Estate of Flaherty, Matter of

• Decision Date: 24 April 1992
• Docket Number: No. 910268,910268
• Citation: 484 N.W.2d 515
• Parties: In the Matter of the ESTATE OF John J. FLAHERTY a/k/a John Flaherty, Deceased. John H. FLAHERTY, Jr., Petitioner and Appellant, v. Norine FELDNER, Personal Representative of the Estate of John J. Flaherty, Deceased, Respondent and Appellee. Civ.
• Court: North Dakota Supreme Court

Page 515

484 N.W.2d 515

In the Matter of the ESTATE OF John J. FLAHERTY a/k/a John

Flaherty, Deceased.

John H. FLAHERTY, Jr., Petitioner and Appellant, v. Norine FELDNER, Personal Representative of the Estate of

John J. Flaherty, Deceased, Respondent and Appellee.

Civ. No. 910268.

Supreme Court of North Dakota.

April 24, 1992.

Robert J. Slorby (argued), Eaton, Van de Streek & Ward, Minot, for petitioner and appellant.

Robert J. Hovland (argued) and Orlin W. Backes (appearance), McGee, Hankla, Backes & Wheeler, Ltd., Minot, and Richard L. Schnell (no appearance), Mandan, for respondent and appellee.

ERICKSTAD, Chief Justice.

John H. Flaherty, Jr., successor personal representative of the estate of John J. Flaherty, appeals from a county court order that approved the final report and account of Norine Feldner, the former personal representative of the estate; approved payment of certain attorney fees and personal representative fees from estate assets; and discharged Feldner as personal representative. We affirm.

John J. Flaherty died on March 17, 1986. John J. executed four wills during his life, each denying that he had children. His last will, executed in 1985, provided that four charities would receive a total of $10,000 and that his sister, Violet Flaherty, would receive $1,000. The will further provided that nine nieces and nephews would receive one-half of the balance of the estate, and that his sister, Feldner, would receive the other one-half of the balance. The will also appointed Feldner to serve as personal representative of the estate.

John H. Flaherty, Jr., challenged the wills, claiming that he was the son of John J. and that John J. was laboring under an insane delusion and thus lacked the testamentary capacity to execute the wills. The trial court granted summary judgment dismissing the petition to set aside the wills. John H. appealed to this court. In Flaherty v. Feldner, 419 N.W.2d 908 (N.D.1988), we reversed the summary judgment and remanded for further proceedings.

On remand, Feldner again moved for summary judgment, but the motion was denied by the trial court. After a four-day trial, the jury determined that John H. was John J.'s son and that John J. was laboring under an insane delusion when he executed the four wills. The trial court entered a judgment declaring that all four wills were invalid and that John H. was John J.'s son and the sole heir to his father's estate. Feldner appealed from that judgment, and in Matter of Estate of Flaherty, 446 N.W.2d 760 (N.D.1989), we affirmed, with two Justices dissenting.

Feldner then filed a report and account of all assets received and expended by her while serving as personal representative of the estate. The total value of the estate assets was approximately $232,236. Following a hearing, the trial court approved payment of attorney fees and costs from estate assets to the McGee, Hankla, Backes & Wheeler, P.C., law firm [hereinafter McGee law firm] in the total amount of approximately $36,262 for representing Feldner as personal representative of the estate. The court also approved total payment from estate assets of approximately $9,860 in attorney fees and costs to Richard L. Schnell for his work in the will litigation. The court also allowed Feldner total payment of $11,500 in personal representative fees from the estate and discharged her as personal representative.

The trial court entered a Rule 54(b), N.D.R.Civ.P., certification, and John H. [hereinafter Flaherty] has appealed. Flaherty challenges the propriety and the amount of attorney fees and personal representative fees awarded by the trial court from the estate.

ATTORNEY FEES

Flaherty asserts that the trial court erred in allowing Feldner the attorney fees incurred in her unsuccessful defense of the will contest.

A personal representative is entitled to compensation from the estate for reasonable attorney fees incurred in defending or prosecuting any proceeding in good faith. See Matter of Estate of O'Connell, 476 N.W.2d 8, 11 (N.D.1991); Matter of Estate of Kjorvestad, 375 N.W.2d 160, 170 (N.D.1985). The personal representative may be reimbursed for these expenses, or payment may be made directly to the attorney out of the estate. First Trust Co. of North Dakota v. Conway, 345 N.W.2d 838, 843 (N.D.1984). Section 30.1-18-20 [U.P.C. Sec. 3-720], N.D.C.C., provides:

"30.1-18-20 (3-720). Expenses in estate litigation.--If any personal representative or person nominated as personal representative defends or prosecutes any proceeding in good faith, whether successful or not, he is entitled to receive from the estate his necessary expenses and disbursements, including reasonable attorneys' fees incurred."

Generally, a personal representative "has the duty, as well as the right, to defend the will by all fair means, and with his best efforts, at least where he has reasonable ground to believe the will is valid." 95 C.J.S. Wills Sec. 331, at p. 185-186 (1957) [Footnotes omitted]. See also Secs. 30.1-18-03(1) and (2) [U.P.C. Sec. 3-703], and 30.1-18-15(22) [U.P.C. Sec. 3-715], N.D.C.C. This duty applies regardless of whether the personal representative is also a beneficiary under the will. See, e.g., Matter of Estate of Unger, 54 Or.App. 713, 636 P.2d 436, 437 (1981). Furthermore, Sec. 30.1-18-20 specifically provides that ultimate success in the legal proceedings is not a prerequisite to the allowance of reasonable attorney fees. See Matter of Estates of Kjorvestad, 287 N.W.2d 465, 468 (N.D.1980); Estate of Brideau, 458 A.2d 745, 748 (Me.1983); In re Estate of Reimer, 229 Neb. 406, 427 N.W.2d 293, 295 (1988).

In construing Sec. 30.1-18-20, we have said that "it must appear that the personal representative acted in good faith, that his conduct was free from fraud, and that he benefited the estate before attorney fees and costs may be awarded by the court." Matter of Estate of Honerud, 326 N.W.2d 95, 97 (N.D.1982). A "benefit" to an estate certainly includes services that bring about an enhancement in value or an increase in the assets of the estate. See, e.g., Matter of Estate of Ambers, 477 N.W.2d 218, 224 (N.D.1991). However, we believe that a "benefit" to the estate is not to be measured solely in monetary terms, but can also include a personal representative's good faith attempts to effectuate the testamentary intention set forth in a facially valid will. See, e.g., In re Estate of Lewis, 442 So.2d 290, 292 (Fla.Ct.App.1983). As the court reasoned in In re Pelgram's Estate, 146 Misc. 750, 262 N.Y.S. 848, 854 (1933):

"To be beneficial, it need not be shown that net tangible monetary advantage was realized or that a money loss was avoided. The administration of trust property does not permit so simplified a test of 'benefit.' The word applies to every aspect of administration which sound judgment would approve. If in the carrying on of such an administration legal services are required either in defense or in attack, the fiduciary may contract for or may pay and receive allowance for reasonable fees."

Statutes providing for attorney fees to be paid out of the estate to a successful or unsuccessful personal representative who engages in good faith proceedings recognize that an estate as an entity is benefited when genuine controversies as to the validity or construction of a will are litigated and finally determined. See Matter of Estate of Robinson, 236 Kan. 431, 690 P.2d 1383, 1387 (1984). The purpose and public policy underlying these statutes is to allow the personal representative, as a fiduciary acting on behalf of persons interested in an estate, to in good faith pursue appropriate legal proceedings without unfairly compelling the representative to risk personal financial loss by underwriting the expenses of those proceedings. Cf. Dunnuck v. Mosser, 546 N.E.2d 1291, 1292 (Ind.Ct.App.1989). We review the trial court's allowance of attorney fees in this case with these principles in mind.

The trial court essentially determined that Feldner's defense of the will was conducted in good faith and that her conduct was free from fraud. The trial court found "that the claim that ... Feldner mismanaged the estate during her administration is not well founded. Her actions appeared to be those of one who was intent on handling the estate in the best manner she knew how." The court further found that "[t]he fact that the verdict was unfavorable to the personal representative and that the decision of the jury and the Court was upheld by the Supreme Court should not be used as a factor in determining that the personal representative or her attorneys acted inappropriately."

We conclude that the trial court did not err in allowing Feldner attorney fees for defending the will contest. The will was facially valid and the will contest was based on a rather novel theory. Flaherty claimed that his father's mother was insane, that she forced her insane delusion on his father, and that she caused his father to suffer from this delusion for 20 years after the mother's death. Unlike the situation in Matter of Estate of Honerud, supra, this is not a case in which the named personal representative and primary beneficiary in a contested will was found by the jury to have exercised undue influence over the testator in executing the will. Moreover, Feldner's subsequent appeal of the jury verdict cannot be considered frivolous. Indeed, two Justices of this court agreed with Feldner and would have reversed the jury verdict. See Matter of Estate of Flaherty, supra, 446 N.W.2d at 768.

We likewise reject Flaherty's contention that the purpose of Feldner's defense to the will contest "was essentially to defend Feldner's own substantial personal interest as an heir under the wills and to exclude Flaherty from receiving anything from his father's estate." There were fourteen beneficiaries other than Feldner who would have received proceeds from the estate if the 1985 will had been upheld....