William Wallace Allred v. Fairchild-Windham Exploration Company ( 2004 )

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2004-CA-00882-SCT
WILLIAM WALLACE ALLRED
v.
WILEY FAIRCHILD; FAIRCHILD-WINDHAM
EXPLORATION COMPANY, A PARTNERSHIP;
JOHN M. FAIRCHILD, MICHAEL B. MOORE AND
MARK A. FAIRCHILD, TRUSTEES OF THE MARIE
L. FAIRCHILD LIFE INSURANCE TRUST; B. R.
NOEL, MARK A. FAIRCHILD AND JOHN M.
FAIRCHILD, EXECUTORS OF THE ESTATE OF
WILEY FAIRCHILD, DECEASED
DATE OF JUDGMENT: 3/26/2004
TRIAL JUDGE: HON. PERCY L. LYNCHARD, JR.
COURT FROM WHICH APPEALED: COVINGTON COUNTY CHANCERY COURT
ATTORNEYS FOR APPELLANT: OTIS JOHNSON
KEITH R. RAULSTON
ATTORNEY FOR APPELLEES: LAWRENCE CARY GUNN
NATURE OF THE CASE: CIVIL - OTHER
DISPOSITION: REVERSED AND RENDERED - 12/08/2005
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
EN BANC.
GRAVES, JUSTICE, FOR THE COURT:
¶1. William Wallace Allred (“Allred”) filed suit on December 19, 1990 against Wiley
Fairchild (“Fairchild”) alleging that he was due a commission for services rendered in
connection with the sale of oil and gas leases, minerals and royalties in a transaction hereafter
referred to as the Windham Properties. To compensate Allred for his services in connection
with the Windham Properties purchase, Fairchild agreed to convey to Allred a 10% interest
in the properties “after payout.”1 Fairchild also agreed to keep Allred informed as to the status
of the payout.
FACTS AND PROCEDURAL HISTORY
¶2. In the late 1980's a dispute arose between Allred and Fairchild for Fairchild’s
refusal to furnish payout information to Allred and for his refusal to assign Allred the 10%
interest in the Windham Properties. Allred’s complaint sought enforcement of the agreement
of 10% interest in the Windham Properties after payout, imposition of a constructive trust,
accounting, actual damages, and other relief. Fairchild admitted that he told Allred that he
would pay $2,250,000.00 for the Windham Properties, but denied that there was an agreement
to pay Allred a commission.
¶3. The case was tried in the Chancery Court of Covington County, Mississippi and on
December 16, 1998, the special chancellor held that Allred was not entitled to any relief. The
chancellor further found that payout of the Windham Properties had occurred in July of 1981.
Allred appealed the decision to this Court.
¶4. On May 31, 2001, this Court reversed and remanded the chancellor’s decision. On
remand, the chancery court awarded Allred over $6,000,000.00. On May 22, 2003, Allred filed
a costs bill with the chancery court. The costs bill was in the amount of $79,858.35. The sum
of $79, 235.35 represented fees paid to Oscar Hartman (“Hartman”), an oil and gas accountant,
1
In the oil and gas industry the term “payout” refers to that point in time when
income, including proceeds from production and sale of oil, gas and other minerals from
the properties, has equaled the cost and expense of acquiring the properties and operating
them. Therefore, with the exception of some minor overhead expenses, the income derived
translates into profits.
2
for his work preceding and during the trials. On May 23, 2003, Fairchild filed an objection to
the costs bill. Allred filed a motion for assessment of costs and response to defendant’s
objection.
¶5. The chancery court rendered its opinion on Allred’s motion for the assessment of fees
to Hartman as costs and denied the motion. On April 1, 2004, the chancery court found that
there were no exceptional circumstances to warrant Allred’s recovery of the fees paid to
Hartman and declined to grant the fees to Allred.
On April 29, 2004, Allred filed an appeal to this Court, raising two issues:
I. The chancery court erred in finding that there were no exceptional
circumstances that would authorize the chancery court to exercise
discretion and grant accounting fees as expenses to Allred.
II. The chancery court erred in finding that there was no evidence to show
that the accountant’s fees were reasonable.
DISCUSSION
I. Whether the chancery court erred in finding that there were no
exceptional circumstances that would authorize the court to
exercise discretion and grant accounting fees as costs and expenses
to Allred.
¶6. We will reverse a chancellor’s decision only where he is manifestly wrong. Hans v.
Hans, 482 So. 2d 1117, 1119 (Miss. 1986). A chancellor’s findings will not be disturbed
unless he is manifestly wrong, clearly erroneous or an erroneous legal standards applied.
Tinnin v. First United Bank of Mississippi, 570 So. 2d 1193, 1194 (Miss. 1990); O.J.
Stanton & Co. V. Mississippi State Highway Commission, 370 So. 2d 909, 911 (Miss. 1979).
However, the chancery court’s interpretation and application of the law is reviewed under a de
3
novo standard. Weissinger v. Simpson, 861 So. 2d 984, 987 (Miss. 2003).
A. Did exceptional circumstances exist and did the chancery
court abuse its discretion in not awarding accounting fees to
Allred?
¶7. Allred contends that the undisputed facts and circumstances require this Court to
reverse the decision of the chancery court and award Allred the accounting fees which he paid
to Hartman. Fairchild counters that Allred has not cited a single precedent, rule, statute, or any
legal authority that would justify the imposition of expert witness fees as costs.
¶8. Fairchild argues that Allred is not entitled to recover accounting fees as costs under
Mississippi Rule of Civil Procedure 54(d) which states:
Except when express provision therefor is made in a statute, costs shall
be allowed as of course to the prevailing party unless the court otherwise
directs, and this provision is applicable in all cases in which the State of
Mississippi is a party plaintiff in civil actions as in cases of individual
suitors. In all cases where costs are adjudged against any party who has
given security for costs, execution may be ordered to issue against such
security. Costs may be taxed by the clerk on one day’s notice. On
motions served within five days of the receipt of notice of such taxation,
the action of the clerk may be reviewed by the court.
However, the comments to Mississippi Rule of Civil Procedure 54(d) state:
Although costs has an everyday meaning synonymous with expenses,
taxable costs under Rule 54(d) is more limited and represents those
official expenses, such as court fees, that a court will assess against a
litigant. Costs almost always amount to less than a successful litigant’s
total expenses...Absent a special statute or rule, or an exceptional
exercise of judicial discretion, such items as attorney’s fees, travel
expenditures, and investigatory expenses will not qualify either as
statutory fees or reimbursable costs. These expenses must be borne by
the litigants.
¶9. Fairchild argues that this case is distinguished from Memphis Hardwood Flooring
4
Company v. Daniels, 771 So. 2d 924 (Miss. 2000), in that expert witness fees were awarded
specifically because there is a statute, Miss. Code Ann. § 95-5-10(3), which allows expert
witness fees and attorney fees to be assessed as court costs under Mississippi’s timber
trespass statute. Fairchild is also correct when he asserts that in Selleck v. S.F. Cockwell
Trading, Inc., 517 So. 2d 558 (Miss. 1987), the plaintiff was awarded expert witness fees not
as “costs,” but as sanctions against the defendant as a penalty for jury tampering. Allred has not
requested that we award the accounting fees as sanctions for Fairchild’s fraudulent conduct,
but that we assess the fees against Fairchild as costs.
¶10. Allred relies solely upon the exercise of exceptional judicial discretion as referenced
in the comments to Rule 54(d) and argues that but for Fairchild’s fraud, he would not have
incurred the costs and expenses of payout determination and accounting for the monies due
to him. Exceptional circumstances must exist in order for the court to exercise exceptional
judicial discretion. We must look to the record to determine whether or not exceptional
circumstances exist.
In Allred I, we stated:
...Allred cites an extensive list of alleged discovery violations in support
of his assertion that Fairchild committed fraud. Allred’s contention is
that Fairchild purposely lied, withheld evidence and did everything
possible to cover up the fact that he owed Allred a percentage of the
Windham Properties. This fraud has allowed Fairchild to benefit from
the 10% interest due Allred per their oral
agreement. As such, Fairchild should not be allowed to benefit from his
wrongdoing as a matter of law. (785 So. 2d 1064, paragraph 8).
The Court also established that “it was this confidential relationship [between Allred and
Fairchild] that allowed Fairchild to conceal the truth concerning the payout so long.” Id.
5
Finally, this Court found that:
Furthermore, Fairchild made numerous false representations and swore
under oath to them, including: denying the existence of an oral contract,
until presented with the evidence of one; denying the existence of any
documented proof of the contract when P-67 (a February, 1974 memo)
evidenced the existence of a contract; sworn testimony that payout
records were never kept when, in fact, his long-time secretary testified
that they were; failure to turn over many highly relevant documents, even
after compelled to do so. Id. P. 1070 (paragraph 17).
¶11. Based upon the evidence present in the record, we found Fairchild’s actions to be
riddled with fraud and deception and that the confidential relationship between the parties
allowed Fairchild to perpetrate the fraud for a substantial period of time. We also determined
that Fairchild denied the very existence of an oral contract, until he was presented with
documented evidence that an oral contract existed.
¶12. Moreover, this Court has previously held that extra-contractual damages may be
appropriate even in cases where a party’s conduct does not warrant punitive damages.
Universal Life Ins. Co. v. Veasley, 610 So. 2d 290, 295 (Miss. 1992). It is axiomatic that one
is liable for the full measure of the reasonably foreseeable consequences of their actions. Id.
at 295. It was entirely foreseeable by Fairchild that his breach of the contract and his continued
denial of its existence would lead to substantial litigation and accounting costs. Those costs
should be borne by Fairchild. Considering these facts, Allred has proven that exceptional
circumstances existed.
B. Did the chancery court err when it failed to exercise
exceptional judicial discretion?
¶13. When the chancellor refused to exercise exceptional judicial discretion and award the
accounting fees to Allred, the chancellor stated as follows:
6
Here, I think the facts would bear out that both parties for the sake of
argument, assuming that this matter had not reached the litigation stage,
would have still employed an accountant to determine what their
respective positions would be and respective amounts due from and
owing to the other. I don’t find that the misconduct as cited by the
Supreme Court necessitated the hiring of an accountant anymore so then
one would have been otherwise.
Based upon the language used by the chancellor, he is strictly using hindsight to speculate as
to what the parties would have done absent litigation instead of solely relying on the record
before him. All evidence in the record points to a conclusion different from that reached by
the chancellor. According to the record, in the 20 years that Allred did business with Fairchild,
Allred never did his own accounting. Fairchild’s office personnel always conducted the
accountings and were responsible for maintaining the records on the Windham Properties.
Fairchild advised his personnel not to generate and maintain accounting records. Through the
custom and practice of the parties, Allred relied upon Fairchild to perform the accounting.
Until a dispute arose between the parties, Allred never employed an accountant to determine
the status of his financial dealings with Fairchild, primarily because he trusted Fairchild to
provide an honest and accurate accounting of funds. The chancellor was manifestly wrong in
determining that Allred would have initially hired an accountant absent litigation. The chancery
court decision is reversed.
II. Whether the chancery court erred in finding that there was no
evidence before the court to show that the accountant’s fees were
reasonable.
¶14. The chancery court cites Martin v. Martin, 566 So. 2d 704 (Miss. 1990) and
McKee v. McKee, 418 So. 2d 764 (Miss. 1982), as guidelines for properly determining
accountant’s fees. Martin and McKee specifically discuss determining the reasonableness of
7
attorney’s fees in divorce cases. However, a case that appears to be more on point with the
chancellor’s assumption that accounting fees are determined in the same manner as attorney’s
fees is Smith v. Dorsey, 599 So. 2d 529, 550 (Miss. 1992). In the Smith case, this Court found
no abuse of discretion in the chancellor’s awarding of expert fees as well as attorney’s fees
where taxpayers successfully challenged a school board’s illegal expenditure of public funds.
Inasmuch as it is appropriate to examine prior case law, i.e. Martin and McKee, it is equally
appropriate to examine and apply Miss. Code Ann. § 9-1-41 which states:
In any action in which a court is authorized to award reasonable attorneys'
fees, the court shall not require the party seeking such fees to put on
proof as to the reasonableness of the amount sought, but shall make the
award based on the information already before it and the court's own
opinion based on experience and observation; provided however, a party
may, in its discretion, place before the court other evidence as to the
reasonableness of the amount of the award, and the court may consider
such evidence in making the award.
Hartman is a certified public accountant who attached an affidavit which was submitted with
the costs bill detailing the services he rendered. Hartman charged an hourly rate of $150 -
$165 while his assistant’s rate was $50 per hour. He stated that these rates were fairly
conservative and reasonable for the knowledge, skill, and expertise needed to perform oil and
gas accounting matters and were well within the range of fees charged by certified public
accountants.
¶15. The chancery court erred in finding that there was nothing before it to show that
Hartman’s fees were reasonable. But for the fraud of Fairchild, Allred would not have incurred
this expense. Therefore, we reverse and render the decision of the chancery court and award
Allred $79, 235.35 in costs which represents the accounting fees and expenses he incurred.
8
CONCLUSION
¶16. We find that the chancellor erred in deciding that there were no exceptional
circumstances that would authorize him to exercise discretion and grant accounting fees as
expenses to Allred. We also find that the chancellor erred in holding that there was nothing
before him to show that the accountant’s fees were reasonable. For the foregoing reasons, we
reverse and render the judgment of the Chancery Court of Covington County. Allred is entitled
to $79,235.35 in costs.
¶17. REVERSED AND RENDERED.
SMITH, C.J.,COBB, P.J., CARLSON AND DICKINSON, JJ., CONCUR. EASLEY,
J., DISSENTS WITHOUT SEPARATE OPINION. WALLER, P.J., DIAZ AND
RANDOLPH, JJ., NOT PARTICIPATING.
9