In Matter of Hyde, 2010 NY Slip Op 05676 (June 29, 2010), the New York Court of Appeals held that New York Surrogate’s Court Procedure Act (“SCPA”) Section 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.” The Court’s holding overruled its 1971 statutory construction in Matter of Dillon (28 NY2d 597) (1971) which led to a customary charge of such fees against the entire estate.
The Hyde case was brought before the court as a result of objections filed by certain, but not all, of the beneficiaries to trust accountings. The Surrogate’s Court dismissed all objections and determined that Dillon required that the non-objecting beneficiaries, who had not even stood to gain from the success of the accounting objections, were responsible for over $700,000 in legal fees. Those beneficiaries filed an appeal of the decision which was affirmed by the Appellate Division.
SCPA Section 2210 (2) provides that attorney’s fees incurred by a fiduciary in the execution of his or her fiduciary duties can, by court direction, “be paid from the estate generally or from the funds in the hands of the fiduciary belonging to any legatee, divisee, distributee or person interested.” The Court of Appeals stated that the Dillon decision, in which SCPA 2110 was interpreted as requiring that the entire estate be charged with legal fees “seems to have ignored the plain meaning of the statute . . . . [and] did not focus on considerations of fairness . . . .”
The Court then found that the trial court should engage in a multi-factored assessment of the facts that includes considerations of “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 a 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 . . .”
The Court remitted the case to the trial court for that purpose.