Title: Bush v. Arrowood
Citation: 198 N.W.2d 263
Docket Number: 43340
State: Minnesota
Issuer: Minnesota Supreme Court
Date: May 26, 1972

198 N.W.2d 263 (1972) Edyth BUSH, et al., Plaintiffs, v. Herschel S. ARROWOOD, et al., Defendants, The Bush Foundation, additional defendant, Appellant, Robert J. Christianson, et al., Respondents. No. 43340. Supreme Court of Minnesota. May 26, 1972. *264 Briggs &amp; Morgan and Frank Hammond, Terence N. Doyle and Douglas R. Haddock, St. Paul, for appellant. *265 Faegre &amp; Benson, Robert J. Christianson, Wright W. Brooks, and John Harris, Minneapolis, for respondent. Heard and considered en banc. TODD, Justice. The Bush Foundation appeals from a judgment of the district court requiring the foundation to pay attorneys' fees to Robert J. Christianson, Wright W. Brooks, and John E. Harris, respondents pro se, who were hired by the attorney general to represent him in litigation affecting the foundation. We reverse. This matter comes before this court as part of a long, protracted dispute arising in 1966 following the death of Archibald G. Bush, one of the founders of Minnesota Mining and Manufacturing Company. Under his last will, Mr. Bush left the bulk of his estate, amounting to upwards of $150,000,000, to The Bush Foundation, a nonprofit Minnesota corporation that he had established in 1953. Immediately following his death, a controversy arose between his surviving spouse and the directors of the foundation. In order to avoid litigation, an agreement was made creating a bicameral board of directors, which had the effect of giving each faction a veto over the foundation's activities. This compromise was made in the face of the threat of Mrs. Bush to attempt to void her consent to the will and take her statutory share of the estate, which would have substantially reduced the residuary bequest to the foundation. The compromise, however, proved ineffectual, and compounded rather than solved the problems. In January 1968, Mrs. Bush commenced this action in the district court. Douglas M. Head, the then attorney general, was made a party defendant because "[u]nder the laws of the State of Minnesota he may be charged with responsibility incident to certain of the matters alleged in [the] Complaint." Attorney General Head retained the above-named respondents as special counsel to represent him in this matter. It is uncontroverted in the record that these attorneys performed substantial and meritorious service in fulfilling the obligations of the attorney general in this complicated procedure. Due in a large part to the services performed by these attorneys, a stipulation of settlement was finally arrived at, and, on April 10, 1970, a judgment was entered in district court which disposed of the right of the widow to renounce the will of Mr. Bush, provided a workable board of directors for the foundation, and in many other respects provided an orderly and competent means of controlling and managing The Bush Foundation. None of the parties affected by that judgment appealed, and the res judicata effect of that judgment obviously is a substantial benefit to the foundation. As part of the stipulation which led to the judgment, respondent attorneys were directed by the court and the parties to perform additional services outside the scope of their representation of the attorney general. The stipulation of settlement provided that respondents would receive reasonable fees and expenses for these additional services but left unresolved the question of whether respondents would be compensated by the foundation for work done while they were acting solely as the attorney general's special counsel. On July 8, 1971, in response to a motion by respondents, the trial court granted respondents their fees and expenses for the additional activities from the foundation. In addition to this amount, which had been agreed on by all parties, the trial court also allowed respondents to collect from the foundation that portion of their fee which had not been paid by the attorney general, who had advised them that he had insufficient funds to pay their entire bill. 1. The reasonableness of the total charges made by respondents in rendering their services to the attorney general is not in dispute. The only question on this appeal is the validity of the court's order directing that the foundation pay a portion *266 of these attorneys' fees. The trial court in its memorandum accompanying its order for judgment said: The substantial benefit rule has been applied by this court in a variety of situations where private litigants instituted or appeared in litigation which resulted in benefits to the public or to a class of persons. In one of these cases, In re Living Trust Created by Atwood, 227 Minn. 495, 500, 35 N.W.2d 736, 739 (1949), this court said: This case was followed in St. Paul Elec. Workers Welfare Fund v. Cartier, 288 Minn. 483, 182 N.W.2d 187 (1970). Since the litigation conferred substantial benefits on the trusts, the court allowed the attorneys' fees to be charged against the trust fund. Similarly, in a case involving litigation brought by the remaindermen to have a receiver appointed to take possession of the property to prevent waste and destruction of the estate, the court allowed attorneys' fees to the remaindermen since the suit was necessary to protect the rights of owners of present and future estates. Beliveau v. Beliveau, 217 Minn. 235, 14 N.W.2d 360 (1944). Stockholders' derivative actions, such as Bosch v. Meeker Co-op. Light &amp; Power Ass'n, 257 Minn. 362, 101 N.W.2d 423 (1960), are a third type of case in which we have applied these principles. In Bosch, the court held that, since the stockholders' derivative action resulted in substantial benefit to the company, attorneys' fees should be allowed. In Regan v. Babcock, 196 Minn. 243, 264 N.W. 803 (1936), a private party commenced *267 suit to have six state highway paving contracts declared void. The attorney general subsequently intervened in the action and in effect joined with the plaintiffs, realleging substantially the same facts contained in the plaintiffs' complaint and asking that the contracts be declared void. The plaintiffs went forward with the action and subsequently obtained a judgment declaring the contracts void and effecting a substantial saving to the State of Minnesota. This court upheld an award of attorneys' fees to plaintiffs' attorneys out of the funds so saved the state. In all of these matters, the courts have applied principles of equity as enunciated in Matter of Roosevelt, 131 Misc. 800, 805, 228 N.Y.S. 323, 329, and adopted by this court in Beliveau (217 Minn. 248, 14 N.W. 2d 367): The trial court applied these principles in the instant case and extended the rule of substantial benefit to allow recovery of fees by special counsel for the attorney general. Under the facts of this case, there is no question that substantial benefits have been conferred upon The Bush Foundation. However, it is the opinion of this court that the statutory provisions affecting the attorney general precluded his right and the right of his special counsel to recover any attorneys' fees from the foundation. 2. Charitable corporations, such as The Bush Foundation, have been held by our court to be governed by the provisions of Minn.St. 501.12. In re Estate of Quinlan, 233 Minn. 35, 40, 45 N.W.2d 807, 810 (1951); In re Estate of Peterson, 202 Minn. 31, 37, 277 N.W. 529, 533 (1938). Section 501.12, subd. 3, provides in part: It is clear from this language that the attorney general is compelled to be a party in the present action. This statutory mandate distinguishes the role of the attorney general in these cases from that of a private litigant. A private litigant appears under no compelling statutory mandate. However, the equity rules which we have applied in the cases cited above represent a public policy of encouraging individuals to advance before the court meritorious claims broader than their own private interests. Newman v. Piggie Park Enterprises, Inc., 390 U.S. 400, 88 S. Ct. 964, 19 L. Ed. 2d 1263 (1968). This purpose was recognized in the St. Paul Electrical Workers case, where this court said (288 Minn. 488, 182 N.W.2d 189): In this case there is no danger of a prohibitive effect on intervention since there is an affirmative statutory duty on the attorney general to intervene. Attorney General Head apparently decided that he could best meet this statutory duty by employing outside counsel to represent him. Accordingly, respondents were hired under the provisions of Minn.St. 8.02, which provide in part:[1] 3. Although the attorney general has the right under § 8.02 to hire special counsel, in construing the method of payment of such special counsel, we must consider the provisions of Minn.St. 15 A. 01, which provide: Our statutes expressly prohibit the attorney general from being paid by the foundation. Section 15 A. 01, subd. 2, clearly specifies that all salaries, including those of the attorney general and his employees, shall be in full payment for their services. Respondents argue that this prohibition must be considered together with subd. 3 and that nothing would prevent payment of fees and expenses by the foundation to the attorney general had he handled the matter himself as long as such sum was turned into the state treasury. We reject this interpretation of the statute and conclude that the language is clear and explicit that his sole compensation for performing his statutory duties is as defined by the legislature under the statute. 4. Since the right of respondents to recover in this matter is a derivative right and is coextensive with the right of the attorney general to make a similar recovery, we are unable to permit the allowance of fees to stand. 5. This is a case of first impression in Minnesota. However, other jurisdictions that have considered this issue have uniformly disallowed the payment of attorneys' fees to the attorney general or his special counsel. The respondents were unable, and this court has been unable, to find a single case which allowed attorneys' fees to the attorney general or his special *269 counsel. All those cases cited by respondents and found by this court regarding the substantial benefit theory involved litigation commenced by private litigants. One of the earlier cases, Attorney-General v. Continental Life Ins. Co., 88 N.Y. 571 (1882), involved an insolvent insurance company in the hands of a receiver and a request by the special counsel employed by the attorney general for allowance of attorneys' fees. In rejecting the request, the New York Court of Appeals said (88 N.Y. 575): Wemme v. First Church of Christ, 110 Ore. 179, 219 P. 618, 223 P. 250 (1924), involved a fact situation very similar to the present case. There a decedent had directed under his last will and testament that an endowment fund be created out of his estate for the purpose of providing a maternity home or a lying-in hospital for unfortunate or wayward girls in the city of Portland, Oregon. When litigation arose involving actions of the trustees in administering the fund, the attorney general intervened. He was not compelled by statute to intervene, but the Oregon court held that the common law required that he intervene in this type of litigation. He employed special counsel to represent him, and through the efforts of the special counsel the trust was preserved and was, therefore, substantially benefited. At the time of that action, the Oregon statutes contained a provision very similar to our statute regarding compensation of state officers and employees.[2] In response to the attorney's *270 application to the court for an order directing the trust fund to pay his fees, the Oregon court said (110 Or. 216, 223 P. 251): The Wemme case was followed in Thatcher v. City of St. Louis, 343 Mo. 597, 122 S.W.2d 915 (1938). In that case, the Missouri attorney general had appointed special counsel to represent him in his defense against an action to terminate a charitable trust. The attorney so appointed successfully defended the action and preserved the trust. The court, under constitutional provisions very similar to the Minnesota statutes,[3] disallowed the recovery of attorneys' fees from the trust fund. *271 In Beck v. Good, 147 Kan. 578, 77 P.2d 968 (1938), the Kansas Supreme Court held that under their statute requiring the attorney general to probate the estates of decedents who had no known heirs, the estate could not be charged for attorneys' fees of special counsel hired to represent the attorney general. The court there held that the only recourse for the attorney so employed was against the attorney general and the State of Kansas. No American court has yet quarreled with the logic or legal principles set out in these cases. We are convinced that they represent not only the majority rule, but also the correct rule. In the Wemme case, the Oregon Supreme Court presented an excellent summary (110 Or. 224, 223 P. 253): 6. We hold that under the statutes of the State of Minnesota the attorney general or his special counsel are not entitled to charge a charitable trust fund with attorneys' fees incurred in representing the interests of the state in litigation involving that fund. The attorneys in this case must look to the attorney general or the legislature for funds to pay the legitimate and reasonable claim which is the subject of this litigation. Reversed. MURPHY and OTIS, JJ., took no part in the consideration or decision of this case. MacLAUGHLIN, J., not having been a member of this court at the time of the argument and submission, took no part in the consideration or decision of this case. [1] There is some discussion in the briefs as to whether respondents were hired under Minn.St. 8.06, which provides: "The attorney general shall act as the attorney for all state officers and all boards or commissions created by law in all matters pertaining to their official duties and, when requested by the attorney general, it shall be the duty of any county attorney of the state to appear within his county and act as attorney for any such board, commission, or officer in any court of such county; and when, in his judgment, the public welfare will be promoted thereby the attorney general may, upon request in writing, employ a special attorney for any such board, commission, or officer and fix his compensation, and when such special attorney is so employed his fees or salary shall be paid from the appropriation made for such board, commission, or officer. Except as herein provided, no board, commission, or officer shall hereafter employ any attorney at the expense of the state. "Whenever the attorney general, the governor, and the chief justice of the supreme court shall certify, in writing, filed in the office of the secretary of state, that it is necessary, in the proper conduct of the legal business of the state, either civil or criminal, that the state employ additional counsel, the attorney general shall thereupon be authorized to employ such counsel and, with the governor and the chief justice, fix his compensation. Except as herein stated, no additional counsel shall be employed and the legal business of the state shall be performed exclusively by the attorney general and his assistants." From the face of the statute, it is apparent that § 8.06 applies only to the employment of "house counsel" for various state boards, commissions, or officers; furthermore, the certificate provided by paragraph 2 of the statute was never prepared or executed. The provisions of this statute cannot be considered. [2] Ore.Laws, § 2978 (1920) provides: "That the salaries provided in this act shall be in lieu of all salaries, fees, commissions, and emoluments now received or enjoyed by any of the said officers mentioned herein, and any and all fees and commissions of any kind, name, or nature hereafter collected by any of said officers for any service performed by him by virtue of his office or collected by him by virtue of his office, shall be paid into the treasury of this state on or before the tenth day of the month following the collection thereof, accompanied by an itemized statement of the services for which the same were collected, and each of said officers shall, in his biennial report, set forth a statement of all moneys so collected and paid over to the state treasurer." [3] Mo.Const. art. V, § 24, V.A.M.S., which applied to the attorney general and other elective executive officers, read as follows: "The officers named in this article shall receive for their services a salary to be established by law, which shall not be increased or diminished during their official terms; and they shall not, after the expiration of the terms of those in office at the adoption of this Constitution, receive to their own use any fees, costs, perquisites of office, or other compensation. All fees that may hereafter be payable by law for any service performed by any officer provided for in this article shall be paid in advance into the state treasury."