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Court Discusses Case Where Second Wife Left Out of Will

 

This was a proceeding brought before the Surrogate’s Court, Suffolk County, for the accounting of AFS, as administrator c.t.a. of the estate of WPS. A stipulation was submitted to the court for its approval and incorporation into the provisions of an intermediate accounting decree. Jurisdiction has been obtained over the necessary parties to the proceeding, and no one appeared in opposition to the relief requested by the petitioner.

On 17 March 1980, the decedent died testate, and was survived by his spouse and an infant daughter, born of the marriage between himself and his former wife, who also survived him.

In the decedent’s last will and testament dated 6 December 1972, he devised and bequeathed his real and personal property, together with the maximum amount allowable as a marital deduction under federal law, to his former spouse, and disposed of the rest, residue and remainder of his estate, in trust, for the benefit of his former spouse during her lifetime; upon the death of his said spouse, the decedent he directed that the principal of the trust estate continue to be held, in trust, for the benefit of his daughter, until she attained the age of 30, at which time, it was to be transferred and paid over to her, outright, if then living, or if not then living, to her then living issue, or if none, to a named charity.

The decedent, in his will, made no provision for his second wife. Thus, his daughter became the sole beneficiary of his estate, by virtue of his divorce from his former spouse on 19 October 1979.

On 8 July 1980, the decedent’s former spouse filed a petition with the court requesting for the probate of the decedent’s last will and testament, and the issuance to her of letters of administration c.t.a. as guardian of her infant daughter’s property.

The decedent’s surviving spouse objected.

The objections of the decedent’s surviving spouse were dismissed by the court in the context of a motion for summary judgment made by the guardian ad litem appointed to represent the interests of the infant in the proceeding. Thus, on 24 November 1980, letters of administration c.t.a. were issued to the decedent’s former spouse, upon her posting of a bond in the sum of $20,000.00.

At around three months later, the decedent’s surviving spouse served and filed a notice of election against the decedent’s estate, and, simultaneously therewith, a discovery proceeding was commenced by the fiduciary against the decedent’s spouse.

The discovery proceeding was subsequently discontinued with prejudice.

Two years later, the decedent’s surviving spouse filed a petition to compel an accounting seeking, inter alia, a determination of her elective share against the decedent’s estate.

Initially, the application was contested by the fiduciary, but ultimately, the parties resolved their differences. The proceeding was withdrawn in accordance with the terms of a stipulation of settlement requiring the fiduciary to file her account with the court within six months from the date thereof.

On 5 June 1985, the fiduciary filed the instant accounting proceeding with the court requesting, inter alia, the following: judicial allowance and/or rejection of various claims filed against the estate; approval of a pro rata payment of those claims which were allowed; fixation of counsel fees in a stated amount; and, authorization to pay administrator’s commissions in the sum of $6,634.03.

The petitioner’s account showed that, in support of the first two items of relief requested, multiple claims existed against the decedent’s estate at death, which far exceeded the total gross value of its assets, presently estimated in Schedule A thereof to be worth $305,000. In particular, Schedule D of the account reflected that the decedent had secured debts totaling $118,440, miscellaneous debts, rejected in whole or in part, of approximately $159,000, and contingent debts of at least $4.75 million, the most significant of which was attributable to a cause of action against the estate for wrongful death.

On the return date of the citation, four creditors appeared in the proceeding with estimated claims of $4.9 million.

Subsequently, the court said a stipulation was filed with the court providing, inter alia, for the payment of counsel fees in the sum of $70,000, and the settlement and satisfaction of the various debts of the estate in specified pro rata amounts. The terms thereof were then incorporated into the schedules of the petitioner’s account, which was amended by order of the court dated 24 March 1986, on notice to all interested parties to the proceeding. Consequently, the petitioner’s only request for relief became the judicial settlement of her intermediate account, subject to the court’s ratification of the propriety of the stipulation and its terms. Incidentally, paragraph 11 of the said stipulation specifically stated as follows: “It is agreed that this stipulation will be filed in the Surrogate’s Court of the County of Suffolk along with a decree incorporating its provisions by reference; if the said Surrogate’s Court declines to grant such a decree, or otherwise disapproves this stipulation or any portion hereof, the same shall be of no further force or effect, and the undersigned, or any of them, shall be entitled to take such further proceedings and file such further papers with respect to the within proceeding as they may deem appropriate.”

Based on the record, all parties who have appeared in the proceeding are adult and competent and have consented to and signed the agreement, and those parties who have not appeared in the proceeding have been duly notified of the settlement and have not appeared in opposition to the relief requested.

Nonetheless, despite the absence of objections, and/or the written consents of the persons interested in the proceeding, this court refused to sanction any portion of the stipulation submitted which sought to circumscribe its power and duty to pass upon or review any one or more of its provisions which lie within the scope of its statutory and inherent jurisdiction. More specifically, the court addressed itself to that paragraph of the stipulation which conditions its enforcement and binding effect upon its receiving judicial approval. This kind of all or nothing proposition will leave the court little recourse but to rubber stamp the stipulation regardless of its terms, or disapprove of it in its entirety. Either alternative is but an act of blind justice which the court cannot and will not allow. The court will not place its imprimatur upon any document before it without scrutiny. Thus, in this light, the court reviewed the stipulation.

As a rule, a settlement may embrace and be binding upon the court only as to those matters that are within the power of the parties to resolve without prior judicial approval. As to those matters that exceed this limitation, a settlement constitutes nothing more than a recommendation to the court as to the manner in which the parties desire to resolve their differences.

Indeed, the law, EPTL § 11-1.1(b)(13), is clear as to the authority of a fiduciary to compromise or otherwise settle a claim against an estate. However, it is also equally clear as to the authority of the court to fix and determine legal fees. Such authority has, indeed, long been recognized as within the court’s inherent and statutory power to regulate the practice of law. This is evident in the court’s rulings in the cases of Gair v. Peck, 6 N.Y.2d 97, 188 N.Y.S.2d 491, 160 N.E.2d 43 (1959); First National Bank of East Islip v. Brower, 42 N.Y.2d 471, 398 N.Y.S.2d 875, 368 N.E.2d 1240 (1977); and, Avco Financial Services Trust v. Bentley, 116 Misc.2d 34, 455 N.Y.S.2d 62 (1982).

Recently, the exercise of this authority has been spurred by a prevailing tendency by certain members of the practicing Bar to exact unreasonable sums of money from their clients for services performed. With this behavior, it has become clear to the court that, although viewed as one of the prime constituents of justice and equity, these practitioners, in following this course, have done little to promote its image. Motivated by interests which can solely be characterized as financial, they have embarked upon a track which sacrifices these ends in order to derive a profit through unfair advantage. Attorneys, as professionals, are cast in a respected position in today’s society. With this flows public confidence and trust in their judgment, advice and direction. In the area of a decedent’s estates, particularly, is the reliance upon the advice and direction of counsel the most glaring. Certainly, propelled by emotions rather than by a sense of understanding and logic, clients afford counsel unbridled discretion to achieve desirable results on their behalf. However, the price of this discretion is not without a premium, a premium which, in the court’s opinion, has exceeded the bounds of propriety, and for too long has been allowed to pass without criticism.

In the previous years, the court has become increasingly sensitive to the proclivity of a minority segment of the Bar to view the Surrogate’s Court as a haven by which they may easily enrich themselves at estate expense. So manifest were the transgressions inherent in this situation, that the issue has been the subject of a plethora of recent decisions, as well as investigations by the Internal Revenue Service and debate by the Surrogate’s Association. What’s more, the media has also seen it fit to conduct inquiries into this ever-increasing problem. In each all of these forums, the focus has been upon curtailing the excessive fees charged by counsel in estate-related proceedings. Incidentally, the court finds significant a survey conducted by the Internal Revenue Service of twenty-two counties in upstate New York disclosing a 37% reduction in legal fees amounting to $957,000 in revenues after audit, and in 51 of the 64 cases examined, the corrected fee was agreed to by counsel. In addition, just two months ago, the Surrogate’s Association of New York adopted a resolution which reaffirmed the extensive latitude of the court to fix and determine legal fees.

Abuses have indeed been increasingly alarming and has triggered a policy of judicial intervention even in the absence of litigation. As a consequence, the jurisdiction of the court to exercise such scrutiny is beyond question and has, in fact, recently been held “unassailable” by the Appellate Division, Second Department, in Matter of Male Infant B, 96 App.Div.2d 1055, 466 N.Y.S.2d 482 (2d Dept.1983).

As held in the case of Gair v. Peck, supra, “the duty and function of the courts to keep the house of the law in order does not hinge upon whether clients, worn down by injuries, delay, financial need and counsel holding the purse strings of settlement, knowing little about law or lawyers, have had the stamina to resist excessive exactions of attorneys whom they’ve retained to represent them.”

Of course, it is the duty of the court to oversee and prevent such overreaching by investigating, and checking the practices of a counsel in any instance, regardless of controversy, where it appears that an egregious fee is being sought and charged for professional services rendered. this doctrine was also discussed in Gair v. Peck, supra; Matter of Brehm’s Estate, supra; and Matter of Promotional Services, Inc., N.Y.L.J., 4/28/86, p. 15, col. 3 (County Court, Nassau County).

Applying the aforementioned principles to the case at bar, the stipulation, to the extent it effectuates a resolution and compromise by the fiduciary of the various claims against the estate, was found by the court to be in full force and effect and binding upon the parties to this proceeding; on the other hand, the court found the terms of the stipulation, to the extent they encompass an extrajudicial accord as to counsel fees, to be superseded by its power and prerogative, regardless of the circumstances, to assess the reasonableness of the sum set forth.

As held in the cases of Matter of Freeman, 34 N.Y.2d 1, 355 N.Y.S.2d 336, 311 N.E.2d 480 (1974), and Matter of Potts, 123 Misc. 346, 205 N.Y.S. 797, affd. 213 App.Div. 59, 209 N.Y.S. 655, appeal dismissed 241 N.Y. 510, 150 N.E. 533 (1925), in the determination of reasonable counsel fees, the generally recognized criteria utilized are the time spent, the difficulties involved in the matter, the nature of the services rendered, the amount involved, the professional standing of counsel and the results obtained.

Here, upon examining the affidavit of services submitted by counsel, the court observed, at the outset, that the fee which he requested, $70,000.00, is in addition to the sum of $12,500.00, which he received for services he performed for the fiduciary in her individual capacity. More particularly, the court noted that the fee was based upon 712 hours of time expended by partners and associates at the rates of $150/hour and $75/hour respectively, and the counsel’s affidavit described work performed in connection with the contested probate, discovery and compulsory accounting proceedings, as well as in relation to a contested ancillary administration proceeding in Connecticut, Federal and New York State estate tax proceedings, a proceeding for advice and direction, the instant accounting proceeding, and the negotiation and settlement of the multitude of claims against the estate which essentially saved it from insolvency.

While the court does not discount the considerable amount of time and effort expended by counsel in the administration of the estate, its assessment of an appropriate fee to be awarded must still be guided and circumscribed by the size of the fund in issue. This is the same doctrine laid down in the cases of In re Estate of Meringola, N.Y.L.J. 5/25/83, at 14, col. 6 (Surrogate’s Court, Kings County), and In re Estate of Judith Melinek, N.Y.L.J., 4/4/86, at 13, col. 4 (Surrogate’s Court, Bronx County).

Here, the total fee requested by counsel is approximately 20% of the estate’s total principal. However, the court cannot disregard the work which remained, at the time, to be completed by counsel in order to finalize the settlement of the estate, and the additional fees which will necessarily be incurred thereby. Thus, the account reflects that the value of many of the estate assets is still undetermined, that several unpaid claims have yet to be resolved, that there are assets of the estate which must be liquidated, and that outstanding issues continue to exist as to the possible interest of the deceased in certain foreign realty.

After a careful evaluation and consideration of the nature, extent and details of the services performed by counsel, as well as the size of the estate and the legal fees, which the court presumed will still be incurred in connection with its final settlement, the court fixed and determined the fair value of counsel’s services to be in the reduced sum of $25,000.00, of which, $15,000.00 has already been paid, for all services rendered and to be rendered through the settlement of the intermediate accounting decree to be submitted. On another note, the court, in all other respects, deemed the stipulation between the parties to be fair and equitable, in the best interests of the estate and, therefore, binding upon the signatories thereto.

Accordingly, the decree was settled on notice incorporating the terms of the stipulation, as modified and otherwise approved.

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