PROBATE CORNER
Former Trustee ’ s Entitlement To Attorney ’ s Fees And Costs ( Continued )
DAVID M . GARTEN
Long-established principles of trust law impose a double-barreled reasonableness requirement : the fee award must be reasonable in amount and reasonably necessary to the conduct of the litigation , but it also must be reasonable and appropriate for the benefit of the trust .”…. Patrick ’ s “ spare-no-expense strategy calls for close scrutiny on questions of reasonableness , proportionality and trust benefit . “ Consequently , where the trust is not benefited by litigation , or did not stand to be benefited if the trustee had succeeded , there is no basis for the recovery of expenses out of the trust assets .” ( Whittlesey v . Aiello ( 2002 ) 104 Cal . App . 4th 1221 , 1230 [ 128 Cal . Rptr . 2d 742 ].) Patrick ' s defense by so many topflight lawyers may have benefitted Patrick , but was it also reasonable and beneficial to the trust ? Did Patrick demand a Rolls Royce defense when a prudent trustee could have arrived at the same destination in a Buick , Chrysler or Taurus ? The Restatement Third of Trusts expressly recognizes the need for trustees to incur costs proportional to the trust ' s objectives . “ The comprehensive powers of a trustee (§ 85 ) include the power to incur and pay expenses in the course of trust administration , but the exercise of this power is subject to the trustee ' s fiduciary duties (§ 70 ). Implicit in a trustee ' s fiduciary duties is a duty to be cost-conscious .” ( Rest . 3d Trusts , § 88 , com . a , p . 256 , italics added .) “ ‘ Wasting beneficiaries ’ money is imprudent .’ ” ( Id ., reporter ' s notes , com . b , p . 261 .) Although the veteran jurist here may have had these principles in mind , we find nothing in the fee orders of April and November 2008 to assure us the trial court analyzed these factors . This is not sufficient . The trial court ' s assessment of reasonableness depends not simply upon what fees were reasonably incurred in representing Patrick , but also upon whether such fees were reasonably and prudently incurred for the trust .”
B . Assuming the former trustee is sued for breach of trust , can he retain trust assets to pay for his anticipated attorney ’ s fees / costs pursuant to § 736.0707 ? Maybe . Sec . 736.0707 ( 2 ), F . S . reads in relevant part : “ A trustee who has resigned or been removed shall within a reasonable time deliver the trust property within the trustee ’ s possession to the cotrustee , successor trustee , or other person entitled to the property , subject to the right of the trustee to retain a reasonable reserve for the payment of debts , expenses , and taxes . The provisions of this subsection are in addition to and are not in derogation of the rights of a removed or resigning trustee under the common law .” [ Emphasis added ]. I would anticipate that if the Plaintiff objects to the holdback , it will be necessary to obtain a court order approving the holdback .
C . Assuming the former trustee is sued for breach of trust , is he entitled to interim ( pendente lite ) attorney ’ s fees / costs ? Maybe . In People ex rel . Harris v . Shine , 16 Cal . App . 5th 524 ; 224 Cal . Rptr . 3d 380 ( Cal . App 2017 ), the Attorney General petitioned for the removal of the trustee of a family trust and for surcharge based on his mismanagement of the trust . An interim substitute trustee was subsequently appointed . The former trustee ( Shine ) petitioned the trial court to pay his future attorney fees and costs subject to repayment if he was ultimately found not entitled to indemnification . The lower court granted the petition and the appellate court reversed and remanded for reconsideration . The court held that “ in an ordinary case , where the trust instrument is silent on interim fees , the grant of interim fees should be governed by the following : The court must first assess the probability that the trustee will ultimately be entitled to reimbursement of attorney fees and then balance the relative harms to all interests involved in the litigation , including the interests of the trust beneficiaries . An assessment of the balance of harms requires at least some inquiry into the ability of the trustee or former trustee to repay fees if ultimately determined not to be entitled to the costs of defense .” The court reasoned that “[ i ] n its Fee Order , the trial court focused on the “ inequity of forcing the former trustees to fund their own defense against the unlimited resources of the Attorney General ' s office .” It did not expressly weigh the balance of relative harms to Shine , the People , and most significantly , the charitable beneficiaries of the Trust if Shine ' s defense fees are or are not advanced by the Trust . A mere imbalance in resources between parties is not , standing alone , a proper equitable consideration supporting an award of interim fees . “[ I ] t is the rare case where the state does not have greater resources than a private party in any sort of litigation .” ( Clark v . Superior
Court ( 1998 ) 62 Cal . App . 4th 576 , 591 [ 73 Cal . Rptr . 2d 53 ].) Rather , the court must consider whether Shine will be unduly prejudiced by having to bear his own attorney fees until resolution of the petition allegations ( i . e ., his ability to mount an adequate defense ) and whether the charitable beneficiaries would be unduly prejudiced if the fees were advanced and not repaid ( i . e ., Trust assets would be placed at risk ). On the current record , we cannot conclude that the trial court applied the correct legal standards in deciding to approve the fee request .”
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