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 A S OF N OVEMBER 14, 2019 GREG @ HURLEYFIRM . COM

New Mexico adheres to the so-called American rule that, absent statutory or other authority, litigants are responsible for their own attorney's fees…The American rule recognizes the authority of I. The statute, court rule, or contractual American Rule 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 omitted).

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… Matter of of Estate of of Fos oster, 1985-NMCA- The exception, which permits an award of attorney fees, requires that the entire estate be benefited. 038, ¶ 40, 102 N.M. 707, 714, 699 P.2d We agree with Price that respondents did not increase the assets of the estate. No money or other assets were brought into the estate by the litigation. We also agree that the result of this 638, 645 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.

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 on 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, III. Abuse of 1999-NMSC-028, ¶ 6, 127 N.M. 654, 656, 986 P.2d 450, 452 (citations omitted). Discretion Nevertheless, even when we review for an abuse Review of 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)

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. Khalsa v. Puri, Chalamidas, 1991 – NMSC – 099, ¶ 2, 113 N.M. 17, 821 P.2d 355 (“Award of attorney fees rests in the 2015-NMCA-027, discretion of the trial court and this [C]ourt will not alter the fee award absent an abuse of ¶ 72, 344 P.3d discretion.”); see also Garwood v. Garwood, 2010 WY 91, ¶ 38, 233 P.3d 977, 986 (Wyo.2010) 1036, 1053 (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 of such an award”)

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.” … Martinez v. Preciliana The test is “whether the trial court's Martinez Revocable Tr., decision was clearly against the logic and 2018 WL 6584144, at effect of the facts and circumstances before the court. *6 (N.M. Ct. App. Nov. 20, 2018) (unpublished) Stated otherwise, our inquiry is limited to the question of whether the trial court's decision was beyond the bounds of all reason….”

In a judicial proceeding involving the IV. The administration of a trust, the court, as justice and equity may require, may Uniform Trust award costs and expenses, including reasonable attorney's fees, to any party, Code Sec. 1004 to be paid by another party or from the (2000) trust that is the subject of the controversy.

• 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 V. The Uniform costs from the trust. Trust Code Sec. • The court may also charge a party's costs and fees against another party to the litigation. 1004 (2000), • Generally, litigation expenses were at official comment 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.

A. A trustee is entitled to be reimbursed out of the trust property, with interest as appropriate, for: (1) expenses that were properly incurred in the administration of the trust; and VI. Distinguish: (2) to the extent necessary to prevent unjust enrichment of the trust, NMSA 1978 Sec. expenses that were not properly incurred in the administration of the 46A-7-709 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.

In a judicial proceeding involving the administration of a trust, the court, as VII. NMSA justice and equity may require, may award costs and expenses, including 1978 § 46A-10- reasonable attorney fees, to any party, to be paid by another party or from the 1004 (2003) trust that is the subject of the controversy.

VIII. Select Recent UTC Decisions Major Questions

Principal Questions Raised by Recent Decisions • 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

• 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!