Court Opinion

ID: 4514211
Source: CourtListenerOpinion
Date Created: 2020-03-10 14:06:50.612328+00
Date Added: 2024-06-11T08:49:24.882621
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                           APPROVAL OF THE APPELLATE DIVISION
    This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
 internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

                                                    SUPERIOR COURT OF NEW JERSEY
                                                    APPELLATE DIVISION
                                                    DOCKET NOS. A-4084-17T1
                                                                A-1276-18T1

IN THE MATTER OF THE ESTATE
OF KEITH R. O'MALLEY,
     Deceased.

               Argued November 21, 2019 – Decided March 10, 2020

               Before Judges Alvarez and Suter.

               On appeal from the Superior Court of New Jersey,
               Chancery Division, Monmouth County, Docket Nos. P-
               000405-16 and P-000280-18.

               Robert D. Borteck argued the cause for
               appellants/cross-respondents Barbara    O'Malley,
               Dennis O'Malley, Jessica Shuman, Dylan Shuman,
               Luke Shuman, and Brooke Shuman in A-4084-17 and
               appellants in A-1276-18 (Borteck & Czapek, PC,
               attorneys; Robert D. Borteck and Christine Socha
               Czapek, on the briefs).

               Anthony J. La Porta argued the cause for
               respondent/cross-appellant Michele O'Malley in A-
               4084-17 and respondent Michelle O'Malley in A-1276-
               18 (Connell Foley LLP, attorneys; Anthony J. La Porta
               and Daniel B. Kessler, on the briefs).
            Brian R. Selvin argued the cause for respondent/cross-
            appellant Michael K. Feinberg in A-4084-17 and
            respondent Michael K. Feinberg in A-1276-18
            (Greenbaum Rowe Smith & Davis LLP, attorneys;
            Brian Selvin and Irene Hsieh, on the briefs).

            Lauren D. Bercik argued the cause for respondent
            Estate of Keith O'Malley in A-1276-18.

PER CURIAM

      In these two appeals, consolidated for decision, beneficiaries of certain

trusts challenge orders granting substantive relief to interested parties and

counsel fees. We affirm as to the substantive relief. We also affirm the counsel

fee awards, except that we remand for the Probate Part judge to make more

detailed findings regarding amounts.

      The Estate of Keith O'Malley, who was only thirty-two at the time of his

death on June 1, 2014, consists of a $5,000,000 trust created for his minor child

(specific bequest trust). The residue of the estate is divided equally between

two trusts, a trust designated as available for the benefit of the child

(discretionary trust), and a trust for the benefit of his surviving extended family

members: mother, father, sister, and the sister's children (family residual trust).

In addition, decedent disinherited a second child, a son, which generated

litigation ultimately settled by the testamentary trustee and the child. The family

residual trust beneficiaries (beneficiaries) did not contribute to the settlement

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with the son. In fact, when the settlement agreement reached by the testamentary

trustee, with contribution from the child, was approved by the Probate Part, it

was over the objection of the beneficiaries.

      The child, whose interests were represented by her mother, engaged in

post-death litigation regarding ongoing support payable by the estate. The

beneficiaries object that the child support settlement reached by the testamentary

trustee, approved by the judge, was improper because the judge did not review

the child's mother's budget. The beneficiaries contend that the child support

payable by the estate is excessive, and improperly depletes estate assets while

inuring to the benefit of the child's mother.

      Two orders are appealed. The first is the April 3, 2018 order awarding

counsel fees and costs: the judge's award of $373,116.98 in counsel fees to the

child's mother's attorneys, Connell Foley LLP. The beneficiaries object to the

amount of fees and payment from estate funds. On cross-appeal, the child's

mother challenges the counsel fee award payable on behalf of the beneficiaries'

attorney, Borteck & Czapek, P.C., in the amount of $146,772.42. She too

contends the award should not be payable from estate funds, and is excessive.

The testamentary trustee, also by way of cross-appeal, challenges the award to

Borteck & Czapek, contending the fees are unreasonable and were accrued for

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the individual benefit of the beneficiaries, not the estate, and therefore should

not be paid from estate assets.

      In reaching her conclusions, the judge who awarded the fees noted that

"this was not an ordinary estate. . . . The [w]ill was [thirty-nine] pages and

involved numerous trusts and other requirements." With regard to the amounts,

the judge said that she had reviewed the time records of each firm, that the time

was invested appropriately, that the fees were reasonable based on the firm's

geographical location, and that in light of the extensive years-long litigation,

"the amount of fees were necessary for the results . . . ." She further stated that

an award of counsel fees should be made from a fund in court when the party

receiving them "aided directly in creating, preserving, or protecting the fund."

The judge considered the estate assets to be a fund in court from which fees

should be paid. She opined that:

            the actions taken by the attorneys in this case were
            designed to advance the purposes of the [e]state and the
            testator's estate plan.

                   Each party viewed its actions as promoting the
            testator's intent.

Since everyone engaged in litigation attempted to preserve the residuary estate,

ultimately benefitting the child as well as the beneficiaries, she was satisfied

that all "parties were bona fide in their actions," although they held "divergent

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views of how the testator's intent should be fulfilled." The judge made fees for

counsel for the testamentary trustee payable from estate assets because he was

a necessary party to all the litigation. Thus, she ordered $94,389.24 to be paid

to Greenbaum, Rowe, Smith & Davis LLP on behalf of the testamentary trustee.

      On October 5, 2018, a different Probate Part judge approved a settlement

agreement between the child's mother and the testamentary trustee. That second

order is also appealed by the beneficiaries. Under the agreement, the prior

Family Part order for child support of $14,000 per month was reduced to

$11,000. Certain additional fluctuating payments for the child's expenses that

mirrored the Family Part order were reduced to fixed amounts.

      The judge approved the settlement because it "minimizes the need for

contact between the parties and effectively eliminates potential disputes . . . by

providing a steady, consistent and clear method of compensation and payments

of [the minor child's] support." The beneficiaries objected to the settlement,

among other reasons, because the judge was not provided a monthly budget from

the child's mother. The judge rejected the argument because reviewing the

child's mother's budget "would effectively be engaging in the micromanagement

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[of the trustee] that our Appellate Division held that our courts cannot do in

Wiedenmayer."1

      The Family Part judge had ordered the creation of a property settlement

agreement (PSA) trust in the related litigation, to be funded with $1,000,000.

The judge opined that the settlement agreement between the child's mother and

the testamentary trustee eliminated potential for future disputes, and created "a

clear path forward for these parties."       Further, by virtue of the structured

settlement, the parties were "increasing the likelihood of the life of the PSA

trust, which will then have the effect of increasing the life and preserve the assets

of the specific bequest trust . . . ."     The judge considered "the settlement

agreement [to have] no negative pecuniary impact on the trust . . . [and] may

very well and likely will have the effect of reducing obligations related to annual

child support." Once the determination was made by the Family Court judge as

to the amount of child support, she was bound by that decision. As the judge

further explained, the beneficiaries "cite no law, no rule which would permit this

[c]ourt sitting in [p]robate to question those determinations . . . ."

1
  Wiedenmayer v. Johnson, 106 N.J. Super. 161, 165 (App. Div. 1969) (finding
"[o]nly unwarranted judicial interference would induce a negating of the course
pursued by the trustees" in the best interests of the beneficiaries).
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The beneficiaries raise three points on appeal for A-4084-17:

      POINT I
      THE TRIAL COURT'S AWARD OF LEGAL FEES
      AND COSTS TO CONNELL FOLEY FROM THE
      ASSETS OF THE ESTATE CONSTITUTED AN
      ABUSE OF DISCRETION.

      POINT II
      THE TRIAL COURT ERRED IN AWARDING TO
      GREENBAUM LEGAL FEES AND COSTS FROM
      THE ASSETS OF THE ESTATE RATHER THAN
      FROM THE ASSETS OF THE TRUSTS FOR WHICH
      THE FIRMS' CLIENT SERVED AS TRUSTEE.

      POINT III
      THE AWARD TO CONNELL FOLEY WAS AN
      ABUSE OF DISCRETION BECAUSE THE TRIAL
      COURT     FAILED  TO   CONSIDER   THE
      REASONABLENESS OF THE REQUESTED FEE
      AWARD.

By way of cross-appeal, the child's mother raises one point:

      POINT I
      TRIAL COURT ABUSED ITS DISCRETION IN
      AWARDING FEES TO APPELLANTS.

The testamentary trustee raises a similar point on cross-appeal:

      POINT I
      THE TRIAL COURT ERRED IN AWARDING
      ROBERT D. BORTEK, P.C.'S FEES AND COSTS
      BECAUSE ALL OF THE FEES AND COSTS
      INCURRED WERE FOR THE INDIVIDUAL
      BENEFIT OF THE FAMILY MEMBERS, NOT THE
      ESTATE.

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      The beneficiaries raise three points on appeal for A-1276-18:

             POINT I
             THE TRIAL COURT ERRED IN APPROVING THE
             SETTLEMENT AGREEMENT BECAUSE IT IS NOT
             A REASONABLE COMPROMISE OF THE DISPUTE
             BETWEEN THE PARTIES.

             POINT II
             THE TRIAL COURT ERRED IN APPROVING THE
             SETTLEMENT AGREEMENT BEFORE FIRST
             REVIEWING AND CONSIDERING (1) THE
             BUDGET UPON WHICH THE SETTLEMENT WAS
             BASED AND (2) [the child's mother's] FINANCIAL
             RESPONSIBILITY TO SUPPORT HER CHILD.

             POINT III
             THE TRIAL COURT ERRED IN APPROVING THE
             PROVISION OF THE SETTLEMENT THAT
             PERMITS TRUST FUNDS TO BE USED TO PAY [the
             child's mother's] FUTURE LEGAL FEES WITHOUT
             THE COURT'S REVIEW AND APPROVAL
             PURSUANT TO RULE 4:42-9(A)(2).

                                           I.

      We first address the beneficiaries' challenge to approval of the settlement

agreement, appeal No. A-1276-18. A fiduciary "shall, in the exercise of good

faith and reasonable discretion," have the power to "compromise, contest, or

otherwise settle any claim in favor of the estate, trust, or fiduciary . . . ." N.J.S.A.

3B:14-23(m). Trustees of a discretionary trust are afforded broad discretion,

implicitly limiting a beneficiary's ability to compel a specific action by the

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trustee. Tannen v. Tannen, 416 N.J. Super. 248, 267 (App. Div. 2010). Such

"absolute and uncontrolled discretion" is limited only by a trustee's

determination that a decision is for the beneficiary's best interests.

Wiedenmayer, 106 N.J. Super. at 164. A trustee's decision must be "made in

good faith, after consideration of all the facts and attendant circumstances, and

for reasonably valid reasons." Id. at 165. "Courts may not substitute their

opinions as to the [beneficiary's] 'best interests,' as opposed to the opinion of the

trustees vested by the creator of the trust . . . to make that determination." Ibid.

      The Probate Part judge did not abuse her discretion in approving the

settlement agreement. The court identified decedent's "clear and unquestioned"

principal intent to be the "maintenance and care of the [child.]" Thus, the

Agreement was in her best interest, with the added benefit to the estate that it

reduced child support obligations, resolved ongoing legal disputes, and

increased the life of the PSA Trust.         It was a reasonable exercise of the

testamentary trustee's discretion.

      In support of their appeal, the beneficiaries contend the settlement

agreement lacked consideration. But that is an issue they cannot raise, as they

are limited to challenging whether the trustee made a good faith decision,

supported by the evidence, for reasonably valid reasons. See Wiedenmayer, 106

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N.J. Super. at 165. They have not demonstrated bad faith, or that the settlement

agreement was not supported by the evidence, or that the settlement agreement

was reached for impermissible reasons.

      Consideration is a "bargained-for exchange of promises or performance,"

which does not even require the dollar amount of a settlement to be lower than

the original agreement, so long as there is some exchange. See Bernetich,

Hatzell & Pascu, LLC v. Med. Records Online, Inc., 445 N.J. Super. 173, 183

(App. Div. 2016). On its face, the settlement agreement benefits the estate, and

thus there was bargained-for consideration.

      The beneficiaries again argue that without seeing the child's mother's

budget, the court should not have approved the settlement. But the issue is

whether the decision was made in the best interest of the beneficiary, and does

not require the court to scrutinize the details of that discretionary decision once

made by a trustee.       See Wiedenmayer, 106 N.J. Super. at 165 ("Only

unwarranted judicial interference would induce a negating of the course pursued

by the trustees.").

      It is always possible that a minor's caretaker benefits from child support.

See Isaacson v. Isaacson, 348 N.J. Super. 560, 584 (App. Div. 2002) ("We also

recognize . . . that the law is not offended if there is some incidental benefit to

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                                       10
the custodial parent from increased child support payments."). But the focus is

solely on whether the minor benefits from the agreement. The child gained

benefits from the agreement.

      As part of the settlement, the testamentary trustee agreed to fund the

child's mother's counsel fees if incurred in future litigation. The beneficiaries

argue that equals a blank check. Such fees will be paid from the estate, however,

only if approved by the court. If the estate is not required to pay the fees, then

they would be paid through the PSA trust. Thus, either the court would approve

fees drawn from the estate, or fees would be taken from the child's assets.

Therefore, the points raised in No. A-1276-18 regarding the court's approval of

the settlement agreement lack merit.

                                       II.

      The decision to award or deny attorney's fees rests within the sound

discretion of the trial court. Desai v. Bd. of Adjustment, 360 N.J. Super. 586,

598 (App. Div. 2003).      Judges have broad discretion to determine when,

whether, and under what circumstances attorney's fees should be awarded. Ibid.

A trial court's award of attorney's fees should be disturbed only on the rarest of

occasions, "and then only because of a clear abuse of discretion." Rendine v.

Pantzer, 141 N.J. 292, 317 (1995).

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      Generally, rulings by courts of equity on discretionary decisions "are

entitled to deference and will not be reversed on appeal absent a showing of an

abuse of discretion involving a clear error in judgment." In re Estate of Hope,

390 N.J. Super. 533, 541 (App. Div. 2007).

      Abuse of discretion occurs when a decision is "made without a rational

explanation, inexplicably departed from established policies, or rested on an

impermissible basis." Flagg v. Essex Cty. Prosecutor, 171 N.J. 561, 571 (2002).

An award of fees is an abuse of discretion when not premised upon consideration

of all relevant factors, is based upon consideration of irrelevant or inappropriate

factors, or amounts to a clear error in judgment. Ibid.

                                        A.

      Rule 4:42-9(a)(2) states a court "in its discretion" may award attorney's

fees out of a fund in court. A "fund in court" generally refers to some fund in

the hands of a fiduciary but within a court's jurisdictional authority to be dealt

with. In re Probate of the Alleged Will of Landsman, 319 N.J. Super. 252, 272

(App. Div. 1999). Generally, "allowances are payable from a 'fund' when it

would be unfair to saddle the full cost upon the litigant for the reason that the

litigant is doing more than merely advancing his own interests." Henderson v.

Camden Cty. Mun. Util. Auth., 176 N.J. 554, 564 (2003) (citing Sunset Beach

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                                       12
Amusement Corp. v. Belk, 33 N.J. 162, 168 (1960)). A party who participates

in litigation involving an estate may be awarded fees from a fund in court when

the litigation serves to "protect the estate or . . . further its proper

administration." Sunset Beach, 33 N.J. at 169. They "must have aided directly

in creating, preserving or protecting the fund." Landsman, 319 N.J. Super. at

272.

       We agree with the Probate Part judge's conclusion that regardless of the

perspective of others involved in the litigation, each party sought to maximize

estate funds. Decedent's estate plan was intended to substantially benefit the

child before all others—thus efforts to maximize estate assets inured to her

benefit. In that respect, the actions taken by all parties "were designed to

advance the purposes of the estate and the testator's estate plan."

       The child's mother engaged in litigation in order to protect her child's

interests. The beneficiaries engaged in litigation in order to protect the residuary

estate. The testamentary trustee engaged in litigation in order to both protect

the child, the focus of decedent's estate plan, while maintaining trust funds at

maximal level with an eye to the future. Given the nature of the estate plan and

the litigation which followed, both in the Probate and the Family Part, attorneys'

fees should be paid from estate funds.

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                                        B.

      Rule of Professional Conduct 1.5(a) requires that "[a] lawyer's fees shall

be reasonable." This applies in all cases regarding fees, not just cases governed

by a fee-shifting statute. Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 21-22

(2004). "The starting point in awarding attorneys' fees is the determination of

the 'lodestar,' which equals the 'number of hours reasonably expended multiplied

by a reasonable hourly rate.'" Id. at 21 (quoting Rendine, 141 N.J. at 335). First,

the trial court must determine the reasonableness of the rates proposed in support

of the fee application. Id. at 22. "Second, a trial court must determine whether

the time expended in pursuit of the 'interests to be vindicated,' the 'underlying

statutory objectives,' and recoverable damages is equivalent to the time

'competent counsel reasonably would have expended to achieve a comparable

result . . . .'"   Ibid. (quoting Rendine, 141 N.J. at 336).       Excessive and

unnecessary hours spent on the case cannot be included in calculating the

lodestar. Ibid.

      There is considerable overlap between calculating the lodestar and the

factors laid out in Rule of Professional Conduct 1.5(a), but the New Jersey

Supreme Court is adamant that the factors "must inform the calculation of the

reasonableness of a fee award in . . . every case." Ibid. Those factors are:

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                                       14
            (1) the time and labor required, the novelty and
            difficulty of the questions involved, and the skill
            requisite to perform the legal service properly;

            (2) the likelihood, if apparent to the client, that the
            acceptance of the particular employment will preclude
            other employment by the lawyer;

            (3) the fee customarily charged in the locality for
            similar legal services;

            (4) the amount involved and the results obtained;

            (5) the time limitations imposed by the client or by the
            circumstances;

            (6) the nature and length of the professional
            relationship with the client;

            (7) the experience, reputation, and ability of the lawyer
            or lawyers performing the services;

            (8) whether the fee is fixed or contingent.

            [R.P.C. 1.5(a).]

The trial court recognized these factors and applied them to the facts of this case.

      In applying the factors, however, the court stated only that it reviewed the

records from each attorney and firm, concluding "each firm expended its time

properly." That does not suffice.

      That same judge, during the course of earlier proceedings, stated that she

never reviewed the number of hours expended by attorneys because no

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                                        15
reasonable way exists to determine if the sum was appropriate. Unfortunately,

pursuant to Rendine, a court must review the number of hours and determine

whether or not they are reasonable. 141 N.J. at 336. It is not clear from the

record if such review occurred here.

      Hence, we agree with the parties that the actual amount of fees requires a

more detailed examination and discussion, and remand for that purpose.

Although the judge properly exercised her discretion by ordering the sums to be

paid from the estate, we have no explanation of the basis for specific numbers

awarded. Basically, the judge just gave each firm the amount it requested. That

may ultimately be correct, but requires more explicit analysis.

      Affirmed, except remanded for reconsideration of specific amounts of

counsel fees.

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