In Matter of LiGreci, decided June 2, 2021, the Supreme Court of the State of New York, Appellate Division, Second Department, affirmed a Surrogate’s Court decree ordering a trustee to pay a surcharge to an objectant, and ordering the objectant to pay the trustee’s attorneys fees.
The Facts Of Matter of LiGreci
Nicholas LiGreci (“Decedent”) created the LiGreci Irrevocable Insurance Trust by an Irrevocable Trust Agreement dated November 5, 1991. Decedent appointed his brother John T. LiGreci as trustee of the Trust. The beneficiaries of the Trust are Decedent’s adult children, including Linda Perosi. The corpus of the Trust consisted of a $1 million life insurance policy on Decedent’s life.
Linda Perosi, as Decedent’s attorney-in-fact, executed an Amendment to the Trust on May 19, 2010, by which John was removed as trustee and replaced with Nicholas Perosi, Linda Perosi’s son.
Decedent passed away on June 2, 2010. On July 15, 2010, $1,004,506.85 in life insurance proceeds was collected from the insurance carrier by Nicholas (Linda’s son).
Nicholas commenced a proceeding for an accounting and turnover of documents, and John moved to set aside the Amendment to the Trust which removed him as trustee.
In an order dated February 14, 2011, the Supreme Court granted John’s motion, set aside the Amendment to the Trust, and directed the John to provide an accounting. On appeal, this Court, by opinion and order dated July 11, 2012, reversed the Supreme Court’s order, concluding that Linda Perosi could amend the Trust as the creator’s attorney-in-fact, and the Amendment to the Trust successfully removed John as trustee and appointed Nicholas as trustee (see Matter of Perosi v LiGreci, 98 AD3d 230).
The Supreme Court ordered John to provide an accounting. The accounting proceeding was subsequently removed to the Surrogate’s Court. Nicholas filed objections to the accounting.
After a hearing the Surrogate’s Court imposed a surcharge on John in the sum of $30,266.66, representing the Nicholas’s counsel fees from June 14, 2010, through September 18, 2013, and ordering Nicholas to pay John the sum of $44,924.00, representing counsel fees from August 24, 2010, through November 30, 2012. Nicholas appealed.
Article 10 of the Trust Agreement provided:
“The GRANTOR (and his estate) shall reimburse and indemnify the TRUSTEE and hold him harmless against, any loss, liability or expense, including but not limited to counsel fees, arising out of or in connection with the TRUSTEE’s acceptance of, or the performance of its duties and obligations under, this Agreement, except for losses, liabilities and expenses caused by the willful misconduct or gross negligence of the TRUSTEE.”
New York SCPA § 2110 – Compensation of Attorneys
Pursuant to Surrogate’s Court Procedure Act § 2110(1), the Surrogate’s Court has the authority “to fix and determine the compensation of an attorney for services rendered to a fiduciary . . . in connection with the performance of his duties as a fiduciary.”
Pursuant to Surrogate’s Court Procedure Act § 2110(2), “The court may direct payment therefor from the estate generally or from the funds in the hands of the fiduciary belonging to any legatee, devisee, distributee or person interested.”
The Surrogate’s Court has broad discretion to fix such fees (see Matter of Sall, 292 AD2d 195). Accordingly, upon hearing proof of the account, the court must “make such order or decree as justice shall require” (SCPA 2211).
Here, the Court determined that the Surrogate’s Court providently exercised its discretion in awarding John a counsel fee for the time period from August 24, 2010, through November 30, 2012. John had a sound basis for resisting his removal as trustee until the Court reversed the Supreme Court’s order dated February 14, 2011. There was no evidence in the record that John breached his fiduciary responsibilities as trustee. The remaining counsel fees awarded to John were incurred in the preparation of the accounting, which the Supreme Court had ordered him to prepare.
Surcharge Of a New York Trustee
The Court also determined that surcharging John as trustee was within the Surrogate Court’s discretion, stating:
The Surrogate’s Court providently exercised its discretion in surcharging the petitioner and awarding counsel fees to the Trust for the period June 14, 2010, through September 18, 2013. The Surrogate’s Court has the discretion to surcharge a former trustee for improper expenditures for accounting and legal services (see Matter of Acker, 128 AD2d 867). Here, while the petitioner had a reasonable basis upon which to mount a challenge to the Amendment to the Trust, the objectant’s position was eventually found to be correct, and the Trust reaped no benefit from the petitioner’s challenge.
Although it might seem inconsistent to award fees to the trustee and at the same time surcharge a trustee, the New York Surrogate’s Court was within its discretion to do so, and supported its decision by isolating the time periods and specific actions for which the awards were made.