In re Montgomery

1

ESTATE OF: ROBERT L. MONTGOMERY, JR., DECEASED APPEAL OF: H. BEATTY CHADWICK

No. 96 EDA 2023

No. J-S25032-23

Superior Court of Pennsylvania

December 22, 2023

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT OP 65.37

Appeal from the Order Entered November 21, 2022 In the Court of Common Pleas of Montgomery County Orphans' Court at No(s): 1977-X0448

Benjamin D. Kohler, Esq.

BEFORE: NICHOLS, J., MURRAY, J., and McCAFFERY, J.

MEMORANDUM

McCAFFERY, J.

H Beatty Chadwick (Appellant) appeals pro se from the order of the Montgomery County Court of Common Pleas Orphans' Court granting $75,000 in attorneys' fees from each of two trusts, designated as Trust No. 6 and Trust No. 7 (collectively "the Trusts"). The fees concerned litigation that commenced in 2018 and ended in 2021. Appellant alleges: (1) that PNC Bank, N.A. (Trustee)'s request for attorneys' fees was unauthorized since the prior litigation was solely for the benefit of Trustee and not the estate; and (2) that Appellant's objections in that prior litigation, while overruled by the Orphans' Court, were meritorious and thus attorneys' fees should not be awarded. We affirm.

The Trusts arose from the wills of the late Robert Montgomery, Jr., and his wife, Elizabeth B. Montgomery. Appellant is the beneficiary and upon his death 26 named charitable organizations receive the remaining principal in percentages as specified by the trust instrument. The Trusts have been the subject of much litigation. As this Court stated in an appeal from a 2014 accounting action, "[t]he full factual and procedural history in the instant case is long, torturous, and infamous." In re Trusts Under the Will of Montgomery, 1453 EDA 2016 (unpub. memo. at 1) (Pa. Super. Feb. 28, 2017). See also Orphans' Court Opinion, 11/21/22, at 1 ("These Petitions follow decades-long litigation between Trustee and [Appellant]...."). We set forth some of the prior litigation as it supplies necessary context for the current appeal.

On April 19, 2018, Trustee filed an accounting ("2018 Accounting") for transactions spanning April 7, 2014, through February 15, 2018, as well as accompanying petitions for adjudication. Trustee "requested the payment of attorney's fees in the amount of $447,635.40 to cover the costs incurred by it, which were expended to defend itself against Appellant's claims, both past and present." In re Trusts Under Will of Montgomery, 3007 EDA 2019 (unpub. memo. at 2) (Pa. Super. Aug. 13, 2020). The Orphans' Court ultimately denied Appellant's objections and we affirmed. Id. Appellant unsuccessfully sought further review with our Supreme Court. In re Trusts Under Will of Montgomery, 249 A.3d 252 (Pa. 2021) (per curiam).

The instant order relates to Trustee's petition filed on February 2, 2022, seeking $250,670.70 in attorneys' fees for expenses incurred from May 31, 2018^[1] through January 18, 2021, relative to the 2018 Accounting and all subsequent litigation, including the appellate proceedings.^[2] The petition noted that it was seeking these fees via the petition for these reasons:

[Disbursements to pay [Trustee]' s legal costs incurred as a result of [Appellant's unsuccessful claims have, over time, substantially reduced the principal of the Trusts, which has impacted not only [Appellant's interests in the Trusts, but also those of the charitable remainder beneficiaries of the Trusts. [Trustee] is mindful of the need to avoid presenting [Appellant] with further opportunities to deplete the Trusts by bringing meritless claims against [Trustee]. Accordingly, [Trustee] presents its current request for payment of fees and costs by way of this Petition, rather than filing new accountings of the Trusts, in order that the request may be considered independently of another audit of the Trusts' administration.

Petition for Payment of Attorneys' Fees, 2/2/22, at 2.

Trustee discussed its responses to Appellant's preliminary objections to the 2018 Accounting, explaining that its attorneys' fees request was limited to the costs incurred responding to Appellant's first five objections. As reflected in the Orphans' Court opinion filed in this matter, Appellant's challenges "fell into two broad categories," which the Orphans' Court summarized as follows:

(1) the first five objections . . . related to the administration of the Trusts, the investment objectives of the Trusts, the duty of impartiality of Trustee and whether Trustee made appropriate efforts to generate income in their investment allocation with respect to each of the Trusts; and (2) the remaining objections challenged the legal fees charged by counsel to Trustee and paid . . . with respect to each of the Trusts.

Orphans' Court Opinion, 11/21/22, at 2.

As previously noted, the Orphans' Court resolution of Appellant's objections and its ruling on the attorneys' fees requests within the 2018 Accounting was affirmed by this Court. The Orphans' Court held a trial in this matter on October 5, 2022, and issued an order and accompanying opinion on November 21, 2022, granting Trustee's petition for attorneys' fees but reduced the amount to $150,000. Appellant filed a timely notice of appeal and the Orphans' Court did not order Appellant to file a concise statement. Appellant raises two arguments on appeal.

1. Should a fiduciary be allowed counsel fees and expenses from a trust estate that were incurred in a proceeding commenced at the election of the fiduciary for the benefit of the fiduciary without any benefit to the trust estate?

2. Should a fiduciary be allowed counsel fees and expenses from a trust estate for its defense of charges of fiduciary misconduct with a reasonable basis in the factual evidence although no sanction was imposed upon the fiduciary as a result thereof?

Appellant's Brief at 4.

Our standard of review in this matter is as follows:

When reviewing a decree entered by the Orphans' Court, this Court must determine whether the record is free from legal error and the court's factual findings are supported by the evidence. Because the Orphans' Court sits as the fact-finder, it determines the credibility of the witnesses and, on review, we will not reverse its credibility determinations absent an abuse of that discretion.

In re Fiedler, 132 A.3d 1010, 1018 (Pa. Super. 2016) (en banc) (citation omitted). Additionally, "[t]he award of counsel fees is within the sound discretion of the Orphans' Court." In re Estate of Geniviva, 675 A.2d 306, 313 (Pa. Super. 1996).

Appellant's first argument is that attorneys' fees regarding the 2018 Accounting were categorically unavailable. His fundamental position is that the Orphans' Court mischaracterized the 2018 Accounting: "The Orphans' Court erred because it failed, contrary to the evidence, to find that . . . the entire April 2018 proceeding was for the sole benefit of the trustee and its counsel and not for the benefit of the trust estate." Appellant's Brief at 14. In Appellant's view, the expenses incurred litigating his objections cannot be recovered as part of attorneys' fees. See id. at 11 (asserting that the fee petition "was solely for the benefit of the trustee and its counsel with no benefit to the trusts themselves"). Appellant argues that neither the Orphans' Court nor any interested party in the administration of the trust had requested an accounting, stating "[T]rustee was not able to identify any reason independent of the request for counsel fees . . . which made the filing of accounts necessary." Id. at 13.

By characterizing the 2018 Accounting as benefiting only Trustee, Appellant submits that the "American rule" should apply. "Under the American Rule, applicable in Pennsylvania, a litigant cannot recover counsel fees from an adverse party unless there is express statutory authorization, a clear agreement of the parties, or some other established exception." Trizechahn Gateway LLC v. Titus, 976 A.2d 474, 482-83 (Pa. 2009). "One of the more common exceptions to the American Rule is that attorney's fees are available at the discretion of the court in cases involving trusts." Dardovitch v. Ha ltz man, 190 F.3d 125, 145 (3d Cir. 1999), citing Estate of Tose, 393 A.2d 629 (Pa. 1978).^[3]

One type of case "involving trusts" in which attorneys' fees are available is for successfully countering a request for surcharge, which "is the penalty imposed for failure of a trustee to exercise common prudence, skill and caution in the performance of its fiduciary duty, resulting in a want of due care." Estate of Pew, 655 A.2d 521, 541 (Pa. Super. 1994). A trustee's entitlement to attorneys' fees for defending against a surcharge is well-established.

The executors were placed in the position to be sued because of duties they had performed for the estate. That being the case, it would be unjust to require them personally to bear the reasonable costs of the defense of suits brought against them solely by reason of their positions as executors. "It is well established that whenever there is an unsuccessful attempt by a beneficiary to surcharge a fiduciary the latter is entitled to an allowance out of the estate to pay for counsel fees and necessary expenditures in defending himself against the attack. . . ."

In re Bro warsky's Estate, 263 A.2d 365, 366 (Pa. 1970) (citations omitted).

Appellant does not dispute these principles. Instead, he suggests that the 2018 Accounting was solely for the benefit of Trustee notwithstanding his attempt to seek a surcharge. "The trustee is not entitled to recover attorney fees when the legal services performed for the trustee are personal to the trustee and have nothing to do with the preservation of the trust." Appellant's Brief at 14 (citation omitted).

We disagree that the litigation was unrelated to the administration of the Trusts. The...