Opinion
2000 DT 1108.
Decided April 22, 2004.
Hall and Karz (Samuel M. Hall, Esq.) for the Petitioner, Kenneth Betlem.
Woods Oviatt Gilman, LLP (Christian Valentino, Esq.) for the Respondent, Harvey E. Morse, P.A.
PROCEDURAL HISTORY
On November 20, 2001, Kenneth Betlem ("Betlem", the Petitioner herein) filed a petition to have this Court set aside an assignment of his interest in his father's estate to Harvey E. Morse, P.A., an heir finder firm based out of Florida. This Court issued a Decision and Order dated February 22, 2002 in which the Court determined the agreement between Betlem and Harvey E. Morse, P.A. was not an effective assignment of interest of Betlem's inheritance from his father's estate. Furthermore, this Court held that the fee arrangement set forth in the agreement, in which Harvey E. Morse, P.A. was to receive 40% of Betlem's inheritance, was unconscionable and set the fee at 5% of Betlem's ultimate distribution. Harvey E. Morse, P.A. appealed the decision to the Appellate Division, Fourth Department.
On appeal, the Fourth Department agreed with this Court and held that the agreement between Kenneth Betlem and Harvey Morse, PA. was invalid and unenforceable as it did not comply with EPTL § 13-2.3. However, the Fourth Department remitted the matter to this Court to permit Harvey Morse, P.A. to answer the Petition and submit evidence of the services provided for this Court to fix and determine the compensation for the heir finder.
Harvey E. Morse, P.A. filed a Verified Answer on January 15, 2003 and, upon the Court's request, Harvey E. Morse, as President of the Harvey E. Morse, P.A. submitted an affidavit sworn to on November 13, 2003. Counsel for Kenneth Betlem, Samuel M. Hall, Esq., submitted his own affidavit dated April 5, 2004 and that of Geoffrey K. Resnick, a private investigator licensed in New York State retained by Mr. Hall, sworn to on March 29, 2004.
BACKGROUND
The decedent, John H. Betlem, died on May 15, 2000 leaving a daughter, who lived in Wisconsin and a son, the Kenneth Betlem, whose whereabouts were unknown at the time of the estate proceedings. The decedent's Will, in which he directed that his entire estate be split between his two children, was admitted to probate on December 11, 2000. According to the List of Assets filed with this Court on December 4, 2001, the Petitioner's share of the estate is valued at approximately $185,000.
At the time of his father's death, Betlem was living in Colorado and had sporadic contact with his family and friends. Betlem learned of his father's passing from a family friend two weeks after it had occurred.
In the Spring of 2001, after being discharged from a stay at the Veteran's Administration hospital in Denver, Betlem was contacted by John Karbus, a private investigator subcontracted by Harvey E. Morse, P.A. to locate Betlem. After Karbus told Betlem that they needed to speak regarding a family emergency, the two met on June 9, 2001. At that meeting, Karbus presented a two-sided letter addressed to Betlem which stated he had a potential interest in unclaimed property. In addition to the boilerplate legal text, the letter offered the services of Harvey E. Morse, PA. and "in consideration of disclosing to you, the name and location of the estate or asset . . . we are to receive 40% of what you ultimately obtain . . ." The letter also provided that "if you contest any part of this agreement the amount due to Morse shall increase to sixty (60) percent." The letter urged Betlem to act quickly as Harvey E. Morse, P.A. could not protect his interests until he was their "legal client" and that "time is of the essence as statutory filing deadlines are involved."
This letter is the backdrop of this decision. By his own admission, Betlem signed the letter after which Karbus presented to him a second packet of materials which included a power of attorney and assignment of interest. Karbus told Betlem he could not provide further detail about Betlem's property interest until he signed the additional documents. Betlem refused to sign the papers after realizing that Morse was to receive 40% of his inheritance.
ISSUE PRESENTED
Having previously determined that the assignment of Betlem's interest in his father's estate to Harvey Morse, P.A. was ineffective pursuant to EPTL § 13-2.3(a), the issue now before the Court is to determine the fee owed to the heir finder firm for the services rendered.
OPINION
As the letter signed by Betlem was in essence an attempt at creating an assignment of interest as described in EPTL § 13-2.3(a), the Court is authorized to fix and determine the compensation, charges, and expenses of Harvey E. Morse, P.A. incurred as a result of locating Betlem, regardless of the 40% contingency fee set forth in the letter. SCPA § 2112; Estate of Kraus, 144 Misc. 2d 34 (Surr.Ct. Queens Co. 1989). As the 40% contingency fee arrangement is well in excess of 15% fee cap established by § 1419 of the Abandoned Property Law, some courts may have invalidated the agreement in its entirety. Kraus, at 39-40. However, Harvey E. Morse, P.A. is clearly entitled to reasonable compensation for the services it provided to Betlem. Matter of Devlin, 182 A.D. 2d 322 (2nd Dept. 1992); Matter of Maxson, 66 A.D. 2d 635 (1st Dept. 1979).
In determining a reasonable fee under SCPA § 2112, the Court will consider a variety of factors that are also used to setting a fee for an attorney providing services to an individual with an interest in an estate. Matter of Devlin, 182 A.D. 2d 322 (2nd Dept. 1992); see Matter of Freeman, 34 N.Y.2d 1 (1974). These factors may include time and labor required, the difficulty of the matters involved and the skill needed to handle the problems presented, the genealogist's experience, ability and reputation; the amount of benefit resulting to the principal from the services, the experience of the person providing the services, fees awarded to others for similar services; the contingency or certainty of compensation, and the results obtained and the responsibility involved. Matter of Miller, N.Y.L.J. 9/28/89 at 28 (Sur.Ct. Queens Co.); Matter of Devlin, 182 A.D. 2d 322, 328 (2nd Dept. 1992); see also 22 N.Y.C.R.R. 1200.11.
The Court requested the heir finder firm to provide an affirmation of services to assist in the determination of the fee. Harvey E. Morse, (hereinafter referred to as "Morse") president of Harvey E. Morse, P.A. submitted an affidavit in which the first forty-one paragraphs detail his credentials as a genealogist and genealogist investigator. The Court notes that Morse's expertise in genealogical studies likely did not contribute in locating Betlem as the probate file of the decedent's estate had identified him by name and intimated that Betlem was last known to reside in Denver. Instead, the services provided were almost exclusively investigative in nature.
Despite the affirmation of services, the Court is troubled by the failure by Harvey E. Morse, P.A. to provide time records or invoices to substantiate the claim that the firm devoted approximately 400 hours to finding Betlem. Although Morse states he does not require his employees to keep time records, the claim that it took 400 hours to locate Betlem would not be so incredible if it were fortified with empirical evidence.
Furthermore, Morse's narrative of the investigation suggests that there must be a written account of the efforts expended by his staff, otherwise it would have been extremely difficult to provide such a detailed account of his firm's efforts in locating Betlem. Nowhere in the affidavit is it suggested that the affiant alone performed the proprietary database searches, or that he himself made the necessary phone contacts with numerous individuals that lead to the discovery of Betlem. Instead, Morse refers to the actions of others, who are often referred to as "my genealogist", and the affidavit itself is peppered with the collective "we" and "our" when describing the investigation of Betlem. It is inconceivable that two years later Morse could provide such a detailed account of what steps other people (i.e., the employees of his firm) took to locate Betlem without referring a written log of those actions and conversations. Indeed, Morse refers to the significant amount of out-of-pocket expense incurred by the firm in its investigation, yet nothing is submitted to verify these expenses in the way of invoices or receipts. Surely the private investigator who met Betlem in Denver billed the firm for his services, yet Morse states in his affidavit that his business does not keep track of such expenses because of the contingency fee arrangement.
As an aside, the Court cannot pass commenting on the analogy offered by Morse on the value of the services by an heir finder and to those of an attorney. Morse correctly states that the value of an attorney's fees in a personal injury or collection matter is not determined upon the time spent on the particular matter, but rather contingent on the results or the recovery and that heir finders operate in a similar fashion. Presumably the analogy is made to justify the contingency fee arrangement instituted by Harvey E. Morse, P.A., however that analogy is specious at best. The risk factor of an attorney accepting a negligence case based upon a contingency fee is hardly comparable to an heir finder seeking a lost legatee or distributee. Whereas an attorney in a negligence suit cannot definitively know the quantum of recovery when he is retained due to myriad of factors (i.e., competing claims, contributory negligence, judgment proof defendants), an heir finder already has full knowledge as the value of the estate and potential of recovery before setting out to look for a lost heir. see Matter of Miller, N.Y.L.J. 9/28/89 at 28 (Sur.Ct. Queens Co.). Furthermore, it is common practice amongst attorneys, including those involved in negligence actions and collections, to keep accurate records as to the their time and expenses they devoted to the cause of action. Finally, it should be noted that in contrast to the 40% contingency fee sought by Harvey E. Morse, P.A., an attorney is generally prohibited from taking a contingency fee of more than one third of the gross recovery. Judiciary Law § 474. More often than not, an attorney provides more services to his client at a greater risk of not being compensated, and, if successful, receives a smaller percentage of the recovery than a heir finder.
Regardless of Morse's unusual business practice of not keeping files or records, the Court will not accept the unsubstantiated claim with respect to the number of hours spent or out-of-pocket expenses incurred by Harvey E. Morse, P.A. in locating Betlem. Matter of Devlin, 182 A.D. 2d 322, 329 (2nd Dept. 1992); Matter of Schaich, 55 A.D. 2d 914 (2nd Dept. 1977). As such, the fee will be set at an amount substantially less than 40% contingency.
Ironically, the Court must turn to the affidavit of Geoffrey Resnick, a private investigator hired by Betlem's attorney, to set the fees. Resnick's affidavit fills a remarkable void as it is the only evidence available to attach a monetary value to the services provided.
In his affidavit, Mr. Resnick states he has been a licensed private investigator since 1976 and possesses substantial experience in locating individuals whose whereabouts is unknown. After being provided the same information obtained by the heir finder firm, to wit Betlem's name and that he was last known to reside in Denver, Resnick performed an online search which rendered two addresses and a Social Security Number. Using this information, Resnick conducted another search that yielded additional addresses in Denver. A third and final search rendered the address and contact information that Harvey E. Morse, P.A. used to locate Betlem. Resnick states he expended one hour of his time in performing these three searches and further estimates that it would have taken him an additional two hours to locate Betlem in Denver. According to Resnick, the total cost of locating Betlem would amount to $195.00.
It is not lost upon this Court that Resnick's re-enactment took place two years after of the initial investigation. Additionally, the Court is mindful that Resnick's estimation of the time it would have taken to locate Betlem is conservative. Nevertheless, Resnick's insight provides a foundation from which the Court can extrapolate and quantify the services provided by the heir finder.
After a thorough review of the affidavits of Harvey E. Morse and Geoffrey Resnick and consideration of the criteria set forth in Devlin and Miller, this Court, pursuant to SCPA § 2112, fixes the fair and reasonable compensation of Harvey E. Morse, P.A. for the services provided Kenneth Betlem at $1,850.00, inclusive of disbursements. The services provided did confer a benefit to Betlem, although it is arguable that the firm's involvement is the sole reason that led Betlem to learn of his inheritance, and the set fee reflects the effort expended and results achieved. Matter of Devlin, 182 A.D. 2d 322, 329 (2nd Dept. 1992); Matter of Miller, N.Y.L.J. 9/28/89 at 28 (Surr. Ct. Queens Co.).
This Decision shall constitute an Order of this Court.