Estate of Coan v. Gaughan

ROBERT J. GLADWIN, Judge.

|,The Estate of Helen Virginia Coan, deceased, through its co-administrators Thomas Carmody and Dr. Norman Savers, appeals the order of the Ouachita County Circuit Court awarding attorney’s fees to appellee Michael Gaughan, a former co-administrator of the estate. The estate challenges the award of fees on several fronts. We affirm the circuit court’s order.

This case is one in a series of appeals spawned by litigation over the estates of Helen Virginia Coan and her brother Joseph Coan, Jr.¹ The record reflects that Helen and Joseph |2inherited considerable sums of money upon the deaths of their parents. Helen was born with Downs Syndrome, and in 1977, the Probate Court of Ouachita County appointed Joseph as guardian of Helen’s person and estate. Joseph died in 1984. In his will, Joseph established a testamentary trust for Helen’s benefit during her lifetime. Linnie Betts, an employee of the bank where the Coan siblings’ funds were held, succeeded Joseph as Helen’s guardian. Betts also served as co-executor of Joseph’s estate with Gaughan.

Helen died in January 2005. The circuit court appointed Betts and Gaughan as co-administrators of Helen’s estate. In March 2006, the circuit court named Car-mody and Savers as additional co-administrators of the estate. The following June, the circuit court removed Betts as co-administrator of Helen’s estate upon the request of Carmody and Savers. Betts died after her removal.

In November 2006, Carmody and Savers, on behalf of Helen’s estate and her heirs, filed suit against Betts’s estate and others, claiming that Betts had misallocat-ed funds and seeking a construction of Joseph’s will pertaining to the testamentary trust. This lawsuit is referred to by the parties as the “global” litigation. The complaint contained no allegations accusing Gaughan of any wrongdoing, and Gau-ghan, who was both a co-administrator and co-executor of Helen’s and Joseph’s estates, requested that he not be named as a plaintiff in the global lawsuit.

The complaint in the global litigation included a claim against Western Surety Company on the bond it had provided Gau-ghan and Betts as administrators of Helen’s estate. |sIn turn, Western Surety filed a third-party complaint against Gau-ghan, individually, and a cross-claim against Betts’s estate and the administrator of her estate. In this pleading, Western Surety asserted that Gaughan and Betts were personally liable to it for any sums it might be required to pay as a result of the litigation, based on an indemnity clause contained in the application for the bond. Gaughan hired an attorney and filed a separate answer to Western Surety’s third-party complaint. The record also reflects that Gaughan filed a motion in the global lawsuit seeking an interpretation of Joseph’s will that was antithetical to the construction urged by Carmody and Savers in them complaint. The circuit court rejected Carmody and Savers’s construction of the will, and we affirmed that decision in Carmody v. Betts, supra.

On April 27, 2007, Carmody and Savers filed a petition to have Gaughan removed as a co-administrator of Helen’s estate. The petition cited various conflicts of interest on Gaughan’s part. On June 19, 2007, Gaughan filed a motion seeking to withdraw as co-administrator of Helen’s estate. In this petition, Gaughan averred that he was not consulted by Carmody and Savers before they filed the global lawsuit; that he believed that the litigation was without merit; and that he had not otherwise been consulted concerning the management of the estate. Gaughan also sought to be released from all liability that may be asserted against him in his capacity as a co-administrator of Helen’s estate, and he requested the discharge of his bond and surety. Carmody and Savers did not object to Gaughan’s resignation, but they resisted Gaughan’s efforts to be relieved from liability for actions taken as a co-administrator.

14Gaughan filed two accountings for the time he served as a co-administrator of Helen’s estate. The first accounting included the period from Helen’s death until the court removed Betts as an administrator. This accounting overlapped a period of time when Carmody and Savers were also co-administrators of the estate. The second accounting prepared by Gaughan covered the period from Betts’s removal to the date that he filed his motion to withdraw as a co-administrator. Carmody and Betts objected to the accountings, asserting that they were rife with errors.

On October 16, 2007, the circuit court entered an order approving Gaughan’s resignation as a co-administrator of Helen’s estate. The order provided that Gau-ghan’s resignation was effective as of June 19, 2007, and that Gaughan had no further liability or responsibility with regard to the administration of the estate as of that date. The court reserved the other issues raised by Gaughan in his motion to resign, including the approval of the accountings.

On June 11, 2008, Gaughan filed a petition seeking attorney’s fees.² The fees included charges for services rendered by his attorney in connection with the two accountings, his resignation, his defense of the Western Surety third-party complaint, and a brief that he filed in Carmody v. Betts, supra. The motion was accompanied by detailed time records from |fiGaughan’s attorney, reflecting that counsel spent 153 hours working on these matters at a rate of $170 or $175 per hour.

Carmody and Savers opposed the award of fees to Gaughan. They first argued that the circuit court should deny the motion as a matter of law because Gaughan cited no authority for an award of fees. Also, Carmody and Savers relied on Dunklin v. Ramsay, 328 Ark. 263, 944 S.W.2d 76 (1997), to argue that Gaughan lacked standing as a minority co-administrator to seek reimbursement for attorney’s fees. They also asserted that Arkansas Code Annotated section 28^8-108 (Supp.2009) provided no authority for an award of fees to Gaughan because he was a minority co-administrator whose attorney represented his personal interests that were of no benefit to Helen’s estate.

After conducting a hearing, the circuit court issued a letter opinion deciding the fee motion. First, the circuit court found that Gaughan was entitled to fees for retaining counsel to perform his duties as an administrator, which included the preparation and defense of the accountings. The court also found that Carmody and Savers’s opposition to the accountings resulted in protracted litigation. As authority for the fee award, the circuit court cited “A.C.A. § 28-56-104.” Further, the court awarded attorney’s fees incurred by Gau-ghan in defending the third-party complaint filed against him by Western Surety. In making this award, the circuit court reasoned that retaining counsel was necessary to defend his position as co-administrator with Betts and that the third-party complaint was the direct result of the litigation initiated by Carmody and Savers. In setting the amount of the fee, the circuit court |fifound that the hourly rate charged by Gaughan’s counsel was reasonable and that Gaughan had paid his attorney $28,404.25. However, the court examined counsel’s billing records and disallowed $6,120 in fees, finding that certain charges represented services that were either not related to Gaughan’s duties as co-administrator of Helen’s estate or were related to matters concerning Joseph’s estate. The court entered an order granting Gaughan’s fee request in the amount of $22,284.25 on February 26, 2009. That same day, the circuit court filed a supplemental order awarding Gaughan an additional $2,857.50 in attorney’s fees. This timely appeal followed.

An award of attorney’s fees will not be set aside absent an abuse of discretion by the circuit court. Calvert v. Estate of Calvert, 99 Ark.App. 286, 259 S.W.3d 456 (2007). While the decision to award attorney’s fees and the amount awarded are reviewed under an abuse-of-discretion standard, we review the factual findings made by the circuit court under a clearly erroneous standard of review. Id. On appellate review, however, we do not defer to a circuit court’s conclusions of law. Baldwin v. Eberle, 2009 Ark. App. 222, 301 S.W.3d 475.

Carmody and Savers first take issue with the circuit court’s citation to Arkansas Code Annotated section 28-56-104 as authority for the fee award. They point out that this statute is currently a “reserved” section of the code and argue that the circuit court’s order fails to identify a proper statutory basis for the award. It is clear to us, however, that the circuit court meant to cite Arkansas Code Annotated section 28-48-108, which governs awards of attorney’s fees for the employment of counsel by a personal representative, and that the court 17referenced section 28-56-104 by simple mistake. Because section 28-48-108 provides statutory authority for an award of fees to an administrator, we find no reversible error resulting from the circuit court’s citation to the wrong statute. We will affirm a circuit court’s decision if it reaches the right result, even though the court states an incorrect reason. See Calvert, supra.

Next, Carmody and Savers argue that section 28^48-108 does not authorize an award of fees for the services performed by Gaughan’s attorney. Carmody and Savers contend that the accountings filed by Gaughan were not necessary because they, as the majority of co-administrators, also submitted accountings that Gaughan did not dispute as being inaccurate. They also assert that Gaughan is not entitled to fees incurred in the global lawsuit. In this regard, Carmody and Savers argue that an estate is not required to pay the attorney’s fees of a minority co-administrator engaged in litigation where the services performed do not benefit the estate and where the services are for the benefit of a co-administrator in defense of a personal, contractual obligation. Further, Carmody and Savers maintain that fees are not allowed where the minority co-administrator asserts positions that are in derogation of the interests of the estate and that are contrary to positions taken by the majority of co-administrators. In presenting these arguments, Carmody and Savers point out the testimony of Gaughan’s attorney stating that he could attribute only $10,772.50 of his total fee request to services connected with the accountings, Gaughan’s resignation, and related hearings.

Section 28^8-108 provides as follows:

1 «(d)(1) The personal representative may employ legal counsel in connection with the probate of the will or the administration of the estate, and the attorney so employed shall prepare and present to the circuit court all necessary notices, petitions, orders, appraisals, bills of sale, deeds, leases, contracts, agreements, inventories, financial accounts, reports, and all other proper and necessary legal instruments during the entire six (6) months, or longer when necessary, while the estate is required by law to remain open.

Subsection (d)(2) of the statute sets out a fee schedule based on the total, reportable market value of the real and personal property, but subsection (d)(3) allows the circuit court to deviate from the schedule to allow a fee commensurate with the value of legal services rendered if the court determines that the scheduled fee is either excessive or insufficient under the circumstances of the case.

We do not hesitate to hold that the circuit court did not abuse its discretion in awarding attorney’s fees to Gau-ghan for both preparing and successfully defending his accountings. Under Arkansas Code Annotated section 28-52-103 (Repl.2004), Gaughan had a duty to file annual accountings during the period of his administration and to file an accounting upon his resignation as co-administrator. Thus, Gaughan cannot be faulted for submitting an accounting to chronicle the estate’s activities during the time that he and Betts were co-administrators and for submitting another one upon his resignation. Also, the circuit court overruled the objections to Gaughan’s accountings. It is well settled that attorney’s fees necessarily incurred in defense of an administrator’s accounting can be paid from the estate but not fees paid to attorneys in resisting proper charges against the administrator, or one brought to compel him to perform his legal duty when he is at fault. Souter v. Fly, 182 Ark. 791, 33 S.W.2d 408 (1930); Jacoway v. Hall, 67 Ark. 340, 55 S.W. 12 (1900). The circuit court’s award of fees in this regard rests on sound authority.

This brings us to the time Gau-ghan’s counsel spent in defending against Western Surety’s third-party complaint against Gaughan on the bond issued by it to Gaughan and Betts as the original co-administrators of Helen’s estate. Carmo-dy and Savers argue that the time spent on this claim was personal to Gaughan and did not benefit the estate. The value of services rendered to an estate is primarily a factual determination to be made by the probate court, and the appellate court will not reverse its decision where it is not clearly erroneous. Nabers v. Estate of Setser, 310 Ark. 194, 196, 833 S.W.2d 375, 376 (1992); Adams v. West, 293 Ark. 192, 195, 736 S.W.2d 4, 6 (1987). The circuit court found that Gaughan’s defense of the action filed by Western Surety was necessarily taken in defense of his position as co-administrator with Betts and a direct result of the litigation commenced by Car-mody and Savers. We cannot say that this finding is clearly erroneous.

It has long been the rule in Arkansas that an action on the administrator’s bond is not maintainable until the probate court has adjusted the accounts of the administrator and has ordered him to pay over amounts found to be in his hands. Continental Ins. Cos. v. Estate of Rowan, 250 Ark. 724, 466 S.W.2d 942 (1971); Statham v. Brooke, 140 Ark. 187, 215 S.W. 581 (1919); Planters’ Mutual Ins. Ass’n v. Harris, 96 Ark. 222, 131 S.W. 949 (1910). This is because the surety’s liability is derivative and ordinarily does not exceed that of the principal. Estate of Rowan, swpra. Thus, Carmody and Savers’s premature action against Western Surety |inresulted in Western Surety protecting its interest by filing the cross-claim and third-party claim against Betts and Gau-ghan. Moreover, an action on an administrator’s bond is part of the administration of the estate pursuant to Ark.Code Ann. § 28-48-208. As such, Gaughan’s attorney’s fees are authorized by Ark.Code Ann. § 28 — 48—108(d)(1).

Affirmed.

VAUGHT, C.J., HART, ABRAMSON, and BAKER, JJ., agree. ROBBINS, J. concurs in part and dissents in part. HENRY and BROWN, JJ., concur in part and dissent in part.

1 . The other appeals are Carmody v. Raymond James Fin. Servs., Inc., 373 Ark. 79, 281 S.W.3d 721 (2008) (affirming the probate court’s order compelling arbitration of claims against a brokerage firm); Carmody v. Betts, 104 Ark.App. 84, 289 S.W.3d 174 (2008) (affirming the probate court’s interpretation of Joseph’s will). On May 12, 2010, we decided the matter of Estate of Helen Virginia Coan v. Estate of Joseph Coan, Jr., 2010 Ark. App. 411, 2010 WL 1923946, holding that the statute of limitations did not bar Helen’s estate from seeking to recover funds retained by Joseph’s estate.

2 . In his motion for attorney's fees, Gaughan asserted that, by an order dated February 28, 2008, the circuit court approved both of his accountings and relieved him from liability to Helen’s estate arising out of his duties as a co-administrator. This order is not contained in the partial record submitted on appeal.