04.29.2016

Provisions in Wills as to Counsel Fees and Costs

In the Matter of the Estate of Berry 2016 N.J. Super. Unpub. LEXIS 855 (App. Div., Apr. 15, 2016).

Decedent Evelyn Berry had four children from two different marriages.  The two older, adult children from her first marriage were Tara and defendant Darryl Fusco.  The two younger, minor children from her second marriage were Garrett and Brook.  (The court used first names for certain of the children, for ease of reference.)

Just before she died, Evelyn Berry executed a new will in which she established a trust to provide for Garrett and Brook.

The trust also provided that, only after assets were used for the care and education for Garrett and Brook, would the remaining trust assets pass equally to all four of decedent’s children.

The will appointed her son, defendant Darryl Fusco, as trustee.  Tara was a co-trustee.

The main asset of the estate was decedent’s liquor store:  Lyn’s Liquors.  To fund the trust, the will permitted Fusco to purchase the liquor store, according to a formula and terms set forth in the will.  Fusco made that purchase.

Eventually, plaintiffs Garrett and Brook filed litigation alleging that Fusco had mismanaged the trust and had failed to comply with the payment terms in the will for the liquor store.  Plaintiffs asserted that not only did defendant fail to make timely and full payments, he later sold the liquor store for approximately $365,000 and failed to pay off the balance owed for the purchase of that business.  (Plaintiffs brought no claims against Tara, the other trustee.)

Significantly, the will established the right of the beneficiaries to recover attorney fees should defendant default on his obligation to pay the amount owed for the purchase of the liquor store.

At trial, defendant/trustee Fusco presented little evidence regarding the sale.  His records were incomplete.

The trial court found that Fusco had breached his fiduciary duty by failing to keep adequate records, failing to make reasonable investments, making certain investments that were prohibited by the will, and misappropriating funds for his own benefit.  For example, the judge found that defendant breached his fiduciary duties to invest and manage the assets solely in the interests of the beneficiaries, and instead borrowed large sums from the trust assets for his own benefit, to invest in his own liquor stores, to pay his own bills for those liquor stores.

The judge also rejected defendant’s argument that Tara should share liability as a co-trustee, finding that she was not complicit in the wrongful conduct.

The trial judge awarded $554,893 to plaintiffs, including $137,879 for attorney fees and costs incurred by plaintiffs.

Fusco appealed.  The Appellate Division affirmed, substantially for the reasons expressed below, finding that the record contained adequate, substantial and credible evidence supporting the judge’s findings and conclusions.

The appeals court also concluded that the trial court did not err by declining to assess damages against Tara, noting that plaintiffs had not asserted claims against her.

Finally, the Appellate Division found no abuse of discretion in the award of attorney fees:

The scope of appellate review of a counsel fee award is narrow and “fee determinations by trial courts will be disturbed only on the rarest occasions, and then only because of a clear abuse of discretion.”  Rendine v. Pantzer, 141 N.J. 292, 317 (1995). New Jersey has adopted the “American Rule” which prohibits recovery of counsel fees by the prevailing party against the losing party.  Litton Indus., Inc. v. IMO Indus., Inc., 200 N.J. 372, 404 (2009).  Despite the constraints of the American rule and New Jersey’s public policy against fee-shifting, an allowance of counsel fees may be made even if not authorized by rule or statute where the parties themselves have so agreed in advance by contract.  Satellite Gateway Com. v. Musi Dining Car Co., 110 N.J. 280, 285-86 (1988); see also In re Unanue, 311 N.J. Super. 589, 597-98 (App. Div.) (enforcing testamentary trust provision calling for payment of attorney’s fees by the party losing litigation out of disputes over the trust), certif. denied, 157 N.J. 541 (1998), cert. denied, 526 U.S. 1051, 119 S. Ct. 1357, 143 L. Ed. 2d 518 (1999).

Id. at 10.

The Appellate Division then focused even more on the probate arena:

In the context of wills, “[i]f the devise be upon terms which are capable of being enforced in equity, and the gift be accepted, equity will compel compliance with the conditions annexed to it.”  Bird v. Hawkins, 58 N.J. Eq. 229, 243 (Ch. 1899).  We discern no basis for defendant’s argument that the court abused its discretion in awarding the attorney’s fees based on the terms of the Will.  The court reasoned that by accepting the terms of the Will concerning the purchase of the liquor store, defendant agreed to accept the provision making him liable for attorney’s fees in the event he defaulted.  We further note that the court limited the award of attorney’s fees to those fees incurred in connection with defendant’s default on the payments owed for purchase of the liquor store.  Our review of the record convinces us that the trial court reasonably exercised its discretion in the amount of attorney’s fees awarded here.

Id. at 10.

 

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