Opinion ID: 1282277
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Heading: Equitable Basis for Attorney Fees

Text: We have long held that the allowance of fees and costs is a creature of statute, and the allowance therefore cannot be made unless authorized by statute. NDCC § 28-26-10; Tharaldson v. Unsatisfied Judgment Fund, 225 N.W.2d 39 (N.D.1974); Thorvaldson-Johnson Co. v. Cochran, 252 N.W. 268 (N.D.1934). However, regardless of statutory authority, some states allow an award of attorney fees to successful beneficiaries who challenge a will on the grounds of equity. In re Keller, 65 Ohio App.3d 650, 584 N.E.2d 1312 (1989); In re Estate of Chrisman, 723 S.W.2d 484 (Mo.Ct.App.1986); In re Estate of Murray, 682 S.W.2d 857 (Mo.Ct.App. 1984); In re Estate of Brown, 137 Ariz. 309, 670 P.2d 414 (Ct.App.1983). Although in North Dakota the jurisdiction of a county court sitting in probate matters is very broad, and the county court can take necessary actions to preserve the assets of the estate for the ultimate beneficiaries, In re Estate of Ridl, 455 N.W.2d 188 (N.D.1990), the question is presented whether county courts can exercise equitable jurisdiction in awarding attorney fees in probate matters. Prior to North Dakota's adoption of the Uniform Probate Code, we held that county courts have no equitable jurisdiction in probate matters. Because probate orders could be appealed to district courts which exercised general jurisdiction, we held that equitable matters not addressed in the county courts could be addressed in the district courts. In re Estate of Edinger, 136 N.W.2d 114 (N.D.1965). When the Legislature adopted the North Dakota version of the Uniform Probate Code, it omitted sections 1-308 and 1-309 of the Uniform Code. These sections, assuming county courts to be courts of general jurisdiction, provided for a direct appeal from the county courts to the supreme courts of the adopting states. Instead, North Dakota left intact the prior procedure requiring that probate appeals from county courts be taken to the district courts. In re Estate of Bieber, 256 N.W.2d 879 (N.D.1977). With the adoption of the Uniform Probate Code, we held that the adoption did not broaden the county court's power to include the exercise of equitable jurisdiction. In re Estate of Jones, 288 N.W.2d 758 (N.D.1980). However, after Edinger and Jones were decided, the Legislature undertook a radical revision of the county court structure, wherein equitable jurisdiction was granted to county courts over certain matters. NDCC §§ 27-07.1-17, 30.1-02-02. These changes in county court jurisdiction were addressed in In re Estate of Binder, 366 N.W.2d 454 (N.D.1985), where we held that the county courts have concurrent jurisdiction in regard to trusts as do the district courts, conferring upon them equitable jurisdiction in trust matters under the Uniform Probate Code. As a result of Binder, the holdings of Jones and Edinger which held that county courts have no equitable jurisdiction were no longer dispositive of equitable jurisdictional limitations imposed upon the county courts. In 1981, the Legislature adopted section 30.1-02-06.1, NDCC, which required an appeal from a county court probate judgment to be taken directly to the Supreme Court, thereby bypassing an appeal to the district court. If we adhere to the Jones and Edinger rationales which prohibited exercise of equitable jurisdiction at the county court level in probate matters, parties would have no equitable remedies available to them. The county courts could not provide equitable remedies in probate matters and, on appeal from such decisions, the Supreme Court's review would be limited to the matters considered by the county court, [4] [ e.g., Jarmin v. Shriners Hospitals, 450 N.W.2d 750 (N.D. 1990) ]. Realizing the inconsistent and inequitable result of such an interpretation, we hold that county courts sitting in probate matters have the power to exercise equitable jurisdiction. [5] It has been held that the equitable power of a court authorizes an award of attorney fees in an action by one person which benefits a class of persons, thus making it equitable to spread the costs of the action among the members of the benefited class. Hall v. Cole, 412 U.S. 1, 93 S.Ct. 1943, 36 L.Ed.2d 702 (1973). More specifically, some states allow beneficiaries to recover fees in equity when, at their own expense and not for their sole benefit, their attorney's services benefited the estate as a whole by increasing a common fund in which other beneficiaries might share. Rogers v. Rogers, 71 Or.App. 133, 691 P.2d 114 (1984); In re Estate of Katschor, 637 P.2d 855 (Okla.1981); In re Estate of Lappy, 202 Or. 571, 277 P.2d 781 (1954); In re Estate of Parr, 287 P.2d 906 (Okla.1955); cf. In re Estate of O'Brien, 18 Ariz.App. 375, 502 P.2d 176 (1972). This common fund concept has long been a part of our jurisprudence. See, e.g., Hildreth v. Western Realty Co., 62 N.D. 233, 242 N.W. 679 (1932); Kilby v. Movius Land & Loan Co., 55 N.D. 830, 215 N.W. 284 (1927) [stockholders bringing successful suit on behalf of himself and other stockholders entitled to costs and attorney fees from corporation]; Beyer v. North American Coal & Mining Co., 43 N.D. 401, 175 N.W. 216 (1919) [an action brought by minority stockholders to recover attorney fees incurred in representing corporations in former litigation]. The theory of these cases is equally applicable when a beneficiary benefits the estate. In determining if Joanne's action was a benefit to the entire estate by increasing a common fund, we find guidance in our previous holdings of Flaherty, supra; Honerud, supra; Conway v. Parker, 250 N.W.2d 266 (N.D.1977); and In re Estates of Kjorvestad, 287 N.W.2d 465 (N.D.1980). In these cases, the issue was whether a personal representative could be entitled to attorney fees by bringing or defending an action which resulted in a benefit to the entire estate. We held that a benefit to an estate included services that brought about an enhancement in value or an increase in the assets of the estate. Flaherty, supra, at 518. Within the meaning of the common fund doctrine, if the beneficiary's action brought about an enhancement in value or an increase in the assets of the estate, the beneficiary may be awarded fees if the facts justify the award. Katschor, supra. When a trial court exercises its discretion after weighing the equities of a case, we will not interfere on appeal absent a showing of an abuse of discretion. Heinsohn v. William Clairmont, Inc., 364 N.W.2d 511 (N.D.1985). Cost and fee awards in equitable actions are likewise governed by the abuse of discretion standard. NDCC § 28-26-10; Lemer v. Koble, 86 N.W.2d 44 (N.D.1957); Silbernagel v. Silbernagel, 79 N.D. 275, 55 N.W.2d 713 (1952). A trial court abuses its discretion when it acts in an arbitrary, unreasonable, or unconscionable manner. In re Kinney, 495 N.W.2d 69 (N.D.1993). A trial court acts in such a manner when its exercise of discretion is not the product of a rational mental process by which the facts of record and law relied upon are stated and are considered together for the purpose of achieving a reasoned and reasonable determination. Id.; In re Altshuler, 171 Wis.2d 1, 490 N.W.2d 1 (1992). In light of the high standard we apply to the review of a trial court's exercise of equitable powers, we conclude that the trial court did not abuse its discretion in awarding $8,846.00 in attorney fees to Joanne. Joanne's action, which resulted in the inclusion of stock proceeds and the exclusion of management and personal representative fees, increased the value of the estate by approximately $15,343.00, and served as a basis for denying any further personal representative fees to be paid to James and Clemens. While we are reluctant to establish a litmus test which would call for an award of attorney fees only if the fee is within a certain proportion to the amount by which the estate was increased in value, we believe equity requires the estate's increase in value to be greater than the attorney fees. Beyer, supra [fees to be measured by value of assets saved to the corporation]. In this case, the amount brought into the estate was twice as much as the attorney fees incurred by Joanne. As a result, the value of the estate increased to the benefit of James and Clemens as well as Joanne, so her legal action was not solely for her own benefit. Her actions benefited the estate, for which she should be compensated. Katschor, supra; Rogers, supra ; cf. Parr, supra. Under the facts of this case, the county court did not abuse its discretion in awarding Joanne attorney fees, and we affirm the award.