ATTORNEY FOR APPELLANT: ATTORNEYS FOR APPELLEES:
MICHAEL F. WARD ERIC A. MANTERFIELD
Ward Tyler & Scott RODNEY S. RETZNER
New Albany, Indiana Kreig DeVault LLP
COURT OF APPEALS OF INDIANA
IN THE MATTER OF THE TRUST CREATED )
UNDER THE LAST WILL and TESTAMENT OF )
JOHN E. MITCHELL, DECEASED )
PNC BANK, )
vs. ) No. 22A05-0208-CV-361
ROBERT SNODDY and )
MARK SNODDY, )
APPEAL FROM THE FLOYD CIRCUIT COURT
The Honorable J. Terrence Cody, Judge
Cause No. 22C01-0112-TR-65
OPINION - FOR PUBLICATION
March 14, 2003
PNC Bank, as trustee of the John E. Mitchell Trust (the Trust), appeals
the trial courts denial of reimbursement from the Trust for attorney fees incurred
in defending an action brought by brothers Robert and Mark Snoddy, the Trusts
beneficiaries, to prematurely terminate the Trust or to remove PNC as trustee.
The sole restated issue before us is whether the trial court lacked discretion
to prevent PNC from recouping its attorney fees from the Trust when PNC
successfully defended against the Snoddys action to terminate the Trust or remove PNC
The evidence most favorable to the trial courts decision reveals that the Trust
was established in 1974 following Mitchells death, pursuant to the terms of his
last will and testament. The terms of the Trust provided that it
would pay income to Mitchells widow until her death. Thereafter, the Trust
was to remain in existence until both Robert and Mark Snoddy, Mitchells great-nephews,
reached fifty years of age, at which time the Trust was to terminate
and the Snoddys were to receive the remainder of the Trust assets.
The original corpus of the Trust was approximately $419,000.
Mitchells widow died in November 2000. Brenda Tucker, a PNC vice president
and the administrator assigned to the Trust, began communications with the Snoddys that
apparently misled them into believing PNC was willing to terminate the Trust prematurely,
even though Mark, the youngest brother, would not turn fifty until September 2003.
Tucker also led the Snoddys to believe, alternatively, that PNC would step
down as trustee if it did not prematurely terminate the Trust. Ultimately,
PNC was neither willing to prematurely terminate the Trust nor to remove itself
as trustee. In addition to these misunderstandings, the Snoddys also were dissatisfied
generally with PNCs performance as trustee because of poor customer service, particularly with
respect to the failure of Tucker and others to timely respond to inquiries
regarding the Trust.
On December 21, 2001, the Snoddys filed a petition to terminate the Trust,
which then had a value of approximately $2.8 million. On January 18,
2002, the Snoddys filed a petition to remove and replace PNC as trustee
in the event the trial court decided not to terminate the Trust.
On February 22, 2002, the Snoddys filed a petition requesting that the trial
court forbid PNC from recovering from the Trust its attorney fees in defending
against the Snoddys petitions. The trial court conducted a hearing on April
5, 2002, at which Robert Snoddy and Tucker testified. On May 24,
2002, the trial court entered its order denying termination of the Trust and
the removal of PNC as trustee. It did, however, direct PNC to
replace Tucker as administrator of the Trust. Additionally, it concluded that [u]nder
the facts and circumstances of this case, PNC could not recover its attorney
fees in this matter from the Trust. App. p. 7. The
trial court denied PNCs motion to correct error on July 12, 2002, and
PNC now appeals.
The first issue we must address is PNCs contention that the trial courts
findings regarding the attorney fees issue are inadequate to support its ruling.
PNC also contends we are limited in our review of the attorney fees
issue to determining whether the trial courts findings on the termination and removal
issues support its decision to prevent PNC from recouping its attorney fees from
the Trust. Specifically, PNC contends that we must adhere to the familiar
two-tiered standard of review for judgments accompanied by Indiana Trial Rule 52 findings
and conclusions: whether the evidence supports the findings, and whether the findings
support the judgment. See Learman v. Auto Owners Ins. Co., 769 N.E.2d
1171, 1174 (Ind. Ct. App. 2002), trans. denied. Sua sponte findings control
only as to the issues they cover, and a general judgment standard of
review will control as to the issues upon which there are no findings.
Id. A general judgment entered with findings will be affirmed if
it can be sustained on any legal theory supported by the evidence.
Id. In making that determination, we will neither reweigh the evidence nor
judge the credibility of the witnesses. Sizemore v. H & R Farms,
Inc., 638 N.E.2d 455, 457 (Ind. Ct. App. 1994), trans. denied.
Here, in support of its decision not to terminate the Trust, the trial
court found that [a]lthough the purpose of the trust has been fulfilled, the
terms of the trust are clear and unambiguous in that the trust is
not to terminate until such time as both Robert Snoddy and Mark Snoddy
attain fifty (50) years of age. App. pp. 5-6. The trial
court supported its decision not to remove PNC as trustee because although it
found there was a bad relationship or no relationship between [the Snoddys] and
[Tucker] . . ., [f]rom an investment and performance standpoint, the Trustee appears
to have performed well. App. p. 6. To the extent the
trial court made some findings on these two issues, it did so sua
sponte and did not make extensive findings and conclusions. As for that
paragraph of the trial courts order discussing the attorney fees issue, it simply
noted that PNC would not be allowed to recover its fees from the
Trust under the facts and circumstances of this case. App. p. 7.
We conclude that because the trial court only entered partial findings sua
sponte, and entered no detailed findings with respect to the attorney fees issue,
we will review the trial courts decision on that issue as a general
judgment and analyze whether it can be affirmed under any legal theory supported
by the evidence.
The parties do not agree as to the correct standard to apply when
considering whether a trustee may collect attorney fees from the trust in a
situation where the trustee successfully defends against an action or actions brought by
a beneficiary. The Snoddys argue that the attorney fees issue is controlled
by Indiana Code Section 34-52-1-1(b), which allows a prevailing party to recover attorney
fees from the losing party if the losing partys claim or defense was
frivolous, unreasonable, or groundless, or if that party litigated in bad faith.
Because allowing PNC to recover its attorney fees from the Trust would be
tantamount to charging the Snoddys with those fees, the Snoddys argue, PNC was
required to demonstrate, but failed to do so, that the Snoddys claims were
frivolous, unreasonable, or groundless, or that they litigated in bad faith.
PNC, on the other hand, argues that the trial courts discretion not to
allow PNC to recover its attorney fees from the Trust was severely limited
by a number of different statutes. First, it notes that Indiana Code
Section 30-4-3-3 allows a trustee to defend actions for the protection of trust
property and of himself in the performance of his duties and to employ
attorneys for that purpose. Additionally, Indiana Code Section 30-4-5-16 provides that a
trustee is entitled to reasonable compensation from the trust estate for acting as
trustee unless there has been a breach of trust or the terms of
the trust provide otherwise. Finally, Indiana Code Section 28-1-11-13 permits any bank
or trust company to demand and receive reasonable compensation for duties it performs,
together with advances that may include the compensation paid for the employment of
legal services when necessary for the protection of any trust or other fiduciary
See footnote PNC argues that reading these statutes together indicates that unless a
trustee is guilty of a breach of trust, has failed to faithfully perform
and discharge its duties . . ., or is . . . subject
to removal for cause, then it is entitled to reasonable compensation for its
services out of the trust estate. Appellants Br. p. 14.
Neither partys suggested analysis perfectly squares with the limited case law authority on
this issue. First, we observe that Indiana Code Section 30-4-5-11 is the
provision of the Trust Code that explicitly permits attorney fees to be charged
against either trust income or principal, depending on the circumstances. This court
has held that a trial court finding a trustee acted reasonably in defending
an action brought by a beneficiary, that legal expenses were reasonably incurred by
a trust, and that attorney fees were properly incurred as an expense of
administration of a trust are sufficient findings to permit the attorney fees to
be assessed as an administrative expense against the trust under Section 30-4-5-11.
Matter of Fitton, 605 N.E.2d 1164, 1174 (Ind. Ct. App. 1992). We
did not say, however, whether such findings are necessary, or that such findings
required an allowance for attorney fees. Nevertheless, the opinion indicates the discretionary
nature of a trial courts decision whether to allow a trustee to recover
attorney fees from the trust if he successfully defends an action brought by
Our supreme court has also explicitly held that the award or denial of
the reimbursement of attorney fees from a trust to a trustee is in
the exercise of a sound discretion, and in the absence of an affirmative
showing of error or abuse of discretion we must affirm [the trial courts]
Malachowski v. Bank One, 682 N.E.2d 530, 533 (Ind. 1997) (quoting
Zaring v. Zaring, 219 Ind. 514, 523, 39 N.E.2d 734, 737 (1942)).
Additionally, [t]he right to compensation at the cost of the estate should not
depend upon the result of the litigation but rather upon the reasonable necessity
for such litigation. Id. (quoting Zaring, 219 Ind. at 523, 39 N.E.2d
at 737)). A trustee may be precluded from recovering attorney fees from
the trust if the litigation arose because of the misconduct and/or negligence of
the trustee. Id. (quoting Haas v. Wishmiers Estate, 99 Ind. App. 31,
35-36, 190 N.E. 548, 549 (1934)). The Malachowski court affirmed the trial
courts denial of the trustees recovery of its attorney fees where the trustee
successfully defended against several fraud counts brought by the beneficiaries, but the trial
court had nevertheless ordered the trustees removal because it had committed significant and
substantial misconduct. Id. at 534.
It is highly informative that the Malachowski court did not mention any statute
as limiting the trial courts discretion to deny the trustees recovery of its
attorney fees, as PNC would have us hold, while at the same time
acknowledging that the trial court had no discretion to deny the beneficiaries from
recovering their attorney fees in their successful attempt to remove the trustee because
of a specific governing Trust Code statute, Indiana Code Section 30-4-3-22(e). We
are not inclined to find a statutory limitation on a trial courts discretion
to deny recovery of attorney fees to a trustee that our supreme court
did not find. Instead, our supreme court noted the following factors to
consider when determining whether an award of attorney fees to a trustee from
a trust is appropriate: whether the trustee acted reasonably and in good
faith; whether the litigated issue is of little or momentous consequence to the
estate or its beneficiaries; whether the facts are undisputed or are so controversial
as to require an adversary proceeding for their determination; whether the legal questions
are simple or complex, settled by precedent, or open to serious debate; and
any other matters bearing upon the reasonableness or the necessity for the litigation
and the employment of attorneys. Malachowski, 682 N.E.2d at 533 n.3 (quoting
Zaring, 219 Ind. at 523, 39 N.E.2d at 737).
We acknowledge the existence of authorities stating that as a general rule, [a]
trustee is entitled to attorneys fees on a successful attempt to defend against
an action to remove him, with the fees payable out of the trust.
Henrys Probate Law & Practice, Vol. 3A p. 100 (citing
Salusbury v. Denton
Nat. Bank, 25 Md.App. 669, 335 A.2d 199 (1975); Jennings v. Murdock, 553
P.2d 846 (Kan. 1976)). Such a broad statement, however, is incompatible with
the notion that a trial court has discretion in awarding attorney fees and,
specifically, with the Malachowski/Zaring holding that a decision whether to award attorney fees
to a trustee out of the trust should not depend on the result
of the litigation, but primarily on the reasonable necessity for the litigation.
Although it may be the relatively rare case that a trustee would completely
prevail in an action brought against it by the beneficiaries, yet still be
denied recovery of its attorney fees, such a result is not without precedent.
See In re Estrichers Estate, 202 Misc. 431, 111 N.Y.S.2d 295 (1952)
(holding trustee was not entitled to reimbursement of attorney fees incurred in successfully
defending beneficiarys action to remove it as trustee where trial court found the
corporate trustee was remiss in the performance of certain of its trust duties
and the court does not condone its acts), affd, 281 A.D. 828, 118
N.Y.S.2d 922 (1953). We also observe that the Malachowski opinion did not
allow the trustee to recover any attorney fees from the trust in spite
of its successful defense of several claims brought by the beneficiaries; therefore, a
successful defense against a beneficiarys claim is no guarantee of the recovery of
the attorney fees incurred in defending that claim.
In determining whether a trial court has abused its discretion, we consider whether
the judgment is clearly against the logic and effect of the facts and
inferences supporting the judgment. Breneman v. Slusher, 768 N.E.2d 451, 461 (Ind.
Ct. App. 2002), trans. denied. In conducting our review, we will neither
reweigh the evidence nor substitute our judgment for that of the trial court.
Id. In its order denying PNCs motion to correct error, the
trial court stated that PNC had acted badly, just not to the level
that the Court would exercise its discretion to remove PNC as Trustee. .
. . and that PNC was responsible, to a certain degree, for this
litigation. App. p. 9. There is some evidence in the record
to support these statements. Specifically, Robert Snoddy testified that he and his
brother initially had been led to believe that PNC was willing to terminate
the Trust prematurely. That position was reversed during a subsequent meeting between
the Snoddys and Brenda Tucker, at which time the Snoddys were led to
believe that PNC was, in the alternative, willing to step down as trustee
without objection in favor of another bank. PNCs Trust Committee did not
approve this move, however, to the Snoddys surprise and dismay. Tucker and
the PNC investment officer for the Trust regularly failed to return phone calls
regarding the Trust from the Snoddys and their attorney. At one point,
Tucker phoned the Snoddys aunt seeking information related to the Trust, but also
asked irrelevant questions about the Snoddys background and made disparaging comments about Mark
It may be a very close question whether PNC truly acted badly enough
to warrant precluding it from recovering its attorney fees from the Trust, as
the trial court stated, or whether it simply was doing its best to
deal with trust beneficiaries who were overly-eager to destroy the trust and prematurely
access a substantial windfall inheritance. It does appear that the Snoddys may
have acted unpleasantly toward Tucker, were disliked and viewed with suspicion by John
Mitchells widow, and were at least partially to blame for the hostile relationship
and lack of communication between them and PNC. Tucker, in particular, also
denies having misled the Snoddys as to PNCs intentions regarding the Trust.
This, however, was a question for the trial court to answer, after examining
the evidence and particularly after listening in-court to the competing testimony of Robert
Snoddy and Brenda Tucker; we will neither reweigh evidence nor judge witness credibility.
There is some indication in the record that PNCs representatives substantially misled
the Snoddys as to their intentions regarding the Trust on at least two
occasions, and that the failure of PNCs representatives to maintain communication with the
Snoddys was a source of great irritation to them, thus supporting the conclusion
that PNC was not without blame in fostering a hostile relationship with the
Trust beneficiaries that led to the current litigation, especially with respect to the
Snoddys removal request. Resolution of that issue was of momentous consequence to
the Trust, required the weighing of competing evidence in an adversarial proceeding, presented
a legal question open to serious debate, and litigation of the issue was
at least partially necessitated by PNCs actions. Under Malachowski and Zaring, this
was sufficient to deny PNC recovery of its attorney fees. We cannot
say the trial courts decision to deny PNC the opportunity to recover its
attorney fees from the Trust clearly went against the logic and effect of
the facts and circumstances before it, and, therefore, the trial court did not
abuse its discretion in making that decision.
We have reviewed the trial courts decision to deny PNC recovery of its
attorney fees for an abuse of discretion and not as a judgment supported
by special findings. Having done so, we conclude the trial court did
not abuse its discretion in refusing to allow PNC to recover its attorney
fees from the Trust even though PNC prevailed on the petitions brought by
the Snoddys, where there was evidence presented that this litigation was at least
partially prompted by PNCs actions. We affirm.
BAILEY, J., and ROBB, J., concur.
PNC also directs us to Indiana Code Section 29-1-10-13, which provides that
an attorney performing services for the estate at the instance of the personal
representative shall have such compensation therefor out of the estate as the court
shall deem just and reasonable. That section falls under the Probate Code.
We are concerned here with the Trust Code, Title 30 of the
Indiana Code, which has its own provisions regarding the payment of attorney fees.
Footnote: The key holding of
Fitton was that a trial court could not
assess the attorney fees against one particular beneficiarys share of the trust unless
the trustee demonstrated under prior Indiana Code Section 34-1-32-1(b) (now 34-52-1-1(b)) that the
beneficiarys action was frivolous, unreasonable, groundless, or litigated in bad faith. 605
N.E.2d at 1173-74.
Zaring actually considered whether one co-trustee could be awarded attorney fees from
the trust where he initiated unsuccessful litigation against the other co-trustees, but the
Malachowski court clearly found Zaring applicable to the situation before it and the
one before us today, namely, where a trustee seeks to recover attorney fees
for defending an action brought the beneficiaries.