Trust Estb. Under Will of Graybill, C. ( 2016 )

J-S36035-16
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
IN THE MATTER OF THE TRUST IN THE SUPERIOR COURT OF
ESTABLISHED UNDER THE WILL OF PENNSYLVANIA
CLAIR S. GRAYBILL, DECEASED
APPEAL OF: JODY GRAYBILL
No. 1656 MDA 2015
Appeal from the Order Entered August 27, 2015
In the Court of Common Pleas of Juniata County
Orphans' Court at No(s): 34-00-0077
BEFORE: MUNDY, J., DUBOW, J., and STEVENS, P.J.E.*
MEMORANDUM BY STEVENS, P.J.E.: FILED JUNE 10, 2016
Appellant Jody Graybill, in his capacity as Trustee of the Trust
established by his late grandfather, Clair S. Graybill, appeals from the order
entered in the Court of Common Pleas of Juniata County, Orphans’ Court
division, which confirmed the auditor’s report directing that various
distributions be made from the Trust.1 After a careful review, we affirm.
The relevant facts and procedural history underlying this matter have
been aptly set forth, in part, by the court-appointed auditor as follows:
____________________________________________
1
We note this appeal is properly before us. See Pa.R.A.P. 342(a)(1) (“An
appeal may be taken as of right from. . .[a]n order confirming an account, or
authorizing or directing a distribution from an estate or trust[.]”).
*Former Justice specially assigned to the Superior Court.
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By [o]rder dated October 25, 2013, the [Orphans’] Court
appointed [an] auditor in this matter “to address all objections,
request for accounts and outstanding legal issues.”
By agreement of counsel for the [Appellant] and [Donald
Graybill and Dianna Spriggle (collectively “Objectors”)], the audit
hearing was delayed to permit the parties to pursue liquidation
of real estate assets.
The [a]uditor limited the scope of the hearing to the
objections raised by [Objectors] and the Co-Executors of the
Last Will of Florence M. Graybill to [Appellant’s] Twelfth and Final
Account with proposed distribution filed on August 13, 2013.
The requests for accounts that were pending on October 25,
2013, were fulfilled and no objections were filed to those
accounts.
A pre-hearing conference was held on October 1, 2014,
and the [a]uditor’s hearing was held [on] October 15, 2014. At
the [a]uditor’s hearing[,] Attorney Antonio D. Michetti,
representing [Appellant], Attorney Thomas C. Clark,
representing [Objectors], and Attorney Brian R. Baker,
representing the Florence M. Graybill Estate, all appeared and
participated in the hearing. [Appellant], [Objector] Dianna
Spriggle, and Cynthia Williams, Trust Officer of Juniata Valley
Bank, the surviving Co-Executor of the Last Will of Florence M.
Graybill, also attended and participated in the hearing.
***
Based on a review of the notes of testimony and the
exhibits admitted at [the] hearing, the [a]uditor ma[de] the
following findings:
1. [Appellant], grandson of [the late] Clair S. Graybill and
Florence M. Graybill, was named as Trustee in his
grandfather’s Will of potentially two (2) separate trusts[.]
[He] accepted that position and responsibility, and acted in
the capacity of Trustee during the period [of] May 30, 2002,
to and including the closing date of this Twelfth Account, July
31, 2013.
2. Florence M. Graybill was the income beneficiary of the sole
trust funded by Clair’s estate, and she died [on] March 11,
2013.
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3. The trust principal has consisted of varying amounts of cash;
common stock of Juniata Valley Financial Corporation, Fulton
Bank, and PPL Electric Utilities; and undivided one-half
interests of three (3) distinct parcels of real estate, referred
to as the Residence, the Farm, and the Woodland[.]
4. [Appellant] over time sold the Fulton Bank stock, the PPL
Electric Utilities stock, and some of the Juniata Valley stock,
and the proceeds of those sales were deposited in interest-
bearing certificates of deposit or a checking account for use in
paying costs of the Trust and/or distribution of income or
principal pursuant to the terms of the Trust.
5. [Appellant] did not inquire into what income was being
produced from the Farm or the Woodland during the
administration of the Trust.
6. [Appellant] received repeated requests from [Objector]
Donald Graybill, his uncle and one of the three remaindermen
of the Trust, in the period of 2000-2007 for advance
distributions of principal for various reasons.
7. During the period [of] 2001-2003, [Appellant] received
multiple communications from [Objector] Dianna Spriggle, his
aunt and one of the Trust’s remaindermen, regarding the
Trust[’s] terms and questioning the propriety or necessity for
the Trust’s existence.
8. On three (3) occasions over the 11-year period of
[Appellant’s] administration, Trust funds were used to pay
costs associated with the real estate assets other than taxes
and insurance.
9. No evidence was produced to show that [Appellant] actively
managed the real estate assets or the securities portfolio.
10. At least for some tasks, [Appellant] used co-employees of
First National Bank of Mifflintown, or paid the Bank or
someone else to prepare tax returns for the Trust.
11. Prior to Florence [M.] Graybill’s death on March 11, 2013,
she incurred long-term care expenses of $8,615.00, and
uninsured medical expenses of $614.47, which remain
unpaid.
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12. At the death of Clair [S.] Graybill, [a] no marital deduction
trust (“Trust A”) was created by [Appellant], there being
insufficient assets for such trust to be necessary, and the
provisions of Trust B included in Clair’s Will were the effective
provisions for the Trust administered by [Appellant].
13. Clair [S.] Graybill’s Will, at Article IV(2)(b), gave
[Appellant] discretion to use [the] principal of Trust B for
Florence’s support, welfare[,] and best interests without
consideration of the other beneficiaries of the Trust.
14. Clair [S.] Graybill’s Will, at Article VI(1)(c), provides for
[Appellant] to be paid reasonable compensation for his
services and to be reimbursed expenses.
15. No separate fee agreement was entered between Clair [S.]
Graybill and [Appellant].
16. The value of the Trust principal as of May 30, 2002, was
$250,732.35, book value, and $265,965.84, market value.
Of that, the book value of the real estate was $145,890.20[.]
17. The value of the Trust principal as of July 31, 2013, was
$181,012.54, book value, and $381,090.48, market value.
Of that book value, $145,890.20 was the value of the real
estate. Of that market value, $336,000.00 was the value of
the real estate.
18. [Appellant] spent 347.75 hours of his time on Trust
matters from May 30, 2002, to July 31, 2013, or an average
of 1.3 hours per month over the 264-month period for which
his compensation of $27,064.70 is claimed.
19. [Appellant] has extensive experience in trust and estate
management and administration, and was the Trust Officer of
First National Bank of Mifflintown at the time his grandfather’s
Will was made.
20. As of July 31, 2013, the Trust held $27,064.70 in cash, the
interests in the real estate, and 737 shares of common stock
of Juniata Valley Financial.
21. When asked by Cynthia Williams of Juniata Valley Bank in
November[] 2012, whether the Trust had liquid assets to help
pay Florence [M.] Graybill’s nursing home costs, [Appellant]
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did not answer the question, despite being told that Florence’s
liquid assets were being depleted by nursing home costs.
22. Objectors. . .incurred attorney’s fees in this matter of
$3,810.15.
Auditor’s Report, filed 11/25/14, at 1-3.
In addition to the aforementioned findings of fact, noting the absence
of a fee agreement governing Appellant’s compensation and concluding the
Will provided Appellant was entitled to “reasonable compensation,” the
auditor concluded Appellant’s claimed compensation of $27,064.70 was
unreasonable. In this regard, the auditor indicated the following:
Here, the value of the initial trust principal was modest, so
much so that the credit trust was the only trust required to be
administered. The three listed securities are exchange-listed
securities requiring little or no effort to track. The undivided
interests in the real estate could have justified an enhanced fee,
had they been actively managed. They were not. Although the
administrative difficulty of this trust was not high, because the
marital deduction trust was not needed, the evidence does show
that [Appellant] was required to respond to challenges by
beneficiaries regarding trust terms, especially during the early
years of his tenure as Trustee. [Appellant] exhibited some skill
in negotiating a few issues during the trust administration.
Success is harder to find in this scenario, there being no
securities trading activity, no attempt to bolster income from the
real estate, and rather feeble attempts to coordinate
management with Florence [M. Graybill] or her representatives.
Little if any risk was taken by [Appellant] in the management of
the assets held in Trust. Finally, of the various fee schedules
introduced by the parties at [a] hearing, none seem to provide
for a full percentage point annual fee, as is claimed by
[Appellant]. All provide for lower fees.
Another factor will be considered in evaluating a
reasonable fee in this trust, and that is the family relationship
between the testator and [Appellant]. The [a]uditor is of the
opinion that the testator named his grandson as Trustee not only
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because of the grandson’s experience as a trust administrator,
but also because he placed faith and trust in him as a grandson.
The testator certainly was aware that [Appellant] was the Trust
Officer with First National Bank of Mifflintown, and yet Clair [S.]
Graybill did not name the Bank as Trustee, he named his
grandson,[Appellant], as Trustee. The [a]uditor believes that a
tacit assumption was made by the testator that his grandson
would perform the same services at a lower cost than the Bank
would charge.
Id. at 4-5.
Having concluded Appellant’s claimed compensation amount was
unreasonable, the auditor reviewed the relevant factors and concluded
$15,583.47 was “reasonable compensation” for Appellant. In this regard,
the auditor indicated the following:
No doubt exists that [Appellant] did provide services to the
Trust in its administration, some of which were beyond the
ordinary administrative tasks in a trust setting. On the other
hand, the laissez faire approach to the real estate did not serve
the interests of the primary income beneficiary.
[Appellant] has suggested that, now that his compensation
is at issue, its calculation should be based primarily on a
percentage basis, using the fair market value of the assets,
rather than the book value. The [a]uditor will not fully adopt
that approach, primarily because the current real estate
appraisals (commissioned after the objections to [Appellant’s]
compensation had been pending for more than six months) are
of questionable relevance to the value of the real estate over the
eleven (11) years plus trust administration. Because the “book
value” of the real estate interests was established by the date of
death value used in the Clair S. Graybill estate administration,
the [a]uditor will use those value in calculating trust fees, absent
any other relevant and contemporaneous value over the life of
the trust administration.
For the years 2003, 2005, 2006[,] and 2007, the [a]uditor
finds that reasonable Trustee compensation is 1% of the fair
market value of the Trust assets, not including the real estate
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interests. For the years 2002, 2004, 2008, 2009, 2010, 2011,
2012, and the first seven (7) months of 2013, the [a]uditor finds
that reasonable Trustee compensation is .6% of the fair market
value of the Trust assets, not including the real estate interest.
For the administration of the real estate interests, the [a]uditor
finds that reasonable Trust compensation for the entire period of
May 31, 2002, to July 31, 2013 is 5% of the book value of the
real estate interests. Consequently, the [a]uditor finds
reasonable compensation for [Appellant] for the period of May
31, 2002, to July 31, 2013, is $15,583.47. The auditor
acknowledges that even this fee, at over eight (8%) percent of
the value of the trust principal, could arguably be viewed as on
the high side, but feels it is reasonable in these circumstances.
Id. at 5.
The auditor additionally addressed the fact that Appellant did not pay
the nursing home, pre-death uninsured, and unpaid medical expenses for
Florence M. Graybill, who was the sole income beneficiary of the Trust prior
to her death. The auditor concluded Appellant should have paid the
expenses, which totaled $9,229.47. Id. at 6. Moreover, the auditor
concluded Objectors, who sought attorneys’ fees, were entitled to such fees
from the Trust since “the objection to [Appellant’s compensation] resulted in
added value to the Trust beneficiaries[.]” Id. Finally, the auditor concluded
“[a]udit costs and fees are the liability of the trust, unless a basis exists for
shifting that liability to [Appellant] or the remaindermen. No such basis has
been argued in this proceeding, and therefore the Trust shall bear the costs
and fees of the audit.” Id.
By decree entered on November 25, 2014, the Orphans’ Court adopted
the auditor’s report, and thereafter, Appellant filed timely exceptions.
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Following a hearing, by order and opinion entered on August 27, 2015, the
Orphans’ Court denied Appellant’s exceptions and confirmed the auditor’s
report. Appellant filed a timely notice of appeal.2
Appellant’s first contention is the Orphans’ Court erred in concluding
Appellant’s requested compensation was unreasonable and in calculating
Appellant’s compensation at a lower rate. Specifically, Appellant contends
that, while the Orphans’ Court cites “the correct factors to consider when
determining reasonableness of compensation[,] [it] erred when looking
beyond the four corners of the documents, considering factors not supported
by law.” Appellant’s Brief at 15. In this vein, Appellant argues the
following: (1) The Orphans’ Court erred in failing to consider that, despite
his “extraordinary efforts,” Appellant was unable to properly manage the
property due to the noncooperation of Florence M. Graybill. Id. at 18; (2)
The Orphans’ Court erred in considering the family relationship between Clair
S. Graybill and Appellant. Id. at 19-20; (3) The Orphans’ Court erred in
adopting the auditor’s factual finding and analysis regarding Appellant’s use
of his Bank co-employees in performing his services under the Trust. Id. at
21; (4) The Orphans’ Court erred in failing to consider the extent of
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2
The Orphans’ Court directed Appellant to file a Pa.R.A.P. 1925(b)
statement, and Appellant properly complied. The Orphans’ Court did not file
a responsive Pa.R.A.P. 1925(a) opinion; however, on August 27, 2015, in
denying Appellant’s exceptions, the Orphans’ Court filed a comprehensive
opinion, which addresses the issues presented on appeal.
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Appellant’s involvement with the management of the Trust, including filing
annual formal accounts with the court and providing monthly informal
accounts to the Trust beneficiary, Florence M. Graybill. Id. at 23; (5) The
Orphans’ Court erred in failing to consider Appellant has specialized skill and
expertise, which should be properly compensated. Id. at 23-24; and (6) The
Orphans’ Court erred in failing to acknowledge that “[m]arket rates for a
corporate fiduciary of similar skill and experience as Appellant would be in
excess of what Appellant sought as compensation for his services in the
management of the Trust.” Id. at 24.
Our standard of review for decisions of the Orphans' Court is well
settled. “We will modify a decree [or order] only if it is not supported by
competent or adequate evidence, if an error of law has been committed, or if
the [Orphans’ Court] abused its discretion or capriciously disbelieved
credible or competent evidence.” In re Sweeney, 695 A.2d 426, 428
(Pa.Super. 1997) (quotation omitted).
Here, there is no dispute that the parties did not have a specified fee
agreement, but that Appellant’s grandfather’s Will provided Appellant is
entitled to “reasonable compensation” for his management of the Trust.
20 Pa.C.S.A. § 7768, pertaining to the compensation of a trustee,
provides, in relevant part, the following:
(d) Court authority.--In determining reasonable
compensation, the court may consider, among other facts, the
market value of the trust and may determine compensation as a
fixed or graduated percentage of the trust's market value. The
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court may allow compensation from principal, income or both
and determine the frequency with which compensation may be
collected. Compensation at levels that arise in a competitive
market shall be presumed to be reasonable in the absence of
compelling evidence to the contrary.
20 Pa.C.S.A. § 7768(d) (italics added) (bold in original).
This Court has noted that the determination of proper compensation is
a “matter peculiarly within the knowledge, competence, and experience” of
the Orphans’ Court. In re Raymond G. Perelman Charitable Remainder
Unitrust, 113 A.3d 296, 308-09 (Pa.Super. 2015) (quotation marks and
quotation omitted). See In re Estate of Sonovick, 541 A.2d 374, 376
(Pa.Super. 1988) (indicating the determination of whether compensation
claimed by a fiduciary is “reasonable and just” is left to the sound discretion
of the trial court). Moreover, the trustee has the burden of proving the
services rendered to establish the amount claimed is “reasonable
compensation.” In re Smith, 874 A.2d 131 (Pa.Super. 2005) (en banc).
Further, “[i]t is well established that an orphans' court, in certain situations,
can reduce the fees of. . . a trustee to a level that it determines is
‘reasonable and just compensation.’” In re Adoption of M.M.H., 981 A.2d
261, 273 (Pa.Super. 2009) (quotation marks and quotations omitted).
In the case sub judice, in explaining the reasons it confirmed the
auditor’s calculation of the “reasonable compensation” in connection with
Appellant’s services as the Trustee, the Orphans’ Court relevantly provided
as follows:
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[Appellant] first argues that the [a]uditor erred in
determining [Appellant’s] compensation of $27,064.70 was
unreasonable.
***
The [a]uditor acknowledged in his report that the Will
creating the Trust. . .dictate[s] that reasonable compensation be
paid to [Appellant] for his services. The [a]uditor further cited
several factors to be considered in his determination of what
constitutes reasonable compensation in this case including the
value and character of the trust property, the extent of risks
undertaken by [Appellant], the degree of administrative
difficulty, the skill and success of administering the trust[,] and
statutorily approved rates of reasonable compensation. The
[a]uditor clearly explained his reasoning for lowering
[Appellant’s] compensation by analyzing each of these factors.
He distinguished the separate assets of the trust: three
exchange-listed securities that require little or no effort to track
and the undivided interests in real estate, which were not
actively managed by [Appellant]. The [a]uditor acknowledged
the need for [Appellant] to communicate more frequently than
usual with beneficiaries challenging the terms of the trust. He
also noted [Appellant’s] negotiation of a few issues through the
administration of the trust. However, the [a]uditor noted []
there is no securities trading activity and no attempt to foster
income from the real estate. Thus, the [a]uditor found that little
risk was taken by [Appellant] while managing these assets and
concluded that [Appellant’s] [requested] compensation was
unreasonable.
Objectors argue in support of the [a]uditor’s findings,
claiming compensation must be based on services actually
performed by [Appellant], not an arbitrary formula. They
suggest Attorney Clyde Bomgardner[,] as well as Rhoads and
Sinon, LLP, assisted [Appellant] in his administration of the trust
from 2002-2004. In addition, Objectors claim First National
Bank of Mifflintown and Monroe Tax Associates prepared the
annual Trust Income Tax Returns for several years. They also
note Renee Williams, an assistant trust officer at First National,
was paid for her administrative services for the trust. Finally,
Objectors contend that [Appellant’s] secretary[,] Sandra
Holman, typed the monthly asset inventory and transaction
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history provided to Daniel Clark, Florence [M.] Graybill’s
attorney.[3]
[Appellant] testified that he did not perform any duties for
the Graybill trust during his regular work hours as Vice President
of First National Bank of Mifflintown. Evidence was also
presented that other Bank employees were asked to complete
some tasks for the Trust. However, it is unclear if these
employees were acting outside of their regular schedule. This
evidence contradicts [Appellant's] assertion that all trust
business, including his own, was conducted outside First National
Bank of Mifflintown’s business hours. If [Appellant] was this
particular about separating his own work hours from the hours
he spent personally administering to the trust, it seems he would
have also been personally communicating this information to his
staff as well. It is notable that Ms. Hoffman did not receive
compensation for any duties she performed for the Graybill Trust
outside of her regular work hours.
In addition, the [a]uditor perceived little effort by
[Appellant] in attempting to communicate with Florence [M.]
Graybill and her representatives. Evidence on the record
strongly corroborates the [a]uditor’s assessment that [Appellant]
also participated in withholding information[,] as well as funds[,]
from Florence [M.] Graybill and her representatives. Thus, it is
difficult to see why [Appellant] should receive further
compensation when he contributed to the miscommunication and
delay in care, necessitating superfluous reports.
The [a]uditor also explained his reasoning for arriving at
the lower rate of [$]15,583.47. The [a]uditor felt that despite
[Appellant’s] services to the trust, his actions did not serve the
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3
During the entire administration of the Trust, Appellant was employed by
the First National Bank of Mifflintown as a trust officer, and he utilized
various co-employees to perform tasks for the trust. For example, the
evidence revealed that Appellant had a Bank employee notarize documents
for him; in 2007, Appellant paid the Bank $100.00 for the Trust’s income tax
preparation; in 2006 and 2007, Appellant paid Renee Williams, an assistant
trust officer, $65.00 for administrative services for the Trust; and from 2003
to 2004, his secretary typed monthly asset inventory and transaction
histories for him. N.T., 10/15/14, at 123, 124-26, 165-66.
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interests of the primary income beneficiary. He further noted
that [Appellant] wished to base the calculations on a percentage
of the fair market value of the assets, however he partially
declined to adopt that approach, stating that current real estate
appraisals are of questionable relevance to the value of the
property during the eleven-year administration of the trust.
[Appellant] takes issue with this. . ., arguing that he is being
punished for choosing not to have yearly property appraisals
completed in an effort to conserve trust funds. While the lack of
appraisals may or may not unfavorably influence the calculation
of [Appellant’s] compensation, the fact still remains that no
appraisals were completed during the trust’s eleven-year tenure.
Having no values calculated from the relevant time frames, and
upon finding the value of an appraisal completed six months
after objections were raised to be irrelevant, it is reasonable to
conclude that compensation should be calculated by the book
value of the real estate assets. This value was determined at
the time of the administration of Clair [S.] Graybill’s Estate and
are based on values at the date of [his] death. Thus, the
[a]uditor concluded that [Appellant] is entitled to 5% of the book
value of the real estate assets from 2002-2013.
The [a]uditor calculated [Appellant’s] fee for all other
assets based on the fair market value of those assets. For years
2003, 2005, 2006, and 2007, [Appellant’s] compensation was
calculated at 1% of the fair market value of the Trust assets not
including real estate. For years 2002, 2004, 2008, 2009, 2010,
2011, 2012, and 2013, the [a]uditor assessed [Appellant’s] fee
at .6% of the fair market value of all assets excluding real
estate.
Finally, the [a]uditor acknowledged that the reduced fee of
$15,583.47 is over eight (8%) percent of the value of the trust
principal and such a fee can still be considered excessive.
Despite this, the [a]uditor felt this compensation was reasonable
based on the evidence presented regarding [Appellant’s]
administration of the Trust.
Orphans’ Court Opinion, filed 8/27/15, at 1-3 (footnote added).
As indicated supra, 20 Pa.C.S.A. § 7768(d) does not provide an
exhaustive list of factors, which the court should consider in determining
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what constitutes “reasonable compensation.” In this case, we find no abuse
of discretion and conclude the Orphans’ Court has adequately explained the
reasons for adopting the auditor’s findings of fact and calculations. See In
re Sweeney, supra.
Appellant’s second contention is the Orphans’ Court erred in holding
Appellant should have paid Florence M. Graybill’s nursing home, pre-death
uninsured, and unpaid medical expenses from the Trust. Appellant contends
the Will and Trust instrument gave him sole discretion whether to pay for
Florence M. Graybill’s support and welfare from the Trust. Appellant’s Brief
at 28-29. He further asserts the Will provisions make it clear that Clair S.
Graybill did not intend to pay for Florence M. Graybill’s estate expenses from
the Trust, and the Orphans’ Court erred in holding to the contrary. Id. at
28-30.
In addressing Appellant’s issue, the Orphans’ Court explained as
follows:
The [Will] of Clair S. Graybill gives [Appellant] discretion to
pay certain sums to his wife, Florence [M.] Graybill, “as the
Trustee from time to time determines to be required or desirable
for her support[,] welfare[,] and best interests.” The [W]ill goes
on to state, “The [T]rustee need not consider the interests of
any other beneficiaries in making distributions to [Florence M.
Graybill] or for her benefit.” Florence [M.] Graybill died on
March 11, 2013. Her medical bills obviously pre-date her death.
After review[,] the Court [finds] [Appellant] provided no
explanation at the [a]uditor’s [h]earing for not paying the
nursing home expenses and other pre-death medical bills.
[Appellant’s] actions are particularly inexplicable when emails
between him[], Cynthia Williams, Vice President and Trust
Officer of Juniata Valley Bank, reflect it was common practice of
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the Trust to pay such expenses when Florence [M.] Graybill’s
income was depleted.
Orphans’ Court Opinion, filed 8/27/15, at 3.
We find no abuse of discretion in this regard. In re Sweeney, supra.
Moreover, we note the Will provides that Clair S. Graybill’s “primary concern
is for the support, welfare[,] and best interest of my wife[, Florence M.
Graybill].” See Clair S. Graybill Will, dated 6/9/00, at 3. Accordingly, the
Orphans’ Court did not err in concluding Appellant should have paid the
expenses at issue from the Trust.
In his final contention, Appellant avers the Orphans’ Court erred in
awarding auditor’s fees and attorneys’ fees to Objectors. Specifically,
Appellant initially contends “[t]he Orphans’ Court erroneously affirmed the
[a]uditor’s [r]eport, holding that Objectors’ actions were not meritless,
therefore the reasoning for granting attorney[s’] fees and auditor[’s] fees is
no longer applicable and should be reversed by this Honorable Court.”
Appellant’s Brief at 32. Alternatively, with regard to the award of attorneys’
fees, Appellant argues the Orphans’ Court erred by awarding such fees
under the common fund doctrine since no individual was unjustly enriched
by the litigation at issue. Id. at 33.
As to Appellant’s argument the award of attorneys’ fees and auditor’s
fees was improper since the Orphans’ Court should not have confirmed the
auditor’s report, we find no merit to this argument and decline to address it
further in light of our analysis supra.
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As to Appellant’s argument the Orphans’ Court erred in awarding
attorneys’ fees to Objectors under the common fund doctrine, we disagree.
As this Court has previously recognized:
We begin by noting that “a litigant cannot recover counsel
fees from an adverse party unless there is express statutory
authorization, a clear agreement of the parties, or some other
established exception.” Gall v. Crawford, 982 A.2d 541[, 549]
(Pa.Super. 2009) (citing Trizechahn Gateway LLC v. Titus,
601 Pa. 637, 976 A.2d 474, 482 (2009)). Moreover, “[t]he
applicant for counsel fees has the burden of proving his/her
entitlement thereto.” Id.
***
It is the American rule that parties to adversary litigation
are required to pay their own counsel fees. The common fund
doctrine, a common law exception to this rule, has been
statutorily codified at [42 Pa.C.S.A.] § 2503[(8)]. Jones v.
Muir, 511 Pa. 535, 515 A.2d 855 (1986). In essence, the
common fund doctrine applies when an attorney's services:
protect a common fund for administration or distribution under
the direction of the court, or where such fund has been raised for
like purpose, it [the fund] is liable for costs and expenses,
including counsel fees incurred. This is the case even though the
protection given or the raising of a fund results from what may
be properly termed adversary litigation. Hempstead v.
Meadville Theological School, 286 Pa. 493, 134 A. 103
(1926).
In other words, when several people have a common
interest in a fund, the assets of which may be created through
adversary litigation, and one or more of these people, for the
benefit of all, but at their own cost and expense, bring suit to
administer or preserve that fund, the court will order plaintiff or
plaintiffs to be reimbursed for costs and expenses, including
counsel fees, from the property of the fund, or order those
benefited to contribute proportionately toward that expense.
Furthermore, 42 Pa.C.S.[A.] § 2503(8) authorizes the
award of attorneys' fees to “[a]ny participant who is awarded
counsel fees out of a fund within the jurisdiction of the court
pursuant to any general rule relating to an award of counsel fees
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from a fund within the jurisdiction of the court.” This
authorization has been taken to mean that the common fund
exception applies not only when the fund is before the court
prior to litigation, but where the successful litigation of the
underlying suit resulted in a substantial benefit to a “group of
others in the same manner as plaintiff[.]”
Petow v. Warehime, 996 A.2d 1083, 1087-88 (Pa.Super. 2010) (citation
and quotations omitted). See Couy v. Nardei Enterprises, 587 A.2d 345,
347 (Pa.Super. 1991) (“[T]he common fund exception. . .rests on the
perception that persons who obtained the benefit of a lawsuit without
contributing to its cost are unjustly enriched at the successful litigant's
expense[.]”) (citation omitted)).
In the case sub judice, the Orphans’ Court found that, following
Florence M. Graybill’s death, there were three remaining beneficiaries to the
Trust; namely, the two Objectors, who incurred attorneys’ fees with regard
to the instant litigation, and Appellant’s father, Dale Graybill, who did not
participate in the litigation or, consequently, incur attorneys’ fees. However,
as the Orphans’ Court aptly concluded, “all beneficiaries, including[] Dale
Graybill, will benefit from [the] reduction in [Appellant’s] compensation.”
Orphans’ Court Opinion, filed 8/27/15, at 3. Accordingly, the Orphans’ Court
directed the Objectors be paid their attorneys’ fees from the Trust. We
agree with the Orphans’ Court’s sound reasoning in this regard. See
Petow, supra; Couy, supra.
For all of the aforementioned reasons, we affirm.
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Affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 6/10/2016
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