NO. 95-103 INTHESUPREME

COURTOFTHESTATEOFMONTANA 1995

APPEALFROM: District Court of the Eighth Judicial District,

In andfor the County of Cascade, TheHonorable Robert S. Keller, Judge presiding.

COUNSELOFRECORD:

For Appellant: Keith Tokerud, JonS. McCarty; Scott &Tokerud, Great Falls, Montana

For Respondent: WardE. Taleff; Alexander, Baucus, Taleff &Paul, Great Falls, Montana J. Daniel Hoven; Browning, Kaleczyc, Berry &Haven, Helena, Montana

Filed: Submitted onBriefs: July 6, 1995 Decided: fiovember 2, 1995

I ClerkJustice W.William Leaphart delivered the Opinion of the Court.

Appellant Mazie Ross appeals from an order of the Eight Judicial District Court, Cascade County, denying Ross' requested relief regarding the conservatorship of Mazie Richardson, deceased, anddenying Ross' request for attorney's fees. Weaffirm. Backqround In October 1981, respondent GeneB. Daly was, bycourt order, appointed conservator ofMazie Richardson's estate. Richardson was anincapacitated andprotected person. Ross is her daughter and only surviving child. Pursuant to §72-S-424, MCA,andthe courtordered conservatorship appointment, Daly wasrequired to file an inventory of the estate and annual accounting of estate administration. From its beginning, this conservatorship was subject to disputes between Daly andRossandher sons. After aNovember 1984 hearing, the District Court appointed respondent Jack P. Stevens, P.C., C.P.A., as co-conservator to

serve with equal and independent authority with Daly. Thecourt further ordered that Stevens file an estate inventory within 90 days, account for the period between October 1981 and November 1984, andaccount annually for the estate‘s administration. Mazie Richardson died in September 1991andRosswasappointed personal representative of her estate. In December 1991, Rosspetitioned the court to order the coconservators to file anestate inventory andaccounting. Thecourt ordered that Daly file aninventory within two weeks andthat both conservators file anaccount of estate administration within five 2weeks. These tasks were not completed. Ross alleges that Daly was

unwilling, while Daly alleges that health problems prohibited him from complying. As a result of Daly's alleged inaction, Ross requested a conference with the District Court. In June 1992, Ross and her counsel held the conference with Judge Joel Roth; Judge Roth subsequently held Daly in contempt and awarded Ross her attorney's fees and costs in an amount to be determined at a later hearing. Daly was not notified of this conference. In July 1992, Daly filed

an accounting of the conservatorship estate, prepared by aprivate accounting firm, with the District Court. Ross objected to this accounting and requested ahearing to clarify Daly's accounting and to determine her attorney's fees and costs from the June contempt proceeding. Daly did not appear at the hearing scheduled to determine these issues, held in December 1992. Only Ross presented testimony and the court took the matter under advisement. In January 1993, Daly requested the court reopen the matter as well as continue the hearing on Ross' objections and request for attorney's fees and costs. Onthe April 1993 date set for the rehearing, Judge Roth recused himself. The matter was transferred to Judge Robert S. Keller. In November 1994, Judge Keller conducted a re-hearing on all issues and on December 31, 1994, issued an order denying Ross' requested relief. This appeal followed. IssuesWerestate Ross' issues as follows:

31. Did the District Court err byruling that Daly andStevens are

not liable for misfeasance or for the alleged insufficiencies in the accounting of the estate administration? 2. Did the District Court err by allowing the co-conservators their fees? 3. Did the District Court err bydisallowing Rossher attorney's fees? Standard of Review Weuseathree-step test to determine whether the findings are clearly erroneous. First, if acourt's findings are not supported by substantial credible evidence, they are clearly erroneous. Second, if acourt hasmisapprehended the effect of the evidence, its findings are clearly erroneous. Third, if a review of the record leaves the reviewing court with the definite and firm conviction that amistake has been committed, the lower court's findings are clearly erroneous. Interstate Production Credit Ass'n

v. DeSaye (1991), 250Mont. 320, 323, 820P.2d 1285, 1287. Wedo not reweigh the evidence before the district court, evaluate witness credibility, or substitute our judgment for that of the district court. SeeDetienne Associates Ltd. v. Montana Rail Link, Inc. (1994)I 264 Mont. 16, 22, 869 P.2d 258, 262. "Wereview conclusions of law to determine whether the district court's interpretation of the lawwascorrect." In re Marriage of Barnard (1994), 264Mont. 103, 106, 870P.2d 91, 93. 1. Did the District Court err byruling that Daly andStevens are not liable for misfeasance or for the alleged insufficiencies in the accounting of the estate administration? Claims aaainst Daly TheDistrict Court described this situation asafamily feud,

acharacterization that wecannot challenge. At the heart of Ross'

4arguments is Daly's alleged misfeasance anddeficient accounting.

Because of health problems, Daly was unable to assist with the District Court's December 1994hearing. TheDistrict Court found that the maximumdisputed amountis $38,000, which includes $22,000 of conservator fees paid to Daly ($10,000 is identified as conservatorship fees and $12,000 is identified as "possible" conservatorship fees). TheDistrict Court found that: anyamounts of moneynot directly traceable to the care of Mazie Richardson are more than offset by convincing evidence illustrating that Mr. Daly and his wife Ruth utilized their personal funds to set up an incomeproducing account with Waddell and Reed [an investment firm]. Theonly credible evidence submitted to the Court establishes that Mr. Daly andhis wife set upanincome producing account by utilizing $24,000 of their own personal funds. This account provided Richardson with $150-200 per month from the

time of its inception in 1986 until her death in 1991. The District Court heard evidence that the redemption value of the Waddell and Reed account was $27,315 and it paid dividends of $13,094 over the life of the account. The District Court found that "atotal of over $40,000 of principal anddividends generated from the personal funds of Mr. Daly andhis wife went directly to the care of Mazie Richardson anduponher death to her estate." Thecourt concluded that the 1992 inventory was as complete andaccurate aspossible. It appears that Daly did not cooperate with all court orders and that Ross and her sons did not fully cooperate with Daly. TheDistrict Court concluded that Daly was not able to prepare aninventory of the estate's assets but Daly

5did knowwhat hehadreceived andspent andhetherefore could have

made an annual accounting. The District Court balanced this deficiency against the fact that Daly provided for Richardson's best interests andDaly substantially augmented the assets of the conservatorship. Wenowapply the three-part test from De&ye. The District Court's findings are supported by substantial evidence. Further, the District Court did not misapprehend the evidence in the record. Finally, after areview of the District Court's order, wehave a firm conviction that a mistake was not committed. The record supports that the District Court's findings were not clearly

erroneous. Wewill not substitute our judgment for that of the District Court. Finally, weaffirm the District Court's conclusion that in light of Daly's present health concerns nouseful purpose can be served in examining questions of contempt or sanctions. Claims aqainst Stevens TheDistrict Court found that Stevens did not receive anyfees for his conservatorship duties and no evidence was presented to contradict the finding that the only moneypaid to Stevens wasfor out-of-pocket expenses. TheDistrict Court also found that Ross' conduct andprior pleadings support the finding that Stevens was not jointly liable for the acts of Daly. Therecord supports that Stevens properly collected and accounted to the estate for all funds andassets collected byhimor in his possession. Finally, the District Court held that Stevens did not consent to Daly's

6failure to file aninventory, nor did Stevens negligently allow or

enable Daly to commit awrongful act. Ourapplication of DeSaye is the same for Stevens asit wasfor Daly. Therecord supports that the District Court's findings were not clearly erroneous. Wewill not substitute our judgment for that of the District Court. 2. Did the District Court err by allowing the co-conservators their fees? TheDistrict Court considered that Daly hasnomemoryof the proceedings andnopersonal assets. TheDistrict Court applied the doctrine of in pari delict0 to conclude that the parties should be left the way they were found. TheDistrict Court noted that to disallow Daly his fees would require him to pay Ross $8,000. The District Court, asacourt of equity, concluded that such apayment would be "fundamentally wrong." Particularly in light of Daly's

care for Richardson, weagree. Asweheld in issue one, the District Court did not err in its findings regarding the co-conservators' conduct and liability. Further, the District Court correctly found that Richardson was well taken care of andher estate wasaugmented by Daly's conduct. It would beunequitable andmanifestly unjust to disallow the coconservators' fees when these facts are combined with the contentious conduct of Ross andher sons andthe apparent ongoing family dispute regarding the conservatorship. 3. Did the District Court err bydisallowing Rossher attorney's fees? The District Court properly considered that attorney's fees

are awarded where authorized by statute or contract. This casedoes not fit into either of those categories and there is no

equitable basis for awarding fees in this case. TheDistrict Court properly interpreted the law regarding Ross' attorney's fees. Ross' arguments to the contrary are not supported bythe record or law. Affirmed. Pursuant to Section I, Paragraph 3(c), Montana SupremeCourt 1988 Internal Operating Rules, this decision shall not becited as precedent andshall bepublished byits filing asapublic document with the Clerk of the SupremeCourt andbyareport of its result to Montana LawWeek, State Reporter, andWest Publishing Company.

Weconcur:

Justices

8Justice Terry N. Trieweiler specially concurring in part and

dissenting in part. I concur with those parts of the majority opinion which affirm the District Court's judgment in favor of Jack G. Stevens and deny attorney fees to the personal representative of Mazie Richardson's estate.I dissent from that part of the majority opinion which allows the respondent, Gene B. Daly, to recover fees for his services as conservator of Mazie Richardson's estate. It is not necessary to conclude that any of the District Court's findings of fact are clearly erroneous in order to conclude that Daly was not entitled to a fee for his services. A conservator who flagrantly violates his obligations to the estate that he manages is not entitled to afee. The following findings of the District Court clearly establish that Daly flagrantly violated his duties:

3. [Gene B.] Daly, of Helena, Montana, was appointed as Conservator of the Estate on October 20, 1981. Pursuant to §72-S-424, M.C.A., and Court Order, Daly was required to file an inventory of the Estate within 90 days. In addition, pursuant to § 72-5-438, M.C.A., and Order of the Court, Daly was required to account annually for his administration of the Estate.

. . . 5. Jack Stevens wasappointed asCo-conservator of the Estate of Mazie Richardson on November 14, 1984.

. . . . 11. Following the auction of the personal property, the sale of the residence and recovery of the stock for the Estate, Stevens completed each item on the detailed memorandum he had advised the parties hewould undertake 9asCo-conservator. Theonly exception wasthe completion

of the final inventory, a task he could not complete without the assistance of Daly. Stevens did prepare reconciliation of the Estate's bankaccount andasummary of the Estate in 1984, but thereafter was unable to obtain the cooperation of Mr. Daly or information necessary for Stevens himself to complete aninventory or accounting.

. . . . 13. Between approximately 1985 and 1991, Stevens attempted numerous times to obtain from Daly a final accounting and inventory. Stevens prepared one income tax return for the Estate, but Daly indicated hewould be responsible for filing all others. Stevens' efforts to obtain the inventory and accounting information or documentation and to prevail on Daly to complete his duties included letters to Daly andtelephone orpersonal conversations with Joseph Marra, counsel for the Estate andalong-time friend of Daly. In each instance, Marra prevailed onStevens not to resign or take other steps, indicating that he would be able to convince Daly to provide anaccounting.

. . .

. . . . 16. Shortly after Mazie Richardson passed awayMr. Marra finally determined that hewould not besuccessful in obtaining afinal inventory from Daly. Hewithdrew as counsel. UponMazie Richardson's death Mazie R. Rosswas appointed personal representative of her estate. Mr. Stevens wasin the process of retaining counsel to seek his release as Co-conservator when the present proceedings were initiated. 17. OnDecember 16, 1991 [morethan tenyears after Daly was first appointed conservator], Mazie R. Ross filed aPetition in this matter seeking anorder against the Co-conservators directing them to file aninventory andaccount for their administration of the estate. She also sought the discharge of the Co-conservators and turn-over of the residue of the estate to her aspersonal representative.

. . . 25. During the time period of 1984, following Mr. Stevens' appointment, through 1991, Mr. Daly failed to file anannual accounting. However, on July 24, 1992, Mr. Daly, in response to orders of the Court, filed a

10final accounting, prepared by Anderson Zurmuehlen Co.

Thefinal accounting is representative of the activities undertaken byMr. Daly onbehalf of Mazie Richardson for the preceding ten years. The final accounting demonstrates that the maioritv of the disbursements from the conservatorship account canbedirectly attributable to the care of Mazie Richardson. 26. The final accounting shows that there is approximately $38,000 which cannot be directly attributable to the care of Mazie Richardson. Of that amount, $10,000 is identified as conservatorship fees, and another $12,000 is identified as "possible" conservatorship fees. Unfortunately, Mr. Daly is unable to assist the Court in any further delineation of the $38,000 andwhether it wasattributable directly to the care of Mazie Richardson because of his present physical andmental condition, which this Court recognizes.

. . . 28. After her appointment as personal representative, Mazie Ross petitioned the Court on December 16, 1991, to order the co-conservators to file aninventory andaccounting. TheCourt issued its Order on January 16, 1992, giving conservator Daly until January 31, 1992, to file an inventory and both conservators until February 21, 1992, to file anaccount of the administration of the Estate. 29. Stevens filed a partial accounting which covered only the disposition of the ward's personal property andsale of her homein 1986. It did not list the Estate's income and expenses. Nor did it list the Estate's assets onhandandavailable for distribution to the ward's probate Estate. 30. Daly did not comply with the Court's Order to file aninventory andaccounting bythe dates set forth therein. (Emphasis added.) Asconservator of Mazie Richardson's estate, GeneB. Daly was required to file aninventory of her assets, andfile it with the District Court within 90days from the date of his appointment. He

was also obligated to keep records of his administration of her

11estate andprovide it to any interested person upon that person's

request. Section 72-S-424, MCA. Additionally, Daly wasrequired bY law to account to the court annually regarding his administration of the Richardson estate. Section 72-S-430, MCA. For over ten years while heserved asconservator of Richardson's estate, hedid neither. Evenafter being ordered repeatedly to do

so by the District Court, hedid neither. Finally, after being held in contempt of court, he filed an inventory of assets which the District Court liberally found accounted for a "majority" of Richardson's assets, but which disclosed that $10,000 had been spent onconservatorship fees, andthat $28,000 of expenses cannot beaccounted for. While the District Court found that Daly's administration of the Richardson conservatorship was impeded by interference from Mazie Ross and her sons, the fact is that the last documented interference by Mazie Ross and her sons occurred prior to February 18, 1983. Onthat date, the District Court granted Daly's request for aninjunction andordered Ross andher sons to vacate Richardson's house, payrent for the time that oneof the sons had resided there, andreturn to the estate items of personal property which hadbeen removed. Whatever Richardson andher sons did from 1981until 1983, doesnot account for Daly's repeated dereliction of responsibility and frustration of Stevens's efforts from 1983 until 1992. The District Court excused Daly's inability to account for approximately $28,000 of conservatorship funds andthe payment to 12himself of $10,000 as aconservator fee based on the assumption

that the sumof $24,000 which was placed in aWaddell and Reed account and used for Richardson's benefit camefrom Daly and his wife. However, the source of those funds wasanything but clear. Furthermore, the fact that Daly andhis wife mayhave at sometime

or other madeagift to Mrs. Daly's mother does not justify the award of aconservatorship fee to aconservator whohas totally neglected his responsibilities under the law. This Court previously considered the propriety of a conservator fee under similar circumstances in InreAllardGuardianship (1914)) 49Mont. 219, 141P.661. In that case, the district court also interpreted the propriety of fees to aconservator who, for a period of thirteen years, had failed to account for the estate's assets or provide aninventory of those assets. Thelaw at that

time provided for reasonable compensation to aconservator, just as §72-5-432, MCA,provides now. However, this Court held that the district court correctly denied attorney fees in that case for the following reasons: While amere technical breach of duty which does not result in injury to the ward's estate will not ordinarily justify acourt in withholding compensation altogether, aflagrant violation of the duties of the trust will do so. During the entire term of this guardianship the statute in force required every guardian to return to the court aninventory of the estate of his wardwithin three months after his appointment, and annually thereafter (CodeCiv. Proc., sec. 2985; Rev. Codes, sec. 7774), and, upon the expiration of a year from the time of his appointment, to render anaccount to the court (CodeCiv. Proc., sec. 2986; Rev. Codes, sec. 7775). Not only did the guardian absolutely ignore these provisions of law, 13but the district court was equally remiss, for no

inventory wasever made,andfrom the date of appointment in March, 1899, to December, 1912--a period of morethan thirteen years--no report wasever required bythe court or rendered bythe guardian. It is not anyanswer to say that the guardian managed the estate prudently and accounted for every cent belonging to it. Thepurpose of these statutory provisions is to furnish ameansbywhich the guardian's managementmaybechecked andhis accounts verified. In the present instance the trial court was practically limited to the guardian's owntestimony asto what property of this ward cameinto his possession, and what disposition he madeof it, without any means of determining the truth of the testimony. These statutes were enacted to be obeyed, and the conduct of the guardian in ignoring themaltogether is inexcusable, and all the more sobecause hehadthe advice andassistance of able counsel. Indisallowing the guardian's claim for compensation, the trial court doubtless reached the conclusion that, by reason of his mismanagement of the estate, hehadforfeited all claim to compensation. InreAllard, 141P. at 664 (citations omitted). Likewise, in this case, whether Daly actually managedMazie Richardson's estate in her best interest is not the point. Noone will ever know. There is no record of what was done with her assets for a period of over ten years. By the time Daly was finally forced to account for her assets, hewasnolonger capable of recalling what he had done with them. For all practical purposes, no one knows the full extent of the assets that he managedor what wasdonewith all of her property. Thestatutes regarding aninventory andanannual accounting were designed to prevent the kind of uncertainty that nowexists. Daly not only ignored those statutes, he ignored repeated efforts by his co-conservator to gather the necessary information to comply with them; he ignored previous requests by the estate's attorney to comply with them; and most seriously, he ignored repeated court 14orders that he comply with them. When he finally did make an

effort to comply with them, he was unable to completely do so due to the passage of time, his failed memory, and the impossibility of reconstructing what had happened during the previous ten years. According to our prior decision in InreAllard, aflagrant violation of a conservator's duties is asufficient basis for denying that conservator afee for his services. Under the undisputed facts in this case, I conclude that Daly flagrantly violated his duties as conservator and that the District Court abused its discretion when it allowed him to retain fees for acting as a conservator on "equitable" grounds. As a practical matter, I realize that Mazie Ross may be no better off had the District Court ordered Daly to return the fees that he had received. However, as a matter of precedent and principle, I also believe it is inappropriate for the courts to sanction Daly's conduct in this case. For these reasons, I dissent from the majority opinion.

15Justice JamesC. Nelson specially concurring.

I concur in our opinion to affirm the District Court's judgment in favor of JackG.Stevens andagainst Mazie Richardson's estate.Ialso agree in substance with Justice Trieweiler's dissent as regards our opinion in favor of GeneB. Daly to recover fees for his services asconservator. Notwithstanding, I have signed the majority opinion because I amconvinced that, given Daly's present circumstances--he is apparently under a conservatorship and is penniless--there is little, aside from moral victory, that will be accomplished in sending this case back for still further litigation. That which starts out badly usually endsworse. This

case proves the rule.

16