Opinion
No. A06-916.
Filed April 10, 2007.
Appeal from the District Court, Ramsey County, File No. 62-P2-01-005288.
Randy F. Boggio, Garvey Boggio, P.A., Bloomington, MN (for appellant Douglas R. Whitney).
Thomas R. Haugrud, Rosene, Haugrud Staab, St. Paul, MN (for respondent Midwest Guardians and Conservators, Inc.).
Kirsten Elizabeth Lasley, St. Paul, MN (pro se respondent).
Thomas Lasley, St. Paul, MN (pro se respondent).
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2006).
UNPUBLISHED OPINION
Appellant Douglas R. Whitney, former conservator, argues that the district court abused its discretion in its determinations (1) that certain conservatorship disbursements were inappropriate, requiring reimbursement by the conservator; (2) that his claim for legal services was unreasonable because a portion of the charges were for work that was non-legal in nature and/or duplicative of services rendered by another conservatorship attorney; and (3) by reserving the issue of allowance of tax payments for later determination. Because we conclude that the district court did not abuse its discretion, we affirm.
FACTS
Christine Forth Lasley, the adoptive mother of conservatee Kirsten Elizabeth Lasley, and Thom Lasley divorced after four years of marriage. Christine had custody of Kirsten and possession of the homestead following the dissolution. After Christine's death from cancer, when Kirsten was ten years old, Thom Lasley moved back into the home to take care of Kirsten. He subsequently remarried on May 1, 2004.
Because Kirsten is the beneficiary of assets owned by her mother, the district court in 2001 appointed appellant, Douglas R. Whitney, an attorney and family friend, as conservator pursuant to Minn. Stat. § 525.6198 (2000). Kirsten also receives social-security benefits, which are payable to Thom Lasley as the representative payee. The record reflects the following annualized social-security payments: $15,828 in 2002; $16,056 in 2003; $16,392 in 2004; and $16,824 in 2005.
Whitney was also appointed as trustee of the trust established by Christine to benefit Kirsten. He was removed as trustee by the district court's order of April 11, 2006, but the expenditures related to the trust are not involved in this appeal.
Whitney's first annual accounting as conservator was approved by the district court in an order dated October 28, 2002. In its review of the second, third, and fourth annual accountings, the district court determined that several disbursements from the conservatorship funds were inappropriate. Specifically, during the second accounting period (2002-03), the district court disallowed: air fare to Washington, D.C. ($212.50); a family trip to Disney World ($1,044.93); meals and clothing at a Florida resort ($572.84); reimbursement to Thom Lasley for Kirsten's clothing ($923.93); and excess legal fees paid to Whitney ($3,577.69). During the third accounting period (2003-04), the district court disallowed: reimbursement to Thom Lasley for Kirsten's broadband Internet service, clothing, car rental, and spring break to Florida ($628.51); reimbursement to the stepmother for Kirsten's clothing ($217); and excess legal fees paid to Whitney ($5,961.06). During the fourth accounting period (2004-05), the district court disallowed reimbursement to Thom Lasley of $1,188.47, which included expenditures for Kirsten's dance tickets, clothing, tennis gear, and spring break in the French West Indies.
The district court disallowed $126 in bank fees for research, insufficient funds, and overdraft charges that are not being appealed. The district court also disallowed one-half of an interest-free loan to Thom Lasley to purchase a Jeep Cherokee ($14,685). Because Thom Lasley and his wife have paid the successor conservator $17,332.53 to satisfy this obligation with interest, the district court's decision on that issue is not being appealed.
The district court concluded that Whitney and Thom Lasley "have gone beyond what is reasonable under the circumstances. Expenditures were made that provided only limited benefit to [Kirsten] and that benefited persons other than [Kirsten]." In addition, the district court noted that although Thom Lasley had $625 available each month from Kirsten's social-security benefits after paying her private high-school tuition, "the father requested, and [Whitney] allowed, expenditures for family vacations, meals for family members, and other items that should otherwise be provided by the . . . father." The district court further found that Whitney billed and paid himself at his attorney rate for providing legal services, although "many of the services claimed [were] either non-legal in nature (i.e., services ordinarily performed by a conservator, not an attorney), and/or were duplicative of services rendered" by the conservatorship's attorney. Therefore, the district court reduced Whitney's attorney fees from $15,050 to $5,511.25.
In addition, the district court noted that "[s]ufficient evidence was not presented to substantiate that [Whitney] exercised due diligence in managing [Kirsten's] income and resulting tax liabilities. The issue of allowance of tax payments should be reserved for later determination by the court." As a result, the district court ordered judgment of $31,604.96 against Whitney by order dated March 14, 2006, and removed him as conservator by order dated April 11, 2006.
In seeking reconsideration, Whitney argued that (1) the district court erroneously attributed $72,000 in personal income and $150,000 in household income to Thom Lasley that was available only during the fourth accounting period following his May 1, 2004 marriage; (2) because Kirsten's stepmother has not adopted her, she is not financially responsible for Kirsten; (3) his attorney fees involved legal services not provided by the conservatorship's attorney; and (4) any alleged error in his management of the conservatorship's tax liabilities should be resolved with these issues. The district court denied reconsideration. This appeal follows.
DECISION I.
The district court's approval of a conservator's accounting for disbursements is reviewed on an abuse-of-discretion basis, In re Conservatorship of Moore, 409 N.W.2d 14, 16 (Minn.App. 1987), but "[a] probate court's determination of factual questions will not be set aside unless clearly erroneous." In re Conservatorships of T.L.R., 375 N.W.2d 54, 58 (Minn.App. 1985); see also Minn. R. Civ. P. 52.01 ("Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the [district] court to judge the credibility of the witnesses.").
A conservator "is a fiduciary with a duty to guard the entrusted assets" to prevent the assets from being depleted. Moore, 409 N.W.2d at 16. A conservator's duties include
the duty to pay the reasonable charges for the support, maintenance, and education of the protected person in a manner suitable to the protected person's station in life and the value of the estate. Nothing herein contained shall release parents from obligations imposed by law for the support, maintenance, and education of their children. The conservator has no duty to pay for these requirements out of personal funds. Wherever possible and appropriate, the conservator should meet these requirements through governmental benefits or services to which the protected person is entitled, rather than from the protected person's estate. Failure to satisfy the needs and requirements of this section shall be grounds for removal, but the conservator shall have no personal or monetary liability.
Minn. Stat. § 524.5-417(c)(1) (2006) (emphasis added); see also Moore, 409 N.W.2d at 16 (stating that parents have a duty to provide for their children, including "necessary food, clothing, shelter, education, and other care essential for the physical, mental and emotional health and development of children"). In making distributions, the conservator is required to "consider recommendations relating to the appropriate standard of support, care, education, health, and welfare for the protected person . . . , and, if the protected person is a minor, the conservator shall consider recommendations made by a parent." Minn. Stat. § 524.5-427(b) (2006) (emphasis added). The conservator thus
may not be surcharged for money paid to persons furnishing support, care, education, or benefit to the protected person . . . pursuant to the recommendations of a parent or guardian of the protected person unless the conservator knows that the parent or guardian derives personal financial benefit therefrom, including relief from any personal duty of support, or the recommendations are not in the best interest of the protected person.
Minn. Stat. § 524.5-427(c) (2006) (emphasis added).
Here, the district court noted that it is appropriate to use funds for Kirsten's education that "[Kirsten's] mother had previously provided, and which would not otherwise be available to [Kirsten]." But the district court determined that "[Whitney] and [Thom Lasley] have gone beyond what is reasonable under the circumstances. Expenditures were made that provided only limited benefit to [Kirsten] and that benefited persons other than [Kirsten]."
The district court expanded on its concern by stating:
The Court recognizes that the father pays private school tuition for the minor. However, after deduction of the school tuition from the social security payments, there remains approximately $7,500 per year, or $625.00 per month to purchase food and clothing for the minor child. Despite the adequate amount of funds for the support of the minor, the father requested, and the conservator allowed, expenditures for family vacations, meals for family members, and other items that should otherwise be provided by the minor's father. Especially egregious is the "no interest loan" for the purchase of an automobile for the father's use. The father and the conservator attempted to justify the expense by claiming that reliable transportation was needed to take the minor to and from school and school events. The Court finds that the purchase of a $28,000 vehicle far exceeds what is required for reliable transportation to and from school. The reality of the situation is that the vehicle is used primarily by the father for his personal use. Also, no consideration was given to the loss of investment income for this no interest loan.
A conservator's use of conservatorship funds to pay general household expenses was addressed by this court in Moore. In Moore, the father, as conservator, deposited his sons' monthly social-security checks and life-insurance proceeds into a joint checking account following the boys' mother's death. 409 N.W.2d at 15. The father subsequently married a woman who had two children. Id. Moore had no personal income following his marriage. Id. Over a seven-month period, Moore spent approximately $23,500 on house payments, appliances, furniture, a car, "unexplained miscellaneous expenditures and items such as `pet kennel and vet,'" day care, house and yard maintenance, cable television, video rental, music, food, and a memorial plaque for the boys' mother. Id. at 15-16. The probate court approved these disbursements. Id. at 15. But on appeal, this court concluded that "[t]his depletion cannot be justified . . . for the shelter and support of the three boys since they are entitled to those necessities and should not be forced to shoulder the costs of their own shelter and support, as well as those for father, stepmother and her children." Id. at 17.
Under Minn. Stat. § 524.5-427(c), a conservator is liable for payments for items that "the conservator knows that the parent . . . derives personal financial benefit therefrom, including relief from any personal duty of support." Here, the district court's determination that the entire family derived benefit from the conservatorship's payments for family travel and personal expenses is supported by the record. We therefore conclude that the district court did not abuse its discretion by ordering Whitney to compensate the conservatorship for these disallowed expenditures.
II.
Whitney challenges the district court's reduction of his statement for legal services rendered to the conservatorship from $15,050 to $5,511.25, arguing that the district court failed to identify which charges it found to be duplicative of work done by Garvey Boggio, the law firm retained by Whitney to perform legal services for the conservatorship, or what services the district court found to be non-legal in nature. Whitney's billing statement, reflecting 86 hours of legal work between March 23, 2001, and September 19, 2002, billed at $175 an hour, is in the record and was reviewed by the district court. A district court's award of attorney fees is reviewed for abuse of discretion, but the reasonableness of the fees is a question of fact and will not be set aside unless clearly erroneous. In re Conservatorship of Mansur, 367 N.W.2d 550, 552 (Minn.App. 1985), review denied (Minn. July 11, 1985).
"Notwithstanding any law to the contrary, an attorney performing services for the estate at the instance of the . . . conservator shall have such compensation therefore out of the estate as shall be just and reasonable." Minn. Stat. § 525.515(a) (2006); see also Mansur, 367 N.W.2d at 552 (stating that "[c]onservators and attorneys may recover reasonable fees for services which inure to the benefit of the estate"). In the absence of prior agreement, the following factors are used to determine
what is a fair and reasonable attorney's fee:
(1) The time and labor required;
(2) The experience and knowledge of the attorney;
(3) The complexity and novelty of problems involved;
(4) The extent of the responsibilities assumed and the results obtained; and
(5) The sufficiency of assets properly available to pay for the services.
Minn. Stat. § 525.515(b) (2006).
"When the court determines that a . . . conservator has rendered necessary services or has incurred necessary expenses for the benefit of the . . . protected person, the court may order reimbursement or compensation to be paid from the estate of the protected person." Minn. Stat. § 524.5-502(c) (2006) (emphasis added). In addition
a lawyer . . . rendering necessary services with regard to . . . the administration of the protected person's estate or personal affairs . . . shall be entitled to compensation from the protected person's estate. . . . When the court determines that other necessary services have been provided for the benefit of the . . . protected person by a lawyer . . . the court may order fees to be paid from the estate of the protected person. . . . If, however, the court determines that a . . . conservator has not acted in good faith, the court shall order some or all of the fees or costs incurred in the proceedings to be borne by the . . . conservator not acting in good faith.
Minn. Stat. § 524.5-502(b) (2006) (emphasis added).
None of the charges at issue are for Whitney's time spent in his capacity as conservator, which he planned to bill separately. In disallowing a portion of appellant's legal fees, the district court found:
The conservator is a licensed attorney and paid himself for services rendered at his attorney's rate. In reviewing the conservator's invoices, the Court determined that many of the services claimed [were] either non-legal in nature (i.e. services ordinarily performed by a conservator, not an attorney), and/or were duplicative of services rendered by another attorney, retained by the conservator to provide legal services. The court has made appropriate reductions in the amounts allowed to reflect the actual value and nature of the services rendered.
We note that the district court allowed all claimed expenses for legal services rendered by Garvey Boggio ($6,375.70 during the second accounting period, $701.92 during the third accounting period, and $393 during the fourth accounting period).
The district court determined that much of Whitney's billing statement for legal work involved managing the conservatorship assets and various administrative matters that were properly considered to be part of his duties as the conservator. On this record, we conclude that the district court acted within its discretion.
III.
Upon removal, a conservator is required to file a final accounting in the manner similar to annual accountings. Minn. Stat. § 524.5-420(a) (2006). The district court reviews the accounting, and its final order "adjudicates all previously unsettled liabilities relating to the conservatorship." Id. Here, the district court inquired into the amount of taxes paid. Whitney conceded to the district court that he did not inquire as to any potential means of reducing the tax liability. Because the district court has the responsibility to review the final accounting, which had not been filed at the time of this hearing, the district court properly reserved the issue.
At the November 1, 2005 hearing on the accountings, the district court asked Whitney to provide additional documentation about the taxes paid by the conservatorship. According to tax returns submitted to the district court, Kirsten paid federal income tax of $36,639 in 2002, $17,912 in 2003, and $14,528 in 2004.