Opinion
No. 76-729
Decided September 22, 1977. Rehearing denied November 3, 1977.
In estate proceeding, successor administrator challenged payment of certain accountant's fees incurred during earlier administration of the estate by executrix, which administration had been admittedly mishandled. From trial court order affirming the payment of the fees, administrator appealed.
Award Affirmed
1. EXECUTORS AND ADMINISTRATORS — Expenses of Administration — Approval or Disapproval — Necessity to Estate — Not Determinative — Issue — Who Retained Benefit — Trial Court Discretion — Circumstances of Case. In approving or disapproving claimed "expenses of administration" of a decedent's estate, a court is not bound to any particular formula based upon necessity to the estate; rather the question to be resolved is who has retained the benefit of the services rendered, and that issue is left to the broad discretion of the trial court within the special circumstances of each case.
Appeal from the Probate Court of the City and County of Denver, Honorable Stewart A. Shafer, Judge.
Norman Dart Johnson, pro se.
West Weaver, P.C., Robert F. Fiori, John W. Weaver, for claimant-appellee.
Norman Dart Johnson, as administrator, and successor to the executrix under the will of decedent, Harold R. McKeen, appeals the trial court's order awarding the payment from estate funds of $5,470 in accountant's fees to claimant, Alexander Grant and Company. He asserts that these expenses were only incurred as a result of mismanagement on the part of the executrix, and that she should therefore personally bear the expense. We affirm the award.
The expense resulting in the disputed claim arose from the preparation by claimants of a final report and an amended final report for the estate of decedent, who died in 1963. Neither claimant nor Johnson disputes the proposition that the executrix, who had been responsible for hiring claimants, had mishandled the estate.
The exact dimensions of this mishandling were disclosed when an initial final report was submitted in 1971. At that time, objections were filed, both by the beneficiaries, and by the testamentary trustee of the McKeen estate. In 1973 the probate court found that numerous disbursements, amounting to more than $100,000, had been improperly made by the executrix, and that they resulted in no benefit to the estate. The probate court, apparently in an attempt to remedy the resulting inequity, ordered, inter alia, that the executrix only be compensated in the amount of $10,000, approximately one-third the amount statutorily permitted. At that time, the probate court approved the payment of accountant's fees which had been incurred by this claimant to and including that date. Although the claim for the fee in question had not been made formally, the record discloses that references were made concerning the final and amended final report as well as to the expenses involved in preparing these reports.
The respondent asserts first that the fees involved in the claim before us were not properly chargeable to the estate in that they were incurred not of necessity, but because of the mishandling of the executrix. Secondly, he asserts that the probate court erred in determining that the fees were properly chargeable and that they had played a role in the earlier reduction of the executrix' compensation. Under the claimant's view, the mere fact that the executrix had contracted for work relative to the estate is sufficient ground from which to conclude that the estate is liable.
I.
Current statutory law in Colorado sides with the claimant, in that it rests upon agency-like principles. The Colorado Probate Code, and specifically § 15-12-714, C.R.S. 1973, provides protection for third parties who, in their dealings, rely on the apparent authority of a personal representative. Although the probate code could have been applied to this case, by virtue of § 15-17-101, C.R.S. 1973, the trial court acted within its discretion in deciding that such an application was not feasible under the circumstances, and in choosing to apply the law in existence prior to the effective date of the code. Section 15-17-101(2)(b), C.R.S. 1973.
In looking to the law as it existed prior to enactment of the probate code in 1974, we are urged by claimants to apply the Colorado Fiduciary Powers Act, C.R.S. 1963, 57-8-1 et seq., adopted in 1967. This act clothes, as does the probate code, the personal representative with statutory authority to bind the estate in favor of third parties. 1967 Perm. Supp., C.R.S. 1963, 57-8-6. However, since this act only applies to those estates which came into existence after January 1, 1968, 1967 Perm. Supp., C.R.S. 1963, 57-8-7, and since the estate in question was opened in 1963, we must turn our attention to other sources of Colorado law.
In the statutory law prior to the above 1967 act we find no express protection for third parties dealing with representatives of these estate. The only applicable sections are those which define expenses of administration as claims of a second class; and give the administrator the power to pay from the estate the expenses of administration. Sections 153-12-2 and 153-10-13, C.R.S. 1963.
II.
Colorado case law, however, offers little ready guidance as to what is a valid "expense of administration." Johnson, relying on case law from other jurisdictions, claims that such expenses must be "necessary" ones in order to be properly chargeable to the estate. He points to the record and its disclosure of ample evidence relative to the executrix' mishandling of the estate, as well as the testimony demonstrating that the estate was not an inherently complex one, as indications of a lack of necessity for the hiring of the accountants in this case. He characterizes this as merely a case of the executrix shirking her statutory responsibility to prepare a final report, § 153-14-1, C.R.S. 1963, for which she in effect attempted to charge the estate twice: once by transmitting the bill for the accountant's service and once by billing the estate for her compensation in performing her statutory duties.
Distilled to its essence, Johnson's argument is that prior to Colorado's adoption of the present probate code and the fiduciary powers act, an executrix was primarily and personally liable for all expenses of administration, but could be indemnified only for those expenses properly incurred which were necessary ones. Claimant on the other hand insists, on the strength of Colorado's recent statutes and on recent common law from other jurisdictions, that the estate should be primarily liable, regardless of any misdeeds by the personal representatives.
In a nationwide sense, claimant appears to be correct in its estimation, see 5 A. Scott, Trusts § 271(a) (1967), but Colorado case law does not directly support it. Indeed, until the state legislature began revamping the law governing fiduciaries in 1967, the most definitive pronouncement on this subject was that laid down in 1908, when the Supreme Court predicated payment to a third party on the propriety of the services rendered to the estate and the reasonableness of the payment. United States Fidelity Guaranty Co. v. People, 44 Colo. 557, 98 P. 828 (1908).
[1] The Fidelity case contains elements of both claimant's and the estate's positions. For it provides that the estate is primarily liable for those reasonable expenses of administration which the court finds to have been incurred for the benefit of the estate. A reading of the sparse Colorado law elaborating this point reveals that in approving or disapproving claim "expenses of administration," a court is not bound to any particular formula based upon necessity to the estate. See, e.g., Bennett v. Poudre Valley National Bank, 129 Colo. 107, 267 P.2d 647 (1954) (attorney's fees sustained because a caveat which was successfully prosecuted brought benefits to the estate as well as to the caveator). Rather the question to be resolved is who has retained the benefit of the services rendered. That issue is left to the broad discretion of the trial court within the special circumstances of each case. Compare Bennett, supra, with Proudfit v. Coons, 137 Colo. 353, 325 P.2d 273 (1958) (caveator's bill for attorney's fees rejected). Absent manifest error, the conclusion of a trial court should not be disturbed on appeal. Broncucia v. McGee, 173 Colo. 22, 475 P.2d 336 (1970).
An examination of the record here demonstrates that the "primary benefit" test was properly applied en route to the trial court's conclusion. The fact that the executrix also derived some benefit from the compilation of the accountants' report does not prevent the court from concluding that the estate was properly chargeable for the fees. See Bennett, supra.
The award is affirmed.
JUDGE ENOCH and JUDGE STERNBERG concur.