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In re Estate of Riley - 3/1/2013

Arizona Supreme Court Holds That A.R.S. § 14-3952(1) Requires All Beneficiaries to Execute a Settlement Agreement if It Affects Beneficial Interests in the Estate and the Settling Parties Seek Court Approval Pursuant to A.R.S. § 14-3951.


Decedent died in 1996, leaving her estate to her thirteen children and appointing her two oldest, Joseph Riley and Mary Benge, as co-personal representatives.  Joseph and Mary filed a petition to distribute and close the estate, accompanied by an accounting of their administrative expenses.  One of Decedent’s other children objected to the accounting, claiming that Joseph and Mary breached their fiduciary duties.  The superior court appointed a successor personal representative (“PR”) and ordered Joseph and Mary to submit a new accounting.  The PR objected to the new accounting, but before the Court held a hearing on the objection, the PR, Joseph, and Mary executed a settlement agreement requiring Joseph to pay $15,000 and disclaim his interest in the estate, and Mary to pay $50,000 but maintain her interest in the estate.  In exchange, the estate agreed to release all claims against Joseph and Mary.  Nine of Decedent’s children, none of whom executed the agreement, objected.  The superior court approved the agreement, but the court of appeals reversed, finding that the agreement was void because A.R.S. § 14-3952(1) required all beneficiaries to execute the settlement agreement.  The PR petitioned for review.

The Arizona Supreme Court vacated the court of appeals’ opinion and remanded.  The Court held that the settlement agreement did not bind all beneficiaries because they did not execute the settlement agreement.  A.R.S. § 14-3952(1) requires that a settlement agreement “shall be executed by all competent persons . . . having beneficial interests or having claims which will or may be affected by the compromise.”  In this case, the settlement agreement impacted all of the beneficiaries’ interests because Joseph disclaimed his interest in the estate.  Accordingly, the settlement agreement had to be executed by all of the beneficiaries before the superior court could approve it.

The Court vacated the Court of Appeals’ decision, however, because the failure to secure the signatures of all beneficiaries did not void the settlement agreement for all purposes.  Rather, the failure to comply with the statute only meant that the agreement was not binding on all beneficiaries.

The Court rejected the PR’s argument that the beneficiaries did not need to execute the settlement because it did not diminish their interests, explaining that the statute does not distinguish based on whether a beneficial interest is positively or adversely affected.  The Court also rejected the PR’s argument that requiring signatures from all beneficiaries would impede the resolution of disputes, explaining that the probate statutes provide other means for resolving disputes.

Chief Justice Berch authored the unanimous opinion.

Posted by: Sharad H. Desai

Posted On: 3/4/2013