Opinion
Nos. 24393-1-III; 25766-5-III.
February 3, 2009.
Appeals from judgments of the Superior Court for Spokane County, No. 01-4-01535-6, Salvatore F. Cozza, J., entered July 6, 2005 and November 17, 2006.
Affirmed in part, reversed in part, and remanded by unpublished opinion per Korsmo, J., concurred in by Schultheis, C.J., and Brown, J.
Appellant Laura Leeds Jensen (Leeds) seeks review of the Spokane County Superior Court order removing her as personal representative of her deceased husband's estate. She also seeks review of orders denying her motion for continuance and denying her motion to disqualify Lukins Annis (Lukins) as counsel for respondents. We affirm the ruling on the disqualification motion, concluding that there was insufficient evidence an actual conflict existed. However, we reverse the removal order and remand to the trial court to follow the statutorily mandated procedures under RCW 11.68.070 for the removal of a personal representative.
BACKGROUND
On November 29, 2001, Stanley G. Jensen died. His surviving spouse, Laura Leeds, was appointed personal representative of his estate with nonintervention powers. Ms. Leeds also was the sole beneficiary under Mr. Jensen's will. A notice to creditors was published in January 2002. Lukins Annis filed two creditor's claims: one on its own behalf for legal services incurred by the decedent in a dissolution action against Ms. Leeds, and the other on behalf of Washington Trust Bank (WTB) for various secured and unsecured notes executed by 3J's Investment Company (3J's) and Mr. Jensen.
Subsequent estate activity was sporadic. In July 2002, WTB filed a written request for the inventory and appraisal. When Ms. Leeds failed to comply within 10 days, WTB sought to remove her as personal representative. This motion was abandoned in January 2003 when she provided an inventory. In November 2003, the court entered findings after a motion to increase Ms. Leeds' exemption from creditor's claims.
In December 2003, Ms. Leeds filed for personal Chapter 7 bankruptcy. Twelve sterling silver chargers were turned over to the bankruptcy trustee; these chargers, valued at $18,000.00, also were listed in the probate estate, subject to surviving spouse's one-half interest.
In May 2004, Ms. Leeds moved for relief from the bankruptcy stay to determine probate assets in the probate court; however, no hearing was held. In April 2005, WTB obtained an order to lift the bankruptcy stay to allow the probate court to determine the nature and extent of the estate, including the decedent's interest in the chargers and in 3J's.
On June 1, 2005, WTB and 3J's filed a motion to remove Ms. Leeds as personal representative pursuant to RCW 11.28.250, contending she was unfit to act as personal representative because she failed to timely complete the probate and she had filed a personal bankruptcy. There was no petition filed. The supporting affidavit did not allege facts relating to alleged deficiencies in the handling of the estate. Instead, it advised the court about the notice given Ms. Leeds concerning the hearing. The trial court did not make a preliminary showing of cause and summon Ms. Leeds to appear. Instead, the matter was noted according to standard motion practice.
Ms. Leeds retained new counsel on June 9, 2005. Six days later she filed a motion to disqualify Lukins Annis as counsel for WTB and 3J's. She also sought continuance of the motion to remove her as personal representative in order to allow new counsel to obtain all of the files. The bankruptcy trustee joined in the motion for continuance and objected to the removal motion. Ms. Leeds' bankruptcy attorney also moved for a continuance and asserted that the removal motion did not establish facts warranting removal.
Hearing on the three motions was held on June 17, 2005. No testimony was taken; the trial court heard arguments and orally ruled. With regard to the motion for disqualification of counsel, the court was unconvinced there was anything more than "a theoretical conflict" and not one "that would prevent Lukins Annis from proceeding in representation." The court weighed the length of time the matter had been pending and the fact that the issue had not been raised earlier. With regard to the motion for continuance, the court only stated that it was time to replace Ms. Leeds with a professional personal representative. The court did not make specific oral findings as to what evidence it based its ruling upon. Written findings on the motion to remove were entered November 17, 2006 after this case was on appeal.
After the oral ruling, Ms. Leeds sought discretionary review. This court ultimately determined the case was appealable as a matter of right.
ANALYSIS
Disqualification Motion. Ms. Leeds contends that Lukins Annis should be disqualified as counsel under the Rules of Professional Conduct (RPC) because they provided legal representation to her and the decedent in both business and personal matters. WTB and 3J's contend Ms. Leeds (1) waived this issue by waiting three years after filing creditor claims to raise this issue, and (2) failed to show an actual conflict requiring disqualification.
Additional Facts Relevant to the Motion for Disqualification. There are conflicting declarations and evidence as to the extent of Lukins Annis' representation. Ms. Leeds declared that prior to the death of Mr. Jensen, Lukins provided legal representation on both personal and business matters and learned extensive confidential personal and financial information. She alleged that a Lukins attorney provided legal advice in connection with the formation and business of Heights Home Center, LLC, while another Lukins attorney actually drafted the limited liability corporation (LLC) paperwork and other documents for that business. Lukins also provided legal counsel and advice for the formation of 3J's, which started as a partnership and was converted to an LLC. Ms. Leeds holds a substantial interest in 3J's. Yet another Lukins attorney was representing Mr. Jensen in the dissolution proceedings with Ms. Leeds when Mr. Jensen died. The creditor's claim by WTB is based on three loans taken out by Mr. Jensen individually after his separation from Ms. Leeds and while he was represented by Lukins. The creditor's claim by 3J's is based on debt incurred by Heights Home Center, LLC.
Counsel for 3J's declared that while Mr. Jensen was represented by Lukins in the dissolution case, Ms. Leeds was represented by Martin Salina. At no time did Ms. Leeds claim there was a conflict of interest in Lukins representing her husband in the dissolution. Lukins agreed it has done work for 3J's; however, the issue in this case is a dispute resolution agreement. The agreement specified that Lukins was acting only as scrivener; both Ms. Leeds and Mr. Jensen had separate counsel for review and advice.
The trial court orally found that while it was appropriate to raise the issue, it was not convinced there was anything more than a theoretical conflict that would not prevent Lukins from proceeding in representation. The court relied upon the fact the case had been pending for quite some time and that this issue was not raised previously.
We review a trial court's decision not to disqualify an attorney for an abuse of discretion. Pub. Util. Dist. No. 1 v. Int'l Ins. Co., 124 Wn. 2d 789, 811-812, 881 P.2d 1020 (1994). Failure to act promptly to file a motion for disqualification may warrant denial of the motion. First Small Business Inv. Co. v. Intercapital Corp., 108 Wn.2d 324, 337, 738 P.2d 263 (1987). As one court stated:
"A motion to disqualify should be made with reasonable promptness after a party discovers the facts which lead to the motion. This court will not allow a litigant to delay filing a motion to disqualify in order to use the motion later as a tool to deprive his opponent of counsel of his choice after substantial preparation of a case has been completed."
Id. (quoting Cent. Milk Producers Coop. v. Sentry Food Stores, Inc., 573 F.2d 988, 992 (8th Cir. 1978)).
The record reflects that Ms. Leeds was not a current client of Lukins Annis. Therefore, RPC 1.9 concerning former clients was applicable. It provides in relevant part as follows:
(a) A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing.
(Emphasis added.) In addition, if an individual in a law firm is precluded by RPC 1.9 from representing a particular client, then all the members of the law firm are likewise prohibited from representing the client under RPC 1.10(a).
Comment 3 to RPC 1.9 declares that "[m]atters are 'substantially related' . . . if they involve the same transaction or legal dispute or if there otherwise is a substantial risk that confidential factual information as would normally have been obtained in the prior representation would materially advance the client's position in the subsequent matter."
In order to disqualify Lukins for a conflict of interest, Ms. Leeds must show that her previous representation by Lukins is substantially related to Lukins' representation of creditors of the estate. RPC 1.9; Sanders v. Woods, 121 Wn. App. 593, 597-598, 89 P.3d 312 (2004).
To determine whether the two representations are substantially related, the court must:
(1) reconstruct the scope of the facts of the former representation, (2) assume the lawyer obtained confidential information from the client about all these facts, and (3) determine whether any former factual matter is sufficiently similar to a current one that the lawyer could use the confidential information to the client's detriment. The decision turns on whether the lawyer was so involved in the former representation that he can be said to have switched sides.
Sanders, 121 Wn. App. at 598 (citation omitted).
In an attempt to reconstruct the scope of facts of the former representation, the record shows that Lukins represented Mr. Jensen in the dissolution matter with Ms. Leeds; Lukins assisted with the formation of 3J's sometime in the past; Lukins advised and drafted the documents for the defunct Heights Home Center, LLC sometime in the past. It is unclear whether any relevant confidential information was obtained and whether any former factual matter is sufficiently similar to this matter. Ms. Leeds does not articulate an actual conflict. There simply is not enough information to establish that the previous representation matters are sufficiently related to the current one.
In light of the fact that Ms. Leeds waited over three years from the filing of the creditor's claims by Lukins to file her motion for disqualification, the fact Mr. Jensen was represented by Lukins during the dissolution without apparent objection, and the fact Ms. Leeds does not articulate an actual conflict warranting disqualification, we do not believe the trial court abused its discretion in denying the motion for disqualification.
Motion to Remove Personal Representative. Ms. Leeds contends that the trial court erred in removing her because the statutory procedure was not properly invoked and the court's eventual findings of fact are not supported by the evidence. We agree that the technical failure to follow the required procedure left the court without an evidentiary basis for removing Ms. Leeds.
Whether a court has jurisdiction is a question of law that we review de novo. Crosby v. Spokane County, 137 Wn.2d 296, 301, 971 P.2d 32 (1999). RAP 2.5(a)(1) provides that a party may raise lack of trial court jurisdiction for the first time on appeal. Superior court jurisdiction over a nonintervention probate is statutorily limited. In re Estate of Bobbitt, 60 Wn. App. 630, 632, 806 P.2d 254 (1991). Once the decedent dies, the personal representative must apply for an order of solvency. The trial court has jurisdiction to grant or deny the order. In re Estate of Jones, 152 Wn.2d 1, 9, 93 P.3d 147 (2004). Once an order of solvency is entered, the court loses jurisdiction. Id. The court regains jurisdiction only if the executor or another person with statutory authority invokes jurisdiction. In re Estate of Coates, 55 Wn.2d 250, 255-256, 347 P.2d 875 (1959) (citing In re Estate of Peabody, 169 Wash. 65, 13 P.2d 431 (1932)). Here, an order of solvency was granted. Ms. Leeds did not invoke the superior court's jurisdiction. Instead, WTB as a creditor of the estate attempted to invoke jurisdiction under RCW 11.68.070.
3J's LLC has been variously described in the pleadings and at oral argument as either "dissolved" or "cancelled," and appellant in a footnote, without supporting argument, questioned the ability of 3J's to participate in the case. A cancelled LLC cannot maintain a legal action. Chadwick Farms Owners Ass'n v. FHC, LLC, 139 Wn. App. 300, 160 P.3d 1061 (2007), review granted, 163 Wn.2d 1021 (2008); Emily Lane Homeowners Ass'n v. Colonial Dev., LLC, 139 Wn. App. 315, 160 P.3d 1073 (2007), review granted, 163 Wn.2d 1022 (2008). The Washington Supreme Court heard argument in Chadwick Farms and Emily Lane on November 18, 2008. Since the record is insufficient to address the issue in this case, we will leave to the trial court the issue of 3J's further participation. The status of 3J's does not affect this action since corespondent WTB brought the same issues in the trial court and has jointly argued them in this appeal.
If the personal representative "has not faithfully discharged said trust or is subject to removal for any reason specified in 11.28.250," RCW 11.68.070 allows the court to intervene and to remove or restrict the powers of a nonintervention personal representative, upon the petition of a creditor or other person with statutory authority. Jones, 152 Wn.2d at 9. RCW 11.28.250 provides:
Whenever the court has reason to believe that any personal representative has wasted, embezzled, or mismanaged, or is about to waste, or embezzle the property of the estate committed to his charge, or has committed, or is about to commit a fraud upon the estate, or is incompetent to act, or is permanently removed from the state, or has wrongfully neglected the estate, or has neglected to perform any acts as such personal representative, or for any other cause or reason which to the court appears necessary, it shall have power and authority, after notice and hearing to revoke such letters.
The trial court must have valid grounds supported in the record in order to justify removal of the personal representative. Jones, 152 Wn.2d at 10 (citing In re Estate of Beard, 60 Wn.2d 127, 132, 372 P.2d 530 (1962); In re Estate of Aaberg, 25 Wn. App. 336, 339, 607 P.2d 1227 (1980)). The process for removing a personal representative is set forth in RCW 11.68.070, which provides:
If any personal representative who has been granted nonintervention powers fails to execute his trust faithfully or is subject to removal for any reason specified in RCW 11.28.250 as now or hereafter amended, upon petition of any unpaid creditor of the estate who has filed a claim or any heir, devisee, legatee, or of any person on behalf of any incompetent heir, devisee, or legatee, such petition being supported by affidavit which makes a prima facie showing of cause for removal or restriction of powers, the court shall cite such personal representative to appear before it, and if, upon hearing of the petition it appears that said personal representative has not faithfully discharged said trust or is subject to removal for any reason specified in RCW 11.28.250 as now or hereafter amended, then, in the discretion of the court the powers of the personal representative may be restricted or the personal representative may be removed and a successor appointed.
(Emphasis added.)
"Where a statute is unambiguous, the court assumes the legislature means what it says and will not engage in statutory construction past the plain meaning of the words." Jones, 152 Wn.2d at 11 (citing Davis v. Dep't of Licensing, 137 Wn.2d 957, 963-964, 977 P.2d 554 (1999)). Jones determined that "RCW 11.68.070 is not ambiguous and plainly incorporates all of the reasons for removal listed in RCW 11.28.250 into the nonintervention statutory scheme." Id. The court acknowledged that purpose of the statutes "is to provide protection to beneficiaries and other interested parties when a personal representative breaches his fiduciary duties." Id.
The statute is clear. The party seeking removal must file a petition. The petition must be supported by affidavit making a prima facie showing of cause for removal. Then, after making that preliminary finding, the court shall cite the personal representative to appear before it. RCW 11.68.070. That process was not followed here. Instead, WTB simply filed a motion with a supporting memorandum. There was no petition. The supporting affidavit did not address the grounds for removal. Similarly, the trial court did not make a prima facie showing of cause and did not cite Ms. Leeds to appear before the court. Respondents failed to follow the statutory procedure for the trial court to regain jurisdiction and hear the matter of removal. Therefore the trial court lacked authority to remove Ms. Leeds as personal representative. See generally, Jones, 152 Wn.2d at 9.
In addition to not conveying authority for the court to intervene, the failure to follow the statutory process meant that there was no evidence before the trial court to consider. The purposes of the petition and affidavit process are to give notice to the personal representative of the allegations to which she must respond and to give the trial court an evidentiary basis for taking action. Allegations in a pleading, unsupported by an affidavit, do not constitute a basis for factual findings. State v. Ford, 137 Wn.2d 472, 483, 973 P.2d 452 (1999). Here, Ms. Jensen did not know what allegations she needed to address, and the trial court lacked a factual basis for making its findings. For all of these reasons, we conclude that the order of removal must be reversed.
We are loathe to contribute to further delay in this case, but the mandates of the statute require reversal here. We understand the trial court's frustration with the failure of the personal representative to move this estate along, and nothing in this opinion should be read to indicate the reasons for removal are insufficient. There simply was no authority for the trial court to act, and no evidence presented for it to do so.
The parties indicated at oral argument that the new personal representative has undertaken little action pending the outcome of this appeal, so reversal should have little substantive effect on the estate.
The order removing the personal representative is reversed and the case is remanded for further proceedings.
A majority of the panel has determined this opinion will not be printed in the Washington Appellate Reports, but it will be filed for public record pursuant to RCW 2.06.040.
SCHULTHEIS, C. J. and BROWN, J., concur.