Bank of Mississippi v. Southern Memorial Park, Inc.

• Decision Date: 13 June 1996
• Docket Number: No. 92-CA-01307-SCT,92-CA-01307-SCT
• Citation: 677 So.2d 186
• Parties: BANK OF MISSISSIPPI v. SOUTHERN MEMORIAL PARK, INC.
• Court: Mississippi Supreme Court

Page 186

677 So.2d 186

BANK OF MISSISSIPPI v. SOUTHERN MEMORIAL PARK, INC.

No. 92-CA-01307-SCT.

Supreme Court of Mississippi.

June 13, 1996.

David S. Raines, Breard & Raines, Gulfport, Fred Mannino, Page Mannino Peresich Dickinson & McDermott, Biloxi, for Appellant.

Nicholas Van Wiser, Byrd & Wiser, Biloxi, Kenneth C. Johnston, Dallas, TX, for Appellee.

En Banc.

PRATHER, Presiding Justice, for the Court:

INTRODUCTION

The Bank of Mississippi appeals the November 16, 1992, decision of the Harrison County Chancery Court denying the authorization of attorneys' fees incurred while adjudicating its status as trustee in litigation instigated by Southern Memorial Park, Inc. The sole issue on appeal is whether the trial court erred in failing to authorize the payment of attorneys' fees in the aforementioned proceedings.

STATEMENT OF THE CASE

Ernest H. Brown, acting as president for Southern Memorial Park, Inc. (hereinafter the "Park") filed on February 1, 1991, a The Bank filed an answer to the petition and counterclaimed for the appointment of a new trustee. In its answer, the Bank delineated eleven issues for consideration by the chancery court in which the statutes' interplay with the trust agreement raised issues regarding the proper means of effectuating a legal substitution. In addition, the Bank requested $2,000.00 as compensation for its services as trustee and $3,500.00 in attorneys' fees, but it later increased this amount to $8,339.82 following the performance of additional legal services.

                motion seeking to transfer trust funds from First Mississippi National Bank of Hattiesburg to Paul E. Roberts, Jr., C.P.A., in Biloxi.   The Harrison County Chancery Court granted the motion, but the Bank of Mississippi (hereinafter the "Bank"), the successor in interest of First National following a merger, refused to comply because of alleged code violations.   After communication between the parties, a petition was filed seeking transfer of funds to an entity called Planned Trusts, Inc., which had not yet been validly incorporated
                

On October 26, 1992, the chancery court issued its opinion and judgment, recognizing the substitution of Planned Trusts as trustee, mandating the transfer of all funds less the Bank's trustee's fees incurred during final accounting, and assessing all court costs to the Bank. The Bank timely appealed from the judgment.

STATEMENT OF THE FACTS

On March 29, 1983, Great American Properties--Mississippi, Inc., a Georgia corporation, executed a perpetual care trust pursuant to the requirements of Miss.Code Ann. § 41-43-31 to -53 (1993) for the management of the Park, which consisted of cemetery property located in Biloxi, Mississippi. The Park is incorporated in the State of Mississippi and engages in the business of "providing lots or other interment space therein for the remains of human bodies, and of entering into contracts with retail consumers whereunder personal property and/or services related to a funeral service or burial of the dead are deliverable at a future or unspecified date." Another declaration of trust was made for the purpose of assuring payment of merchandise purchased and paid for by owners of interment rights in the cemetery.

Great American created the trusts, with the First Mississippi National Bank in Hattiesburg (hereinafter "First National") designated as trustee. First National merged with the Bank of Mississippi (the "Bank"), which assumed the duties of trustee for the Park. As trustor, Great American subsequently sold the property on May 19, 1983 to Ernest H. Brown, who currently owns the Park in an individual capacity. An amendment was subsequently made to the original trust for a cemetery merchandise trust fund.

Thereafter, the Park and Brown began efforts to replace the Bank as trustee, executing a perpetual care trust with Paul E. Roberts, C.P.A., as trustee for the Park. On February 22, 1991, the Park filed a motion with the Harrison County Chancery Court, seeking recognition of the trustee transfer. On that very same day, and without notice to the Bank, the chancery court entered an order requiring all trust funds belonging to the Park to be transferred from the Bank to Roberts and designating Roberts as the new trustee.

Upon advice of counsel, the Bank refused to comply with the order on the basis that various provisions of Miss.Code Ann. § 41-43-31 to -53 and § 75-63-3 to -23 were not followed. The Bank's attorneys presented a letter to the Park on April 4, 1991, suggesting certain procedures to follow in substitution of the trustee, including one procedure which dictated that a corporation, not an individual, had to be designated as trustee. The letter also requested verification of the Notice of Intent to Transfer and Notice of Intent to Receive fund assets, income tax returns, direction as to liquidation of certain fund investments that could not be transferred, and indemnification and hold harmless instruments. Some of these requests were made pursuant to statutory requirements and others were merely precautionary steps taken by the Bank.

Following this correspondence, the Park did in fact attempt to comply with some of the recommendations made by the Bank's At the time of trial, the principal of the cemetery merchandise trust was $57,835.04 with estimated annual interest of $2,313.00, and the principal of the perpetual care trust was $184,918.69 with estimated annual interest of $7,396.00. In its second and final petition with the chancery court, the Park sought, inter alia, a review of the charges and expenses which could be assessed against the trust corpus and those expenses which were incurred by the Bank in its own interest, and therefore, not chargeable against the trust. The Bank, in turn, sought declaration on its duties as trustee in order to appropriately relinquish trustee status, particularly with regards to the state statutory requirements.

                attorney.   On July 1, 1991, for example, the Bank received a copy of a notice of intent that Planned Trusts, Inc. was sought as a substitute trustee, even though said entity was not validly incorporated until two weeks later
                

After a final determination by the chancery court authorizing the trustee substitution, the Bank appealed because attorneys' fees were not granted. The law firm of Page, Mannino & Peresich (hereinafter the "Firm"), employed by the Bank, asserts that it spent a total of 82.6 hours at $100.00 per hour in this matter. The Firm further asserts that all the aforementioned fees were incurred after June 28, 1991, the cut-off date established by the chancery court for the trusts' liability of attorneys' fees. As a result, no allowance of attorneys' fees was made for the proceedings related to the substitution of the trustee.

ANALYSIS OF THE LAW

Neither trust agreement addressed the reimbursement of attorneys' fees to the trustee. However, various statutes imply that, when related to the administration of the trust, attorneys' fees are reasonable expenses entitling the trustee to reimbursement. First, Miss.Code Ann. § 75-63-7 specifically allows for the income of trust funds to be used for reasonable expenses as stated herein:

To insure the adequacy of the trust funds of their intended purpose, the net income therefrom shall remain therein and be reinvested and compounded except the income of the trust fund may be used to defer reasonable expenses of the trustee in connection with the administration of the trust funds.

Miss.Code Ann. § 75-63-7 (1991).

Another code section pertaining to perpetual care trusts requires that the principal remain intact and the funds be used only for cemetery upkeep. Miss.Code Ann. § 41-43-37(1), (5) (1993). These statutes are open to interpretation, and the chancery court decided that the Bank was not entitled to the expense of court costs nor attorneys' fees associated with the trustee substitution after June 28, 1991, when the notice of intent to transfer and the notice of intent to receive funds were received by the clerk's office.

A reading of the Mississippi Uniform Trustees Powers Law indicates that the Bank should be entitled to a reasonable amount of attorneys' fees for work performed in connection with the trustee substitution. The following are related excerpts:

(1) From time of creation of the trust until final distribution of the assets of the trust, a trustee has the power to perform, without court authorization, every act which a prudent man would perform for the purposes of the trust, including but not limited to the powers specified in subsection (3) of this section, and those powers, rights and remedies set forth in Section 91-9-9, Mississippi Code of 1972.

* * * * * *

(3) A trustee has the power, subject to subsections (1) and (2):

(r) To borrow money to be repaid from trust assets or otherwise; to advance money for the protection of the trust and for all expenses, losses and liability sustained in the administration of the trust or because of the holding or ownership of any trust assets, for which advances with any interest the trustee has a lien on the trust assets as against the beneficiary.

(x) To employ persons, including attorneys, auditors, investment advisors or agents, even if they are associated with the trustee, to advise or assist the trustee in the performance of his administrative duties; to act without independent investigation upon their recommendations; and instead of acting personally, to employ one or more agents to perform any act of administration, whether discretionary or not.

(y) To prosecute or defend actions, claims or proceedings for the protection of trust assets and of the trustee in the performance of his duties;

Miss.Code Ann. § 91-9-107(1), (3) (Revised 1994) (Emphasis added).

Clearly, this statute provides for attorneys' fees associated with a trustee's administrative duties akin to the Bank's efforts. A trustee has all the powers conferred by statute unless limited by the trust...