NO. 88-277
IN THE SIJPREME COURT OF THE STATE OF MONTANA
1989
IN THE MATTER OF THE ESTATE OF
ROBERT E. STONE, deceased.
APPEAL FROM: District Court of the Fifth Judicial District,
In and for the County of Madison,
The Honorable Frank Davis, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
David N. Niklas, Helena, Montana
C. Bruce Loble, Hel.ena, Montana
For Respondent:
DavFd A. Grauman; Jardine and Grauman, Whitehall,
Montana
Submitted on Briefs: Dec. 9, 1988
Decided: January 27, 1989
3
LC 0
If:
Mr. Justice R. C. McDonough delivered the Opinion of the
Court.
This appeal involves a dispute over fees awarded to the
personal representative of an estate who was removed for
cause. Petitioners Sherrie Schandelmeier and Sam Wonderly,
successor co-personal representatives of the Estate of Robert
Emerson Stone, appeal from an order of the District Court of
the Fifth Judicial District, Madison County. On remand from
a previous appeal to this Court, the District Court was
instructed to remove R. Thomas Garrison as personal
representative of the Estate and determine the fee due
Garrison for his services. The court ordered: (1) Garrison
is entitled to $20,000 for services rendered as personal
representative and attorney for the Estate, and any amount
previously paid to him in excess of that sum must be
reimbursed; (2) Garrison is entitled to $3,814 to pay for the
services of an attorney in resisting his removal as personal
representative; and (3) Garrison must pay the Estate $15,000
as his contribution to lost interest and tax penalties
occasioned by his administration. We reverse and remand.
Petitioners present four issues in this appeal:
1. Whether the prior personal representative and
attorney for the Robert Emerson Stone Estate was entitled to
combined fees of $20,000, as allowed by the District Court?
2. Whether it was proper for the District Court to allow
payment of $3,814 in Estate funds to the attorney for the
former personal representative for his services in the
removal litigation?
3. Whether the District Court, after hearing objections
to the Accountinq of the prior personal representative,
should have made a determination of damages to the Estate
instead of merely ruling on the proper amount of attorney's
fees and personal representative's fees?
4. If the ruling on the issue of damages was within the
scope of the hearing, whether the amount of damages awarded
was sufficient?
The facts of this case were discussed in our prior
opinion, Matter of Estate of Stone (Mont. 1986), 727 P.2d
508, 43 St.Rep. 1760. They will be reiterated here only
where relevant. Our instructions on remand directed the
District Court to remove Garrison and determine his fees.
Once removed by the court, Garrison submitted his Final
Account of all receipts and disbursements during his
administration of the Estate. Petitioners filed an objection
to the Final Account, objecting specifically to the fees
Garrison paid himself as personal representative and attorney
for the Estate, and to the fees paid to a law firm Garrison
employed to defend him in the removal suit.
Petitioners contended that Garrison was not entitled to
a fee, because his administration was harmful to the Estate.
They also contended that Garrison's decision to resist
removal was not made in good faith, and he was therefore not
entitled to pay his attorneys out of Estate funds. Garrison
had paid himself a total of $26,515 for his services as
personal representative and attorney for the Estate. After
hearing was had on Petitioners' objections to the Final
Account, the District Court reduced that fee to $20,000, and
Petitioners appealed.
The fees challenged by Petitioners are outlined by
sections of the Uniform Probate Code as adopted in Montana.
The personal representative's fee is covered in 5 72-3-631,
MCA, which sets a maximum based on the size of the estate,
and directs that in any case the fee shall he "reasonable."
Section 72-3-633, MCA, states that the fee for an attorney
engaged by the estate shall not exceed I+ times the
compensation allowed the personal representative. Section
72-3-632, MCA, deals more explicitly with litigation expenses
incurred by the personal representative on behalf of the
estate, and allows for a "reasonable" attorney's fee for
actions maintained in good faith.
Section 72-3-634, MCA, allows any person with an
interest in the estate to petition for review of fees paid to
a personal representative, attorney or other person rendering
services to the estate. The comments to the Uniform Probate
Code written by the Code Commission state that one important
feature of the UPC is that a personal representative has
initial control over fees paid for services to the estate,
including his own fee. Formerly, fees were set by the
probate court. Because the personal representative would
control the "purse strings" of the estate and essentially pay
himself, the drafters of the UPC Felt it important to allow
for review of those fees.
This Court has not yet had the opportunity to define a
standard of review for cases of this type. However, because
the UPC is a uniform act, we can look to decisions from other
jurisdictions utilizing the same statutory scheme.
The review of fees paid or taken by a personal
representative is left to the sound discretion of the
District Court. We will not overturn that decision absent a
showing of abuse of discretion, and the court's findings of
fact will be upheld unless clearly erroneous. Estate of
Davis (Me. 1986), 509 A.2d 1175; Matter of Estate of Baird
(Mich. 1984), 357 N.W.2d 912.
Once review of a fee is sought by one with an interest
in the estate, the personal representative has the burden of
proving that the services rendered were necessary, and the
fee charged was reasonable. Baird; Matter of Estate of
Vertin (N.D. 1986), 381 N.W.2d 199. With regard to legal
services, a reasonable fee should be ascertained by
considering the time spent, the nature of the service, and
the skill and experience required. Matter of Weaver's Estate
(Mich. App. 1982), 327 N.W.2d 366. A crucial factor for
determining the reasonableness of any challenged fee is
whether the services rendered were beneficial to the estate.
Matter of Kjorvstad's Estates (N.D. 1980), 287 N.W.2d 465.
We agree with the view taken by the courts of the State of
Michigan that when a personal representative's negligence
causes harm to the estate, he or she may be deprived of all
or part of their fee. Matter of Estate of Thacker (Mich.
App. 1984), 358 N.W.2d 342.
In the present case, petitioner Sherrie Schandelmeier is
one of the devisees under the will, and therefore certainly
has an interest in the Estate. Petitioners' objection to the
Final Account challenged the fees taken by Garrison and those
paid to his attorney, thereby requiring a review of those
fees under 72-3-634, MCA. The burden was therefore upon
Garrison to show that the fees paid to himself and to his
attorney were reasonable, and were for the purpose of
obtaining necessary services for the Estate. The record
indicates that he failed to do so.
Beyond submission of the Final Account, which merely
lists the Estate ' s income and expenditures, Garrison adduced
virtually no evidence concerning the reasonableness of the
fees. While there is some evidence from the initial removal
hearing showing Garrison's work product, he has made no
attempt to show the value of those services to the Estate or
their relation to the fees he took. Under cross-examination
by counsel for Petitioners, Garrison testified that he kept
no time logs of his activities as either personal.
representative or attorney for the Estate, and was able to
give only a very rough estimate of the time he devoted to
these tasks.
Garrison's argument for his entitlement to the fees he
charged rests on the premise that they were "the standard
amounts that are allowed." This is fundamentally incorrect.
Sections 72-3-631 and 72-3-633, MCA, provide that fees for
personal representatives or attorneys shall - exceed
not
certain amounts based on the size of the estate. Garrison
took not a standard fee, but the maximum fee under each
section. Given Garrison's removal for cause and his nearly
complete failure to justify his fees when challenged, the
record is patently insufficient to support the District
Court's award.
In our previous opinion, we held that Garrison should be
removed as personal representative and attorney for the
Estate because of shortcomings in the discharge of his
duties:
1. Failure to invest excess Estate monies in an
interest-bearing account.
&. Failure to pay any portion of Montana
-l
inheritance tax due when Estate monies were
available to do so.
3. Failure to file the Estate's inventorv and
appraisement for over four years after his
appointment as personal representative.
4. Active misleading of a devisee concerning the
disposition of the main Estate asset.
The present record also demonstrates a remarkable failure by
Garrison to complete his work properly, and a nearly complete
failure to do so in a timely fashion. Simple arithmetic
indicates that Garrison's failure to invest Estate monies
resulted in lost interest, and his failure to pay taxes
completely or in part resulted in the imposition of penalties
and the accrual of interest on unpaid amounts. These
failures alone brought calculable harm to the Estate, which
calls for reduction or even elimination of Garrison's fee.
As to the fees paid to Garrison's attorney, under 5
72-3-632, MCA, such fees are to be reimbursed only if they
were incurred in an action pursued in good faith. The
District Court's ruling on these fees was based on Finding of
Fact No. 7 , which states that Garrison was obligated to
resist removal under the decedent's will. We find no such
language in the will, and hold this finding to be clearly
erroneous.
R.T. Garrison was sufficiently remiss in performing his
duties as personal representative and attorney for the Estate
of Robert E. Stone that he was removed for cause. He failed
to present meaningful evidence to justify the fees he paid
himself when those fees were challenged. The fees he claimed
for the services of an attorney in resisting removal were
allowed on the basis of a finding of fact that is clearly
erroneous. On this record, the District Court's award of
$20,000 was a manifest abuse of discretion.
The award of $15,000 to the Estate as "reimbursement"
for tax penalties and interest was also inappropriate. The
objection filed by Petitioners sought review of Garrison's
fee, but did not mention any liability that might be imposed
for his actions. The court did not have issue jurisdiction
on the question of Garrison's liability for his actions,
because that issue was not placed before the court in the
pleadings. The award of "reimbursement" was therefore error.
See, In re Marriage of DiPasquale (Mont. 1986), 716 P.2d 223,
43 St.Rep. 557.
We reverse the decision of the District Court as clearly
erroneous and an abuse of discretion, and remand for retrial
of the fee dispute.
Reversed and remand.&.
We concur: A
u
Justice