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Defendant Files Objections to Probate Accounting


The decedent died in May 2004, leaving a will which was admitted to probate. The decedent was survived by his four children. The will makes pre-residuary cash bequests of $45,000.00 to each of the children. The will further provides that the decedent’s residuary estate be divided equally among his four children. Letters testamentary issued to petitioner in July 2004.

The Petitioner originally filed a First and Final Accounting of his proceedings covering the period May 2004 through January 2008. Thereafter, he filed a First Interim Account of the Estate of the decedent. This document covers the period from May 2004 to January 2008, the same period covered by the First and Final Accounting. The Interim Account was verified by Petitioner in February 2009, nearly one year after the First and Final Account.

The brother filed objections to the accounting. The parties stipulated at trial that the estate had the burden of proof on the issue of whether the decedent made a loan to the brother. In addition, the parties acknowledged that petitioner took an advance payment of commissions in the amount of $10,0000.00, without prior court order and repaid the sum of $10,000.00 to the estate.

Generally, in determining whether a valid loan exists, a court will consider such things as, “whether notes or other written acknowledgments of indebtedness were executed, collateral was given, a method or time for repayment was fixed by agreement and if there exists any evidence of a systematic repayment”. In the absence of an instrument evidencing the transaction, a factual determination must be made as to whether a loan was made. There is no presumption that money, which has been advanced, was advanced as a loan. In fact, it is presumed that the delivery of a check arises from an antecedent debt and is not a loan. The person alleging that a loan was made has the burden of proof.

With respect to the issue of the statute of limitations, “[t]here are two ways in which the statute of limitations may be tolled. One involves part payment and the other a signed acknowledgment”. It is well-settled that an acknowledgment of a debt may be sufficient to toll the statute of limitations. As to an acknowledgment, “it must be a signed written acknowledgment of an existing debt which contains nothing inconsistent with an intention on the part of the debtor to pay it”. As to part payment, the statute will be tolled if it is demonstrated that it was “payment of a portion of an admitted debt, made and accepted as such, accompanied by circumstances amounting to an absolute and unqualified acknowledgment by the debtor of more being due, from which a promise may be inferred to pay the remainder”. Thus, the circumstances of the part payment must be sufficient from which to infer a promise to pay the remainder.

The parties agree that the burden is on petitioner, as the fiduciary of the estate, to establish that the loan existed. Here, there was no evidence of a written note setting forth collateral or a method or time for repayment. Accordingly, in the absence of an instrument evidencing the transaction, a factual determination must be made as to whether a loan was made.

It is well settled that a trier of fact in an evidentiary hearing has the unique ability to make credibility assessments based upon its opportunity to view the witnesses, hear the testimony and observe their demeanor.

As to the issue of commissions, commissions are not ordinarily payable until the entry of a decree settling a fiduciary’s account. Taking a commission prior to the settlement of an account without securing court approval pursuant to SCPA 2310 or SCPA 2311 exposes the fiduciary to the potential of being. Ordinarily, the court will allow the commissions but will surcharge the fiduciary the amount of interest the estate lost because of payment, most commonly at the statutory interest rate under CPLR 5004, from the date the unauthorized commissions were taken until the entry of the decree settling the account.

The court has generally taken the position the taking of advance commissions without prior court approval is grounds for “automatic surcharge at the statutory rate of interest of 9%”.

Considering all the circumstances in this case and the above principles, the court surcharges the executor 9% statutory interest on the amount paid of $10,000.00 from the date taken until the date of repayment.

The account also shows that petitioner took $100,000.00 and $20,000.00 from the estate and paid it to his company. The brother credited himself with the $100,000.00 as a distribution and ultimately repaid the $20,000.00. Nevertheless, the court surcharges petitioner 9% statutory interest on the amount of $20,000.00 from the date taken until repayment and on the $100,000.00 advance from the date taken until the date of this decision.

The accounting and petitioner’s testimony also shows that he took $66,000.000 from his brother’s share as repayment for a personal loan he made to him. The court finds that petitioner acted in bad faith, motivated solely out of his own self-interest in insuring that the amount be repaid.

Thus, petitioner’s testimony and account show that he (i) withdrew $10,000.00 in commissions without prior court order; (ii) made a $20,000.00 distribution to his company, which he ultimately repaid; and (iii) withdrew $66,000.00 of his brother ‘s share as repayment for an alleged loan Petitioner made to his brother and paid it to himself. The record confirms that Petitioner engaged in misconduct with respect to the administration of the estate. Accordingly, the court denies him commissions, but declines to revoke his letters.

With respect to the issue of attorneys’ fees, the court bears the ultimate responsibility for approving legal fees that are charged to an estate and has the discretion to determine what constitutes reasonable compensation for legal services rendered in the course of an estate. While there is no hard and fast rule to calculate reasonable compensation to an attorney in every case, the Surrogate is required to exercise his or her authority “with reason, proper discretion and not arbitrarily”.The burden with respect to establishing the reasonable value of legal services performed rests on the attorney performing those services. Contemporaneous records of legal time spent on estate matters are important to the court in determining whether the amount of time spent was reasonable for the various tasks performed.

With respect to disbursements, the tradition in Surrogate’s Court practice is that the attorney may not be reimbursed for expenses that the court normally considers to be part of overhead, such as photocopying, postage, telephone calls, and other items of the same matter. In a case, the court discussed the allowance of charges for photocopies, telephone calls, postage, messengers and couriers, express deliveries and computer-assisted legal research. The court concluded that it would permit reimbursement for such disbursements only if they involved payment to an outside supplier of goods and services, adopting the standards set forth. The court prohibited reimbursement for ordinary postage and telephone charges other than long distance.

The attorney has submitted an affirmation of legal services and a supplemental affirmation of legal services which shows that the attorney rendered approximately 110 hours at the hourly rate of $350.00 per hour for a total of $36,000.00 plus a flat fee of $10,000.00 for preparation of the accounting. The services performed by counsel included services in connection with the probate of the will; services with respect to the sale of two properties owned by the decedent; review of the antenuptial agreement between decedent and his spouse; review of appraisals; drafting federal estate tax return; appearances at court conferences; preparation of the accounting, work in connection with the Supreme Court proceeding; preparation for trial and conducting of trial. In addition, disbursements incurred amount to $1,911.15 consisting of filing fees, certified mailings, process serving fees and fees for certificates of letters.

Considering all of the factors used to determine the reasonableness of fees, the court fixes the fee of counsel for the executor in the amount of $35,000.00, plus disbursements in the amount of $1,911.15.

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