Opinion
C.A. No. PB-2012-3338 C.A. No. PB-2012-3476
04-16-2018
ANGELA GIGUERE KUMBLE f/k/a ANGELA GIGUERE and CHRISTINE TELLEFSON f/k/a CHRISTINE GIGUERE-CARROZZA v. MICHAEL VOCCOLA and DANIEL SHEDD MICHAEL A. VOCCOLA and DANIEL S. SHEDD, in their capacity as Trustees of the Trust Under Will of Frederick Carrozza Jr., and MICHAEL A. VOCCOLA in his capacity as Executor of the Estate of Frederick Carrozza Jr. v. ANGELA GIGUERE KUMBLE, CHRISTINE TELLEFSON and EVAN S. LEVISS
ATTORNEYS: For Plaintiff: Mark W. Freel, Esq. For Defendant: Robert M. Duffy, Esq. Stacey P. Nakasian, Esq.
DECISION SILVERSTEIN , J. This case is before the Court for decision with respect to a single issue. The issue—should prejudgment interest be added to the amount of legal fees and costs determined by the Court to be reasonable to which the Trustees (Defendants in PB-2012-3338 and Plaintiffs in PB-2012-3476) are entitled by way of indemnification. That issue appears not previously to have been presented to or ruled upon by our Supreme Court.
FACTS
The issue arises out of the following facts. The Trustees have been involved with lengthy, contentious, and somewhat bitter litigation with the Trust beneficiaries since 2012 when the beneficiaries sought and ultimately successfully obtained the effective termination of the Trust (subject however to the terms and conditions set forth in a Consent Order dated December 10, 2012 entered in PB-2012-3338). A copy of the Consent Order is annexed hereto as Exhibit 1 and is made a part hereof (the Consent Order). The Consent Order in Paragraph 8 clearly contemplated that the Trustees' fees and expenses, including professional fees, would be determined and would be paid and that thereafter judicial involvement with respect to the trusts, properties, assets, and proceeds would end. Subsequent to the entry of the Consent Order, extensive litigation ensued between the Trustees and the beneficiaries. On May 11, 2017, this Court issued its decision dealing with the merits of the controversy between the parties, a copy of which may be found at 2017 WL 2159096. Predicated upon that decision, the Court directed the Trustees, through counsel, to present their claims for professional fees (legal fees and costs) and in connection therewith to follow the procedure set forth in Tri-Town Constr. Co., Inc. v. Commerce Park Assocs. 12, LLC, 139 A.3d 467 (R.I. 2016). Consistent with the Court's direction, the parties followed the dictates of Tri-Town, and, on or about January 17, 2018, this Court rendered a Bench Decision determining that the amount of legal fees reasonably incurred by the Trustees subject to indemnification was $1,040,293.00, and that the amount of costs reasonably incurred by the Trustees subject to indemnification was $1688.66.
In its Bench Decision, the Court directed that amounts previously paid toward such fees and costs by retainer, pursuant to earlier Court orders or otherwise, be reconciled. Following such reconciliation, the Court finds the amount presently unpaid to which the Trustees are entitled is $765,456.66, leaving open only the issues stated above—should prejudgment interest be added to the amount that the Court has found to be due to the Trustees by way of indemnification for legal fees and costs incurred by them.
The Beneficiaries' Position
The beneficiaries contend that although there appears to be a void with respect to cases involving interest on legal fees and expenses awarded as indemnity to trustees, because such fees (and expenses) are not "damages" the provisions of our prejudgment interest statutes G.L. 1956 §§ 9-21-8 and 9-21-10 are not applicable. Further, the beneficiaries argue that until the Court's Bench Decision of January 17, 2018, a copy of which is attached hereto as Exhibit 2 and made a part hereof, the amount of reasonable legal fees (and expenses) subject to indemnification had not been determined. Accordingly, any interest at most should run from that date because prior to that date there was no amount which had been determined to be due to which interest would apply.
In response to the assertion that the Trustees had agreed with their counsel in a certain engagement letter dated June 11, 2012 to pay interest at the rate of 1% per month on amounts not paid within thirty days following billing and that the beneficiaries' counsel had been made aware of that fact, the beneficiaries argue that neither that fact nor the engagement letter had been made part of the record until the March 6, 2018 hearing on the objection by the beneficiaries to the imposition of interest.
The Trustees' Position
The Trustees assert that interest at the rate of 1% per month on sums outstanding after thirty days following billing is applicable to the reasonable fees and expenses found by the Court. They argue that pursuant to the provisions of the engagement letter such interest is specified—that the beneficiaries' counsel had been provided with a copy of that engagement letter—and that despite such knowledge the beneficiaries contested the Trustees' request for payments during the course of the litigation. Indeed, at one point the beneficiaries even unsuccessfully sought certiorari from our Supreme Court to an on-account award of fees by this Court which was subject to regurgitation if the Court ultimately found such fees to be unwarranted.
The Trustees, in addition to arguing that the agreement with their counsel contemplated the imposition of interest (a service fee so-called) as aforesaid, also argue that our Supreme Court's order in Sundlun v. Loper, 598 A.2d 653 (R.I. 1991) also supports their contention that interest is due with respect to the reasonable attorneys' fees and expenses subject to indemnification. In that case, the Court, following a show cause hearing, reversed a trial justice's decision denying a trustee prejudgment interest with respect to the trustee's fees found by the trial justice to be due. The Supreme Court remanded the matter to the trial court "to determine the amount of interest to be awarded." Id. at 653. The Supreme Court's order directed that interest run from the date on which the trustee's services had terminated even though no bill was rendered by the trustee until some six or seven months after the termination of his services (see trial court decision Sundlun v. Loper, No. 84-3285, 1990 WL 10000213 (Oct. 18, 1990). Here, essentially, the Trustees contend that their counsel periodically rendered bills to them and that if the trustees in Sundlun were entitled to interest for a period prior to rendering a bill, that they as the recipient of legal services from their attorneys were obligated to pay their attorneys a service fee or interest per the engagement letter.
Here, the Trustees established that bills were rendered to them by their attorneys on a regular, periodic basis and that the engagement letter freely entered into by them contemplated the interest factor for which they now seek indemnification.
Discussion
Having laid out the positions of the respective parties, the Court now turns to its determination of what is described at the inception of this Decision as the single issue to be decided, that is, "should prejudgment interest be added to the amount of legal fees and costs determined by the Court to be reasonable" and subject to indemnification from the trust assets.
After taking into account the arguments (both written and oral) of counsel for the parties, the Court turns to Rhode Island statutory law for the answer to the issue presented. G.L. 1956 § 18-6-1 provides, in pertinent part, as follows:
"Every trustee under any trust instrument . . . shall be entitled to reasonable expenses and costs incurred in the execution of the trust . . ."
The Court is satisfied that the provision contained in the retainer agreement, which, while not having heretofore been made an exhibit nor introduced at trial, had been provided to counsel for the beneficiaries early in the case.
Counsel for the beneficiaries did not object when Trustees' attorney produced a copy of the engagement letter to the Court at the March 6, 2018 hearing. (Tr. 3:6-4:5.)
Having found that there are no Rhode Island cases directly on point and having found that 1% a month on amounts due and unpaid thirty days following billing is reasonable and was called for by the retainer agreement, the Court further is satisfied that the service charge (interest) hereinbefore referred to constitutes in the language of § 18-6-1 "reasonable expenses and costs incurred in the execution of the trust" for which the Trustees are entitled to indemnification.
The Court notes that at oral argument, counsel for the Trustees agreed that prior to the Consent Order, the Trustees had control of the trust res and could have paid their attorneys' invoices and indemnification for interest as to any such unpaid amount prior to said Consent Order would not be appropriate.
Also during arguments on March 6, Trustees' counsel articulated what essentially was a formula by which the amount of interest should be determined. The Court approves of that formula and directs that the amount of interest be computed through April 24, 2018, taking into account the provisions contained in n.1 ¶ 1.
An order consistent with the provisions of this Decision shall be prepared and presented by the prevailing party with notice and an opportunity to be heard to counsel for the beneficiaries.
ATTORNEYS:
For Plaintiff:
Mark W. Freel, Esq.
For Defendant:
Robert M. Duffy, Esq.
Stacey P. Nakasian, Esq.
EXHIBIT 1
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