May 7th, 2012
It’s not easy being a trustee, so if you’re a state that wants to create a positive atmosphere for fiduciary business, you’ll have a trust code that encourages financial institutions and individuals to accept that fiduciary role.
So states do this well; others, well, not so much. One aspect that is almost uniform, however, is the difficulty with which it is to put trustees personally on the hook for a successful litigant’s attorney’s fees. That’s why, when it happens in a case like Jacobson v. Sklaire, we take notice.
After Jacob Sklaire died, the co-trustees of the Jacob Sklaire Trust, refused to distribute a gift to his wife despite being required to by the trust instrument. The wife prevailed at trial on her claim to compel distribution of the gift (the co-trustees’ lack of capacity, undue influence, and fraud defenses were denied and their counterclaim for funds the wife allegedly took from trust assets was dismissed). The wife was also awarded her costs and fees from the trust.
After an appeal, the co-trustees agreed to an order taxing the wife’s costs against the trust and agreed to pay the wife’s attorney’s fees from the trust. One problem: the co-trustees had been paying their own attorney’s fees out of the trust during the litigation, which left less money in the trust than was necessary to pay the judgment, attorney’s fees and costs.
Most of the money that was diverted from the trust was ultimately repaid by the co-trustees’ original law firm and by the co-trustees themselves. But, even after all of that, the trust was about $112,000 short on repaying what was required. The trial court found that the co-trustees were jointly and severally liable to the wife for the attorney’s fees and costs.
The case drew an interesting dissent, which suggested that, if the co-trustees were going to be held personally liable for attorney’s fees, then they should have been personally sued and personally served with process, which they were not in this case. While the point was made in a dissent, it does suggest a potential out for trustees stuck with a personal judgment.