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Kumble v. Voccola

Superior Court of Rhode Island

April 16, 2018

ANGELA GIGUERE KUMBLE f/k/a ANGELA GIGUERE and CHRISTINE TELLEFSON f/k/a CHRISTINE GIGUERE-CARROZZA
v.
MICHAEL VOCCOLA and DANIEL SHEDDMICHAEL 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

          For Plaintiff: Mark W. Freel, Esq.

          For Defendant: Robert M. Duffy, 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. 3:6-1:5.)

         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.[1], [2]

         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.

         EXHIBIT 1

         Alan Baton, Senior Counsel SEYFARTH SHAW LLP

         Bernard J. Jackvony, Esq., PANNONE LOPES DEVEREAUX & WEST LLC

         CONSENT ORDER

         This matter arose upon the Emergency Motion to Modify Order and For Stay filed on November 28, 2012, by Michael Voccola and Daniel Shedd in their capacity as Trustees (the "Trustees") of the Frederick Carrozza Jr. Testamentary Trust Under Will dated April 2, 2002, including the Marital Trust and the Family Trust contained therein (the "Trusts"). Upon consent and agreement of the undersigned parties, including Plaintiffs Angela Giguere Kumble f7k/a Angela Giguere ("Kumble") and Christine Tellefson f/k/a Christine Giguere-Carrozza ("Tellefson") (sometimes collectively, "Plaintiffs"), following a hearing before this Court on November 29, 2012, and a chambers conference on December 5, 2012, it is hereby

         ORDERED

         as follows:

         1. Except as expressly set forth and modified herein, the Order entered by this Court on November 19, 2012 (the "November 19 Order"), shall remain in full force and effect according to its terms. Any previous stay of the November 19 Order by this Court, following the hearing held on November 29, shall be lifted and shall cease to be of force or effect upon entry of this Order.

         2. The Trustees will transfer the real estate owned by the Trust (the "Properties") to Tellefson, absolutely, in fee simple, free of trust, in accordance with the November 19 Order, by Trustees' Deeds to be executed within twenty-four (24) hours of the entry of this Order, subject to Bank consent and Tellefson assumption as described below, by executing the deeds provided by Plaintiffs and delivering them to their counsel Mark W. Freel, Esq. Thereafter, the executed Trustees' Deeds shall be held in escrow by counsel for the Plaintiffs, Mark W. Freel, Esq., and shall not be recorded in the land evidence records or delivered to Tellefson or Kumble until the Trustees' receive verification that Newport Federal Savings Bank (the "Bank") has consented to such transfer, Tellefson has assumed any of the Trust's obligations under the Loan Agreement dated March 16, 2012 secured by the Properties, and the Bank has agreed to such assumption. Tellefson is free to pursue other financing arrangements for the Properties, provided those arrangements result in a release of all of the Trustee's obligations under the aforementioned Loan Agreement, and provided they do not increase the encumbrance on any one or more of the Properties. Tellefson and Kumble will indemnify and hold harmless the Trustees for any errors that may be contained in the aforementioned Trustees' Deeds.

         3. Upon transfer, Tellefson will become responsible for all ongoing expenses, oversight, maintenance and management of the Properties, and neither the Trust nor the Trustees will have any further responsibility for the Properties after the date of the transfer. Effective immediately, Mark W. Freel, Esq., counsel for the beneficiaries, shall provide counsel for the Trustees with monthlyreports of revenue received and expenses incurred in connection with the management of the Properties after transfer within two weeks of the close of the prior month, but only until such time as the Trustees are duly discharged by the Court. Revenue generated by the Properties, after payment of necessary and ordinary expenses incurred in connection with operation of the Properties, shall be held in escrow with the law firm of Edwards Wildman Palmer, LLP until the Trustees are duly discharged by the Court. The Court shall retain an equitable lien (not to be recorded in any land evidence records) on the Properties and proceeds therefrom, as set forth herein, and shall retain jurisdiction over the disposition of the Properties and proceeds until the Trustees are duly discharged by the Court.

         4. In accordance with the November 19 Order, the Trustees shall assign the Trust's interest in the Judgment entered by this Court in Civil Action No. NM02-0603, currently pending on appeal before the Rhode Island Supreme Court in Carrozza v. Voccola. Appeal No. SU-11-0132, (the "Judgment"), to Tellefson absolutely, in fee simple, free of trust. That assignment shall occur forthwith and shall be in a form reasonably satisfactory to Plaintiffs' counsel. Upon entry of this Order, the law firm of Duffy & Sweeney shall withdraw its appearance on behalf of the Trust in the pending appeal of the Judgment in the Rhode Island Supreme Court.

         5. Tellefson shall not further encumber or borrow against the Properties until such time as the Trustees are duly discharged by this Court. If she first obtains approval of this Court, Tellefson may sell one or more of the Properties, the net proceeds of any such transaction, after payment of usual and customary costs of sale, to be placed in escrow with the law firm of Edwards Wildman Palmer, LLP, until such time as the Trustees are duly discharged by this Court.

         6. Tellefson and Kumble shall not assign, encumber or otherwise dispose of any part of their interest in the Judgment until such time as the Trustees are duly discharged by this Court. Any collection or recovery that Tellefson or Kumble obtains on the Judgment following the entry of this Order shall be placed in escrow with the law firm of Edwards Wildman Palmer, LLP, until such time as the Trustees are duly discharged by this Court. The foregoing is subject to Plaintiffs' right to assert a claim for reimbursement of legal fees and costs incurred in pursuit of the Judgment as expenses incurred in administration of the Trust. No payment shall be made on any such claim prior to Court approval and Trustee discharge. The amounts to be placed in escrow include, but are not limited to, all payments on the Promissory Note dated November 21, 2011 received by Kumble from Barbara Patriarca and Soho, Inc. in partial satisfaction of the Judgment.

         7. Attorney Mark Freel will make monthly reports to Trustees' counsel of all activity in the escrow account within two weeks of the close of the prior month.

         8. Once all claims and issues related to the wind-down of the Trust have been fully adjudicated and resolved (in this action and/or in Civil Action No. 12-3476), including but not limited to any claims by the Trustees for fees or expenses, including professional fees, and Plaintiffs' defenses and Counterclaims, and after the Trustees and their professionals have received whatever remuneration and compensation is deemed to be due to them and they have been discharged by this Court, any restrictions on the disposition of the Properties, other Trust assets or ...


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