Estate of Shano, Matter of

• Decision Date: 17 June 1993
• Docket Number: CA-CV,No. 1,1
• Citation: Estate of Shano, Matter of, 869 P.2d 1203, 177 Ariz. 550 (Ariz. App. 1993)
• Parties: In the Matter of the ESTATE OF Charles L. SHANO, Deceased. FIDUCIARY SERVICES, INC., and Ronald L. Maksym, Special Administrators-Appellants, v. Michael A. SHANO and Thelma Shano, Personal Representatives-Appellees. 91-104.
• Court: Arizona Court of Appeals

Page 1203

869 P.2d 1203

177 Ariz. 550

In the Matter of the ESTATE OF Charles L. SHANO, Deceased FIDUCIARY SERVICES, INC., and Ronald L. Maksym, Special Administrators-Appellants, v. Michael A. SHANO and Thelma Shano, Personal Representatives-Appellees.

No. 1 CA-CV 91-104.

Court of Appeals of Arizona Division 1, Department D.

June 17, 1993.

Review Denied April 5, 1994.

[177 Ariz. 552] Ronald L. Maksym, P.C. by Ronald L. Maksym, Phoenix, for appellants.

S. Alan Cook, P.C. by S. Alan Cook, Phoenix, for appellees.

Michael A. Shano, in pro. per.

OPINION

TOCI, Presiding Judge.

Deborah Garrison ("Garrison"), a friend of Charles L. Shano ("decedent"), was a named beneficiary in a holographic will executed two days before decedent's death. At the time of decedent's death, he was married to his surviving spouse, Thelma Shano ("Thelma"), although dissolution proceedings were pending. Garrison's attorney, Ronald L. Maksym ("Maksym"), filed the holographic will for probate and obtained informal appointment of Garrison as the special administrator for decedent's estate. Later, when Thelma requested probate of an earlier will of decedent, the court suspended Garrison's powers because of the potential conflict between Thelma's interests and those of Garrison. After the parties agreed to appointment of an independent special administrator for decedent's estate, Maksym associated as co-counsel with the attorney for the special administrator.

Maksym appeals from the probate court's order disqualifying him as counsel for the special administrator and the court's judgment rejecting his request for payment of his attorney's fees from the estate and from Thelma's half of the community property. We must decide: (1) whether an attorney who represents the beneficiary of a holographic will disinheriting decedent's surviving spouse may later represent the personal representative of decedent's estate and oppose the surviving spouse's claims against the estate; (2) whether a probate court may reject a request for fees by a special administrator's attorney who, because of a conflict of interest, has violated his fiduciary duty; and (3) whether such attorney may recover for services rendered to the estate before such violations occurred.

We hold that the probate court did not abuse its discretion in disqualifying Maksym as the special administrator's attorney. Garrison's interests were clearly adverse to those of Thelma. The record establishes that Maksym violated both his ethical duty to Garrison and his fiduciary obligation to Thelma when, after representing Garrison, he undertook representation of the estate and opposed Thelma's claims against the estate. We also hold that the probate court did not abuse its discretion when it denied Maksym's application for compensation. The record contains substantial evidence that Maksym's inability to exercise independent judgment on behalf of the estate caused excessive cost and delay in administering decedent's estate. Thus, we affirm the probate court's order and judgment.

FACTS AND PROCEDURAL HISTORY

Decedent died on February 24, 1989. He was survived by his wife, Thelma, and three adult sons, David, Michael and Steven. In 1986, the decedent had executed a will that left his estate to his wife and to the Shano Family Trust. Under that will, Thelma was to be the personal representative of the estate, and if she did not serve, David and Michael were to serve jointly.

At the time of his death, however, the decedent was separated from his wife and involved in dissolution proceedings. Two days before he died, the decedent drafted a holographic will leaving 25% of his estate to Garrison; 25% to his sister, Lillian Lapin; 25% to his son, Michael; 15% to Michael's infant son, Jason; and 10% to various educational institutions and charities. The decedent did not name a personal representative in the holographic will.

On March 2, 1989, Garrison, through her attorney, Maksym, filed the holographic will with the court. Alleging a need to protect the estate pending appointment of a personal representative, Garrison also sought informal appointment as special administrator pursuant to Ariz.Rev.Stat.Ann. ("A.R.S.") section 14-3614. The probate registrar granted the application and appointed Garrison as special administrator.

In June 1989, the probate court granted Garrison's motion for summary judgment, filed by Maksym, to have the holographic will admitted to probate as the last will and testament of decedent. The following day, however, David and Michael filed a petition, which Thelma later joined, seeking suspension of Garrison's powers as special administrator. They also requested probate of the will that decedent had executed in 1986 and sought appointment as special administrators and personal representatives of the estate.

After observing that the Shanos' pleadings disputed the validity of the holographic will, the probate court suspended Garrison's powers as special administrator. The court also ruled that neither David nor Michael should be appointed and advised the parties that, in the absence of their agreement, it would appoint a third party as special administrator.

Later, pursuant to the parties' agreement, the probate court appointed Fiduciary Services, Inc. ("Fiduciary") as special administrator of the estate. Fiduciary signed letters of special administration on September 21, 1989, and with Charles J. Dyer ("Dyer") as its attorney, Fiduciary began to administer the estate. Approximately six weeks later, Dyer filed a notice that Maksym would appear in association with him on behalf of Fiduciary.

Thelma then asserted several claims against the estate. First, she requested that the estate pay her attorney's fees incurred in the dissolution action pending at decedent's death. Second, she asked reimbursement for certain community debts paid by her from separate funds. Third, she claimed the proceeds from several life insurance policies on decedent's life. Finally, she asked for payment of certain statutory allowances to which she was entitled as surviving spouse.

After approximately three months passed without any response to her claims, Thelma filed a petition asking the court to order the special administrator to pay her claims against the estate. Thelma also filed a petition asking the probate court to order payment of the statutory allowances authorized by A.R.S. sections 14-2401 through -2403. Maksym and Dyer, acting on behalf of Fiduciary, opposed Thelma's claims.

Next, Thelma moved for summary judgment to have one of the insurance policies declared to be her separate property. Maksym, appearing on behalf of the special administrator, filed a response opposing the motion. During the hearing, Thelma submitted evidence showing that she had paid the premiums on that policy solely from her separate funds and that the decedent had agreed to keep the policy in force for her benefit if she made these payments. The probate court determined that Thelma was entitled to summary judgment and awarded her the insurance policy as her separate property.

In the meantime, Michael filed a motion, in which Thelma joined, to disqualify Maksym as counsel for Fiduciary because of a conflict of interest. Maksym filed Fiduciary's response opposing the motion, claiming that his association with Fiduciary was proper. In his affidavit in support of Fiduciary's response, Maksym stated "[s]ubsequent to October 31, 1989, [he] had no contractual basis for billing [his] services to Garrison." After a hearing, the probate court, without making findings or conclusions, entered an order disqualifying Maksym as counsel for the special administrator. Maksym no longer appeared for Fiduciary, except to file an unsuccessful motion for a new trial on the issue of his disqualification.

On November 21, 1990, Thelma's remaining claims proceeded to trial. Fiduciary, represented by Dyer, lost on all issues. Thelma was granted judgment against the estate for the attorney's fees she had incurred in the dissolution proceedings. She was awarded the proceeds of all of the other insurance policies as her sole and separate property. She also obtained favorable rulings on her requests for the statutory allowances authorized by A.R.S. sections 14-2401 through -2403.

Fiduciary entered into a stipulation with Thelma for division and distribution of most of the community debts and assets. The stipulation authorized the estate to pay for all the fees and costs incurred in connection with administration of the estate. The probate court signed an order, approved by all of the attorneys who had appeared in the case except Maksym. The court mailed a copy of the stipulation to each of the attorneys, including Maksym.

On March 5, 1991, Maksym filed an application for compensation for the legal services he had provided to both Garrison and Fiduciary. He claimed approximately $10,000 in fees for his representation of Garrison and approximately $10,000 for his services to Fiduciary. He requested that one-half of his fees be paid from the decedent's share of the community property and one-half be paid from Thelma's share of the community property. Without making findings or conclusions, the probate court entered a judgment denying Maksym's application for compensation.

Maksym timely filed two notices of appeal: one from the order disqualifying his association with the special administrator and the other from the judgment denying his request for compensation. This court consolidated the two appeals.

DISCUSSION

1. Maksym's Derivative Fiduciary Duty To Thelma

We conclude that because Maksym represented conflicting interests, the probate court did not abuse its discretion in disqualifying Maksym. As attorney for the special administrator, Maksym owed a derivative fiduciary duty to the successors to decedent's estate, including the surviving spouse, Thelma. Maksym's representation of Garrison, one of the beneficiaries named in...