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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Cottini v. Berggren (6/15/2018) sp-7250
Notice: This opinion is subject to correction before publication in the P ACIFIC REPORTER.
Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,
303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email
corrections@akcourts.us.
THE SUPREME COURT OF THE STATE OF ALASKA
MARC COTTINI, )
) Supreme Court No. S-16312
Appellant, )
) Superior Court No. 3AN-13-01828 PR
v. )
) O P I N I O N
JOHN BERGGREN and )
OLENA BERGGREN,
) No. 7250 - June 15, 2018
)
Appellees. )
)
Appeal from the Superior Court of the State of Alaska, Third
Judicial District, Anchorage, Catherine M. Easter, Judge.
Appearances: Susan Orlansky, Reeves Amodio LLC,
Anchorage, for Appellant. Christina M. Passard, Woelber &
Passard, LLC, Anchorage, for Appellees.
Before: Stowers, Chief Justice, Winfree, Maassen, Bolger,
and Carney, Justices.
STOWERS, Chief Justice.
I. INTRODUCTION
Aformer agent, appointed under apower ofattorney,successfully defended
an accounting of his actions, expenditures, and fees against objections and counterclaims
by his former principal. In this appeal we are asked to resolve whether the former agent
is entitled to reimbursement from his former principal for reasonable attorney's fees
incurred in maintaining that defense. The superior court denied the agent's request for
----------------------- Page 2-----------------------
attorney's fees because the dispute occurred in the context of a guardianship proceeding
and because the request did not meet the requirements of AS 13.26.291, which governs
cost-shiftinginguardianshipproceedings. Theagent appeals, arguing that AS 13.26.291
does not apply, that he is entitled to attorney's fees based on his authority as an agent to
hire an attorney under AS 13.26.665(m), and that he is entitled to attorney's fees based
on common law principles, equity, and considerations of public policy. We conclude
that neither statute applies, but that the agent may be entitled to reimbursement of his
attorney's fees under the common law of agency and as a matter of equity. We therefore
reverse the superior court's order and remand for further proceedings.
II. FACTS AND PROCEEDINGS
John Berggren is an Anchorage resident with business and real estate
interests worth over $12 million. He executed a general power of attorney in 2007
1
naming Marc Cottini as his attorney-in-fact - his legal agent
- in the event he became
incapacitated. Berggren suffered a traumatic brain injury in July 2013, triggering the
power of attorney. After the accident Berggren's attorney, David Shaftel, informed
Cottini that he had been named Berggren's agent. Shortly after Cottini assumed his role
as agent, Berggren's wife Olena filed a petition for guardianship. Acting as Berggren's
agent, Cottini opposed the guardianship petition on Berggren's behalf. Over the next
eight months, Cottini acted as Berggren's agent until, after court-ordered medical
examinations concluded that Berggren had regained the capacity to manage his own
affairs, the court terminated the agency. Olena withdrew her guardianship petition
shortly afterwards. The court ordered Cottini to produce an accounting of his actions and
expenditures during the time of his agency, which he did with the assistance of Shaftel's
law firm. Shaftel represented Cottini in his capacity as Berggren's agent.
1
We use the term "agent" to refer to Cottini's relationship with Berggren.
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----------------------- Page 3-----------------------
The accounting requested the court approve $71,683.57 as Cottini's fees
and costs for acting as Berggren's agent. This included compensation for Cottini's time
at a rate of $50 per hour. Cottini later declared that the accounting showed he processed
transactions involving $1,064,947 including handling Berggren's personal and joint
expenses and paying invoices amounting to $242,263. Berggren objected to Cottini's
2 arguing that Cottini's actions were not taken to advance Berggren's best
accounting,
interests, and that Cottini's fees were excessive.
Berggren also filed counterclaims alleging breach of Cottini's fiduciary
duties and listing objections to specific requested fees and costs. Cottini hired a second
attorney, Diane Vallentine, who appeared before the court "for the sole purpose of
representing Mr. Cottini with regard to the Joint Objection to Accounting of Agent's
Fees." Documents filed with the court consistently identified Shaftel as representing
Cottini in his capacity as agent and Vallentine as representing Cottini individually;
despite making this distinction, the two attorneys consistently cosigned filings and
worked together.
Eventually, the parties settled. Berggren agreed to dismiss the
counterclaims with prejudice, withdrew the objections, and agreed to pay most of what
Cottini had initially requested; Cottini agreed to accept a slightly reduced total amount
in fees and reimbursement in exchange for prompt payment. The parties reserved all
issues regarding attorney's fees for decision by the court.
Shortly thereafter, Cottini filed a motion asking the court to award him
$148,254 in attorney's fees incurred for Vallentine's work in assisting himin responding
2
The objections were filed jointly by both John and Olena Berggren, as were
all their subsequent briefs and arguments both before the superior court and on appeal.
Because of their common claims, and for ease of reference, we refer to the Berggrens
collectively as "Berggren."
-3- 7250
----------------------- Page 4-----------------------
to Berggren's objections and in defending against Berggren's counterclaims. Cottini
argued that as the appointed agent he was required to prepare an accounting of his
actions, expenditures, and fees and that he was entitled to full payment of the attorney's
fees he incurred in successfully defending the accounting under the power of attorney
3 which outlines a statutory agent's authority to
statute, specifically AS 13.26.665(m)(4),
hire and compensate attorneys. Cottini also contended that attorney's fees were
warranted because Berggren had objected to the accounting in bad faith, and defending
the accounting was necessary to make Cottini whole for his time and financial
expenditures and to ensure third parties would not go unpaid. Berggren opposed the
motion for attorney's fees, arguing that AS 13.26.665(m) did not apply because the legal
services at issue benefited Cottini, not Berggren; that while the objections to Cottini's
accounting were ultimately withdrawn, those objections were reasonable; and that the
attorney's fees Cottini incurred were unreasonable. Berggren also argued that any
request for legal fees should have been made under the fee-shifting provisions of Alaska
Civil Rule 82.
The superior court denied Cottini's motion for attorney's fees. The court
held that AS 13.26.665(m)(4) did not apply to the fee request because the statute allows
reimbursement only for attorney's fees incurred for services to the principal that the
agent reasonably believes are desirable for the proper execution of the agent's powers.
The court, citing Vallentine's limited entry of appearance for the sole purpose of
representing Cottini with regard to Berggren's objections, concluded that none of the
attorney representation with respect to Berggren's objections fell within that statutory
framework. The court also concluded that Alaska Civil Rule 82 has been displaced by
3
FormerlyAS13.26.344(m)(4), renumbered asAS13.26.665(m)(4) in 2016
SLA.
-4- 7250
----------------------- Page 5-----------------------
4
AS 13.26.291(d) as the governing rule for fee-shiftingin any guardianship case, and that
this statute required Berggren to pay for Cottini's attorney's fees only if adversary
proceedings were initiated maliciously, frivolously, or without just cause. The court
found that Berggren had not acted in such a manner when objecting to Cottini's
accounting and that Cottini therefore was not entitled to attorney's fees. The court
denied Cottini's motion and did not rule on any of Berggren's fact-based claims that
some of the fees were excessive or unreasonable.
Cottini appeals the single question whether he is entitled to reimbursement
for reasonable attorney's fees incurred in defending his actions and expenditures as
Berggren's agent and in defending his requested fees.
III. STANDARD OF REVIEW
"[W]e independently review 'whether the trial court properly applied the
5
law when awarding attorney's fees.' "
"Determinations of which legal authorities apply
in a case and interpretations of what those legal authorities mean are questions of law
6
subject to de novo review." When determining the meaning of a statute, we "look to the
meaning of the language, the legislative history, and the purpose of the statute," and
7
"adopt the rule of law that is most persuasive in light of precedent, reason, and policy."
4
Formerly AS 13.26.131(d), renumbered as AS 13.26.291(d) in 2016 SLA.
5
State, Office of Pub. Advocacy v. Estate of Jean R. , 371 P.3d 614, 618
(Alaska 2016) (quoting Baker v. Ryan Air, Inc., 345 P.3d 101, 106 (Alaska 2015)).
6 ConocoPhillips Alaska, Inc. v. Williams Alaska Petroleum, Inc., 322 P.3d
114, 122 (Alaska 2014) (footnotes omitted).
7 Marshall v. First Nat'l Bank Alaska, 97 P.3d 830, 834 (Alaska 2004)
(quoting Enders v. Parker, 66 P.3d 11, 13-14 (Alaska 2003)).
-5- 7250
----------------------- Page 6-----------------------
IV. DISCUSSION
Cottini argues that the superior court erred in relying on AS 13.26.291 to
deny his attorney's fees request because the statute's cost-shifting provisions refer to
petitioners and respondents in a guardianship proceeding, and Cottini was neither. He
also argues that AS 13.26.665(m) contains specific provisions that govern an agent's
ability to hire attorneys, and that this statute therefore displaces Alaska Civil Rule 82's
familiar fee-shifting provisions and entitles him to reasonable attorney's fees incurred
in successfully defending against the challenges to his accounting because the defense
also benefited Berggren. Finally, Cottini points to case law and treatises from analogous
contexts, public policy concerns, and our decision in Marshall v. First National Bank
8 all of which he argues support his construction of AS 13.26.665(m), or
Alaska ,
alternatively support an award of attorney's fees on either common law or equitable
grounds.
We conclude that AS 13.26.291, which applies in guardianship contexts,
is inapplicable to the attorney's fees dispute here because this dispute is between an
agent appointed under the statutory form power of attorney and his principal, not a
respondent contesting a guardianship petition brought in bad faith. We also conclude
that AS 13.26.665(m), while not inconsistent with the conclusion that an agent is entitled
to attorney's fees incurred in a successful defense of his accounting, does not provide a
controlling rule of decision. However, we hold that under the substantive common law
of agency and as a matter of equity, an agent may be entitled to attorney's fees incurred
in successfully defending his actions, expenditures, and fees, depending on a set of
factors outlined in this opinion.
8
Id.
-6- 7250
----------------------- Page 7-----------------------
A. Alaska Statute 13.26.291 Does Not Govern Cottini's Motion For
Attorney's Fees.
Alaska Statute 13.26.291 provides, in relevant part:
(a) Subject to (d) of this section, the state shall bear
the costs of the visitor and expert appointed under
AS 13.26.226(c).
(b) Subject to . . . (d) of this section, the respondent
shall bear the costs of the attorney appointed under
AS 13.26.226(b) . . . and of other court and guardianship
costs incurred under this chapter.
. . . .
(d) The court may require the petitioner to pay all
or some of the costs described in (a) and (b) of this section if
the court finds that the petitioner initiated a proceeding under
this chapter that was malicious, frivolous, or without just
cause.
As we recently explained in In re Vernon H. , "Alaska Statutes 13.26.[291](a) and (b)
allocate certain categories of costs in guardianship proceedings to the state, respondent,
9 Alaska Statute 13.26.291(d), in turn, "enables the court to shift those
and petitioner."
costs to the petitioner '. . . if the court finds that the petitioner initiated a proceeding
under this chapter that was malicious, frivolous, or without just cause.' "10 We also held
that "fees of privately retained counsel and experts qualify for fee shifting pursuant to
AS 13.26.[291](d) if the other requirements of that subsection are also satisfied,"11 and
9
332 P.3d 565, 572 (Alaska 2014).
10
Id. (quoting former AS 13.26.131(d)).
11
Id. at 573.
-7- 7250
----------------------- Page 8-----------------------
that AS 13.26.291(d) therefore "entirely displaces Civil Rule 82" and "forecloses any
12
role for Civil Rule 82 in the guardianship and conservatorship context."
The superior court concluded that AS 13.26.291(d) was the applicable
standard for determining which party was responsible for the attorney's fees in this case,
relying on our ruling in In re Vernon H. Berggren argues that AS 13.26.291 governs
because the case now before us was initiated by a guardianship petition, Cottini was an
activeparticipant in the guardianship case, and Cottini filed hismotionfor attorney's fees
in the guardianship case. Berggren also argues that Cottini's fees request falls within the
statute's provisions because of our holding in In re Vernon H. that fees of privately
retained counsel are covered by AS 13.26.291, and because, as Berggren puts it,
subsection (b) of that statute "provides for the bearing of costs for 'other court and
13 We disagree.
guardianship costs incurred under this chapter.' "
Our explanation in In re Vernon H. of how AS 13.26.291 operates makes
clear that this statute is inapplicable to this attorney's fees dispute. As we explained,
"Alaska Statutes 13.26.[291](a) and (b) allocate certain categories of costs in
guardianship proceedings to the state, respondent, and petitioner."14 And "Alaska
Statute 13.26.[291](d) enables the court to shift those costs to the petitioner '. . . if the
court finds that the petitioner initiated a proceeding under this chapter that was
malicious, frivolous, or without just cause.' "15 Cottini is not a respondent seeking fees
from a petitioner who initiated a guardianship proceeding, maliciously or otherwise. He
is an agent appointed under a statutory form power of attorney seeking reimbursement
12
Id. at 577.
13
AS 13.26.291(b).
14
In re Vernon H., 332 P.3d at 572 (emphasis added).
15
Id. (emphasis added) (quoting former AS 13.26.131(d)).
-8- 7250
----------------------- Page 9-----------------------
from his principal for the cost of defending his actions, expenditures, and fees. Although
Cottini requested attorney's fees for privately retained counsel, and In re Vernon H. held
that fees of privately retained counsel are covered by AS 13.26.291(d), that holding was
16
made in the context of a respondent who was opposing a guardianship petition.
Reading In re Vernon H. to include the attorney's fees sought in this principal-agent case
would require ignoring the plain language of AS 13.26.291. Unlike with private
attorney's fees sought by a respondent in a guardianship case, there is no textual basis
for applying AS 13.26.291 to an agent seeking reimbursement from his principal for
attorney's fees incurred in defending his accounting.
The superior court's factual analysis also illustrates the statute's
incompatibility with this case. The court's analysis was not focused on whether Olena
Berggren's initialdecision to initiateaguardianshipproceedingwas frivolous,malicious,
or without cause, as AS 13.26.291 directs.17 Instead, it analyzed the opposition to
Cottini's accounting, implicitly recognizing that the real underlying matter at issue was
not the guardianship petition, but rather the dispute over whether Cottini had acted
properly as an agent and was entitled to the agent's fees he requested. It is entirely
coincidental that Cottini's request arose within the context of a guardianship proceeding,
and we conclude that AS 13.26.291 does not provide the applicable rule of decision in
this dispute.
16
Id. at 577.
17
AS 13.26.291(d) ("The court may require the petitioner to pay all or some
of the costs described in (a) and (b) of this section if the court finds that the petitioner
initiated a proceeding under this chapter that was malicious, frivolous, or without just
cause.").
-9- 7250
----------------------- Page 10-----------------------
B. Alaska Statute 13.26.665(m) Does Not Apply To This Dispute But Is
Not Inconsistent With Awarding Cottini Attorney's Fees.
Alaska Statute 13.26.665 provides rules of construction for the statutory
power of attorney form set out in AS 13.26.645. Berggren used the statutory form.
Alaska Statute 13.26.665(m) provides in relevant part:
In a statutory form power of attorney, the language
conferring general authority with respect to records, reports,
and statements shall be construed to mean that, with respect
to a record, report, or statement concerning the affairs of the
principal, . . . the principal authorizes the agent to
(1) keep records of cash received and disbursed for
or on account of the principal, of all credits and debits to the
account of the principal, and of all transactions affecting the
assets and liabilities of the principal;
. . . .
(4) hire, discharge, or compensate an attorney,
accountant, or assistant when the agent reasonably believes
the action to be desirable for the proper execution of the
powers described in this subsection; and
(5) do any other act or acts that the principal can do
through an agent in connection with the preparation,
execution, filing, storage, or other use of any records, reports,
or statements of or concerning the principal's affairs.
Cottini asserts on appeal that just as AS 13.26.291 removed the fee-shifting
dispute in the guardianship case at issue in In re Vernon H. from the scope of Rule 82,
AS 13.26.665(m) does the same in this case. This is so, he argues, because AS
13.26.665(m)(4) "expressly governs the ability of an agent to retain an attorney to assist
him regarding reports concerning the affairs of the principal" and because Rule 82
applies only when an alternate fee-shifting framework is not "otherwise provided by
-10- 7250
----------------------- Page 11-----------------------
law." Accordingly, he argues that we should hold that AS 13.26.665 displaces Rule 82
when an agent seeks to recover attorney's fees from his principal.
More specifically, Cottini argues that subsection (m)(1) authorized him to
prepare an accounting of his handling of Berggren's affairs and subsection (m)(4)
explicitly authorized Cottini toretain andcompensatean attorneyusingBerggren's funds
when he reasonably believed this was desirable for the proper execution of his power as
Berggren's agent to prepare and submit an accurate accounting. Berggren appears to
agree, conceding that Shaftel was entitled to compensation from Berggren for preparing
the accounting. But Cottini argues further that under AS 13.26.665(m)(4) and (5), he is
also entitled to be reimbursed for retaining Vallentine to assist him in defending the
accounting.
Berggren responds that AS 13.26.665(m) does not entitle Cottini to
attorney's fees incurred in defending theaccounting because only Shaftel, as the attorney
who prepared the accounting, was hired pursuant to Cottini's authority as an agent under
the power of attorney and AS 13.26.665(m)(1) and (4). Therefore, Berggren argues,
although Cottini would be entitled to reimbursement for Shaftel's fees, he would not be
entitled to reimbursement for Vallentine's.
The statute does not help resolve this issue, for several reasons. First, the
dispute hinges on whether retaining Vallentine to assist with responding to Berggren's
objections to Cottini's accounting was within the scope of Cottini's powers as
Berggren's agent. Cottini certainly had the power to "keep records of cash received and
disbursed for or on account of the principal, of all credits and debits to the account of the
principal, and of all transactions affecting the assets and liabilities of the principal," as
well as to "hire [and] compensate an attorney . . . when [he] reasonably believe[d] the
-11- 7250
----------------------- Page 12-----------------------
18
action to be desirable for the proper execution of [this power]." But the proper
preparation of an agent's accounting is distinct from the defense of that accounting when
challenged by the principal, and the latter does not clearly fall within the scope of the
statute.
Second, even assuming that retaining Vallentine was within the scope of
Cottini'sauthority as agent, AS 13.26.665 contains no provisions actually relating tofee-
shifting or reimbursement. The statute instructs courts on how to construe the powers
19 Where the statutory form
of an agent outlined in the statutory form power of attorney.
is used to appoint an agent, the statute ensures that the agent has the authority to hire and
compensate an attorney on the principal's behalf while acting as agent.20 But the statute
contains no provisions obliging the principal to reimburse a former agent even for
21 That is not to say that the principal has no such
indisputably appropriate expenditures.
obligation, just that one does not arise from AS 13.26.665.
Therefore, while the text of AS 13.26.665 says nothing to suggest Cottini
is not entitled to reimbursement for attorney's fees incurred in the successful defense of
18
AS 13.26.665(m)(1), (4).
19
Every subsection of AS 13.26.665 begins with the language "In a statutory
form power of attorney, the language conferring general authority with respect to . . . [a
specific topic] . . . shall be construed to mean that . . . the principal authorizes the agent
to . . . ," followed by a list of more specific powers falling within the topic addressed.
20 AS 13.26.665(m)(4).
21 A number of provisions in the statute allow agents to reimburse themselves
"for an expenditure properly made in the execution of the [agent's] powers." E.g.,
AS 13.26.665(a)(6), (b)(5), (c)(7). But none of these provisions relate to a principal
reimbursing a former agent for such expenditures after the end of the agency
relationship.
-12- 7250
----------------------- Page 13-----------------------
his accounting, these fees do not clearly fall within its scope, and the statute by itself
does not require that Berggren reimburse Cottini for them.
C. Under The Common Law Of Agency, An Agent Is Entitled To
Reasonable Attorney's Fees Incurred In Successfully Defending His
Accounting If That Defense Benefited The Principal.
A power of attorney, such as the statutory form Berggren executed, is a
legal instrument granting authority to an agent to act on behalf of the principal who
22
executed it.
Berggren's power of attorney established a fiduciary principal-agent
relationship between Berggren and Cottini and created duties between them. This
relationship is subject tobothlegislativeenactments, likeAS13.26.665,andthecommon
law of agency as interpreted and promulgated by this court. And in a common law
agency relationship, unless the parties agree otherwise, the principal has a duty to
23
indemnify the agent for expenditures that were beneficial to the principal. Under this
rule, the relevant question is whether the attorney's fees Cottini seeks to collect were
incurred for services that benefited Berggren.
Berggren argues that after the superior court terminated the agency
relationship, Cottini and Berggren were adverse parties, and that because Vallentine
represented Cottini individually, the services Vallentine provided benefited Cottini, not
Berggren. In short, Berggren contends that there is a "principled difference" between
22
Power of Attorney , B LACK 'S LAW DICTIONARY (10th ed. 2014).
23
RESTATEMENT (THIRD) OF AGENCY § 8.14 (A M. L AW INST . 2006) ("A
principal has a duty to indemnify an agent (1) in accordance with the terms of any
contract between them; and (2) unless otherwise agreed, (a) when the agent makes a
payment (i) within the scope of the agent's actual authority, or (ii) that is beneficial to
the principal, unless the agent acts officiously in making the payment; or (b) when the
agent suffers a loss that fairly should be borne by the principal in light of their
relationship.").
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----------------------- Page 14-----------------------
Cottini's "unquestioned right to pay Shaftel to assist in agency affairs" and Cottini's
"individual defense" through Vallentine against Berggren's objections. Berggren points
to several out-of-statecases, largely fromtheestateadministrationcontext, that heargues
give dispositive weight to the distinction between an attorney representing an agent
individually and one representing the agent in a fiduciary capacity, with reimbursement
for attorney's fees being required only for the latter. But in each of these cases, the
dispositive question the court addressed was whether the services in question were
actually rendered for the benefit of the estate. 24
And either way, the distinction in this case between Vallentine's and
Shaftel's services was largely cosmetic. Although Vallentine and Shaftel repeatedly
identified themselves to the superior court as respectively representing Cottini
individually and in his capacity as agent, the two attorneys consistently cosigned filings
and worked together. At one point, Shaftel even filed a notice of non-participation in a
scheduled hearing in which he informed the court that he had conferred with Vallentine
and that she would convey to the court Cottini's position in his capacity as Berggren's
former agent. Thus, despite their representations, it is clear that Vallentine's
representation covered Cottini both individually and in his capacity as agent. We are not
24
See, e.g. , In re Estate of Raphael , 274 P.2d 880, 883-84 (Cal. App. 1954)
(denying attorney's fees for legal services where the court found "no theory upon which
the estate could be benefitted by the administrator's action" but allowing attorney's fees
for defending against challenges to the administrator's accounting); In re Estate of
Painter, 671 P.2d 1331, 1334 (Colo. App. 1983) ("[F]ees collectable under [the relevant
statute] must necessarily be related to services rendered to benefit the estate."); Estate
of Breeden v. Gelfond, 87 P.3d 167, 170-71 (Colo. App. 2003) (applying Painter 's
"benefit rule" to conclude that an estate representative who was sued for work he
performed in that capacity, and whose work benefited the estate, was "entitled to
necessary expenses, disbursements, and reasonable attorney fees incurred in defending
this action").
-14- 7250
----------------------- Page 15-----------------------
convinced that resolution of the question whether Vallentine's services benefited
Berggren should depend on how Vallentine nominally characterized her representation
of Cottini. Rather, the correct analysis is whether the representation actually afforded
some benefit to Berggren.
To answer that question, Cottini directs us to several cases from the trustee
context. He argues that those cases indicate by analogy that as an agent - who like a
trustee is a fiduciary - he should be entitled to attorney's fees from his principal when
those fees were incurred in defending his work as an agent. For example, in Saulsbury
v. Denton National Bank , a Maryland case, the life tenants of a trust petitioned the court
to remove the trustee and surcharge him for alleged malfeasance, but they later moved
25 The court awarded
to dismiss their claims without prejudice when one of them fell ill.
26 The petitioners
attorney's fees to the trustee, to be charged against the trust's assets.
argued on appeal that "where the defendant-trustee is not directly preserving the assets
of the trust but is rather fighting a legal battle to preserve his own status as trustee, he is
27 The Maryland Court of
acting not on behalf of the trust but on behalf of himself."
Special Appeals acknowledged "a certain surface logic in the proposition" but held that
"a successful defense by a trustee against an effort to remove him as trustee is a defense
on behalf of the trust estate itself."28 The court quoted from a treatise to explain its
rationale:
[T]rustees have no beneficial interest in the trust property.
They hold it for the accommodation and benefit of others. If
25
335 A.2d 199, 199-200 (Md. Spec. App. 1975).
26
Id. at 200.
27
Id. at 201.
28
Id.
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----------------------- Page 16-----------------------
they perform their duties faithfully, and are guilty of no
unjust, improper, or oppressive conduct, they ought not in
justice and good conscience to be put to any expense out of
their own moneys. If, therefore, they are brought before the
court without blame on their part, they should be reimbursed
all the expenses that they incur, and allowed their costs as
between solicitor and client. [29]
The court also noted opinions on the subject from Judge Benjamin Cardozo30 and Judge
Learned Hand,31 both supporting the proposition that a trustee is entitled to
reimbursement from the trust for attorney's fees incurred in successfully defending
against surcharge and removal.
Similarly, in Hollaway v. Edwards, a California case, a trust beneficiary
petitioned for removal of the trustee and alleged breach of fiduciary duties.32 The court
found no wrongdoing and denied the petition, allowing the trustee to recover attorney's
fees from the trust.33 The California Court of Appeal affirmed and explicitly rejected the
29
Id. (quoting 2 JAIRUS WARE PERRY, A T REATISE ON THE LAW OF TRUSTS
TRUSTEES § 894 (7th ed. 1929)).
AND
30
Id. at 201-02 ("The question remains whether the services were beneficial
in the preservation of the trust. We have no doubt that they were. . . . [The trustee] owed
a duty to the estate to stand his ground against unjust attack. He resisted an attempt to
wrest the administration of the trust from one selected by the testator and to place it in
strange hands." (quoting Jessup v. Smith , 119 N.E. 403, 404 (N.Y. 1918) (Cardozo, J.))).
31 Id. at 202 ("To compel [the trustee] to bear the expense of an unsuccessful
attack would be to diminish the compensation to which he is entitled and which was a
part of the inducement to his acceptance of the burden of his duties. This has been
uniformly the ruling, so far as we have found." (quoting Weidlich v. Comley, 267 F.2d
133, 134 (2d Cir. 1959) (Learned Hand, J.))).
32 80 Cal. Rptr. 2d 166, 168 (Cal. App. 1998).
33 Id.
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----------------------- Page 17-----------------------
argument that the trustee should not be entitled to attorney's fees because they were
34
incurred to serve her own interests.
The appellate court reasoned that "[w]hile defense
against those allegations may have benefited [the trustee] personally by eliminating the
possibility of individual liability, [it] also benefited the trust by eliminating charges
raising serious questions about whether she had and could continue to administer the
35
trust properly."
Berggren raises a number of arguments against following the examples of
these cases. First, Berggren contends that we considered and rejected this line of
36 But in that
reasoning in the trustee context in Marshall v. First National Bank Alaska .
case, we only refused to hold as a matter of law that the trustee was entitled to attorney's
fees for defending his actions; we recognized that a trustee may be entitled to attorney's
37 an approach we discuss in further detail below.
fees on a case-by-case basis,
Second, Berggren contends that we rejected this "benefit theory" in Enders
38 We did not. In that case we considered AS 13.16.435, which governs
v. Parker.
39 We concluded that, based on the
recovery of expenses incurred in estate litigation.
statute's plain language,40 it does not impose a requirement that such litigation benefit
34
Id. at 170.
35
Id.
36
97 P.3d 830 (Alaska 2004).
37
See id. at 842-43.
38
66 P.3d 11 (Alaska 2003).
39
Id. at 14-15.
40
AS 13.16.435 provides in full: "If any personal representative or person
nominated as personal representative defends or prosecutes any proceeding in good faith,
(continued...)
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the estate; rather, the statute allows the personal representative of an estate to recover
attorney's fees for any proceeding or defense brought in good faith on behalf of the
estate. No equivalent statute applies to the case now before us, and common law agency
principles do look to whether an agent's actions benefit the principal.
Third, Berggren also argues that some of the cases Cottini relies on are
distinguishable as based on statutes that explicitly provide for shifting of attorney's fees.
But this does not undermine their relevance. The policies animating similar statutes and
the principles courts rely on to interpret those statutes are relevant to deciding the issue
before us.
Fourth, Berggren argues thatweshoulddisregard casesbased on successful
defenses, asserting that Cottini did not successfully defend his actions because he settled
the claims challenging his accounting and actions as agent. This argument is
unpersuasive given that all of Berggren's objections to Cottini's accounting were
withdrawn, Berggren's counterclaims were dismissed with prejudice, and Berggren
ultimately agreed to pay almost all of the agency fees and expenditures Cottini requested.
Although it is theoretically possible that a trial might have revealed that Cottini acted
improperly as Berggren's agent or that Cottini's accounting was inaccurate, Berggren
chose to settle. He cannot now argue that Cottini has not successfully defended his
accounting.41
40
(...continued)
whether successful or not, that person is entitled to receive from the estate necessary
expenses and disbursements including reasonable attorney fees incurred."
41 Cf. Saulsbury v. Denton Nat'l Bank, 335 A.2d 199, 203 (Md. Spec. App.
1975) ("[Appellants'] effort to shift the burden to the defendant-trustee to establish that
its defense would have been bona fide had the issue reached a trial upon the merits, after
they themselves aborted the trial, is an intolerable instance of wishing 'to have their cake
(continued...)
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Fifth, Berggren asserts that Saulsbury held "that if a trustee is removed he
must pay his own expenses," suggesting without further argument that because Cottini's
role as agent was terminated prior to the dispute over the accounting, Cottini is
responsible for his own attorney's fees. Saulsbury did cite a treatise stating that "if [a
trustee] is removed he must pay his own expenses," but that passage refers to an
42 not broadly to any circumstance where
unsuccessful defense against a removal action,
the litigant no longer serves in a fiduciary capacity, as Berggren seems to suggest.
And sixth, Berggren argues that these cases are distinguishable as fiduciary
removal cases. But those removals were frequently initiated because of some alleged
malfeasance, much like the malfeasance Berggren alleged.43 In any event, they involved
defending a fiduciary's role like the defense at issue here, and the cases are persuasive
by analogy.
A recent treatise indicates that the rule reflected in Saulsbury and Hollaway
has persevered: trustees are generally entitled to recoup attorney's fees incurred in
successfully defending their actions as trustees because the defense benefits the trust.44
41
(...continued)
and eat it too.' ").
42 See id. at 201 (quoting GEORGE GLEASON BOGERT & G EORGE TAYLOR
BOGERT, THE LAW OF TRUSTS AND TRUSTEES § 809 (2d ed. 1960)).
43 See Hollaway v. Edwards, 80 Cal. Rptr. 2d 166, 168 (Cal. App. 1998)
("[Co-trustee and beneficiary] petitioned . . . for [respondent's] removal as cotrustee,
alleging she breached her fiduciary duties . . . ."); Saulsbury, 335 A.2d at 199-200.
44 ALAN NEWMAN ET AL ., T HE LAW OF TRUSTS AND TRUSTEES § 971 (online
ed. 2017) ("Reasonable attorney's fees incurred by the trustee in anticipation of, or in
defending, a claim brought against it by a beneficiary for removal or surcharge alleging
breach of duty generally will be allowed from the trust if the trustee's defense is
successful, but usually will not be allowed if the beneficiary's claimsucceeds." (footnote
(continued...)
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45
Several jurisdictions also apply a similar rule in the estate administration context. By
analogy, an agent, who is also a fiduciary, should also be entitled to attorney's fees
incurred in successfully defending his work as an agent against a challenge by his
principal because his defense benefits the principal.
We recognize that in some ways an agent's relationship to the principal
differs from the relationship between trustee and beneficiary. For example, a trustee is
not appointed by the beneficiary but by the trustor. Consequently, a trustee's defense
against a beneficiary's attempts to remove him or sue him for malfeasance is easier to
characterize as benefiting the trust itself because it is done in the service of ensuring that
46 With a statutory agent, there is no third party or entity
the trustor's intent is effectuated.
on behalf of which the agent can be said to be resisting; there is only the principal.
Notwithstanding this difference, Cottini's analogy to the trust context remains
persuasive. As in Hollaway, Cottini's defense against Berggren's allegations and
objections "may have benefited [Cottini] personally by eliminating the possibility of
individual liability," but it also benefited Berggren by "eliminating charges raising
44
(...continued)
omitted)).
45 See, e.g., In re Estate of Beach, 542 P.2d 994, 1008 (Cal. 1975)
("[E]xpenditures for an executor's or administrator's successful defense against
exceptions to his account are chargeable against the estate."); In re Estate of Browarsky,
263 A.2d 365, 366 (Pa. 1970) ("[I]t would be unjust to require [estate executors]
personally to bear the reasonable costs of the defense of suits brought against themsolely
by reason of their positions as executors. 'It is well established that whenever there is
an unsuccessful attempt by a beneficiary to surcharge a fiduciary the latter is entitled to
an allowance out of the estate to pay for counsel fees and necessary expenditures in
defending himself against the attack.' " (quoting In re Wormley's Estate, 59 A.2d 98, 100
(Pa. 1948))).
46 See Saulsbury, 335 A.2d at 201-02.
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47
serious questions" about whether Cottini had properly fulfilled his duties as an agent.
As Cottini argues, "[a]n accurate accounting of both the expenditures and the agent's
time and a determination that the agent fulfilled his fiduciary duties serve the interests
48
of the principal, even if the defense in the end also benefits the agent."
We conclude that where a former agent retains an attorney and successfully
defends the agent's accounting, the agent may be entitled to reimbursement from the
principal because the defense and the attorney's representation also benefited the
principal. The fact that the attorney may have nominally represented the agent
individually, or that the agent may have received some individual benefit from the
attorney's services, does not preclude such reimbursement. Again, a principal has a duty
to indemnify his agent for payments that benefit him.49
Both Cottini and Berggren advance public policy arguments in support of
their respective positions. Having considered these arguments, we conclude that the rule
outlined above also serves the interests of public policy. Attorney representation
enhances the adversarial process and assists the court in discerning both the truth of a
matter and how the law might apply to it. Holding agents personally responsible for the
cost of successfully defending their accounting could discourage agents from obtaining
the advice of counsel, or even discourage agents from maintaining a good-faith defense
47
See Hollaway , 80 Cal. Rptr. 2d at 170.
48 Alaska law already recognizes that conduct that benefits the individual
agent can also benefit the principal. For example, AS 13.26.327(d) provides that "[a]n
agent [who] acts with care, competence, and diligence for the best interest of the
principal is not liable [for breach of duty] solely because the agent also benefits from the
act or has an individual or conflicting interest in relation to the property or affairs of the
principal."
49 RESTATEMENT (THIRD) OF AGENCY § 8.14(2)(a)(ii) (AM.L AW INST . 2006).
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50
of legitimate actions, expenditures, and fees. We acknowledge that making the
principal pay the cost of an agent's successful defense may similarly discourage a
principal from challenging an agent's accounting. But between these two options, we
believe it is more fair to place the cost on the principal as the party choosing to initiate
51 Furthermore, because the rule we outline here would require
adversary proceedings.
a principal to pay only the cost of legal services that actually benefit the principal, we are
notpersuaded byBerggren'ssuggestion thatthislimitedindemnificationwould foreclose
judicial oversight over unscrupulous agents.
Cottini also argues that a number of equitable factors support his claim. He
asserts that he did not ask to be appointed as Berggren's agent but accepted the surprise
appointment after Berggren's injury, even though it was a substantial time commitment.
Cottini contends that after submitting a detailed accounting he hoped to be done with the
matter, but that Berggren's unreasonable objections and counterclaims led him to retain
an attorney to defend his accounting. When Berggren withdrew the counterclaims and
objections, Cottini observes that everyone was left in the same position as if Berggren
had never opposed the accounting. Cottini argues he should not now be left to foot the
bill for fees he incurred only because of his appointment as Berggren's agent.
50
Contrary to Berggren's suggestion, we did not reject this policy argument
in Marshall v. First National Bank Alaska, 97 P.3d 830 (Alaska 2004). In that case, the
superior court's probate master expressed this possible chilling effect as one of several
grounds for denying a surcharge petition against a trustee. Id. at 838. Our decision
vacated that denial, but we did not reject the substance of the policy arguments. Rather,
we merely directed the superior court to a contrary applicable statutory standard and
remanded for further proceedings. Id. at 838-39, 843.
51 Cf. Saulsbury, 335 A.2d at 201 ("If [trustees] are brought before the court
without blame on their part, they should be reimbursed all the expenses that they incur,
and allowed their costs as between solicitor and client." (quoting PERRY, supra note 31,
at § 894)).
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An agent has a statutory duty to "keep a record of all receipts,
disbursements, and transactions made on behalf of the principal" and to produce that
52 From this obligation, it is a short
accounting on request of the principal or the court.
step to reason that, as a consequence of accepting the appointment, the agent would need
to defend that accounting if challenged. Broadly speaking, we find compelling Cottini's
argument that it would be unfair to force an agent to personally fund the successful
defense of actions that were taken in good faith and only because of having accepted the
appointment as agent.
On the other hand, there are factors in tension with Cottini's narrative.
Cottini was not acting merely as a friend, but sought compensation at a rate of $50 per
hour for his services as agent. Cottini also initially resisted the termination of his agency.
One of Berggren's physicians opined that Cottini was not "using appropriate substituted
judgment consistent with Mr. Berggren's values or wishes," and described the situation
as "completely adversarial." In addition, although Cottini claims that Berggren
unreasonably prolonged litigation, Berggren asserts that Cottini failed to communicate
with Berggren and that the dispute "could have been resolved privately between two
'friends.' "
The court did not consider these factual issues because it denied Cottini's
attorney's fees under AS 13.26.291(d) as a matter of law. These considerations may be
relevant to the court's inquiry under the approach we outline in the next section, but we
highlight here the more general point that agents who are "brought before the court
without blame on their part,"53 who are forced to defend their accounting by virtue of
52
AS 13.26.610(b)(4), (h).
53 Saulsbury, 335 A.2d at 201 (quoting PERRY, supra note 31, at § 894).
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accepting the appointment as agent, and who succeed in that defense, should not
therefore be obligated to fund their litigation costs out of pocket.
D. On Remand, The Superior Court Must Determine Whether Cottini Is
Entitled To Attorney's Fees Through An Approach Modeled On
Marshall v. First National Bank Alaska .
Both parties spend a considerable portion of their briefing discussing how
our decision in Marshall v. First National Bank Alaska supports their respective
positions. That case addressed attorney's fees related to the substitution of a trustee, not
a challenge to an agent's performance and accounting. Its holding therefore does not
directly govern this case, but it nonetheless provides valuable guidance for resolving the
issue at hand. In Marshall, the beneficiary of a trust successfully petitioned to have the
54 The trustee incurred attorney's fees in litigating the dispute and
trustee substituted.
charged themto the trust; the beneficiary, in a surcharge petition, asked the court to order
the trustee to repay the trust.55 The superior court denied the request, reasoning that the
trustee had not acted in bad faith, that no statute authorized such a request, and that
forcing the trustee to repay the trust would have a chilling effect on future trustees who
might disagree with a trust beneficiary.56
We explained that because there was a statute that authorized a surcharge
petition if the trustee's fees were excessive or unreasonable it was legal error to deny the
petition for the reasons discussed by the superior court.57 We then explained that
compensation could be unreasonable either because the fees themselves were
54
Marshall, 97 P.3d at 833-34.
55
Id. at 834.
56
Id.
57
Id. at 838; see AS 13.36.055.
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unreasonable or because the services for which the fees were charged were
58
unreasonable.
To inform this analysis, we looked to the trust document, applicable
statutes, and common law principles.
Thetrust document authorized thetrusteetoemployattorneysandpay them
59 But, noting that "[a]
reasonable compensation, as well as to join in or defend litigation.
trustee is a fiduciary of the highest order,"60 we expressed doubt as to whether the
trustee's prolonged opposition to the beneficiary's request to change trustees was
consistent with the statutes or the trust document.61 We ultimately refused to rule as a
matter of law whether the trustee had to repay the disputed fees.62 Instead, we remanded
to the superior court to determine whether the trustee was entitled to attorney's fees in
light of several factors, including:
the total amount of the fees, the size of the trust relative to the
amount of the fees, the merits of the parties' arguments on the
substitution dispute, the extent to which the opposition [was]
based on the beneficiary's best interests in accordance with
the trust document and the Alaska Statutes, and the duration,
extent, and expense of the trustee's opposition.[63]
Cottini argues we should consider Marshall persuasive authority
establishing the right of an agent to recover attorney's fees incurred in successfully
defending the agent's own role. Berggren urges us to reject Cottini's claim for fees
58
Marshall, 97 P.3d at 839.
59
Id. at 840.
60
Id. at 839.
61 Id. at 841-42.
62
Id. at 842-43.
63 Id. at 842-43.
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because, he asserts, we rejected a similar claim by the fiduciary in Marshall . He
emphasizes that in Marshall we concluded that a trustee's good faith opposition to
substitution does not foreclose forcing the fiduciary to pay attorney's fees spent in
defending against substitution. Both parties ask too much of Marshall. While our
opinion in Marshall is persuasive, it does not establish as a matter of law a trustee's right
to recover attorney's fees incurred in defending an attempt to replace him, only that he
may recover such fees if they are determined to be reasonable. And while we did not
grant the trustee's claim regarding fees in Marshall, we also did not reject it, but
remanded for further consideration in light of the factors we identified as potentially
relevant.
We believe a similar approach in this analogous context is appropriate,
given the similarity of the relevant common law principles and fiduciary duties.
Consequently, we remand for the superior court to determine whether Cottini is entitled
to attorney's fees incurred in successfully defending his accounting of his actions,
expenditures, and fees in light of the factors we discuss here. The superior court should
consider the statutory form power of attorney, other relevant documents, the common
law of agency, and factors such as the total amount of the attorney's fees, the amount of
the assets managed relative to the amount of the attorney's fees, the merits of the parties'
arguments in the underlying dispute, the extent to which the defense was based on the
best interests of the principal in accordance with the power of attorney document and
relevant Alaska Statutes, as well as the duration, extent, and expense of the agent's
defense.64
64
See id.
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On the facts in Marshall, we refused to rule as a matter of law that the
65
trustee was entitled to attorney's fees.
We observed that some of the trustee's
opposition to the substitution was likely illegitimate, failed to give proper weight to the
66 In addition, the trustee
beneficiary's wishes, and was based on irrelevant factors.
fought substitutionin prolongedlitigation that wasultimatelyunsuccessful.67 In contrast,
Cottini litigated to ensure that he was paid for his time and costs already expended on
behalf of his principal in response to Berggren's objections. Virtually all objections to
his accounting were withdrawn. Berggren's counterclaims were dismissed with
prejudice, and Berggren ultimately agreed to pay most of the fees and expenditures
Cottini requested. The attorney's fees were relatively small in comparison to the assets
Cottini was managing. And basic agency law requires that "when the agent makes a
payment . . . that is beneficial to the principal . . . or . . . suffers a loss that fairly should
be borne by the principal in light of their relationship" the agent must be indemnified.68
Because the superior court is more familiar with the dispute at hand,
including equitable factors such as thosediscussed above, and because it did not consider
these factors in its decision denying Cottini's fee request, we remand so the court can
consider and apply the factors we have identified, as well as other factors the parties or
the court may identify on remand. We emphasize that although the requested attorney's
fees were more than double the agent's fees Cottini charged, the ratio between the
65
See id. at 842.
66
Id. ("The probate master's report recommending substitution implicitly
recognizes the frailty of [the trustee's] opposition.").
67 Id. at 841 ("We leave it to the court on remand to consider whether
prolonged opposition to a request to change trustees was consistent with the statutes or
the trust document.").
68 RESTATEMENT (THIRD) OF AGENCY § 8.14(2) (A M. L AW INST . 2006).
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amount of Cottini's agent's fees and the amount of the attorney's fees incurred to defend
them is not among the factors to be considered in determining whether Cottini is entitled
to reasonable attorney's fees, considering that Cottini was also defending against
allegations of breach of fiduciary duty and mismanagement of a multi-million dollar
estate.69
Finally, we hold that where an agent successfully defends against a
challenge from his principal and is entitled to reimbursement for the attorney's fees
incurred, the agent is not also entitled to an award of attorney's fees under Alaska Civil
Rule 82. This is because the framework we have outlined here constitutes a fee-shifting
framework that is "otherwise provided by law," thus displacing Rule 82 in this context.
We are not presented with the question whether a principal who successfully challenges
the agent's accounting might be eligible for a Rule 82 award, and so we do not address
it.
V. CONCLUSION
WeREVERSE thecourt's decision denying Cottini'smotion for attorney's
fees and REMAND for further proceedings consistent with this opinion.
69
See In re Estate of Johnson , 119 P.3d 425, 434 (Alaska 2005) ("[A]nother
factor that a trial court may consider when determining the reasonableness of fees in the
estate context is the size of the estate.").
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