Rhode Island Hospital Trust Nat. Bank v. Burns

• Decision Date: 05 October 1981
• Citation: 12 Mass.App.Ct. 251,423 N.E.2d 1
• Parties: RHODE ISLAND HOSPITAL TRUST NATIONAL BANK, executor, et al. v. Paul J. BURNS, administrator.
• Court: Appeals Court of Massachusetts

Page 1

423 N.E.2d 1

12 Mass.App.Ct. 251

RHODE ISLAND HOSPITAL TRUST NATIONAL BANK, executor, et al. v. Paul J. BURNS, administrator.

Appeals Court of Massachusetts, Suffolk.

Argued March 12, 1981.

Decided July 10, 1981.

Further Appellate Review Denied Oct. 5, 1981.

Samuel J. Armstrong, Boston (Karen J. Bloom, Boston, with him), for defendant.

Robert J. Muldoon, Jr., Boston (Elizabeth A. Zeldin, Boston, with him), for plaintiffs.

Before HALE, C. J., and BROWN and KASS, JJ. BROWN, Justice.

The defendant Paul J. Burns, administrator, appeals from a judgment entered in a Probate Court refusing to allow or reducing the amount to be allowed for certain payments made by him for fees and services and surcharging him on his bond in the amount of $261,453.38. The Probate Court judge found that Burns was "so negligent in the administration of the (intestate's) estate ... as to have caused substantial losses to the estate and inordinate delays in the administration thereof."

We summarize the pertinent facts. On June 26, 1969, Maurice P. Shedd died intestate, leaving an estate valued at over $800,000.00. Grace L. Kempton (Kempton), a resident in an apartment in the home of Attorney Eugene Sullivan (E. Sullivan), had been an acquaintance of the decedent for over twenty years. Following Shedd's demise, Kempton approached Mr. E. Sullivan in regard to a possible claim against the estate. Mr. E. Sullivan referred Kempton to another attorney, Mr. George Mahoney, who in turn agreed to pay Mr. E. Sullivan a fee for the referral. Thereafter, on July 29, 1970, Mr. Mahoney, on behalf of Kempton, commenced an action against the defendant administrator in quantum meruit for services rendered by her to Shedd during his lifetime. ¹ In the meantime, on the suggestion of Mr. E. Sullivan, the defendant, a public administrator, ² had applied for and secured appointment as administrator of Shedd's estate. The defendant and Mr. E. Sullivan agreed to share equally all fees derived from such administration. The defendant later retained Mr. E. Sullivan "to prepare state and federal tax returns and to advise him on the tax consequences of any settlement of the Kempton claim." At this juncture in the chronology, neither the defendant nor Mr. Mahoney was aware that the other had a financial arrangement with Mr. E. Sullivan. ³ The defendant also retained the services of Mr. J. Sullivan of the law firm of DiMento and Sullivan ⁴ to defend against the Kempton claim. DiMento and Sullivan were paid $22,500 for these services. Sometime later, Mr. Benjamin Stein (Stein), a lawyer who earlier had done some genealogical investigation for the estate, was retained to correct errors in the estate tax return which had been prepared by Mr. E. Sullivan, to examine the tax consequences of any proposed settlement of the Kempton claim, and to handle all other estate tax matters. The defendant paid Mr. Stein $15,000 for performing tax services in connection with the Kempton settlement and for "correcting and concluding the tax work performed by E. Sullivan." (Stein was also paid $2,250 by DiMento and Sullivan "for services rendered them in their defense of the action.")

Several meetings were held between Mr. Burns, Mr. J. Sullivan, and Mr. Mahoney for purposes of negotiating a settlement of the Kempton claim. Mr. E. Sullivan attended some or all of these meetings. At all times Mr. E. Sullivan, when present at these meetings, appeared on behalf of the estate. ⁵ Mr. William Monahan, an attorney representing the heirs, actively participated in these negotiations. A compromise settlement was reached in the amount of $135,000, and a judgment approving this settlement was entered in a Probate Court. (Some time after the claim had been settled, Mr. Monahan died.) However, that judgment was later vacated because of improper service on the heirs. The defendant did not appeal. For the legal services performed in negotiating the Kempton settlement, Mr. Mahoney received a fee of $45,000, from which and pursuant to the referral agreement, Mr. E. Sullivan was paid one-half. ⁶ On April 19, 1977, the defendant filed his first accounting, which was challenged by four of seven heirs of Shedd who had, following Mr. Monahan's death, obtained successor counsel.

This case is governed by Mass.R.Civ.P. 52(a), 365 Mass. 816 (1974), which states in pertinent part that "(f)indings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge of the credibility of witnesses." See also Mass.R.Civ.P. 72(b), 371 Mass. 912 (1977). For cases which describe the application of that standard, see Building Insp. of Lancaster v. Sanderson, 372 Mass. 157, 160-161, 360 N.E.2d 1051 (1977); Nickerson v. Fiduciary Trust Co., 6 Mass.App. 317, 318, 375 N.E.2d 357 (1978).

With respect to expenses, costs and fees, G.L. c. 206, § 16, establishes that their allowance rests to a large extent in the discretion of the Probate Court judge. McMahon v. Krapf, 323 Mass. 118, 123, 80 N.E.2d 314 (1948). Corcoran v. Thomas, 6 Mass.App. 190, 191, 374 N.E.2d 329 (1978). See also Paone v. Gerrig, 362 Mass. 757, 763, 291 N.E.2d 426 (1973). "(T)he award ... may be presumed to be right and ordinarily ought not to be disturbed." Smith v. Smith, 361 Mass. 733, 738, 282 N.E.2d 412 (1972), quoting from Old Colony Trust Co. v. Third Universalist Soc. of Cambridge, 285 Mass. 146, 151, 188 N.E. 711 (1934). Conversely, the decision to disallow such expenditures is also within the judge's discretion, and, unless clearly erroneous, ought not be disturbed. See Old Colony Trust Co. v. Third Universalist Soc. of Cambridge, supra. See also McMahon v. Krapf, supra at 122, 80 N.E.2d 314, Chase v. Pevear, --- Mass. ---, ---, ^a 419 N.E.2d 1358 (1981).

The dispute centers on the correct burden of proof and whether that burden has been satisfied. It is settled that in a probate proceeding the burden of proof "is on the accountant, after he has admitted the relation and the receipt of a certain sum, to prove that he has disposed properly of the amount for which he is accountable, and to show what that amount is." First Natl. Bank v. Brink, 372 Mass. 257, 264, 361 N.E.2d 406 (1977), quoting from Pappathanos v. Coakley, 263 Mass. 401, 408, 161 N.E. 804 (1928). See also Restatement (Second) of Agency § 399 & comment e (1957).

1. Kempton claim. The burden of proof placed upon the accountant in justifying the estate disbursements was not satisfied in this instance. Contrast Kinion v. Riley, 310 Mass. 338, 340, 37 N.E.2d 984 (1941). The judge made extensive findings concerning each of five challenged items of the defendant's accounting. In reaching his conclusion that the Kempton settlement should be disallowed the judge weighed the lack of evidence presented establishing the value of Kempton's services ⁷ to the decedent the dual role played by Mr. E. Sullivan leading to the initiation of that claim, and the tainting effect Mr. E. Sullivan's "presence and participation ... at settlement conferences" had in reaching the final compromise. We think that in the aggregate of the circumstances the judge was justified in disallowing this disbursement.

The defendant's contention that he needs merely to show that he exercised "sound judgment and reasonable skill and discretion in the discharge of (his) duties," Kinion v. Riley, supra at 341, 37 N.E.2d 984, is ill founded. Once payment has been made, the fiduciary administering the estate must justify the basis for the disbursement, especially in circumstances like the present where there have been allegations of impropriety on his part. For without that, the soundness of his judgment cannot be determined. Compare Jones v. Jones, 297 Mass. 198, 207, 7 N.E.2d 1015 (1937). In so doing, the accountant should be afforded the opportunity to establish what the services were in order to justify the amount of the payment. Compare Blake v. Pegram, 109 Mass. 541, 555 (1872). The defendant was afforded such an opportunity. The record, however, shows that he failed to convince the judge. Although it is not essential that a person making a claim against an estate testify, see Edelstein v. Old Colony Trust Co., 336 Mass. 659, 664, 147 N.E.2d 193 (1958), in the peculiar circumstances presented here the judge could have given weight to the fact that there was no testimony from Kempton in support of her claim. ⁸ While there was some evidence that the payment to Kempton was made in good faith, compare id. at 663, 147 N.E.2d 193 (absence of bad faith or fraud prerequisite to a compromise of a claim), the judge made no such finding. The judge found that the evidence adduced to place a fair value on the claim was no more than "mere arbitrary conjectures." We cannot say that this finding is clearly erroneous within the meaning of Mass.R.Civ.P. 52(a).

Moreover, the burden here is even heavier, as the record reflects that the compromise settlement meetings were attended by an interested third party, Mr. E. Sullivan. Not only was Mr. E. Sullivan instrumental in encouraging Kempton to pursue her claim against the Shedd estate, for which he was performing the tax work, albeit negligently, but he was also deriving a significant financial benefit from Kempton (through Mr. Mahoney) as well as from the estate. Although the judge, in disallowing the $135,000 settlement of the Kempton claim, stopped short of finding bad faith, we think that he was warranted in finding that these proceedings were "tainted" by Mr. E. Sullivan's "presence and participation."

2. DiMento and Sullivan fee. We think that the judge may have improperly disallowed the entire amount awarded by the defendant to the firm of DiMento and Sullivan for its legal services in connection with the compromise of the Kempton claim. The judge disallowed the $22,500 legal fee "in part as excessive and in part because of the taint" attached to the involvement of Mr. E. Sullivan....