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This case can also be found at 184 N.J. 115, 875 A.2d 925.
(This syllabus is not part of the opinion of the Court. It has
been prepared by the Office of the Clerk for the convenience of the
reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not
have been summarized).
Argued February 14, 2005 -- Decided June 29, 2005
RIVERA-SOTO, J., writing for a unanimous Court.
This will contest between estranged siblings requires that the Court address yet again whether, in the absence of a mandate based on a statute, court rule or contract, attorneys fees can be shifted from one party to another.
Elizabeth Hull Vayda died testate on January 12, 2000, survived by her son
and daughter, Peter Vayda (Peter) and Katherine Rainey (Katherine). Under decedents last will,
Peter was entitled to 55% of the residuary estate, while Katherine was entitled
to 45%. Peter was appointed executor of decedents estate. For more than a
year, Peter did little to administer the estate or carry out his duties.
As ultimately described by the trial court, Peter was not administering the estate
at all. The Appellate Division echoed the trial courts appraisal of Peters discharge
of his executors duties.
Katherine sued, seeking to void the will as the product of undue influence
and, alternatively, to remove Peter as executor of decedents estate and to obtain
an accounting. In response, Peter submitted an estate summary that purported to include
distributions to him totaling more than $104,000 for Peters daughters college education and
ballet lessons together with reimbursement for expenses Peter claimed to have incurred on
decedents behalf. Katherine amended her complaint to include a challenge to those proposed
distributions and reimbursements. Peters post-will contest claims against the estate constituted the entirety
of Katherines bad faith claim against him.
The trial court held that the will was not the product of undue
influence, confirmed its earlier determination to remove Peter as executor, disallowed many of
Peters claims against the estate, and determined that all of Peters activities, taken
as a whole, amounted to breach of fiduciary duties to the beneficiaries of
the estate. The trial court further found that Peters post-will contest actions manifested
obvious and blatant bad faith to his sister. The trial court concluded that
Peter be required to pay Katherines legal fees. The Appellate Division reversed the
trial courts judgment that Peter pay Katherine the costs she incurred and remanded
that issue to the trial court for consideration of whether, under R. 4:42-9(a)(3),
the estate should pay Katherines attorneys fees.
We granted Katherines cross-petition for certification limited solely to the question of whether
the trial court properly concluded that an executor who breached his duty to
beneficiaries of the estate should be obligated for the payment of the prevailing
partys counsel fees.
HELD: The circumstances here do not present sufficient cause to depart from New
Jerseys deep-rooted adherence to the American Rule, a rule that requires that each
party bear their own attorneys fees. In this case, the successful siblings attorneys
fees nonetheless should be reimbursed by the estate.
Our analysis of whether a derelict executor should bear the burden of the
successful contesting partys attorneys fees in an action seeking the executors removal must
start from the proposition that New Jersey has a strong public policy against
the shifting of costs and that that this Court has embraced that policy
by adopting the American Rule, which prohibits recovery of counsel fees by the
prevailing party against the losing party. Rule 4:42-9 specifically provides that no fee
for legal services shall be allowed in the taxed costs or otherwise, with
a number of exceptions, one of which provides that in a probate action,
if probate is granted, and it appears that the contestant had reasonable cause
for contesting the validity of the will or codicil, the court may make
an allowance to the proponent and the contestant, to be paid out of
the estate. (pp. 6-7)
3. This case invites us to create yet another exception to the American Rule,
one that would allow attorney fee shifting whenever a non-attorney executor is removed
because of, among other things, breach of a fiduciary duty and bad faith
against co-beneficiaries. According to Katherine, her status as a 45% beneficiary of the
residuary estate means that her recovery is limited to only 55% of her
attorneys fee award and, thus, she would not be made whole. One cannot
quarrel with either Katherines arithmetic or the equitable gloss that arises from Katherines
quandary. That result, however, is compelled by the clear language of R. 4:42-9(a)(3)
which, under the circumstances present here, allows an award of attorneys fees to
be paid out of the estate and not from another source. Given the
availability of a specific remedy as provided in our Rules albeit one that
does not, in Katherines view, make her whole this case is unlike those
where equity demands the fashioning of a remedy in the first instance. A
remedy, as ordered by the Appellate Division and now upheld by this Court,
exists, and the claim that it is inadequate simply because it is incomplete
is insufficient impetus to warrant a further exception the American Rule, one to
which we have repeatedly averted as a well-established feature of our jurisprudence. We
therefore reaffirm New Jerseys strong public policy against the shifting of counsel fees
and, under the circumstances presented here, we decline to extend recovery for attorneys
fees. (pp. 11-13)
Judgment of the Appellate Division is AFFIRMED.
CHIEF JUSTICE PORITZ and JUSTICES LONG, LaVECCHIA, ZAZZALI, ALBIN, and WALLACE join in
JUSTICE RIVERA-SOTOS opinion.
SUPREME COURT OF NEW JERSEY
IN THE MATTER OF THE ESTATE
ELIZABETH HULL VAYDA, Deceased
Argued February 14, 2005 Decided June 29, 2005
On certification to the Superior Court, Appellate Division.
Robert A. Knee argued the cause for appellant, Katherine V. Rainey (The Knee
Law Firm, attorneys).
Leonard Adler argued the cause for respondent, Peter E. Vayda.
JUSTICE RIVERA-SOTO delivered the opinion of the Court.
The relevant facts are stated briefly. Decedent Elizabeth Hull Vayda died testate on January 12, 2000, survived by her son and daughter, Peter Vayda (Peter) and Katherine Rainey (Katherine). Her most recent will See footnote 1 provided for the following specific bequests: Peter was to receive ten percent of decedents residuary estate as a thank you for all the support and care he has given me over the course of the years; Peter also was to receive a specific bequest of $20,000; Katherine would be forgiven a $20,000 loan; and Peters paramour of many years was to receive a specific bequest of $25,000 apparently in appreciation for having assisted in providing care for decedent in her later years. Decedents residuary estate was to be divided between Peter and Katherine in equal shares per stirpes. Because the will provided for a specific bequest to Peter of 10% of the residuary estate with the remainder of the residuary estate to be divided equally between Peter and Katherine, Peter was entitled to 55% of the residuary estate, while Katherine was entitled to 45%. Finally, and most significant, contrary to all of decedents prior wills, each of which named Katherine as executor, Peter was appointed executor of decedents estate to serve without any bond, surety or other security in any jurisdiction.
Decedents will was admitted to probate and letters testamentary were issued to Peter on January 24, 2000, twelve days after decedents death. Notwithstanding the diligence with which decedents will was submitted to the Surrogate, it is undisputed that for more than a year following decedents death, Peter did little to administer the estate or carry out his duties as executor, which stands in marked contrast to his uncontested portrayal as a dutiful and attentive son. The list of Peters shortcomings as an executor need not be repeated here; it is sufficient to note that, as ultimately described by the trial court, Peter was not administering the estate at all. The Appellate Division echoed the trial courts appraisal of Peters discharge of his executors duties as follows: Peters administration of decedents estate proceeded with a marked lack of diligence.
Katherine sued, seeking both to void the will as the product of undue influence and, alternatively, to remove Peter as executor of decedents estate and to obtain an accounting. In response, Peter submitted an estate summary that, based on Peters uncorroborated claim that decedent wanted to pay for Peters daughters college education and ballet lessons, purported to include distributions to him totaling more than $104,000, together with reimbursement for a series of expenses Peter claimed to have incurred on decedents behalf. Katherine amended her complaint to include a challenge to those proposed distributions and reimbursements. Peters post-will contest claims against the estate constituted the entirety of Katherines bad faith claim against him.
The will contest was heard before the Chancery Division. In a carefully considered written opinion, the trial court held that the January 13, 1998 will was not the product of undue influence. The trial court, however, confirmed its earlier pendente lite determination to remove Peter as executor of the estate and disallowed many of Peters claims against the estate. More importantly, the trial court determined that all of Peters activities, taken as a whole, amount to breach of fiduciary duties to the beneficiaries of the estate of which he assumed executorship. The trial court further found that Peters post-will contest actions manifested obvious and blatant bad faith to his sister. The trial court thus concluded that
[f]or these acts, it is appropriate that [Peter] be required to pay [Katherines] legal fees, not to be paid from the estate, which would result in her paying 45% of her own fees, but rather from his share of the estate. But for his deceptive actions and devious treatment of her, she would not have had to bring this action. He will pay his own legal fees. . . . . Fee shifting is appropriate in probate actions, as there is considered to be a fund in court. See Packard-Bamberger & Co.  v. Collier , 167 N.J. 427 (2001).
Peter appealed and Katherine cross-appealed, raising eight and four separate issues, respectively. The
Appellate Division, in an unpublished decision, affirmed the trial court in all but
three respects, only one of which is relevant before us. The panel reversed
the trial courts judgment that [Peter] shall pay [Katherine] the costs she incurred
in pursuing this action the amount of said costs to be . .
. paid to [Katherine] from [Peters] share of the estate, and remanded that
issue to the trial court for consideration of whether, under R. 4:42-9(a)(3), the
estate should pay Katherines attorneys fees.
Our analysis of whether a derelict executor should bear the burden of the successful contesting partys attorneys fees in an action seeking the executors removal must start from the proposition that New Jersey has a strong public policy against the shifting of costs and that [t]his Court has embraced that policy by adopting the American Rule, which prohibits recovery of counsel fees by the prevailing party against the losing party. In re Niles, 176 N.J. 282, 293-94 (2003) (citations omitted). As we explained in In re Niles, [t]he purposes behind the American Rule are threefold: (1) unrestricted access to the courts for all persons; (2) ensuring equity by not penalizing persons for exercising their right to litigate a dispute, even if they should lose; and (3) administrative convenience. Id. at 294.
In general, Rule 4:42-9 codifies those specific instances where, in the absence of a separately enabling statute or contract, fee shifting is permitted. In the context of probate matters such as the one before us, the Rule specifically provides that
[n]o fee for legal services shall be allowed in the taxed costs or otherwise, except . . . [i]n a probate action, . . . [i]f probate is granted, and it shall appear that the contestant had reasonable cause for contesting the validity of the will or codicil, the court may make an allowance to the proponent and the contestant, to be paid out of the estate.
[R. 4:42-9(a)(3) (emphasis supplied.]
This limited exception does not, however, modify [the Rules] approach and philosophy, namely
that sound judicial administration will best be advanced by having each litigant bear
his own counsel fee except in those few situations specially designated . .
. in the rule. That is the so-called American Rule to which the
New Jersey Supreme Court remains committed. Pressler, Current N.J. Court Rules, comment 1
on Rule 4:42-9 (2005) (citations and internal quotation marks omitted).
In Packard-Bamberger & Co. v. Collier, 167 N.J. 427 (2001), we extended the limited exception allowing the recovery of attorneys fees in attorney malpractice actions created in Saffer v. Willoughby, supra, to include actions for attorney misconduct, reasoning that
an attorney who intentionally violates the duty of loyalty owed to a client commits a more egregious offense than one who negligently breaches the duty of care. A clients claim concerning the defendant-attorneys breach of a fiduciary duty may arise in the legal malpractice context. Nonetheless, if it does not and is instead prosecuted as an independent tort, a claimant is entitled to recover attorneys fees so long as the claimant proves that the attorneys breach arose from the attorney-client relationship. Accordingly, we hold that a successful claimant in an attorney-misconduct case may recover reasonable counsel fees incurred in prosecuting that action.
[Packard-Bamberger & Co. v. Collier, supra, 167 N.J. at 443.]
The fulcrum of the analysis for these limited exceptions to the American Rule
was thus shifted from Saffer v. Willoughbys allowance of attorneys fees as consequential
damages arising out of an attorneys malpractice to Packard-Bamberger & Co. v. Colliers
focus on the recovery of attorneys fees as damages directly and proximately arising
from the attorneys breach of fiduciary duty to the plaintiff.
[Id. at 26 (citations omitted).]
We further noted that a [b]reach of fiduciary duty is a tort theory,
such that attorneys fees incurred as a result of that breach may be
recoverable as a portion of the plaintiffs damages, id. at 27 (citations omitted),
and that the American Rule does not preclude an allowance of reasonable counsel
fees where the incurring thereof is a traditional element of damages in a
particular cause of action. Id. at 33 (citation and internal quotation marks omitted).
However, we specifically limited the reach of In re Estate of Lash to
attorney breach of fiduciary duty malfeasance only, explaining that the fact that a
person owes another a fiduciary duty, in and of itself, does not justify
an award of fees unless the wrongful conduct arose out of an attorney-client
relationship. Id. at 34 (emphasis supplied).
This Court has described the policies undergirding the American Rule as strong. N.
Bergen Rex Transp., Inc. [v. Trailer Leasing Co.,
158 N.J. 561, 569 (1999)].
Our courts have been justifiably circumspect in departing from the [American] rule, doing
so only when there is express authorization by statute, court rule or contract,
Dept of Envtl. Prot. V. Ventron Corp.,
94 N.J. 473, 504 (1983), or
when the interests of equity demand it, Red Devil Tools v. Tip Top
50 N.J. 563, 575-76 (1967).
[In re Estate of Lash, supra, 169 N.J. at 43 (Verniero & LaVecchia,
Remaining properly tethered to that foundation, we have created limited categories as exceptions
to the principle that each party should bear its own costs, including only
those instances involving claims against attorneys (for malpractice, misconduct, or malfeasance by way
of a breach of fiduciary duty), or when an executor or trustee has
committed the pernicious tort of undue influence.
The judgment of the Appellate Division is affirmed.
CHIEF JUSTICE PORITZ and JUSTICES LONG, LaVECCHIA, ZAZZALI, ALBIN, and WALLACE join in JUSTICE RIVERA-SOTOs opinion.
SUPREME COURT OF NEW JERSEY
NO. A-48 SEPTEMBER TERM 2004
ON CERTIFICATION TO Appellate Division, Superior Court
IN THE MATTER OF THE ESTATE
ELIZABETH HULL VAYDA, Deceased
DECIDED June 29, 2005
Footnote: 1 There were several wills that preceded decedents last will, dated January 13, 1998. That latter will itself was the subject of some controversy. Originally, it was dated incorrectly as executed on January 13, 1997. The date of the will was corrected to January 13, 1998 via a codicil dated July 8, 1998. Additional controversy concerning the manner in which the January 13, 1998 will was executed, including claims of undue influence, were addressed by the trial court but are not before us.
Footnote: 2 In re Estate of Lash, supra, was argued before but decided after Packard-Bamberger & Co. v. Collier, supra.
Footnote: 3 In re Estate of Lash, supra, 169 N.J. at 34, explicitly disclaims that it is not an application, much less an expansion, of Saffer and Packard-Bamberger. That disclaimer, however, does not oust In re Estate of Lash from its proper position in the developmental continuum of the law regarding attorney fee shifting.
Footnote: 4 Had Katherine established that the decedents will was the result of undue influence, this matter would have been squarely governed by the holding of In re Estate of Lash, supra, and she would have obtained the relief she now seeks.
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