Opinion
No. 2023-50550 File No. 90-286/A&B
05-19-2023
In the Matter of the Application of Community Bank, N.A., for the Intermediate Settlement of its account as Trustee of George J. Adams, TUA Mary Walsh a/k/a Fund "A," Under Article 3.1 of the Mary A. Walsh Trust UA dated December 19, 1986 for the Period March 1, 1991, through September 30, 2018. In the Matter of the Application of Community Bank, N.A., for the Final Judicial Settlement of its Account as Trustee of George J. Adams TUA Mary Walsh a/k/a Fund "A," Under Article 3.1 of the Mary A. Walsh Trust, UA dated December 19, 1986 for the Period March 1, 1991 through June 30, 2019.
Richard L. Weber, Esq., counsel for Community Bank, N.A. Thomas Bezigian, Jr., Esq., counsel for Community Bank, N.A.
Unpublished Opinion
Richard L. Weber, Esq., counsel for Community Bank, N.A.
Thomas Bezigian, Jr., Esq., counsel for Community Bank, N.A.
Rebecca Adams Timothy Adams Samuel Adams Jennifer Schuster Mary Ackley Katherine Ackley Alice Griesenbeck David H. Guy, J.
Hon. David H. Guy Acting Supreme Court Justice
This Court issued a Decision dated March 18, 2022 ("March 2022 Decision") dismissing all but one objection raised by Rebecca Adams (sometimes referred to herein as "Objectant") to the intermediate and final accountings of Community Bank, N.A., as Trustee, in this consolidated account proceeding. The Court issued a supplemental Decision dated May 20, 2022, dismissing the final objection to the consolidated accountings raised by Rebecca Adams ("May 2022 Decision").
There were two issues reserved in the Court's summary judgment decisions. Both were addressed by the Court in its Decision dated November 1, 2022 ("November 2022 Decision). First, the Court found that virtual representation of grantor Mary Walsh's great-grandchildren, pursuant to SCPA 315, was ineffective with respect to the Trustee's account proceeding and its related summary judgement motion. The November 2022 Decision directed a supplemental citation issue to Mary Walsh's great-grandchildren, providing the opportunity for those great-grandchildren to file objections to the consolidated accounting. Two great-grandchildren took the opportunity to file objections to the accounting. The objections of one, Katherine Ackley, were found to have been addressed by the March 2022 Decision and were dismissed on that basis. The objections filed by great-grandchild Alice Griesenbeck were found to raise no issues other than the amount and allocation of the Trustee's legal fees, which is the second issue reserved by the Court in its summary judgement decisions and addressed in the November 2022 Decision.
The great-grandchildren were also given the opportunity to file responses to the Trustee's pending and reserved motion for determination and allocation of its legal fee. The Court received and reviewed responses to that motion from Rebecca Adams, Timothy Adams, Samuel Adams, Jennifer Schuster, Mary Ackley, Katherine Ackley and Alice Griesenbeck.
The Court provided the parties with the opportunity to resolve the issue of the Trustee's legal fees, as well as other issues relevant to the ongoing sub-trusts here, through a presumptive Court-facilitated Alternative Dispute Resolution (ADR) process. An ADR session was held with the parties and counsel on January 19, 2023, and the ADR specialist ultimately determined the parties had reached an impasse, ending the process. The Court issued a scheduling order dated January 24, 2023, directing the Trustee to submit a reply to the parties' responses on the pending fee motion by February 24, 2023. On that date, the Trustee filed an affirmation from counsel, an affirmation from a Trust Officer, and a memorandum of law in response to the objections and in support of its application for fees.
Both the Court's scheduling order of January 24, 2023 and the November 2022 Decision directed the Trustee to provided additional detail on its assessment of the allocation of the time spent on the various aspects of these consolidated account proceedings, including but not limited to the time spent that the Trustee claims would support its requested allocation of its legal fees to Objectant Rebecca Adams. That information was not provided.
Those same two Court orders allowed counsel for Alice Griesenbeck the opportunity to respond the Trustee's reply papers and directed he include in that response additional detail on the allocations set forth in Ms. Griesenbeck's August 16, 2022 response to the Trustee's fee motion. Ultimately, no responsive papers were served by Ms. Griesenbeck's counsel, as his services were discontinued. Ms. Griesenbeck submitted a pro se reply, filed March 2, 2023, to the Trustee's reply papers, including some information stated to be such allocations provided by her former counsel.
The primary pleadings focused on this issue and considered by the Court in rendering this decision include the following:
a. The Trustee's original motion was included in its motion papers filed on October 8, 2021, which included an affirmation of counsel and a memorandum of law.
b. Rebecca Adams's opposition filed on December 15, 2021, including her affidavit and a memorandum of law.
c. Trustee's reply filed on December 16, 2021, by affirmation of counsel.
d. Court invited responses from the other current and residuary beneficiaries of the continuing sub-trusts: the grantor's grandchildren, and her great-grandchildren, previously deemed virtually represented, but cited when the Court determined SCPA 315 had not been properly invoked in the March 2022 Decision. Responding papers were received from: Tim Adams (filed June 27, 2022); Samuel Adams (filed August 5, 2022); Mary Ackley (filed June 9, 2022); Katherine Ackley (filed June 9, 2022); Jennifer Schuster (filed October 10, 2022); Alice Griesenbeck (by affirmation of counsel filed August 16, 2022).
e. Trustee's reply papers filed on February 24, 2023, including affirmation of counsel, affidavit of trust officer Jennifer Critti-LeBeau and memorandum of law.
f. Alice Griesenbeck's reply, filed pro se on March 2, 2023, including her affidavit, affidavit of Rebecca Adams and memorandum of law.
This matter was reassigned to the undersigned on October 19, 2021, with this and more motions pending and multiple previous decisions and orders. Virtually all prior and subsequent pleadings have been reviewed to effectively and adequately understand and address this and other motions. Allegations and arguments in pleadings beyond those listed above may be discussed and analyzed. This decision is based upon and supported by the pleadings listed above. The Court perceives no prejudice to either party from the Court fully informing itself and considering the totality of the proceedings in rendering this decision, which is before the Court on submission.
By way of brief background to set forth the interests of the current parties, on December 19, 1986, Mary A. Walsh ("Grantor") created an inter vivos trust by execution of an agreement ("Trust Agreement") that named the current Trustee's predecessor, Wilbur National Bank, as trustee. On the same day, Grantor executed a pour-over will naming her son, George J. Adams, and Wilbur National Bank as co-executors. Under the will, the residuary of the Grantor's estate was added to the trust corpus. The Trust Agreement describes the principal and income payable to the Grantor as the sole beneficiary during her lifetime. Upon the death of the Grantor, on October 21, 1990, after payment of taxes and other expenses owed by the Grantor's estate, the trust corpus was divided into four parts: Fund A, for the benefit of son George Adams; Fund B for the benefit of Grantor's granddaughter, Anne-Marie Rebecca Adams, also known as Rebecca Adams; Fund C for the benefit of Grantor's granddaughter, Mary Lisbeth Adams, now known as Mary Ackley; and Fund D, for the benefit of Grantor's grandson, Timothy Adams.
Fund A was funded with seventy percent (70%) of the trust corpus, including the real estate which flowed from Grantor's estate to the trust, for the use and benefit of George Adams, who was paid the net income of Fund A at least quarterly during his lifetime, with some discretionary availability of principal. Funds B, C, and D were each funded with ten percent (10%) of the trust corpus, with the respective grandchildren to be paid the net income from their respective funds, up to $8,000 per year, with some discretionary availability of principal. Upon George's death, which occurred on September 30, 2017, Fund A is divided equally among Funds B, C and D, which continue for the Grantor's grandchildren for their respective lives. Upon the death of a grandchild their respective share/fund terminates and is payable to their respective issue, the Grantor's great-grandchildren.
The Court's determination of the Trustee's application for fees involves a two-part analysis. First, the Court must determine a fair and reasonable legal fee for services rendered to the Trustee in connection with this account proceeding. After determining what counsel fees are to be granted to the fiduciary from the Trust, the Court then needs to determine the allocation of those fees as among the Trust generally and the share of the continuing trust for the benefit Rebecca Adams. Matter of Hyde, 15 N.Y.3d 179, 186, footnote 5 (2010); Matter of Tom J. Thomas, 74 Misc.3d 891, 899 (Sur Ct, Monroe County 2022).
In an account proceeding, the Surrogate is called upon to set, or ratify, the legal fees charged, regardless of whether any party objects to them. Stortecky v Mazzone, 85 N.Y.2d 518 (1995). In this case, both current and future beneficiaries of the Trust have filed objections to the requested fees of the Trustee. The Court has considered all the Trustee's and the beneficiaries' positions, and the Court is also guided by its own independent responsibility to review and set a reasonable and appropriate attorney fee.
The Surrogate has the authority and responsibility to fix and determine the compensation of an attorney for services rendered to a fiduciary. SCPA 2110; 2307(1); 2308(1); 2301(1). The standard for the award of legal fees is the fair and reasonable value of the services rendered. In re Potts, 213 A.D. 59 (4th Dept), aff'd 241 N.Y 593 (1925). The setting of attorney fees lies within the sound discretion of the Court. SCPA 2308(1); 2307(1); Matter of Freeman, 34 N.Y.2d 1 (1974); In re Greatsinger, 67 N.Y2d 177, 181 (1986). The Court's determination and exercise of its discretion "will not be interfered with unless it is so manifestly wrong as to indicate [an] abuse of power." Matter of Rose BB., 35 A.D.3d 1044, 1045 (3d Dept 2006) (internal quotations and citations omitted). The existence of a retainer agreement between the fiduciary and counsel does not bind the Court. Matter of Middagh, 267 A.D.2d 593 (3d Dept 1999); Matter of Warhol, 165 Misc.2d 726 (Sur Ct, New York County 1995).
The criteria to be used by the Court in reviewing and setting the legal fee for handling a Surrogate's Court matter are well established in New York and include: the nature of the services rendered; the size of the estate; the skill and responsibility of the lawyers; their experience and reputation; the results obtained; the time spent; and the customary fee for such services. Freeman, supra; Potts, supra; Matter of Gutchess, 117 A.D.2d 852 (3d Dept 1986). The burden of establishing the reasonableness and value of legal fees lies with the attorney requesting the fee. Potts, supra.
In this matter, the legal fee requested by the Trustee is very substantial. As of the Court's supplemental decision of May 20, 2022, which dismissed the final objection raised by Rebecca Adams to the consolidated accountings, counsel's affirmation of services reflects more than $237,000 in legal fees and $11,000 in disbursements. The updated fee affirmation submitted with the Trustee's February 24, 2023 reply to the parties' responses on this fee motion asserts legal fees of nearly $271,000 and disbursements totaling $12,000.
It is instructive to review how the Trustee's legal fees accumulated over the course of this long-pending proceeding. As of the time of the filing of the Trustee's intermediate account, and the initial objections filed by Rebecca Adams in 2018, the Trustee's legal fees had accumulated to $12,200. By 2019, when the final account was filed and Ms. Adams's second set of objections was filed, the Trustee's legal fees had grown to more than $64,000. When the Court supervised discovery was completed with the Referee's Decision in November 2020, the Trustee's legal fees were nearly $122,000. A series of motions to amend and other procedural motions, along with cross-motions for summary judgement, followed; by the time Rebecca Adams's two initial sets of objections were determined to be the "operative objections" and the Trustee moved to re-file its summary judgment motion, in October 2021, the Trustee's legal fees exceeded $212,000. It was at that point that the matter was transferred to the undersigned. At the conclusion of the Trustee's summary judgment motion with the issuance of the Court's May 2022 decision, which dismissed Rebecca Adams's remaining objection and confirmed the full grant of summary judgment in favor of the Trustee, the Trustee's fees had increased modestly to $237,000.
The fees which are subject to this decision are those of Trustee's current counsel. The Trustee had prior counsel in this proceeding, whose fees were paid and set forth in Schedule C of the accounting. No objection was made to those fees.
As of the May 2022 Decision, the only open issues were the supplemental proceedings relating to the Court's determination that the virtual representation requested by the Trustee was improper, and the determination and allocation of the Trustee's legal fees. It was the Trustee who originally requested the application of virtual representation but failed to effectuate that properly, as determined in the March 2022 Decision, at pages 29-31. Additional work associated with correcting that error should not fall on the beneficiaries of the Trust. Matter of NBT Bank, N.A. (Stark), 74 Misc.3d 641, 645-646 (Sur Ct, Broome County 2022). A fiduciary's legal fees associated with the work expended in pursuing its own fee are also not compensable. Estate of Richard A. Otto, 2022 NYLJ LEXIS 1745, *12-13 (Sur Ct, New York County 2022); Matter of Schwartz, NYLJ, Apr. 11, 2019, at 26, col 5 (Sur Ct, New York County 2019); Matter of Marshak, NYLJ, Apr. 30, 1996, at 1, col 6 (Sur Ct, New York County 1996).
A session of presumptive ADR of those open issues was also undertaken. While the ADR was not successful, the Court see no basis for the beneficiaries of the Trust to bear the Trustee's costs associated with that effort.
There is no question that the Trustee is entitled to engage legal counsel, of its choosing, to represent it in an accounting proceeding. Campbell v Bank of Am., N.A., 155 A.D.3d 820, 822-823 (2d Dept 2017). Subject to the Surrogate's determination of a fair and reasonable amount, the Trustee is entitled to have its legal fees paid from the Trust corpus - indemnified by the Trust, in the words of Hyde. Hyde, supra at 186. The current account proceedings were triggered by the death of George Adams, son of the Grantor and then current beneficiary of this multi-generational Trust, more than five years ago. At that time, one of George's children was living in the house with him, creating additional complexity. The house was also filled with at least two generations' worth of personal property, not all assets of the Trust.
All of George's children immediately began making inquiry of the Trustee, from their individual, not necessarily collective, perspectives. While Rebecca Adams was the most frequent and vocal inquirer and criticizer of the Trustee's actions, her siblings both contributed to the volume of questions addressed to the Trustee. As the next generation of beneficiaries of this Trust, George's children had every right to make reasonable inquiry of the Trustee regarding its accounting and actions. The formal inquiry by Timothy Adams and Mary Ackley ceased in 2019, when they both defaulted and did not file objections to the Trustee's final, combined accounting. By that point, the Trustee had made the decision to retain its current counsel, Bond, Schoeneck & King, PLLC ("BSK"), whose legal fees are now at issue.
Rebecca Adams was the only beneficiary of her generation to file objections upon the filing of the intermediate, and then final, accounts. The discovery process became, in the words of the previously presiding Judge in this case, "ongoing, highly contentious disclosure proceedings." Matter of Community Bank, N.A. as Trustee (Walsh), Sur Ct, Delaware County, May 29, 2019, Northrup, J., file No. 90-286/A&B. Due to the contentiousness of the discovery process, the Court assigned a court attorney referee to supervise discovery. The discovery process included production by the Trustee of all the documents relating to the Trust for review and as requested copying by Rebecca Adams. The referee's final order on discovery was issued in November 2020.
During and after the conclusion of discovery, Rebecca Adams made a series of motions (in addition to those related to discovery) seeking to amend or amplify her filed objections. Clearly and appropriately, all those motions required review and response by the Trustee. For reasons not clear to the Court, Ms. Adams missed many deadlines which were granted to allow her amendment of her objections. She was ultimately given what was a final opportunity by the Court in a decision and order dated June 29, 2021, where the Court specifically rejected the Trustee's argument that the filings by Ms. Adams were "in bad faith," "duplicative," or an attempt to "weaponize" the public policy favoring amended pleadings. The Court found that the proposed amended objections "correct and amplify" her previous objections. Matter of Community Bank, N.A. as Trustee (Walsh), Sur Ct, Delaware County, June 29, 2021, Northrup, J., file No. 90-286/A&B.
When Ms. Adams missed the deadline set in the June 2021 order, the Court refused to further extend the deadline for amended pleadings and, by order dated September 23, 2021, found the original sets of objections, filed more than two years prior, the "operative objections" with respect to this account proceeding. By the time of the Court's decision setting the operative objections, which ripened the Trustee's motion to renew its summary judgment motion, more than eighty percent (80%) of the fees incurred through the Court's issuance of the summary judgment decisions had accrued.
The Trustee was compelled to evaluate, analyze, and respond to all of the motions made in this litigated account proceeding. The actions of the pro se Objectant, clearly not familiar with the rules of civil procedure, but capable enough to present pleadings entertained by the Court, made the job of the Trustee's counsel more difficult. There were multiple filings, many more than likely could or would have been made by counsel. Ms. Adams's papers are very verbose and substantially duplicative. However, it does not necessarily follow that all the Trustee's legal fees associated with responding to them are "fair and reasonable." There is no "matter of law" result; the Court must exercise its discretion on all the facts of the proceeding. Greatsinger, supra at 181.
The Trustee, in its supporting affidavit, stresses the difficulties of their communication with Rebecca Adams and cites that as the factor for retaining BSK. Rebecca was not the only beneficiary of the Trust with whom the Trustee experienced communication challenges following George Adams's death, even before the accounting had been compelled or prepared. In the first instance, dealing with a difficult beneficiary is primarily the Trustee's responsibility. Use of counsel for administrative tasks or responsibilities is not compensable. In re Estate of Gates, 120 A.D.2d 890, 892 (3d Dept 1986). Retaining counsel to manage that communication is certainly within the Trustee's discretion, but whether, and how much of, those fees are included as fair and reasonable fees in connection with the settlement and accounting for the Trust is within the Court's discretion. Greatsinger, supra.
The Trustee stresses both the detailed and voluminous demands made by Rebecca Adams, and their duplicity, arguing that this compelled counsel to review her communications and pleadings and the Trustee's responses "each and every time," in "painstaking detail." Rebecca Adams communication with the Trustee was clearly voluminous and duplicative; it should follow that some efficiency be gained in responding to the same objections repeatedly. Early in this proceeding, it was or should have been evident to the Trustee that verbal sparring with Rebecca Adams was not proving effective, yet that process appears to have continued, aided, and perhaps even enhanced, by counsel.
There is an element in these proceedings of a personal, or personality, conflict between Trustee's counsel and the pro se Objectant. Both the prior presiding Judge and the undersigned note that counsel's repeated used of terms such as "bad faith," "vexatious," "obstructionist," "abusive," "extreme," "contumacious" and "weaponize" were not supported. Such terms serve to inflame, not resolve or deescalate, matters, particularly when directed toward a pro se litigant. The Court is mindful that one side of this pitched battle is a pro se party; the other, experienced attorneys and officers of the court.
The Court concedes it is handicapped by having only presided over this matter since November 2021. Virtually all the prior pleadings, decisions and orders have been reviewed, multiple times. That review fully supports the analysis made by the Court in this decision.
The Court has reviewed and analyzed counsel's affirmations in detail. While counsel expresses that the Trustee is being billed at a discounted rate, the variability in the rate reflected in the time records discloses that discount was not consistently applied. Even at the discounted rates, the rates charged by partners at counsel's office exceeds those typically charged in Delaware County, New York, where this matter is pending. There are also frequent instances of consultations between partners and other professionals at the firm, all of which were billing at the same time. These factors all support a reduction in the requested fee, per the Freeman and Potts factors.
Counsel has also billed for travel time between its location in Syracuse and Delaware County. Fortunately, the transition to virtual appearances necessitated by COVID-19 reduced the amount of these charges. The Trustee's decision to retain out-of-town counsel is within its discretion, but costs associated with that distance are not necessarily appropriately borne by the Trust.
One of the Potts and Freeman factors particularly relevant to this case is the size of the Trust corpus. Potts, supra; Freeman, supra. The legal fee must bear a reasonable relationship to the size of the Trust, and the size of the Trust can "operate as a limitation of the fees payable without constituting an adverse reflection on the service provided." Matter of Meares, 2010 NY Misc. LEXIS 1977, *4 (Sur Ct, New York County 2010) (internal citations omitted); Matter of McCranor, 176 A.D.2d 1026, 1026-1027 (3d Dept 1991). The updated affirmation from Trustee's counsel filed February 24, 2023 shows $271,000 of accrued legal fees. This is nearly forty percent (40%) of the principal value of the Trust reported to the Court in November of 2022. The accrued fees as of the time of the Court's rendering of the final summary judgment decision exceed one-third of the Trust balance.
The Trustee informally reported to the Court the current principal value of $565,000 in Fund A at that time. Adding back legal fees and disbursements paid to BSK per schedule C of the accounting yields a total principal balance before fees of approximately $710,000. Note this is some $90,000 higher than the reported on-hand balance as of the June 30, 2019 closing balance of the filed account. Using the account figure as the denominator in this calculation would result in the Trustee's requested fees being an even higher percentage of the Trust corpus.
In its February 2023 reply papers, the Trustee urges that the Court's failure to award all of the Trustee's requested legal fees would create a precedent that would have a chilling effect on corporate trustees undertaking trust administration work. The Court rejects that argument. The Trustee's predecessor took on administration of this Trust more than 25 years ago, knowing it did or would contain real estate which would be continued in the Trust for both the benefit of the Grantor and her son, but would ultimately need to be liquidated from the Trust. The Objectant and her siblings were not beneficiaries at that time; their children, now the residuary beneficiaries of the continuing sub-trusts, were infants or not yet born. The Trustee cannot now say it did not know what it was taking on, or that it should be absolutely indemnified from the challenges arising from future trust beneficiaries.
The Court does not applaud or encourage Objectant's behavior with respect to this proceeding. At the same time, raising of questions and objections and requesting discovery of information with respect to a trust accounting is an absolute right of a trust beneficiary, as is the right to have a court determine whether the grant of summary judgment on those objections is appropriate, or for the court to ultimately decide on objections following a hearing, regardless of whether those objections are inartfully drafted or duplicative. The objections were entertained by the Court, discovery was monitored by the referee, and the summary judgement decision has now been rendered. That does not mean that the Trustee is entitled to absolute indemnification of its legal costs. The Court is tasked with applying the multi-factor analysis of Freeman, Potts, and Hyde to determine, in its discretion, guided by the facts of this case, a fair and reasonable legal fee for the Trustee in this account proceeding.
The Court reviews this fee request guided by 25 years of experience practicing trust and estate law and more than 10 years on the bench reviewing hundreds of fee applications in both Surrogate's Court matters and Mental Hygiene Law Article 81 proceedings. Weighing all the facts and circumstances of this Trust through the lens of the Freeman and Potts factors, in the Court's judgement and discretion a total legal fee of $200,000 is appropriate to be paid from the Trust to BSK as Trustee's counsel for this account proceeding. This is more than twenty-five percent (25%) of the current value of Fund A.
The court in an MHL Article 81 proceeding is called upon to set fees and direct their sources of payment. The legal fee analysis in those proceedings is also based upon the Freeman and Potts factors. Matter of Springarn, 164 Misc.2d 891 (Sup Ct, New York County 1995).
The disbursements submitted by the Trustee include substantial charges for copying, long-distance calls, fax charges, postage, travel expenses and courier services. The first four of these items are considered part of normal law office overhead. The travel expense is disallowed for the reasons discussed above in the allowable fee analysis. A portion of the courier services were incurred due to Trustee's counsel running up against deadlines and seeking flexibility from the Court, noted in previous decisions. The Court disallows $4,000 of the submitted disbursements on these bases, allowing $8,000 to be paid from the Trust corpus. Otto, supra; Matter of Herlinger, NYLJ April 28, 1994 at 29, column 3 (Sur Ct, New York County 1994).
The Court now turns to the allocation of the fee allowed to the Trustee, as between the Trust in general and the share of Objectant individually. First, it must be noted that the portion of this Trust which continues for the benefit of Rebecca Adams does not benefit her alone. Upon her passing, the remainder of this share of the Trust is payable to her daughter. The continuing shares of each of George Adams's children are structured the same way, with income and limited discretionary principal payments available to George's children, and the remainder payable to their respective children. The payment of fees from the Trust thus impacts not only the current generation of beneficiaries, but the following one as well.
It is also important to note that the Trustee has requested that the entirety of its fees be allocated against the share of Objectant. That position is to some extent antithetical to the Trustee's fiduciary responsibility to all beneficiaries because the allocation of fees against Objectant's share impacts not only her, but her daughter. Some of the Trustee's allowed legal fees are allocable to the general and typical work associated with accounting for this Trust. There is no basis to argue that those general expenses should not be allocated to the Trust generally, rather than any particular share or beneficiary.
The Surrogate has the discretion to allocate responsibility for payment of a fiduciary's attorney fees, to the extent allocated against the Trust, either from the Trust as a whole or from shares of the individual beneficiaries. SCPA 2110(2). Where a fiduciary is to be granted counsel fees under SCPA 2110 (2), the Court should undertake a multi-factored assessment of the sources from which the fees are to be paid. These factors, none of which should be determinative, may include: (1) whether the objecting beneficiary acted solely in his or her own interest or in the common interest of the estate; (2) the possible benefits to individual beneficiaries from the outcome of the underlying proceeding; (3) the extent of an individual beneficiary's participation in the proceeding; (4) the good or bad faith of the objecting beneficiary; (5) whether there was justifiable doubt regarding the fiduciary's conduct; (6) the portions of interest in the estate held by the non-objecting beneficiaries relative to the objecting beneficiaries; and (7) the future interests that could be affected by reallocation of fees to individual beneficiaries instead of to the corpus of the estate generally. Hyde, supra at 186-87 (citing Matter of Greatsinger, 67 N.Y.2d 177, 183-84 [1986]). The Court will review each of these factors under the facts of this case.
BSK was retained by the Trustee in August of 2018, before the petition to compel the intermediate account was filed by Rebecca Adams. In the period leading up to the filing of the final account, all of George Adams's children were in communication with the Trustee, requesting information and expressing opinions regarding the Trustee's actions in working to wrap up the Trust. The disposition of the house held by the Trust and the personal property within it, much of which was not Trust assets, was the primary, but not sole, issue generating this communication. The Trustee acknowledges that it was the communications with George's children, not Rebecca Adams alone, which motivated its retention of BSK as legal counsel.
Timothy Adams and Mary Ackley both defaulted on the return dates on the citations issued after the filing of the intermediate and final accounts. Only Rebecca Adams filed objections to either account, so she was the only party involved in formal legal proceedings with the Trustee. There was some commonality in the concerns expressed before the accountings, relating to the Trustee's actions with respect to the real estate which was in the Trust until sold in May of 2019. Had Rebecca Adams been successful in her objections, the result would have been an increase in the value of the Trust, benefitting all beneficiaries, not just Objectant. At the same time, her continuation of her opposition to the Trustee and the discovery and motion battle she engaged in with the Trustee caused the Trustee's legal fees to accrue excessively, unnecessarily, and not of benefit to the other beneficiaries. The Trustee's role in those excessive fees has been addressed in the Court's determination of the portion of its legal fees to be paid from the Trust, discussed above. As among her siblings, Objectant bears more than a proportionate share of the responsibility under this factor.
The possible benefit to the beneficiaries had Rebecca Adams's objections been successful is impossible to quantify. All the beneficiaries believe that the Trustee could have realized more for the real estate, but the objections raised by Rebecca Adams were dismissed, with the finding that the process engaged in by the Trustee was appropriate for disposition of the real estate. The size of the legal fees allowed is not proportionate to the potential benefit had the objections been successful. This factor also weighs against Objectant. Only she participated in the litigation surrounding her objections to the Trust. All those objections were dismissed on summary judgement. Though all beneficiaries expressed similar reservations about the Trustee's actions, only Rebecca Adams was unrelenting in her objections to the Trustee.
Neither the prior presiding Judge nor the undersigned found bad faith in Rebecca Adams's actions in pursuing her objections. Nonetheless, whether through inexperience, naivety, anger, or legitimate confusion, those actions continued far longer than they should have, causing the fees associated with this Trust settlement to become excessive. The objections were entertained and discovery was allowed with respect to the accounting. However, the Trustee's response to that inquiry yielded information that should have resolved the questions for Objectant; it was sufficient for the grant of summary judgement. Again, this factor supports greater relative assessment of fees against Objectant's share of the Trust.
Finally, the impact of payment of these fees upon future interests needs to be taken into consideration. One fact that can never be undone is the failure of the next generation of beneficiaries to be properly cited, due to the Trustee's incorrect attempt to apply virtual representation pursuant to SCPA 315. The great-grandchildren were ultimately given the opportunity to object, both to the accounting and the fee request, after the error was corrected. They raised no substantive objections to the accounting beyond those already raised by Objectant and dismissed. With respect to allocation of the fees as among the shares of the respective beneficiaries, understandably - and with awareness of the amount involved - the next generation is supportive of assessment of the bulk of the fees against Objectant, as most stated in their responses to the motion presently before the Court. Because the Trustee has some discretion to invade the principal for the benefit of George Adams's children, it is impossible to even actuarially assess the relative value of the ultimate remainder interests. The Court does not find this factor as compelling in the analysis of the allocation of the legal fee among the shares of this Trust.
Considering all the Hyde factors, the Court finds that an appropriate allocation of the fees among the Trust shares is three-eighths (3/8) of the fees allocable to the Trust generally (Fund A) and five-eighths (5/8) of the fees allocable to the share of Rebecca Adams (Fund B). Since Rebecca's continuing share of the Trust includes one-third (1/3) of Fund A, she will effectively pay one of the three eighths allocated to Fund A, so the total fees allocated against her is in fact six-eighths (6/8), or seventy five percent (75%) of the fees allowed from the Trust. Each of Timothy's and Mary's shares of Fund A will bear one-eighth (1/8) or twelve and a half percent (12.5%). This means Objectant is responsible for three times more of the allowed legal fees than her siblings collectively, which the Court deems an appropriate result under all the circumstances of this case.
This Decision constitutes the Order of the Court. The Trustee is directed to submit an affidavit updating the accounting from June 30, 2019, to date, and a proposed decree consistent with this Decision, no later than June 20, 2023.