Estate of Coan v. Gaughan
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Cite as 2010 Ark. App. 616
ARKANSAS COURT OF APPEALS
DIVISIONS I, II, & IV
No. CA 09-704
Opinion Delivered September 22, 2010
ESTATE OF HELEN VIRGINIA COAN
APPELLANT
APPEAL FROM THE OUACHITA
COUNTY CIRCUIT COURT
[NOS. PR-2005-1 & PR-1985-21]
V.
HONORABLE MICHAEL R.
LANDERS, JUDGE
MICHAEL P. GAUGHAN
APPELLEE
AFFIRMED
ROBERT J. GLADWIN, Judge
The Estate of Helen Virginia Coan, deceased, through its co-administrators Thomas
Carmody and Dr. Norman Savers, appeals the order of the Ouachita County Circuit Court
awarding attorney’s fees to appellee Michael Gaughan, a former co-administrator of the estate.
The estate challenges the award of fees on several fronts. We affirm the circuit court’s order.
This case is one in a series of appeals spawned by litigation over the estates of Helen
Virginia Coan and her brother Joseph Coan, Jr.1 The record reflects that Helen and Joseph
1
The other appeals are Carmody v. Raymond James Fin. Servs., Inc., 373 Ark. 79, 281
S.W.3d 721 (2008) (affirming the probate court’s order compelling arbitration of claims
against a brokerage firm); Carmody v. Betts, 104 Ark. App. 84, 289 S.W.3d 174 (2008)
(affirming the probate court’s interpretation of Joseph’s will). On May 12, 2010, we decided
the matter of Estate of Helen Virginia Coan v. Estate of Joseph Coan, Jr., 2010 Ark. App. 411,
holding that the statute of limitations did not bar Helen’s estate from seeking to recover funds
retained by Joseph’s estate.
Cite as 2010 Ark. App. 616
inherited considerable sums of money upon the deaths of their parents. Helen was born with
Downs Syndrome, and in 1977, the Probate Court of Ouachita County appointed Joseph as
guardian of Helen’s person and estate. Joseph died in 1984. In his will, Joseph established a
testamentary trust for Helen’s benefit during her lifetime. Linnie Betts, an employee of the
bank where the Coan siblings’ funds were held, succeeded Joseph as Helen’s guardian. Betts
also served as co-executor of Joseph’s estate with Gaughan.
Helen died in January 2005. The circuit court appointed Betts and Gaughan as coadministrators of Helen’s estate. In March 2006, the circuit court named Carmody and Savers
as additional co-administrators of the estate. The following June, the circuit court removed
Betts as co-administrator of Helen’s estate upon the request of Carmody and Savers. Betts
died after her removal.
In November 2006, Carmody and Savers, on behalf of Helen’s estate and her heirs,
filed suit against Betts’s estate and others, claiming that Betts had misallocated funds and
seeking a construction of Joseph’s will pertaining to the testamentary trust. This lawsuit is
referred to by the parties as the “global” litigation. The complaint contained no allegations
accusing Gaughan of any wrongdoing, and Gaughan, who was both a co-administrator and
co-executor of Helen’s and Joseph’s estates, requested that he not be named as a plaintiff in
the global lawsuit.
The complaint in the global litigation included a claim against Western Surety
Company on the bond it had provided Gaughan and Betts as administrators of Helen’s estate.
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In turn, Western Surety filed a third-party complaint against Gaughan, individually, and a
cross-claim against Betts’s estate and the administrator of her estate. In this pleading, Western
Surety asserted that Gaughan and Betts were personally liable to it for any sums it might be
required to pay as a result of the litigation, based on an indemnity clause contained in the
application for the bond. Gaughan hired an attorney and filed a separate answer to Western
Surety’s third-party complaint. The record also reflects that Gaughan filed a motion in the
global lawsuit seeking an interpretation of Joseph’s will that was antithetical to the
construction urged by Carmody and Savers in their complaint. The circuit court rejected
Carmody and Savers’s construction of the will, and we affirmed that decision in Carmody v.
Betts, supra.
On April 27, 2007, Carmody and Savers filed a petition to have Gaughan removed as
a co-administrator of Helen’s estate. The petition cited various conflicts of interest on
Gaughan’s part. On June 19, 2007, Gaughan filed a motion seeking to withdraw as coadministrator of Helen’s estate. In this petition, Gaughan averred that he was not consulted
by Carmody and Savers before they filed the global lawsuit; that he believed that the litigation
was without merit; and that he had not otherwise been consulted concerning the management
of the estate. Gaughan also sought to be released from all liability that may be asserted against
him in his capacity as a co-administrator of Helen’s estate, and he requested the discharge of
his bond and surety. Carmody and Savers did not object to Gaughan’s resignation, but they
resisted Gaughan’s efforts to be relieved from liability for actions taken as a co-administrator.
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Gaughan filed two accountings for the time he served as a co-administrator of Helen’s
estate. The first accounting included the period from Helen’s death until the court removed
Betts as an administrator. This accounting overlapped a period of time when Carmody and
Savers were also co-administrators of the estate. The second accounting prepared by Gaughan
covered the period from Betts’s removal to the date that he filed his motion to withdraw as
a co-administrator. Carmody and Betts objected to the accountings, asserting that they were
rife with errors.
On October 16, 2007, the circuit court entered an order approving Gaughan’s
resignation as a co-administrator of Helen’s estate. The order provided that Gaughan’s
resignation was effective as of June 19, 2007, and that Gaughan had no further liability or
responsibility with regard to the administration of the estate as of that date. The court
reserved the other issues raised by Gaughan in his motion to resign, including the approval
of the accountings.
On June 11, 2008, Gaughan filed a petition seeking attorney’s fees.2 The fees included
charges for services rendered by his attorney in connection with the two accountings, his
resignation, his defense of the Western Surety third-party complaint, and a brief that he filed
in Carmody v. Betts, supra. The motion was accompanied by detailed time records from
2
In his motion for attorney’s fees, Gaughan asserted that, by an order dated February
28, 2008, the circuit court approved both of his accountings and relieved him from liability
to Helen’s estate arising out of his duties as a co-administrator. This order is not contained
in the partial record submitted on appeal.
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Gaughan’s attorney, reflecting that counsel spent 153 hours working on these matters at a rate
of $170 or $175 per hour.
Carmody and Savers opposed the award of fees to Gaughan. They first argued that the
circuit court should deny the motion as a matter of law because Gaughan cited no authority
for an award of fees. Also, Carmody and Savers relied on Dunklin v. Ramsay, 328 Ark. 263,
944 S.W.2d 76 (1997), to argue that Gaughan lacked standing as a minority co-administrator
to seek reimbursement for attorney’s fees. They also asserted that Arkansas Code Annotated
section 28-48-108 (Supp. 2009) provided no authority for an award of fees to Gaughan
because he was a minority co-administrator whose attorney represented his personal interests
that were of no benefit to Helen’s estate.
After conducting a hearing, the circuit court issued a letter opinion deciding the fee
motion. First, the circuit court found that Gaughan was entitled to fees for retaining counsel
to perform his duties as an administrator, which included the preparation and defense of the
accountings. The court also found that Carmody and Savers’s opposition to the accountings
resulted in protracted litigation. As authority for the fee award, the circuit court cited
“A.C.A. § 28-56-104.” Further, the court awarded attorney’s fees incurred by Gaughan in
defending the third-party complaint filed against him by Western Surety. In making this
award, the circuit court reasoned that retaining counsel was necessary to defend his position
as co-administrator with Betts and that the third-party complaint was the direct result of the
litigation initiated by Carmody and Savers. In setting the amount of the fee, the circuit court
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found that the hourly rate charged by Gaughan’s counsel was reasonable and that Gaughan
had paid his attorney $28,404.25. However, the court examined counsel’s billing records and
disallowed $6,120 in fees, finding that certain charges represented services that were either not
related to Gaughan’s duties as co-administrator of Helen’s estate or were related to matters
concerning Joseph’s estate. The court entered an order granting Gaughan’s fee request in the
amount of $22,284.25 on February 26, 2009. That same day, the circuit court filed a
supplemental order awarding Gaughan an additional $2,857.50 in attorney’s fees. This timely
appeal followed.
An award of attorney’s fees will not be set aside absent an abuse of discretion by the
circuit court. Calvert v. Estate of Calvert, 99 Ark. App. 286, 259 S.W.3d 456 (2007). While
the decision to award attorney’s fees and the amount awarded are reviewed under an abuseof-discretion standard, we review the factual findings made by the circuit court under a clearly
erroneous standard of review. Id. On appellate review, however, we do not defer to a circuit
court’s conclusions of law. Baldwin v. Eberle, 2009 Ark. App. 222, 301 S.W.3d 475.
Carmody and Savers first take issue with the circuit court’s citation to Arkansas Code
Annotated section 28-56-104 as authority for the fee award. They point out that this statute
is currently a “reserved” section of the code and argue that the circuit court’s order fails to
identify a proper statutory basis for the award. It is clear to us, however, that the circuit court
meant to cite Arkansas Code Annotated section 28-48-108, which governs awards of
attorney’s fees for the employment of counsel by a personal representative, and that the court
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referenced section 28-56-104 by simple mistake.
Because section 28-48-108 provides
statutory authority for an award of fees to an administrator, we find no reversible error
resulting from the circuit court’s citation to the wrong statute. We will affirm a circuit court’s
decision if it reaches the right result, even though the court states an incorrect reason. See
Calvert, supra.
Next, Carmody and Savers argue that section 28-48-108 does not authorize an award
of fees for the services performed by Gaughan’s attorney. Carmody and Savers contend that
the accountings filed by Gaughan were not necessary because they, as the majority of coadministrators, also submitted accountings that Gaughan did not dispute as being inaccurate.
They also assert that Gaughan is not entitled to fees incurred in the global lawsuit. In this
regard, Carmody and Savers argue that an estate is not required to pay the attorney’s fees of
a minority co-administrator engaged in litigation where the services performed do not benefit
the estate and where the services are for the benefit of a co-administrator in defense of a
personal, contractual obligation. Further, Carmody and Savers maintain that fees are not
allowed where the minority co-administrator asserts positions that are in derogation of the
interests of the estate and that are contrary to positions taken by the majority of coadministrators. In presenting these arguments, Carmody and Savers point out the testimony
of Gaughan’s attorney stating that he could attribute only $10,772.50 of his total fee request
to services connected with the accountings, Gaughan’s resignation, and related hearings.
Section 28-48-108 provides as follows:
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(d)(1) The personal representative may employ legal counsel in connection
with the probate of the will or the administration of the estate, and the attorney
so employed shall prepare and present to the circuit court all necessary notices,
petitions, orders, appraisals, bills of sale, deeds, leases, contracts, agreements,
inventories, financial accounts, reports, and all other proper and necessary legal
instruments during the entire six (6) months, or longer when necessary, while
the estate is required by law to remain open.
Subsection (d)(2) of the statute sets out a fee schedule based on the total, reportable market
value of the real and personal property, but subsection (d)(3) allows the circuit court to
deviate from the schedule to allow a fee commensurate with the value of legal services
rendered if the court determines that the scheduled fee is either excessive or insufficient under
the circumstances of the case.
We do not hesitate to hold that the circuit court did not abuse its discretion in
awarding attorney’s fees to Gaughan for both preparing and successfully defending his
accountings. Under Arkansas Code Annotated section 28-52-103 (Repl. 2004), Gaughan had
a duty to file annual accountings during the period of his administration and to file an
accounting upon his resignation as co-administrator. Thus, Gaughan cannot be faulted for
submitting an accounting to chronicle the estate’s activities during the time that he and Betts
were co-administrators and for submitting another one upon his resignation. Also, the circuit
court overruled the objections to Gaughan’s accountings. It is well settled that attorney’s fees
necessarily incurred in defense of an administrator’s accounting can be paid from the estate
but not fees paid to attorneys in resisting proper charges against the administrator, or one
brought to compel him to perform his legal duty when he is at fault. Souter v. Fly, 182 Ark.
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791, 33 S.W.2d 408 (1930); Jacoway v. Hall, 67 Ark. 340, 55 S.W.12 (1900). The circuit
court’s award of fees in this regard rests on sound authority.
This brings us to the time Gaughan’s counsel spent in defending against Western
Surety’s third-party complaint against Gaughan on the bond issued by it to Gaughan and
Betts as the original co-administrators of Helen’s estate. Carmody and Savers argue that the
time spent on this claim was personal to Gaughan and did not benefit the estate. The value
of services rendered to an estate is primarily a factual determination to be made by the
probate court, and the appellate court will not reverse its decision where it is not clearly
erroneous. Nabers v. Estate of Setser, 310 Ark. 194, 196, 833 S.W.2d 375, 376 (1992); Adams
v. West, 293 Ark. 192, 195, 736 S.W.2d 4, 6 (1987). The circuit court found that Gaughan’s
defense of the action filed by Western Surety was necessarily taken in defense of his position
as co-administrator with Betts and a direct result of the litigation commenced by Carmody
and Savers. We cannot say that this finding is clearly erroneous.
It has long been the rule in Arkansas that an action on the administrator’s bond is not
maintainable until the probate court has adjusted the accounts of the administrator and has
ordered him to pay over amounts found to be in his hands. Continental Ins. Cos. v. Estate of
Rowan, 250 Ark. 724, 466 S.W.2d 942 (1971); Statham v. Brooke, 140 Ark. 187, 215 S.W.
581 (1919); Planters’ Mutual Ins. Ass’n v. Harris, 96 Ark. 222, 131 S.W. 949 (1910). This is
because the surety’s liability is derivative and ordinarily does not exceed that of the principal.
Estate of Rowan, supra. Thus, Carmody and Savers’s premature action against Western Surety
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resulted in Western Surety protecting its interest by filing the cross-claim and third-party
claim against Betts and Gaughan. Moreover, an action on an administrator’s bond is part of
the administration of the estate pursuant to Ark. Code Ann. § 28-48-208. As such,
Gaughan’s attorney’s fees are authorized by Ark. Code Ann. § 28-48-108(d)(1).
Affirmed.
V AUGHT, C.J., H ART, A BRAMSON, and B AKER, JJ., agree.
R OBBINS, J.concurs in part and dissents in part.
H ENRY and B ROWN, JJ., concur in part and dissent in part.
JOHN R. R OBBINS, Judge, concurring in part; dissenting in part. I agree with the
rationale of the majority opinion that recognizes appellee Gaughan’s entitlement to be
reimbursed by the estate for his attorney fees.
However, I am of the opinion that
reimbursement for his attorney fees incurred in defending Western Surety’s action against him
under his administrator’s bond was premature. The litigation between Western Surety and
Gaughan has not yet played out. In that action, Gaughan has pled that he should be awarded
from Western Surety his attorney fees incurred in defending Western Surety’s claim. If
successful on such request, Gaughan will not have need of reimbursement from the estate
because the party directly responsible for his incurring these fees will have made
reimbursement to Gaughan in whole or in part.
Consequently, I would reverse the award of attorney fees made by the trial court as to
that portion applicable to Gaughan’s defense of Western Surety’s claim, but without prejudice
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to Gaughan’s right to again seek reimbursement from the estate if he does not receive full
reimbursement of these expenses from Western Surety.
C OURTNEY H UDSON H ENRY, Judge, concurring in part and dissenting in part.
Today, a majority of this court has upheld the circuit court’s decision to award a personal
administrator attorney’s fees for the preparation and defense of his accountings, as well as the
circuit court’s ruling that the estate was also liable to the personal administrator for attorney’s
fees he incurred in opposition to litigation brought by the estate to recoup funds allegedly
misappropriated from the estate. I am in complete agreement with the majority’s opinion
affirming that portion of the fee award attributable to the accountings. However, Arkansas
law does not permit the award of fees for legal services rendered in connection with the
separate lawsuit. Therefore, I must dissent.
In Arkansas, a circuit court may not award attorney’s fees unless the fees are authorized
by statute. In re Estate of Reimer, 2010 Ark. App. 41. As applicable here, Arkansas Code
Annotated section 28-48-108 (Supp. 2009) provides:
(d)(1) The personal representative may employ legal counsel in connection
with the probate of a will or the administration of the estate, and the attorney
so employed shall prepare and present to the circuit court all necessary notices,
petitions, orders, appraisals, bills of sale, deeds, leases, contracts, agreements,
inventories, financial accounts, reports, and all other proper and necessary legal
instruments during the entire six (6) months, or longer when necessary, while
the estate is required by law to remain open.
Pursuant to this statute, the supreme court has long recognized that courts may authorize an
administrator to employ counsel in the necessary protection of the estate in his or her hands
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and may allow fees for such services rendered by the administrator to protect and preserve the
estate. Paget v. Brogan, 67 Ark. 522, 55 S.W. 938 (1900). So, too, attorneys may be retained
and paid reasonable sums for advising the administrator in the affairs relating to his office and
for giving proper legal assistance in the conduct of the administration. Miller v. Oil City Iron
Works, 184 Ark. 900, 45 S.W.2d 36 (1931). Here, however, the question is whether an
award of fees to a co-administrator is authorized where the services are not associated with
the administration or the protection of the estate.
Carmody and Savers place much reliance on the supreme court’s decision in Dunklin
v. Ramsey, 328 Ark. 263, 944 S.W.2d 76 (1997). In that case, the question before the court
was whether a minority co-executor had the right to oppose the actions of the majority of
executors in construing the decedent’s will. The supreme court held that the minority coexecutor lacked standing to do so, holding that the provisions of Arkansas Code Annotated
section 28-48-104 (1987) clearly mandated that, in situations where there are more than two
executors of an estate, the powers given to them may only be exercised by the joint action
of the majority, unless otherwise provided in the will. Dunklin did not involve the issue of
attorney’s fees, but the supreme court cited with approval the decision of In re Greenberg’s
Estate, 146 N.E.2d 404 (Ill. App. Ct. 1957), where the Illinois Appellate Court held that a
minority co-executor was free to seek independent legal counsel at his own expense in
administering the affairs of the estate but not at the expense of the estate. While Dunklin
supports Carmody and Savers’ actions in prosecuting the global lawsuit in the manner they
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see fit and over the objection of appellee, it does not directly touch upon the attorney’s fee
issue in question here.
More to the point is the decision of In re Torian v. Smith, 263 Ark. 304, 564 S.W.2d
521, cert. denied, 439 U.S. 883 (1978),where the supreme court approved the disallowance of
fees for services that were performed on behalf of the executor in his individual capacity and
whose actions were in derogation of the interests of the estate and its beneficiaries. Building
upon this holding, in Croft v. Clark, 24 Ark. App. 16, 748 S.W.2d 149 (1988), we reversed
an award of attorney’s fees to an administrator who was sued both in his administrative and
personal capacities. There, certain heirs of the decedent sued the administrator, who was also
an heir, to set aside transfers made by the decedent to the administrator and other members
of the administrator’s family, claiming that the decedent was incompetent at the time the
transactions were consummated.
The heirs’ lawsuit was successful.
Afterwards, the
administrator petitioned the probate court for the attorney’s fees that he incurred in defending
the suit. The trial court allowed the fees, but we disagreed, reasoning that the administrator
could not recover his attorney’s fees from the estate because the estate stood to gain nothing,
even if the administrator had prevailed in the lawsuit, and because the position taken by the
administrator was in derogation of the interests of the estate as a whole.
The view our courts have taken in such matters is shared by those in other
jurisdictions. In the case of In re Estate of Maxcy, 240 So. 2d 93 (Dist. Ct. App. Fla. 1970), the
court stated the general rule:
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It is a clearly recognized principle in the administration of estates that counsel
may be reimbursed from the estate only for the reasonable value of the
necessary legal services he renders which benefits the estate, not the executor
personally. And this principle is equally as applicable in the case of coexecutors, assuming arguendo that separate counsel could represent each coexecutor. Such separate counsel should not expect, and should not receive, fees
for services that do not represent a distinct benefit to the estate. Such services,
or a portion thereof, as inure to the benefit of the executor or co-executors
primarily should not be compensable out of the estate funds.
Id. at 96. See also In re Estate of Amator, 574 P.2d 67 (Ariz. Ct. App. 1978) (holding that
attorney’s fees are not allowed if incurred to protect the administrator’s personal interests); In
re Oliver v. City of Larimore, 540 N.W.2d 630 (N.D. 1995) (holding that attorney’s fees are
authorized only when counsel is retained for the benefit of the estate and are disallowed if the
legal services are performed primarily for the personal interest of the administrator).
The common themes emanating from this body of law are that an administrator may
not recover attorney’s fees from the estate where the legal services rendered advance the
personal interests of the administrator, where the estate derives no benefit from the services,
or where the position asserted by the administrator is contrary to the interests of the estate.
When these principles are applied to the instant case, I am persuaded that the trial court erred
as a matter of law in awarding fees related to the global lawsuit. The third-party complaint
asserted a claim against Gaughan in his individual capacity, based on his own contractual
obligation. Thus, Gaughan’s personal interest is at stake, not that of the estate. Gaughan’s
potential liability is to the surety; therefore, there will be no resulting benefit to the estate.
Moreover, Gaughan is aligned in opposition to the estate, and he has specifically taken
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positions contrary to those asserted by the estate. For these reasons, I must conclude that the
estate is not obliged to reimburse Gaughan for his attorney’s fees.
Rather than apply the law, the majority is consumed by the notion that Gaughan
should not have to pay his own attorney’s fees because he was wrongfully haled into court
when Carmody and Savers “prematurely” brought Western Surety into the global lawsuit.
This “but for” logic runs counter to the settled law that an estate is not responsible for paying
the fees of a personal administrator who is protecting his own interests, not the estate’s, and
who aims to defeat the lawsuit rightfully brought by a majority of the administrators of the
estate. Quite simply, the law does not allow attorney’s fees under these circumstances.
In addition, I am not convinced that joining Western Surety in the global lawsuit was
necessarily improper. Arkansas Code Annotated section 28-48-208 (Repl. 2004), which
governs the enforcement of obligations on a bond, authorizes the filing of a separate lawsuit,
apart from the administration of an estate, to recover damages sustained by reason of the
default of a personal administrator, and the statute further provides that a surety is entitled to
notice of actions affecting its liability on the bond. Carmody and Savers filed an independent
action as permitted by the statute, and they have maintained that they named Western Surety
in the global lawsuit in order to comply with the notice provision of the statute.
In
Continental Ins. Cos. v. Estate of Rowan, 252 Ark. 980, 482 S.W.2d 102 (1972), the surety
received notice of the lawsuit brought against the former guardian for whom it had issued a
bond, and the surety elected to participate in the litigation. In fact, the surety took the lead
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role in defending the actions of the former guardian in order to avoid its own liability on the
bond. In the same way, the liability of Western Surety, and in turn Gaughan, depends on
whether Betts misallocated funds. If either Western Surety or Gaughan believed that joining
Western Surety in the litigation was premature, they could have pursued the simple measure
of moving to dismiss Western Surety from the lawsuit. Instead, like the surety in Continental
Ins. Cos., id., they have chosen to remain in the lawsuit as a means of protecting their own
interests. As stated before, the law does not require the estate to pay the attorney’s fees of
Gaughan for advancing his own personal interests that are antithetical to the interests of the
estate. I cannot fault Gaughan for protecting his interests, but he cannot do so at the expense
of the estate.
B ROWN, J., joins.
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