Middleton v. Commonwealth Bank & Tr. Co.
| Docket Number | 2022-CA-0675-MR,2021-CA-1035-MR |
| Decision Date | 26 May 2023 |
| Parties | CHARLES G. MIDDLETON, III, INDIVIDUALLY AND IN HIS CAPACITY AS CO-EXECUTOR OF THE ESTATE OF LAWRENCE J. MIDDLETON, SR.; AND LAWRENCE J. MIDDLETON, JR., IN HIS CAPACITY AS CO-EXECUTOR OF THE ESTATE OF LAWRENCE J. MIDDLETON, SR. APPELLANTS v. COMMONWEALTH BANK AND TRUST COMPANY, IN ITS CAPACITY AS SUCCESSOR TRUSTEE FOR THE LAWRENCE L. JONES, SR. TRUST UNDER AGREEMENT DATED DECEMBER 28, 1933; AND PNC BANK, N.A., IN ITS CAPACITY AS PREDECESSOR TRUSTEE FOR THE LAWRENCE L. JONES, SR. TRUST UNDER AGREEMENT DATED DECEMBER 28, 1933 APPELLEES And CHARLES G. MIDDLETON, III, INDIVIDUALLY AND IN HIS CAPACITY AS CO-EXECUTOR OF THE ESTATE OF LAWRENCE J. MIDDLETON, SR.; CHARLES G. MIDDLETON, III, IN HIS CAPACITY AS TRUSTEE OF THE KATHERINE JONES SMITH TRUST U/W; AND LAWRENCE J. MIDDLETON, JR., IN HIS CAPACITY AS CO-EXECUTOR OF THE ESTATE OF LAWRENCE J. MIDDLETON, SR. APPELLANTS v. COMMONWEALTH BANK AND TRUST COMPANY, IN ITS CAPACITY AS SUCCESSOR TRUSTEE FOR THE LAWRENCE L. JONES, SR. TRUST UNDER AGREEMENT DATED DECEMBER 28, 1933; AND PNC BANK, N.A., IN ITS CAPACITY AS PREDECESSOR TRUSTEE FOR THE LAWRENCE L. JONES, SR. TRUST UNDER AGREEMENT DATED DECEMBER 28, 1933 APPELLEES |
| Court | Kentucky Court of Appeals |
1
CHARLES G. MIDDLETON, III, INDIVIDUALLY AND IN HIS CAPACITY AS CO-EXECUTOR OF THE ESTATE OF LAWRENCE J. MIDDLETON, SR.; AND LAWRENCE J. MIDDLETON, JR., IN HIS CAPACITY AS CO-EXECUTOR OF THE ESTATE OF LAWRENCE J. MIDDLETON, SR. APPELLANTS
v.
COMMONWEALTH BANK AND TRUST COMPANY, IN ITS CAPACITY AS SUCCESSOR TRUSTEE FOR THE LAWRENCE L. JONES, SR. TRUST UNDER AGREEMENT DATED DECEMBER 28, 1933; AND PNC BANK, N.A., IN ITS CAPACITY AS PREDECESSOR TRUSTEE FOR THE LAWRENCE L. JONES, SR. TRUST UNDER AGREEMENT DATED DECEMBER 28, 1933 APPELLEES
And
CHARLES G. MIDDLETON, III, INDIVIDUALLY AND IN HIS CAPACITY AS CO-EXECUTOR OF THE ESTATE OF LAWRENCE J. MIDDLETON, SR.; CHARLES G. MIDDLETON, III, IN HIS CAPACITY AS TRUSTEE OF THE KATHERINE JONES SMITH TRUST U/W; AND LAWRENCE J. MIDDLETON, JR., IN HIS CAPACITY AS CO-EXECUTOR OF THE ESTATE OF LAWRENCE J. MIDDLETON, SR. APPELLANTS
v.
COMMONWEALTH BANK AND TRUST COMPANY, IN ITS CAPACITY AS SUCCESSOR TRUSTEE FOR THE LAWRENCE L. JONES, SR. TRUST UNDER AGREEMENT DATED DECEMBER 28, 1933; AND PNC BANK, N.A., IN ITS CAPACITY AS PREDECESS OR TRUSTEE FOR THE LAWRENCE L. JONES, SR. TRUST UNDER AGREEMENT DATED DECEMBER 28, 1933 APPELLEES
Nos. 2022-CA-0675-MR, 2021-CA-1035-MR
Court of Appeals of Kentucky
May 26, 2023
NOT TO BE PUBLISHED
APPEAL FROM JEFFERSON CIRCUIT COURT HONORABLE SUSAN SCHULTZ GIBSON, JUDGE ACTION NO. 16-CI-002566
BRIEFS AND ORAL ARGUMENT FOR APPELLANTS: Charles G. Middleton, III Louisville, Kentucky Mark G. Hall Louisville, Kentucky
BRIEFS FOR APPELLEES: Edward H. Stopher Earl L. Martin III Louisville, Kentucky David Cantor Louisville, Kentucky David Tachau Louisville, Kentucky
ORAL ARGUMENT FOR APPELLEES: Edward H. Stopher Louisville, Kentucky
AFFIRMING
BEFORE: THOMPSON, CHIEF JUDGE; CETRULO AND ECKERLE, JUDGES.
OPINION
ECKERLE, JUDGE:
These appeals arise from a judgment awarding attorney fees and a post-judgment order allowing the judgment creditor to attach trust assets belonging to the judgment debtor. In the first appeal, Charles G. Middleton, III and the Estate of Lawrence J. Middleton (collectively, "the Middletons") appeal from an order of the Jefferson Circuit Court awarding contractual attorney fees to Commonwealth Bank &Trust Company, in its capacity as successor trustee for the Lawrence Jones Middleton, Sr. Trust under agreement dated December 28, 1933, ("C.B.&T."). In the second appeal, the Middletons appeal from a post-judgment order of the Jefferson Circuit Court allowing C.B.&T. to attach assets of a separate trust of which Charles Middleton is both trustee and lifetime beneficiary.
For the following reasons, we conclude that the Trial Court applied the proper standard in determining the amount of reasonable attorney fees owed to C.B.&T. We further conclude that the Trial Court did not err in allowing C.B.&T. to attach Charles Middleton's beneficial interest in the separate trust in order to satisfy the judgment for attorney fees. Hence, we affirm in both appeals.
I. Facts and Procedural History
For purposes of this appeal, the following facts are relevant: In 1933, Lawrence Jones, Sr., created an inter vivos trust ("the Trust") for the benefit of his three daughters and their descendants. He established a similar trust for the benefit of his son, Lawrence Jones, Jr., and his descendants. The Middletons are descendants of Lawrence Jones, Jr., who predeceased his father.
Throughout the years, there were ongoing issues involving the administration of the Trust. In 2004, PNC Bank, N.A. ("PNC"), as trustee, instituted a declaratory judgment action in the Jefferson Circuit Court to determine, among other things, whether the descendants of Lawrence Jones, Jr., were included in the class of remainder beneficiaries under the Trust ("the 2004 Action"). The Middletons, as potential remainder beneficiaries, were named as parties to that action and eventually filed a counterclaim against PNC. After several years, the parties entered into a Settlement Agreement and Release ("the Agreement"), stipulating that the Middletons were remainder beneficiaries under the Trust.
As part of the Agreement, the Middletons accepted a series of distributions in exchange for giving up their rights as potential remainder beneficiaries upon termination of the Trust. In addition, the Middletons reserved their rights to maintain individual claims against PNC as Trustee. As further consideration, the Agreement contained the following provision:
Charles G. Middleton, III and Lawrence J. Middleton hereby covenant and agree to hold harmless and indemnify . . . [the Trust] . . . from any and all claims, causes of action, demands or suits of any kind arising directly or indirectly from any damages and/or claims asserted in Middleton v. PNC, including but not limited to, any claims for attorneys' fees and costs and any claims by other Defendants in Middleton v. PNC.
In 2007, the Middletons brought a separate action against PNC asserting claims for breach of fiduciary duties arising from its delegation of investment management and failure to supervise investments properly ("the 2007 Action"). The Middletons also asserted that PNC's conduct while managing the Trust amounted to other violations of Kentucky law, PNC's internal policies, and the requirements of the Trust itself. The Middletons contended that PNC's actions caused losses to the Trust's investment portfolio during the period of July 2001 through October 2007.
After protracted litigation, the Trial Court granted summary judgment to PNC on the claims raised in that action. On appeal, this Court affirmed, concluding that the Middletons failed to establish that they suffered any non-speculative injury caused by the alleged negligence of PNC and its investment manager, Parthenon, L.L.C. ("Parthenon"). Middleton v. PNC Bank, NA, No. 2012-CA-002142-MR, 2014 WL 5510872 (Ky. App. Oct. 31, 2014) (unpublished).
During the pendency of the 2007 Action, C.B.&T. became successor trustee of the Trust. In addition, while the 2007 Action was on appeal, Lawrence
Jones Middleton, Sr. passed away. Charles Middleton and Lawrence Jones Middleton, Jr., were appointed co-executors of the Estate of Lawrence Jones Middleton, Sr. In 2015, C.B.&T. sent the Middletons a letter and supporting affidavit setting forth the attorney fees and costs paid by the Trust in the 2007 Action, as provided under the Agreement. The Middletons thereafter denied any obligation to indemnify the Trust.
In 2016, C.B.&T. filed the current action to enforce the indemnity obligation. The matter proceeded to a motion for partial summary judgment on the issue of the Middletons' liability. The Trial Court granted the motion, concluding that the Agreement clearly required the Middletons to reimburse the Trust for all attorney fees, expenses, and costs paid on behalf of PNC in defending the 2007 Action. Because PNC prevailed, the Trial Court found that the Middletons were obligated under the Agreement to pay those fees and costs. Subsequently, C.B.&T. moved for summary judgment on damages, submitting affidavits showing that the Trust had expended $1,081,293.61 in attorney fees and costs during the PNC litigation and the indemnity action. The Middletons did not dispute the affidavits, and the Trial Court thereafter entered judgment in that amount with prejudgment interest.
On appeal, this Court affirmed the Trial Court's substantive rulings, but reversed on the award of attorney fees. Middleton v. PNC Bank N.A., No.
2017-CA-001673-MR, 2019 WL 1224621 (Ky. App. Mar. 15, 2019) (unpublished). In pertinent part, this Court held that any award of attorney fees is subject to a determination of reasonableness by the Trial Court. Id. at *8 (citing Capitol Cadillac Olds, Inc. v. Roberts, 813 S.W.2d 287, 293 (Ky. 1991)). In the absence of the necessary findings of reasonableness, this Court remanded the matter for a new hearing and findings on that issue. To determine whether the requested attorney fees are reasonable, this Court directed the Trial Court to address the "well-established" factors, including:
(a) Amount and character of services rendered.
(b) Labor, time, and trouble involved.
(c) Nature and importance of the litigation or business in which the services were rendered.
(d) Responsibility imposed.
(e) The amount of money or the value of property affected by the controversy or involved in the employment.
(f) Skill and experience called for in the performance of the services.
(g) The professional character and standing of the attorneys.
(h) The result secured.
Id. at *9 (citing Mo-Jack Distrib., LLC v. Tamarak Snacks, LLC, 476 S.W.3d 900, 910 (Ky. App. 2015) (quoting Axton v. Vance, 207 Ky. 580, 269 S.W. 534, 536-37 (1925))).
On remand, the Middletons argued that they were entitled to a jury trial on the issue of reasonableness of the attorney fees. The Trial Court denied the motion, concluding that reasonableness is a question of law for the Court to decide. The Court also directed the Middletons to identify the specific expenses that were claimed to be unreasonable. In a separate order, the Trial Court granted C.B.&T.'s motion to exclude the Middletons' expert witness, finding that the reasonableness of attorney fees is a matter of law and not an appropriate topic for expert testimony. Finally, the Trial Court denied the Middletons' motion to apply the "lodestar" analysis in assessing the reasonableness of the fees, concluding that standard was not applicable in this situation.
The matter proceeded to an evidentiary hearing in February 2021. The Trial Court summarized the evidence as follows:
Ms. Beth Breetz an attorney with Stites and Harbison, the law firm that represented PNC, testified regarding the fees and costs incurred by PNC in defending the Defendants' lawsuit. She testified that despite the extensive...
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