IN RE ESTATE OF ROSSO

701 N.W.2d 355

270 Neb. 323

In re ESTATE OF Richard P. ROSSO, deceased.

Linda Rosso, appellant, v. Sandra A. Rosso, appellee.

No. S-04-391.

Supreme Court of Nebraska.

July 29, 2005.

James H. Monahan and Maureen K. Monahan, of Monahan & Monahan, Omaha, for appellant.

Thomas K. Harmon, of Respeliers & Harmon, P.C., Omaha, for appellee.

HENDRY, C.J., WRIGHT, CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.

GERRARD, J.

This is an appeal from a formal probate proceeding involving the estate of Richard P. Rosso. Richard's wife, Sandra A. Rosso, and Richard's daughter, Linda Rosso, dispute the ownership of stock Richard held in the Strata Real Estate Corp. (Strata). Specifically, Linda contends that Richard was the sole owner of the stock, while Sandra argues that the stock was held in joint tenancy by Richard and Sandra. The county court ruled in favor of Sandra and determined that the stock became the sole property of Sandra when Richard died. The issues presented in this appeal are whether Sandra was precluded from making a personal claim to the stock by virtue of her appointment as personal representative of the estate and whether the court required Sandra to meet the correct burden of proof.

BACKGROUND

Sandra and Richard were married in 1969 and had two daughters together. Linda is Richard's daughter from a previous marriage. As relevant, Richard's will, executed February 13, 2001, devised one-half of his estate to Sandra and divided the other half equally among his three daughters. Sandra was nominated in the will to be the personal representative of Richard's estate. The validity of the will is not at issue on appeal.

Richard died on April 10, 2003. On June 12, Linda filed a petition for formal adjudication of intestacy in the county court. However, on June 27, Sandra filed an application for informal probate of Richard's will and nominated herself as personal representative of the estate. The inventory of Richard's estate, filed June 27, included shares of Strata, which, according to the inventory, had been held by Richard and Sandra in joint tenancy with right of survivorship. The shares were valued in the inventory at $220,000, although the record suggests that the corporation was worth far more. The inventory also listed investment accounts that Richard held in joint tenancy with each of his three daughters.

On July 3, 2003, Sandra filed a petition for formal probate of Richard's will. The court scheduled a hearing on the formal petition, and prior to the hearing, Linda filed an objection to Sandra's appointment as personal representative, because "she has a conflict of interest, in that she claims property of the Deceased as her property as joint tenant." After a hearing, on November 20, the court found in favor of Sandra, admitted Richard's will to formal probate, and appointed Sandra to serve as personal representative of Richard's estate in unsupervised administration. Thereafter, the court scheduled a hearing on Sandra's application for a declaration of ownership of assets. A hearing was held on March 1, 2004, to determine whether the Strata stock was held in joint tenancy with Sandra.

At the hearing, Sandra testified that she became involved in Richard's business enterprises the day they were married, initially doing office work, and then becoming a corporate officer and director. According to Sandra, she had been the secretary-treasurer of Strata from 1970 to the present. In her answers to Linda's interrogatories, Sandra stated that she had become a shareholder in Strata in the winter of 1979-80 and that the shares had been reissued in the name of Richard and Sandra as joint tenants with right of survivorship. However, Sandra stated that all the original documents "were destroyed in a flood of the corporate office in the early 1990's."

Sandra testified at the hearing that Strata had two shareholders: herself and Richard. Sandra said that she became a shareholder "about in the late '70's," because Strata was negotiating with the government for the purchase of some land, and they were required to bring the corporate minutes up to date. Sandra testified that shares of Strata stock had been generated that were held by Richard and Sandra in joint tenancy with right of survivorship and that she had physically prepared those shares of stock in her capacity as secretary-treasurer of the corporation. Sandra also said that the transfer had been made on the corporate books.

However, Sandra did not have copies of the corporate books or stock certificates. Sandra explained that

[w]e had a lateral file in [Richard's] office. And all of the abstracts for — for the properties that we owned, the corporate books, were all kept in the top shelf of the lateral file. And a pipe — there's a bathroom upstairs above his office, and a pipe broke and everything flooded. And I — I was working at the hospital at that time, so I wasn't — didn't go in and out of the offices frequently. And it was some time between '92 and '98, and we went to find them [and Richard] had thrown everything away.

Roger Alger, a certified public accountant, testified that he had been Richard's accountant since 1979. Alger testified that he had also "dealt considerably" with Sandra. Alger stated that Sandra had been responsible for keeping all the monthly accounting records and payroll records for Strata and another, now-defunct corporation in which Richard had an interest. Alger had also prepared other documents for several limited partnerships. Alger testified that he had "fairly good knowledge of the intricate workings" of Strata but had never seen any stock certificates or corporate minutes books for Strata. Alger explained, with reference to the stock ownership, that

[t]he stock was held jointly, but for tax purposes we always considered that [Richard] held them in his own. And that was only because of tax attributions — a man and wife are considered one for tax purposes, so we never — we never designated one or the other. It was always Richard had a hundred percent.

An IRS Form 2553 subchapter S election form for Strata, dated March 30, 2001, listed Richard as the sole shareholder of Strata. Alger explained with reference to that form that "the hundred percent just meant that he and his wife — he controlled his wife's shares. So that's how come we filed it that way." Alger explained that the subchapter S election was done to avoid double taxation but that Strata had to remain an S corporation for a period of 10 years or "everything would be sucked back into the `C' corporation and double-taxed." Alger said that the subchapter S election form was not an attempt to illustrate the ownership of the shares and that Richard "wanted that to be jointly held because he didn't feel that he would live the ten years, and we had to keep the corporation alive ten years. He knew [about] that ten-year period." The schedule K-1 attached to the tax return for Strata for the tax year 2001, prepared January 15, 2003, identified only Richard as a shareholder. Strata's tax return for the tax year 2002, prepared December 26, 2003, included both Richard and Sandra on attached schedules K-1. Alger explained that the forms for tax year 2001 had been filed on extension, because Richard had been ill. Alger testified that the tax forms for the tax year 2002 had been completed differently because Richard specifically told Alger that the corporate stock of Strata was held in joint tenancy with Sandra. Alger also explained that the forms for the tax year 2002 had been prepared according to Richard's instructions, although because a filing extension was obtained, the forms were not prepared and filed until after Richard's death. Alger indicated there was no question in his mind that Richard understood all shares of Strata stock were held in joint tenancy with right of survivorship and that Richard "was even angry that I asked the question."

James Stumpf, an Omaha attorney, testified that he became acquainted with Richard in 1997 and 1998, when Richard sought Stumpf's legal advice with respect to some contracts. Stumpf was somewhat familiar with the workings of Strata and was also responsible for preparing Richard's will. Stumpf testified that during the preparation of Richard's estate plan, Richard told Stumpf that with the exception of some oil revenues, all of Richard's assets were in joint tenancy. Stumpf said Richard had specifically indicated that the Strata stock was held in joint tenancy with Sandra. Stumpf said that he had explained to Richard that because his assets were in joint tenancy, a written will was superfluous, but Richard had insisted on having a will anyway.

Linda testified that she was not the record holder of any Strata stock. However, Linda testified that Richard "talked to me at different times, and he told me that I had forty-nine percent, and he had fifty-one percent." Linda also testified that Richard had told her, on one occasion, that she was "down as Vice President" and told her at another point that she was treasurer, although she had never filed a treasurer's report. Linda admitted Richard had never given her any stock certificates. Linda said Richard had given her money on occasion, but did not know if any of that money represented corporate dividends.

Linda said that she was surprised to be informed Richard's property was held in joint tenancy, because "he told me something totally different." Linda testified Richard had told her she would receive one-sixth of his estate, but never told her his Strata stock was held in joint tenancy.

Linda stated that Sandra had been hostile toward Linda and that Richard advised Linda to

get an attorney because he was afraid I wasn't going to get my fair share; and that—he said [Sandra] wanted the whole thing, but he only gave her half. And in an earlier point he had told me he was gonna introduce me to ... Stumpf because he was afraid I wouldn't get my fair share.

After...