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In re Estate Of King

March 22, 2001

IN RE: ESTATE OF HAZEL M. KING MILDRED M. REARDEN, ET AL., APPELLANTS.


Before Steadman, Ruiz and Reid, Associate Judges.

The opinion of the court was delivered by: Ruiz, Associate Judge

Appeals from the Superior Court of the District of Columbia (Hon. Cheryl M. Long, Trial Judge)

Argued December 8, 1999

This appeal presents an issue of first impression concerning the responsibilities of fiduciaries who have dual roles, as trustees and personal representatives, relating to the same assets. *fn1 We affirm the trial court's award of unpaid trustee fees to appellees, Riggs National Bank and Sanford Goldstein, and its decision awarding compensation to Riggs in its capacity as co-personal representative. We remand the case for further fact finding regarding compensation for appellee Goldstein as personal representative, on the question of the legatees' request that their legal fees be imposed as a sanction for bad faith litigation or as a surcharge against appellees on whether compensation to the law firms which represented the trustees/co- personal representatives should be paid from estate funds, the trial court should then make any appropriate adjustments or redeterminations of the awards of compensation and attorney's fees.

I.

Hazel M. King died testate on July 17, 1991, at the age of 91. The Estate of Hazel M. King ("the Estate") was the distributee of the remaining principal and the accumulated and undistributed income of an inter vivos revocable trust that had been created by Ms. King, the Hazel M. King Trust ("the Trust"), which by its terms terminated at her death. The Estate consisted of approximately $1.5 million in assets comprised of cash, stocks and bonds. Appellees, Riggs National Bank of Washington D.C. ("Riggs") and Sanford Goldstein, were trustees of the now- terminated Trust. *fn2 Riggs and Goldstein were also named co-personal representatives of the Estate, along with Lillian Malins.

The trust instrument provided that "upon termination of this trust, the remaining principal and the accumulated and undistributed income, if any, shall be paid over to the Personal Representatives of the Grantor's estate and said trust assets shall be distributed in accordance with the Grantor's will, dated August 27, 1982." With respect to accountings by the trustees, "upon the termination of the trust, the Trustees shall prepare a final account and shall deliver the same to the Grantor's agents and to the Personal Representatives of the Grantor's estate."

The trust instrument provided that "[t]he Trustees shall be entitled to receive the compensation that is customary for trustees in the District of Columbia; provided, however, that the compensation of any institutional Trustee shall be in accordance with such institution's standard trust fee schedule as in effect from time to time."

On August 7, 1991, three weeks after Ms. King's death, her will was admitted to probate. In accordance with Ms. King's instructions, Riggs, Goldstein and Malins were appointed co-personal representatives of the Estate on September 16, 1991. In 1993, the legatees requested a copy of the final account of the Trust from Riggs and Goldstein in order to evaluate the reasonableness of their requests for compensation, the legatees having filed objections with the Register of Wills. Appellees denied their request, prompting the Rearden litigation. While the Rearden case against Riggs and Goldstein as trustees was pending, further consideration of the probate account and the personal representatives' compensation request was held in abeyance, but on September 5, 1995, the trial court ordered Riggs, Goldstein and Malins, the personal representatives, to provide the Final Account of the Trust to the legatees. On September 21, 1995, Riggs provided the legatees with an undated and unsigned "Statement of Account." In an order dated December 18, 1996, the probate court ordered appellees to file a Final Account by January 31, 1997, and by affidavit to "certify under oath the pertinent information about the preparation and submission of the [Statement of Account]," identified as the final account of the trust, including the date its preparation was complete and the date a copy was mailed to Malins, the third co-personal representative of the Estate. Appellees filed separate "declarations" confirming that the Statement of Account was the Final Account for the Trust and had been mailed to Malins on November 29, 1993. On January 31, 1997, the Fourth and Final Account of the Trust was filed by appellees along with their separate counsels' Second Request for Compensation of Litigation Expenses on behalf of the personal representatives, to which the legatees filed their objections.

The probate court: 1) approved unpaid Trustee commissions payable to Riggs but denied further Trustee commissions requested by Goldstein; 2) approved in full the compensation sought by the law firms representing Riggs and Goldstein; and 3) approved half of the compensation sought by Riggs as personal representative, 4) but denied entirely the compensation sought by co-personal representatives Goldstein and Malins. The probate court found that the co-personal representatives were responsible for the non-disclosure of the final account of the Trust to the legatees, and accordingly sanctioned Riggs by reducing its requested personal representative compensation by half.

Because Goldstein had been overpaid from the Trust in his role of trustee, the trial court refused to approve further trustee compensation. Goldstein was not required to reimburse the Trust for the overpayment; instead the probate court refused to approve his request for compensation as personal representative as a sanction for the non- disclosure of the final account of the Trust to the legatees, and offset the overpayment from the Trust against Goldstein's requested compensation as personal representative. The legatees appealed this order. Subsequently, by order dated June 12, 1998, the probate court approved the restated fourth and final account, which incorporated the court's previous order regarding trustee commissions, personal representative compensation and related attorneys' fees. The legatees appealed this order as well, and the two appeals were consolidated by order of this court.

II.

A. Unpaid Trustee Fees professors

"As is evident, a court's initial focus must be on the terms of the trust." In re Estate of Cavin, 728 A.2d 92, 98 (D.C. 1999). Pursuant to the trust instrument, Riggs, as an institutional trustee, was to be paid according to its applicable fee schedule whereas Goldstein was entitled to "compensation that is customary for trustees in the District of Columbia." The legatees assert that the probate court made no findings regarding Estate funds totaling $33,398, which, according to the legatees, were taken unilaterally by Riggs and Goldstein once they became personal representatives. *fn3 The trial court recognized, however, that "remaining additional [trustee] commissions must be payable, if at all, from assets of the estate because all Trust assets have been relinquished to the estate." The ...


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