Opinion
No. 2-148 / 01-0884
Filed March 26, 2003
Appeal from the Iowa District Court for Woodbury County, Robert Clem, Judge.
The beneficiaries and one executor appeal, and the attorney for the co-executors cross-appeals, from the district court's ruling awarding attorney fees to the attorney for the co-executors. AFFIRMED.
Kimberly Wolff and Richard Moeller, of Berenstein, Moore, Berenstein, Heffernan Moeller, Sioux City, for appellants.
Anthony Stoik of Klass, Stoik, Mugan, Villone, Phillips, Orzechowski, Clausen Lapierre, Sioux City, for appellee.
Heard by Vogel, P.J., and Miller and Vaitheswaran, JJ.
The beneficiaries and one executor of the Estate of Frederick Stark (collectively "beneficiaries") appeal from the district court's ruling awarding attorney fees to the attorney for the co-executors, and the attorney for the co-executors cross-appeals. The beneficiaries contend there is insufficient evidence to support the amount of attorney fees the district court awarded counsel. The attorney for the co-executors argues that the court should have ordered that the fee be paid at once. We affirm.
I. BACKGROUND FACTS.
Dr. Frederick Stark died testate on August 9, 2000. He had four children, Richard Stark, Barbara Rickord, Carolyn Stark, and David Stark. His children were the beneficiaries of his estate. Richard and Wells Fargo Bank were co-executors. The co-executors designated George Madsen of Mayne, Marks, Madsen Hirschback, L.L.P., as their counsel.
Frederick's estate was sizeable. His assets consisted of stock, brokerage accounts, cash, one parcel of real estate in Iowa, one parcel of real estate in Colorado, a car, and his personal furnishings and effects. His Iowa gross estate totaled $6,207,421.96. In addition, the Colorado real estate had an estimated value of $188,000.
On August 16, 2000, the issue of Madsen's fees came up at a meeting between Madsen, Richard, and Barbara. In response to a question about fees, Richard testified that Madsen stated, "You guys are so lucky your dad died in Iowa because Iowa law limits executors and attorney fees to two percent of the gross Iowa estate." In a letter dated August 22, 2000, Madsen stated, "Our fees will be paid as authorized by the Court Rule authorizing payment and entry of a Court Order."
Madsen performed various services for the estate, including preparing the standard letters and opening documents, retaining a Colorado attorney to probate the Colorado real estate, preparing the probate inventory, consents, and powers of attorney. He filed the Report and Inventory with the clerk of court.
In November 2000, Richard once again brought up the issue of Madsen's fees. Richard testified that Madsen stated, "I don't want to talk about fees in Fred Stark's estate. I will simply take what the bank takes." Richard then called Wells Fargo and learned that Madsen and the bank had been discussing fees of 1.5% each. Madsen thereafter stated he would accept the amount of fees requested by Wells Fargo, which was 1.25% of the Iowa assets, plus $120. A dispute over fees developed, and Richard ultimately discharged Madsen as attorney by letter received by Madsen on February 20, 2001. Madsen had not completed assisting with administration of the estate at that time.
Wells Fargo had previously filed an application for executor and attorney fees, and the court set the matter for hearing. After Madsen's discharge, Wells Fargo moved to withdraw its application. A hearing on the issue of Madsen's attorney fees ensued. Madsen requested a fee equal to 1.25% of the Iowa gross estate, or $77,592.77. The evidence shows the co-executors had agreed to request fees in the total amount of two percent of the Iowa gross estate.
After the hearing, the district court awarded Madsen $50,000 in attorney fees. The court noted that no complaints were made about the quality or sufficiency of Madsen's legal work. It stated that Madsen testified he had performed eighty percent of the work required to administer the estate, but it found this estimate a little high. The court awarded attorney fees to Madsen in the amount of $50,000, to be payable in accordance with Iowa Court Rule 7. The beneficiaries appeal, and Madsen cross-appeals.
II. SCOPE AND STANDARD OF REVIEW.
The beneficiaries and Madsen dispute the scope of review. The beneficiaries contend our review is de novo; Madsen argues we should treat the matter as if it were for an abuse of discretion rather than a true de novo review. Probate proceedings concerning the costs of estate administration are equitable in nature. Iowa Code § 633.33 (2001) ; In re Estate of Petersen, 570 N.W.2d 463, 465 (Iowa Ct.App. 1997). The costs of administration include attorney fees. Iowa Code § 633.3(8). Thus, our review is de novo. In re Estate of Wulf, 526 N.W.2d 154, 156 (Iowa 1994). However, the allowance of attorney's fees in estate actions is left to the considerable discretion of the trial court, subject to appellate review. Petersen, 570 N.W.2d at 465. The burden is on the applicant to establish the services were reasonably necessary and the charges are reasonable in amount. In re Estate of Brady, 308 N.W.2d 68, 73-74 (Iowa 1981).
III. REASONABLE ATTORNEY FEES.
The beneficiaries contend that there is insufficient evidence to support the amount of attorney fees the district court awarded to Madsen. They contend the award of $50,000 for 28.45 recorded hours of work, which represents more than $1,757 per hour, is an abuse of the district court's discretion. In support of their contention, they point to the services Madsen performed, the work remaining at the time of his discharge, and the minimal extent of his exposure to liability, in support of their contention.
Section 633.197 allows for the compensation of personal representatives, with a maximum fee of two percent of the gross assets of the estate plus $120. Section 633.198 provides as follows:
There shall also be allowed and taxed as part of the costs of administration of estates as an attorney's fee for the personal representative's attorney, such reasonable fee as may be determined by the court, for services rendered, but not in excess of the schedule of fees herein provided for personal representatives.
Personal representatives and their attorneys are entitled to the reasonable value of their ordinary services not exceeding the percentages specified in those statutes. In re Estate of Simon, 288 N.W.2d 549, 550 (Iowa 1980).
In determining the reasonable amount for a legal fee, the probate court may consider the size of the estate. Id.at 552. This is because the size of an attorney's exposure to liability depends on the size of the matter he is handling. Id. Relevant factors in fixing a fee include the following: the time necessarily spent by the attorney, the nature and extent of the service, the amount involved, the difficulty of handling and the importance of the issues, responsibility assumed, results obtained, experience of the attorney, competence and efficiency exercised in the estate, and the fee customarily charged for similar services. Id.; In re Estate of Randeris, 523 N.W.2d 600, 607 (Iowa Ct.App. 1994). We will next turn to consideration of each of these factors as they relate to the case before us.
A. Size of estate. Frederick's estate was quite large, with over six million dollars in Iowa assets. Thus, Madsen was exposed to a large amount of liability in administering his estate.
B. Time necessarily spent by attorney. Madsen recorded 28.45 hours in administering this estate. Madsen testified that he expended additional time on the estate, and the district court stated that it found "that time listing to be extremely conservative." Thus, it is likely Madsen spent more than the recorded time in administration of this estate.
C. Nature and extent of the service. This was a sizeable estate with two co-executors, including one who lived out-of-state. There was Colorado real estate involved, which required an ancillary probate proceeding. Madsen prepared consents for the beneficiaries to permit the Colorado real estate to be distributed to one of the beneficiaries. Madsen prepared powers of attorney from three beneficiaries, to allow the fourth beneficiary to handle the Iowa real estate. Madsen also had to procure consents to retain some investments and to sell some of the assets.
D. Competence and efficiency exercised by Madsen. There is no dispute that Madsen was competent and efficient in the tasks he undertook to assist in administering this estate.
E. Experience of the attorney. Madsen has practiced law for over forty years. He testified that twenty to thirty percent of his practice is devoted to trust and estates, probate, and taxation work. His regular billing rate is $150 per hour. He has recently attended continuing legal education programs in the area of probate estate taxation sponsored by Northwestern Mutual Life Insurance Company. He testified that he has been involved with real estate and trust matters throughout his career.
F. Fee customarily charged for similar services. At the hearing, Madsen introduced evidence of attorney fee awards in other estates. The estates had total gross assets ranging from $500,000 to less than $4 million. The fees awarded ranged from $8,000 to $78,000. The average fee as a percentage of the gross estate was 1.88 percent. However, this evidence is not particularly strong in support of Madsen's fee of $50,000. He admitted the information on the exhibits does not disclose on what basis the fees were calculated. Nor does it provide the time the attorneys worked on administering the estates. The exhibits also do not indicate whether there were issues rendering the administration of the estates more difficult.
G. Results obtained. The beneficiaries do not criticize the results obtained.
In considering the relevant factors, we point out that different factors favor each side's position. Giving proper deference to the trial court, while noting that the attorney fees awarded by the trial court are on the higher end of the spectrum of reasonableness in this case, we affirm the award of $50,000 in attorney fees payable to Madsen.
IV. CROSS-APPEAL.
On cross-appeal, Madsen contends that the district court should have ordered that the $50,000 attorney fee be paid at once. He argues that because he has been dismissed by the executors, he should not be required to wait for payment of his fee in accordance with Iowa Court Rule 7.2(4). He notes that his firm has been discharged by the executors, it has fully performed the services it is going to perform, and there is no risk that it will be compensated in advance for services it might fail to perform.
Rule 7.2(4) provides as follows:
One half of the fees for ordinary services may be paid when the federal estate tax return, if required, and Iowa inheritance tax return, if required, are prepared. When an inheritance tax return is not required, an inheritance tax clearance must be filed. When a federal estate tax return is not required, the one-half fee may be paid when the Iowa inheritance tax return is prepared or, when it is not required, when the inheritance tax clearance is filed. The remainder of the fees may be paid when the final report is filed and the costs have been paid. The schedule for paying fees may be different when so provided by order of the court for good cause.
Neither party raised the issue presented on cross-appeal before the district court. That court entered its order, requiring the fees to be paid pursuant to rule 7.2(4). As required under the rule, good cause must be shown to differ the schedule for paying the fees. Madsen did not show good cause before the district court as to why the payment of fees should not comply with rule 7.2(4). We affirm the trial court's ruling requiring the fees to be paid in accordance with rule 7.
V. CONCLUSION.
We affirm the trial court's award to Madsen of $50,000 in attorney fees, to be paid in accordance with rule 7.2(4).