Opinion ID: 2163536
Heading Depth: 1
Heading Rank: 2

Heading: Trustee's Attorney Fees

Text: In its assertion of cross-error, the trustee contends that it had a valid claim for reimbursement of fees incurred while successfully defending against the bulk of the beneficiaries claims, but that the trial court denied fees to both sides as a matter of equity. The trustee argues that the trial court's decision to deny the trustee's claim for attorney fees was intertwined with, and dependant upon the denial of the beneficiaries claim for fees. Brief of Appellee at 72. The trustee urges that, if the denial of the beneficiaries' claim is reversed on appeal, the denial of the trustee's fee claim should be reversed as well. While the trial court's decision to deny attorney fees to the beneficiaries expressly resulted from its decision to deny the trustee reimbursement for its attorney fees or costs, the converse is not true. The denial of the trustee's attorney fee claim occurred in the trial court's judgment entered January 13, 1994. The findings of fact and conclusions of law upon which it was based did not include any reference to a denial of the beneficiaries' attorney fees claim. The trial court did not address the beneficiaries' claim until its March 21, 1994, order denying the beneficiaries' Motion to Correct Error, wherein the court explained [i]n these circumstances, where [the trustee] was denied reimbursement from the trust for any attorney fees or costs of litigation, an award of attorney fees to [the beneficiaries] ... would be inequitable and unreasonable. Record at 1221. Because the denial of the trustee's claim for attorney fees and costs was thus independent of the trial court's decision to deny the beneficiaries' claim, our reversal of the latter does not automatically compel reversal of the denial of the trustee's claim. We will, however, consider the trustee's contention that it was entitled to reimbursement from the trust for its attorney fees. Again we note that the award or denial of attorney fees is in the exercise of a sound discretion, and in the absence of an affirmative showing of error or abuse of discretion we must affirm [the trial court's] order. Zaring v. Zaring, 219 Ind. 514, 523, 39 N.E.2d 734, 737 (1942). We do not find that the trial court abused its discretion. This Court, in Zaring, also held that [t]he right to compensation at the cost of the estate should not depend upon the result of the litigation but rather upon the reasonable necessity for such litigation. Id. at 523, 39 N.E.2d at 737. [3] The necessity for litigation was also emphasized by the Indiana Court of Appeals in Haas v. Wishmier's Estate, 99 Ind.App. 31, 190 N.E. 548 (1934). In finding that the trustee could not use trust funds to pay the expenses and attorney fees for his defense, the court stated, The record in this case shows that these proceedings were actuated because of the misconduct of [the trustee].... It was because of the misconduct and negligence of the appellant that these proceedings became necessary. Id. at 35-36, 190 N.E. at 549. The trustee contends that it is entitled to recover its attorney fees from the Trust even though the Probate Court found that Bank One acted improperly in one limited area. Brief of Appellant at 54. We disagree. The probate court's findings and conclusions of law demonstrate that, although the trustee was successful in defending certain actions, the majority of the probate court's conclusions of law focus on the trustee's misconduct, specifically conclusions two through twenty-one relating to the trustee's misrepresentations as to the mandate, listed in part: 2. Bank One failed to give the beneficiaries complete and accurate information concerning matters related to the administration of the Trust. ... 4. ... The assertion that there was a mandate, without explanation of the legal effect of the comments was misleading and constituted misrepresentation. 5. Bank One breached its duty to Plaintiffs when Bank One ... misrepresented the existence of a mandate from the [Examiners] requiring diversification... 6. Bank One continued to misrepresent the existence of a mandate to diversify and failed to correct the misrepresentation in 1979 when it had an opportunity to do so. ... 9. But for Bank One's [misrepresentations], the beneficiaries would have brought a legal action to prevent the diversification before it occurred. 10. [Such legal action] would have prevented additional time, expense and other difficulties resulting from the great delay in the filing of these actions.... ... 12. By virtue of the fiduciary relationship between the parties, Bank One owed Plaintiffs ... a fiduciary duty to act with utmost loyalty, honest and in good faith. Bank One has breached this duty. ... 19. Bank One cannot avail itself of a laches defense, since its own wrongful conduct prevents it from coming to the Court with clean hands. ... 21. [T]he Bank has so jeopardized its trust relationship as to require removal. Record at 1163-67. After removing the trustee for its misconduct, including a breach of fiduciary duty regarding the misrepresentation, the probate court nevertheless found in favor of the trustee with regards to the allegations as to its handling of the diversification itself. The court found: 22. ... Bank One fully complied with its duty under the prudent man rule.... 23 ... Bank One made the diversification decision based on the interests of the beneficiaries and not on its own interests. Bank One did not diversify in order to increase its fees or to obtain additional investment.... Bank One did not breach the duty of loyalty to the Plaintiffs or other Trust beneficiaries.... 24. Bank One did not breach any fiduciary duty in connection with the indemnification agreements.... 25. Bank One did not breach the duty of impartiality as to the various beneficiaries.... 26. Bank One did not act improperly in failing to obtain Probate Court approval for the diversification.... Record at 1167-1171. Clearly, the probate court's conclusions of law do not represent an overall approval of the trustee's conduct minimally affecting one limited area. Brief of Appellant at 54. Rather, the court found that the trustee committed significant and substantial misconduct. We are informed by the trial court's Conclusions of Lawspecifically numbers nine and ten [4] that the beneficiaries' legal action was reasonably necessary due to the trustee's misrepresentations. We conclude that the trial court did not abuse its discretion in denying the trustee's request for reimbursement of attorney fees. The judgment denying the beneficiaries' attorney fees is reversed and the judgment denying the trustee's attorney fees is affirmed. The cause is remanded to determine the amount of the beneficiaries' award. SHEPARD, C.J., and SULLIVAN and SELBY, JJ., concur. BOEHM, J., not participating.