[WSBAPT] Deny PR or Trustee Fee for breach of fiduciary duty?

[Eric Nelsen]

Hi all--I received a very helpful offline response with 3 citations that got me there:

Tucker v. Brown, 20 Wn.2d 740 (1944)
Kane v. Clos, 50 Wn.2d 778, 788-790 (1957) (corporate fiduciary who stole corporate funds forced to disgorge all improper gains, denying any right to keep a portion as compensation)
Cogan v. Kidder, Mathews & Segner, Inc., 97 Wn.2d 658, 667 (1982) (real estate agent acting as dual agent forced to forfeit its commission for failure to disclose it was acting as dual agent)

Kane and Cogan have to do with corporate and contractual fiduciaries, while Tucker is about a probate administrator, so that's the one I went for. Unfortunately it's a 140-page opinion on three consolidated actions, involving two competing estates and a trust, all of which had already been to the Supreme Court three previous times since 1939 on other issues. It looks like it was an epic battle--there are references to over 120 depositions taken in multiple states across the country and in Canada, over 1000 exhibits, and appeal briefs over 700 pages in length.

Briefly: Tucker represented the Smith Estate, and sued Brown's Estate to establish that over $1.5 million in assets held by Brown's Estate were originally held by Brown under an express trust for the benefit of Smith. In one of the early suits, the court agreed that the assets belonged to the Trust and Brown's Estate should account for them and turn them over to the Smith Estate. The PR for Brown's Estate, Guaranty Trust Company, together with its attorneys, resisted fiercely for years, denying that the trust existed even after the court had held it did, and meanwhile bleeding the Trust assets dry in fees and costs (and by paying Brown's debts and a monthly allowance to his widow).

For what it's worth, here's what I found in the opinion that was most helpful on my issue:

20 Wn.2d at 767-769: There is good material here on the general standard of fiduciary duties of an Administrator of an Estate. "Courts have fixed a very high and exceptionally strict standard for trustees to folow in the conduct of their trust activities."  Tucker also quotes in full the old Cardozo "punctilio of an honor most sensitive" paragraph from Meinhard v. Salmon regarding the standard of care for trustees, and says "we give it our unqualified approval by adopting it as written by Chief Judge Cardozo."

pp. 771-772. There's some great language for when a trustee or PR is resisting providing a full and accurate accounting. "It is not always that a trustee is permitted to urge, against the strict examination of his accounts, all of the rules of legal warfare governing in purely adversary proceedings. His duty to render an account not only mathematically correct, but equitably fair, and to submit his performances of the trust duties to examination, operates, often, to the advantage of the cestuis que trust, who might be, otherwise, considered to be irretrievably in default. This rule is also one largely of public policy" quoting Pomeroy v. Noud, 145 Mich. 37, 108 N.W. 498, 502.

The Court has discretion to deny compensation to a Trustee who has breached her trust.

If the administration of any particular trustee falls below [the highest degree of good faith and with ordinary skill and care], his compensation should be reduced or forfeited entirely. The court having jurisdiction to approve the award of compensation also has power to direct that a trustee shall receive none of the compensation he would get for normal performance.

Tucker v. Brown, 20 Wn.2d 740, 825, 150 P.2d 604 (1944), quoting 4 Bogert, Trusts and Trustees, p. 2877, § 979 (italics added). A breach of trust is not merely "willful and fraudulent acts that have a quasicriminal character," but every violation of fiduciary duty, "whether willful or fraudulent, or done through negligence, or arising from mere oversight and forgetfulness." Id. at 826, quoting Pomeroy's Eq.Jur. 1079.

Even though the trustee acts in good faith, if his conduct is a breach of trust, compensation will be denied. And the refusal of a trustee to do his duty until compelled deprives him of the right to compensation.

Tucker, 20 Wn.2d at 826, quoting Perry on Trusts, §919 (internal citations omitted, italics added).

Sincerely,

Eric

Eric C. Nelsen
SAYRE LAW OFFICES, PLLC
1417 31st Ave South
Seattle WA  98144-3909
phone 206-625-0092
fax 206-625-9040

From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Eric Nelsen
Sent: Thursday, August 16, 2018 6:00 PM
To: WSBA Probate & Trust listserve (wsbapt at lists.wsbarppt.com)
Subject: [WSBAPT] Deny PR or Trustee Fee for breach of fiduciary duty?

It is getting late and I am competely losing my research ability. Can anyone point me to the case or cases that say that a PR or Trustee who has violated her/his fiduciary duty can be denied their fee for services?

Sincerely,

Eric

Eric C. Nelsen
SAYRE LAW OFFICES, PLLC
1417 31st Ave South
Seattle WA  98144-3909
phone 206-625-0092
fax 206-625-9040

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