In re Estate of Ladd

• Decision Date: 30 April 2007
• Docket Number: No. M2005-02089-COA-R3-CV.,M2005-02089-COA-R3-CV.
• Citation: 247 S.W.3d 628
• Parties: In re ESTATE OF W. Garnett LADD, Sr., W. Garnett Ladd, III, et al. v. Robert C. Marks.
• Court: Tennessee Court of Appeals

247 S.W.3d 628

In re ESTATE OF W. Garnett LADD, Sr., W. Garnett Ladd, III, et al. v. Robert C. Marks.

No. M2005-02089-COA-R3-CV.

Court of Appeals of Tennessee, Middle Section, at Nashville.

September 13, 2006 Session.

April 30, 2007.

Opinion on Petition for Rehearing June 25, 2007.

Permission to Appeal Denied by Supreme Court November 19, 2007.

Neil M. McIntire, Nashville, Tennessee, for the appellant, Robert C. Marks.

F. Evans Harvill, Clarksville, Tennessee, for the appellees, W. Garnett Ladd, III and Gerda Ladd Mayo.

FRANK G. CLEMENT, JR., J., delivered the opinion of the court, in which WILLIAM B. CAIN and PATRICIA J. COTTRELL, JJ., joined.

OPINION

The matters at issue pertain to the fee awarded a Co-Executor of an estate. The Co-Executor appeals contending he was entitled to a contractual fee equal to five percent of the gross estate based on an oral agreement with the ninety-four year old widow of the testator who served as his Co-Executor. The Special Master and Chancellor made concurrent findings that the appellant had failed to properly administer the estate. They also found that his claimed excuse, that he was acting according to the wishes of his ninety-four year old Co-Executrix, did not relieve him of his affirmative fiduciary duties as a personal representative. The Chancellor awarded him a fee of $25,000 for his services as Co-Executor. We have concluded he is entitled to no fee for his services.

W. Garnett Ladd, Sr., died testate on December 25, 1994, leaving a three million dollar estate to be administered. He was survived by his ninety-four (94) year old wife, Gerda Ladd, one son, Garnett Ladd, Jr., and two adult grandchildren, Garnett Ladd, III and Gerda Ladd Mayo. Mr. Ladd bequeathed one-half of his estate outright to his wife with the rest and residue of his estate to a family trust,¹ of which his wife was the primary beneficiary for the remainder of her life, and his son, Garnett Ladd, Jr., and grandchildren, Garnett Ladd, III and Gerda Ladd Mayo, were the residual beneficiaries.²

The Last Will and Testament, which had been prepared in 1989 by attorney Robert C. Marks, designated the testator's wife, Mrs. Ladd, and Dempsey Marks³ as Co-Executors. Robert Marks was designated as the Alternate Co-Executor in the event his father, Dempsey Marks, predeceased the testator, which he did. As a consequence of Dempsey Marks' death, Robert Marks was the next in line to serve as Co-Executor with Mrs. Ladd.

Robert Marks filed a Petition to Probate the 1989 will of Garnett Ladd, Sr. (the "testator"). The Petition was granted, and on February 5, 1995, Letters Testamentary were issued to Mrs. Ladd and Robert Marks (hereinafter "Marks") to serve as Co-Executors.

At the time the Letters Testamentary were issued, Mrs. Ladd was ninety-four (94) years of age and was residing in a nursing home, where she had been for two years due to declining health and the infirmities of age. As a consequence of her infirmities, which necessitated numerous trips to the hospital for various health problems, Marks assumed the primary responsibility for administering the estate. Marks also served as the attorney for the estate and assumed the responsibility to prepare the estate tax return.

The estate was principally comprised of approximately $2.28 million in stocks and bonds, $515,000 of deposits in bank accounts, and $28,000 in real estate. Shortly after his appointment as Co-Executor, Marks inventoried the safe deposit boxes, opened a bank account for the estate, and attended to some of the preliminary tasks associated with the administration of the estate.

Marks testified that he consulted with Mrs. Ladd prior to Marks filing the estate's Form 706 Federal Estate Income Tax Return, which was filed on September 27, 1995, regarding the compensation he would receive for serving as Co-Executor. He stated they orally agreed that he would receive a fee for his services as a Co-Executor in an amount equal to five (5%) percent of the three million dollar gross estate. There are, however, no letters or written agreements to evidence the fee agreement. The only documentation concerning Marks' fee is found in the cancelled checks paid to Marks.⁴ The record reflects that Marks received $166,200 for his services to the estate.

In addition to the fee Marks received for his service as Co-Executor, Marks received a fee of $17,000. Marks testified that this fee, which was paid by the estate, was compensation for legal services he rendered to Mrs. Ladd as her personal attorney.

Mrs. Ladd died during the administration of the estate, in September of 1998, almost four years after the estate was opened by Marks. At the time of her death, Marks had not distributed the bequest to Mrs. Ladd, and had not funded the trust, which was to receive the rest and residue of the estate. Only an insignificant portion of the estate had been distributed when Mrs. Ladd died.

Three days after Mrs. Ladd's death, the residual beneficiaries, Garnett Ladd, III and Gerda Ladd Mayo (hereinafter collectively the "Plaintiffs"), filed a Petition in the Chancery Court seeking an accounting by Marks. A consent decree was entered, which required Marks to provide a complete inventory and accounting of the estate.⁵ Ten days later, Marks provided an incomplete accounting. Finding the accounting wholly inadequate, Plaintiffs filed numerous pleadings including, inter alia, a Petition to require Marks to show cause why he should not be held in contempt for failure to comply with the court's decree, a Motion for Distribution, and a Motion to Distribute Trust Assets.

After Marks' repeated failures to provide a sufficient accounting, Plaintiffs commenced this action with the filing of a Complaint and Devastavit. The Complaint was filed on May 17, 1999, almost four and one-half years after Marks opened the estate. In the Complaint, Plaintiffs alleged that Marks failed in his professional and fiduciary duty to appropriately administer the estate by: (1) failing to properly marshal assets; (2) failing to cause assets to be made productive and to maximize income during the period of administration; (3) failing to communicate with any beneficiary of the estate, other than his co-executrix; and (4) failing to distribute and close the estate in a prompt manner. For relief, Plaintiffs requested a complete and total accounting of all financial activities undertaken by Marks, a judgment awarded against Marks for his malfeasance and nonfeasance in his failure to properly perform the tasks of an executor, reimbursement of the fees Marks received from the estate, and reimbursement for an insurance policy which Marks failed to properly process. Marks filed an Answer to the Complaint in July, 1999, denying, inter alia, any negligence in the administration of the estate and denying that his fees were excessive.

In March of 2003, over eight years after the estate was opened, attorney Stennis Little was appointed Special Master pursuant to Tenn. R. Civ. P. 53.⁶ Pursuant to the order, the Special Master was to receive evidence and report to the Court his findings and conclusions with respect to the following:

There is pending in this Court a Complaint and Devastavit which was filed May 17,1999, an accounting by Robert C. Marks, Executor under the Will of W. Garnett Ladd, Sr., which was filed on June 8, 1999, an exception to the accounting which was filed on June 25, 1999, and an Answer of Robert C. Marks to the Complaint and Devastavit which was filed on July 8, 1999. The Special Master will report in writing to this Court his findings and conclusions with respect to any issues raised by these pleadings and upon which the parties present evidence for the Special Master's consideration.

In November, 2003, the Special Master filed his Findings of Fact and Conclusions of Law. One month later, the Special Master modified his Findings of Fact and Conclusions of Law. The Special Master's findings were highly critical of Marks' services, or lack thereof, as an executor. The Special Master made forty-three findings of fact, almost all of which were critical of Marks' acts and omissions. Specifically, the Special Master found that in the four years between his appointment and the filing of the Complaint, Marks failed to distribute Mrs. Ladd's share of the estate outright and failed to fund the trust. Based on his findings of fact, the Special Master concluded that Marks failed to carry out his fiduciary responsibilities as Co-Executor and that Marks "should receive zero ($0.00) dollars for his performance as Co-Executor and judgment should be issued for the return of the executor's fees." The Special Master, however, recommended that Marks be awarded a fee "for the initial gathering of all of the assets and the filing of all of the returns, both estate and income" of $25,000.

The Special Master also found that the fee Marks received for representation of Mrs. Ladd, which was paid out of the estate account, was "excessive and undocumented," and he recommended a judgment in that amount be entered against Marks. Additionally, the Special Master found that a $25,000 U.S. Treasury Bond listed in the inventory was unaccounted for, and unless Marks accounted for the bond, he recommended Marks reimburse the estate for the loss.

Marks filed Objections to the Master's Findings of Fact and Conclusions of Law after which Plaintiffs filed their Response. The Chancellor conducted a hearing following which he confirmed the Special Master's findings and all but one of his conclusions, that pertaining to the $25,000 fee to be paid to Marks, which the Chancellor classified as an executor's fee, not an attorney's fee.

The Chancellor also made additional findings that were not in conflict with the findings and conclusions of the Special Master.⁷ One of the conclusions made by the Chancellor, a subject not addressed by the Special Master, was that Mrs. Ladd's ability to make an informed decision was...