This matter is before me on exceptions to the intermediate account of the trustees in dissolution of the Clifton Trust Company. The exceptants object to the granting of allowances to the trustees. They take exception to the payment of $54,000 to the tax expert who participated in the dissolution proceedings. And they charge that the trustees, by an improper use of the bank's assets, made a secret profit from purchases of the preferred stock of the bank, for which profit they claim the trustees should be surcharged.
On April 22, 1949 the Clifton Trust Company executed an agreement with the First National Bank and Trust Company of Paterson, under the terms of which the Paterson bank agreed to purchase the assets of the Trust Company and assume its liabilities. Among the provisions of the contract was one providing for the dissolution of the Clifton Trust Company upon the consummation of the agreement.
Among the assets of the Clifton Trust Company were 2,203 of the 2,500 shares of the First National Bank of Clifton. On April 22, 1949 the First National Bank and Trust Company of Paterson executed an agreement with the First National Bank of Clifton for the purchase of its assets. The contract was similar to the one entered into by the Clifton Trust Company.
Following the execution of the contracts the trustees in dissolution of the Clifton Trust Company, its former
directors, were confronted with the problem of carrying out the terms of the agreement in such a manner as to insure a minimum assessment of capital gain taxes by the Federal Government. To aid them, the trustees called into consultation Mr. Sydney A. Gutkin, a member of the bar of this State and a well-known expert in the field of federal taxation. Mr. Gutkin prepared a plan for the liquidation of the two Clifton banks which, when carried into execution, resulted in a tax saving of $200,000.
Thereafter, Mr. Gutkin submitted a bill for $56,000 which, after some negotiations, was reduced to $54,000. On December 16, 1949 the bill was paid. On the same day the trustees paid to their general attorneys the sum of $15,000 and to themselves the sum of $2,400, or $200 for each trustee, there being 12 of them. None of these payments was submitted to the court for its approval.
In the account now submitted for consideration, allowance is sought by the trustees for those payments. They also seek additional allowances for themselves totalling $33,600, and a further fee of $5,000 for their attorneys.
The exceptants have raised no objection to the fees paid by the trustees to their general counsel. They do question the amount of the Gutkin payment. And they resist the application of the trustees for allowances.
Trustees, of course, are entitled to the advice and help of counsel in the performance of their duties. However, before payment is made to counsel for services rendered, the proper practice is to submit the matter to the court for its approval of the amount to be paid. In making payments of counsel fees without the court's consent, the trustees acted at their peril. To the extent that the court should find the payments to be excessive, the trustees exposed themselves to a surcharge. In re Babcock , 112 N.J. Eq. 374 (E. & A. 1932).
In considering the value of the services rendered by counsel, the court takes into consideration the legal ability of the attorney, the amount of work which he does, the
skill with which he does it, the success of his efforts and the amount involved. Soper v. Bilder , 87 N.J. Eq. 564 (Ch. 1917). Mr. Gutkin is an expert in the field of taxation. His experience has been great. The work which he performed for the trustees, upon which he spent some 400 hours, was performed expeditiously and efficiently. The result was a ...