NO. 96-074 INTHESUPREMECOURTOFTHESTATEOFMONTANA

INRETHEESTATE OFMARYK. DAMM, h/Q!!,:?iVj!Q!j Deceased.

APPEAL FROM: District Court of the Seventy Judicial District,

In andfor the County of Richland, TheHonorable Richard G.Phillips, Judge presiding.

COUNSELOFRECORD:

For Appellant: George T. Radovich, Radovich LawFirm, Billings, Montana (for Edwin K. Damm) Fred E.Whisenand, McIntee &Whisenand, Williston, North Dakota (for Leona Howard) For Respondent: Mike Weber, Cresap, Weber &Irigoin, Sidney, Montana (for Alice Synek)

Filed: Submitted onBriefs: September 5, 1996 Decided: November 21, 1996Justice Charles E. Erdmann delivered the opinion of the Court.

Pursuant to Section I, Paragraph 3(c), Montana Supreme Court 1995 Internal Operating Rules, the following decision shall not be cited asprecedent andshall bepublished byits filing asapublic document with the Clerk of the Supreme Court andbyareport of its result to State Reporter Publishing Company and West Publishing Company. Edwin DammandLeona Howard appeal from anorder issued bythe Seventh Judicial District Court, Richland County, approving the final accounting of the estate of Mary K. Dammwith respect to its award of personal representative fees and attorney fees. We affirm.The issues onappeal are asfollows: 1. Did the District Court err in setting the amount of compensation to the personal representative? 2. Did the District Court err in approving the fee agreement between the personal representative and the attorney for the estate? FACTS Mary K. Dammdied testate onApril 7, 1993. Mary's last will andtestament provided that the residue of her estate bedivided in equal shares to her three children, Alice Synek, Edwin Damm, and Leona Howard. The assets of the residuary estate consisted of Mary's residence in Sidney, mineral property located in Richland County, one bond, and numerous bank accounts and certificates of

2deposit. Mary also held bank accounts andcertificates of deposit

in joint ownership with Alice, Edwin, and Leona. Mary nominated Alice to be the personal representative of the estate and the District Court appointed Alice to act in that capacity. InNovember 1993, Alice filed her final account, petition for determination of testacy, determination of heirs, and for settlement and distribution of the estate. OnDecember 14, 1993, the District Court conducted ahearing on the matter. At that hearing, Edwin's attorney stated that he had filed a separate complaint against Alice regarding the treatment of certain joint tenancy acc0unts.l Edwin's attorney also objected to the amount of personal representative fees andattorney fees included in the final accounting and argued that closing the estate at that time would bepremature. The court agreed to continue the hearing so that Alice andthe attorney for the estate could file affidavits in support of their time spent working onthe affairs of the estate. OnDecember 18, 1995, Alice filed her second final account, petition for determination of testacy, determination of heirs, and for settlement and distribution of the estate. Alice sought $14,283 in personal representative fees, and $21,394 in attorney fees. Edwin and Leona both filed objections to the final accounting and onJanuary 9, 1996, the District Court conducted a

1The companion suit against Alice involved whether or not some of the jointly held bank accounts andcertificates of deposit should be included in the estate. The litigation was eventually settled in 1995 and resulted in asignificant delay in the final accounting of the estate. 3hearing onthe matter. OnFebruary 7, 1996, the court issued its

order approving the final account asadjusted. In that order, the court awarded Alice $5,280 in personal representative fees and approved the fee agreement between Alice andthe attorneys for the estate. This appeal followed. ISSUE 1 Did the District Court err in setting the amount of compensation to the personal representative? Inher affidavit filed with the court, Alice indicated shehad spent 314.25 hours performing her duties as personal representative. The $14,283 total fee award she sought in the final accounting of the estate resulted in acompensation rate of

over $45per hour. TheDistrict Court reduced the number of hours to 264 andthe hourly rate to $20, resulting in atotal fee award in the amount of $5,280. Edwin andLeona argue onappeal that Alice inflated her fee in order to "have her vengeance onthe other heirs for the poor or unequal treatment shefeels shereceived atthe hands of her mother during her lifetime." They contend that Alice wasmotivated byher

own self-interest and submitted false time records and afalse affidavit to the court. Edwin and Leona argue that Alice should not be compensated for her time in resisting the separate civil lawsuit andthey claim that the maximum number of hours Alice could have expended onthe affairs of the estate was221.75. They claim that $8per hour is areasonable rate of compensation since that

4wasthe highest hourly rate Alice ever received during the course

of her regular employment. Thus, Edwin andLeona maintain that, at best, afair and equitable fee should be$1,774. Section 72-3-634(Z), MCA, provides that in any dispute concerning fees, the court shall set the fee. Wehave previously held that the review of fees paid or taken by a personal representative is left to the sound discretion of the district court. Flikkema v. Kimm (1992), 255Mont. 34, 42, 839 P.2d 1293, 1298. The court's determination will not beoverturned absent a showing of anabuse of discretion. Flikkema, 839P.2d at 1298-99 (citing Estate of Stone (1989), 236Mont. 1, 768 P.2d 334). The test for abuse of discretion is whether the trial court acted arbitrarily without employment of conscientious judgment or exceeded the bounds of reason resulting in substantial injustice. Gaustad v. City of Columbus (1995), 272Mont. 486, 901P.2d 565. In the present case, the District Court determined that even though Alice's accounting for her hours varied from the original

time sheets tothe affidavits supplied to the court, it would give her the benefit of the doubt. Thecourt determined that the hours spent in preparation ofthe separate civil litigation should not be paid from the estate funds and that 'I[alfter reviewing the other hours contained in the time sheets," Alice should becompensated for 264 hours of work. In addition, the District Court held that the filing, deposition, andjury costs associated with the separatestated that the personal representative is free to contract with

employees of the estate aslong asthe fees for such services are not excessive. Thecourt stated that anexcessive fee is onethat goes beyond the ceiling established by §72-3-633, MCA, and held that the "statutory language puts anoutside limit onwhat can be contracted for." Edwin and Leona argue that anattorney should becompensated only for those services which were beneficial to the estate. They

claim that Alice andher attorney attempted to keep certain joint accounts out of the estate andthat the separate litigation which resulted wasnot beneficial to the estate. Edwin and Leona argue that the attorney fees should belimited to the attorney's hourly rate multiplied by the amount of time actually spent onhandling estate matters. Here, they claim that, at most, the attorney fees should be$3,468, based on40.8 hours of work at $85per hour. Alice argues that whenthe fee for anattorney is questioned, the court does not set the fee, but rather, reviews the fee arrangement. She claims that the personal representative, not the court, sets the attorney fees in the first instance and that the estate is bound bythat agreement. Alice argues that even though the fee contract is open for review, the amount of the fee is not automatically converted into aquantummeruit measure of compensation whereby recovery is limited exclusively tothe reasonable value of services rendered onanhourly basis. Shecites to Inre Estate of Magelssen (1979), 182Mont. 372, 380, 597P.2d 90, 95, where thisCourt stated that quantummevuit compensation is normally appropriate

only where avalid contract does not exist. Section 72-3-633, MCA, provides that if the services of an attorney are engaged by the personal representative, the compensation of the attorney shall not exceed one and one-half

times the compensation allowable to the personal representative. Juxtaposed against that statutory requirement, however, is the situation where the terms of the attorney fee agreement exceed the statutory ceiling. In that regard, the District Court cited to Maselssen, 597 P.2d at 95, where westated: It is clear that acourt, whenreviewing afee agreement under asubstantially performed contract, cannot blind itself to the terms of the contract and make its own determination of what is reasonable. In Maselssen, wealso stated that: Wedonot believe that section 91A-3-722 [the predecessor to §72-3-634, MCA,which allows the court to review the employment of attorneys andtheir fees1 was intended to permit competent, fullyinformedpersonalrepresentatives to disavow their otherwise enforceable contracts for an attorney's services. Maselssen, 597P.2d at 95. Thus, the statutory maximum should not necessarily prevent an award of attorney fees which exceed the ceiling in a situation where the personal representative and attorney have contracted for ahigher fee andthe contract hasbeen substantially performed. Wetherefore conclude that in this case the District Court did not abuse its discretion when it determined that the fee agreement between Alice and the attorney must be approved.

8Nevertheless, the court did not award aspecific amount of

attorney fees. Wemust therefore turn to the attorney/client fee agreement in order to determine the amount of attorney fees which should be paid by the estate in this case. According to the attorney's affidavit filed with the court, he andAlice "entered into an oral agreement wherein Alice Synek agreed to pay [the attorney] the maximum fee allowed bySection 72-3-663, MCA[sic]." It is clear that the fee agreement set the attorney fees at the statutory maximum. In Issue 1weheld that the District Court did not abuse its discretion when it awarded Alice $5,280 in personal representative fees. Thus, the statutory maximum for attorney fees is $7,920 and the final accounting of the estate should reflect that amount. Affirmed.

Justice

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