McLemore v. McLemore
| Docket Number: | 2009-CA-00784-SCT | |
| Supreme Court: | Opinion Link Opinion Date: 03-31-2011 Opinion Author: Randolph, J. Holding: DA-Affirmed; CA-Affirmed in part, reversed and remanded in part. |
|
| Additional Case Information: |
Topic: Wills & estates - Attorney's fees - Section 91-7-299 - M.R.C.P. 60(b)(1) - M.R.C.P. 60(b)(3) - Fraud - Newly discovered evidence - Sanctions - M.R.C.P. 11 - Fiduciary compensation - Transfer of property - Prejudgment interest - Accounting of estate funds - Estate taxes - 26 U.S.C.A. § 2044 - 26 U.S.C.A. § 2207A - Postjudgment interest Judge(s) Concurring: Waller, C.J., Dickinson, P.J., Lamar, Kitchens, Chandler, Pierce and King, JJ. Non Participating Judge(s): Carlson, P.J. Procedural History: Bench Trial Nature of the Case: CIVIL - WILLS, TRUSTS AND ESTATES |
|
| Trial Court: |
Date of Trial Judgment: 10-11-2007 Appealed from: Desoto County Chancery Court Judge: Mitchell M. Lundy, Jr. Disposition: The chancellor considered and approved various petitions for orders to confirm sales contracts and for authority to sell the propety, but not sale had been consummated by the time of the chancellor's post trial orders in October 2007. |
|
| Consolidated: 2007-CA-02043-SCT In Re: Estate of William F. McLemore, Deceased: Gerald D. McLemore v. Dennis M. McLemore, Floyd Shannon McLemore, Jackie McLemore and Estate of Colleen H. McLemore; DeSoto Chancery Court; LC Case #: 02-06-0878ML; Ruling Date: 10/11/2007; Ruling Judge: Mitchell Lundy, Jr. | ||
| Party Name: | Attorney Name: | |||
| Appellant: | In Re: Jackie McLemore, Dennis Marshall McLemore, Individually and as Co-Executors of the Estate of Colleen H. McLemore and Floyd Shannon McLemore |
AUBREY LEE BROWN, JR.
ROSS EMERSON WEBSTER |
||
| Appellee: | Gerald D. McLemore, Executor of the Estate of William F. McLemore, Deceased, Gerald D. McLemore, Trustee of the William F. McLemore Living Trust, William F. McLemore Marital Trust and William F. McLemore Family Trust, and First Security Bank, Trustee of the William F. McLemore Marital Trust | STEVEN W. PITTMAN SUSAN ELIZABETH MACKENZIE EDWARD THOMAS AUTRY |
|
|
Synopsis provided by:  If you are interested in subscribing to the weekly synopses of all Mississippi Supreme Court and Court of Appeals hand downs please contact Tammy Upton in the MLI Press office. |
|
| Topic: | Wills & estates - Attorney's fees - Section 91-7-299 - M.R.C.P. 60(b)(1) - M.R.C.P. 60(b)(3) - Fraud - Newly discovered evidence - Sanctions - M.R.C.P. 11 - Fiduciary compensation - Transfer of property - Prejudgment interest - Accounting of estate funds - Estate taxes - 26 U.S.C.A. § 2044 - 26 U.S.C.A. § 2207A - Postjudgment interest |
| Summary of the Facts: | William McLemore appointed his widow, Colleen McLemore, and eldest son, Gerald McLemore, as coexecutors of his will and cotrustees of his trusts. William amassed a great deal of wealth, primarily represented by real-estate holdings in DeSoto County, Mississippi, and Shelby County, Tennessee. By the time he died, he had been married to Colleen for more than sixty-seven years. They had four sons, Gerald, Billy, Dennis, and Shannon. William and his sons worked together in various real-estate and farming operations. They were involved in many property transactions, including trading properties with each other. William gave and loaned money to his sons on numerous occasions over the years. A longstanding hostility existed among the sons. None of the others liked the eldest, Gerald. The relationship between Gerald and Billy was especially poor. After William died, Colleen continued William’s practice of providing money to their sons, particularly to Dennis and Shannon. After cooperating initially, Gerald and Colleen disagreed over: ownership of various properties; loans/gifts to Dennis and Shannon; and remuneration for rent collection, building maintenance, and contracting with new tenants. At the suggestion of Billy and Dennis, Colleen retained an attorney to seek Gerald’s removal as coexecutor and cotrustee. Their efforts to remove Gerald as executor did not succeed. When family tensions worsened, Colleen excluded Gerald as an heir to her estate and as a beneficiary of a trust she controlled. She named Billy and Dennis as her coexecutors. After trial had begun, Colleen died. Her estate was substituted in her stead. Upon Colleen’s death, Gerald became the sole executor and trustee of William’s estate and trusts. Then his three brothers, a majority of the trust beneficiaries, voted to remove him as trustee. Following trial, Billy died, and Jackie McLemore, as personal representative of his estate, was substituted in his stead. The conflict over the disposition of one parcel, known as the Elvis Ranch and Bank Building, was especially contentious. Colleen and William had contracted to sell the property in 2002 for $7,000,000, but the sale was never completed. Other sales opportunities occurred later; Gerald had a buyer, and his brothers had another buyer. The chancellor considered and approved various petitions for orders to confirm sales contracts and for authority to sell the property, but no sale had been consummated by the time of the chancellor’s post-trial orders. After trial, the chancellor awarded fees of approximately $420,000 to Edward T. Autry, the attorney for Colleen’s estate, based in part on his affidavit that he and Colleen had operated under an oral agreement for attorney fees ranging from $175 to $350 per hour. Later, a written fee agreement (setting the hourly fee at $175), signed by Colleen and Autry, turned up in discovery in another case involving these parties. At that time, Gerald charged that Autry, as well as Billy and Dennis, had committed fraud upon the court by claiming not only that no written agreement had existed, but that Autry and his firm had never used written fee agreements. Autry claimed that Gerald’s attorney, Aubrey L. Brown, Jr., had committed fraud by continuing to operate under an old fee agreement and failing to complete a new agreement after Brown had changed firms. After a trial, the chancellor found that, as a majority of the trust beneficiaries had removed Gerald as trustee, the issue of his removal was moot. However, since the successor trustee had not accepted appointment, Gerald was to continue as trustee. Further, the chancellor granted Shannon’s motion to limit Gerald’s duties as trustee and to restrain him from coming onto or around the Elvis property, or attempting to solicit or negotiate its sale. The chancellor found that Colleen and Dennis had made unauthorized loans of estate funds to Dennis and/or Greenriver Farms in the amount of $383,500. Thus, he ordered a judgment in favor William’s estate of $192,800 (the unpaid balance) against Colleen’s estate and Dennis, jointly and severally. The chancellor found that, at the time of William’s death, Dennis owed William $640,673, and Shannon owed $69,098. Thus, the chancellor ordered judgments in favor of William’s estate against Dennis and Shannon for those amounts. The chancellor denied Gerald’s request for prejudgment interest on these awards. All the attorney-fee requests were approved. Brown was awarded approximately $177,000 as an interim payment for services rendered through June 30, 2007. Shannon’s attorney, Susan MacKenzie, was awarded approximately $41,000 as interim payment for her services and expenses. Pittman was awarded approximately $44,000 as interim payment for his services and expenses. Autry was awarded fees of $420,891.50 for his services provided through September 20, 2007, and expenses in the amount of $7,000.96 for the same period. The chancellor found that Colleen had provided valuable and necessary services to William’s estate during her tenure as coexecutor and cotrustee, and found that Autry had represented Colleen’s interests, as well as those of her estate, as they related to William’s estate. The chancellor based the award on the time records and affidavit presented by Autry. However, the chancellor declined to award fees based on Autry’s estimate of future services. The chancellor approved fiduciary commissions for Colleen’s estate and Gerald for their services as coexecutors and cotrustees. The chancellor denied Colleen’s estate’s motion to direct payment of Colleen’s estate taxes from the marital trust. The chancellor denied Gerald’s motion for prejudgment interest on the loan repayment judgments and granted the motion to transfer the judgments from William’s estate to the marital trust. The chancellor denied Gerald’s motion to require Dennis to account for estate funds and property. The chancellor granted the motion to compel Gerald to transfer the Elvis property from the family trust to its beneficiaries, Billy, Dennis, and Shannon. The chancellor ordered, inter alia, that, if a sale of the property occurred, one-fourth of the proceeds of the sale, plus $250,000, be placed in escrow to provide for Gerald’s share if he were to succeed in challenging Colleen’s will. Gerald filed an appeal, and Billy and Dennis filed a cross-appeal. Billy, Dennis, and Shannon filed contempt motions against Gerald because he had not complied with the chancellor’s orders, including those to transfer the Elvis property out of the family trust and to transfer the judgments from the estate to the marital trust. Gerald responded to these motions and requested M.R.C.P. 11 sanctions against Billy, Dennis, Shannon, and their attorneys. The chancellor granted the contempt motions, but found that Gerald’s actions had not been willful and that he had purged himself of contempt. Gerald’s requests for sanctions were denied. Alleging that newly discovered evidence supported his motion, Gerald moved under Rule 60 to vacate the final judgment awarding fees to Autry and for disgorgement of all amounts paid, as well as for contempt and Rule 11 sanctions. Two days later, Autry filed a similar motion against Brown. The chancellor found that Autry’s actions did not constitute fraud, but that the court should have been advised of the proposed fee agreement, as it was something the court would have considered. The chancellor ordered Autry’s fee award to be based on the proposed agreement ($276,033.75) and that the difference in that amount and the previous award ($420,891.50) was to be disgorged. The chancellor dismissed Autry’s motion, as he found no misrepresentation by Brown. The chancellor denied fees to either side for bringing these motions. After the successor trustee, First Security Bank, accepted the court’s appointment replacing Gerald in December 2007, the process of closing William’s estate, as well as funding and winding up the trusts, accelerated. As the closure of William’s estate approached, all the attorneys except Autry submitted supplemental fee requests, all of which were approved. After the chancellor ordered the estate closed and Gerald discharged of his duties as executor. Billy, Dennis, and Shannon appealed, and Gerald cross-appealed. |
| Summary of Opinion Analysis: | Issue 1: Attorney’s fees It is well-settled that the amount allowable as attorney's fees for services rendered in the administration of an estate rests within the sound discretion of the chancery court. Section 91-7-299 provides that the court may allow an executor’s necessary expenses, including a reasonable attorney's fee, to be assessed out of the estate, in an amount to be determined by the court. As was done here, a testator could expressly provide in his will that his executor should have the power to employ counsel to assist him in the administration of the trust estate; and that a reasonable fee for such services should be a charge against the trust estate. William’s will and trusts made Colleen a coexecutor and cotrustee. The living trust authorized her to hire and compensate an attorney. A chancellor is required to review the reasonableness of requests to charge fees to an estate, considering the McKee factors. Gerald does not challenge the chancellor’s authority to grant fees, but argues that fees are not warranted here, as Autry’s services did not inure to the benefit of William’s estate. Among the services provided by Colleen, as assisted by Autry, were the following: directing her sons’ rent collection, lease negotiation, and property sales; securing the release of claims on the Elvis property; completing estate tax and income-tax returns; and recovering $70,000 that Gerald had claimed as his personal property. Gerald argues that Colleen’s payments to Dennis and Shannon reveal that her neglect and maladministration had led to financial losses for the estate. The chancellor found that Colleen was in error, but did not impute any fault to her, as he found that she had thought she was doing the right thing, while maintaining day-to-day operations and trying unsuccessfully to keep the family together. These payments did not result in a loss to the estate, as judgments were entered requiring their repayment. Gerald also argues that fees should be denied to Autry because of his lack of candor to the court in failing to acknowledge the proposed fee agreement. Gerald cites no cases in which an attorney’s lack of candor has led to a denial of all fees. By failing to cite authority, Gerald’s claim must fail. Gerald argues that the chancellor abused his discretion in awarding fees to the attorneys for the beneficiaries of the estate, as no statutory authority exists to award fees unless the will or trusts otherwise authorize payment, and the will and trusts authorize such payments only to Colleen and Gerald. If attorney's fees are not authorized by the contract or by statute, they are not to be awarded when an award of punitive damages is not proper. Colleen testified that Gerald would not talk to her and was running roughshod over the rest of the family. All three brothers testified that Gerald would not communicate with them. Colleen and all three brothers believed that they required attorney services in order to ensure the proper administration of the estate. Autry, as well as Pittman and MacKenzie, were essentially serving William’s estate. Gerald’s brothers took actions that were required under the circumstances to benefit the estate and move the estate and trusts toward closure. The beneficiaries’ attorneys essentially were acting as attorneys for the estate, and Gerald was held in contempt for failing to carry out his duties. Thus, the chancellor did not abuse his discretion in allowing attorney fees to Pittman and MacKenzie. Issue 2: Rule 60 motion Brown filed a motion to vacate the chancellor’s award of attorney fees to Autry under M.R.C.P. 60(b)(1) and 60(b)(3). The parties debate whether Autry’s misconduct met all nine elements of fraud, including the speaker’s knowledge of the falsity of his statement. However, a finding of fraud is not essential to granting a motion under Rule 60(b)(1), if misrepresentation or other misconduct is shown. The chancellor made no specific finding regarding misrepresentation, but stated that Autry had failed to disclose the agreement, and that such a contract was something he would have wanted to see. The chancellor did not find there was no evidence of an agreement. In fact, he used the agreement as the basis for reducing the fee award. Gerald argues that the written fee agreement constitutes newly discovered evidence, allowing for a reversal of the fee award. Newly discovered evidence must be evidence in existence of which a party was excusably ignorant, discovered after trial. In addition facts implying reasonable diligence must be provided by the movant. The evidence must be material, and not cumulative or impeaching, and it must be such as to require a different result. Here, Gerald showed that the evidence had surfaced after the trial. Colleen’s estate asserts correctly that the chancellor never made a finding that the fee agreement was newly discovered evidence, but the chancellor treated it as such. He stated that Autry should have disclosed the agreement and that he would have considered it if available. Finally, he used the agreement in reaching a different result. The chancellor did not abuse his discretion in granting Gerald’s Rule 60 motion, reducing the fee award, and requiring disgorgement of fees. Issue 3: Sanctions M.R.C.P. 11(a) requires all attorneys representing parties to sign all pleadings and motions. A pleading or motion is frivolous within the meaning of Rule 11 only when, objectively speaking, the pleader or movant has no hope of success. The chancellor stated, “[T]his matter has been hotly litigated, and highly anxious moments. Matters filed on both sides.” All parties filed multiple motions for sanctions, all of which were denied. It is unlikely that the threat of sanctions would have deterred parties with such a penchant for litigation. Under these circumstances, the chancellor did not abuse his discretion. Issue 4: Fiduciary compensation Gerald requested fees for executor services in the amount of $400,000, to be split equally between Colleen’s estate and himself. The chancellor found that Colleen’s and Gerald’s services had benefitted William’s estate, and awarded fees to each coexecutor in the amount of $160,000. Gerald now argues that Colleen’s estate should get no executor fees, claiming that her maladministration caused waste to the estate. In the alternative, he argues that the award should be reduced, as it exceeds the amount requested by Colleen’s estate. Gerald is judicially estopped from alleging error on this issue, as he is taking a position at odds with the one he took at trial. Issue 5: Transfer of property Gerald argues that the terms of the trusts and the statutes of Mississippi and Tennessee granted him plenary power to act as trustee of the family trust. However, by the time the chancellor ordered him to transfer the Elvis property from the marital trust to its beneficiaries, he had been removed as trustee and remained only as acting trustee. Gerald argues further that transferring the property would deplete the family trust of its assets, leaving him unable to pay the fees and expenses to be assessed against the trust; and pending litigation would affect the ultimate disposition of the family trust. In the order directing the transfer of the property, the chancellor adequately protected Gerald’s claim, pending the outcome of the litigation over Colleen’s estate. Issue 6: Prejudgment interest Gerald argues that the trial court abused its discretion in denying prejudgment interest on the judgments for the loans to Dennis and Shannon. An award of prejudgment interest rests in the discretion of the awarding judge. Under Mississippi law, prejudgment interest may be allowed in cases where the amount due is liquidated when the claim is originally made or where the denial of a claim is frivolous or in bad faith. No award of prejudgment interest may rationally be made where the principal amount has not been fixed prior to judgment. Dennis and Shannon claimed, and Gerald admitted, that he had never requested that they begin repayment of the loans, i.e., no claim was originally made. Thus, there was no abuse of discretion. Issue 7: Accounting of estate funds Gerald argues that Dennis (as a coexecutor of the estate of Colleen, who herself was a coexecutor of William’s estate) was required to settle Colleen’s accounts in the administration of William’s estate. Further, according to Gerald, the chancellor was without discretion to excuse Dennis from this duty. Dennis was called to account. The chancellor had available to him the bank records of the new rental account and a summary of all receipts and expenditures. Further, Dennis testified and was cross-examined regarding his actions. There was no abuse of discretion in the denial of Gerald’s motion. Issue 8: Estate taxes Colleen’s estate argues that the chancellor erred legally by granting Gerald’s motion to enforce the provision in William’s living trust expressing his desire for the payment of “[a]ny inheritance, estate, or other death taxes payable by reason of [Colleen]’s death” from Colleen’s assets outside the marital trust. Under the provisions of William’s living trust, his property was to be split into a family trust and a marital trust. The family, or “bypass,” trust was set up to hold the amount that could pass free of estate tax ($1,000,000 in 2002). The marital, or “Q-TIP,” trust was set up to hold the remainder of the estate. It qualified for an unlimited marital deduction on federal estate taxes. Thus, no tax was due at the time of William’s death. However, the Internal Revenue Code, 26 U.S.C.A. § 2044, provides that, if, at the time of the second spouse’s death, the inclusion of the marital trust in her estate makes it exceed the amount that can pass free of estate tax, her estate is required to pay the tax. 26 U.S.C.A. § 2207A allows the second decedent’s estate to recover from the marital trust the amount of estate tax that is payable as a result of the inclusion of the marital trust in her estate. Colleen’s separate assets at the time of her death totaled approximately $1,500,000. The amount that could pass without estate-tax liability was $2,000,000 at that time. By including the approximate $1,900,000 from the marital trust, her estate increased to $3,400,000. She then had an estate-tax liability of approximately $630,000, owing entirely to the inclusion of the marital trust. Under section 2207A of the IRC, her estate would be able to use marital-trust assets to pay the entire amount. 26 U.S.C.A. § 2207A(a)(2) allows for waiver of this right to recover. Gerald argues that the settlor’s intent (William’s) is paramount here and that his desire should trump federal law to the contrary. In the face of federal law to the contrary, William’s desire regarding the apportionment of his wife’s estate’s tax obligations is irrelevant. Colleen is the decedent contemplated in section 2207A(a)(2). She did not waive her right to recovery under section 2207A. Thus, her estate retains this right. The dispute over the precedence of federal and state tax laws is moot, as the statutes are not in conflict. Thus, that portion of the chancellor’s judgment is reversed. Issue 9: Attorney’s fees In December 2007, Colleen’s estate moved to cut off Brown’s fees. The trial court denied the motion, and the estate argues this was error. Gerald counters that, despite his removal as trustee, he remained an executor until the estate was closed. He claims correctly that, in every litigation he commenced, he prevailed and benefitted the estate. Thus, there was no abuse of discretion in awarding fees to Gerald’s attorney after July 2007. Issue 10: Postjudgment interest The chancellor did not order postjudgment interest on any of the awards of attorney fees or executor fees. Colleen’s estate now cites section 75-7-7 and argues that the chancellor erred in denying postjudgment interest, a statutory right. These parties had a right to postjudgment interest, but they sat on those rights. Gerald, Dennis, and Billy did not raise the issue on appeal. No party raised this issue with the trial court. A trial court will not be held in error on appeal for a matter not presented to it for decision. Issue 11: Attorney’s fees on appeal All parties request that attorney fees be awarded for this appeal. The Court may grant a motion for attorney fees where a contract provides for reasonable attorney fees and the trial court granted fees for services in the trial court. Such an award is not appropriate in this case. On remand, the chancellor may first determine which parties, if any, are entitled to fees for this appeal, and then determine the reasonable fee award(s), if any. |
Home | Terms of Use | About the JDP | Feedback | Using JDP | MC Law Library | Mississippi Supreme Court
