Opinion ID: 1829773
Heading Depth: 1
Heading Rank: 6

Heading: an estate.

Text: Uniform Chancery Court Rules 6.01, 6.07, 6.11 and 6.12 all address the responsibilities of a fiduciary for petitioning the court for approval of attorney's fees in probate matters. Rule 6.01 Every fiduciary must, unless he is licensed to practice law, retain an attorney or firm of attorneys to represent, advise and assist him during the whole term of his office, whose compensation will be fixed or approved by the Chancellor... . Rule 6.07 Claims arising after the death of a decedent, such as funeral bills, expenditures for monuments, attorney's fees, and the like must be approved by the chancellor before payment. Otherwise, payment thereof will be at the risk of subsequent disapproval by the Chancellor as to the propriety or reasonableness thereof. Uniform Chancery Court Rules 6.01, 6.07. Additionally, state law also requires court approval for fees paid to an attorney who is hired to administer the affairs of an estate. In annual and final settlements, the executor, administrator, or guardian shall be entitled to credit for such reasonable sums as he may have paid for the services of an attorney in the management or in behalf of the estate, if the court be of the opinion that the services were proper and rendered in good faith... . Miss. Code Ann. § 91-7-281 (1972). Over a period of approximately seven and a half years, Fortenberry withdrew $90,360.00 in unapproved attorney's fees. However, in the Order Accepting Final Accounting, the chancellor ultimately approved all sums which Fortenberry withdrew and found such sums to be fair and reasonable and not excessive. The chancellor also determined that modest fees which were paid to outside attorneys who were handling litigation pertaining to the estate and Mrs. McCaffrey were fair, reasonable and necessary. Mr. Fortenberry's total fee of $122,860.00 represented 2189 hours of work at the rate of $50.00 per hour in the first years to $75.00 per hour in the last few years of the estate. At trial, Fortenberry put on testimony which substantiated that the fees which he withdrew were fair and reasonable and consistent with the customary hourly rate charged by other attorneys in the area. According to Fortenberry, he devoted ninety percent of his time to the administration of this estate in the first few years. Further, the chancellor remarked that Fortenberry's fees were less per month than those currently being requested and approved by the administrator d.b.n.c.t.a. in the estate of Mrs. McCaffrey. However, we note that Fortenberry did not present any evidence of contemporaneous documentation for the amount of time that he invested in the management of this estate. Therefore, the chancellor's ultimate approval of $90,360.00 in attorneys fees could not have included an evaluation of the amount of time and work which Fortenberry invested in a seven and a half (7 1/2) year period. Court approval of attorney's fees is required; however, in Harper v. Harper , we recognized that an attorney can be paid a fee from estate funds without prior court approval, but the attorney takes the fee subject to the peril of having it disapproved later by the chancellor. Harper v. Harper, 491 So.2d 189, 200 (Miss. 1986). In Matter of Chambers, we reversed an allowance of an attorney's fee of $17,000.00 as shocking. Matter of Chambers, 458 So.2d 691, 693 (Miss. 1984). In Chambers, the executor's neglect resulted in losses to the estate of several thousand dollars in penalties and interest. Chambers, 458 So.2d at 693. It is noted that in the case sub judice, the appellants allege that Fortenberry's neglect of duty resulted in financial losses to the estate. However, since the inventory of Mr. McCaffrey's estate was not filed until ten (10) years following his death, we are unable to accurately determine if the estate incurred financial losses which might be attributed to Fortenberry's neglect of duty. Furthermore, the Court abhors Fortenberry's reckless practice of withdrawing fees on an unscheduled, periodic basis with no prior approval and strongly counsels against such an approach. The record reveals that over a period of time spanning seven and a half (7 1/2) years, Fortenberry withdrew his own fees at will in complete disregard for statutory obligations and chancery court rules governing the administration of estates. See Miss. Code Ann. § 91-7-281 (1972); Unif.Chan.Ct.R. 6.01, 6.07. We are not compelled to condone such an egregious neglect of duty. Therefore, we find that the chancellor was manifestly in error when he approved $90,360.00 in fees which Fortenberry paid himself during a seven and a half (7 1/2) year period. Consequently, it follows then that we reverse as to that portion of the Final Order which ultimately approved these fees and hereby surcharge Davis T. Fortenberry in the amount of $90,360.00.
Mr. McCaffrey owned eighty-four parcels of rental property. As noted above, Mr. Fortenberry had an arrangement whereby Mrs. McCaffrey would collect the rental income, police the tenancy and pay the expenses. Sums over and above whatever amounts were necessary for the maintenance of the property were deposited by Mrs. McCaffrey to the estate account of which she was the sole beneficiary. The appellants argue that Fortenberry's failure to take control of all of the rental income violated his duty as an executor under § 91-7-47 of the Mississippi Code. Every executor or administrator with the will annexed, who has qualified, shall have the right to the possession of all the personal estate of the deceased, unless otherwise directed in the will; and he shall take all proper steps to acquire possession of any part thereof that may be withheld from him, and shall manage the same for the best interest of those concerned, consistently with the will, and according to law. Miss. Code Ann. § 91-7-47 (1972) (emphasis added). In essence, the statute requires the executor to marshal the assets for the benefit of those concerned. Fortenberry's response is that there was only one concerned party, Mrs. McCaffrey. Fortenberry points out that it was Mrs. McCaffrey who devised this plan for rent collection which obviously met with her approval. This leads one to conclude that the executor's maladministration in this instance resulted more from his failure to be more assertive in the management of the estate rather than from a conscious intent to disregard the law in this instance. Fortenberry argues that since Mrs. McCaffrey assumed control over the bulk of the estate's income with no loss occurring by this arrangement, then no detriment or harm inured to anyone. However, Fortenberry testified about the estate's severe indebtedness, redemption of property lost to tax foreclosure, and late filing of estate tax returns. Again, we are without a complete record in this case; and, in the absence of a proper inventory and accounting we are unable to evaluate Fortenberry's claim that no loss resulted due to the beneficiary's management of the estate. We take this opportunity to note that when a beneficiary is ready, willing and capable of managing an estate's income and disbursements, then the proper course for a fiduciary would be directed at efforts to bring about a closure and distribution of the estate assets without delay. Rather than taking the necessary steps to close the estate, Fortenberry allowed it to remain open for ten years. It is well known that an executor has a responsibility to move forward with due diligence in probating and closing the affairs of an estate. Such a responsibility is inherent in one's obligation as a fiduciary. Mr. McCaffrey was in the business of buying and selling real estate. When he sold a piece of property, he would often take a down payment and receive a note with a deed of trust. The notes would be placed with the bank for collection, and the debtors would make their payments directly to the bank. The collected funds were deposited into a special account with Citizens Bank. Mr. and Mrs. McCaffrey owned this account with a survivorship provision. Upon Mr. McCaffrey's death, Mrs. McCaffrey became the sole owner. Mrs. McCaffrey had control over this account. Occasionally, when the estate account was short of funds, Mrs. McCaffrey would transfer funds from this bank account to the estate account. Fortenberry testified at trial that this was a survivorship account and that Mrs. McCaffrey became the sole owner upon her husband's death. The appellants offered nothing to rebut Fortenberry's claim that this was a survivorship account. It is, of course, well settled that survivorship property becomes the property of the survivor, and the joint tenant's estate has no interest in these funds. In re Will and Estate of Strange, 548 So.2d 1323, 1328 (Miss. 1989); In re Ware's Estate, 218 Miss. 694, 67 So.2d 704, 706 (1953). Before an executor can sell realty, court approval of the sale must be obtained. Miss. Code Ann. § 91-7-187 (1972). Mr. Fortenberry understood this, and a review of the docket sheets reveals many instances where Fortenberry sought and obtained court approval to sell realty. However, there were at least two occasions when Fortenberry did not obtain court approval. At the hearing, Mr. Fortenberry was questioned about a court approved sale of realty in the amount of $26,000.00 which was paid directly to Mrs. McCaffrey, thereby bypassing the estate. The appellants argue that Fortenberry's failure to take control of the proceeds of this sale to pay administrative expenses and taxes constituted further evidence of maladministration. Mr. Fortenberry explained this transaction. In March of 1983, the estate obtained a bank loan in the amount of $125,000.00 to pay off all remaining obligations owed by the estate. All debts were paid except for taxes and insurance as those items became due. From that point forward, Fortenberry did not receive any funds which belonged to the estate since all creditors except for the bank had been satisfied. The note on the $125,000.00 loan was to be paid in monthly installments of $2900.00, and this payment was to be debited from a trailer park account that was owned and held by Mrs. McCaffrey solely. Therefore, due to Mrs. McCaffrey's need to fund this trailer park account in order to satisfy the last remaining debt to the bank, all funds from that point forward from the sale of realty were deposited to Mrs. McCaffrey directly. Eventually, the bank note of $125,000.00 was satisfied in June of 1986 when a piece of property was sold for $100,000.00. Every executor or administrator is required to file an annual accounting with the court at least once in each year showing receipts and disbursements. Miss. Code Ann. § 91-7-277 (1972). At the end of the first year of administering the estate, Fortenberry filed a First Annual Account. When he presented this document to Mrs. McCaffrey for her review and signature, she inquired into the need for the document. After being informed that the document would become a matter of public record upon filing, Mrs. McCaffrey became upset and asked Fortenberry not to file any more accountings. Therefore, Fortenberry did not file any additional accountings until he filed the final account on May 15, 1987. Significantly, Mr. J.L. McCaffrey's will waived the requirement that the executor file accountings. Our prior cases which have addressed the testator's waiver of the statutory requirement of filing annual accountings have resulted in some uncertainty on this question. R. Weems, Wills and Administration of Estates in Mississippi, § 9-4, 216 (1988). In Smith v. Bank of Clarksdale , this Court indicated in dicta that a testator's waiver of an accounting would be honored. Smith v. Bank of Clarksdale, 374 So.2d 776, 779 (Miss. 1979). Moreover, Harper clearly endorses the testator's waiver of the statutorily required accounting. [T]he testator may waive the executrix's duty to account. The granting of such a privilege imputes to the executor confidence and trust. Harper v. Harper, 491 So.2d 189, 200 (Miss. 1986). By way of comparison, the rule is markedly different in instances where the testator's will makes no provision at all for the waiver of accountings. In the Matter of Chambers, the will in question made no provision for the waiver of the annual accounting, and we held in unequivocal terms that the statutory requirement imposed by § 91-7-277 is a mandatory, affirmative duty and not merely advisory. Matter of Chambers, 458 So.2d 691, 693 (Miss. 1984). However, despite a testator's waiver, the chancery court may require an accounting upon a charge of mismanagement by the devisees under a will. Harper, 491 So.2d at 200. Mr. McCaffrey's will clearly relieved his executor of the necessity of filing annual accountings. I hereby nominate and appoint Davis T. Fortenberry as the Executor of this my Last Will and Testament and I hereby expressly direct that he not be required to post any bond whatsoever and that he never be required to give any accounting thereof. In light of Harper and the testator's waiver of the annual accounting, we do not find that the executor's failure to file annual accountings constituted maladministration. Under Miss. Code Ann. § 91-7-93 (1972), the executor must file an inventory within ninety days of the grant of letters testamentary. Section 91-7-95 requires the executor to update this inventory within thirty days from the time when additional assets are discovered. Fortenberry alleges that McCaffrey's will waived the inventory as well as the accounting. We do not read the testator's statement of waiver so broadly. While the accounting was clearly waived by Mr. McCaffrey, there is no suggestion of any intent to waive the inventory in the testator's will. Mr. Fortenberry did not file an inventory of the estate's assets until ten years after the grant of letters testamentary when he was required to do so under court order. Mississippi law imposes an affirmative duty for an executor to complete this task within ninety days, and Fortenberry's failure to comply was a direct violation and breach of his fiduciary duty. Every fiduciary for an estate is required to file an estate tax return for the taxable year. Miss. Code Ann. § 27-7-35 (Supp. 1990). Fortenberry was late in filing four estate income tax returns. However, the record contains no suggestion that this failure to timely file resulted in any penalty or interest unlike the situation in Chambers where untimely filing resulted in substantial penalties and interest. Matter of Chambers, 458 So.2d 691, 693 (Miss. 1984). Finally, the appellants raise two additional issues concerning Fortenberry's failure to sell some equipment which the estate owned and his receipt of a diamond stick pin from Mrs. McCaffrey six weeks prior to her death. After a review of the record and the arguments advanced by the parties on both of these points, we find no merit to appellant's suggestion of error. We note only in passing that the two gifts of personal items by Mrs. McCaffrey to Fortenberry were not isolated transactions, but rather were part of a much larger scheme whereby Mrs. McCaffrey gave several other items of her personal belongings to other family members as well.