Spannaus v. Arrowood

230 N.W.2d 33, 304 Minn. 105, 1975 Minn. LEXIS 1397
CourtSupreme Court of Minnesota
DecidedMay 9, 1975
DocketNos. 44953, 44954
StatusPublished
Cited by9 cases

This text of 230 N.W.2d 33 (Spannaus v. Arrowood) is published on Counsel Stack Legal Research, covering Supreme Court of Minnesota primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Spannaus v. Arrowood, 230 N.W.2d 33, 304 Minn. 105, 1975 Minn. LEXIS 1397 (Mich. 1975).

Opinion

Yetka, Justice.

Appeal is taken by the Bush Foundation (the foundation) and the Attorney General of Minnesota from judgment entered December 27, 1973, in Ramsey County District Court awarding executors and attorneys fees and from the denial of motions for a new trial. Respondents seek review of the judgment. We affirm.

This appeal is the latest chapter in the history of bitter controversy and protracted litigation surrounding the probate of the estate of the late Archibald Bush (hereinafter called Mr. Bush or decedent). Unfortunately, this court has had occasion to become familiar with the history of this controversy. In the [107]*107recent opinion of In re Estate of Bush, 302 Minn. 188, 189, 224 N. W. 2d 489, 491 (1974), certiorari denied, 420 U. S. 1008, 95 S. Ct. 1454, 43 L. ed. 2d 768 (1975), this court set forth a rather detailed statement of that history with the hope that we would “see an end to this protracted and expensive litigation.” As the instant appeal so vividly shows, that hope was not to be realized.

Stated generally, this appeal is addressed to the question of the fees to which the executors, Herschel Arrowood and Mary Jane Dickman, and their counsel, Smith, Blomquist, Vitko & Hummel (Smith et al.), may receive from the estate for services rendered in its administration.

On April 21, 1965, Mr. Bush executed a will designating the Bush Foundation as residuary legatee to which the bulk of his considerable fortune1 was to pass. However, that designation contained the limitation that if the foundation was unable to take, “or if bequests to it be not deductible for Federal estate tax purposes,” the residue would go to the A. G. Bush Institute. The will further provided that if neither the foundation nor the institute were able to take, or if bequests to them were not deductible for Federal estate tax purposes, then the executors were to form a nonprofit corporation as recipient of the residue.

The will contained no provision for Mrs. Bush.2 However, the will recited that the disposition was pursuant to an agreement between Mr. Bush and Mrs. Bush.3 Attached to the will was a consent of spouse instrument executed by Mrs. Bush, in which she expressly ratified the provisions of her husband’s will.

Respondents, Herschel S. Arrowood and Mary Jane Dickman, were named as executors in the will. The record shows that both were highly trusted business associates of decedent.

[108]*108Subsequent to Mr. Bush’s death, the executors secured the services of First Trust Company of St. Paul, Minnesota, to act as fiscal agent for the estate. The employment of a trust company was expressly provided for by the will.

The will was admitted to probate on March 2, 1966. Arrowood and Dickman were appointed executors.

The executors then retained the services of David Roberts and Walter Trenerry to serve as counsel for the estate, although the executors did not wish to hire these individuals.4 Rather, it was the alleged pressure and threats applied to the executors by Roberts and by Mrs. Bush which prompted that decision. Subsequently, Clifford Lee and Phillip Stringer were engaged to assist Roberts and Trenerry.

Immediately thereafter, problems between the attorneys and the executors began to arise.5 Without engaging in a detailed discussion on this point, the record discloses testimony that the attorneys had conflict of interests between their relationship to the estate and their relationship to Mrs. Bush.6

During the period from March through August 1966, Mrs. Bush threatened to renounce her husband’s will and take her statutory widow’s share. This culminated in a settlement whereby Mrs. Bush waived her right to renounce in return for $2,-100,000 from the estate and an agreement by the executors to [109]*109retain Roberts, Lee, Trenerry, and Stringer as counsel for the estate.7 The probate court approved that settlement in August 1966. It is to be noted that the executors were acting without the advice of “neutral” counsel during this time, although they had unsuccessfully attempted to obtain advice from the firm of Briggs & Morgan.

Although not presented to the probate court, part of the settlement was the reorganization of the foundation into a bicameral board which split the board of directors into two divisions, each having veto over actions proposed by the other.8 In effect, the bicameral structure of the board resulted in a deadlock of opposing factions and eventually became unworkable.

Thereafter, matters proceeded to a point where the executors, upon advice of counsel (Roberts et al.), filed in probate court a first intermediate account and a petition for partial distribution of earned income in the sum of $2,500,000 to the foundation. The purpose of this petition was to take advantage of a purported income tax deduction that, according to Roberts and the other attorneys, would have been lost had not payment been made prior to January 1, 1967.9 Arrowood testified at trial that he harbored some concern over that opinion and the possible inability of the foundation to “take” under the will.10

[110]*110The probate court approved the petition on December 14,1966. However, prior to that date, Arrowood, through Haskins & Sells, the accountants of the estate, requested a ruling from the Internal Revenue Service (IRS) as to whether payment to the legatee prior to December. 31, 1966, was required in order to secure the desired tax deduction. On December 23, 1966, the executors received a revenue ruling that such payment was not required. The executors then unsuccessfully attempted to advise Mr. Trenerry of the IRS ruling.

Upon receipt of the ruling and the unavailability of their present counsel, the executors brought the matter to Mr. Smith (of Smith et al.) who agreed to bring the matter before the probate court. That firm was then engaged to represent the estate.

Mr. Bertrand Poritsky (of Smith et al.) drafted a petition for amendment of the December 14, 1966, order. Amended orders to effectuate this petition were also drafted, and were signed by a judge of the probate court who was in Colorado at the time, thereby resulting in the designation of these orders as the “snowbank orders.” In effect, these new orders withdrew the court’s declaration of the foundation as residuary legatee and the order for partial distribution. Rather, the foundation was designated as “contingent residuary legatee,” and the orders stated that it is not in the best interests of the estate to make partial distribution to the foundation at that time.

On February 8, 1967, Mrs. Bush and the “B” directors of the foundation filed an appeal in district court from these “snowbank orders.” However, in face of opposition by the “A” directors, that appeal was not pursued.

On June 6, 1967, the “B” directors filed a petition in probate court for partial distribution, or for declaratory judgment, to name the foundation as residuary legatee. Action on that petition was continued during that summer and fall, over which period of time negotiations for closing the estate were conducted.

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Bluebook (online)
230 N.W.2d 33, 304 Minn. 105, 1975 Minn. LEXIS 1397, Counsel Stack Legal Research, https://law.counselstack.com/opinion/spannaus-v-arrowood-minn-1975.