Gehlmann v. Gehlmann , 2014 Ohio 4990 ( 2014 )

[Cite as Gehlmann v. Gehlmann, 2014-Ohio-4990.]
STATE OF OHIO ) IN THE COURT OF APPEALS
)ss: NINTH JUDICIAL DISTRICT
COUNTY OF MEDINA )
JAMES C. GEHLMANN and FRANCES
M. GEHLMANN (Susan L. Funk, C.A. No. 13CA0015-M
Guardian)
Appellant
APPEAL FROM JUDGMENT
v. ENTERED IN THE
COURT OF COMMON PLEAS
JAMES C. GEHLMANN, et al. COUNTY OF MEDINA, OHIO
CASE No. 2011-03-CA-00010
Appellees
DECISION AND JOURNAL ENTRY
Dated: November 10, 2014
HENSAL, Judge.
{¶1} Appellant, Susan L. Funk, in her capacity as guardian of James C. Gehlmann and
Frances M. Gehlmann, appeals a judgment of the Medina County Court of Common Pleas
Probate Division. For the following reasons, this Court affirms.
I.
{¶2} Mr. and Mrs. Gehlmann owned real estate located at 905 Seasons Pass Drive in
Brunswick Hills Township. In 2005, the Gehlmanns granted a mortgage on the property to BAC
Home Loans Servicing, LP (“BAC”). Ms. Funk was appointed guardian of the person and estate
of both Mr. and Mrs. Gehlmann in 2011. Approximately one month after her appointment as
guardian, Ms. Funk filed a complaint seeking the court’s authority to sell the property as the
“maintenance and upkeep of [the] * * * property [had] become a burden upon the [Gehlmanns’]
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estate[.]” BAC answered and pleaded its mortgage lien in the amount of $177,928.94.1 The
court ordered the property sold at a private sale in the amount of $177,900. The net proceeds
available for distribution after the payment of the closing costs were $159,558.40. Ms. Funk
filed a motion under Revised Code Section 2127.38 to distribute the net proceeds of the sale.
Therein, she sought to pay her law firm $20,000 for fees, which was discounted from the total
billed amount of $24,677.50, prior to satisfaction of BAC’s lien. The requested fees included
payment for services rendered in providing care to the Gehlmanns in Ms. Funk’s capacity as
their guardian. The fees also included preparation of paperwork and attendance at hearings in
the guardianship cases, conversations and correspondence with creditors other than BAC, and
meetings with Mr. and Mrs. Gehlmann and others concerning their future living arrangements.
Under Ms. Funk’s motion, BAC would receive $138,928.15 in satisfaction of its lien.
{¶3} BAC opposed Ms. Funk’s motion on the basis that only the attorney’s fees
associated with the sale of the property should be entitled to priority over its lien. It advocated
that the court should reduce the attorney’s fee portion to $3,700 which, by its calculations, was
incurred in connection with the land sale. Ms. Funk argued that BAC’s assertion was founded on
an overly narrow construction of Revised Code Section 2127.38 that restricted the court’s ability
to determine the appropriate amount of fees within the unique confines of a guardianship case.
No formal request for fiduciary fees was filed by Ms. Funk in the land sale proceeding. The
court’s magistrate issued a decision that approved Ms. Funk’s requested attorney’s fees in the
1
We note that Bank of America is the named defendant in the complaint. The parties and
the trial court reference Bank of America and BAC Home Loans Servicing, LP at various points
throughout the case. At the point in the proceedings where there is a brief in opposition filed to
the guardian’s motion to distribute, it is filed by Bank of America, N.A. as successor by merger
to BAC Home Loans Servicing, LP. The order of distribution lists only Bank of America, N.A.
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amount of $20,000 after reviewing the itemized bill and deducting several charges that the
magistrate found were not related to the land sale proceeding.
{¶4} BAC filed an objection to the magistrate’s decision and Ms. Funk filed a response
to BAC’s objection. After a non-oral hearing, the court sustained BAC’s objection and ordered
that $3,700 in attorney’s fees were rendered in connection with the land sale and were entitled to
priority of payment before BAC’s lien. Ms. Funk appealed and raises two assignments of error
for this Court’s review.
II.
ASSIGNMENT OF ERROR I
THE JUDGMENT ENTRY DATED FEBRUARY 26, 2013[,] SUSTAINING
DEFENDANT’S OBJECTION AND REDUCING ATTORNEY FEES IN A
LAND SALE PROCEEDING MUST BE REVERSED BECAUSE IT IS BASED
ON AN IMPROPER ANALYSIS OF THE RELEVANT STATUTE, TO WIT:
R.C. 2127.38.
{¶5} Ms. Funk argues in her first assignment of error that the trial court incorrectly
applied Revised Code Section 2127.38 in sustaining BAC’s objection to the magistrate’s
decision. We disagree.
{¶6} BAC maintains that this Court should review the trial court’s judgment under an
abuse of discretion standard since it was reviewing a magistrate’s decision. We note that,
“[a]lthough the trial court has discretion when finding facts and applying those facts to the law,”
the central issue in Ms. Funk’s appeal concerns the trial court’s interpretation and application of
a statute. Swedlow v. Riegler, 9th Dist. Summit No. 26710, 2013-Ohio-5562, ¶ 7, quoting Foster
v. Foster, 9th Dist. Wayne No. 09CA0058, 2010-Ohio-4655, ¶ 6. Accordingly, this Court
reviews such judgments de novo. See In re. Piesciuk, 9th Dist. Summit No. 26274, 2012-Ohio-
2481, ¶ 6. “A de novo review requires an independent review of the trial court’s decision
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without any deference to the trial court’s determination.” Id., quoting State v. Consilio, 9th Dist.
Summit No. 22761, 2006-Ohio-649, ¶ 4.
{¶7} Proceedings initiated by a guardian to sell land are governed by Chapter 2127 of
the Ohio Revised Code. Section 2127.38 sets forth the manner in which the proceeds from a
land sale should be distributed. It provides that:
The sale price of real property sold following an action by a[ ] * * * guardian
shall be applied and distributed as follows:
(A) To discharge the costs and expenses of the sale, including reasonable
fees to be fixed by the probate court for services performed by attorneys
for the fiduciary in connection with the sale, and compensation, if any, to
the fiduciary for services in connection with the sale as the court may fix,
which costs, expenses, fees, and compensation shall be paid prior to any liens
upon the real property sold and notwithstanding the purchase of the real
property by a lien holder;
(B) To the payment of taxes, interest, penalties, and assessments then due
against the real property, and to the payment of mortgages and judgments
against the ward * * * according to their respective priorities of lien, so far as
they operated as a lien on the * * * estate of the ward at the time of the sale,
that shall be apportioned and determined by the court * * * [.]
(Emphasis added.)
{¶8} “[W]hen construing a statute, we first must look to the plain language of its
provisions.” Morgan v. Community Health Partners, 9th Dist. Lorain No. 12CA010242, 2013-
Ohio-2259, ¶ 33, citing Hewitt v. L.E. Myers, 134 Ohio St. 3d 199, 2012-Ohio-5317, ¶ 16.
Accordingly, we must read words and phrases in context and according to grammatical rules and
common usage. Id., quoting Hewitt at ¶ 16. If the statute’s meaning is clear and unambiguous,
we apply the statute “as written.” Boley v. Goodyear Tire & Rubber Co., 125 Ohio St. 3d 510,
2010-Ohio-2550, ¶ 20, quoting Cheap Escape Co., Inc. v. Haddox, L.L.C., 120 Ohio St. 3d 493,
2008-Ohio-6323, ¶ 9. “[S]tatutes ‘may not be restricted, constricted, qualified, narrowed,
enlarged or abridged; significance and effect should, if possible, be accorded to every word,
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phrase, sentence and part of an act.’” Id. at ¶ 21, quoting Weaver v. Edwin Shaw Hosp., 104
Ohio St. 3d 390, 2004-Ohio-6549, ¶ 13.
{¶9} Although both parties argue that the statute is not ambiguous, they disagree on the
meaning of the phrase “in connection with the sale.” Ms. Funk maintains that this phrase
requires that the court determine the reasonableness of the requested attorney’s fees on a case-
by-case basis taking into account the unique circumstances of guardianship cases wherein the
wards are residing in the subject real estate and contesting their placement in alternate living
arrangements. BAC contends that the trial court correctly interpreted the phrase to limit the
priority of attorney’s fees to only those that are attendant to the land sale case rather than those
incurred while performing the general duties of a guardian in caring for the wards and their
estates.
{¶10} In the present case, Ms. Funk submitted a motion to distribute the net proceeds of
the sale under Section 2127.38. One of the “[c]osts of [a]dministration” listed in the motion was
$20,000 in “attorney[’s] fees” dating back to November 19, 2010, which is when Ms. Funk
initiated emergency legal proceedings to be declared the guardian of both Mr. and Mrs.
Gehlmann. We note that the land sale complaint was not filed until March 24, 2011. Ms. Funk
moved to have these fees paid under Section 2127.38(A) prior to payment of BAC’s lien under
Section 2127.38(B). The result of such a distribution was that BAC would receive only a portion
of the balance due on its mortgage.
{¶11} In its judgment sustaining BAC’s objection to the magistrate’s decision, the trial
court found that the magistrate erroneously interpreted Section 2127.38 to allow the cost of legal
work completed both in the guardianship cases and the land sale case to be paid prior to the
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mortgage. It found that “[t]he plain language of the statute indicates that only legal and fiduciary
services connected with the land sale receive priority over taxes and liens.”
{¶12} Applying the principals of statutory construction to the attorney’s fees awarded in
the present case, we must first look to the plain language of the contested phrase, “in connection
with the sale.” A “connection” is defined as “the state of being connected or linked” and a
“relationship or association in thought (as of cause and effect, logical sequence, mutual
dependence or involvement).” Webster’s Third New International Dictionary 481 (1993). Thus,
we conclude that the plain language of Section 2127.38 indicates that attorney’s fees incurred “in
connection with the sale” are fees that are linked to or dependent on the land sale proceedings.
{¶13} We also note that the plain language of the statute vests the trial court with the
authority to “fix” what it determines are reasonable attorney’s fees. R.C. 2127.38(A). This
would mean that in “fixing” the fee, the trial court would have discretion and, therefore, any
review of that determination would employ the abuse of discretion standard. The Ohio Supreme
Court has noted that the probate court’s authority to determine attorney’s fees is solely within its
jurisdiction. See In re Murnan’s Estate, 151 Ohio St. 529, 531 (1949).
{¶14} In reviewing the magistrate’s decision, the trial court cited to the case of Aranda
v. Tammac Holdings Corp., 184 Ohio App. 3d 11, 2009-Ohio-4781 (2d Dist.) in support of its
finding that only legal and fiduciary services connected to the land sale are entitled to priority of
payment under Section 2127.38(A). In Aranda, the executor of an estate filed a land sale
complaint to sell real estate in order pay the decedent’s debts, which included a mortgage owed
to the defendant. The executor sought to pay the attorney’s and executor’s fees associated with
the estate proceedings from the net proceeds of the land sale prior to payment of the mortgage.
The executor’s motion for distribution of the net proceeds separately itemized the attorney’s and
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executor’s fees in the estate proceeding from the attorney’s fees associated with the land sale.
The Second District concluded that the trial court erred in granting payment of the estate fees
prior to payment of the mortgage as they were not earned in connection with the sale of the real
estate. Id. at ¶ 24. The Court also found that it could not determine which executor’s fees were
associated with the sale based upon the record before it and, therefore, remanded the case for a
determination by the trial court. Id. at ¶ 22.
{¶15} We note that Aranda did not involve a statutory construction analysis of the
phrase “in connection with the sale.” There are also factual differences between this case and
Aranda which involved an executor’s rather than a guardian’s land sale. Finally, unlike the
executor in Aranda, Ms. Funk did not separately itemize her attorney’s and guardian’s fees.
{¶16} Nevertheless, the trial court’s reliance on Aranda was well-suited and this Court
concludes that it did not err in its construction of Revised Code Section 2127.38(A) in finding
that “only legal and fiduciary services connected with the land sale receive priority over taxes
and liens.” This is a correct recitation of the applicable statute. Accordingly, Appellant’s first
assignment of error is overruled.
ASSIGNMENT OF ERROR II
THE JUDGMENT ENTRY DATED FEBRUARY 26, 2013[,] OVERRULING
THE MAGISTRATE’S FINDINGS RELATED TO [THE] ALLOWANCE OF
ATTORNEY FEES MUST BE REVERSED BECAUSE IT IS AGAINST THE
MANIFEST WEIGHT OF THE EVIDENCE[.]
{¶17} Ms. Funk argues in her second assignment of error that the trial court’s judgment
was against the manifest weight of the evidence. She reiterates her same argument in the first
assignment of error that the trial court’s misapplication of Section 2127.38(A) resulted in an
overly narrow interpretation of how much of her requested fees were entitled to priority over
BAC’s mortgage. Ms. Funk further maintains that the trial court should have held an oral
8
hearing prior to issuing its decision and that it is unclear from the judgment what evidence it
relied on in making its decision.
{¶18} While Ms. Funk’s assignment of error is couched in terms of challenging the
manifest weight of the evidence, the substance of her argument suggests that the trial court
lacked any evidence from which it could conclude that only $3,700 of the requested attorney’s
fees were entitled to priority before BAC’s mortgage. As such, this Court will analyze her
argument using the sufficiency standard. See Swedlow, 2013-Ohio-5562, at ¶ 29.
{¶19} The Ohio Supreme Court has explained that “[t]he sufficiency of the evidence is
quantitatively and qualitatively different from the weight of the evidence.” Eastley v. Volkman,
132 Ohio St. 3d 328, 2012-Ohio-2179, paragraph two of the syllabus. “[S]ufficiency” has been
defined as
“a term of art meaning that legal standard which is applied to determine * * *
whether the evidence is legally sufficient to support the [judgment] as a matter of
law.” * * * In essence, sufficiency is a test of adequacy. Whether the evidence is
legally sufficient to sustain a verdict is a question of law.
Id. at ¶ 11, quoting State v. Thompkins, 78 Ohio St. 3d 380, 386 (1997).
{¶20} Section 2127.38(A) permits the probate court to grant both attorney’s and
guardian’s fees rendered in connection with the land sale. While Ms. Funk listed the requested
expenditure as an “[a]ttorney[’s] [f]ee” and described the “[a]ttached itemized billing statement
for attorney[’s] fees,” it is clear from our review of the record that the substance of the billing
statement included both attorney’s and guardian’s fees. The majority of the itemized legal
services included on the statement attached to the motion to distribute were performed by Ms.
Funk. In addition to being the Gehlmanns’ guardian, she is also a licensed attorney.
{¶21} The magistrate’s decision specifically found that “this Court allows both
attorney[‘s] fees and guardian’s compensation” and discussed the various factors supporting an
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award of “attorney[’s] fees” that included services more akin to guardian’s fees. In ruling on Ms.
Funk’s motion to distribute the net proceeds of the sale, the magistrate found that the land sale
proceedings and the Gehlmanns’ guardianship cases were connected for several reasons. First,
under the court’s local rules, the land sale complaint could not be filed until the guardianship
cases were filed. See Med Prob L R 78.1(II)(A). Second, the magistrate noted that “[r]elated * *
* guardianship files are always considered by the [c]ourt whenever a hearing is heard and
decided in a civil [land sale] action.” Third, the court allows both legal and guardian’s fees for
attorneys who also serve as guardians. See Med Prob L R 71.2. Finally, the magistrate noted
that the Gehlmanns’ guardianship cases originated from a need to appoint a guardian to manage
their finances after allegations were made that they were not paying their bills, received utility
disconnection notices and had insufficient assets to pay their debt. These findings by the
magistrate were upheld by the trial court. Absent from the record is a designation of what the
fiduciary fees in connection with the sale would be, separate and apart from the attorney’s fees.2
There was no request made upon the trial court for the separate “fixing” of fiduciary fees.
{¶22} Ms. Funk’s request, contained within her motion to distribute, is labeled solely as
attorney’s fees, even though, clearly, she sought fiduciary fees. The magistrate, in granting the
motion to distribute, approved attorney’s fees because that is how the motion is worded, but it
also clearly awarded fiduciary fees, which the magistrate thought were permissible as being “in
connection with the sale.” R.C. 2127.38(A). Further, BAC objected to attorney’s fees but also
engaged in the argument regarding guardian’s fees as it was responsive to the magistrate’s
2
Further absent from the record is any indication that “Bank of America,” who was
named in the complaint or “Bank of America, NA,” who was listed in the amended entry for
distribution of the sale’s net proceeds, is a party to this land sale proceeding. In fact, BAC Home
Loan Servicing, LP filed an answer noting that it was “improperly named in [the] Complaint as
‘Bank of America’” and that Bank of America erroneously received leave to plead, but never
asked to be made a party to the proceeding.
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decision. Finally, the trial court found merit in BAC’s objections and determined that Ms. Funk
was entitled to attorney’s fees in the amount of $3,700. It further stated that the magistrate had
dispensed with all “non-legal services” by denying those fees in its decision. The trial court’s
entry states:
IT IS ORDERED that the objection to magistrate’s decision is sustained as to the
amount of attorney fees to be paid under R.C. 2127.38(A). Upon independent
review and consideration, the balance of the magistrate’s decision contains no
error of law or fact and is adopted by the Court.
IT IS FURTHER ORDERED that reasonable attorney fees for services performed
in connection of the sale of the real estate shall be fixed at $3,700.
(Emphasis deleted.) The court then orders, pursuant to the motion, distribution of the proceeds
from the sale. Therein it awards Ms. Funk $3,700 in attorney’s fees associated with the sale. The
trial court next entered an amended judgment entry to distribute the net proceeds of the sale.
This entry allowed for attorney’s fees in the amount of $3,700 and gave priority for these fees
over BAC’s lien.
{¶23} We previously addressed Ms. Funk’s assertion that the trial court misapplied the
statute in her first assignment of error and determined that it did not err. Regarding her argument
that it is unclear how the trial court decided on the $3,700 in attorney’s fees that were entitled to
priority before BAC’s mortgage, the court concluded that, other than the magistrate’s erroneous
interpretation of the statute, “the balance of the magistrate’s decision contains no error of law or
fact.” The court further stated that it undertook an independent review of the objection and
found that the reasonable attorney’s fees rendered in connection with the sale totaled $3,700. In
opposition to Ms. Funk’s motion to distribute, BAC detailed the legal fees, which amounted to
$3,700, that it argued were connected to the land sale proceedings. Regarding Ms. Funk’s
argument that the trial court should have set the matter for a hearing rather than deciding the
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objection on the record alone, we note that neither she nor BAC requested a hearing even though
the local rules allow for such a request to be made. See Med Prob L R 78.11.
{¶24} After a careful review of the evidence, this Court concludes that there was
sufficient evidence to support the trial court’s judgment. Ms. Funk’s second assignment is
overruled.
III.
{¶25} Ms. Funk’s assignments of error are overruled. The judgment of the Medina
County Court of Common Pleas is affirmed.
Judgment affirmed.
There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Court of Common
Pleas, County of Medina, State of Ohio, to carry this judgment into execution. A certified copy
of this journal entry shall constitute the mandate, pursuant to App.R. 27.
Immediately upon the filing hereof, this document shall constitute the journal entry of
judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the
period for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is
instructed to mail a notice of entry of this judgment to the parties and to make a notation of the
mailing in the docket, pursuant to App.R. 30.
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Costs taxed to Appellant.
JENNIFER HENSAL
FOR THE COURT
MOORE, J.
CONCURS.
CARR, J.
DISSENTING.
{¶26} I respectfully dissent.
{¶27} I agree with the majority that the trial court’s interpretation and application of a
statute is reviewed de novo. State Farm Mut. Automobile Ins. Co. v. Jiles, 9th Dist. Summit No.
26841, 2014-Ohio-2512, ¶ 21. I further agree that statutory construction begins with a
consideration of the plain language of the provisions, which, if clear and unambiguous, must
simply be applied as written. In re K.E.M., 9th Dist. Summit No. 26307, 2012-Ohio-5652, ¶ 11.
However, if a statute is ambiguous, the court must construe it, giving effect to the legislature’s
intent. Family Medicine Found., Inc. v. Bright, 96 Ohio St. 3d 183, 2002-Ohio-4034, ¶ 9. The
court may determine the intent of the legislature by considering such factors as the objective of
the statute; the circumstances under which the statute was enacted; the legislative history;
common law or former versions of the statute, including laws pertaining to the same or similar
subjects; the consequences associated with a particular construction of the statute; and the
administrative construction of the statute. R.C. 1.49. “‘A statute is ambiguous when its
language is subject to more than one reasonable interpretation.’” Lang v. Dir., Ohio Dept. of Job
13
& Family Servs., 134 Ohio St. 3d 296, 2012-Ohio-5366, ¶ 14, quoting Clark v. Scarpelli, 91 Ohio
St.3d 271, 274 (2001).
{¶28} While both parties argue that the statute is not ambiguous, they disagree as to the
meaning of a phrase critical to determining for which services the fiduciary may receive priority
compensation. Specifically, they propose significantly different meanings for the phrase “in
connection with the sale.” It is hard to imagine how, under these circumstances, the statute
cannot be considered ambiguous. I would conclude that the phrase “in connection with the sale”
is subject to more than one reasonable interpretation and is, therefore, ambiguous. Moreover, I
would conclude that the trial court too narrowly construed the phrase.
{¶29} I agree with the majority that inherent in the plain meaning of the statute is the
legislature’s imbuing of discretion upon the trial court in determining fees and compensation for
services performed. The trial court may “fix” those amounts as it deems reasonable and in
consideration of services performed “in connection with the sale” of the property. In this case,
the trial court construed the statute too narrowly and concluded that it had no discretion to award
more expansive fees, i.e., anything beyond fees necessary with regard to the preparation of
paperwork related to the sale of the property.
{¶30} The legislature clearly indicated its intent to compensate the attorney for the
fiduciary and the fiduciary herself for services performed in connection with the sale of real
property prior to all others, even prior to paying taxes and assessments against the property.
Reasonably, any creditor who received payment would do so solely as a result of the efforts of
the fiduciary and/or her attorney. Priority compensation under those circumstances is just. In
this same vein, by using a broad phrase like “in connection with the sale,” the legislature
recognized that the sale of a decedent’s or ward’s real property necessarily implicates more than
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mere preparation and execution of documents immediately related to the sale to effect a just
compensation. For example, expenses to create a guardianship imposed out of necessity in the
interest of preserving a ward’s assets would reasonably be attributed in connection with the sale
of real property. But for the existence of a guardian, an incompetent’s real property could not be
sold. In such a case, the filing of the application for a guardianship would lay the necessary
groundwork for managing assets, including selling real property.
{¶31} By construing the phrase “in connection with the sale” too narrowly and
determining that it had no discretion to award fees or compensation beyond the scope of
documentation immediately related to the sale transaction, the trial court ignored the intent of the
legislature to justly compensate attorneys and fiduciaries for services associated with the sale.
Accordingly, I would reverse and remand the matter to the trial court to determine which
services by the attorney/guardian were associated with the sale, i.e., which services laid the
necessary groundwork for the sale. Only then could the trial court fix an amount in its discretion
to reasonably compensate the attorney for fees and the guardian for services rendered in
connection with the sale of the real property.
APPEARANCES:
S. FORREST THOMPSON, Attorney at Law, for Appellant.
JAMES S. WERTHEIM and MELANY K. FONTANAZZA, Attorneys at Law, for Appellee.