IN THE SUPREME COURT OF MISSISSIPPI

NO. 2004-CA-00882-SCT

WILLIAM WALLACE ALLRED

v.

WILEY FAIRCHILD; FAIRCHILD-WINDHAM

EXPLORATION COMPANY, A PARTNERSHIP;

JOHN M. FAIRCHILD, MICHAEL B. MOORE AND

MARK A. FAIRCHILD, TRUSTEES OF THE MARIE

L. FAIRCHILD LIFE INSURANCE TRUST; B. R.

NOEL, MARK A. FAIRCHILD AND JOHN M.

FAIRCHILD, EXECUTORS OF THE ESTATE OF

WILEY FAIRCHILD, DECEASED

DATE OF JUDGMENT: 3/26/2004

TRIAL JUDGE: HON. PERCY L. LYNCHARD, JR.

COURT FROM WHICH APPEALED: COVINGTON COUNTY CHANCERY COURT

ATTORNEYS FOR APPELLANT: OTIS JOHNSON

KEITH R. RAULSTON

ATTORNEY FOR APPELLEES: LAWRENCE CARY GUNN

NATURE OF THE CASE: CIVIL - OTHER

DISPOSITION: REVERSED AND RENDERED - 12/08/2005

MOTION FOR REHEARING FILED:

MANDATE ISSUED:

EN BANC.

GRAVES, JUSTICE, FOR THE COURT:

¶1. William Wallace Allred (“Allred”) filed suit on December 19, 1990 against Wiley

Fairchild ( “Fairchild”) alleging that he was due a commission for services rendered in

connection with the sale of oil and gas leases, minerals and royalties in a transaction hereafter

referred to as the Windham Properties. To compe nsate Allred for his services in connection1 In the oil and gas industry the term “payout” refers to that point in time when

income, including proceeds from production and sale of oil, gas and other minerals from

the properties, has equaled the cost and expense of acquiring the properties and operating

them. Therefore, with the exception of some minor overhead expenses, the income derived

translates into profits.

2 with the Windham Properties pu rchase, Fairchild agreed to convey to Allred a 10% interest

in the properties “after payout.” 1 Fairchild also agreed to keep Allred informed as to the status

of the payout.

FACTS AND PROCEDURAL HISTORY

¶2. In the late 1980's a dispute arose between Allred and Fairchild for Fairchild’s

refusal to furnish payout information to Allred and for his refusal to assign Allred the 10%

interest in the Windham Properties. Allred’s complaint sought enforcement of the agreement

of 10% interest in the Windham Pr operties after payout, imposition of a constructive trust,

accounting, actual damages, and other relief. Fairchild admitted tha t he told Allred that he

would pay $2,250,000.00 for the Windham Properties, but denied that there was an agreement

to pay Allred a commission.

¶3. The case was tried in the Chancery Court of Covington County, Mississippi and on

December 16, 1998, the special chancellor held that Allred was not entitled to any relief. The

c hancellor further found that payout of the Windham Properties had occurred in July of 1981.

Allred appealed the decision to this Court.

¶4. On May 31, 2001, t his Court reversed and remanded the chancellor’s decision. On

remand, the chancery court aw arded Allred over $6,000,000.00. On May 22, 2003, Allred filed

a costs bill with the chancery court. The costs bil l was in the amount of $79,858.35. The sum

of $79, 235.35 represented fees paid to Oscar Hartman (“Hartman”), an oil and gas accountant,3

for his work precedi

n g and during the trials. On May 23, 2003, Fairchild filed an objection to

the costs bill. Allred filed a motion for assessment of costs and resp onse to defendant’s

objection.

¶5. The chancery court rendered its opinion on Allred’s motion for the assessment of fees

to Hartm an as costs and denied the motion. On April 1, 2004, the chancery court found that

there were no exceptional circumstances to warrant Allre d’s recovery of the fees paid to

Hartman and declined to grant the fees to Allred.

On April 29, 2004, Allred filed an appeal to this Court, raising two issues:

I. The chancery court erred in finding that there were no exceptional

circumstances that would authorize the chancery court to exercise

discretion and grant accounting fees as expenses to Allred.

II. The chancery court erred in finding that there was no evidence to show

that the accountant’s fees were reasonable.

DISCUSSION

I. Whet

her the chancery court erred in finding that there were no

exceptional circumstances that would a uthorize the court to

exercise disc

retion and grant accounting fees as costs and expenses

to Allred.

¶6. We will reverse a chancellor’s decision only where he is manifestly wrong. H ans v.

Hans, 482 So.2d 1117, 1119 (Mi ss. 1986). A chancellor’s findings will not be disturbed

unless he is manifestly wrong, clearly err o neous or an erroneous legal standards applied.

Tinnin v. First United Bank of Mississippi, 570 So.2d 1193, 1194 (Miss. 1990); O .J.

Stanton & Co. V. Mississippi State Highway Com mission, 3 70 So.2d 909, 911 (Miss. 1979).

However, the chancery

court’s interpretation and application of the law is reviewed under a de4

novo standard. Weissinger v. Simpson, 861 So.2d 984, 987 (Miss. 2003).

A. Did exceptional circumstan ces exist and did the chancery

court abuse its discretion in not awarding accou n ting fees to

Allred?

¶7. Allred

contends that the undisputed facts and circumstances require this Court to

reverse the decision of the chancery court and award Allred the accounting fees which he paid

to Hartman. Fairch

ild counters that Allred has not cited a single precedent, rule, statute, or any

legal authority that would justify the imposition of expert witness fees as costs.

¶8. Fairchild argues that Allred is not entitled to recover acco unting fees as costs under

Mississippi Rule of Civil Procedure 54(d) which states:

Except when express provision therefor is made in a statute, costs shall

be allowed as of cou

rse to the prevailing party unless the court otherwise

directs, and this prov

ision is applicable in all cases in which the State of

Mississippi is a party plaintiff in civil actions a s in cases of individual

suitors. In all cases wher e costs are adjudged against any party who has

given security for costs, execution may be ord ered to issue against such

securi ty. Costs may be taxed by the clerk on one day’s notice. On

motions served within five days of the receipt of notice of such t axation,

the action of the clerk may be reviewed by the court.

However, the comments to Mississippi Rule of Civil Procedure 54(d) state:

Although costs has an everyday meaning synonymous with expenses,

taxable costs under Rule 54(d) is more limited and represents those

official expenses , such as court fees, that a court will assess against a

litigant. Costs almost always amount to less than a successful litigant’s

total expenses...Absent a special statute or rule, or an exceptional

exercise of judicial discretion, such items as attorney’s fees, travel

expenditures, and investigatory expenses will not qualify either as

statutory fees or reimbursable costs. These expenses must be borne by

the litigants.

¶9. Fai

rchild argues that this case is distinguished from M emphis Hardwood Flooring5

Company v. Daniels, 771 So.2d 92 4 (Miss. 2000), in that expert witness fees were awarded

specifically because there is a statute, Miss. Code Ann. § 95-5-10(3), which allows expert

witness fees and attorney fee s to be assessed as court costs under Mississippi’s timber

trespass statute. Fairchild is also correct when he as serts that in S elleck v. S.F. Cockwell

Trad ing, Inc., 5 17 So.2d 558 (Miss. 1987), the plaintiff was awarded expert witness fees not

as “costs,” but as sanctions against the defendant as a penalty for jury tampering. Allred has not

requested that we award the accounting fees as sanctions for Fairchild’s fraudulent co nduct,

but that we assess the fees against Fairchild as costs.

¶10. Allred relie s solely upon the exercise of exceptional judicial discretion as referenced

in the comments to Rule 54(d) and argues that but for Fairchild’s fraud, he would not have

incurred the costs and expenses of payout determination and accounting for the monies due

to him. Exception

al circumstances must exist in order for the court to exercise exceptional

judicial discretion. We must look to the record to determine whether or not exceptional

circumstances exist.

In Allred I , we stated:

...Allred cites an extensive list of alleged discovery v iolations in support

of his assertion that Fairchild committed fraud. Allred’s contention is

that Fairchild purposely lied, withheld evidence and did everything

possib le to cover up the fact that he owed Allred a percentage of the

Windham Properties. This fraud has allow ed Fairchild to benefit from

the 10% interest due Allred per their oral

agreement. As such, Fairchild should not be allowed to benefit from his

wrongdoing as a matter of law. (785 So.2d 1064, paragraph 8).

The Co urt also established that “it was this confidential relationship [between Allred and

Fairchild] that allowed Fairchild to conceal the truth concerning the payout so long.” Id.6

Finally, this Court found that:

Furthermore, Fairchild made numerous false r epresentations and swore

under oath to them, including: denying the existence of an oral contract,

until presented with the evidence of one; denying the existence of any

document ed proof of the contract when P-67 (a February, 1974 memo)

evidenced the existence of a contract; sworn testimony that payout

records were never kept when, in fact, his long-time secretary testified

that they were; failure to turn over many highly relevant documents, even

after compelled to do so. Id. P. 1070 (paragraph 17).

¶11. Based upon the evidence present in the record, we found Fairchild’s actions to be

riddled with f

raud and deception and that the confidential relationship between the parties

allowed Fairchild to perpetrate the fra ud for a substantial period of time. We also determined

that Fairchild denied the very existence of an oral contract, until he was presented with

documented evidence that an oral contract existed.

¶12. Moreo ver, this Court has previously held that extra-contractual damages may be

appropriate even in cases where a party’s conduct does not warrant punitive damages.

Universal Life Ins. Co. v. Veasley, 610 So.2d 290, 295 (Mi ss. 1992). It is axiomatic that one

is liable for the full measure of the reasonably foreseeable consequences of their act ions. I d.

at 295. I t was entirely foreseeable by Fairchild that his breach of the contract and his continued

denial of its existence would lead to substantial litigation and accounting costs . Those costs

should be borne by Fairchild. Considering these facts, Allred has proven that exceptional

circumstances existed.

B. Did the chancery court err when it failed to exercise

exceptional judicial discretion?

¶13. When the chancellor refused to exercise exceptional judicial discretion and aw ard the

accounting fees to Allred, the chancellor stated as follows:7 Here, I think the facts would bear out that both parties for the sake of

argument, assuming that this mat ter had not reached the litigation stage,

would have still employed an accountant to determine what their

respective positions would be and respe c tive amounts due from and

owing to the other. I don’t find that the mi sconduct as cited by the

Supreme Court necessitated the hiring of an accountant anymore so then

one would have been otherwise.

Based upon the language used by the chancellor, he is strictly using hindsight to speculate as

to what the parties would have done absent litigation instead of solely relying on the record

before him. All evidence in the record points to a conclusion different from tha t reached by

the chancellor. According to the record, in the 20 years that Allred did business with Fairchild,

Allred never

did his own accounting. Fairchild’s office personnel always conducted the

accountings and were responsible for maintaini ng the records on the Windham Properties.

Fairchild advised his personnel not to generate and maintain accounting records. Through the

custom and practice of the parties, Allred relied upon Fairchild to perform the accounting.

Until a dispute arose between the parties, A llred never employed an accountant to determine

the status of his financial dealings with Fairchild, primarily because he trusted Fairchild to

provide an honest and accurate accounting of fun ds. The chancellor was manifestly wrong in

determining that Allred would ha ve initially hired an accountant absent litigation. The chancery

court decision is reversed.

II. Whether the chancery court erred i n finding that there was no

evidence before the court to show that the accountant’s fees were

reasonable.

¶14. The chancery court cites Martin v. Martin, 566 So.2d 704 (Miss. 1990) and

McKee v. McKee

, 418 So.2d 764 (Miss. 1982), as guidelines for properly determining

accountant’s fees. Martin and McKee specifically discuss deter mining the reasonableness of8

attorney’s fees in divorce cases. However, a case that appears to be more on point with the

chancellor’s assumption that accounting fees are determined in the same manner as attorney’s

fees is S mith v. Dorsey, 5 99 So.2d 529, 550 (Miss. 1992). In the Smith case, this Court found

no abuse of discretion in the chancellor’s awarding of expert fees as well as attorney’s fees

where taxpayers successfully challenged a school board’s illegal expenditure of public funds.

Inasmuch as it is appropriate to exami ne prior case law, i.e. M artin and McKee

, it is equally

appropriate to examine and apply Miss. Code Ann. § 9-1-41 which states:

In any action in which a court is authorized to award reasonable attorneys'

fees, the court shall not require the party se eking such fees to put on

proof as to the reasonableness of the amount sought, but shall mak e the

award based on the information already before it and the court's own

opinion based on experience and observation; provided however, a party

may, in its discretion, place before the court other ev idence as to the

reasonableness of the am ount of the award, and the court may consider

such evidence in making the award.

Hartman is a certified public accountant who at t ached an affidavit which was submitted with

the costs bill detailing the services he rendered. Hartman charged an hourly rate of $150

-

$165 while his assistant’s rate was $50 per hour. He stated that the se rates were fairly

conservative and reasonable for the knowledge, skill, and expertise needed to perform oil and

gas accounting matters and were well within the ran ge of fees charged by certified public

accountants.

¶15. The chancery court erred in finding that there was nothing before it to show that

Hartman’s fees were reasonable. But fo r the fraud of Fairchild, Allred would not have incurred

this expense. The refore, we reverse and render the decision of the chancery court and award

Allred $79, 235.35 in costs which represents the accounting fees and expenses he incurred.9 CONCLUSION

¶16. We find that the chancellor erred in deciding that there were no exceptional

circumstances that would authorize him to exercise discretion and grant accounting fees as

expenses to A llred. We also find that the chancellor erred in holding that there was nothing

before him to show that the accountant’s fees were re asonable. For the foregoing reasons, we

reverse and render the judgment of the Chancery Court of Covington County. Allred is entitled

to $79,235.35 in costs.

¶17. REVERSED AND RENDERED.

SMITH, C.J.,COBB, P.J., CARLSON AND DICKINSON, JJ., CONCUR. EASLEY,

J., DISSENTS WITHOUT SEPARATE OPINION. WALLER, P.J., DIAZ AND

RANDOLPH, JJ., NOT PARTICIPATING.