Harper v. Harper, 54632

• Decision Date: 12 February 1986
• Docket Number: No. 54632,54632
• Citation: 491 So.2d 189
• Parties: Jean Cox HARPER, Individually & As Executrix of the Estate of Robert Lex Harper v. Michael S. HARPER, et al.
• Court: Mississippi Supreme Court

Page 189

491 So.2d 189

Jean Cox HARPER, Individually & As Executrix of the Estate of Robert Lex Harper v. Michael S. HARPER, et al.

No. 54632.

Supreme Court of Mississippi.

Feb. 12, 1986.

As Modified on Denial of Rehearing

June 11, 1986.

Jack W. Brand, William S. Painter, Gerald, Brand, Watters, Cox & Hemleben, Jackson, for appellant.

Jamie G. Houston, III, Hassell H. Whitworth, Watkins & Eager, Jackson, for appellees.

En Banc.

PRATHER, Justice, for the Court:

The former opinion is hereby modified and this version substituted therefor.

This appeal brings into issue alleged conflicting fiduciary duties. The conflict arose when a testator appointed his widow to the multiple roles of executrix of his will, beneficiary of a one-half interest in his estate, corporate officer in the family business, and trustee of the residuary one-half interest belonging to his children as beneficiaries of the testamentary trust. Alleging dissipation of the assets of the estate, three adult children of the parties as residuary beneficiaries of the trust filed suit against their mother for an injunction, accounting, surcharge of funds, judgment, removal of executrix, dissolution of trust and distribution of estate.

The parties to this lawsuit are the heirs of Robert Lex Harper, who died on November 4, 1978, in Hinds County. Robert Lex Harper's widow, Jean Cox Harper, was appointed executrix of his estate and is the appellant here. The appellees are the three adult children of Robert and Jean Harper, Robert William Steven Harper, Michael Stewart Harper, and Shawn Kathleen Harper. Another child, David Haley Harper was made a party defendant with his mother, who was sued as executrix and as an individual. A guardian ad litem was appointed by the court to represent the interests of David, who is deaf. From an adverse holding in the Chancery Court of Hinds County surcharging the executrix and granting judgment of $257,000.00 to the children, the executrix, Mrs. Jean Cox Harper, appeals, and her adult children cross-appeal. The assignments of error of both appeal and cross-appeal are as follows:

(1) On appellant's appeal, Mrs. Harper asserts the lower court erred in granting appellees' motion for reconsideration and surcharging Mrs. Harper $93,348.00 for failing to obtain court authority to continue the operation of Harper Supply Company, a corporation, following the death of R. L. Harper; however, appellees and cross-appellants contend that the trial court erred in surcharging Mrs. Harper only $93,348.00, the liquidated value of Harper Supply Company, rather than $1,245,989.10, the operational losses of the company, or alternatively $334,745.19, the book value of the company as of December 31, 1978.

(2) Appellant also contends that the trial court erred in surcharging Mrs. Harper $68,684.89 as the loss in value to the estate resulting from a division of property between the estate and N. Sidney Harper; however, the cross-appellants contend that the trial court erred in inadequately surcharging Mrs. Harper only $68,684.89 for the loss resulting from the division of property between the estate and N. Sidney Harper.

(3) Appellant Mrs. Harper challenges the trial court's ruling in surcharging Mrs. Harper $24,520.75 for legal fees paid to Mr. O. Murray McNeely after October, 1979, and the sum of $9,405.99 for the interest paid to the United States and the State of Mississippi due to the late filing of the estate tax returns. On the contrary, cross-appellant children assert error in surcharging Mrs. Harper only $24,520.75 for legal fees paid to O. Murray McNeely, contending the amount should not have been less than $49,297.40.

Additionally, the direct appeal of Mrs. Harper assigns as error:

(4) The trial court erred in surcharging Mrs. Harper $49,651.73 due to her payment of debts of the decedent which were not probated, registered or allowed; and

(5) The trial court erred in removing Mrs. Harper as executrix of the estate.

The cross-appellants seek reversal on their cross-appeal of additional assignments of:

(6) The lower court erred in failing to surcharge Mrs. Harper $47,478.00 for salary and $16,295.86 for other personal benefits she received from Harper Supply Company.

(7) The trial court erred in failing to surcharge Mrs. Harper $240,000.00 for causing the estate to assume an unenforceable debt and to pledge unencumbered real property.

I.

Robert Lex Harper died testate on November 4, 1978, at the age of 47. Surviving Robert Harper were his wife of 28 years, Jean Cox Harper (appellant herein), and four children: 27 year old Robert William Stephen Harper, 25 year old Michael Stewart Harper, 21 year old Shawn Kathleen Harper and 19 year old David Haley Harper (appellees herein).

At the time of his death, Robert Harper together with his brother, N. Sidney Harper, owned interests in several closely held corporations and partnerships. According to the Federal Estate Tax Return, the adjusted gross value of the Harper estate was approximately $1,200,000.00.

Robert L. Harper had executed a valid Last Will and Testament naming his wife, appellant Jean Cox Harper, as executrix, waiving bond, accounting and appraisal. The will first provided that personalty go to his surviving spouse, Mrs. Harper. Secondly, Robert Harper bequeathed to Mrs. Harper an amount equal to one-half of his "adjusted gross estate" as determined for federal estate tax purposes, known as the maximum marital deduction. By the terms of the will, the remainder of the estate was to be placed in a trust known as the "Harper Trust" with Mrs. Harper as trustee for the benefit of his four children. Generally, the powers granted under the trust to Mrs. Harper as trustee were as broad as the power of the testator himself in his lifetime.

Prior to his death, Robert Harper was president of Harper Supply Company, a position he had occupied since November 21, 1977 and had been a director of Harper Supply Company since 1974. At the time of her husband's death, Mrs. Harper was secretary/treasurer of Harper Supply Company, a position she had held since November 21, 1977. Mrs. Harper had also been a director of Harper Supply Company since 1974. N. Sidney Harper, the decedent's brother, was vice-president of Harper Supply Company at the time of his brother's death and had been a director of the corporation since 1974.

On November 27, 1978, Mrs. Harper as director, secretary-treasurer and executrix, called a special meeting of the shareholders and directors of Harper Supply Company. Michael S. Harper, son of the decedent, was elected to fill the unexpired term of Robert Harper as director. Mrs. Harper was elected to fill the unexpired term of Robert Harper as chairman of the board, and also president at an annual salary of $52,000.00 per year, the same amount her husband had earned at the time of his death.

Harper Supply Company had not returned a profit since 1976. During the calendar year of 1978, the corporation lost approximately $300,000.00. Following Robert Harper's death, Harper Supply Company continued to lose money. In the Spring of 1979 the Harper Estate began negotiating with Sidney Harper for the purpose of transferring jointly owned assets in such a manner as to completely divide the respective interest of the estate and Sidney Harper. On July 12, 1979, an agreement was reached between Sidney Harper, Mrs. Harper and Michael S. Harper. Under the terms of the agreement, the Harper Estate was to transfer all its stock in Harper Foundry & Machine Company, another closely held family corporation, to Sidney Harper. In return, Sidney Harper was to transfer to the estate all of his stock in Harper Supply Company. Additionally, the agreement called for Mrs. Harper to convey the estate's 25% interest in the Harper & Elliott Partnership and the estate's 25% interest in Mississippi Valley Leasing Corporation to Sidney Harper. The agreement further provided for the transfer of numerous parcels of real estate between the parties.

As executrix of the Harper Estate, Mrs. Harper spent $49,651.73 in payment of debts of the estate which were not probated, registered or allowed. These payments included a $39,770.84 check to Harper Supply Company in payment of an unprobated debt of Robert Harper to Harper Supply. At the time the check was issued in October of 1979, Harper Supply Company owed an outstanding debt to Robert Harper in the amount of $21,328.00, which cross-appellants contend should have been offset against the $39,770.84 before payment.

From November 10, 1978 until the bill of complaint was filed in October of 1980, Murray McNeely acted as the attorney of record for the Robert Harper Estate. Mrs. Harper, as executrix of the estate, paid Mr. McNeely $49,297.40 for his services without obtaining court approval.

On April 30, 1979 the appellant, Mrs. Jean Harper, entered into an agreement with two of the appellees, Michael Harper and Stephen Harper. Under the terms of the agreement, Mrs. Harper was to resign as president of Harper Supply Company, and allow Michael Harper to assume that office. In return, Mrs. Harper was to continue receiving a weekly salary of $750.00 and to retain possession of the company car and company telephones maintained at her home. The agreement further provided that any complaint Stephen and Michael Harper may have had regarding Mrs. Harper's operation of Harper Supply Company "are now compromised and settled."

II.

Some preliminary remarks are in order. Duties and rights of executors and administrators with the will annexed are generally set forth in Miss.Code Ann. Sec. 91-7-1 et seq. (1972), but specifically see Sec. 91-7-47 which provides:

Every executor or administrator with the will annexed, who has qualified, shall have the right to the possession of all the personal estate of the deceased, unless otherwise directed in the will; and he shall take all proper steps to acquire possession of any part thereof that may be withheld from...