In the Matter of the Estate of ELIZABETH HULL VAYDA, Deceased.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0580-05T2

In the Matter of the Estate

of

ELIZABETH HULL VAYDA,

Deceased.

_____________________________________________________________

 

Argued: September 13, 2006 -Decided December 7, 2006

Before Judges Fuentes and Messano.

On appeal from the Superior Court of New Jersey, Chancery Division, Bergen County, P-191-01.

Leonard Adler argued the cause for appellant/cross-respondent Peter E. Vayda.

Robert A. Knee argued the cause for respondent/cross-appellant Katherine V. Rainey (The Knee Law Firm, attorneys; Mr. Knee, on the brief).

PER CURIAM

This is the latest round in an ongoing, intra-familial battle between, Peter Vayda (Peter), executor of the estate of his late mother, Elizabeth Hull Vayda (Elizabeth), and his sister, Katherine V. Rainey (Katherine). Upon remand from the Supreme Court, In Re Estate of Vayda, 184 N.J. 115 (2005), the trial court amended its original orders of judgment. Two aspects of that order on remand are now the subject of this appeal. First, Peter appeals the trial court's award of counsel fees to Katherine in the amount of $67,661.93 payable by the estate. Katherine, in turn, cross-appeals the trial court's conclusion that Peter was entitled to $39,960 from the estate as reimbursement for costs and expenses paid by Peter or his girlfriend, Jeanette Cordero (Cordero), on behalf of Elizabeth during her lifetime.

The tortured procedural history of this matter prior to the remand requires some brief explication. Katherine initiated this litigation in 2001 seeking an accounting of the estate, Peter's removal as executor of Elizabeth's estate, and the appointment of herself in his stead. Prior to trial, Katherine sought to amend her complaint and sought a declaration that Elizabeth's will was the product of Peter's undue influence or was otherwise null and void because of Elizabeth's incompetence, and also the probate of an earlier will whose provisions were more favorable to Katherine. On the day of the trial, the judge permitted the amendment of Katherine's complaint to include only her claim that the will should be set aside because it was the product of Peter's undue influence. The parties proceeded to trial and on April 17, 2003, the trial judge entered a comprehensive order that detailed the resolution of all issues presented. On the same date, the judge entered a second order that awarded Katherine counsel fees in the amount of $44,000, payable by Peter, not the estate.

Peter appealed various aspects of those orders including the award of counsel fees from his share of the estate. Katherine cross-appealed portions of the orders as well including the trial court's reduction of her counsel fee request that was originally in excess of $67,000. She asked that the balance of her requested fee be paid from the estate.

We reversed the trial court's judgment in three respects and otherwise affirmed the balance of the orders. In the Matter of the Estate of Elizabeth Hull Vayda, No. A-4653-02 (App. Div. June 11, 2004). First, we concluded the trial judge erred in approving $6218.10 charged to Peter's credit cards as legitimate reimbursements for expenses paid by Peter on behalf of the decedent. We concluded the monies reflected Peter's "personal expenses" and ordered him to reimburse the estate. Second, we reversed the trial judge's approval of $39,960 taken by Peter under a power of attorney he held during Elizabeth's lifetime. In doing so, we concluded the judge had not adequately addressed various checks made payable to Peter or Cordero that appeared on the estate accounting. We remanded that issue to the trial court "to address the funds transferred by these three checks." Lastly, we reversed the trial court's order regarding the award of counsel fees to Katherine. Finding no authority to shift the fee award to Peter personally, we concluded, "Here, Katherine presented a prima facie case of undue influence and thus has shown reasonable cause for contesting decedent's will. Her allowance of counsel fees should therefore be paid by the estate pursuant to R. 4:42-9(a)(3)." Notably, despite Katherine's explicit cross-appeal that sought the award of her entire requested counsel fee of $67,661.93, we did not conclude that the amount of the award entered by the trial court, $44,000, was inappropriate. We ordered, "(t)he matter . . . remanded for the court to apply the provisions of R. 4:42-9(a)(3) to any counsel fees awarded to Katherine."

Peter's petition for certification to the Supreme Court was denied, but, Katherine's cross-petition for certification was granted, "limited solely to the question of whether the trial court properly concluded that an executor who breached his duty to beneficiaries of the estate should be obligated for the payment of counsel fees incurred by the prevailing party." In re Estate of Vayda, 182 N.J. 139 (2004). Affirming our judgment, the Court concluded,

We therefore reaffirm New Jersey's "strong public policy against the shifting of counsel fees," and, under the circumstances presented here -- in which the allegations against the non-attorney executor involve negligence in the administration of the estate and the claimed bad faith arose only after the will contest was filed -- we decline to extend recovery for attorneys' fees. If determined to be appropriate under the facts here, the proper source for recovery remains as set forth plainly in Rule 4:42-9(a)(3) -- the recovery, if allowed, is "to be paid out of the estate." The judgment of the Appellate Division is affirmed.

[In re Estate of Vayda, 184 N.J. 115, 124-25 (2005) (quoting In Re Niles, 176 N.J. 282, 293 (2003)).]

Katherine had argued that any payment of counsel fees from the estate, as opposed to payment of the fees by Peter, would work an inequity against her. The Court characterized her contention as follows:

Acknowledging that she was unsuccessful in proving that the decedent's will was the result of undue influence but pointing out that the trial court found Peter's actions after Katherine commenced this will contest to be in breach of his fiduciary duty as an executor and in bad faith against her as a co-beneficiary, Katherine principally argues that it is inequitable to allow her to recover her attorneys' fees only against the estate. According to Katherine, because any such recovery would come from the residuary estate, her status as a 45% beneficiary of the residuary estate simply means that her recovery is limited to only 55% of her attorneys' fee award and, thus, she would not be made whole.

[Id. at 123-24.]

After consideration of this argument, the Court noted,

One cannot quarrel with either Katherine's arithmetic or the equitable gloss that arises from Katherine's quandary. That result, however, is compelled by the clear language of R. 4:42-9(a)(3), which, under the circumstances present here, allows an award of attorneys' fees "to be paid out of the estate" and not from another source. Given the availability of a specific remedy as provided in our Rules -- albeit one that, because of the peculiarities of this case, does not, in Katherine's view, make her whole -- this case is unlike those where equity demands the fashioning of a remedy in the first instance. A remedy, as ordered by the Appellate Division and now upheld by this Court, exists, and the claim that it is inadequate simply because it is incomplete is insufficient impetus to warrant a further exception to the American Rule, one to which we have repeatedly averted as "a well-established feature of our jurisprudence."

[Id. at 124-25 (citations omitted).]

On remand from the Court, the trial judge conducted further proceedings to resolve the two remaining issues. First, as to the issue of counsel fees, he considered written submissions in which Katherine requested fees and costs in the amount of $67,661.93. This was the identical amount she originally requested after trial and requested again on appeal. Peter again opposed the request. After reviewing the submissions, the trial judge concluded that Katherine should be awarded the full amount of $67,661.93 paid from the estate.

The judge began his consideration by noting the initial fee award, $44,000, was calculated using Peter's counsel fees as a "benchmark." The reasonableness and necessity of Katherine's original request was "not disapproved by the court." The judge concluded,

So as to place in perspective this legal issue in its voyage through the various courts, it should be noted that the shifting away of the legal-fee assessment of $44,000 against . . . Peter, over to an amount of $67,661.93 now payable by the estate, results in a savings to Peter of $6,785.94. The will allocates to Peter 55% of the residuary estate, thus obligating him to pay the equivalent of 55% of his sister's counsel fees. (The mathematical calculation shows that 55% of $67,661.93 equals $37,214.06, some $6,785.94 less than the $44,000 assessment under the trial court's decision.) In other words, Katherine's appeal to the Supreme Court to reverse the Appellate Division's decision if successful would have given her $6,785.94 more for her counsel fees than the Appellate Division's decision provided.

With respect to the second issue on remand, the resolution of Katherine's claim that $39,960 should be reimbursed to the estate by Peter, the trial judge concluded,

I have reviewed my decision and my notes on this subject matter and perceive that in that decision, it was my intent to deny her claim for all of these funds, which altogether represented Peter's having annually reimbursed himself for various expenses he had paid for on behalf of his mother. They appear to be reasonable in the context of what the late Ms. Vayda required and what her son was doing for her at the time.

Peter now appeals the amount of the counsel fee award made upon remand; Katherine cross-appeals the trial judge's denial of her request to have Peter reimburse the estate $39,960.

After carefully reviewing the record and considering the applicable legal standards, we are compelled to reverse both aspects of the trial judge's order on remand.

Implicitly, the judge's primary purpose in increasing the counsel fees award from $44,000 to $67,661.93, an increase of more than fifty percent, was to address the perceived inequity to Katherine. Although successful in removing Peter as executor of Elizabeth's estate based upon his mismanagement and serious breaches of his fiduciary duties, she was nonetheless required to bear forty-five percent of the legal fees incurred.

In reworking his calculus, the trial judge took note of the relative impact that his new award would have upon both Peter and Katherine. These impacts were significantly affected by the change in the award the trial judge made upon remand. Now, Peter was responsible for $37,214.06 of the counsel fees as opposed to all of the $44,000 previously awarded. The trial judge equated this to being $6,785.94 less of an obligation upon Peter. However, this is not entirely accurate. Had the original award remained, Peter would have been responsible for only fifty-five percent of $44,000, or $24,200, more than $13,000 less than his obligation under the new award made on remand. In turn, the new calculus resulted in a benefit to Katherine of that amount. We conclude that the trial judge's award of the full amount of counsel fees requested by Katherine was an attempt to make Katherine's "inadequate" remedy under Rule 4:42-9(a)(3) more palatable.

We are further convinced that these equitable considerations lay at the heart of the trial judge's decision to increase the counsel fee award because he did not engage in any detailed analysis of the actual certification of services submitted, nor did he consider it in light of the appropriate legal standards. We therefore conclude that in awarding Katherine the full amount of counsel fees she requested, the trial judge abused his discretion. With this one exception, we find the remainder of the arguments advanced by Peter regarding the counsel fee award to be without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).

An award of counsel fees by the trial court will not be overturned unless there has been a clear abuse of discretion. Rendine v. Pantzer, 141 N.J. 292, 317 (1995). The starting point in awarding counsel fees is a determination of the "lodestar," or "the 'number of hours reasonably expended multiplied by a reasonable hourly rate.'" Furst v. Einstein Moomjy, 182 N.J. 1, 21 (2004) (quoting Rendine, supra, 141 N.J. at 335). The factors that inform the court's determination of what is a reasonable fee are those set forth in R.P.C. 1.5(a). Id. at 22. The court must determine both the reasonableness of the rates and the reasonableness of the time actually expended in the litigation. Id. at 22-23.

Once the lodestar is determined, the court may consider enhancement if the prevailing attorney entered into a contingent fee agreement. Id. at 23. Enhancement of the lodestar amount is also appropriate in the exceptional case where the result is "significant and of broad public interest." Rendine, supra, 141 N.J. at 341.

However, "a trial court should decrease the lodestar if the prevailing party achieved limited success in relation to the relief he had sought." Furst, supra, 182 N.J. at 23. "If . . . a plaintiff has achieved only partial or limited success, the product of hours reasonably expended on the litigation as a whole times a reasonable hourly rate may be an excessive amount. This will be true even where the plaintiff's claims were interrelated, nonfrivolous, and raised in good faith." Hensley v. Eckerhart, 461 U.S. 424, 436, 103 S. Ct. 1933, 1941, 76 L. Ed. 2d 40, 52 (1983) (emphasis supplied); see also Rendine, supra, 141 N.J. at 336.

The trial judge failed to consider these applicable standards in making his award. Essentially, without any detailed analysis to calculate the lodestar, the judge concluded that the full amount Katherine requested was reasonable. He noted "it can be said that all of [Katherine's] litigation costs are related, directly or indirectly, to the will challenge." However, Katherine's challenge to Elizabeth's will included her paramount claims that the will was the product of Peter's undue influence. She sought to have an earlier will, more favorable to her, admitted to probate. On this major claim, she failed. The fact that all of her claims were interrelated to the will challenge does not justify an award that fails to reflect that her success was limited and partial. The trial judge's failure to consider this in determining the award was an abuse of his discretion.

On remand, we also required the trial judge to "address the funds transferred" by three checks Peter made payable to himself or Cordero which he claimed was for reimbursement of home care he and Cordero rendered to Elizabeth during her lifetime. At trial, Katherine had challenged Peter's claim that $39,960 reflected on five such checks was reimbursement for these expenses. Peter, however, sought an additional $20,636 for home care expenses. After trial, the judge decided that two of the five checks, in the combined amount of $19,980, and reflected on Peter's estate summary as reimbursement for "Home Care Debt," were payments "for reimbursement for then contemporary expenditures." However, he also denied Peter's additional claim for home care expenses, finding,

The monetary claims supposedly due Peter are for the time before her death. If they were legitimate, they could have been reimbursed to them on an as-you-go basis. In any event, it appears to me that they were already compensated for any expenses to which they were put by the non-earmarked payments (e.g., the two $9900 checks) made to them from her accounts contemporaneously with their being incurred. It is obvious these claims are made up by Peter in order to appropriate to himself more of the estate. The fact that he did not make claims or pay them for more than a year after Ms. Vayda's demise further indicates that they are in fact illusory, made up by him to fit the scenario he wishes to advance.

The two checks the court originally determined to be reimbursements were included amongst the five checks in Peter's later accounting, the balance of which he sought from the estate. The trial judge's conclusions that some of the checks were for legitimate reimbursements, and some were "illusory" and part of Peter's attempt to "appropriate to himself more of the estate" were inconsistent.

On remand, the trial judge decided,

[I]t was my intent to deny (Katherine's) claims for all of these funds, which altogether represented Peter's having annually reimbursed himself for various expenses he had paid for on behalf of his mother. They appear to be reasonable in the context of what the late Ms. Vayda required and what her son was doing for her at the time.

We have carefully reviewed the trial record and we conclude that the trial judge's finding that the five checks totaling $39,960 reflected reimbursement to Peter and Cordero of legitimate contemporaneous expenses they incurred for Elizabeth's benefit is not supported by adequate, substantial and credible evidence and must be set aside. Rova Farms Resort, Inc. v. Investors Ins. Co. of America, 65 N.J. 474, 483-84 (1974); McDonald v. Estate of Mavety, 383 N.J. Super. 347, 358-59 (App. Div.), certif. denied 187 N.J. 79 (2006).

At trial, Peter testified inconsistently regarding this claim for reimbursement of home care expenses. Although he originally characterized the checks as reflecting compensation for services he and Cordero provided, he quickly recanted this when confronted with the fact that neither he nor Cordero ever reported the money as income. Later in the trial, Peter testified that the monies were gifts that he would willingly return to the estate because any determination that the funds were income from compensation would have dire tax consequences. In short, there was not any substantial credible evidence from Peter's own testimony, or from any other evidence in the case, that the monies obtained through the five checks were monies for compensation of actual expenses incurred by him or Cordero during Elizabeth's lifetime.

Rather than remand this matter to the trial court, we reluctantly conclude that we should exercise our original jurisdiction and resolve these two issues that have plagued the final resolution of this rather modest estate for now over five years. R. 2:10-5. The exercise of our original jurisdiction is particularly appropriate in this case due to the length of this litigation the burden it has created for the parties and the estate, the limited issues presented, and because any remand to the trial court will only result in unnecessary further litigation, before a new judge, since the original trial judge has retired. Accardi v. Accardi, 369 N.J. Super. 75, 91-92 (App. Div. 2004); see also Gandolfi v. Town of Hammonton, 367 N.J. Super. 527, 549 (App. Div. 2004) (five year length of litigation justified the exercise of original appellate jurisdiction).

Considering first the issue of the $39,960 that Peter paid to himself or Cordero, we conclude that full reimbursement of that amount must be made to the estate. These funds reflected in five checks were not for legitimate reimbursement of expenses Peter or Cordero paid on behalf of Katherine because they were entirely unsupported by any documentation at trial, Peter was unable to explain what the payments actually reflected, and the funds were not contemporaneously paid out as the expenses were allegedly incurred. We further conclude that we need not characterize the funds paid by the checks as compensation or gifts in order to reach the conclusion that they reflect the improper diversion of the estate's funds to Peter. Considering the equivocal testimony Peter gave at the trial, we simply conclude that $39,960 must be reimbursed because there was no proof that it reflected legitimate disbursements of Elizabeth's funds.

With respect to Katherine's counsel fees, we begin with our own review of the certification for services submitted by her counsel at the time of the original trial as well as some of the detailed invoices that supported the certification. We deem the lodestar to be $63,952 in fees and $3709.93 in related expenses and disbursements for a total of $67,661.93. We conclude that the hourly rates charged by Katherine's counsel were reasonable and consistent with the rates charged for similar services by lawyers of comparable skill and experience. Rendine, supra, 141 N.J. at 337. We also conclude that the time actually spent was reasonable considering the scope of Katherine's claims at the onset of the litigation. Id. at 335-36. We conclude, however, that the lodestar should be significantly decreased because Katherine's ultimate success was partial and limited. Id. at 336. Katherine succeeded in her claims that an accounting of the estate was necessary, that Peter had mismanaged the estate and breached his fiduciary duties, and removing Peter as executor. Our review of her counsel's certification and the invoices attached leads us to conclude that a significant amount of the fees generated were directly related to these successful claims.

However, Katherine also sought to have Elizabeth's will set aside and if successful, the entire distribution of Elizabeth's estate would have been more favorable to her. She failed to prevail on this significant claim. Our review of the certification and invoices reveals that much of the time and effort spent by her counsel could have likewise been spent on this specific aspect of her claim. It is impossible to specifically identify expenditure of time that related solely to the undue influence claim.

Nevertheless, we are convinced that the lodestar fee must be reduced and the appropriate reduction should be fifty percent. This reflects the fact that Katherine achieved success on a number of issues in this case, but that she did not succeed on the issue that was perhaps most important and could have altered the distribution of the estate's assets in a manner more favorable to her. We therefore conclude that counsel fees in the amount of $33,830.97 shall be awarded to Katherine, payable by the estate.

 
The matter is remanded for the entry of an order consistent with this opinion.

Because of the intrafamilial relationships of the parties, we have used first names for the sake of clarity. No disrespect is intended.

Not all of the original invoices have been made available to us. Nonetheless, our review of the certification and the sampled invoices convinces us that we have sufficient factual evidence for a complete determination of the issue. R. 2:10-5; see also, Bailes v. Twp. of East Brunswick, 380 N.J. Super. 336, 347 (App. Div.), certif. denied, 185 N.J. 596 (2005).

(continued)

(continued)

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A-0580-05T2

December 7, 2006