Opinion ID: 1832312
Heading Depth: 1
Heading Rank: 12

Heading: the chancellor erred in failing to remove the co-executors for conflict of interest.

Text: ¶ 47. McNeil initially requested, in his Motion for Accounting and Other Relief, that the chancellor remove the co-executors because of their alleged failure to provide an accounting. At the close of McNeil's case-in-chief, McNeil's attorney requested that the court amend the pleadings to reflect McNeil's request that a constructive trust be imposed. It was not until after the trial that McNeil submitted a brief requesting, among other things, that the chancellor remove the co-executors for conflict of interest. The chancellor denied the request, stating only that [t]he Court does not find this to be well-taken and is denied. On appeal, McNeil argues that the chancellor's refusal to remove the co-executors was error. ¶ 48. McNeil relies on this Court's decisions in Estate of Ratliff, 395 So.2d 956 (Miss.1981), and In re Chambers, 458 So.2d 691 (Miss.1984). Ratliff involved a probate dispute between the decedent's heirs and the executor of the estate. The executor petitioned the chancery court for authority to sell certain real property of the decedent to satisfy expenses of the estate. Attached to the petition was the decedent's tax return, which represented that he owned a partnership interest at the time of his death. However, at trial, witnesses for the executor testified that, prior to his death, the decedent gave his partnership interest to the executor. The heirs appealed the chancellor's determination that the decedent's partnership interest was not in his estate at death. The Court held that the chancellor was manifestly wrong in finding that the decedent made an inter vivos gift of his interest in the partnership to the executor. The Court stated, In the absence of fraud or mistake, the executor may not take, in the course of the same cause or proceeding, inconsistent positions which would be detrimental to the appellants, on the one hand, and beneficial to himself, on the other hand. Ratliff at 957. ¶ 49. As the executors note, the above statement by the Ratliff Court is not applicable in the case at hand. In Ratliff, the executor made conflicting representations to the courtthat is, for purposes of his request that he be able to sell off property of the estate, the executor maintained that the partnership interest was part of the estate, while at the same time arguing that the decedent made an inter vivos gift of the partnership interest. In the case at hand, the co-executors have made no conflicting representations to the court, having maintained at all times that the certificates of deposit do not belong to the estate. While this representation may be beneficial to the co-executors and detrimental to the other devisees, the co-executors do not maintain the inconsistent positions condemned by this Court in Ratliff. ¶ 50. More accurate is McNeil's reliance on In re Chambers, 458 So.2d 691 (Miss. 1984). Chambers involved an appeal by devisees under the decedent's will of the chancery court's approval of the accounting offered by the executors. The decedent had deeded property to one of the executors, and the devisees of the estate brought suit to bring the property back into the estate. This Court stated: In defending this suit and attempting to prevent the subject property from being returned to the corpus of the estate, [the executor] obviously had a conflict of interest with the estate. As we have held in [ Estate of] Ratliff v. Ratliff, 395 So.2d 956 (Miss.1981), an executor may not take inconsistent positions which would be detrimental to the heirs on the one hand and beneficial to himself on the other. When an executor finds his own interest in conflict with those of the estate, the sanctity of the fiduciary relationship is invaded and he should immediately resign as executor. Chambers at 693. The Court's reliance on Ratliff in this situation was perhaps unfortunate given the distinction addressed above. However, whether based on Ratliff or not, the Court's statement, when an executor finds his own interest in conflict with those of the estate, ... he should immediately resign as executor, clearly applies to the situation in Chambers as well as the case at hand. The Court in Chambers went on to find that the co-executors breached their duties in failing to make an accounting until thirteen years after the decedent's death. The Court also held that the fees awarded to the executors and to the attorney for the estate were excessive. The Court reversed the chancellor's order approving the final accounting and remanded the case for a determination of appropriate fees, ordering the chancellor to take into consideration the inappropriate conduct of the executors. ¶ 51. The executors in the case at hand attach significance to the fact that the Chambers Court did not remove the executors or order the chancellor to remove the executors. The executors submit that though it might have been advisable for Terry and Linda to voluntarily resign upon the commencement of McNeil's action, this Court is not compelled by Chambers to reverse the finding of the trial court and order their removal. The executors contend that when the chancellor, in the case at hand, determined that the certificates of deposit were owned by Terry and Linda and that no constructive trust could be imposed, the potential for conflict was resolved, and the issue of whether Terry and Linda should have resigned pending the action brought by McNeil is rendered moot. ¶ 52. This Court addressed the failure of a lower court to remove an executor for conflict of interest in In re Estate of Holloway, 515 So.2d 1217 (Miss.1987), superseded by statute as stated in Cooper v. Crabb, 587 So.2d 236 (Miss.1991). In Holloway, the decedent's widow filed a complaint against the executor, seeking recovery of a promissory note and certificates of deposit which listed the decedent and executor as payee. The chancellor determined that the assets at issue were not part of the decedent's estate. This Court reversed the judgment of the chancellor, finding that the executor failed to demonstrate that the decedent had made a gift of the certificates of deposit. The Court also noted that the executor had a conflict of interest with the estate which necessitated his resignation as executor. Id. at 1225 (citing Chambers, 458 So.2d at 693; Ratliff, 395 So.2d at 957). The Court held that the failure of the chancellor to appoint a new executor upon request was error, and stated that such should be done on remand. Id. at 1225. ¶ 53. In light of this Court's opinions in Chambers and Holloway, the chancellor's failure in the case at bar to remove the executors for conflict of interest was error. The fact that McNeil did not request removal of the executors for conflict of interest until after the trial is of no consequence. He requested their removal in his initial request for relief, and the conflict was obvious even at that time. The executors should have resigned, and, when they failed to do so of their own initiative, the chancellor should have granted McNeil's request that they be removed by order of the court. The conflict of interest was not rendered moot by the chancellor's determination that no constructive trust should be imposed on the certificates of deposit as McNeil timely appealed that determination.