UNIFORM TRUST CODE UPDATE: SECT CTION 1004 GREGORY W. MACKENZIE, - - PowerPoint PPT Presentation

UNIFORM TRUST CODE UPDATE: SECT CTION 1004

GREGORY W. MACKENZIE, ESQ. HURLEY TOEVS STYLES HAMBLIN & PANTER PA AS OF NOVEMBER 14, 2019

GREG@HURLEYFIRM.COM

I. The American Rule

New Mexico adheres to the so-called American rule that, absent statutory or

• ther authority, litigants are responsible

for their own attorney's fees…The American rule recognizes the authority of statute, court rule, or contractual agreement… We have strictly adhered to this rule since our territorial days. New Mexico Right to Choose/NARAL v. Johnson, 1999-NMSC-028, ¶ 9, 127 N.M. 654, 657, 986 P.2d 450, 453 (citations

• mitted).

Matter of

• f Estate of
• f

Fos

• ster, 1985-NMCA-

038, ¶ 40, 102 N.M. 707, 714, 699 P.2d 638, 645

An exception exists which authorizes an award of attorney fees for services rendered which confer a benefit upon the estate. We have pointed out that this exception has been recognized in New Mexico decisions and is an equitable doctrine... This exception, an equitable doctrine, supplements the Probate Code's provisions concerning an award of attorney fees… The exception, which permits an award of attorney fees, requires that the entire estate be benefited. We agree with Price that respondents did not increase the assets

• f the estate. No money or other assets were brought into the

estate by the litigation. We also agree that the result of this litigation will result in respondents sharing in the estate as heirs. We do not agree that the litigation did not protect the assets of the estate in any manner. As a result of the litigation, the estate will be distributed to heirs in accordance with the law pertaining to intestacy.

• III. Abuse of

Discretion Review

This court reviews the award of attorney fees for an abuse of discretion.” …This appears to be the traditional statement of the standard of review

• n appeal... We have previously explained that

“[a] trial court abuses its discretion when its decision is contrary to logic and reason.” New Mexico Right to Choose/NARAL v. Johnson, 1999-NMSC-028, ¶ 6, 127 N.M. 654, 656, 986 P.2d 450, 452 (citations omitted). Nevertheless, even when we review for an abuse

• f discretion, “our review of the application of

the law to the facts is conducted de novo...” Accordingly, we may characterize as an abuse of discretion a discretionary decision that “[is] premised on a misapprehension of the law.” New Mexico Right to Choose/NARAL v. Johnson, 1999-NMSC-028, ¶ 7, 127 N.M. 654, 656, 986 P.2d 450, 452 (citations omitted)

Khalsa v. Puri, 2015-NMCA-027, ¶ 72, 344 P.3d 1036, 1053

While there is no New Mexico case law interpreting Section 46A–10–1004, generally speaking, an award of attorney fees is a matter for the district court's discretion. See Lenz v. Chalamidas, 1991–NMSC–099, ¶ 2, 113 N.M. 17, 821 P.2d 355 (“Award of attorney fees rests in the discretion of the trial court and this [C]ourt will not alter the fee award absent an abuse of discretion.”); see also Garwood v. Garwood, 2010 WY 91, ¶ 38, 233 P.3d 977, 986 (Wyo.2010) (stating that under the Uniform Trust Code, “[o]nce it has been determined that authority exists to award fees and costs, a trial court has extremely broad discretion to rule on the amount

• f such an award”)

Martinez v. Preciliana Martinez Revocable Tr., 2018 WL 6584144, at *6 (N.M. Ct. App. Nov. 20, 2018) (unpublished)

An “[a]ward of attorney fees rests in the discretion of the trial court and this [C]ourt will not alter the fee award absent an abuse of discretion.” … The test is “whether the trial court's decision was clearly against the logic and effect of the facts and circumstances before the court. Stated otherwise, our inquiry is limited to the question of whether the trial court's decision was beyond the bounds

• f all reason….”

• IV. The

Uniform Trust Code Sec. 1004 (2000)

In a judicial proceeding involving the administration of a trust, the court, as justice and equity may require, may award costs and expenses, including reasonable attorney's fees, to any party, to be paid by another party or from the trust that is the subject of the controversy.

V. The Uniform Trust Code Sec. 1004 (2000),

• fficial comment
• This section…codifies the court's historic

authority to award costs and fees, including reasonable attorney's fees, in judicial proceedings grounded in equity.

• The court may award a party its own fees and

costs from the trust.

• The court may also charge a party's costs and

fees against another party to the litigation.

• Generally, litigation expenses were at

common law chargeable against another party only in the case of egregious conduct such as bad faith or fraud.

• The court may award a beneficiary litigation

costs if the litigation is deemed beneficial to the trust.

• VI. Distinguish:

NMSA 1978 Sec. 46A-7-709

• A. A trustee is entitled to be reimbursed out
• f the trust property, with interest as

appropriate, for: (1) expenses that were properly incurred in the administration of the trust; and (2) to the extent necessary to prevent unjust enrichment of the trust, expenses that were not properly incurred in the administration of the trust.

• B. An advance by the trustee of money for

the protection of the trust gives rise to a lien against trust property to secure reimbursement with reasonable interest.

• VII. NMSA

1978 § 46A-10- 1004 (2003)

In a judicial proceeding involving the administration of a trust, the court, as justice and equity may require, may award costs and expenses, including reasonable attorney fees, to any party, to be paid by another party or from the trust that is the subject of the controversy.

• VIII. Select Recent

UTC Decisions

Major Questions

• Does Section 1004 change the standard of review on appeal?
• Acorn, 6
• Khalsa, 10 ***A NEW MEXICO DECISION****
• Does Section 1004 require a finding of misconduct? Mixed bag
• O’Reily, 14
• Fisher, 19
• Kutten, 21

Principal Questions Raised by Recent Decisions

• How does one define “justice and equity”?
• Atwood, 23
• Guidelines for this include
• (a) reasonableness of the parties' claims, contentions, or defenses;
• (b) unnecessarily prolonging litigation;
• (c) relative ability to bear the financial burden;
• (d) result obtained by the litigation and prevailing party concepts; and
• (e) whether a party has acted in bad faith, vexatious, wantonly, or for oppressive reasons in

the bringing or conduct of the litigation.

• Have other courts followed Atwood?
• Shriners, 7
• Trimble, 12
• Does the prevailing party concept influence the result
• Evans, 16
• Morrow, 17
• Does the party seeking fees have to prevail on all claims?
• McHenry, 4
• Warner, 11
• Can “pox on both your houses” operate?
• Hull, 15

• Does the concept of “benefit to the trust” still operate?
• Alain, 3
• Garwood, 18
• What fees are at risk? If you are representing a fiduciary, both sides are at risk.
• Cohen, 1
• Does Section 1004 allow an attorney fee award against a trustee personally?
• Cohen, 1
• Shelton, 13
• Can the trust share of a beneficiary be offset for an attorney fee award?
• Brown, 2
• O’Reily, 14

• Can the attorney fee award exhaust the share of the complaining beneficiary?
• Klinkerfuss, 5
• Does the attorney fee award have to be proportionate to the compensatory damage

award?

• McHenry, 4
• Can Section 1004 be used to combat frivolous litigation by either side?
• Acorn, 6

Thank you!