Opinion
141/01.
Decided November 17, 2010.
Former Counsel to the PA, Louis R. Rosenthal, Esq., Debary, Florida.
For the Present Counsel to the PA, Steven Finkelstein, Esq., By Gerard Virga, Esq., Finkelstein Virga, New York, New York.
In this proceeding to judicially settle the account of the Public Administrator, the Court is called upon to decide a number of issues concerning the payment of legal fees to prior and current counsel to the Public Administrator. Hearings on the fee allocation between prior and current counsel to the administration and the unauthorized payments of legal fees to the prior counsel to the Public Administrator were held on October 21, 2009 and April 30, 2010 before a Court Attorney Referee.
Improper Advances
The prior practice of the Court was that the legal fees of counsel to the Public Administrator would be based upon a sliding percentage of the gross estate and that the Surrogate would authorize payment to prior counsel of 60% of the projected legal fees, as a payment on account, upon filing the final account. Matter of Feinberg , 5 NY3d 206 , 212 (2005). The balance of the legal fee would be determined and authorized in the final decree. At the hearing, however, prior counsel testified that the Public Administrator would pay him legal fees in advance of the filing of the account upon his request. In the instant case, the final account was filed on November 29, 2001. Nonetheless, prior counsel received advances of $4,500 on May 27, 2001, $3,200 on November 21, 2001 and $399 on November 21, 2001. Current counsel to the Public Administrator filed a supplemental account assessing interest on the advances, from the date of payment to the date the final account was filed, at a rate equal to the rate earned by the Public Administrator on funds held by estates he was administering plus 1.5%. The total interest claimed is $117.68.
This practice was terminated by Administrative Order of the Surrogate, dated October 30, 2009. Thereafter, determination and payment of the legal fees of counsel to the Public Administrator would be made in the final decree.
Prior counsel testified that he would discuss his request for advances with the Public Administrator. He assumed that the Public Administrator conferred with the prior Surrogate and obtained his approval. In any event, the Public Administrator issued him the advances, on the dates shown in the account. Prior counsel argues that the payments were authorized by the Surrogate. However, no order was ever entered authorizing the advance payment of legal fees. See SCPA 2110.
In Matter of Louis Rosenthal, 57 AD2d 1085 (2d Dept 2008), lv denied 12 NY3d 739 (2009), the Court found that the practice of giving counsel to the Public Administrator legal fees in excess of the guidelines enumerated in SCPA 1108(2)(c) was improper, even though the fees were set by the Surrogate. For the same reason, receipt of legal fees in advance of the filing of the petition to settle the final account of the Public Administrator violates the guidelines and is improper. Accordingly, prior counsel to the Public Administrator is responsible for interest on the sums improperly advanced.
The CPLR provides that prejudgment interest "shall be recovered upon a sum awarded because of a breach of performance of a contract, or because of an act of omission depriving or otherwise interfering with . . . possession or enjoyment of property" (CPLR 5001(a). In addition to a cause of action founded on breach of contract, "causes of action such as fraud, breach of fiduciary duty, conversion and unjust enrichment qualify for the recovery of prejudgment interest under this section." Miot v Miot, 24 Misc 3d 1244(A) (Sup Ct, NY County 2009; see, e.g. Flamm v. Noble, 296 NY 262, 268 (1947) ; Gibbs v. Breed, Abbott Morgan, 181 Misc 2d 346, 354 (SupCt, NY County 1999) reversed on other grounds 279 AD2d 887 (1st Dept. 2001); Eighteen Holding Corp v Drizin, 268 AD2d 371 (1st Dept 2000).
As for the rate of interest to be charged on the unauthorized advances, an executor/attorney who pays himself advances on his commissions without prior court order in violation of SCPA 2111 may be surcharged interest at the legal rate. Matter of Levy, NYLJ, Nov. 1, 1990, at 28, col 4 (Sur Ct, Nassau County). Fiduciaries who pay themselves commissions without prior court order may be surcharged at the legal rate. see Matter of Penn, NYLJ, Jan. 13, 199, at 31, col 2 (Sur Court, Nassau County). The same result should apply in the instant case, where the payments to prior counsel for the Public Administrator from the estate were not authorized under the guidelines then in effect or by any order of the Surrogate. Accordingly, interest on these advances shall be computed at 9%, computed from the date of payment until the date the final account was filed.
Fee Allocation
On June 29, 2007, this Court signed the decree in the final accounting submitted by the Public Administrator as Administrator of this estate. Matter of Gibson, Surrogate López Torres. In the decree, the Court set and fixed the amount of legal fees for counsel to the Public Administrator in conformity with the guidelines and fee schedule promulgated by Administrative Board for Offices of Public Administrators, applying the criteria set forth in SCPA 1108 (2) (c). In this estate the legal fee for counsel to the Public Administrator was determined to be $6,932.50. The apportionment of this fee, however, as between the former counsel and succeeding counsel for the Public Administrator was reserved for a future hearing.
At the hearings, by testimony and affidavit, the Court was provided with the details concerning each attorney's experience and reputation, the services rendered, the time spent for each service rendered, and the method or basis by which requested compensation was determined. Neither attorney contested or objected to the claims made by the other regarding to services provided. What was contested was the value of the services rendered.
Based upon the proof adduced from the hearing, the Court finds the proper allocation of the previously determined fee of $6,932.50 for the legal services provided to the Public Administrator to be as follows: 60% to Louis Rosenthal ($4159.50) and 40% to Steven Finkelstein ($2,773.00).
The final issue is the treatment of $1,260 that the former counsel to the Public Administrator received for his legal services in selling the decedent's real property. The prior practice was to pay counsel for the Public Administrator 1% of the gross sales proceeds on the sale of real property to pay for his legal services in the sale. In this estate, the prior counsel received 1% of the gross sales price of $126,000, or $1,260.00, on November 5, 2001 upon the sale of the decedent's real property. He filed the account shortly thereafter, on November 29, 2001. However, he never submitted a decree. As a result, the Court never passed on his fees. After he was removed as counsel to the Public Administrator in 2007, current counsel had to restate the accounting and a decree was entered on June 29, 2007. This fixed the total fees for legal services provided by counsel to the Public Administrator in accordance with current guidelines. The fee so fixed is for all legal services, including the sale of the decedent's real property. Providing prior counsel with an additional $1,260 would exceed the current guidelines and be improper. Accordingly, the $1,260 received will be treated as an advance.
See Letter of Hesterberg Keller to Surrogate Bloom, dated January 13, 1988.
Based on the above, Louis Rosenthal received $9,299 as advances on his legal fees. He is directed to remit to the Public Administrator the amount in excess of the fee allowed (4,159.50), or $5,139.50, plus interest at the rate of 9% from the date the over payments were paid to the date they are repaid, in addition to the interest on the improper advances as determined above.
Settle order supplementing the accounting decree accordingly.