In re Estate of Hyde, 15 N.Y.3d 183 (2010)

Surrogate’s Court Procedure Act (SCPA) § 2110 grants the trial court discretion to allocate responsibility for payment of a fiduciary’s attorney’s fees for which the estate is obligated to pay—either from the estate as a whole or from shares of individual estate beneficiaries.

Summary

This case addresses the discretion of the Surrogate’s Court in allocating attorney’s fees in estate litigation. The Renzes, non-objecting beneficiaries of two trusts (Hyde and Cunningham), sought to have trustee counsel fees deducted solely from the shares of the objecting beneficiaries (the Whitneys). The Surrogate’s Court, relying on a prior interpretation of SCPA 2110, ordered fees disbursed from the corpus of each trust generally, impacting the Renzes. The Court of Appeals reversed, overruling its prior holding in Matter of Dillon, and held that SCPA 2110 grants the Surrogate’s Court discretion to allocate attorney’s fees either from the estate generally or from individual beneficiaries’ shares, based on a multi-factored assessment.

Facts

Charlotte Hyde created a testamentary trust (Hyde Trust). Nell Pruyn Cunningham created an inter vivos trust (Cunningham Trust). Mary Renz and Louis Whitney were income beneficiaries and presumptive remaindermen of both trusts. The Whitneys (Louis Whitney and his children) objected to the trustees’ accountings in both trusts, alleging failure to diversify assets. The Renzes, along with other beneficiaries, did not object. The Renzes filed an acknowledgment as non-objectors and sought to have future trustee counsel fees paid exclusively from the objecting beneficiaries’ shares.

Procedural History

The Surrogate’s Court dismissed the Whitneys’ objections. Citing Matter of Dillon, the court ordered trustee counsel fees to be disbursed from the corpus of each trust generally. The Appellate Division affirmed. The Court of Appeals granted leave to appeal.

Issue(s)

Whether SCPA 2110 grants the Surrogate’s Court discretion to allocate responsibility for payment of a fiduciary’s attorney’s fees for which the estate is obligated to pay—either from the estate as a whole or from shares of individual estate beneficiaries.

Holding

Yes, because SCPA 2110 provides the trial court with discretion to disburse funds from any beneficiary’s share in the estate—and not exclusively from “the estate generally.”

Court’s Reasoning

The Court overruled its prior interpretation of SCPA 2110 in Matter of Dillon, which had mandated that attorney’s fees be paid from the estate generally. The Court found that Dillon ignored the plain meaning of the statute and departed from prior jurisprudence emphasizing fairness. The Court noted the statute’s unambiguous language allowing disbursement from any beneficiary’s share. It cited the principle that statutes should be construed to avoid unjust or unreasonable results. The Court emphasized that trustee should have “an opportunity to prove their expenses and the circumstances under which they were incurred,” and at that point, “it would be for the court to determine on the facts of the case what part, if any, of such expenditures should be allowed to the [trustees] and charged against the life tenant and what part against the corpus of the estate” (Ungrich, 201 NY at 420). The Court directed the Surrogate’s Court to undertake a multi-factored assessment when allocating fees, including: whether the objecting beneficiary acted solely in their own interest or the common interest; the possible benefits to individual beneficiaries; the extent of participation; the good or bad faith of the objector; justifiable doubt regarding fiduciary conduct; the portions of interest held by non-objectors relative to objectors; and the future interests affected by reallocation.