Opinion
No. CX-02-1410.
Filed May 6, 2003.
Appeal from the Le Sueur County District Court, File No. P499803.
Robert O. O'Neill, O'Neill, Traxler, Zard, Neisen Morris, Ltd., (for appellant)
William Marek, (for estate of Louis Krenik)
Considered and decided by Minge, Presiding Judge, Kalitowski, Judge, and Hudson, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2002).
UNPUBLISHED OPINION
This is an appeal by special administrator Robert O. O'Neill from the determination by the district court that his fees to the estate should be reduced. Because the record does not contain evidence supporting that determination, we reverse and remand.
FACTS
On September 30, 1999, Louis Krenik died at the age of 97. Due to uncertainty as to its value and the interest of the personal representative in purchasing the farm, its sale was a sensitive task. At the outset, two appraisals were performed: one valued the farmland at $280,000 and the other at $314,000. John Krenik, the personal representative, and his daughter, Patricia Knish, offered $300,000 for the property. Other heirs objected to such a sale due to an inherent conflict of interest and asked that Krenik resign as personal representative or be removed by the court.
In September 2000 the attorney for the estate, William Marek, received an $816,000 offer for the property, which was withdrawn. Later that fall, Marek received an offer of $408,000. Subsequent to the offers and recognizing that several people were interested in the property, it was determined that the farm should be sold using some kind of bidding process.
To resolve the conflicts over the sale of the property, a district court hearing was held on April 12, 2001 for the purpose of appointing a special administrator. Attorney Marek testified that based upon a meeting in chambers, the court would be appointing a special administrator
solely for the purpose of handling the farm sale, including the advertising, conducting the auction of the farm and the bidding procedure, and also closing on the sale of the farm property.
Marek indicated that he had talked with Robert O'Neill, an attorney in New Prague, who had agreed to serve as such a special administrator. Although two other people, including a banker, had been considered, the court and Marek concluded that O'Neill would be a better choice because of the sensitivity of the sale and the fact that he was an attorney. At the time of the appointment, Marek and O'Neill had agreed to a fee of $100 per hour. This was $50 per hour less than what O'Neill normally charged as an attorney. Nothing in the record indicates that this rate of compensation was disclosed to or approved by the court or the heirs. However, Marek warned the heirs that in retaining O'Neill to act as the special administrator, the fees would be a bit more but that the money was well spent just to avoid the problems already encountered in trying to sell the farm. The family had earlier agreed that a realtor would show potential buyers the property and be compensated at a rate of $50 per hour to perform that service.
After the April 12, 2001 hearing, the district court issued an order appointing Robert O'Neill as "special administrator for the marketing and sale of the real property." The court determined that unusual circumstances existed such that appointment of the special administrator was necessary to preserve and enhance the estate. On May 10, 2001, the district court issued an order regarding the sale of the real estate. The proposed ad for the sale of the land was approved. The order stated that
[i]t is further noted that in the court order appointing the special administrator dated April 13, 2001 the special administrator shall have the authority to amend or supplement the terms of this court order * * * [and that] the special administrator shall be paid reasonable fees and expenses from the estate for his services in handling the sale and closing of the farm real estate.
While the basic procedure and advertisement for the sale had been discussed and determined prior to the April 12, 2001 hearing, O'Neill modified the Notice of Sale and Call for Bids to emphasis the land's natural attractions. He also set up the sale, arranged advertising, talked to prospective purchasers, showed them the property, and conducted the sale.
After 14 rounds of bidding, the property was sold for $1 million. At noon the high bid was at $795,000. The high bidder asked for a recess to once again view the land. Before he left, O'Neill reminded him that the farm tenants were waiting for the end of the bidding to determine if they wanted to take advantage of their right of first refusal. After the recess, bidding was reopened and the high bidder increased his bid to $1 million. No further bids were made, the tenants declined to exercise their right to match the bid, and the property was sold for $1 million.
O'Neill assisted in the closing of the sale. Both O'Neill and Marek stated the closing was difficult because the purchaser was an attorney acting as an agent for the actual buyer and was very particular about his demands.
O'Neill submitted his fee statement for his services accompanied by a letter briefly detailing his activities in connection with the sale of the property. O'Neill detailed 174 hours of work; according to O'Neill's understanding with Marek he was to be paid $100 per hour or $17,400. Marek told the court that he believed O'Neill's fees were reasonable
considering the work that was involved, the difficulty of this matter and the results that were obtained. These results were a prompt sale, a great price realized and a successful closing thirty days after the auction sale without delay or litigation.
Four heirs objected to the fees charged by O'Neill, attorney Marek, and personal representative Krenik. The court approved Marek and Krenik's fees. Notwithstanding testimony from O'Neill detailing his efforts and from Marek supporting O'Neill's fees and pointing out that the farm sold for about three times the appraised value, the court reduced O'Neill's fees from $17,400 to $4,000. The court did not state specific reasons for the reduction.
O'Neill moved for a reconsideration and a hearing was held. O'Neill again stated that he believed he had performed as the court had instructed him to preserve and enhance the property and that his actions were instrumental in selling the property for $1 million. Attorney Marek again supported O'Neill's requested fee as reasonable and stated that the "proof is in the pudding." John Krenik, the personal representative, agreed that O'Neill should be paid the fees that he billed.
The court issued its order on June 17, 2002, denying O'Neill's request for a new trial or amended findings and judgment. The memorandum was short and stated that the issue was
the value of the task that was assigned to the Special Administrator, not the task performed.
The Special Administrator was to finalize the sale of the Krenik farmsite. The attorneys for the estate and certain heirs had basically put the sale package together before the Special Administrator even got involved in the proceeding. In addition, persons other than the Special Administrator were called upon during the sale process to deal with survey and title concerns. In reviewing the work file of the Special Administrator, as well as the court file, this Court concludes that the actual work performed exceeded the actual task assigned and was not necessary or reasonably related to the task.
O'Neill now appeals.
DECISION
There are two issues to be determined in this case: (1) What were O'Neill's duties as special administrator for the estate; and (2) did the district court abuse its discretion in determining that O'Neill's fee should be reduced?
A determination of what O'Neill was asked to do as the special administrator of the Krenik estate is a fact question, which this court will review under a clearly erroneous standard. Maxfield v. Maxfield, 452 N.W.2d 219, 221 (Minn. 1990). If the findings of fact are undisputed or sustainable because they are not clearly erroneous, this court will affirm the district court absent an abuse of discretion. Id.
Based upon the record, O'Neill was approached and asked to be the special administrator of the Krenik estate by attorney Marek. Marek explained the family situation to O'Neill and the history of the difficulties surrounding the distribution of the estate. Marek stressed the importance of completing the sale quickly. O'Neill also received a copy of a court order appointing him as the special administrator. The order stated that a special administrator was needed to resolve issues surrounding the marketing and sale of the property, that O'Neill was to be appointed as that special administrator, that while the court would issue a separate order outlining the procedure and timing of the sale, O'Neill would have the authority to carry out all the duties associated with the marketing and sale of the property, "including the authority to amend or supplement the terms which are set forth in the Order," that the circumstances were unusual, and that the appointment of the special administrator was "necessary to preserve and enhance the estate."
O'Neill argues that the court's order clearly details his responsibilities and that marketing is a distinct and separate responsibility. He states that he fulfilled his responsibility to market the property by stressing the beauty of the property when communicating to numerous interested persons by letter, phone, and in person. He further argues that the court gave him broad latitude to use his expertise and experience to preserve and enhance the estate without demanding that this be accomplished within a specific period of time. O'Neill also contends that whether he fulfilled the duties assigned him by the court can be determined by looking at the results. While the highest appraisal for the property prior to O'Neill's appointment was $380,000 and the highest offer prior to O'Neill's appointment was $408,000, the property sold for $1 million.
In contrast, the court held in its order that O'Neill's duties actually were simply to "finalize the sale" of the property and thus "actual work performed exceeded the actual task assigned and was not necessary or reasonably related to the task."
Based on the language in the order appointing O'Neill, Marek's testimony, and the results of the sale, O'Neill reasonably interpreted the intentions of the court to market the property in such a way as to preserve and enhance the estate. We thus hold that the district court erred in determining that the special administrator's duties were narrowly limited to a finalization of the sale of the property.
II.
The next issue to address is whether $17,400 is reasonable compensation for the services O'Neill performed as the special administrator. A special administrator's appointment and duties are similar to those of a personal representative. See Minn. Stat. § 524.3-617 (2002) ("[A] special administrator appointed by order of the court * * * has the power of a general personal representative except as limited in the appointment * * * ."). Neither Minnesota state law nor the order appointing O'Neill as the special administrator address the compensation to be paid to a special administrator. The court's order approving the sale advertisement stated that O'Neill was to be paid "reasonable fees." An application of Minnesota law addressing compensation of a personal representative is appropriate. O'Neill and attorney Marek had an initial understanding that he would be paid $100 per hour. Although attorney Marek did not have authority to bind the estate to that figure, the discussion and O'Neill's resulting expectation are relevant.
A personal representative is entitled to reasonable compensation for his services. Minn. Stat. § 524.3-719(a) (2002). To determine what is reasonable compensation, the court is to consider three factors: (1) the time and labor required; (2) the complexity and novelty of the problems involved; and (3) the extent of the responsibilities assumed and the results obtained. Minn. Stat. § 524.3-719(b) (2002).
While O'Neill and attorney Marek addressed these factors in testimony, affidavits, letters, and a brief to this court, the district court did not specifically address the factors in its order denying the payment of O'Neill's fees. While the court did state that the "actual work performed exceeded the actual task assigned," the court gave no indication as to how it arrived at the $4,000 fee it allowed in its order, stating only "the fees and costs afforded to the Special Personal Representative shall be $4,000." The court gave no indication as to which items on O'Neill's fee statement were excluded from payment.
We review an award of attorney fees by the district court under an abuse of discretion standard. Becker v. Alloy Hardfacing Eng'g Co., 401 N.W.2d 655, 661 (Minn. 1987). Because the district court abused its discretion in rejecting O'Neill's request for $17,400 and setting his compensation at $4,000 and because the district court gave no indication how it determined the fees allowed, we reverse. Based on the record on appeal, it appears O'Neill's duties were to market and sell the property and that the fee of $17,400 is fair and appropriate. We reverse and remand to the district court with instructions to grant a fee of $17,400.