June 26, 2012
IN THE MATTER OF THE INTER VIVOS A-6050-09T3 TRUST, JOSEPH BRANDES, GRANTOR (SEPTEMBER 12, 1994) IN THE MATTER OF THE INTER VIVOS TRUST, DOROTHY SINGER, GRANTOR (DECEMBER 23, 1999)
On appeal from the Superior Court of New Jersey, Chancery Division, Bergen County, Docket Nos. P-263-08 and P-264-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted November 29, 2011
Decided January 11, 2012
Remanded by Supreme Court June 5, 2012
Resubmitted June 21, 2012
Before Judges Fisher, Baxter and Nugent.
These appeals relate to two probate actions commenced by appellant Ricki Singer (Ricki) as the guardian ad litem of her son, Daniel Martin Singer (Daniel). The actions concern two trusts, the 1994 and 1999 trusts. Daniel is the beneficiary of both trusts; Ricki's brother, Steven Singer (Steven), is the trustee of both trusts. The actions (hereafter "the 1994 trust action" and "the 1999 trust action") relate to Steven's management of the trusts.
In a prior opinion in these appeals, we: reversed the trial court order that removed Ricki from her position as Daniel's guardian ad litem in the 1994 trust action; vacated the order that approved a settlement reached on Daniel's behalf in the 1994 trust action following Ricki's removal; and remanded for further proceedings in the 1994 trust action. In re Brandes, Nos. A-1998-09, A-6049-09, and A-6050-09 (App. Div. Jan. 11, 2012) (slip op. at 2-3). We also "set aside" the disposition of the fee applications in the 1994 trust suit, holding that they could be "renewed following the ultimate disposition of the merits of the 1994 trust suit or at any other occasion the [trial] court deems appropriate." Id. at 23. In addition, we determined that our reversal of the order removing Ricki as guardian ad litem had "no impact on the [trial] judge's disposition of the fee applications in the 1999 trust suit," and as to the issues on appeal regarding those fee applications, we found "insufficient merit to warrant discussion in a written opinion." Ibid.
On June 5, 2012, the Supreme Court granted a petition for certification and "summarily remanded" to us "to address the fee issue on the merits in a written opinion." In accordance with that direction, we now amplify our earlier opinion.
FEE APPLICATIONS IN THE 1994 TRUST ACTION
In her appeal (No. A-1998-09), Ricki argues that the trial judge erred in denying her claim for nearly $800,000 in counsel fees and costs incurred in the 1994 trust action. In his cross-appeal, Steven argues that the judge erred in both failing to award any part of the approximately $635,000 in fees and costs he sought in connection with the 1994 trust action and in failing to render the findings of fact required by Rule 1:7-4(a). And, in their cross-appeal, defendants Romulus Holdings, Inc. and Remus Holdings, Inc., argue that the trial judge erred in denying their application for Ricki to pay the counsel fees they incurred in defense of Ricki's claim that they had conspired with Steven to defraud the 1994 trust.
In amplifying further in light of the Supreme Court's June 5, 2012 order, we would again hold that the disposition of all the fee applications in the 1994 trust action should abide the resolution of that action. Our judgment reversed the order removing Ricki as Daniel's guardian ad litem and vacated the order enforcing the settlement that was later reached by the substitute guardian ad litem. Because our judgment permits the continuation of the 1994 trust action, the disposition of the merits will have a profound effect on the issues raised by the parties in their fee applications. As a result, we concluded that those fee applications are better considered at a later occasion and we, thus, vacated the disposition of those fee applications, subjecting them to being renewed at a more propitious time.
In short, we continue to adhere to our prior judgment regarding the fee applications in the 1994 trust action. To the extent, however, the Supreme Court's June 5, 2012 order requires a decision on the propriety of the trial judge's disposition of the fee applications in the 1994 trust action -- should our disposition of the removal of Ricki and the enforceability of the settlement agreement be reversed -- we offer the following.
A. Ricki's Fee Application
In denying Ricki's fee application, the trial judge acknowledged that the 1994 trust action had been settled and that what she knew about the case came from "what the lawyers have told me about it and the exhibits that they may have presented." Based on the record in light of this candid observation, the judge found that the costs in the 1994 trust action were "exorbitant" and "beyond what is appropriate, given what is at stake." The judge also observed that Ricki claimed that the trust assets plummeted from $1,300,000 to $300,000, and the counsel fees (on all sides) far exceeded the alleged loss. The judge recognized that, even if the trust was entitled to a $2,000,000 recovery, as Ricki's expert claimed, "this level of litigation is beyond what should be expended, even if $2 million could have possibly been the result, because the result also could have been zero." In addition, the judge found Ricki's discovery requests were "abusive" and her attorneys were "relentless in their litigation technique," which was "not necessary and was not to Daniel's benefit." As a result, the judge disallowed Ricki's request for payment of any part of her fees from the trust.
A non-attorney guardian ad litem may be entitled to counsel fees from a "fund in court," R. 4:42-9(a)(2), when the guardian's efforts have "produce[d] a tangible economic benefit for a class of persons that did not contribute to the cost of the litigation." Henderson v. Camden Cnty. Mun. Util. Auth. 176 N.J. 554, 564 (2003). Ricki argued that her efforts and those of her attorneys brought the matter to the brink of an economic recovery for her ward's benefit but that those efforts were dashed by her removal on the eve of trial in the 1994 trust action. According to Ricki, the matter then settled for far less than what was fair or appropriate in the circumstances.
We held in our earlier opinion that Ricki should not have been removed and the settlement, reached without Ricki's approval, could no longer be upheld. As a result, we concluded that Ricki's counsel-fee application must abide the resolution of the 1994 trust action. Brandes, supra, slip op. at 23. It is only in the light of what, if anything, Ricki's efforts produced for the 1994 trust that it can be said whether or to what extent she should be compensated. That is, the judge's determination that Ricki is entitled to nothing in counsel fees was determined on the basis of the settlement reached after Ricki was removed as guardian ad litem. With the vacation of the order approving that settlement, the ground upon which the judge denied Ricki compensation for her efforts has been removed.
We repeat the conclusion in our earlier opinion that whether Ricki is entitled to fees in the 1994 trust action is dependent upon the resolution of that action; the same holds true for Ricki's claim that Steven, as trustee, should have been surcharged.*fn1 However, as we have noted, if our judgment regarding Ricki's removal and the enforceability of the settlement agreement should be set aside, we would conclude that the trial judge did not abuse her discretion in ruling on Ricki's fee application and request to surcharge Steven.
B. Steven's Fee Application
Steven's fee application was based on the "fund in court" rule, R. 4:42-9(a)(2), and on N.J.S.A. 3B:14-23(l). He also sought an award of fees based on what he claimed was the bad faith actions of Ricki.
In both respects, Steven argues that the trial judge made inadequate findings. We disagree. In denying this relief to Steven, the judge chiefly concluded that the litigation was not in the best interests of Daniel and, thus, no fees should be paid from the trust. And, in considering Steven's argument that his fees should be chargeable to Ricki, the judge recognized that only N.J.S.A. 2A:15-59.1 provided the authority for such a ruling and that there was no basis for concluding that the action was frivolous within the meaning of that statute.
N.J.S.A. 2A:15-59.1(a)(1) states: "A party who prevails in a civil action . . . may be awarded all reasonable litigation costs and reasonable attorney fees, if the judge finds at any time during the proceedings or upon judgment that a complaint, counterclaim, cross-claim or defense of the non-prevailing person was frivolous." A claim is "frivolous" within the meaning of the statute if filed or pursued "in bad faith, solely for the purpose of harassment, delay or malicious injury," N.J.S.A. 2A:15-59.1(b)(1), or if "[t]he non-prevailing party knew, or should have known, that the [claim or defense] was without any reasonable basis in law or equity and could not be supported by a good faith argument for an extension, modification or reversal of existing law," N.J.S.A. 2A:15-59.1(b)(2). "The phrase 'should have known' imposes a duty of reasonable investigation prior to commencing suit." Chernin v. Mardan Corp., 244 N.J. Super. 379, 384 (Ch. Div. 1990). But, [w]hen a prevailing defendant's allegation is based on the absence of "a reasonable basis in law or equity" for the plaintiff's claim and the plaintiff is represented by an attorney, an award cannot be sustained if the "plaintiff did not act in bad faith in asserting" or pursuing the claim. The rationale for requiring proof of bad faith is that clients generally rely on their attorneys "to evaluate the basis in 'law or equity' of a claim or defense," and "a client who relies in good faith on the advice of counsel cannot be found to have known that his or her claim or defense was baseless." . . . "[T]he burden of proving that the non-prevailing party acted in bad faith" is on the party who seeks fees and costs pursuant to N.J.S.A. 2A:15-59.1. [Ferolito v. Park Hill Ass'n, Inc., 408 N.J. Super. 401, 408 (App. Div.) (quoting McKeown-Brand v. Trump Castle Hotel & Casino, 132 N.J. 546, 549, 557-58, 559 (1993)), certif. denied, 200 N.J. 502 (2009)]
When the plaintiff's conduct "bespeaks an honest attempt to press a perceived, though ill-founded and perhaps misguided, claim, he or she should not be found to have acted in bad faith." Belfer v. Merling, 322 N.J. Super. 124, 144-45 (App. Div.), certif. denied, 162 N.J. 196 (1999).
"The term 'frivolous' as used in the statute must be given a restrictive interpretation." Id. at 144 (citing McKeown-Brand, supra, 132 N.J. at 561). "This is in recognition of the principle that citizens should have ready access to all branches of government, including the judiciary." Ibid. Further, the "statute should not be allowed to be a counterbalance to the general rule that each litigant bears his or her own litigation costs, even when there is litigation of 'marginal merit.'" Ibid. (quoting Venner v. Allstate, 306 N.J. Super. 106, 113 (App. Div. 1997)).
With respect to the arguments about the alleged frivolousness of the 1994 trust action, the judge appears to have viewed all the fee applications collectively. It is perhaps for this reason that Steven -- uncertain about whether the judge's November 13, 2009 oral opinion encompassed findings regarding his fee application -- claims that the judge failed to make the findings required by Rule 1:7-4(a). With this understanding, the judge said, among other things:
With regard to the frivolous litigation [argument], the case law does not support in my view assessing frivolous litigation costs against [Ricki] herself. . . . [L]itigants who have attorneys and who rely in good faith on the advice of counsel, have to be found to have known that his or her claim [or] defense was baseless, and I put [Ricki] in that category. In spite of the fact that she may have signed the complaint and later indicated under oath that she wasn't so sure about the allegations in the complaint,*fn2 [Ricki] is not at all sophisticated legally or financially, and I believe pursued these complex and sophisticated causes of action both in the Law Division and in Chancery on the advice of counsel.
In Ferolito, supra, 408 N.J. Super. at 407, we described the applicable standard of review in the following way:
A trial court's determinations on the availability and amount of fees and costs for frivolous litigation are reviewable for "abuse of discretion." Masone [v. Levine, 382 N.J. Super. 181, 193 (App. Div. 2005).] Reversal is warranted when "the discretionary act was not premised upon consideration of all relevant factors, was based upon consideration of irrelevant or inappropriate factors, or amounts to a clear error in judgment." Ibid.
Considering the judge's familiarity with the complex bundle of claims in both the 1994 trust action and the 1999 trust action, we owe deference and find no abuse of discretion in the judge's determination that Ricki's actions on behalf of Daniel were not commenced or prosecuted frivolously.*fn3
C. Romulus and Remus's
Romulus and Remus, who Ricki alleged had conspired with Steven to defraud the 1994 trust, also sought an award of fees from Ricki or her attorneys. The judge denied this application insofar as it sought relief from Ricki for the same reasons that she denied Steven's motion. Our determination, more thoroughly discussed above, that the judge's decision is entitled to our deference is equally applicable here.
Romulus and Remus, however, also sought relief against Ricki's attorneys pursuant to Rule 1:4-8(d), which states:
A sanction imposed for violation of paragraph (a) of this rule shall be limited to a sum sufficient to deter repetition of such conduct. The sanction may consist of
(1) an order to pay a penalty into court, or (2) an order directing payment to the movant of some or all of the reasonable attorneys' fees and other expenses incurred as a direct result of the violation, or both. Among the factors to be considered by the court in imposing a sanction under (2) is the timeliness of the movant's filing of the motion therefore. In the order imposing sanctions, the court shall describe the conduct determined to be a violation of this rule and explain the basis for the sanction imposed.
The rule "has a punitive purpose in seeking to deter frivolous litigation" and "seeks to compensate a party that has been victimized by another party bringing frivolous litigation." Alpert, Goldberg, Butler, Norton & Weiss, P.C. v. Quinn, 410 N.J. Super. 510, 545 (App. Div. 2009), certif. denied, 203 N.J. 93 (2010). "Frivolous litigation" under Rule 1:4-8 "includes pursuing litigation that has no legal basis [and] filing papers to harass or cause unnecessary delay." Id. at 543.
Courts "appreciate that continued prosecution of a claim or defense may, based on facts coming to be known to the party after the filing of the initial pleading, be sanctionable as baseless or frivolous even if the initial assertion of the claim or defense was not." Iannone v. McHale, 245 N.J. Super. 17, 31 (App. Div. 1990). See also Throckmorton v. Twp. of Egg Harbor, 267 N.J. Super. 14, 21 (App. Div. 1993); Sjogren, Inc. v. Caterina Ins. Agency, 244 N.J. Super. 369, 374-75 (Ch. Div. 1990).
In focusing on whether counsel fees should be assessed against Ricki's counsel, the judge noted that fees against counsel are "not frequently sought and very rarely, very rarely awarded." She believed that had Ricki's position in the New York litigation been clearly contrary to her position in the New Jersey litigation, it might have been appropriate to assess counsel fees against her attorney, but concluded:
I think that there is sufficient doubt in my mind as to the contradiction and the possible contradiction [or] conflict in her position in these two pieces of litigation for me not to assess counsel fees against counsel. . . . [I] understand [Ricki's counsel's] point, that he on behalf of [Ricki] was alleging both in New York and in New Jersey that all of the transactions were sham . . . transactions and that they --should be assessed by a neutral appraiser and completely vacated and the process begun again or however he framed it, and therefore, although there is a seeming contradiction in saying in New York that Mars was sold for too little, and then saying in New Jersey that Mars was purchased for too much, that, in fact, really what he was saying is that it was not an arm's length transaction and it should be investigated and that the whole thing was self-dealing and inappropriate.
Given my lack of certainty as to its inconsistency, I'm not going to assess counsel fees against the attorneys.
Again, as with her application of the frivolous litigation statute, and cognizant of the judge's feel of the case, we conclude that this determination is also entitled to our deference.*fn4
Although, in compliance with the Supreme Court's recent mandate, we have expounded on the nature of the fee applications, the trial judge's holding, and our own conclusion that the judge's rulings regarding the fee applications in the 1994 trust action are entitled to our deference, our judgment remains that the trial judge erred in removing Ricki as Daniel's guardian ad litem and, thus, the ultimate disposition of the fee applications is better postponed until the disposition of the 1994 trust action, which can no longer be considered settled.
FEE APPLICATIONS IN THE 1999 TRUST ACTION
In their appeals regarding the 1999 trust action, Steven (in A-6050-09), and Mars Associates, Inc. and Romulus (in A-6049-09), argue that the trial judge erred in denying their applications for fees in the 1999 trust action.
The judge's disposition of these applications was made at the same time, and with the same words, as the fee applications in the 1994 trust action. To that extent, what we have said in amplification of our disposition of the 1994 trust action applications is equally applicable here.
THE $172,000 ALLOWANCE
We would add only the following regarding the uncertainty surrounding a $172,000 allowance permitted to Steven during the course of these suits. In ruling on the fee applications in both the 1994 and 1999 trust actions on November 13, 2009, the trial judge "f[ou]nd that the fees that Steven collected from the '94 Trust of approximately [$]172,000 is sufficient compensation to Steven for his having to engage in the '99 litigation." In an order entered on July 19, 2010, the trial judge memorialized her decision to deny fees to Steven in the 1999 trust action but noted in the order that Steven has requested that this [o]rder reflect a finding that he was previously awarded $172,000 in counsel fees and litigation expenses (all of which has been paid). This is not entirely accurate as no such finding was made, rather the [c]court refrained from making an independent determination as to whether what had previously been paid (in connection with the 1994 trust) was warranted as an award of counsel fees.
We mentioned the arguable inconsistency between the judge's findings in her November 13, 2009 oral opinion and this comment in the July 19, 2010 order in our earlier opinion. Brandes, supra, slip op. at 7-8. It is not only unclear whether the $172,000 in question has either been approved as compensation for Steven or constitutes compensation for services rendered in the 1994 trust action or the 1999 trust action. In our prior opinion we assumed it was viewed as compensation for the former, because the compensation was apparently paid from the 1994 trust, and we assumed this issue would be further addressed in conformity with our earlier opinion that the fee applications relating to the 1994 trust action could be renewed in the trial court pending disposition of the 1994 trust action or at some other propitious time. To the extent we were correct in viewing the $172,000 item that way, we continue to adhere to our disposition in the earlier opinion. To the extent, however, that we were mistaken in light of the judge's inconsistent statements on November 13, 2009 and July 19, 2010, and that the $172,000 item was intended as compensation for Steven's services in the 1999 trust action, we then depart from our earlier opinion, which affirmed the disposition of all the fee applications in the 1999 trust action, and would -- if authorized at this point by the Supreme Court's June 5, 2012 order -- remand on this one aspect of the fee applications in the 1999 trust action. We would, if permitted, amend our prior judgment to direct the trial judge to determine, with adequate findings, the precise nature of this $172,000 item and render an appropriate order regarding its disposition.