Opinion
No. 22188-1-III
Filed: November 16, 2004 UNPUBLISHED OPINION
Appeal from Superior Court of Spokane County. Docket No: 99-4-00869-5. Judgment or order under review. Date filed: 05/23/2003. Judge signing: Hon. Jerome J. Leveque.
Counsel for Appellant(s), Richard Charles Dullanty, Attorney at Law, 1925 E Thurston Ave, Spokane, WA 99203-4249.
Counsel for Respondent(s), Bruce William Hondle, Attorney at Law, PO Box 18400, Spokane, WA 99228-0400.
In response to a petition filed by the heirs of Daniel Morin, the trial court removed William Morin as personal representative of the nonintervention estate. After further hearings, the court determined the total amount of attorney fees owed by the estate to the attorney retained by Mr. Morin. The court also ordered the attorney to disgorge the attorney fees paid to the attorney in excess of the amount approved by the court. When the attorney failed to comply with the order of disgorgement, the court entered a personal judgment against the attorney. The attorney appeals, challenging the jurisdiction of the trial court. We conclude the court had subject matter jurisdiction over the question of attorney fees. But we further conclude the court did not have personal jurisdiction over the attorney. Consequently, the order of the trial court determining the amount of fees is affirmed, and the order of disgorgement and the judgment are vacated.
FACTS
After Daniel Morin died in June 1999, an Order Admitting Will to Probate, Adjudicating Solvency of the Estate, and Directing Administration Without Court Intervention was entered confirming the appointment of William S. Morin (hereinafter `Mr. Morin') as personal representative of the estate pursuant to the terms of the nonintervention will.
The sole heirs of the estate are Daniel's three daughters who reside in California, Hawaii, and Nevada. In late July, Danielle Pilon, one of the heirs, wrote a letter to Mr. Morin's attorney, Richard E. Dullanty, requesting information concerning the assets of the estate. Ultimately, the heirs retained counsel. In September 2000, counsel for the heirs wrote a letter to Mr. Dullanty, inquiring about an estate accounting and requesting an itemization of attorney fees of $14,650.74 charged by Mr. Dullanty. These requests, including the request for information concerning the attorney fees, were made again in a letter dated October 17, 2000. When Mr. Dullanty failed to provide an adequate response to these inquiries, the heirs filed a Petition for Removal and Substitution of Personal Representative (hereinafter the `Petition'), naming William S. Morin, personal representative, as a party. The Petition was served on William S. Morin as personal representative of the estate.
The Petition lists several reasons for the removal of Mr. Morin as the personal representative of the estate. Primarily, the heirs alleged that Mr. Morin had breached his fiduciary duty. As part of this claim, the heirs made assertions concerning Mr. Morin's failure to provide information concerning Mr. Dullanty's attorney fees. Paragraph 6.8 of the Petition addresses the issue of attorney fees and reads as follows:
[William S. Morin] has provided [the heirs] with an Estate Accounting (see Exhibit `K') that shows that the personal representative paid Dullanty Law Offices the amount of $14,650.74 on February 14, 2000, and the personal representative refuses to provide an accounting of the time expended and expenses incurred by Dullanty Law Offices.
Clerk's Papers (CP) at 31. Although the Petition does not expressly ask for an accounting, all of the parties proceeded under the assumption that an accounting had been requested.
A hearing was held on the Petition in April 2001. The morning of the hearing, Mr. Dullanty filed a Response to Petition for Removal and Substitution of Personal Representative. Attached to this response was an estate accounting showing that Mr. Dullanty had been paid $14,650.74 on February 14, 2000, and $20,840.23 for attorney fees over the period from August 2000 through April 2001. At the hearing, Mr. Dullanty informed the court that his itemized attorney bill was not typed up in time for him bring it to the hearing. When counsel for the heirs objected, the court indicated that Mr. Dullanty was asking only for an opportunity to get the information typed.
After arguments, the court ruled that Mr. Morin should be removed and Danielle Pilon should be substituted as personal representative. The court's handwritten order states its decision with respect to the removal and substitution of the personal representative, but the order does not reference or grant Mr. Dullanty's request for additional time to itemize his attorney fees bill.
After the hearing, Mr. Dullanty did not provide the heirs with the promised itemized bill. Consequently, the estate filed a motion in September requesting an order requiring Mr. Dullanty to provide the personal representative with a detailed itemization of all attorney fees and costs related to the probate proceeding. The motion also asked that Mr. Dullanty return the attorney fees paid by the estate if he failed to provide substantiation for the amounts paid to him.
At the hearing on this motion on October 11, Mr. Dullanty once again informed the court that he had been unable to prepare the itemized bill in time for the hearing. In its order, the court granted Mr. Dullanty until October 31 to document his attorney fees bill. Otherwise, the court indicated that an order of disgorgement would be entered. On October 31, Mr. Dullanty provided the estate with an itemized bill dated February 9, 2000, and addressed to Mr. Morin. The statement itemized Mr. Dullanty's attorney fees and costs in the amount of $14,650.74.
Because the estate received no statement itemizing the attorney fees in the amount of $20,863, the estate renewed its motion to disgorge Mr. Dullanty's fees and requested its fees. The court entered an order stating that Mr. Dullanty `shall be disgorged of his attorney fees and costs in the amount of $20,800.00 for failure to provide substantiation of same to the personal representative of this Estate by the end of business on October 31, 2001.' CP at 288.
In January 2002, the court held an evidentiary hearing to determine the reasonableness of the $14,650.74 attorney fees and costs paid to the Dullanty Law Offices. The day prior to the hearing, Mr. Dullanty served the estate's attorney with an affidavit and billing statements. Mr. Dullanty also filed a Motion for Approval of Administrative Expenses to approve fees paid to him in the amount of $35,200. However, Mr. Dullanty testified during his direct testimony that: `Well, the prior order was to disgorge the money, but I have since got my billing in for the entire amount, and that's before the court at this time.' CP at 451. According to the courtroom minutes, the court determined that the $14,650.74 amount of attorney fees was reasonable, but reserved the ruling on the motion to disgorge the $20,800 in fees. The court set a February 15 hearing to consider the presentment of an order reducing the order to disgorge $20,800 fees to judgment. The court also granted leave for Mr. Dullanty to file a motion for reconsideration of the order of disgorgement concerning the $20,800 in attorney fees.
Mr. Dullanty filed a motion for reconsideration. After the February hearing, the court denied Mr. Dullanty's motion for reconsideration because the motion was not filed and served within the time required under CR 59(b). But the court also entered an order approving Mr. Dullanty's request for the $14,650.74 in attorney fees. This order reads in part as follows:
It is hereby ORDERED AND ADJUDGED that said expenses in the following amounts are approved in the following amounts as paid.
1. WILLIAM S. MORIN, Executor $5,089.00 2. RICHARD E. DULLANTY, Attorney Fees plus Costs Advanced $14,650.74 3. CREDITORS CLAIM by S.G. MORIN SONS, INC. for Medical Services Corporation medical premiums in the amount of: $2,226.00 4. RICHARD E. DULLANTY, additional attorney fees and cost advanced from February 10, 2000 to April 23, 2001 [a blank line is crossed out]
CP at 316-17.
Hence, after an evidentiary hearing, the court considered, and rejected, Mr. Dullanty's request for the additional $20,800 in fees. At this same hearing, the court also entered a judgment against Mr. Dullanty for $20,800 in attorney fees plus recoverable costs in the amount of $2,765.
Several weeks later, Mr. Dullanty filed a Motion for Approval of Attorney's Fees requesting approval of $20,800 in attorney fees. In his motion, Mr. Dullanty took the position that the amount of $14,650.74 in fees was before the court at the January 28 hearing, but that the additional amount of $20,800 in fees was presently before the court. The courtroom minutes from the hearing on Mr. Dullanty's motion for approval of these same fees indicate that the court denied this motion, finding that the issue as to the reasonableness of the $20,800 in fees did not have to be addressed because the matter was moot.
The estate then filed an Order Directing Judgment Debtor to Appear for Supplemental Proceeding, which was personally served on Mr. Dullanty. An order was entered directing Mr. Dullanty to provide the estate with 1999 and 2000 tax returns, a current financial statement, and a balance sheet. A writ of garnishment was issued against Mr. Dullanty pursuant to the judgment.
In January 2003, Mr. Dullanty filed a motion to vacate the judgment that was entered against him in February 2002. The trial court upheld the entry of the judgment. In its findings of fact, the court found that its rulings concerning the issue of attorney fees were part of the court's continuing investigation, commenced when the beneficiaries filed their petition. Mr. Dullanty appeals.
ANALYSIS
Standard of Review. To resolve the issues raised by this appeal, we must address two questions. First, did the court have subject matter jurisdiction over the question of attorney fees and, second, did the court have personal jurisdiction over Mr. Dullanty? This court conducts a de novo review of questions of law. Bishop v. Miche, 137 Wn.2d 518, 523, 973 P.2d 465 (1999).
Did the court have subject matter jurisdiction over the issue of attorney fees?
The original Petition in this case was filed under the Trust and Estate Dispute Resolution Act (TEDRA). See RCW 11.96A.010-.902. TEDRA became effective on January 1, 2000. RCW 11.96A.902. TEDRA mandates using nonjudicial resolution in trust and estate cases but permits judicial resolution if other methods are unsuccessful. RCW 11.96A.010. Significantly, the purpose of TEDRA is to consolidate the applicable provisions governing the resolution of disputes and other matters involving trusts and estates in a single chapter. RCW 11.96A.010. When adopting TEDRA, the legislature repealed chapter 11.96 RCW. See Laws of 1999, ch. 42, sec. 637 (effective January 1, 2000).
In nonintervention estates, the court's authority in the question of fees under
RCW 11.48.210 arises only when the personal representative has petitioned for the court's approval or when the court acquires jurisdiction over the matter. In re Estate of Ardell, 96 Wn. App. 708, 719, 980 P.2d 771 (1999). Under RCW 11.68.065, estate beneficiaries have the right to demand interim reports one year after estate administration. Moreover, RCW 11.96A.100(10) provides that the court may enter any order it deems appropriate if the initial hearing does not resolve all of the issues of law and fact.
Did the Petition Request an Accounting? Mr. Dullanty first argues that, while the trial court had the authority to grant an interim accounting, this relief was not requested as part of the Petition because the Petition sought removal and substitution — not an accounting. Additionally, he argues the court's order did not expressly reserve the issue for review at a later time. Our reading of the Petition leads us to the conclusion that the court acquired subject matter jurisdiction over the question of attorney fees. The heirs filed a petition alleging that Mr. Morin had breached his fiduciary duty and included assertions that Mr. Morin refused to provide an accounting of the expenses incurred by Dullanty Law Offices. In Mr. Morin's response to the Petition, he attached an accounting showing the amounts paid to Mr. Dullanty. In short, this record reveals that all of the parties proceeded on the assumption that the issue of attorney fees was raised in the Petition and an accounting was demanded.
Did the Trial Court Retain Subject Matter Jurisdiction? Mr. Dullanty argues that the court lost jurisdiction over the issue of attorney fees when the new personal representative was appointed. We disagree. Under RCW 11.68.065, estate beneficiaries have the right to demand interim reports. Moreover, RCW 11.96A.100(10) provides that the court may enter any order it deems appropriate if the initial hearing does not resolve all of the issues of law and fact. Here, the heirs petitioned the court for information concerning the amount of fees paid to Mr. Dullanty and the court issued an oral ruling requiring Mr. Morin to provide additional information. Hence, even though the order entered after the initial hearing did not expressly reserve the issue of attorney fees, the court had continuing jurisdiction over the issue of attorney fees based on its oral ruling.
To support his argument, Mr. Dullanty relies on In re Estates of Aaberg, 25 Wn. App. 336, 607 P.2d 1227 (1980). In Aaberg, Division Two of this court held that
RCW 11.68.070 granted the court jurisdiction in nonintervention cases to either restrict the executor's nonintervention powers, or completely remove the original executor and appoint a successor. Id. at 343. The Aaberg court reasoned that the superior court lost jurisdiction when the successor was appointed and that the court could not subsequently consider the approval of the original executor's fees or attorney fees. Id. But the holding in Aaberg is limited to its facts and the applicable statutes. In Aaberg, one of the legatees petitioned to remove the executor or restrict his powers based on allegations that the executor failed to include an automobile in the inventory, and failed to explain whether the appraisal of household goods was made before or after items were removed by other legatees. Id. at 338-39. After the trial court approved the executor's removal, but before a successor was appointed, the court ordered the original executor's attorney to refund the majority of his fee. Id. at 339. The Aaberg court determined that the court lost its jurisdiction when appointing a new executor and that the court had no jurisdiction to consider a `later challenge to fees charged or claimed by the executor.' Id. at 343.
Mr. Dullanty contends that a footnote in Aaberg implies that the courts lack authority to consider the issue of attorney fees in any case where a petition is filed to remove a personal representative or restrict the executor's powers because the remedy is limited to one of these two alternatives. Mr. Dullanty points out that the court in Aaberg concludes that it was not significant that the court adjusted the attorney fees before appointing the successor. Mr. Dullanty relies on the court's statement that:
Once the court's jurisdictional basis is established its authority is limited to removal of the executor and appointment of a successor, or restriction of the executor's nonintervention powers and prospective supervision of the estate's administration.
Id. at 344 n. 5.
But it is unclear whether the court was making this decision based on the fact that the petition in Aaberg did not challenge the attorney fees or request additional information from the executor. Additionally, Aaberg was decided before
RCW 11.68.065 was adopted, which, with later amendments, established a mechanism for beneficiaries to seek an interim accounting from a personal representative in a nonintervention estate. See In re Estate of Jones, 116 Wn. App. 353, 366-67, 67 P.3d 1113 (2003), rev'd on other grounds, 152 Wn.2d 1, 93 P.3d 147 (2004).
In a subsequent Division Three case, In re Estate of Ardell, 96 Wn. App. 708, 719, 980 P.2d 771 (1999), this court held that:
With nonintervention estates, however, the court's involvement in the question of the reasonableness of fees under RCW 11.48.210 arises only when the personal representative has petitioned for the court's approval or when the court acquires jurisdiction over the matter, such as under RCW 11.68.070.
The court in Ardell distinguished Aaberg on the basis that the court there had not gained jurisdiction over the issue of attorney fees. The Ardell court further reasoned that once the court gains jurisdiction over the issue of attorney fees, the application of RCW 11.48.210 is appropriate to set compensation. Ardell, 96 Wn. App. at 719 n. 1.
The reasoning in Ardell is supported by the recent decision in In re Estate of Jones, 152 Wn.2d 1, 93 P.3d 147 (2004). In Jones, the beneficiaries had petitioned the court to remove the personal representative based on several breaches of fiduciary duty, including the personal representative's failure to provide information and documents before the estate closure. A commissioner ordered the personal representative to provide the information, but the trial court later revised and reversed the order. Ultimately, the trial court found that the personal representative had breached his fiduciary duty by failing to provide the information. Jones, 152 Wn.2d at 17.
This court reversed, concluding that the trial court did not have subject matter jurisdiction to intervene because the alleged misconduct was insufficient to disqualify the personal representative under either RCW 11.68.070 or RCW 11.28.250. Jones, 152 Wn.2d at 7-8 (citing Jones, 116 Wn. App. at 358). Significantly, in Jones, this court also concluded that the probate statutes in effect at the time of Marcella Jones's death did not require the personal representative to provide interim accountings to beneficiaries and that the personal representative's failure to provide information could not be used as grounds to empower the court to intervene in the estate. Jones, 116 Wn. App. at 366-67. The Supreme Court ultimately affirmed the trial court's removal of the original personal representative for breach of his fiduciary duty to the beneficiaries based on allegations unrelated to the claim that the personal representative failed to provide information. Jones, 152 Wn.2d at 18.
In reaching its decision, the appellate court examined the timing of amendments to RCW 11.68.065, concluding that the 1997 amendments permitting the beneficiaries to demand an interim accounting did not take effect until after Ms. Jones's death in 1995. Jones, 116 Wn. App. at 366-67. But the Supreme Court disagreed, concluding that a court could require interim reporting as part of the personal representative's fiduciary duty where `it is equitable to do so in light of the representative's suspicious activities suggesting self-dealing and unfaithfulness to the estate.' Jones, 152 Wn.2d at 18. Accordingly, the court reasoned that, while the trial court could require an accounting, the personal representative's failure to provide the information could not constitute a breach of fiduciary duty because the trial court had not required the accounting during probate. Nevertheless, the court concluded that this decision did not affect the validity of the trial court's later order to provide an accounting. Id. Of equal importance, the Supreme Court, citing RCW 11.68.065, RCW 11.96A.080, and RCW 11.96A.030, stated that subsequent amendments `afford beneficiaries the same protection as former RCW 11.96.070 and allow a beneficiary to petition the court for an accounting under a nonintervention will.' Jones, 152 Wn.2d at 17 n. 11. Significantly, even though the Supreme Court concluded that the personal representative could be required to supply an interim report prior to the 1997 amendments, Daniel Morin died in 1999, well after the 1997 amendments took effect.
Based on the Supreme Court's broad reading of the court's power to require interim reporting as part of the personal representative's fiduciary duty, the trial court here had continuing jurisdiction over the issue of attorney fees, and had the authority to order Mr. Morin to provide an itemized statement of Mr. Dullanty's fees and to determine the reasonableness of those fees. `It is the court's job to guard against waste or loss to the estate.' Jones, 152 Wn.2d at 19 (citing In re Estate of Langill, 117 Wash. 268, 269, 201 P. 28 (1921)).
Based upon the reasoning in Ardell, Jones, and the relevant statutes, we conclude the trial court had continuing jurisdiction to resolve the dispute over the amount of fees paid to Mr. Dullanty's firm. We hold the trial court had subject matter jurisdiction over the issue of attorney fees.
Did the court have personal jurisdiction over Mr. Dullanty when entering the order for disgorgement and the judgment?
Having determined that the trial court had subject matter jurisdiction over the attorney fees issue, this court must now consider whether the court had personal jurisdiction over Mr. Dullanty, empowering the court to enter the order of disgorgement and the judgment. The answer is `no.'
Due process considerations prevent a court from asserting personal jurisdiction over a defendant unless that defendant is given notice and the opportunity to be heard, and the defendant has minimum contacts with the State. The fundamental requirement of due process is the opportunity to be heard; the opportunity to be heard requires notice that a suit is being commenced. Wichert v. Cardwell, 117 Wn.2d 148, 151, 812 P.2d 858 (1991) (quoting Grannis v. Ordean, 234 U.S. 385, 394, 34 S. Ct. 779, 58 L. Ed. 1363 (1914)). A plaintiff must comply with the requisites of due process and with the statutory service requirements. Weiss v. Glemp, 127 Wn.2d 726, 734, 903 P.2d 455 (1995). A cause of action is commenced when the complaint is filed or the summons served; if service has not been obtained on the defendant prior to the filing of the complaint, the plaintiff must cause service to be obtained, or service by publication commenced, within 90 days. RCW 4.16.170.
In this case, the Petition named Mr. Morin, and not Mr. Dullanty, as a party. Also, the Petition does not state a claim against Mr. Dullanty. As a result, the court had authority to determine the amount of fees, but the court did not have the authority to enter an order of disgorgement or a judgment without granting Mr. Dullanty notice and the opportunity to be heard. We recognize that a superior court has the power to order disgorgement of an attorney's fee when the attorney has breached his or her ethical duties in any proceeding before the court. Danzig v. Danzig, 79 Wn. App. 612, 620, 904 P.2d 312 (1995) (citing Eriks v. Denver, 118 Wn.2d 451, 462-63, 824 P.2d 1207 (1992)). However, this type of claim was not filed against Mr. Dullanty and the question of whether Mr. Dullanty breached his ethical duties was not litigated.
Consequently, the court had the authority to determine that a total of $14,650.74 was the reasonable amount of attorney fees owed to Mr. Dullanty. The trial court's decision resolves that issue. But the court did not have jurisdiction to take the additional step of entering the order of disgorgement or the judgment against Mr. Dullanty. We affirm the order of the trial court determining the total amount of attorney fees owed to Mr. Dullanty. We vacate both the order of disgorgement and the judgment against Mr. Dullanty.
The estate requests attorney fees pursuant to RAP 18.1 and RCW 11.96A.150. Under RCW 11.96A.150, this court has discretion to award costs and reasonable attorney fees. Here, the estate won on the issue of the amount of fees owed but lost on the issues pertaining to the order of disgorgement and the judgment. We deny the estate's request for reasonable attorney fees.
The 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.
SWEENEY, A.C.J. and BROWN, J., Concur.