ESTATE ATTORNEY FEES: ESTATE OF JEAN C. “FOX” DEMOISEY V. RIVER DOWNS INVESTMENT CO. (COA 8/10/07)

ESTATE OF JEAN C. "FOX" DEMOISEY V. RIVER DOWNS INVESTMENT CO.
PROBATE:  PRESENTATION OF CLAIMS, VOID DEBTS, ATTORNEY FEES 
2006-CA-001494
PUBLISHED: REVERSING
PANEL: STUMBO PRESIDING; LAMBERT AND GUIDUGLI CONCUR
COUNTY: CAMPBELL
DATE RENDERED: 8/10/2007

The DeMoisey Estate appealed circuit court order affirming a judgment and order of the Campbell District Court. The Estate contended the District Court improperly concluded the Estate failed to demonstrate a good reason for prosecuting an appeal, and that the Executor therefore was not entitled to recoup costs and attorney fees associated with the appeal. That appeal arose from an action instituted by River Downs Investment Company (“River Downs”) to recover payment for a gambling debt. COA held the appeal at issue was taken for good cause, and reversed the order from which the Estate appeals

Jean C. “Fox” DeMoisey died on December 27, 1998. Approximately two weeks prior to his death, he signed a promissory note in favor of River Downs in the amount of $34,510.80 to cover gambling losses incurred by decedent DeMoisey’s use of a telephone betting account. J. Fox DeMoisey, an attorney and son of Jean, was appointed Executor. River Downs sent a written claim to the Estate seeking recovery under the note. The Estate took no action on the claim other than to request further information.

J. Fox DeMoisey sent a letter to River Downs disallowing the claim as void pursuant to KRS 372.010 which declares any claim for gambling debts void as against public policy. District court rejected disallowing the claim finding the Executor presented no evidence to justify or explain the Estate’s failure to file a timely notice of disallowance for a period of over three years. The Estate unsuccessfully appealed the ruling which was eventually affirmed by the COA in a separate appeal which held that the gambling debt – which was not recoverable by operation of KRS 372.010 -became a valid and enforceable debt when the Estate failed to disallow it within 60 days as required under KRS 396.055(1).

Sometime thereafter, the Executor filed a motion in District Court seeking payment of costs and attorney fees incurred prosecuting the appeal. River Downs filed exceptions to the motion, after which a hearing on the matter was conducted. River Downs argued that the payment of attorney fees was not justified because no benefit inured to the Estate from the Executor’s appeal. The district court concluded there was no reasonable basis for prosecuting an appeal and incurring costs and legal fees, relying on White v. White, 883 S.W.2d 502 (Ky. App. 1994), in determining that the Executor did not – in the language of White – pursue the appellate process “with a good reason.”

White established a very low threshold for distinguishing between legitimate estate actions meriting entitlement to costs and attorney fees, and illegitimate actions not meriting the same. In order to justify the action – and entitle the Executor to costs and fees – an estate need not even show that it benefited from the action. However, where no benefit is shown, costs and fees are not recoverable “unless there appears some good reason” for prosecuting the action.

The Executor arguably had a fiduciary duty to defend against a void claim even if that defense was not timely, and the COA added the issue of whether a void claim could be transformed into an enforceable one by inaction on the part of an Executor was novel and of first impression. Accordingly, w the appeal process below satisfied White, and that the District Court erred in failing to so rule.

By Michael Stevens

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