cavanaugh's motion.
Appellants next contend that the court erred in denying appellants' motion to vacate the September 15, 1977, order because Armour had no notice of the compromise and therefore the compromise is without effect. We disagree.
[3] During the administration of an estate or trust, the Bank as fiduciary has the power to compromise tax claims against the estate or trust without securing court authorization. Section 15-1-804(2)(r), C.R.S. 1973. Thus, contrary to appellants' position, a court hearing on objections filed pursuant to § 39-23-124, C.R.S. 1973 (1978 Cum. Supp.) and § 39-23-142(2), C.R.S. 1973 (1978 Cum. Supp.), is not mandatory where the administrator and the taxing authority reach a compromise.
In addition, the Bank is not required to give notice of the compromise to all persons who might be affected unless the Bank chooses to protect itself from subsequent lawsuits by securing court approval of the compromise. Section 15-12-1102, C.R.S. 1973. Because the Bank did not obtain court approval of this compromise, Armour may have other recourse, but she is not entitled to challenge the dismissal of Cavanaugh's motion. In addition, because Armour did not attempt to intervene until after the judgment and was not an indispensable party to the action, the court did not err in denying her motion to intervene or to vacate the September 15, 1977, order. See In re Estate of Scott, 40 Colo. App. 343, 577 P.2d 311 (1978).
Judgment affirmed.
JUDGE BERMAN and JUDGE VAN CISE concur.