Brady v. Citizens Union Savings Bank

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14-P-1641 Appeals Court
W. NANCY BRADY, executrix,1 & another2 vs. CITIZENS UNION
SAVINGS BANK3 & another.4
No. 14-P-1641.
Bristol. June 1, 2015. - September 30, 2015.
Present: Sullivan, Maldonado, & Massing, JJ.
Probate Court, Attorney's fees, Trust. Trust, Attorney's fees.
Practice, Civil, Attorney's fees. Executor and
Administrator, Attorney's fees.
Complaint in equity filed in the Bristol Division of the
Probate and Family Court Department on July 13, 2011.
The case was heard by Virginia M. Ward, J.
Philip J. Laffey for Dale Eggers.
Edwin F. Landers, Jr., for W. Nancy Brady.
Ben Nathan Dunlap for Edwin J. Haznar, Jr.
1
Of the estate of Thomas T. Brady.
2
Edwin J. Haznar, Jr., executor of the estate of Edwin J.
Haznar.
3
The complaint names the bank in its capacity as bailee of
the assets of the Wilson O. Smith Trust.
4
Dale Eggers.
2
MASSING, J. Defendant Dale Eggers, a beneficiary of the
William O. Smith Trust (the trust), appeals from a decree issued
by a judge of the Probate and Family Court awarding attorney's
fees, costs, and compensation for professional services to be
paid to the plaintiffs from trust funds. The plaintiffs'
petition to the court claimed that their decedents (the
trustees) had rendered legal and accounting services to the
trust and had incurred expenses in their defense of a lawsuit
that Eggers initiated against them in connection with their
duties as trustees. The amount of the award was nearly sixty
percent of the value of the trust at the time of the petition.
While we do not reach the question of the reasonableness of the
award, we remand the case for the judge to "undertake a more
specific and searching analysis of the actual requests for fees
and costs submitted than the record suggests took place."
Matter of the Estate of King, 455 Mass. 796, 809 (2010) (King).
Background. Eggers's father, Wilson O. Smith, established
the trust in 1987. Among the beneficiaries were Smith's wife,
Betty Georgas (who was not Eggers's mother), Eggers, and
Eggers's children. In December, 2006, Eggers and one of her
daughters initiated a lawsuit in the Probate and Family Court
against the trustees, Thomas T. Brady and Edwin J. Haznar,
alleging breach of fiduciary duty in their 1994 conveyance of a
3
Florida property out of the trust to Georgas (the prior action).
After nearly four years of litigation, on November 8, 2010,
summary judgment entered in favor of the trustees. Among the
grounds for judgment was that the prior action was barred by the
statute of limitations because Eggers had actual notice of the
alleged breaches of fiduciary duty more than three years before
she filed the complaint. Eggers filed a notice of appeal from
that judgment, but withdrew her appeal in 2011.
On July 13, 2011, the plaintiffs in the present matter
filed a petition to recover for professional services rendered
to the trust and for attorney's fees, costs, and professional
services incurred by the trustees in connection with their
successful defense of the prior action. See note 8, infra. The
plaintiffs relied on the provisions of G. L. c. 206, § 16,5 and
5
At the time the fee petition was submitted, G. L. c. 206,
§ 16, as appearing in St. 1949, c. 140, provided, in relevant
part:
"An executor, administrator, guardian, conservator or
trustee shall be allowed his reasonable expenses, costs and
counsel fees incurred in the execution of his trust, and
shall have such compensation for services as the court may
allow."
This statute was since repealed as of March 31, 2012. St. 2008,
c. 521, §§ 38, 44, as amended by St. 2010, c. 409, § 23, and
St. 2011, c. 224. See now §§ 708, 709, 805, 811, and 816(15),
(24) of the Massachusetts Uniform Trust Code, G. L. c. 203E,
inserted by St. 2012, c. 140, § 56.
4
G. L. c. 215, § 39B,6 and on the terms of the trust.7 Attached
to the petition were invoices totaling $457,902.09 and
affidavits describing the services rendered and the fees and
costs incurred.8 On October 20, 2012, the same judge who had
6
General Laws c. 215, § 39B, as appearing in St. 1975,
c. 400, § 70, provides in pertinent part:
"When a judgment or decree is entered in a contested
proceeding seeking equitable relief or on an account or to
determine the construction of a will or of any trust
instrument . . . the probate court may, in its discretion
as justice and equity may require, provide that such sums
as said court may deem reasonable be paid out of the estate
in the hands of such fiduciary to any party to the
proceeding on account of counsel fees and other expenses
incurred by him in connection therewith" (emphasis
supplied).
See G. L. c. 215, § 45 (authorizing discretionary awards of
costs and expenses in contested Probate and Family Court cases
"as justice and equity may require").
7
The trust instrument authorizes the trustees to use the
assets of the trust "[t]o employ and pay reasonable compensation
and expenses of investment counsel, legal counsel, accountants,
agents or others for any of the purposes hereto."
8
W. Nancy Brady, as executrix, claimed attorney's fees and
costs under G. L. c. 206, § 16, and G. L. c. 215, § 39B, for her
decedent's defense against Eggers's suit in the amount of
$186,971.88. In addition, she claimed $35,475.77 under G. L.
c. 206, § 16, and the terms of the trust, "in connection with
execution of the Trust and making a successful defense against
[Eggers's suit]," including a $5,000 insurance deductible paid
to the law firm retained to defend the trustee against Eggers's
suit.
Edwin J. Haznar, Jr., as executor, claimed attorney's fees
and costs under G. L. c. 206, § 16, and G. L. c. 215, § 39B, for
his decedent's defense against Eggers's suit in the amount of
$171,854.44. In addition, he claimed $63,600 under G. L.
c. 206, § 16, and the terms of the trust, for his decedent's
5
decided the prior action held a nonevidentiary hearing on the
petition, and on April 11, 2013, she issued a single-page decree
ordering payment from the trust in the full amount requested in
the petition, giving no explanation for the award.
Discussion. 1. Timeliness. Eggers contends initially
that the plaintiffs are not entitled to reimbursement for
expenses associated with the defense of the prior action because
they did not file their petition until after judgment in the
prior action had entered. This contention is without merit.
See Paone v. Gerrig, 362 Mass. 757, 762 (1973), citing G. L.
c. 206, § 16; G. L. c. 215, § 39A; and Condon v. Haitsma, 325
Mass. 371 (1950).
2. Reasonableness of the award. Eggers argued below that
the expenses requested in the petition, $457,902.09, accounted
for nearly sixty percent of the trust assets of $778,645.84 as
of February 28, 2011. She also argued that the fees were
excessive given the nature of the litigation, and that the
services rendered were duplicative or insufficiently documented.
Although the judge presided over the prior action and was
capable of determining, based on first hand observation, many
factors bearing on the reasonableness of the fees sought, see
King, 455 Mass. at 805-806, and cases cited, on the record
"accounting services . . . in connection with the administration
of the Trust and making a successful defense against [Eggers's
suit]."
6
before us, we are unable to determine the reasonableness of the
award. See T. Butera Auburn, LLC v. Williams, 83 Mass. App. Ct.
496, 504 (2013).
"An important factor in assessing the reasonableness of
fees awarded in probate cases is the size of the estate."
Clymer v. Mayo, 393 Mass. 754, 772 (1985). To ensure that the
judge takes this "long-standing principle," ibid., into account,
and to "prevent the fund from being either entirely or in great
part absorbed by counsel fees," ibid., quoting from Frost v.
Belmont, 6 Allen 152, 165 (1863), where, as here, fees are to be
paid for the services of those "'who may not have been employed
by those whose estates are thus diminished,' they are to be
awarded on 'strictly conservative principles,'" Clymer v. Mayo,
supra at 773, quoting from Holyoke Natl. Bank v. Wilson, 350
Mass. 223, 230 (1966).
Additional factors for the judge to consider are well
settled. See Cummings v. National Shawmut Bank, 284 Mass. 563,
569 (1933); Linthicum v. Archambault, 379 Mass. 381, 388-389
(1979); Clymer v. Mayo, 393 Mass. at 773; King, 455 Mass. at
807-808. These include factors bearing on the reasonableness of
the hourly rate, such as "the ability and reputation of the
attorney," the demand for the attorney's services, and the rate
charged for similar services by other attorneys in the same
community. King, supra at 807, quoting from Cummings v.
7
National Shawmut Bank, supra. Other factors to be considered
are "the time spent, . . . the amount of money or the value of
the property affected by controversy, and the results secured."
Ibid., quoting from Cummings v. National Shawmut Bank, supra.
"Particular attention should be given to the necessity for the
services and to the extent of duplication of effort involved."9
Chase v. Pevear, 383 Mass. 350, 374 (1981). As noted supra, the
judge in this case must also consider the amount of the award in
proportion to the size of the estate, although no single factor
is decisive of what is to be considered fair and reasonable
compensation. King, supra.
We recognize that the judge has wide discretion in
determining an appropriate fee award. See Chase v. Pevear, 383
Mass. at 371; King, 455 Mass. at 809. See also WHTR Real Estate
Ltd. Partnership v. Venture Distrib., Inc., 63 Mass. App. Ct.
229, 235 (2005). Here, however, the judge made no findings that
would allow us to determine whether she properly exercised that
discretion by evaluating the relevant factors through a
conservative lens.
9
In this regard, we note that the plaintiffs requested
payment for services that each trustee (one an attorney, the
other an accountant) personally provided in defense of the prior
action, as well as attorney's fees and costs that each trustee
incurred in that defense. See note 8, supra. The judge's
review for necessity and duplication of services should include,
but not be limited to, any overlap of these claimed expenses.
8
3. Collateral sources. Eggers further argues that because
the trustees' insurers apparently paid most of the attorney's
fees associated with their defense of the prior action, the
plaintiffs should not be allowed to recover defense costs
exceeding the trustees' personal out-of-pocket expenses. We do
not agree that the trustees' insurance coverage bars the
plaintiffs from recovering for the expenses incurred in the
trustees' defense of the prior action. However, the insurance
coverage is yet another factor the judge should consider on
remand in awarding fees and costs "in [her] discretion as
justice and equity may require." G. L. c. 215, § 39B, as
appearing in St. 1975, c. 400, § 70.
In many contexts in which fee awards are authorized, the
party entitled to fees is permitted to recover notwithstanding
the fact that the party is not personally responsible for
payment of those fees. See, e.g., Northern Assocs. v. Kiley, 57
Mass. App. Ct. 874, 877-878 (2003) (where commercial lease
provided for payment of "attorney[']s fees incurred," fees
awarded even though attorney had not yet billed or received
payment. "Incurring a fee is to be distinguished from paying a
fee[, . . . and w]hether a party ultimately pays the fees for
which he has obligated himself . . . is not determinative").
Cf. Darmetko v. Boston Hous. Authy., 378 Mass. 758, 763-764
(1979) (mandatory fees under G. L. c. 186, § 14, payable to
9
publicly funded legal services organization representing
prevailing tenant at no cost); Torres v. Attorney Gen., 391
Mass. 1, 14 (1984) (same, with respect to suit under Fair
Information Practices Act, G. L. c. 214, § 3B).
Recently in Polay v. McMahon, 468 Mass. 379, 389 (2014),
the Supreme Judicial Court rejected the contention that the fee-
shifting provision of the anti-SLAPP statute, G. L. c. 231,
§ 59H, did not apply where the prevailing party's liability
insurer paid for its defense. The court reasoned that applying
the fee-shifting provision in these circumstances advanced the
statutory goals of protecting petitioning activity and promoting
prompt resolution of "SLAPP" litigation. Ibid. The court
further observed, "Nothing about the statutory term 'incurred'
precludes application of the fee-shifting provision where the
fees were 'incurred' by a third party acting on a defendant's
behalf." Ibid.
Other jurisdictions also hold that when a party entitled to
recover attorney's fees has insurance coverage for those fees,
this fact does not bar recovery. These decisions rely on two
alternative rationales for the proposition that "an award of
attorney fees is not necessarily contingent upon an obligation
to pay counsel." Ed A. Wilson, Inc. v. General Servs. Admn.,
126 F.3d 1406, 1409 (Fed. Cir. 1997).
One line of cases applies the "benefit of the bargain"
10
rationale of the collateral source rule;10 that is, "the
plaintiff who contracts for insurance with his or her own funds
should receive that benefit" without the other party using it to
offset a claim for expenses. Fust v. Francois, 913 S.W.2d 38,
47 (Mo. Ct. App. 1995), citing Washington v. Barnes Hosp., 897
S.W.2d 611, 619 (Mo. 1995). "The policy underlying [this] rule
focuses on the inherent unfairness of improving the defendant's
position through consideration of payments made independently to
the plaintiff." State ex rel. Owners Ins. Co. v. McGraw, 233 W.
Va. 776, 784 (2014) (Davis, C.J., concurring) (citation
omitted).
The second line of cases rests on a broad interpretation of
what it means to "incur" expenses. "[A]ttorney fees are
incurred by a litigant 'if they are incurred in his behalf, even
though he does not pay them.' . . . [T]he insured can be viewed
as having incurred legal fees insofar as [it has] paid for legal
services in advance as a component of [its] . . . insurance
10
In tort cases, the common-law collateral source rule
provides that "the value of reasonable medical expenses that an
injured plaintiff would be entitled to recover from the
tortfeasor as a component of her compensatory damages is not to
be reduced by any insurance payments or other compensation
received from third parties by or on behalf of the injured
person." Law v. Griffith, 457 Mass. 349, 355 (2010) (citation
omitted). The collateral source rule promotes deterrence by not
allowing the tortfeasor "to benefit from either contractual
arrangements of the injured party with insurers or from any
gifts from others intended for the injured party." Ibid.
11
premiums." Ed A. Wilson, Inc. v. General Servs. Admn., 126 F.3d
at 1409-1410, quoting from Goodrich v. Department of the Navy,
733 F.2d 1578, 1579 (Fed. Cir. 1984). See State ex rel. Owners
Ins. Co. v. McGraw, 233 W. Va. at 785 (Davis, C.J., concurring)
(majority rule is that "in a tort action arising from an
underlying action, a plaintiff may recover attorney's fees paid
. . . by an insurance company in the underlying action").
Under this rationale, a party incurs "the costs of
litigation, including reasonable attorney's fees, when that
party acts in response to a claim brought against him or her by
marshaling financial and human resources. . . . Having
insurance to pay those expenses is merely one way of discharging
the litigant's obligation or liability; it is a way of financing
the costs." Worsham v. Greenfield, 435 Md. 349, 357-358 (2013).
See Graco, Inc. v. CRC, Inc. of Tex., 47 S.W.3d 742, 744-746
(Tex. Ct. App. 2001) (under statute providing for manufacturers'
indemnification of sellers, seller incurred compensable loss
when insurer retained legal counsel to defend products liability
action on seller's behalf). See also Torres v. Attorney Gen.,
391 Mass. at 14-15 (plaintiff represented by legal services
organization "incurred" attorney's fees even though he had no
obligation to pay for services). Compare Northern Assocs. v.
Kiley, 57 Mass. App. Ct. at 878.
Accordingly, the trustees' insurance coverage does not
12
preclude recovery of their reasonable fees and expenses in the
defense of the prior action. We note, however, that an award of
fees under G. L. c. 215, § 39B, should not be viewed as
automatic.11 Rather, in matters relating to wills, estates, and
trusts, the discretion vested in the trial judge to depart from
the usual "American rule" that the parties are responsible for
their own fees "require[s] a reason, grounded in equity, why an
award shifting fees should be made." King, 455 Mass. at 805.
On remand, in addition to the factors enumerated in part 2
supra, the judge should take the trustees' insurance coverage
into account, giving it as much or as little weight as the judge
deems appropriate, in arriving at a just and equitable award.
Conclusion. We vacate the decree allowing the plaintiffs'
petition and remand the matter to the Probate and Family Court
for further proceedings in accordance with this opinion.
So ordered.
11
The relevant considerations are the same whether the
award is made under the judge's statutory authority or under the
trust instrument. See notes 5 through 7, supra. Awards of
counsel fees and expenses to trustees and others rendering
services to the trust "generally lie in the discretion of the
Probate Court." Chase v. Pevear, 383 Mass. at 371. The
language of the trust instrument, permitting "reasonable
compensation" for expenses incurred "for any of the purposes
hereto" echoes the relevant statutory provisions, and the
plaintiffs make no argument that the trust instrument provides a
broader entitlement.