United States v. Printy (221 Ill. 2d 30, 2006)

JUSTICE KARMEIER

delivered the judgment of the court, with opinion.

Chief Justice Thomas and Justices McMorrow, Fitzgerald, and Kilbride concurred in the judgment and opinion.

Justice Freeman concurred in part and dissented in part, with opinion.

Justice Garman took no part in the decision.

OPINION

Floyd W. Funk was a truck driver. He died January 7, 1983, leaving a will; a widow; four children, including a minor son; a modest life insurance policy, and interests in farmland, crops and equipment heavily encumbered by loans from the Farmers Home Administration (FmHA), an agency of the United States government. Funk’s will named his widow, Patsy Printy, as executor. Shortly after Funk’s death, Printy filed a petition in the circuit court of Scott County for admission of the will to probate and issuance of letters testamentary. See 755 ILCS 5/6 — 2 (West 2004). The petition was granted, Printy’s oath and bond were approved, and letters of office were issued to her on February 14, 1983.

With the assistance of David R. Cherry, an attorney she retained to assist her, Printy commenced the work of disposing of her husband’s estate. That work lasted more than two decades. It did not end until December 2, 2003, when the circuit court entered its final order in the case. That order, which was not entered until after Cherry’s election as State’s Attorney required him to withdraw from the case, was one that Printy could not have foreseen when she agreed to assume her responsibilities on behalf of the estate. It held her personally liable to the United States government for $90,092.66 in payments she had authorized as executor, plus interest. Included in that sum was $38,830.73 which Printy had paid to Cherry for the legal work he performed on the estate’s behalf.

The United States appealed, contending that the circuit court’s judgment was inadequate because it did not also include a provision requiring Cherry himself to personally surrender to the government the $38,830.73 in disputed attorney fees. The government conceded that Cherry had earned the fees and that they were reasonable. Its contention was simply that it had a superior claim to the money used to pay the fees and that the money should have gone to it rather than Cherry.

The government’s claim was rejected by the appellate court, which affirmed the circuit court’s judgment over the dissent of one justice. The appellate court subsequently modified its opinion on denial of rehearing, but continued to affirm. 355 Ill. App. 3d 466. The United States then petitioned our court for leave to appeal. 177 Ill. 2d R. 315. We granted the government’s petition, and the matter is now before us for review. For the reasons that follow, we affirm in part and reverse in part.

In order to properly evaluate the government’s arguments, careful review of the facts is necessary. The pages which follow will therefore relate in considerable detail the specifics of what led to the present appeal. As our discussion will reflect, the executor and her attorney were extremely thorough in undertaking their responsibilities. They withheld nothing from the court. They misrepresented nothing to anyone with an interest in the estate.

The exhaustive records maintained by the executor and her attorney have been critical in guiding our understanding of this case. Those records show precisely what monies flowed in and out of the estate, when financial transactions occurred, the identity of the parties involved, and the purposes for which funds were received or expended. Neither the authenticity nor the accuracy of the documentary record is in question.

The issues presented by this appeal turn on the documentary evidence and on questions of law. With respect to such matters, we are not bound by the views or conclusions of either the circuit or appellate court. Our review is de novo. See Eden Retirement Center, Inc. v. Department of Revenue, 213 Ill. 2d 273, 284 (2004); Rosenthal-Collins Group, L.P. v. Reiff, 321 Ill. App. 3d 683, 687 (2001).

Floyd Funk came from a farming background but became a truck driver to earn a living. He died suddenly of an apparent heart failure while traveling through Wisconsin in 1983. He had just turned 61 years old. Surviving him were Patsy Printy, who was his second wife, and four children. Three of the children, Erie, Joyce and Jana, were the issue of Funk’s first marriage and had attained their majority. The fourth, Michael, was the issue of Funk’s marriage to Printy. He was only 12 and still resided with Printy in the family home.

Funk and Printy were married in 1968. After their marriage, Funk executed a will naming Printy executor of his estate. When Funk died, Printy, acting in her capacity as executor, retained attorney David Cherry to assist her in performing the responsibilities imposed on her by the Probate Act of 1975 (755 ILCS 5/1 — 1 et seq. (West 2004)). One of those responsibilities was to prepare and present to the circuit court verified accounts of her administration of the estate. 755 ILCS 5/24 — 1 (West 2004). Printy filed the first such account on October 11, 1983. That report, which covered the period from February 15, 1983, to October 7, 1983, disclosed that as of the date of Funk’s death, the estate’s assets consisted- of real estate located in Scott County, 250 bales of straw, 150 bales of hay, and various pieces of equipment associated with the operation of a farm, including tractors, plows, augers, wagons, a combine, and a cultivator. Printy subsequently discovered and reported to the circuit court that at the time of his death, Funk was also entitled to a tenant’s share of certain harvested grain and a landlord’s share of other harvested grain. In addition, Funk held a life insurance policy from Country Life Insurance Company which paid a benefit to his estate of $28,879.46.

The real estate owned by Funk when he died was the family farm. It consisted of three parcels. The first, referred to as Tract I, consisted of approximately 62 acres and was owned by Funk in fee simple. No other party, including Printy, held an interest in it. The second, designated as Tract II, contained 37.5 acres, while the third, known as Tract III, covered 56 acres. Funk owned an undivided three-fourths interest in Tracts II and III. With respect to the remaining one-fourth interest, he held only a life estate with the remainder in fee simple to his minor son, Michael.

In May of 1980, less than three years before his death, Funk borrowed $205,000 from the FmHA pursuant to the Emergency Agricultural Credit Act of 1978 (7 U.S.C. § 1961 et seq.) That loan, issued under the government’s Economic Emergency loan program, was secured by a 40-year mortgage on all three tracts of his farm, excluding Michael’s interest. The mortgage bore only his signature as did the corresponding promissory note.

Pursuant to the terms of the promissory note, Funk was to make 41 annual payments to the FmHA. The first, for $10,000, was due January 1, 1981. The second, for $15,000, was due January 1, 1982. Beginning January 1, 1983, annual installments were to increase to $19,507.

According to the documentary evidence filed with the circuit court, Funk made payments on the promissory note which reduced the principal balance due at the time of his death to $185,000. An additional $23,252.06 in accrued and unpaid interest was also due. Following Funk’s death, interest continued to accrue on the loan at the rate of approximately $50.68 per day.

A month after taking out the $205,000 loan secured by the mortgage on his farm, Funk obtained an additional loan from the FmHA pursuant to the Emergency Agricultural Credit Act of 1978 (7 U.S.C. § 1961 et seq.). The amount of the second loan was $31,000. It was subject to an interest rate of 14% and was to be paid in annual installments over a three-year period. To secure payment of the loan, Funk executed a security agreement and financing statement. The security agreement granted the government, acting through the FmHA, a security interest in crops grown on Funk’s farm, in crops grown by Funk on land owned by two other individuals, and in tractors and other farm equipment owned by Funk, subject to purchase money interests held by others on some items of that equipment. At the time of Funk’s death, he owed the FmHA $3,322.52 in principal and $495.74 in interest on this loan.

In February of 1981, Funk obtained a third loan from the FmHA pursuant to the Emergency Agricultural Credit Act of 1978 (7 U.S.C. § 1961 et seq.). The amount of the new loan was $39,290. It had a lower interest rate than the second loan, 13%, and a longer term. It was to be paid in annual installments over a five-year period, with the final payment due on the fifth anniversary of the loan. As with the second loan, Funk executed a security agreement and financing statement. Similar to the previous agreement, the new security agreement granted the government, acting through the FmHA, a security interest in crops grown on Funk’s farm, in crops grown by Funk on land owned by other individuals, and in tractors and other farm equipment owned by Funk, subject to purchase money interests held by others on some items of that equipment. Funk made payments on this loan, but still owed $1,782.34 in principal and $262.81 in interest when he passed away.

Funk applied for and obtained a fourth and final loan from the FmHA on April 1, 1982, approximately nine months prior to his death. It was an operating loan issued pursuant to the Consolidated Farm and Rural Development Act (7 U.S.C. § 1921 et seq.). The loan amount, $44,000, was larger than the second and third loans. It carried a higher interest rate, 14¼%, and a shorter term, just one year.

Unlike the earlier loans, the papers for this transaction were signed by Printy as well as by Funk. As with the previous two loans, a security agreement was executed granting the government, acting through the FmHA, a security interest in crops grown on Funk’s farm, in crops grown by Funk on land owned by other individuals, and in tractors and other farm equipment owned by Funk, subject to purchase money interests held by others on some items of that equipment.

The first payment on the fourth and final loan was due the week Funk died and was never made. Funk and Printy therefore still owed the full $44,000 principal amount of the loan plus accrued and unpaid interest of $4,067.65 when he died. Accordingly, of the $114,290 in total loan proceeds Funk received from the second, third and fourth loans between 1980 and 1982, $49,104.86 in principal and $4,826.20 in interest remained unpaid. Under the terms of the respective promissory notes, interest continued to accrue on the unpaid amounts at a combined rate of approximately $19.09 per day.

Pursuant to section 18 — 1 of the Probate Act (755 ILCS 5/18 — 1 (West 2004)), the state director of the FmHA filed a claim with Funk’s estate for the $185,000 in principal owed under the first loan, the $49,104.86 in principal owed on loans two through four, and the unpaid interest that had accrued and was continuing to accrue under all of the loans. Numerous additional claims were filed by Funk’s other creditors. These included unpaid bills for insurance premiums, electricity, equipment and parts, plumbing repairs, oil products, feed, fertilizer and other items; unpaid loans of more than $80,000 owed to a local bank; money owed the United States for two farm storage facility loans; the balance due on purchase agreements for farm machinery; and outstanding labor charges owed to individuals who helped harvest crops on Funk’s land. A report filed with the court on October 22, 1984, calculated the foregoing claims against the estate to be $463,472.76. That sum did not include court costs, taxes, attorney fees or other costs of administration.

Early in the administration of Funk’s estate, it became apparent to the executor and the FmHA that at the time of his death, Funk did not have sufficient assets to pay his debts. He had become insolvent, and now his estate was insolvent. One major reason for that was that Funk’s farmland was worth significantly less than the debt encumbering it. At the time of Funk’s death, the land in Tract I was estimated to be worth only $500 per acre, while Tracts II and III were thought to be worth $1,750 per acre. Using those estimates, the value of Tract I was only $31,000, while the value of Funk’s three-fourths interest in Tracts II and III amounted to $122,718.75, for a total value of $153,718.75. An immediate sale of the land would therefore not have yielded sufficient proceeds to cover even the principal balance still due on the mortgage, much less the accrued but unpaid interest.

To help guard against just such a situation, the FmHA had required Funk to assign to “the United States of America, acting through the Farmers Home Administration, United States Department of Agriculture, all of his right, title and interest in and to” certain specified life insurance policies. Unfortunately for the estate and the government, Funk failed to maintain the requisite policies. As a result, no proceeds from the policies were available to help pay off the mortgage when he died.

Given the dire condition in which Funk had left his finances, the FmHA invoked the Federal Insolvency Statute when it submitted its claims against Funk’s estate. Cited by the FmHA as “31 U.S.C. 191,” the statute was actually amended in 1982, prior to Funk’s death, to update its language. Now codified as 31 U.S.C. § 3713, the statute has been in force since 1797 without significant modifications. United States v. Emory, 314 U.S. 423, 428, 86 L. Ed. 315, 322, 62 S. Ct. 317, 320 (1941). It provides, in pertinent part, that “[a] claim of the United States Government shall be paid first when *** the estate of a deceased debtor, in the custody of the executor or administrator, is not enough to pay all debts of the debtor.” 31 U.S.C. § 3713(a) (2000).

Under section 3713(a), the United States is entitled to priority with respect to the payment of “debts of the debtor,” not debts incurred by the estate. The priority of the federal government is limited to the net proceeds from the property of the deceased after the debts of the estate are paid. Statutory amounts due a widow and a decedent’s minor child, funeral and burial expenses, and expenses of administration of the estate are debts of the estate, not debts of the deceased. As a result, the claims of the United States do not take priority over payment for those items. See In re Estate of Igoe, 717 S.W.2d 524, 527 (Mo. 1986); Martin v. Dennett, 626 P.2d 473, 475 (Utah 1981); In re Estate of Gleason, 68—1 U.S. Tax Cas. (CCH) P9416; 21 A.F.T.R.2d (RIA) 1364 (D. Ks. 1968); United States v. Weisburn, 48 F. Supp. 393, 397 (E.D. Pa. 1943); United States v. Hunter, 5 Mason 229, 26 F. Cas. 439 (Cir. Ct. D. R.I. 1828); 31 Am. Jur. 2d Executors & Administrators § 663 (2002).

Priority for payment of claims against the estate is determined by the classification scheme set forth in section 18 — 10 of the Probate Act of 1975 (755 ILCS 5/18 — 10 (West 2004)). Under that system, funeral and burial expenses and expenses of administration are included in the first class of claims against the estate. The surviving spouse’s or child’s award is ranked second. Debts due the United States come third. Four additional categories of claims follow those. Section 18 — 13 of the Probate Act (755 ILCS 5/18 — 13 (West 2004)) provides that with one exception not relevant here, the representative of the estate is required to pay claims against the estate in order of their classification under this system. See In re Estate of Brooks, 134 Ill. App. 3d 993, 994-95 (1985).

The primacy of funeral expenses, expenses of administration, and what the government referred to as the “widow’s dower or allowance” was acknowledged by the FmHA at the outset of these proceedings, when it submitted its claim for payment of the balance due on the four loans it had made to Funk before he died. In a letter signed by the FmHA’s county supervisor explaining the government’s intention to invoke its statutory priority under what is now 31 U.S.C. § 3713(a), the government specifically advised Printy that

“[i]t has been held that debts due the United States and entitled to priority under [the statute] are not payable until after payment of the costs of administration of the estate, widow’s dower or allowance, funeral expenses, and state taxes levied on the estate as such ***.”

It was against this background that Printy, in her capacity as executor, and Cherry, acting as her attorney, proceeded with the management and disposition of the estate’s assets. Because Funk had fallen behind in his mortgage payments for the farm, the government could have initiated foreclosure proceedings. It elected not to do so. Instead, the FmHA considered it more prudent to have the estate continue to operate the farm until Michael, the minor child, attained his majority. Two reasons were given for this decision: (1) the government had instituted a temporary national moratorium against farm foreclosures, and (2) once Michael attained his majority, he could convey his one-fourth interest in Tracts II and III, allowing the property to be sold unencumbered, thereby enhancing its marketability.

With the government’s approval, Printy, as executor, assumed control of the farm’s operations. Lacking access to cash or loans to finance cultivation and harvesting and not wishing to expose the estate to the risks associated with growing crops, Printy rented the farm to a tenant on a net one-third basis. Under this arrangement, the tenant was to pay all crop expenses and receive two-thirds of the crop. The remaining one-third would be paid to the estate.

At this time, crops harvested from the farm prior to Funk’s death remained in storage. Printy arranged for the stored crops to be sold. The sale, which was completed in July of 1983, yielded $64,441.51 in net proceeds for the estate. An additional $35.70 was added to that sum later for additional interest that had accrued before the sale proceeds were distributed. In addition, Printy identified and liquidated two smaller amounts of grain for $1,238.78 and $1,392.83. These sums totaled $67,108.82 and were deposited into the estate’s checking account.

With respect to the vehicles and various pieces of farm equipment and machinery owned by Funk at the time of his death, Printy retained Leroy Moss Auction Company to sell them at auction. The auction netted $54,756.25 for the estate, after sales commissions, advertising and labor costs incurred by the auctioneer. That sum was also deposited in the estate’s checking account.

The sale of the stored grain was completed in July of 1983. The proceeds from the auction were received in June of 1983. Proceeds from Funk’s remaining life insurance policy, noted earlier in this opinion, were deposited in the estate’s checking account in March of 1983. Additional moneys were received and deposited at various other times during the year. These included a small refund from FS Credit Corporation on March 5, 2003; an additional payment of $62.79 from the life insurance company on June 8, 1983; $1700.53 from GLH Grain Company on July 22, 1983, for the estate’s share of grain harvested on the Funk Farm following Funk’s death; and a refund of $87.85 deposited on July 29, 1983, relating to overpayment of advertising charges for the auction.

In addition to receiving and depositing the foregoing sums, Printy made various cash disbursements during the first 10 months the estate was open. Among these were a $10,000 payment to her as a surviving spouse’s award and a $2,000 payment to Michael as his surviving child’s award pursuant to section 15 — 1 of the Probate Act (755 ILCS 5/15 — 1 (West 2004)) on March 9, 1983; payments totaling $108.30 to the Scott County Farm Bureau on May 19, 1983, for membership fees and other charges; $940.49 on June 8, 1983, for real estate taxes; and periodic disbursements to David Cherry for the legal services he performed on behalf of the estate. Cherry’s attorney fees totaled $4,239 and were paid as follows: $1,047.50 on March 9, 1983; $1,551 on May 5, 1983; $1,285.50 on July 1, 1983; $169.50 on August 3, 1983; and $186 on September 8, 1983.

The receipts and disbursements just described were detailed in the first report and account filed by Printy, in her capacity as executor, on October 11, 1983. The circuit court approved that account, without objection, in an order filed October 31, 1983.

In the months that followed, discussions took place between Cherry and an assistant United States Attorney assigned to the case to explore the possibility of disposing of the farm before Michael attained his majority. Among the proposals considered by the parties was for the FmHA to foreclose on Funk’s interests in the property; to allow the FmHA to take possession of the farm and operate it until Michael turned 18, then sell it; to continue having the executor operate the farm in the context of the probate proceedings and then sell it following Michael’s eighteenth birthday; or to bring an action to partition the 93 acres in which Funk had held a three-fourths interest and sell that.

A hearing on various outstanding claims against the estate, including those asserted by the FmHA, was set for late fall of 1984. That hearing was conducted on October 22, 1984, after the requisite notice was given. To assist the court in resolving the outstanding claims, Printy, through Cherry, filed a report on October 22, 1984, detailing the estate’s assets and liabilities and listing the outstanding claims against the estate according to their priority under section 18 — 10 of the Probate Act of 1975 (755 ILCS 5/18 — 10 (West 2004)). Based on the materials presented at the hearing, the court entered an order denying one claim outright, continuing until another time the hearing on a $6,488.20 claim related to some litigation in which Funk had been involved, and delaying the hearing on the FmHA’s claims for repayment of its four loans until a time set by agreement of the parties. Finally, the court considered and allowed a total of $102,857.59 in seventh class claims. Included among these claims was the $80,000 bank loan and the unpaid bills for insurance, electricity, oil products, plumbing repairs and various other items noted earlier in this opinion.

Although the court allowed the seventh class claims, it did not order them to be paid and Printy did not pay them. Because those claims were of a lower priority than other claims which had not yet been paid, most notably the claims for the expense of administering the estate and those asserted by the United States government, they could not be paid by the executor unless and until there were sufficient funds to first pay off the higher priority claims. See 755 ILCS 5/18 — 13 (West 2004). That condition was not met at the time Printy filed her report with the court prior to the October hearing. According to that report, the amount of outstanding claims exceeded the value of the estate’s assets by an estimated $174,368.84, not including costs of administration, court costs and state and federal tax obligations. As interest on outstanding loans continued to accrue and administration expenses mounted, so too did this deficit.

In November of 1984, Printy filed her second verified report and account under section 24 — 1 of the Probate Act of 1975 (755 ILCS 5/24 — 1 (West 2004)) covering the period from the end of the first report until October 25, 1984. That account disclosed that the estate had received $828.76 on July 24, 1984, and $5,435.38 on October 20, 1983, as its share of the proceeds from the sale of new crops grown on Funk’s farm, plus an additional $35.70 on February 27, 1984, representing additional interest that had accrued in connection with prior grain sales. The account also reported the following disbursements: $3,055.21 to Carlinville Ford to pay off its secured claim on one of the items that had been sold at the auction in 1983; $324 for crop insurance premiums; $2,415.06 in real estate taxes; $808.67 in federal taxes; $126 for tax preparation; $1,566.03 to Michael Funk for his share of the proceeds from the sale of the new crops grown on the farm; a small check charge to the bank; and a total of $2,269.75 in attorney fees to Cherry, paid in 11 increments between November 7, 1983, and October 5, 1984. In addition, the report and account showed that in June of 1984, Printy, as executor, had placed $130,000 of the cash held by the estate in an interest-bearing certifícate of deposit (CD) and that the CD had generated $3,208.68 in interest during that reporting period.

The cash used to purchase the certificate of deposit was derived from the sale of grain following Funk’s death and the auction of the farm equipment and machinery the previous year. The decision to place the money in a CD followed numerous letters, calls and meetings in which Cherry, the FmHA, and counsel for the United States Justice Department, representing the FmHA, attempted to work out how the government’s claims against the estate could best be resolved. At each step of the process, the estate kept the court and the government fully advised as to how it was proceeding. The government acknowledged the difficulty posed by the administration of Funk’s estate and made no objection to the manner in which matters were being handled by Printy. Indeed, by letter dated April 25, 1984, the government expressly authorized the estate to place the $130,000 in sale and auction proceeds into an interest-bearing account.

A hearing on Printy’s second verified report and account was held on November 16, 1984, after requisite notice was given to all claimants, including the FmHA. No objection to that report and account was made, and it was approved by the court. The court also considered a request by the estate to authorize an additional $20,000 payment to Printy for her surviving spouse award and an additional $4,000 payment to Michael for his surviving child award. Finding that proper notice of that request had been given and that no objection had been made, the court approved those amounts.

In accordance with the court’s order approving the surviving spouse and child awards, Printy transferred $24,000 from the account in which the sale and auction proceeds had been deposited and made the specified payments. That transfer, which occurred on December 28, 1984, reduced the balance of the CD to $106,000. When the CD subsequently matured on June 28, 1985, the government requested that the proceeds be remitted to the FmHA, through its county supervisor. Printy complied, issuing a check to the FmHA for the full amount of the remaining principal, $106,000, plus an additional $4,000 in accrued interest, for a total of $110,000. The check was transmitted to the FmHA with a cover letter from Cherry dated July 17, 1985.

Upon receipt of the $110,000 payment, the government applied $68,789.48 to pay off the three FmHA loans secured by crops and farm machinery and equipment which Funk had taken out in 1980 (for $31,000), in 1981 (for $39,290) and in 1982 (for $44,000). The FmHA returned the corresponding promissory notes to Printy, as executor, on September 13, 1985. Each note was marked “paid in full.”

After the three loans were paid off, the FmHA took the $41,210.52 remaining balance from the estate’s $110,000 payment and applied it to the fourth and final loan, which was secured by the mortgage on Funk’s farm. With the additional interest that had accrued on that loan in the years following Funk’s death, the balance still due was calculated to be $205,000, exactly the same as the original loan amount.

The $110,000 payment to the FmHA left only a small amount in the estate’s checking account. At the time, Cherry estimated the remaining amount to be approximately $9,000, and so advised the FmHA. The government did not object to the estate’s retention of that sum. It advised Cherry, however, that it expected the estate to either turn the money over to the FmHA “at some point in time” or else provide the government with an accounting of how the funds were spent.

At the same time the three smaller FmHA loans were paid off, further attention was given by the estate and the government to repayment of the loan secured by the mortgage on the farm. The FmHA ultimately rejected the idea of exercising its right under the mortgage to foreclose and decided against taking over operation of the farm until Michael turned 18. Eather, it chose to maintain the status quo. By agreement with the executor, the estate was to remain open and the executor was to continue operation of the farm until Michael attained his majority, at which time the parties would decide whether the entire farm should be sold or whether the real estate should be partitioned and only the estate’s share sold. The agreement further provided that, during the interim, the FmHA was to receive a share of the proceeds from the sale of any grain grown on the property.

Following these developments, the estate went on with the business of operating the farm. Printy filed her third verified report and account with the circuit court on March 20, 1986. That document covered the period between October 25, 1984, and the date on which the document was filed. It listed all of the financial transactions that had taken place since the previous report, including the transfer of funds to pay the surviving spouse’s and child’s awards and the $110,000 payment to the FmHA. The report itemized receipts from the sale of crops, two modest dividends, and interest paid on the certificate of deposit before it matured. It also listed all cash disbursements, including payment to Michael for his share of the crop proceeds and payments to Cherry for the legal services he performed on behalf of the estate. As with past attorney fees, these were disbursed every month or so during the reporting period. Over the course of this reporting period, which was slightly longer than previous ones, 14 attorney fee payments were made ranging in size from $7.50 to $1,220. The total amount of fees was $3,915. The total amount left in the estate’s checking account, following all the receipts and disbursements, was $14,406.57. Aside from that checking account, the estate held no other assets except for Funk’s farm.

Neither the government nor any other creditor objected to the March 20, 1986, report and account. The FmHA merely sent a letter to Cherry, in his capacity as Printy’s attorney, acknowledging the amount of cash on hand listed in the report and requesting that the estate remit to it some of the proceeds from crop sales to be applied to the remaining loan on the farm. Based on the reports and accounts filed by Printy, the FmHA correctly computed that the estate had received a total of $7,941.02 from the sale of crops during 1985. The FmHA regarded that as an appropriate minimum payment. The government indicated a desire to receive more than that, but acknowledged that the estate needed to retain “some reserve for payment of taxes, etc.” Printy signed a check for $7,941.02 payable to the FmHA on October 8, 1986, and it was forwarded to the agency by Cherry that same day.

With that payment and the $41,210.52 applied to the farm loan the year before, the estate had paid a total of $49,151.54 toward the mortgage since Funk’s death. As indicated earlier in this opinion, Funk was $23,252.06 in arrears when he died. Under the terms of the promissory note secured by the mortgage, three additional payments of $19,507 each should have been made between 1984 and 1986. The arrearage plus the three additional installments due totaled $81,773.06. Even with the payments tendered by the estate, a deficiency of $32,621.52 therefore remained under the loan. It continued to grow each day as additional interest accrued.

Where a loan issued by the Department of Agriculture and administered by the FmHA falls into arrears, Congress has given the Secretary of Agriculture authority to permit the deferral of principal and interest payments upon a showing by the borrower that due to circumstances beyond the borrower’s control, the borrower is temporarily unable to continue making payments when due without unduly impairing the borrower’s standard of living. 7 U.S.C. § 1981a (2000). The government is required to give notice to borrowers that such deferral opportunities are available (Curry v. Block, 738 F.2d 1556, 1560-61 (11th Cir. 1984)), and such notice was given in this case by letter dated February 18, 1986. By the time that letter was received, the estate was operating under what amounted to a deferral from the FmHA already. As a result, no further action was taken by the estate in response to the notice, and none was required by the FmHA or the Department of Agriculture. The FmHA continued to forebear from foreclosure, and the estate was left with the responsibility for operating the farm until Michael turned 18.

During the remainder of 1986 and throughout 1987, little of consequence occurred. Printy’s administration of the estate and the estate’s operation of the farm were routine. The estate received $6,001.40 in payment for its share of crops harvested from the farm in 1986 and gave Michael his one-fourth share of that, $1,500.35. With the knowledge and prior approval of the FmHA, it used $700 to pay part of the expense of repairing a division fence, transferred $2,700 to the FmHA to be applied toward the mortgage, and retained the remainder, $1,101.05, for expenses in administration of the estate.

In November of 1986, the FmHA noticed that the real estate taxes on the property had not been paid and asked Printy to take care of it. Records show that the estate made two payments of $748.64 to the county treasurer. The estate also paid a crop insurance premium and continued making periodic payments to Cherry for the estate work he was doing on Printy’s behalf. The total amount of the fees for this period was $3,616.23.

Printy’s fourth verified report and account, filed with the court on November 12, 1987, covered the period from the end of the previous report through October 26, 1987, and detailed each of the foregoing transactions. To the $14,406.57 in cash on hand at the conclusion of the previous reporting period, the estate added a total of $9,451.41 in additional cash receipts and made $19,827.25 in disbursements, leaving a cash balance of $4,030.73. According to the report and account, that sum, and the estate’s interest in the farmland, remained the estate’s sole assets.

As with the three prior verified reports and accounts filed by Printy, no objection was filed by the government or any other creditor. Administration of the estate continued without controversy. When 1988 arrived and Michael turned 18, Printy filed a verified petition for leave to sell the farm as previously agreed with the FmHA. A hearing on that petition was held September 19, 1988. There being no objection, the petition was approved by the court in a written order filed October 7, 1988. In accordance with the order, notices were published and a public auction was conducted the following month.

The estate retained Moss Real Estate & Auction Company to handle the auction. As indicated earlier in this opinion, the farm consisted of three tracts. The FmHA submitted the highest and best bid, for $31,000, for Tract I. The highest and best bid for the 37.5 acres in Tract II was the $54,375 offered by Frank and Sandra Grubb. Clarence and Ruth Baird were the highest and best bidders, at $91,000, for the 56 acres comprising Tract III.

Printy promptly filed reports with the court asking that each of the three sales be approved. She also petitioned the court to award her the sum of $25,000 for her fees as executor of the estate. A hearing on those matters was conducted on January 20, 1989. All required notices having been given and no objections having been made, the court approved each of the sales, authorized Printy to close the sales, and granted her request for an award of $25,000 in executor fees.

At Cherry’s request, the FmHA agreed to release its mortgage with respect to Tracts II and III in order to permit the sales to be closed and the property to be conveyed to the new owners. When he submitted the mortgage release to the FmHA, Cherry advised the agency in writing that the proceeds of the sale would be placed in an account for the purpose of paying expenses and making a distribution of the proceeds. Cherry confirmed that, consistent with the provisions of 31 U.S.C. § 3713, invoked by the FmHA when it filed its claim against the estate, the government’s claim would have priority over all other outstanding claims with the exception of those for expenses of administration. In response, the FmHA executed documents releasing the property from the liens held by the government. The release specified that it did not affect or modify the loan obligation which the mortgage had secured, a point on which the parties were in agreement. There was no dispute that release of the liens did not excuse the estate from its responsibilities to repay the promissory note.

There was no need for the estate to seek release of the mortgage as to Tract I because, as we have just indicated, that parcel was purchased by the FmHA itself. Subsequent to that purchase, and its approval by the court, the FmHA asked the estate to put Tract I up for auction again. The estate agreed to do so provided that the sale expenses would be deducted from the proceeds. The FmHA gave written assent to that arrangement. A new sale was conducted, and Tract I was sold to Thelma Keehner for $24,000.

By the time the farmland was sold in 1989, the estate had been open for more than six years. As our discussion has suggested, the relationship between Printy and the FmHA throughout this period was marked by cooperation. Both sides recognized the challenges posed by the insolvency of the estate, and both sides strove to ensure that the estate’s financial problems were handled in a rational and appropriate manner.

Although Printy was eventually able to recover a fee for her work as executor and although her son Michael received a share of the proceeds from crop sales over the course of the years, the arrangement inured principally to the benefit of the United States. As a result of Printy’s efforts and the substantial assistance she received from Cherry, the estate was able to pay in full three of the four government loans still outstanding at the time of Funk’s death and make substantial payments toward the fourth. The government was spared the expense of foreclosure, did not have to seek partition of the property, and was able to share in the revenue produced by the farm without assuming any risk or responsibility for the farm’s operations. The land was kept productive and its value was preserved, if not increased, until Michael turned 18 and the property could be sold. In addition, when the property was sold, the government was freed from having to make any of the arrangements. The sales were organized by Printy and the closings were handled by Printy.

Printy drafted a proposed final report and account in the spring of 1989 and submitted a copy of it to the government. Despite the extent of the work Printy had done and the advantages the government received as a result of her labors, the FmHA and the assistant United States Attorney with whom it was then consulting about the case were displeased by the final attorney fees which the proposed final account and report showed that Printy had paid Cherry. Although the government did not object to them at the time they were approved by the court, the FmHA and the assistant United States Attorney also had concerns over the executor fees Printy was paid. In September of 1989, the government therefore requested “a breakdown of the hours and expenses for the administrative and attorney costs in handling [the] estate.” It also asked for information regarding how the surviving spouse award had been determined even though, as with the executor fee, it had not objected to either installment of that award at the time the installments were approved by the court and paid.

Cherry discovered problems with the proposed final report unrelated to the foregoing issues and refrained from filing it with the court. Although that draft was never filed, the government nevertheless filed an objection to it. That objection was limited to the amount of executor fees Printy had received and the size of the payments she had made to Cherry for attorney fees after October 26, 1987. The government did not challenge the estate’s authority to make the payments. Its contention was simply that the payments were excessive given the size of the estate.

The government’s objection lay dormant in the court file. Hearings were scheduled at various times and rescheduled, without objection. On October 20, 1989, the cause was “continued generally to be reset at request of parties.” The reason given for this continuance was that the final tax returns, necessary to determine the amount available for distribution, had not been completed.

Although nothing further was filed with the court during the ensuing months, the United States Attorney’s office sent Cherry a letter in late June of 1990 claiming that the balance due on the mortgage as of June 25, 1990, had risen to $294,485.17. The letter stated that “legitimate itemized expenses relating to the sale of the property can be deducted from the sale proceeds,” but demanded full payment within 30 days.

Cherry filed a prompt response to that letter which provided documentation about the sales and advising that a current report would be forthcoming. Cherry’s response elicited another letter from the United States Attorney’s office, dated August 17, 1990, advising that based on the information Cherry had provided, the estate should distribute $126,161.57 of the sale proceeds to the FmHA, consisting of $131,477.90 in proceeds less $5,316.33 in sale expenses. Inexplicably, the letter then concluded by stating that the United States Attorney’s office would be “making formal demand for full payment of $131,477.90 to FMHA within 30 days.”

One week later, on August 24, 1990, the estate filed its fifth report and account with the court. This report covered the period between October 26, 1987, when the fourth report ended, and August 10, 1990. That report showed that the estate began with a cash balance of $4,030.73 at the start of the period and collected an additional $189,431.24, consisting of $14,415.40 in proceeds from the sale of crops harvested from the farm prior to its sale, $167,235.96 from the sale of the farm itself, monthly interest on the estate’s bank account, and a few minor items, including refund of an overpayment from the Internal Revenue Service. Offsetting the receipts were $108,946.45 in disbursements, including $39,361.88 to Michael for his share of the crop sales and his interest in the real estate, $4,023.50 to the company which conducted the real estate auction, charges for advertising the auction, real estate taxes, federal taxes, tax preparation fees, expenses for fence repair, the $25,000 executor fee approved by the court and paid to Printy, and Cherry’s attorney fees. According to the report, the attorney fees consisted of $7,994.50 paid to Cherry as they were incurred in installments ranging from $37.50 to $1,830.00 plus a final lump-sum payment of $25,000 in April of 1989.

Following these disbursements, the cash balance left in the estate to pay creditors was $84,515.52. All but $141.38 of this amount was transferred to an interest-bearing trust account to protect Printy from any temptation she might have to use the funds for nonestate purposes and to ensure that they remained available to meet the estate’s obligations. The existence, size and purpose of the trust account were known to the court and documented in the record.

Shortly after the fifth report and account was filed, the government filed a new objection. As with the government’s 1989 objection, this version claimed that the executor fees and attorney fees were excessive. In addition, it complained that although the FmHA had agreed to release its liens on the farmland to facilitate the property’s sale and the sale had gone forward, it had not yet received any of the proceeds. No other aspect of the report or the administration of the estate was questioned. The objection simply asked for an order (1) requiring Printy and Cherry to document the basis for the $25,000 payments each of them had received in the latest reporting period and (2) directing the estate to immediately disburse the amounts still owed to the FmHA.

In demanding payment of the amounts still owed to the FmHA, the government’s objection asserted that the estate had made no payments “to FmHA on the farming property.” This claim was false. As we have noted, Printy made several payments to the FmHA which were credited against the balance due on the mortgage. In July of 1985, Printy had issued a check to the FmHA for $110,000, of which $41,210.52 was applied to the mortgage and the balance was used to pay off the other three loans in full. In addition, Printy paid $7,941.02 to the FmHA in 1985 and $2,700 to the FmHA in 1986 as its share of the proceeds from the sale of crops. Both sums were applied to the mortgage, the only debt the estate still owed to the FmHA after the other three loans were paid off.

Following submission of the government’s objection, the cause went dormant again. The next filing occurred on February 10, 1992, when Printy filed her sixth verified report and account. This account covered the period between her previous report and account and January 7, 1992. According to this report, the estate’s sole income consisted of $6,991.63 in interest earned on the account in which the proceeds of the land sale were being held. Disbursements, totalling $2,699.56, consisted of bank service charges, state and federal taxes and $200 paid to a tax preparer. Although Cherry continued to perform significant services on behalf of the estate, he received no fees from the estate for those services and submitted no claim to the court for compensation. At the end of the reporting period, the estate reported having a total of $88,807.59 in the bank. All other assets had been distributed. It owned nothing else.

Printy’s sixth report and account triggered a brief objection from the government. The objection did not dispute the veracity of Printy’s report or the accuracy of her accounts. It merely renewed the government’s complaint that it had not yet “been paid the amounts that are owed to it from the sale of the decedent’s property.” In addition, it asserted, as it had in its initial objection, that the $25,000 paid to Printy and approved by the court for her executor fee and the final $25,000 in attorney fees paid to Cherry for his work on behalf of the estate were “excessive and unreasonable.”

Nothing further took place until the following year. In April of 1993, Printy filed her seventh verified report and account. Once again, the sole income received by the estate was interest from the bank account containing the proceeds from the sale of the farm. This time, the interest totaled $4,094.89. Disbursements, amounting to $886.77, were made for bank service charges, a tax preparation fee and state and federal taxes. The result was a net increase in the estate’s accounts to $92,015.71. No other assets remained and none were reported. As with the previous report, no additional attorney fees were paid or requested even though Cherry continued to perform work on the estate’s behalf.

Following submission of the seventh report, the government elected not to file any new objections. Another year passed. Although nothing further was filed with the court during the interim, the record shows that Cherry was in ongoing communication with the FmHA and the United States Attorney’s office in an effort to resolve any remaining issues, settle the FmHA’s claims, and finally close the estate. The sticking point had nothing to do with the FmHA’s priority over the other creditors whose claims had been allowed but remained unpaid. It was assumed that whatever money remained in the estate’s accounts would be paid to the FmHA in satisfaction of the promissory note secured by the mortgage. The difficulty was with Printy’s $25,000 executor’s fee and the final $25,000 in attorney fees paid to Cherry in April of 1989, four years earlier. The FmHA did not question that Printy was entitled to an executor’s fee or that Cherry should be paid for the legal work he performed on behalf of the estate. As we have already noted, giving priority to such expenses of administration was permitted by the Federal Insolvency Statute (31 U.S.C. § 3713 (2000)) and specifically acknowledged by the FmHA when it asserted its original claim in the probate action. The only problem the FmHA had with the fees, so far as we can tell, was the one it asserted in the objections it filed to Printy’s fifth and sixth verified reports and accounts and to the proposed final account circulated but never filed in 1989: it believed that the disputed $50,000 in fees were simply excessive and unreasonable.

The government’s view was that if the executor and attorney fees were scaled back, the money could be added to the funds obtained from the sale of the farm, thereby increasing the amount the government would receive in satisfaction of the promissory note secured by the mortgage. Without that adjustment, the amount the government stood to recover from the estate was the $92,015.71 identified in Printy’s seventh report and account, plus any interest accruing since the report was filed. In a letter transmitted to Cherry in August of 1993, the government advised that it believed $124,500 to be a fair settlement amount, taking into account the costs of the sale, including publication costs and Cherry’s attorney fees.

The government’s settlement offer exceeded the funds left in the estate by $32,484.29. It would therefore have necessitated return by Printy of some, if not all, of the executor’s fees approved by the court, leaving her with no compensation for a decade’s worth of work on behalf of the estate and for the benefit of the government. It would also have required Cherry to further discount his fee, notwithstanding that he had been paid nothing for his work since 1989, and made no provision for further payment, despite the fact that the estate could still not be closed and significant work for the estate still lay ahead.

Although records filed with the circuit court showed that Cherry prepared a proposed stipulation and judgment in April of 1994, the terms of that stipulation have not been disclosed. All we know is that no settlement was reached. Failing settlement, Cherry returned to court to obtain a hearing on the government’s objections to Printy’s $25,000 executor’s fee and the $25,000 final payment he received for his attorney fees and for resolution of the government’s claim for repayment of the promissory note secured by the mortgage on Funk’s farm. The circuit court granted Cherry’s request and set the matter for hearing on June 17, 1994.

Cherry’s efforts to enlist the aid of the court had an unexpected effect. Rather than hasten the long overdue termination of Funk’s estate, it triggered a succession of legal maneuvers by the United States Attorney’s office that would ultimately keep the estate open for another full decade and more. The government’s immediate response was to file an objection to the estate’s “current report and account.” That objection, filed less than a week before the scheduled June 17 hearing, was not addressed to the seventh and most recent current report and account filed in April of 1993. It was not even addressed to the report and account filed before that, in February of 1992. Instead, it reached back to the fifth account and report filed nearly four years earlier on August 24, 1990.

As we have detailed, the government already had an objection to that report and account on file. Submitted on September 10, 1990, that objection claimed simply that the $25,000 executor fee received by Printy and the $25,000 final attorney fee payment made to Cherry were excessive and unreasonable. As relief, the objection requested an order requiring Printy and Cherry to document the basis for the foregoing payments and directing the estate to immediately disburse the amounts still owed to the FmHA.

The new objection submitted by the government purported to be a memorandum in support of the September 10, 1990, objection. In one limited respect it was. It did address the assertion made in the September 10, 1990, objection that the $25,000 payments to Printy and Cherry reported in the August 24, 1990, report and account could not be justified absent additional documentation. Aside from that, however, the 1994 memorandum represented a quantum shift in the government’s position. In direct contrast to the position it had taken since the inception of these proceedings, the government asserted that none of the expenses of administration, including attorney fees, could be paid out of the proceeds of the sale of the farmland secured by the FmHA mortgage. It further asserted, for the first time, that the estate had failed to properly distribute to the government the estate’s share of the proceeds from the sale of crops for the years 1987 and 1988, and suggested that the conduct of Printy and Cherry in handling the estate’s affairs in the years that followed had been wrongful.

With respect to its claim that Printy and Cherry had acted improperly in administering the estate, the government anticipated, quite rightly, that Printy and Cherry would adduce evidence that their actions were sanctioned by the FmHA officials with whom they had dealt regarding the government’s claims. To forestall this defense, the United States Attorney’s office filed a motion in limine prior to the scheduled hearing to bar the introduction into evidence of any representations by the FmHA officials “concerning use of proceeds of sale of real estate mortgaged to [FmHA] for payment of any costs of administration, attorney’s fees incurred in probating this estate, executor’s fees or any other fees or expenses except for costs of sale of the mortgaged real estate.”

The June 17 hearing was postponed to provide Cherry time to file a response to the government’s latest objection. On July 15, the hearing was continued again at the request of the United States Attorney’s office. Ironically, the reason given by the government for seeking the request was that one of the principal FmHA officials with whom Printy and Cherry had dealt was unavailable to testify at that time.

In due course, Cherry, on behalf of the estate, filed an objection to the government’s motion in limine and a response to the new objection to the August 24, 1990, report and account. Following various developments, including a decision by the government in September of 1994 to submit a belated objection to Printy’s fourth verified report and account dated November 12, 1987, the court conducted a hearing on the motion in limine in December of 1994. The motion was denied. The court then continued the hearing on the government’s objections and set a discovery schedule.

With the failure of its motion in limine and the circuit court’s decision to permit additional discovery before reaching the merits of the government’s latest objections, the United States Attorney’s office decided to seek relief in a different forum under another new theory. It brought a civil action against Cherry and Printy in the United States District Court for the Central District of Illinois alleging that the two of them had converted the proceeds from the sale of the mortgaged farmland. The federal court, however, refused to allow the United States to use that forum to supplant the ongoing state court proceedings. It abstained from hearing the government’s claim under the authority of Colorado River Water Conservation District v. United States, 424 U.S. 800, 817-18, 47 L. Ed. 2d 483, 498, 96 S. Ct. 1236, 1246 (1976), which permits a federal court to stay or dismiss a suit, in exceptional circumstances, when a concurrent state proceeding is pending and the stay or dismissal of the federal action would promote wise judicial administration.

Colorado River abstention is discretionary. In determining whether the doctrine should be invoked, a court must consider a number of factors. One of those factors is the vexatious or contrived nature of the federal claim. See Clark v. Lacey, 376 F.3d 682, 685 (7th Cir. 2004). In applying that factor to the government’s federal action here, the federal district judge cited contentions raised by Printy and Cherry that the United States had looked to the federal forum because of the failure of its motion in limine in the state court action and that it had joined Cherry as a party only because it believed Printy to be indigent and unlikely to have the resources to satisfy a judgment, while Cherry was perceived to be wealthy.

The federal judge specifically stated that he agreed with this characterization of what had taken place. He wrote that the United States had litigated the same issue asserted in the federal action

“in the probate proceeding beginning in 1989 when it first objected to the payment of executor and attorney fees to [Printy and Cherry]. After such time, it allowed [Printy and Cherry] to continue the sale of the last piece of property. In 1994, as the issue regarding the use of the proceeds of the mortgage to pay the attorney and executor fees came close to the hearing, [the United States] filed a motion in limine to prevent FmHA agent Jeffrey Koch from testifying. On March 31, 1995, [the United States] filed the action in federal court. The Court has no doubt that such action was in response to the adverse ruling from the state court regarding its motion in limine. It appears that [the United States] thought it would lose its claim and sought another forum.” United States of America v. Cherry, No. 95—3101, slip op. at 14 (C.D. Ill. October 28, 1996).

Based on this and other factors, the court stayed the federal action pending termination of the probate proceeding in state court and denied a pending motion for summary judgment filed by the United States. United States of America v. Cherry, slip op. at 14-15.

While the federal action was pending, Printy filed exhaustive documentation with the circuit court in response to interrogatories previously propounded by the government. The probate action was subsequently stayed pending the federal court’s determination as to whether it would proceed with the government’s federal claim. The decision by the federal court to abstain from hearing the government’s federal claim was filed at the end of October 1996. Following that ruling, the probate proceedings went forward again.

In June of 1997, a hearing was held in the circuit court at which the parties agreed to complete discovery by September 9, 1997, a pretrial hearing was scheduled for October 16, 1997, and a hearing on the government’s objections to Printy’s fifth verified report and account was set for November 1997. Immediately after the June 1997 hearing, the government served Printy with a voluminous request for admission of facts. When Printy balked at responding to the request to admit, the government moved for an order deeming the facts set forth in the request to have been admitted unless Printy could show cause why those facts “should not be confessed against her.” Following a written objection by the estate and a hearing on October 16, 1997, at