IN RE ESTATE OF GORDON

• Decision Date: 30 March 2004
• Docket Number: No. 1 CA-CV 02-0353.,1 CA-CV 02-0353.
• Parties: In the Matter of the Estate of Kathryn W. GORDON, Deceased. June Davis Pierce; Albert Clair Pierce II; Kathryn Pierce Ward; Susan Panchision; Janet Pierce Pesgraves; Kathryn Davis, Plaintiffs-Appellees, v. Nancy Molet, as Personal Representative, Defendant-Appellant.
• Court: Arizona Court of Appeals

87 P.3d 89

207 Ariz. 401

In the Matter of the Estate of Kathryn W. GORDON, Deceased.

June Davis Pierce; Albert Clair Pierce II; Kathryn Pierce Ward; Susan Panchision; Janet Pierce Pesgraves; Kathryn Davis, Plaintiffs-Appellees, v. Nancy Molet, as Personal Representative, Defendant-Appellant.

No. -0353.

Court of Appeals of Arizona, Division 1, Department A.

March 30, 2004.

Blunt & Associates, P.C. By A. Paul Blunt, Scottsdale, Attorneys for Appellant.

Robert D. Barlow, Phoenix, Attorney for Appellees.

OPINION

SULT, Judge.

¶ 1 Arizona Revised Statutes ("A.R.S.") § 14-3720 (1995) permits a personal representative of a decedent's estate to be reimbursed attorneys' fees incurred in prosecuting or defending a claim, even though unsuccessfully, so long as the litigation is undertaken in good faith. The question raised in this appeal is whether our prior cases applying the statute have judicially engrafted a requirement that the personal representative also demonstrate that the litigation activities were a benefit to the estate. This opinion clarifies that "benefit to the estate" is not a statutory element separate from and additional to the requirement of good faith. However, we do conclude that benefit to the estate is a relevant subject for inquiry because its presence or absence serves as a useful interpretative aid to assist the trial court in determining whether the personal representative litigated in good faith.

¶ 2 In a proceeding defended by appellant Nancy Molet, she incurred attorneys' fees for which the trial court disallowed reimbursement. On this record, we cannot ascertain whether the trial court considered the question of good faith in determining the issue. In any event, because good faith under § 14-3720 has not been clearly defined in our jurisprudence, we must do so and then remand this matter to permit the trial court to conduct a further inquiry applying the clarified meaning of good faith set forth herein.

BACKGROUND

¶ 3 Appellant is the sister of Kathryn Gordon who passed away on August 21, 1999. An informal probate was commenced in superior court and appellant was appointed the personal representative of her sister's estate per Kathryn's nomination in her will of October 6, 1998. Appellant also succeeded Kathryn as trustee of the Gordon Trust, which is the sole beneficiary under Kathryn's will. The beneficiaries of the trust include Kathryn's daughter June and five of Kathryn's grandchildren (collectively "appellees"), as well as appellant herself.

¶ 4 After appellees reviewed the statements submitted by appellant for her services and those of the estate's attorney, Harvey Finks, appellees filed a petition alleging that the fees were unreasonable. Appellees requested that appellant be surcharged for excessive personal representative and attorneys' fees and that restrictions be imposed on the trust and estate assets pending a resolution of the issues in the petition. Appellees also asked that appellant be removed as personal representative/trustee and that beneficiary Albert Pierce be substituted in her place.

¶ 5 Mr. Finks thereupon resigned as the attorney for the estate because of the potential of being called as a witness. Appellant hired A. Paul Blunt to defend her against appellees' allegations.

¶ 6 At the initial hearing on appellees' petition, the parties stipulated that there would be no further disbursements of the estate without a court order. The parties later agreed to submit the fees dispute to arbitration. Appellees apparently abandoned their request to remove appellant as personal representative/trustee as no further action was ever taken on that request.

¶ 7 At the arbitration hearing, the arbitrator found that the decedent intended that appellant be reimbursed at the rate of fifty dollars per hour for her services as personal representative, the rate appellant had been charging. Notwithstanding, the arbitrator reduced the fees appellant paid herself from $10,885.50 to $6,150 after considering evidence regarding the necessity and frequency of appellant's services. The arbitrator also reduced Finks' attorneys' fees from $25,710 to $23,200.

¶ 8 Following arbitration, appellant submitted to the trial court an application for approval of the attorneys' fees she incurred in connection with attorney Blunt's representation of her in the arbitration proceeding. Appellees objected, claiming that Blunt's attorneys' fees should not be paid from the estate. After a telephonic hearing on the matter, the trial court denied appellant's application, finding that "it would be inappropriate to also assess the estate the additional attorney fees incurred by the Personal Representative." It is from the order denying attorneys' fees incurred in the arbitration proceeding that appellant has timely appealed.

ISSUES

¶ 9 Appellant asserts that the trial court based its denial of fees upon appellees' argument that attorney Blunt's services benefitted only appellant and not the estate as required by § 14-3720. Appellant posits that this approach misreads the statute which requires only that a personal representative act in good faith in conducting litigation, not that the litigation also benefit the estate. On this record, appellant argues, we should find that appellant did act in good faith and reverse the trial court's denial of reimbursement.

¶ 10 Appellees respond by pointing to the precedents from this court holding that § 14-3720 does require a finding of a benefit to the estate as a precondition to reimbursement. Appellees then argue that as a matter of law attorneys' fees incurred by a personal representative in defending against an attack on her compensation as well as on that of the estate's attorney cannot be construed as benefitting the estate. Therefore, appellees conclude, we should affirm.

¶ 11 Our first task is to determine what place, if any, the concept of benefit to the estate has in a § 14-3720 good faith analysis. If benefit to the estate plays a role, what exactly does the term encompass? And if benefit to the estate is relevant, can we decide on this record that appellant's defense of her compensation and that paid to the estate's attorney constituted such a benefit?

ANALYSIS

Good Faith and Benefit to the Estate

¶ 12 We begin our analysis with the text of the statute. Section 14-3720 provides:

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.

While appellant is correct that § 14-3720 does not explicitly require a benefit to the estate, our case law construing the statute seems to impose this requirement. In Matter of Stephens' Estate, 117 Ariz. 579, 585, 574 P.2d 67, 73 (App.1978), we construed a request for reimbursement under § 14-3720 and found that "the only circumstances under which [the personal representative] may be reimbursed for her attorney's fees is if services rendered by her attorney benefitted the estate." In Matter of Estes' Estate, 134 Ariz. 70, 80, 654 P.2d 4, 14 (App.1982), we relied on Stephens in holding that "[a]n executor is entitled to reimbursement for attorneys' fees only for services rendered to benefit the estate, not if the services were rendered to protect the executor's personal interests."

¶ 13 Matter of Killen's Estate, 188 Ariz. 569, 937 P.2d 1375 (App.1996) involved a dispute over attorneys' fees incurred in a will contest. Before addressing the principal issue, we commented that the benefit to the estate requirement was met because defense of a will against a charge of invalidity due to lack of testamentary capacity automatically benefits the estate. Id. at 575, 937 P.2d at 1381. Thus it was not necessary for the personal representative to independently prove, or the probate court to specifically find, that the estate was benefitted by the defense. Id.

¶ 14 None of these cases, however, explains how § 14-3720 acquired a benefit to the estate component when the statute itself makes no mention of the concept. To help solve this conundrum, we have reviewed the jurisprudence of those of our sister states which, like Arizona, have adopted verbatim Uniform Probate Code § 3-720 from which our § 14-3720 is derived. Looking to sister states for interpretative assistance is appropriate when construing a provision derived from one of the Uniform Acts because national uniformity in interpretation is an important goal. Canon School District No. 50 v. W.E.S. Construction Co., Inc., 180 Ariz. 148, 154, 882 P.2d 1274, 1280 (1994), citing Holiday Inns, Inc. v. Olsen, 692 S.W.2d 850, 853 (Tenn.1985)

(finding that courts should seriously regard interpretations given to uniform laws by other state courts and strive for uniformity in construction where possible).

¶ 15 Unfortunately for the goal of uniformity, there is no consistent application of the benefit to the estate concept among those states that have adopted Uniform Probate Code § 3-720. Several states have flatly rejected inserting a benefit to the estate requirement into the analysis, noting that the statutory language plainly requires a showing only of good faith. Consequently, these courts have stated that they will not "judicially engraft" a benefit to the estate requirement onto their statute. Enders v. Parker, 66 P.3d 11, 14 (Alaska 2003); In re Estate of Evenson, 505 N.W.2d 90, 92 (Minn.App.1993); In re Estate of Watkins, 243 Neb. 583, 501 N.W.2d 292, 296 (1993); Estate of Frietze, 126 N.M. 16, 966 P.2d 183, 187 (App.1998).

¶ 16 By contrast, several other states have determined that it is not enough that the services were rendered in good faith; to justify reimbursement under the statute, those services must also be found to have benefitted the estate. Estate of Painter, 671 P.2d 1331, 1334 (Colo.App.1983); Estate of Herbert, 91 Hawai'i...