Sullivan v. Brown (In Re Estate of Kay)

THE STATE OF SOUTH CAROLINA

In The Supreme Court

In the Matter of the Estate of Marion M. Kay.

Edward D. Sullivan, as Personal Representative of the

Estate of Marion M. Kay, Petitioner-Respondent,

v.

Martha Brown and Mary Moses, Respondents-

Petitioners.

Appellate Case No. 2016-002337

ON WRIT OF CERTIORARI TO THE COURT OF APPEALS

Appeal from Laurens County

Donald B. Hocker, Probate Court Judge

Opinion No. 27804

Heard March 7, 2018 – Filed May 23, 2018

AFFIRMED IN PART, REVERSED IN PART, AND

REMANDED

Daryl G. Hawkins, of the Law Office of Daryl G.

Hawkins, LLC, of Columbia, for Petitioner/Respondent.

John R. Ferguson, of Cox Ferguson & Wham, LLC, of

Laurens, for Respondents/Petitioners.

JUSTICE HEARN: This cross-appeal primarily concerns the amount of

compensation owed to Petitioner/Respondent Edward Sullivan as personal

representative (PR) of Marion Kay's estate. Sullivan filed a petition to settle the

estate and sought probate court approval for his commissions as PR together with

fees and costs. In response, Respondents/Petitioners Martha Brown and Mary Moses

(Brown and Moses), cousins of the deceased and two of multiple beneficiaries under

the will, challenged his compensation as excessive, and the probate court agreed,

reducing Sullivan's commissions, disallowing certain fees and costs, and awarding

attorney's fees to Brown and Moses. The circuit court affirmed, and both sides

appealed. In a 2-1 opinion, the court of appeals affirmed in part and reversed in part.

In re Estate of Kay, 418 S.C. 400, 792 S.E.2d 907 (Ct. App. 2016). We affirm in

part, reverse in part, and remand to the probate court.

STANDARD OF REVIEW

A proceeding before the probate court may sound in equity or at law. In re

Estate of Holden, 343 S.C. 267, 278, 539 S.E.2d 703, 709 (2000). Brown and Moses

demanded a hearing to challenge Sullivan's compensation for his services in

administering Kay's estate—an action in equity. Lee v. Lee, 251 S.C. 533, 534, 164

S.E.2d 308, 308 (1968) (holding an action for an accounting to determine whether

the guardian received improper compensation was in equity). Ordinarily, an

appellate court reviews cases in equity by finding facts in accordance with its own

view of the preponderance of the evidence. Townes Assocs., Ltd. v. City of

Greenville, 266 S.C. 81, 86, 221 S.E.2d 773, 775 (1976). However, an appellate

court still affords a degree of deference to the trial court because it was in the best

position to judge the witnesses' credibility. Lewis v. Lewis, 392 S.C. 381, 391, 709

S.E.2d 650, 655 (2011).

A threshold issue in this case is the applicability of the "two-judge rule" to a

decision of a probate judge which is affirmed by a circuit court judge. The majority

of the court of appeals employed the two-judge rule in affirming, while the

dissenting judge, then-Acting Judge Few, posited that the standard of review in an

appeal from an equity case should not change simply because two judges have made

the same factual determination, and would have applied a preponderance of the

evidence standard of review in this case. We take this opportunity to clarify the

appropriate standard of review in cases where the probate court's decision is affirmed

by the circuit court.

What has become known as the two-judge rule had its genesis in Townes,

wherein the Supreme Court undertook to explain the applicable standards of

appellate review in various types of cases. In Townes, a master made findings of

fact and conclusions of law which were concurred in by the circuit court, and the

Court stated that: "In an action in equity, tried first by a master or a special referee

and concurred in by the judge, the findings of fact will not be disturbed on appeal

unless found to be without evidentiary support or against the clear preponderance of

the evidence." 266 S.C. at 86, 221 S.E.2d at 775–76.

Both the court of appeals and this Court have applied the two-judge rule to

probate cases where the circuit court judge has agreed with the decision of the

probate court. See Geddings v. Geddings, 319 S.C. 213, 216, 460 S.E.2d 376, 378

(1995) (applying the two-judge rule where the circuit court affirmed the probate

court's decision that a wife had not waived her right to invoke her elective share);

Dean v. Kilgore, 313 S.C. 257, 260, 437 S.E.2d 154, 155 (Ct. App. 1993)

("Although Townes sets forth the two-judge rule for equity cases first tried by a

master or special referee and subsequently affirmed or concurred in by the circuit

court, we see no reason not to apply the same rule to an affirmance or concurrence

of the circuit court with the probate court."). Relying on this precedent, a majority

of the court of appeals held the two-judge rule applied.

Under the framework set out in Townes, prior to our master in equity system,

when circuit judges referred matters to special referees or masters to make findings

of fact, the limited scope of appellate review over factual findings concurred in by

two judges may have been appropriate. However, we hold today that the two-judge

rule has no applicability to cases wherein the circuit court, sitting in a purely

appellate capacity, as here, affirms the findings of a lower tribunal. Instead, the

applicable standard of review is the same as in other equity matters, and the appellate

courts of this state may take their own view of the preponderance of the evidence.

Accordingly, we analyze this case through this broad lens.

FACTUAL/PROCEDURAL BACKGROUND

Marion Kay died on May 3, 2007, leaving a will that named Sullivan, her

close friend and estate planning attorney, as personal representative. At the time of

Kay's death, she owned a house, a ten acre parcel of land, and a one-half undivided

interest in 330 acres (the Farm); the remaining one-half interest belonged to Brown

and Moses. Kay left the residuary of her estate as follows: (1/4) to Lisbon

Presbyterian Church, (1/4) to Lisbon Presbyterian Church Cemetery fund, and the

remaining (1/2) to five beneficiaries who each received (1/10), consisting of Marla

Elizabeth Heard, Bart Edward Heard, Brown, Moses, and the Presbyterian Home of

South Carolina. Brown and Moses had believed Kay would leave them her interest

in the Farm, but instead, they simply were named as (1/10) residuary beneficiaries.

The will also granted an option to Kay's neighbor, Charles Copeland, to

purchase the real estate within eight months of her death "at the fair market price on

the date of my death, the decision of my PR regarding the fair market price to be

final." (Copeland Option). Additionally, the will provided "reasonable compensation

for [Sullivan's] services rendered and reimbursement for reasonable expenses,"

granted him the authority to sell personal and real property, and authorized him:

To exercise all the powers in the management of my Estate which any

individual could exercise in the management of similar property owned

in his or her own right…to execute and deliver any and all instruments,

and to do all acts which my Personal Representative may deem proper

or necessary to carry out the purposes of this my Will, without being

limited in any way by the specific grants of power made, and without

the necessity of a court order.

During Sullivan's administration of the estate, he learned the majority of

beneficiaries preferred their interests in cash rather than a fractional ownership

interest in land. Accordingly, Sullivan decided the best course of action was to

negotiate a sale of the real estate, and if that failed, to file a partition action.

At the outset, Sullivan believed at least three "novel issues" posed potential

impediments to his ability to convey marketable title and heavily discounted the

property's value. First, Sullivan discovered that a 1973 agreement purportedly

granted Brown and Moses a right of first refusal; however, he questioned whether

the right was enforceable under the rule against perpetuities.1 Second, if the right of

first refusal was enforceable, he believed the Copeland Option created a competing

interest in the land. Third, Brown alleged an earlier agreement—which could not be

produced— entitled her to an undivided interest in five acres of the estate's property.

According to Sullivan, these issues had the potential to prolong the administration

of the estate. While Copeland indisputably did not exercise his option during the

1

The 1973 right of first refusal purportedly gave Brown and Moses the right to

purchase Kay's undivided interest in the Farm. At the probate court, Sullivan testified

the rule against perpetuities created potential problems as to its enforceability.

Counsel for Brown and Moses argued any violation of the rule would be academic

if Brown and Moses consented to the sale, which they ultimately did when the

property was sold in 2010.

eight months following Kay's death, Sullivan believed the eight month time period

was tolled until an appraiser determined the Farm's fair market value. Sullivan hired

Paul Major, who appraised the Farm's value at approximately $614,000, of which

Kay's interest represented $307,000. Sullivan received this appraisal in February of

2008, nearly nine months after Kay's death.

Three months later, in May of 2008, Sullivan sent a letter to all the

beneficiaries proposing a compromise whereby Brown would receive the five acres

at no charge, Copeland would exercise his option as to approximately 46 acres of

land, and Brown and Moses would release their right of first refusal but would retain

the option to purchase Kay's remaining interest at the fair market value. If Brown

and Moses elected not to purchase the remaining interest, Sullivan would sell it to

the highest bidder. After the sale, the cash proceeds would be distributed according

to the will's residuary clause.

When Brown and Moses failed to respond to the proposed settlement,

Sullivan attempted another compromise a few months later in July of 2008 by

arranging a meeting with church officials, Brown, Moses, and the appraiser. Again,

Brown and Moses did not respond, later explaining they felt "ambushed" by having

to take part in a meeting with other beneficiaries. Having exhausted repeated

attempts to resolve the matter amicably, Sullivan hired his law firm to file a partition

and declaratory judgment action. The parties ultimately settled whereby Sullivan

sold the Farm, the lot, and the home to a cousin of Brown and Moses for

approximately 94% of the 2007 appraised value. Sullivan then filed a petition for

settlement in the probate court as required by the Probate Code.2

In his petition for settlement and proposal for distribution, filed approximately

three years after Kay's death, Sullivan sought approval of $93,775.00 owed for

services rendered as PR.3 Sullivan notified all the beneficiaries, but only Brown and

Moses sent a letter to the probate court requesting a hearing.4

2

Under the statute in effect at the time, "a personal representative must file with the

court…a petition for settlement of the Estate…." S.C. Code Ann. § 62-3-1001(a)(3)

(2009).

3

Sullivan requested approval of $93,775.00 for commissions paid as of November

2010 and an additional $13,447.05 in unpaid commissions for services rendered

from the last payment date until the settlement hearing.

4

Brown and Moses did not file any pleadings.

At the hearing which ensued before the probate court, counsel for Brown and

Moses argued Sullivan had received excessive compensation because he

unnecessarily complicated the estate administration. Brown and Moses maintained

Sullivan should have simply filed a deed of distribution instead of hiring his law firm

to seek a partition order. Sullivan testified the numerous "novel issues" in the estate's

administration prompted him to file a declaratory judgment action, and he defended

his actions by asserting that he attempted to carry out Kay's intent by selling the real

estate, thereby generating cash proceeds to distribute to the beneficiaries. To support

his position, he pointed to the fact that Kay had hired him approximately four years

prior to her death to negotiate a proposal with Brown and Moses to divide and sell

the Farm, but Brown and Moses never responded to his requests.

After two days of testimony, the probate court found Sullivan should have

executed a deed of distribution to all the beneficiaries rather than have filed a

partition action. According to the probate court, Sullivan's decision to partition the

property and his concern over the Copeland Option complicated what should have

been a rather simple and straightforward estate administration. Finding the

commissions sought by Sullivan to be excessive, the probate court reduced the

amount to $51,300.00—approximately 10% of the estate's value—directed him to

reimburse the estate $42,775.00 for commissions previously received, and awarded

Brown and Moses attorney's fees under the common fund doctrine, concluding that

all beneficiaries benefitted from their counsel's representation.

The circuit court affirmed the probate court, and both parties appealed to the

court of appeals, which affirmed on all grounds except for the award of attorney's

fees to Brown and Moses. Both parties sought certiorari from this Court. Sullivan

seeks to retain the $93,775.00 which he paid himself as PR, approval of an additional

$13,447.05 in commissions, and fees and costs incurred at the settlement hearing.

Brown and Moses seek to limit Sullivan's compensation to 5% of the estate, as

provided by South Carolina Code Section 62-3-719. We now affirm in part, reverse

in part, and remand for further proceedings.

ANALYSIS

I. Personal Representative's Commission

Sullivan contends the probate court's reliance on section 62-3-719 of the South

Carolina Code—setting the default limit for PR compensation at 5% of the estate—

is misplaced because he asserts that statute is inapplicable. Additionally, Sullivan

asks the Court to adopt a new test to assist probate courts in the determination of

reasonable compensation.5 In contrast, Brown and Moses assert that because the will

does not define reasonable compensation, the probate court properly resorted to

section 62-3-719 as a basis for determining compensation.

The Probate Code establishes a default rule for PR compensation in section

62-3-719, which provides,

Unless otherwise approved by the court for extraordinary services, a

personal representative shall receive for his care in the execution of his

duties a sum from the probate estate funds not to exceed five percent of

the appraised value of the personal property of the probate estate plus

the sales proceeds of real property of the probate estate received on

sales directed or authorized by will. . . .

S.C. Code Ann. § 62-3-719(a) (2009 & Supp. 2017). However, subsection (c), an

exception to the 5% default rule, states, "The provisions of this section do not apply

in a case where there is a contract providing for the compensation to be paid for such

services, or where the will otherwise directs…." (emphasis added). Sullivan

contends the will's authorization of "reasonable compensation" falls within this

exception. While the probate court did not specifically find that section 62-3-719(a)

applied, it clearly considered the statute in arriving at its approval of $51,300 in

commissions, which represented approximately 10% of the estate.

We believe the language in the will is not sufficient to bring Sullivan's

commissions within the exception expressed in subsection (c). The will merely

contemplates "reasonable compensation," and absent any directive in the will, that

determination was left to the probate court. Even though the probate court did not

expressly find that Sullivan's actions constituted "extraordinary services," pursuant

to the statute, we believe its decision to award Sullivan compensation of 10% of the

estate's value is tantamount to such a finding.

Moreover, our own view of the preponderance of the evidence supports the

award of $51,300. While Sullivan testified he spent approximately 450 hours on the

estate, he could not definitively answer the probate court's question as to how he

charged for his services—whether it was a set percentage of the estate or based on

5

Sullivan's eighteen-part test, which we decline to adopt, includes factors such as

the time and labor required; time limitations imposed by clients; results obtained;

the PR's professional education, experience, or accolades; and whether the PR is a

member of the South Carolina Bar, is drawn from a Florida statute. See Fla. Stat. §

733.617 (1973).

his time. Sullivan discussed a number of factors he had considered in arriving at his

fee, and appeared to put significant weight on the "exceptional result" he ultimately

garnered for the estate through the property's sale. While we disagree with the

probate court that Sullivan simply "pull[ed] a figure out of the air" in determining

compensation, the total commissions sought constituted 21% of the estate's value, a

figure the probate court deemed "clearly excessive." We believe the probate court

was correct in this assessment, and we affirm the reduction in Sullivan's

compensation to $51,300.6

II. Expenses Incurred at the Settlement Hearing

Sullivan contends the court of appeals erred in affirming the probate court's

decision not to award reasonable fees and expenses incurred at the settlement

hearing. Brown and Moses assert the court of appeals properly affirmed the decision

by differentiating costs incurred defending the estate as PR from costs incurred by

Sullivan seeking more compensation in his individual capacity.

Under the Probate Code, when a "personal representative defends or

prosecutes any proceeding in good faith, whether successful or not, he is entitled to

receive from the estate his necessary expenses and disbursements including

reasonable attorneys' fees incurred." S.C. Code Ann. § 62-3-720 (2009 & Supp.

2017). Each court below concluded that section 62-3-720 does not apply to instances

where the personal representative primarily acts for the benefit of himself in

procuring compensation for his services. However, under the plain language of the

statute, it applies when (1) the PR defends or prosecutes, (2) any proceeding in good

faith, whether successful or not. Here, citing a different statute—section 62-3-

715(20)7—the court of appeals stressed section 62-3-720 was intended to apply only

6

Additionally, Sullivan contends the probate court's disagreement with his decision

to seek a partition improperly influenced its determination to reduce compensation.

Because our own view of the preponderance of the evidence supports the $51,300

award, it is unnecessary to address this argument. 16 Jade St., LLC v. R. Design

Const. Co., LLC., 405 S.C. 384, 390, 747 S.E.2d 770, 773 (2013) (declining to

address an issue after reaching a dispositive issue).

7

Section 62-3-715, titled "Transactions authorized for personal representatives;

exceptions," concerns a personal representative's authority, not necessarily

compensation. This provision states, "Except as restricted or otherwise provided by

the will…a personal representative, acting reasonably for the benefit of the interested

persons, may properly:

to proceedings when the personal representative acted reasonably for the benefit of

the estate as opposed to requesting approval of the PR's compensation. We find this

distinction erroneous as applied to Sullivan.

Once requested by Brown and Moses, it was incumbent on Sullivan to attend

the settlement hearing, and he necessarily incurred attorney's fees and costs to

prepare and travel to Laurens County. At that hearing, Sullivan was called upon to

defend his decision to seek a partition rather than issue a deed of distribution.

Additionally, he defended against Brown's claim that she was entitled to an

additional five acres of property by virtue of an unproduced agreement entered into

years before Kay's death. While this claim may not have been the primary reason for

the hearing, Sullivan was required to defend it. Therefore, we find the hearing

constituted a "proceeding" which Sullivan was required to defend within the

meaning of section 62-3-720.

Section 62-3-720 also requires the proceeding be advanced in good faith.

Significantly, the probate court, as affirmed by the circuit court and the court of

appeals, concluded that Sullivan acted in good faith. Taking our own view of the

preponderance of the evidence, we agree all actions by Sullivan as PR were taken in

good faith. Sullivan had the authority under the will to sell the real estate, and while

the probate court determined Sullivan prolonged the estate by seeking a partition

order, we question whether a deed of distribution was even a viable alternative under

these facts. We believe Sullivan acted well within his authority under the will when

he sought partition of the property. Moreover, prior to filing the action, Sullivan

repeatedly attempted to reach an amicable solution among the beneficiaries.

However, without advancing a solution of their own, Brown and Moses failed to

respond to Sullivan, instead voicing their displeasure only when the end of the estate

administration was in sight. Before the probate court, Sullivan testified Bart Heard,

the Lisbon Presbyterian Church, and the Presbyterian Home all preferred the real

estate be sold in order to receive cash proceeds. Moreover, Major, a forestry

consultant and real estate broker, testified Sullivan reached an extraordinary result

by selling the real estate in 2010 for 94% of the 2007 appraisal—at a time when real

estate prices remained stagnant after severe declines during the recession.

(20) prosecute or defend claims, or proceedings in any jurisdiction for the

protection of the estate and of the personal representative in the performance

of his duties;

S.C. Code Ann. § 62-3-715(20) (2009 & Supp. 2017).

Bart Heard testified not only did he approve of Sullivan's charges and

expenses, but he felt it would be unfair if Brown and Moses did not pay for the

proceeding before the probate court because they were the individuals who had

prolonged the administration of the estate. Penelope Arnold, the Director of

Charitable Foundation and Church Relations for the Presbyterian Home, also

testified the church did not object to Sullivan's purported compensation.

Additionally, Sullivan's law firm reduced its hourly rate by about 35%, and the firm

further discounted its invoices, the total of which represented approximately

$20,000.

Accordingly, because we find ample evidence demonstrating Sullivan

defended the claim in good faith, we reverse the court of appeals' decision refusing

to award him necessary expenses. We remand to the probate court to calculate these

expenses, including attorney's fees.

III. Remaining Issues

On cross-appeal, Brown and Moses assert the court of appeals erred in holding

they abandoned their argument that Sullivan should be responsible for all fees and

costs incurred at the settlement hearing because he acted in his individual interest to

recover additional compensation rather than in the Estate's interest in defending a

claim. While we disagree that the issue was abandoned, because we hold Sullivan

defended the claim in good faith, we find their argument unavailing.

Additionally, Brown and Moses assert the court of appeals erred in reversing

the award of their attorney's fees under the common fund doctrine. We disagree.

Under the common fund doctrine, a court in its equitable jurisdiction may

award reasonable attorney's fees to the party "who, at [the party's] own expense,

successfully maintains a suit for the creation, recovery, preservation, or increase of

a common fund or common property." Layman v. State, 376 S.C. 434, 452, 658

S.E.2d 320, 329 (2008). As a method of fee-spreading, the doctrine's rationale is that

"'one who preserves or protects a common fund works for others as well as for

himself, and the others so benefited should bear their just share of the expenses.'" Id.

at 452, 658 S.E.2d at 329 (quoting Johnson v. Williams, 196 S.C. 528, 531, 14 S.E.2d

21, 23 (1941)). To recover under the doctrine, there must be an express or implied

contract of employment between the successful party's counsel and all individuals

who hold an interest in the fund. Johnson, 196 S.C. at 532–33, 14 S.E.2d at 23.

Moreover, if the parties' interests are adverse, the doctrine does not apply. Bedford

v. Citizens & S. Nat'l Bank of S.C., 203 S.C. 507, 515, 28 S.E.2d 405, 407 (1943).

Significantly, recovery under the common fund doctrine is subject to abuse and

should be exercised cautiously. Johnson, 196 S.C. at 532, 14 S.E.2d at 23.

While all the beneficiaries arguably benefited from Brown and Moses' efforts

to challenge Sullivan's compensation, we find the beneficiaries of the estate were

not united in pursuit of this cause. A majority of the beneficiaries supported

Sullivan's efforts to sell the Farm and distribute the cash proceeds according to Kay's

will. Furthermore, there was no express contract of employment between counsel

for Brown and Moses and the other beneficiaries. Moreover, because the

beneficiaries did not acquiesce in Brown's and Moses' representation but instead

commended Sullivan's performance and opined that Brown and Moses should bear

the costs incurred before the probate court, we find no implied contract existed.

Therefore, we conclude the common fund doctrine does not apply; accordingly, we

affirm the court of appeals' decision that Brown and Moses are responsible for their

own attorney's fees.

CONCLUSION

For the foregoing reasons, we AFFIRM the court of appeals' decision to

uphold the award of $51,300 in commissions for Sullivan's services as personal

representative and the determination that Brown and Moses are responsible for their

own attorney's fees. We REVERSE the court of appeals' conclusion that Sullivan is

not entitled to recover necessary expenses, including reasonable attorney's fees,

incurred at the settlement hearing under section 62-3-720 and REMAND to the

probate court for that determination.

AFFIRMED IN PART; REVERSED IN PART; AND REMANDED.

BEATTY, C.J., KITTREDGE and JAMES, JJ., and Acting Justice Amy W.

McCulloch, concur.