Sullivan v. Brown (In Re Estate of Kay)Sullivan v. Brown (In Re Estate of Kay)
Edward D. Sullivan, as Personal Representative of the Estate of Marion M. Kay, Petitioner-Respondent,
v.
Martha Brown and Mary Moses, Respondents-Petitioners.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED
Daryl G. Hawkins, of the Law Office of Daryl G. Hawkins, LLC, of Columbia, for Petitioner/Respondent.
John R. Ferguson, of Cox Ferguson & Wham, LLC, of Laurens, for Respondents/Petitioners.
STANDARD OF REVIEW
A proceeding before the probate court may sound in equity or at law. In re Estate of Holden, 343 S.C. 267, 278, 539 S.E.2d 703, 709 (2000). Brown and Moses demanded a hearing to challenge Sullivan‘s compensation for his services in administering Kay‘s estate—an action in equity. Lee v. Lee, 251 S.C. 533, 534, 164 S.E.2d 308, 308 (1968) (holding an action for an accounting to determine whether the guardian received improper compensation wаs in equity). Ordinarily, an appellate court reviews cases in equity by finding facts in accordance with its own view of the preponderance of the evidence. Townes Assocs., Ltd. v. City of Greenville, 266 S.C. 81, 86, 221 S.E.2d 773, 775 (1976). However, an appellate court still affords a degree of deference to the trial court because it was in the best position to judge the witnesses’ credibility. Lewis v. Lewis, 392 S.C. 381, 391, 709 S.E.2d 650, 655 (2011).
A threshold issue in this case is the applicability of the “two-judge rule” to a decision of a probate judge which is affirmed by a circuit court judge. The majority of the court of аppeals employed the two-judge rule in affirming, while the dissenting judge, then-Acting Judge Few, posited that the standard of review in an appeal from an equity case should not change simply because two judges have made the same factual determination, and would have applied a preponderance of the evidence standard of review in this case. We take this opportunity to clarify the appropriate standard of review in cases where the probate court‘s deсision is affirmed by the circuit court.
Both the court of appeals and this Court have applied the two-judge rule to probate cases where the circuit court judge has agreed with the decision of the probate court. See Geddings v. Geddings, 319 S.C. 213, 216, 460 S.E.2d 376, 378 (1995) (applying the two-judge rule where the circuit court affirmed the probate court‘s decision that a wife had not waived her right to invoke her elective share); Dean v. Kilgore, 313 S.C. 257, 260, 437 S.E.2d 154, 155 (Ct. App. 1993) (“Although Townes sets forth the two-judge rule for equity cases first tried by a master or special referee and subsequently affirmed or concurred in by the circuit court, we see no reason not to apply the same rule to an affirmance or concurrence of the circuit court with the probate court.“). Relying on this precedent, a majority of the court of appeals held the two-judge rule applied.
Under the framework set out in Townes, prior to our master in equity system, when circuit judges referred matters to special referees or masters to make findings of fаct, the limited scope of appellate review over factual findings concurred in by two judges may have been appropriate. However, we hold today that the two-judge rule has no applicability to cases wherein the circuit court, sitting in a purely appellate capacity, as here, affirms the findings of a lower tribunal. Instead, the applicable standard of review is the same as in other equity matters, and the appellate courts of this state may take their own view of thе preponderance of the evidence. Accordingly, we analyze this case through this broad lens.
FACTUAL/PROCEDURAL BACKGROUND
Marion Kay died on May 3, 2007, leaving a will that named Sullivan, her close friend and estate planning attorney, as
The will also granted an option to Kay‘s neighbor, Charles Copeland, to purchase the real estate within eight months of her death “at the fair market price on the date of my death, the decision of my PR regarding the fair market price to be final.” (Copeland Option). Additionally, the will provided “reasonable compensation for [Sullivan‘s] services rendered and reimbursement for reasonable expenses,” granted him the authority to sell personal and real property, and authorized him:
To exercise all the powers in the management of my Estate which any individual could exercise in the management of similar property owned in his or her own right...to execute and deliver any and all instruments, and to do all acts which my Personal Representative may deem proper or necessary to carry out the purposes of this my Will, without being limited in any way by the specific grants of power made, and without the necessity of a court order.
During Sullivan‘s administration of the estate, he learned the majority of beneficiaries preferred their interests in cash rather than a fractional ownership interest in land. Accordingly, Sullivan decided the best course of action was to negotiate a sale of the real estate, and if that failed, to file a partition action.
At the outset, Sullivan believed at least three “novel issues” posed potential impediments to his ability to convey marketable title and heavily discounted the property‘s value. First, Sullivan discovered that a 1973 agreement purportedly granted Brown and Moses a right of first refusal; however, he
eight months following Kay‘s death, Sullivan believed the eight month time period was tolled until an appraiser determined the Farm‘s fair market value. Sullivan hired Paul Major, who appraised the Farm‘s value at approximately $614,000, of which Kay‘s interest represented $307,000. Sullivan received this appraisal in February of 2008, nearly nine months after Kay‘s death.
Three months later, in May of 2008, Sullivan sent a letter to all the beneficiaries proposing a compromise whereby Brown would receive the five acres at no charge, Copeland would exercise his option as to approximately 46 acres of land, and Brown and Moses would release their right of first refusal but would retain the option to purchase Kay‘s remaining interest at the fair market value. If Brown and Moses elected not to purchase the remaining interest, Sullivan would sell it to the highest bidder. After the sale, the cash proceeds would be distributed according to the will‘s residuary clause.
When Brown and Moses failed to respond to the proposed settlement, Sullivan attempted another compromise a few months later in July of 2008 by arranging а meeting with church officials, Brown, Moses, and the appraiser. Again, Brown and Moses did not respond, later explaining they felt “ambushed” by having to take part in a meeting with other beneficiaries. Having exhausted repeated attempts to resolve the matter amicably, Sullivan hired his law firm to file a partition and declaratory judgment action. The parties ultimately
In his petition for settlement and proposal for distribution, filed approximately three years after Kay‘s death, Sullivan sought approval of $93,775.00 owed for services rendered as PR.3 Sullivan notified all the beneficiaries, but only Brown and Moses sent a letter to the probate court requesting a hearing.4
At the hearing which ensued before the probate court, counsel for Brown and Moses argued Sullivan had rеceived excessive compensation because he unnecessarily complicated the estate administration. Brown and Moses maintained Sullivan should have simply filed a deed of distribution instead of hiring his law firm to seek a partition order. Sullivan testified the numerous “novel issues” in the estate‘s administration prompted him to file a declaratory judgment action, and he defended his actions by asserting that he attempted to carry out Kay‘s intent by selling the real estate, thereby generating cash proceeds to distribute to the beneficiaries. To support his position, he pointed to the fact that Kay had hired him approximately four years prior to her death to negotiate a proposal with Brown and Moses to divide and sell the Farm, but Brown and Moses never responded to his requests.
After two days of testimony, the probate court found Sullivan should have executed a deed of distribution to all the beneficiaries rather than have filed a partition action. According to the probate court, Sullivan‘s decision to partition the property and his concern over the Copeland Option complicated what should have been a rather simple and straightforward estate administration. Finding the commissions sought by
The circuit court affirmed the probate court, and both parties appealed to the court of appeals, which affirmed on all grounds except for the award of attorney‘s fees to Brown and Moses. Both parties sought certiorari from this Court. Sullivan seeks to retain the $93,775.00 which he paid himself as PR, approval of an additional $13,447.05 in commissions, and fees and costs incurred at the settlement hearing. Brown and Moses seek to limit Sullivan‘s compensation to 5% of the estate, as provided by
ANALYSIS
I. Personal Representative‘s Commission
Sullivan contends the probate court‘s reliance on
The Probate Code establishes a default rule for PR compensation in
Unless otherwise approved by the court for extraordinary services, a personal representative shall receive for his care in the execution of his duties a sum from the probate estate
funds not to exceed five percent of the appraised value of the personal property of the prоbate estate plus the sales proceeds of real property of the probate estate received on sales directed or authorized by will. . . .
We believe the language in the will is not sufficient to bring Sullivan‘s commissions within the exception expressed in subsection (c). The will merely contemplates “reasonable compensation,” and absent any directive in the will, that determination was left to the prоbate court. Even though the probate court did not expressly find that Sullivan‘s actions constituted “extraordinary services,” pursuant to the statute, we believe its decision to award Sullivan compensation of 10% of the estate‘s value is tantamount to such a finding.
Moreover, our own view of the preponderance of the evidence supports the award of $51,300. While Sullivan testified he spent approximately 450 hours on the estate, he could not definitively answer the probate court‘s question as to how he charged for his services—whether it was a set percentage of the estate or based on
his time. Sullivan discussed a number of factors he had considered in arriving at his fee, and appeared to put significant weight on the “exceptional result” he ultimately garnered for the estate through the property‘s sale. While we disagree with the probate court that Sullivan simply “pull[ed] a figure out of the air” in determining compensation, the total commissions sought constituted 21% of the estate‘s value, a figure the probate court deemed “clearly excessive.” We believe the probate court was correct in this assessment,
II. Expenses Incurred at the Settlement Hearing
Sullivan contends the court of appeals erred in affirming the probate court‘s decision not to award reasonable fees and expenses incurred at the settlement hearing. Brown and Moses assert the court of appeals properly affirmed the decision by differentiating costs incurred defending the estate as PR from costs incurred by Sullivan seeking more compensation in his individual capacity.
Under the Probate Code, when a “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.”
to proceedings when the personal representative acted reasonably for the benefit of the estate as opposed to
Once requеsted by Brown and Moses, it was incumbent on Sullivan to attend the settlement hearing, and he necessarily incurred attorney‘s fees and costs to prepare and travel to Laurens County. At that hearing, Sullivan was called upon to defend his decision to seek a partition rather than issue a deed of distribution. Additionally, he defended against Brown‘s claim that she was entitled to an additional five acres of property by virtue of an unproduced agreement entered into years before Kay‘s death. While this claim may not have been the primary reason for the hearing, Sullivan was required to defend it. Therefore, we find the hearing constituted a “proceeding” which Sullivan was required to defend within the meaning of
(20) prosecute or defend claims, or proceedings in any jurisdiction for the protection of the estate and of the personal representative in the performance of his duties;
Accordingly, because we find ample evidence demonstrating Sullivan defended the claim in good faith, we reverse the court of appeals’ decision refusing to award him necessary expenses. We remand to the probate court to calculate these expenses, including attorney‘s fees.
III. Remaining Issues
On cross-appeal, Brown and Moses assert the court of appeals erred in holding they abandoned their argument that Sullivan should be responsible for all fees and costs incurred at the settlement hearing beсause he acted in his individual interest to recover additional compensation rather than in the Estate‘s interest in defending a claim. While we disagree that the issue was abandoned, because we hold Sullivan defended the claim in good faith, we find their argument unavailing.
Additionally, Brown and Moses assert the court of appeals erred in reversing the award of their attorney‘s fees under the common fund doctrine. We disagree.
Under the common fund doctrine, a court in its equitable jurisdiction may award reasonаble attorney‘s fees to the party “who, at [the party‘s] own expense, successfully maintains a suit for the creation, recovery, preservation, or increase of a common fund or common property.” Layman v. State, 376 S.C. 434, 452, 658 S.E.2d 320, 329 (2008). As a method of fee-spreading, the doctrine‘s rationale is that “‘one who preserves or protects a common fund works for others as well as for himself, and the others so benefited should bear their just share of the expenses.‘” Id. at 452, 658 S.E.2d at 329 (quoting Johnson v. Williams, 196 S.C. 528, 531, 14 S.E.2d 21, 23 (1941)). To recover under the doctrine, there must be an еxpress or implied contract of employment between the successful party‘s counsel and all individuals who hold an interest in the fund. Johnson, 196 S.C. at 532–33, 14 S.E.2d at 23. Moreover, if the parties’ interests are adverse, the doctrine does not apply. Bedford v. Citizens & S. Nat‘l Bank of S.C., 203 S.C. 507, 515, 28 S.E.2d 405, 407 (1943).
Significantly, recovery under the common fund doctrine is subject to abuse and should be exercised cautiously. Johnson, 196 S.C. at 532, 14 S.E.2d at 23.
While all the beneficiaries arguably benefited from Brown and Moses’ efforts to challenge Sullivan‘s compensation, we find the beneficiaries of the estate were not united in pursuit of this cause. A majority of the beneficiaries supported Sullivan‘s efforts to sell the Farm and distribute the cash proceeds according to Kay‘s will. Furthermore, there was no express contract of employment between counsel for Brown and Moses and the other beneficiaries. Moreover, because the beneficiaries did not acquiesce in Brown‘s and Moses’ representation but instead commended Sullivan‘s performance and opined that Brown and Moses should bear the costs incurred before the probate court, we find no implied contract existed. Therefore, we conclude the common fund doctrine does not apply; accordingly, we affirm the court of appeals’ decision that Brown and Moses are responsible for their own attorney‘s fees.
CONCLUSION
For the foregoing reasons, we AFFIRM the court of appeals’ decision to uphold the award of $51,300 in commissions for Sullivan‘s services as personal representative and the determination that Brown and Moses are responsible for their own attorney‘s fees. We REVERSE the court of appeals’ conclusion that Sullivan is not entitled to recover necessary expenses, including reasonable attorney‘s fees, incurred at the settlement hearing under
AFFIRMED IN PART; REVERSED IN PART; AND REMANDED.
BEATTY, C.J., KITTREDGE and JAMES, JJ., and Acting Justice Amy W. McCulloch, concur.