This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2000).
STATE OF MINNESOTA
IN COURT OF APPEALS
Filed May 29, 2001
Gerald R. Boulton, Qualley Boulton & Vinberg, 137 St. Olaf Avenue North, Canby, MN 56220 (for respondent John E. Qualley)
U N P U B L I S H E D O P I N I O N
SCHUMACHER, ROBERT H., Judge
Appellant Nancy Sitek challenges the district court's denial of her motions in connection with the final account of the Estate of Otto F. Moravetz, a/k/a Otto Moravetz. Sitek contends that (1) the district court erred in declining to disallow the legal fees charged by the estate's representative-attorney; (2) the district court erred in declining to remove the estate's representative-attorney; and (3) the district court erred in determining that the representative-attorney properly refused to cancel a contract for deed on behalf of the estate. We affirm.
Otto F. Moravetz properly executed a will on August 21, 1981, leaving a specific devise of cash to a church and the residue of his estate to the children of his brother and of his sister. In the will, Moravetz nominated respondent John E. Qually as executor, i.e., personal representative. Qually, an attorney at the firm Qually, Boulton & Vinberg, had drafted the will.
Moravetz died in February 1999, leaving Sitek along with three other individuals as the devisees of the residue of his estate. Qually was appointed personal representative of the estate and performed work in the dual role of personal representative and attorney. Sitek objected to the final account on various grounds, including that Qually charged excessive fees and Qually did not "cancel the contract for deed between Otto Moravetz and Thomas Briggs." Sitek also moved that Qually be removed as personal representative.
At the subsequent hearing, Qually explained that he charged the estate $75 per hour for work which would typically be completed by a personal representative, and $125 per hour for work which would typically be completed by an attorney. Qually testified that he felt this arrangement had been fair to the estate.
Further, during the hearing, it was disclosed that Moravetz had entered into a contract for deed with Thomas Briggs, whereby Briggs was to pay the sum of $136,000 in installments in exchange for the deed to a plot of Moravetz's property. The contract required that buyer or seller must notify the other of any assignments of their respective interests in the property. The contract also provided that the purchaser should not permit liens to accrue against the property "which constitute a lien or claim against Seller's interest in the Property." Qually testified that Thomas Briggs later assigned his interest in the land to his mother, Patricia Briggs, and that an attorney in Qually's firm had sent Moravetz a letter of notification concerning the assignment. Subsequently, Thomas Briggs obtained a loan from a bank, purporting to secure the loan with the Moravetz property. Also, Qually testified that an attorney for his own firm was currently representing Briggs in a bankruptcy case, and that Qually had previously done legal work for Briggs's father Ronald concerning a trust.
Qually testified that he had not received a request to cancel the contract for deed and indeed would have refused to do so if he had received such a request, as there were no grounds for cancellation and to do so would be a waste of the estate's money. Qually explained that Briggs no longer held an interest in the property at the time of the mortgage. Also, Qually opined that a buyer's act of mortgaging his own interest in the property at issue would not affect the seller's interest in the property, and thus the terms of the contract for deed were not violated. Finally, Qually noted that the Briggs family was likely to have the means to pay off the contract and that to cancel the contract would constitute a poor use of estate funds. Qually also testified that his firm's handling of Briggs's bankruptcy would have no effect on his continuing representation of the Moravetz estate.
The district court found that the contract for deed between Moravetz and Briggs was dated August 26, 1996 and that Briggs assigned his interest in the contract for deed to Ronald and Patsy Briggs on July 20, 1998. The contract for deed did not require that either party grant permission before a valid assignment could occur. Moravetz was notified of the assignment, as required by the contract for deed, on August 10, 1998.
The district court found that, on March 23, 1999, Thomas Briggs took out a mortgage on the real estate that was the subject of the contract for deed. The district court determined that the validity of this mortgage and the legal ramifications of the bankruptcy of Thomas Briggs did not establish significant loss, risk of loss, or material expense to the estate. Thus, the district court held that the "personal representative acted appropriately in not canceling the contract for deed between the deceased and Thomas Briggs."
As for the issue of a member of Qually's firm representing Briggs, the district court found that the bankruptcy action would not affect the estate and thus no financial loss could occur because of any perceived conflict.
The district court reduced the fees charged for Qually's roles as personal representative and attorney for the estate. The district court reduced the hourly rate for Qually's role as personal representative to $35 per hour and transferred some of Qually's attorney-charged hours to fees for duties as personal representative. The court thereby reduced the personal representative's fee from $8,676 to $4,655 and reduced the legal fees from $16,835 to $14,670.
1. Sitek argues that Qually should not be permitted to act in the dual role of representative-attorney for the estate. In the alternative, Sitek argues that Qually should not be permitted to receive compensation for his legal work on behalf of the estate.
Both parties cite In re Palm's Estate, 210 Minn. 77, 297 N.W. 765 (1941), stating that this case might suggest that the dual representative-attorney role is permissible in some cases. In re Palm's Estate, however, involved a conflict-of-interest situation where a personal representative also acted as attorney for a guardian ad litem. Id. at 79-80, 297 N.W. at 767. In that case, the duties of the guardian ad litem included assuring that the personal representative administered the estate in a timely manner. Id. at 80, 297 N.W. at 767. This issue is distinguishable from that raised by Sitek in this case. Rather, the issue in the present case involves interpretation of relevant Minnesota statutes. Statutory construction is a question of law which a reviewing court examines de novo. Brookfield Trade Ctr., Inc. v. County of Ramsey, 584 N.W.2d 390, 393 (Minn. 1998).
Generally, in administering an estate, a personal representative may "employ persons, including attorneys * * * even if they are associated with the personal representative." Minn. Stat. § 524.3-715(21) (2000). The personal representative controls the selection of her own agents and attorneys hired for the purpose of administering the estate. State ex rel. Seifert, Johnson & Hand v. Smith, 260 Minn. 405, 417, 110 N.W.2d 159, 167 (1961). In addition,
[i]f the lawyer for the estate * * * is the personal representative of the estate * * * the administration shall be supervised. * * * The lawyer should only serve as fiduciary at the unsolicited suggestion of the client and the lawyer must realize that there are legal, ethical and practical problems that must be overcome in order to perform the duties of a fiduciary and lawyer.
Minn. Gen. R. Prac. 414. Because Minn. Gen. R. Prac. 414 specifically contemplates the possibility that a personal representative may also act as attorney for the estate, it follows that there exists no per se rule against the dual representative-attorney role. Obviously, judicial supervision is always available to cure any conflicts that may arise from this dual role.
The corollary issue raised by Sitek is whether a personal representative, having performed legal work for the estate, may receive separate fees for work performed in the capacities of both personal representative and attorney. The relevant statutory scheme does not specifically address this question. Nevertheless, a Minnesota statute mandates that a personal representative is entitled to reasonable compensation for services rendered. Minn. Stat. § 524.3-719(a) (2000). In determining what constitutes reasonable compensation, a court must consider (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) (2000). Furthermore,
the propriety of employment of any person by a personal representative including any attorney * * *, the reasonableness of the compensation of any person so employed, or the reasonableness of the compensation determined by the personal representative for the personal representative services, may be reviewed by the court.
Minn. Stat. § 524.3-721 (2000). Because a personal representative has discretion to hire an attorney for the estate, and because the fees charged by the attorney are reviewable by the district court, we decline to hold that a representative-attorney cannot charge separate fees reflecting those dual capacities. Thus, we hold that the district court did not err in permitting Qually to charge separate fees in the present case. Nevertheless, as demonstrated by the present controversy, we note the inherent pitfalls of the representative-attorney dual role and suggest that this arrangement may not always be advisable.
2. "A person interested in the estate may petition for removal of a personal representative for cause at any time." Minn. Stat. § 524.3-611(a) (2000). Cause for removal exists when, for instance, "removal is in the best interests of the estate." Minn. Stat. § 524.3-611(b) (2000). The decision whether to remove a personal representative lies within the discretion of the district court. See In re Munson's Estate, 238 Minn. 366, 370, 57 N.W.2d 26, 29 (1953) (holding that "it was entirely within [the district court's] discretion" to approve removal of administrator where district court determined administrator had conflict of interest).
Claiming that Qually should have been removed from his position as personal representative, Sitek relies primarily on the proposition that the representative-attorney dual role creates an inherent conflict of interest, requiring removal. As noted above, however, such a judicially-supervised dual role is permissible. It follows that a personal representative cannot be removed merely for assuming such a dual role, absent some showing that an actual conflict of interest arises therefrom. Instead, Sitek relies on her own assertion that the heirs of Moravetz "distrusted" Qually. Yet Sitek cites no legal authority for the proposition that such "distrust" rises to the level of a conflict of interest. Accordingly, we hold that the district court did not abuse its discretion in declining to remove Qually as personal representative.
3. Sitek argues that the district court erred in determining that Qually correctly refused to cancel a contract for deed between Moravetz and Briggs. The district court's findings of fact will not be set aside unless clearly erroneous. Minn. R. Civ. P. 52.01.
Here, the district court found that Briggs attempted to place a mortgage on the Moravetz land after having assigned his own interest in that land to another. This finding is supported by the evidence adduced at the hearing.
"A valid assignment generally operates to vest in the assignee the same right, title, or interest that the assignor had in the thing assigned." State ex rel. Southwell v. Chamberland, 361 N.W.2d 814, 818 (Minn. 1985). It follows that the assignment extinguishes the assignor's rights in the thing assigned. See id. Thus, when Thomas Briggs assigned his vendee's interest in the contract for deed, he lost all rights in the Moravetz land. As Qually points out, based on the district court's findings, Thomas Briggs could not have given a valid mortgage to land for which he no longer held an interest. See In re Bennett, 115 Minn. 342, 350, 132 N.W. 309, 312 (1911) ("[S]ome estate or interest capable of being mortgaged, held by the mortgagor, is essential to the existence of a mortgage.").
Given the district court's findings, the district court properly determined that there had not been a breach of the contract for deed. Thus, the district court did not err in declining to instruct Qually to cancel the contract for deed.