Estate of Effron

Citation117 Cal.App.3d 915,173 Cal.Rptr. 93
CourtCalifornia Court of Appeals
Decision Date10 April 1981
Parties, 1981-1 Trade Cases P 64,081 In the Matter of the ESTATE of James EFFRON, Deceased. BANK of AMERICA, as Executor, etc., Petitioner and Respondent, v. Cheryl L. KOSLOW et al., Objectors and Appellants. Civ. 22005.

Hertzberg, Koslow & Franzen and David S. Koslow and Gary L. Effron, Los Angeles, for appellants.

Gray, Cary, Ames & Frye and R. Reaves Elledge, Jeffrey M. Shohet, William A. Johnson, Jr., and L. Jean Shannon, San Diego, for respondent Bank of America.

Rose, Jennings, Squires & Jay and Kendall M. Squires, Coronado, for respondent Rose, Jennings, Squires & Jay.

WIENER, Associate Justice.

Cheryl L. Koslow and Gary L. Effron, beneficiaries of the Estate of James Effron, deceased, (Beneficiaries) appeal a probate order denying their application for a citation to remove the Bank of America (Bank) as executor and granting the Bank's petition for preliminary distribution of statutory attorney's fees and executor's commissions.

They challenge on theoretical and practical grounds both customary probate practices fostered by corporate fiduciaries and statutory attorney's fees. On a theoretical level, they claim as a matter of law statutory attorney's fees (Prob.Code, §§ 901; 910, subd. (a)) 1 violate the antitrust laws and their application denies due process of law to those affected. As a practical matter, they question the ethical and legal propriety of what they allege to be the customary practice involving reciprocal back scratching between corporate fiduciaries and lawyers in which the lawyer drafting the will is always retained as counsel for the executor. In describing this scenario where the corporation's only purpose is to perpetuate corporate trust and probate business, they claim a conflict of interest is created causing a breach of the executor's duty reflected here by the Bank's failure to negotiate a lesser fee for its lawyer than that allowed by statute and its failure to discharge counsel when Beneficiaries believed it was in their best interest to do so.

As we will explain, we conclude the system of statutory fees is valid, falling within the state action exemption to the Sherman Antitrust Act enunciated in Parker v. Brown (1943) 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315. We also decide the Bank did not breach its fiduciary responsibilities. We affirm the order.

Factual and Procedural Background

James Effron died on December 3, 1977. 2 On January 30, 1978, the court admitted his April 1, 1974 will to probate and issued letters testamentary appointing the Bank executor. The Bank, as executor, retained attorneys Rose, Jennings, Squires & Jay. Dustin Rose of that firm knew the deceased and prepared his will.

Beneficiaries objected to the Bank's first account current and petition for payment on account of statutory attorney's fees and executor's commissions and for preliminary distribution filed on October 10, 1978. They claimed the Bank and the Rose firm were not entitled to commissions or fees because the California statutory compensation and fee schedules violated due process of law and were contrary to the antitrust laws. The court found their objections to be without merit and allowed $5,000 on account of commissions and fees to be paid to the Bank and to its attorneys.

In the same proceedings, the court also considered the Beneficiaries' notice of application and application to remove the executor based on grounds similar to those contained in their objections to the preliminary allowance for commissions and fees. The Beneficiaries also argued the executor should be removed because the Bank, concerned solely with its self-interest, failed to negotiate with the Rose firm for an attorney's fee less than that provided by statute. The court rejected Beneficiaries' arguments and refused to cite the executor. This appeal ensued. 3

Statutory Probate Fees
Parker v. Brown Exemption

We first consider whether statutory attorney's fees violate federal antitrust laws.

The Sherman Act of 1890, enacted to prevent undue restraints upon trade having a significant effect on competition, provides simply,

"Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States ... is ... illegal." (15 U.S.C. § 1.)

Lawyers can no longer take solace in the naive belief that, as members of a learned profession, they are exempt from the Act.

"In the modern world it cannot be denied that the activities of lawyers play an important part in commercial intercourse, and that anticompetitive activities by lawyers may exert a restraint on commerce." (Goldfarb v. Virginia State Bar (1975) 421 U.S. 773, 788, 95 S.Ct. 2004, 2014, 44 L.Ed.2d 572.)

Although "there may be legal services that have no nexus with interstate commerce and thus are beyond the reach of the Sherman Act" (id. at p. 785, 95 S.Ct. at p. 2012), we proceed here on the assumption the fees incurred in probate proceedings, indispensable to the transfer of real and personal property, sufficiently affect commerce to fall within the broad scope of the interstate commerce requirement. (See, e. g., Hospital Building Co. v. Trustees of Rex Hospital (1976) 425 U.S. 738, 743-745, 96 S.Ct. 1848, 1851-1852, 48 L.Ed.2d 338.)

We also proceed on the premise the setting of fees is a form of price fixing, a practice "conclusively presumed to be unreasonable and therefore illegal without elaborate inquiry as to the precise harm they have caused or the business excuse for their use." (Northern Pacific Railway Company v. United States (1958) 356 U.S. 1, 5, 78 S.Ct. 514, 518, 2 L.Ed.2d 545.) The fact that statutory attorney's fees establish a maximum allowance for ordinary services does not alter our premise for "(a)ny combination which tampers with price structures is ... an unlawful activity." (United States v. Socony-Vacuum Oil Co. (1940) 310 U.S. 150, 221, 60 S.Ct. 811, 843, 84 L.Ed. 1129.) Agreements to fix maximum prices, "no less than those to fix minimum prices, cripple the freedom of traders and thereby restrain their ability to sell in accordance with their own judgment." (Kiefer-Stewart Co. v. Joseph E. Seagram & Sons (1951) 340 U.S. 211, 213, 71 S.Ct. 259, 260, 95 L.Ed. 219.)

Within this framework, the applicability of the Sherman Act turns on our determination of whether statutory probate fees fall within the state action exemption of Parker v. Brown, supra.

The Parker court found the California Agricultural Prorate Act, "a program designed to conserve the agricultural resources of the state and to prevent economic waste in the marketing of raisins" (Rice v. Alcoholic Bev., etc., Appeals Bd. (1978) 21 Cal.3d 431, 441, 146 Cal.Rptr. 585, 579 P.2d 476), was exempt from the Sherman Act because the program "derived its authority and its efficacy from the legislative command of the state" (Parker v. Brown, supra, 317 U.S. 341 at p. 350, 63 S.Ct. at p. 313). The Sherman Act, directed to the regulation of private practices, was not intended to prohibit a state from imposing a restraint as an act of government. (Id., at pp. 350-352, 63 S.Ct. at pp. 313-314.) Since Parker, our high courts have had ample opportunity to dissect this doctrine. (See, e. g., Goldfarb v. Virginia State Bar, supra, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed. 572; Cantor v. Detroit Edison Co. (1976) 428 U.S. 579, 96 S.Ct. 3110, 49 L.Ed.2d 1141; Bates v. State Bar of Arizona (1977) 433 U.S. 350, 97 S.Ct. 2691, 53 L.Ed.2d 810; New Motor Vehicle Bd. of Cal. v. Orrin W. Fox Co. (1978) 439 U.S. 96, 99 S.Ct. 403, 58 L.Ed.2d 361; Cal. Retail Liquor Dealers Ass'n v. Midcal Alum. (1980) 445 U.S. 97, 100 S.Ct. 937, 63 L.Ed.2d 233; and Rice v. Alcoholic Bev., etc., Appeals Bd., supra, 21 Cal.3d 431, 146 Cal.Rptr. 585, 579 P.2d 476.)

"These decisions establish two standards for antitrust immunity .... First, the challenged restraint must be 'one clearly articulated and affirmatively expressed as state policy'; second, the policy must be 'actively supervised' by the State itself. (Citation.)" (Cal. Retail Liquor Dealers Assn. v. Midcal Alum., supra, 445 U.S. 97 105, 100 S.Ct. 937, 943, 63 L.Ed.2d 233.) "It is clear that no exemption applies if the anticompetitive act is performed by a private association and is not compelled by the state (Goldfarb ) or if the state merely approves anticompetitive conduct initiated by a private agency and the program does not effectuate any statewide policy (Cantor )." (Rice v. Alcoholic Bev., etc., Appeals Bd., supra, 21 Cal.3d 431 at p. 444, 146 Cal.Rptr. 585, 579 P.2d 476.) In holding that the state action exemption barred application of the Sherman Act to Arizona's restraint on attorney's advertising, the Bates court, 433 U.S. at page 363, 97 S.Ct. at p. 2698, explained,

"(t)he disciplinary rules reflect a clear articulation of the State's policy with regard to professional behavior. Moreover, ... the rules are subject to pointed re-examination by the policymaker the Arizona Supreme Court in enforcement proceedings. Our concern that federal policy is being unnecessarily and inappropriately subordinated to state policy is reduced in such a situation; we deem it significant that the state policy is so clearly and affirmatively expressed and that the State's supervision is so active."

We proceed then to test sections 901 and 910, subdivision (a), against these standards.

Legislative History

California has had statutory provisions for compensating executors for ordinary services since 1850 when the executor was entitled to receive 15% of the first $1,000, 10% of the next $9,000 and 6% of everything thereafter. The executor also was entitled to receive a further allowance for extraordinary services in an amount determined by the probate judge to be just and reasonable. (Stats. of 1850, Ch. 129, § 22.) During the balance of the 19th century, the...

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