Opinion
108298-2000.
Decided June 30, 2008.
James H. Cahill, Jr., Esq., Successor Guardian of the Property, Cahill and Cahill, P.C., Brooklyn, New York.
Emani P. Taylor, Esq., Pro Se, Former Interim Successor Guardian, Brooklyn, New York.
Seth E. Coen, Esq., Court Examiner, Brooklyn, NY.
The late John L. Phillips (Phillips), a former Brooklyn civil court judge became the subject of this Guardianship proceeding pursuant to Article 81 of the Mental Hygiene Law (MHL) in December 2000 after an investigation revealed he was the victim of financial exploitation while suffering from Alzheimer's related dementia. Phillips, who was a well-known and respected member of the Bedford-Styvesant community amassed numerous properties in that community during his lifetime. Many of those properties it was discovered had been improperly conveyed to other individuals and corporations in the late 1990's.
John L. Phillips died on February 16, 2008.
From the beginning this was a very complex guardianship case. The Phillips estate was in shambles. He had virtually no properties left in his name. There was also very vocal community opposition to the appointment of a guardian on behalf of Phillips. Additionally, Phillips' estate had limited assets to meet his needs. The two largest and most valuable properties, the Slave I and Slave II theaters (1215 Fulton Street and 746,748 and 750 Nostrand Avenue, respectively), iconic properties associated with the civil rights movements, were conveyed pursuant to a 1999 deed to JJ Real Estate Inc., a corporation formed by John Clarke (Clarke) a subsequently convicted felon and former property manager for Phillips. Clarke made himself majority shareholder of JJ Real Estate Inc. (55%) without providing Phillips any consideration. Clarke also extracted powers of attorney (POA) from Phillips in 1999 at a time when Phillips was suffering from dementia. Clarke was subsequently convicted in May 2004 of bank fraud in the Federal District Court relating to another Phillips property and served a six-month period of incarceration (Guardian's Exhibit 10). Clarke's sister, Orlaine Clarke also took title to another property owned by Phillips. She was ultimately ordered by the court to convey that property back to Phillips' estate.
The POAs were executed at about the same time Phillips assigned his interest in the Slave properties to JJ Real Estate Inc. Justice Pesce who presided over this case ultimately determined after hearing extensive medical evidence that those conveyances occurred at a time when Phillips was incapacitated. By logical extension, he was also incapacitated to execute the powers of attorney (see Order dated August 22, 2007, J Pesce).
Phillips was declared an incapacitated person (IP) pursuant to MHL Article 81 by now-retired Justice Scholnick in 2001. Harvey Greenberg, Esq., served as Phillips' guardian of the person and property for a brief period after which Ray Jones and Frank J. Livoti served as co-guardians until September 2003 when Emani P. Taylor (Taylor), the subject of these proceedings, was appointed interim successor guardian. Taylor represented Phillips in this case from April 2002 until her appointment as interim successor guardian on September 3, 2003. There were six re-appointment orders issued until she resigned on September 13, 2006.
One of the main objectives of the guardianship proceeding, in addition to meeting Phillips' personal needs, was returning to his estate those properties which had been transferred out of his name. To Taylor's credit, she successfully returned some of the properties back into the Phillips estate, including the Slave I II theaters. By order dated April 27, 2004, Taylor was given permission to sell 132-140 Herkimer Street (132-140), a property owned by Phillips. That property was ultimately sold at a court-supervised auction. The successful bidder offered $810,000 in addition to the satisfaction of substantial liens. Taylor received a net sum of $696,277.75 from the sale of 132-140. She placed the $81,000 down payment in her attorney escrow account (IOLA account) at Signature Bank. At the closing on November 11, 2005 the purchasers paid $615,277.75 which was wire-transferred into the Guardianship checking account at Signature Bank (A/C No. 442). There was also another guardianship money market account (A/C #418) at Signature Bank.
The purchasers satisfied liens which totaled $2,531,277.
Upon Taylor's resignation, James H. Cahill, Jr. Esq., (Cahill) was appointed successor guardian of the IP's property. In the course of marshaling the assets from A/C #442 he learned from bank statements and cancelled checks that Taylor had helped herself without authority or prior court approval to a substantial portion of the net proceeds from the sale of 132-140. Cahill also found out that Taylor used guardianship funds to pay relatives and friends for services they allegedly provided to Phillips. Cahill also discovered that Taylor failed to pay income taxes or capital gains taxes on behalf of Phillips during her three-year tenure. As a result, Phillips' estate was saddled with substantial tax penalties and interest, especially due to her failure to pay capital gains taxes from the sale of 132-140.
Cahill received $245,995.09 from the guardian accounts but nothing from the IOLA account. He immediately commenced a turnover proceeding against Taylor alleging she had intentionally converted and/or grossly mishandled in excess of $500,000 from the guardian accounts. By order dated November 30, 2006 Justice Pesce directed Taylor to restore to the estate $187,000 by December 12, 2006 under penalty of contempt. Taylor was also ordered to file an appropriate final account with the requisite proofs (MHL § 81.33[b]). Taylor was held in contempt of court on December 19, 2006 for willfully disobeying the November 30, 2006 order and again on December 28, 2006 for, inter alia, failing to provide contemporaneous records, documents and supporting papers with reference to her financial handling of the guardian accounts.
Taylor ultimately submitted an accounting to Seth Coen, Esq. (Coen), the court-appointed examiner. Justice Pesce labeled her submission a "sham." Accordingly, by order dated June 1, 2007, Justice Pesce directed Coen to prepare a final account on behalf of Taylor for her entire three-year tenure occasioned by her failure to submit an acceptable final account. Coen filed a motion on June 20, 2007 for judicial settlement of the final account he prepared on Taylor's behalf. Significantly, in that report he indicated that "[d]ue to the combination of incomplete records, poor record keeping and the lack of cooperation from [Taylor], the final account as submitted represents a reconstruction to the best of my ability from the proofs and records available to the preparer" [emphasis added]. According to Coen's report Taylor helped herself to $327,491.23 from the guardianship accounts from October 24, 2003 to August 8, 2006.
See transcripts, February 6, 2007, p 41-42.
At the behest of Justice Pesce, Coen also produced a schedule of issues confronting the court with respect to Taylor's financial stewardship of the Phillips estate (Schedule G of Coen's Final Account). Cahill filed 89 objections to Coen's Final Account and sought a surcharge against Taylor. Taylor then filed an affirmation in opposition to Cahill's objections and sought a total of $853,100 in fees relating to her work as interim successor guardian. By order dated September 24, 2007, Justice Pesce directed a framed-issue hearing to address the issues raised by Coen in Schedule G of his Final Account. Taylor then moved to recuse Justice Pesce from presiding over this guardianship proceeding. By order dated November 16, 2007, Justice Pesce recused himself and the case was re-assigned to this court on November 19, 2007. Trial dates were selected on December 7, 2007 with the hearing to commence on February 5, 2008.
Meanwhile, by order dated December 10, 2007, this court directed the sale of the Slave II property at a court-supervised auction in order to pay outstanding substantial tax liabilities. No bids were received at the upset price of $1,600,000 at the auction held on February 6, 2008.
On December 27, 2007, the Appellate Division, First Department suspended Taylor from the practice of law for professional misconduct relating to this case ( Matter of Emani P. Taylor, 48 AD3d 138 [1st Dept., 2007]). Taylor was suspended for her failure to cooperate with the Disciplinary Committee's investigation and for "uncontested evidence that [she] . . . committed misconduct" by at best, withdrawing funds from the guardianship account as legal fees without court permission, or, at worst, intentionally converting guardianship funds. It is clear from the Appellate Division's decision and order that the funds Taylor helped herself to without court permission were related to fees she claimed she was entitled to for her work as interim successor guardian.
This court takes judicial notice of the proceeding before the Appellate Division, First Department which resulted in her suspension from the practice of law (see, Matter of Justin EE, 153 AD2d 772 [3rd Dept., 1989]; "[a] court may take notice of prior judicial proceedings though in a different court. . .").
Just prior to the commencement of the hearing, Clarke filed a motion to vacate the order directing the sale of the Slave II property claiming that the POAs he held on behalf of Phillips divested this court of jurisdiction over Phillips.
On the return date of Clarke's motion, February 5, 2008 — the very day the hearing was to commence — Clarke and Taylor jointly appeared in court to argue their inane claim that POAs executed by Phillips at a time he was incapacitated required the dismissal of this entire guardianship proceeding for lack of jurisdiction. Interestingly, Taylor never made this claim in 2002 when she was challenging the guardianship on Phillips' behalf. Taylor stated on the record that she was only making "a special appearance" to support Clarke's motion then left the courtroom. Having stonewalled the Disciplinary Committee, Coen and Justice Pesce, this was apparently Taylor's last ditch effort to thwart an on-the-record accounting of her financial misdeeds. This court summarily denied Clarke's motion and declared Clarke's POAs to be a nullity.
The court then commenced the hearing without Taylor who excused herself from the courtroom. While Coen was testifying, she re-emerged and fully participated in the hearing which was conducted on February 5, 6, 7, 8, 19; March 11 and 12, 2008. Final written summations were received on May 7, 2008.
II Applicable Law
Eighty years ago, Justice Cardozo set the bar for the conduct of fiduciaries in this state ( Meinhard v Salmon, 249 NY 458). He observed the following:
"many forms of conduct permissible in a workaday world for those acting at arms length, are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive is then the standard of behavior. As to this there has developed a tradition that is unbending and inveterate . . . only thus has the level of conduct of fiduciaries been kept at a level higher than that trodden by the crowd. It will not consciously be lowered by any judgment of this court." I Id.
Codifying this standard, MHL § 81.20[a][3] provides that a guardian shall exhibit the utmost degree of trust, loyalty and fidelity in relation to the IP; and MHL § 81.20[a][6][ii] requires a guardian to "preserve, protect and account for [the IP's property] and financial resources faithfully." A fiduciary owes an undivided loyalty to his ward ( Matter of Mel S, 15 Misc 3d 1037). If a guardian maladministers an estate, or otherwise acts improperly commissions may be denied and the guardian may be surcharged (MHL § 81.23[a][1]). The court may reduce or deny compensation to any temporary guardian if the fiduciary fails to discharge her duties in a satisfactory fashion (MHL § 81.23[a][1]).
III Findings of Fact / Conclusions of Law
Applying the rigorous standard for the conduct of fiduciaries, it is patently clear that Taylor failed miserably as Phillips' guardian. Indeed, at trial she readily admitted not knowing her responsibilities and duties as Phillips' guardian and repeatedly attempted to shift the blame to others including the court, the guardianship department and prior guardians. For example, she testified that she failed to file taxes on behalf of Phillips because the interim appointment orders did not spell this out as one of her duties. This response demonstrates a fundamental lack of understanding of what her role as guardian entailed. As guardian she stepped into the shoes of her ward. Whatever financial responsibilities the ward had she now had as his guardian — and one of the most basic financial obligations is to file tax returns and pay taxes if you owe them.
There is of course a laundry list of her failings as fiduciary any one of which would be sufficient to deny her any compensation. She failed to obtain a bond in accordance with Justice Pesce's order. As it turns out Taylor was unable to be bonded due to a bankruptcy petition she filed and because of its impact on her credit. She never informed Justice Pesce that she could not be bonded.
She failed to file a closing statement after the sale of 132-140. Her excuse was that she did not think it was necessary since the court conducted the auction. She failed to maintain records which memorialized financial transactions utilizing guardianship funds. This was particularly egregious since she paid relatives and friends thousands of dollars for alleged services they rendered on behalf of Phillips. She failed to disclose to the court that she had hired relatives. While hiring relatives is not necessarily improper, basic common sense dictates that if you are going to do that, there should be full disclosure and meticulous record keeping.
According to Taylor, all her records relating to this case including her time sheets, retainer agreements, billing records, receipts, etc., were all destroyed in July 2006 because of a "flood" in her basement. This "dog ate my homework" excuse for failing to produce contemporaneous records is simply not credible. There was indeed some water damage in her basement. Apparently her neighbors who were renovating next door caused water to seep into her basement. Taylor called Jeffrey Pierre, the architect working on the project next door to testify on her behalf. He testified that he went to her basement and saw three to four inches of water on the basement floor. He also noticed cardboard boxes stacked on the floor some of which were on skids or palettes presumably safe from the water. Daniel Howell, Taylor's son testified that he noticed approximately six to eight inches of water and no palettes in the basement. Taylor's own witnesses contradicted themselves with respect to how much water had accumulated in Taylor's basement. The court credits Pierre's testimony, a disinterested witness, and not Howell, who received IP funds from Taylor.
It simply strains credulity to believe that every single record would have been destroyed by this "flood." Taylor makes no mention of what if any efforts she made to rescue the documents from the water in her basement. We are to believe that by coincidence all the records just happened to be in the boxes stacked on the bottom exposed to the water and that all her documents relating to her guardianship work were all completely obliterated by the water. Why was she unable to produce any documents, even if they were waterlogged? Her claim is simply not believable.
Her failings as listed above are sufficient for this court to deny her any compensation as guardian for breaching her fiduciary responsibilities. Unfortunately, those breaches pale in comparison to her most egregious conduct of helping herself to a substantial amount of the guardianship funds without authorization or prior court approval. Significantly, Taylor has failed to prove to the satisfaction of this court that she was entitled to those funds. She thus converted guardianship funds for her own personal use and this improper behavior requires surcharging her.
At trial, Taylor testified she was entitled to approximately $200,000 in counsel fees from guardianship funds for legal work she performed as Phillips' attorney from April 2002 to September 2003, prior to her appointment as interim successor guardian. Taylor testified that Clarke retained her in April 2002, to among other things, represent Phillips in this guardianship proceeding. She further testified that Clarke had the authority to retain her on behalf of Phillips by virtue of Clarke's POAs which designated him attorney in fact for Phillips. This claim came as quite a surprise to those familiar with this case, including Cahill and Coen. Taylor had never previously advanced this claim in any prior proceeding or pleadings in this case. Indeed, she apparently told the Disciplinary Committee she had reimbursed herself for fees as interim successor guardian. In that proceeding, the court observed "[w]hile [Taylor] was entitled to be compensated for the work she performed for three years [referring to her three-year tenure as interim guardian], self-help to guardianship funds is not the way to proceed" ( Matter of Emani P. Taylor, 48 AD3d at 142 [emphasis added]).
At a court appearance before Justice Pesce on July 3, 2002, Taylor stated on the record, not that Clarke had retained her pursuant to his POAs, but that Phillip's paternal relatives had retained her to represent Phillips. Michael C. Forth, the court-appointed evaluator asked Taylor on the record who had retained her to represent Phillips, to which she replied: "John Phillips' brother and niece." She was then asked whether she had a retainer agreement with them. Her response: "No." Most significantly, she was then asked who was compensating her for her services to which she said " [n]o one is paying. I waived my fees." In a May 29, 2002 affirmation she submitted to the court "under penalty of perjury" she stated that "I have been retained by the paternal family of John L Phillips an alleged incapacitated person." Taylor also filed a petition to terminate the Phillips guardianship on behalf of Brian Flowers, a long time friend of Phillips. Justice Pesce's March 4, 2005 decision and order with respect to that application noted that Flowers was "represented by Taylor." Six years ago Taylor told the court she had been asked by Phillips' relatives to represent Phillips in this case which she agreed to do pro bono. Now it's a completely different story. Clarke retained her and she paid herself approximately $200,000 from the IP's fund for that legal representation.
Transcript, July 3, 2002, pages 51-52.
Even assuming, arguendo, Taylor's claim is true, Clarke had no legal authority to foist her retainer fees on to Phillips' estate by virtue of his POAs since, as previously noted, Phillips was incapacitated when he executed those POAs. They were essentially a nullity from day one. Phillips also repudiated Clarke's POAs on the record on February 21, 2001 before Justice Scholnick:
JUSTICE SCHOLNICK: Did you ever give power of attorney to any people? PHILLIPS: I think the one I gave the power [of] attorney to is a fella named Clarke. That was sometime ago, and then later on I revoked it (Transcript, February 21, 2001 p. 30; emphasis added).
At the July 3, 2002 proceeding, Justice Pesce also specifically questioned Taylor about Clarke's POAs. Had she actually been retained by Clarke to represent Phillips pursuant to the POAs as she now claims one would have expected her reply to Justice Pesce to be along the lines of: Yes I'm familiar with Clarke's POAs because he retained me to represent Phillips in this proceeding pursuant to his POAs. Instead she stated the following when questioned by Justice Pesce about Clarke's POAs:
THE COURT: . . . do you have any information on that, Miss Taylor?
MS TAYLOR: Regarding the power of attorney?
THE COURT: Yes.
MS TAYLOR: I've spoke to Alan Drezin (Clarke's then-attorney) a few times regarding that. It's just his opinion that his client is the owner of that property (referring to the Slave I Theater which Clarke took majority ownership of from Phillips for no consideration). I don't know anything specifically about a power of attorney but I did speak to the Judge [Phillips] about that and whatever relationship it was, whatever relationship he specifically had with John Clarke, John Clarke assumed that, but [sic] Alan Drezin supports the fact that his client does own the property . . . (see, Transcripts, July 3, 2002, p. 65-66; emphasis added).
Even more stunning, Justice Pesce asked Taylor whether she intended to "challenge" Clarke's POAs to which she replied "Yes!" (July 3. 2002, p. 66 lines 15-19). It makes no sense to seek to challenge a POA from which Taylor claims she derived her authority to represent Phillips. "Oh, what a tangled web we weave, when first we practice to deceive" (Sir Walter Scott, Marmion, Canto VI, XVII, 1808).
At trial, Clarke produced the alleged retainer agreement he executed with Taylor (Taylor's copy was allegedly "lost in the flood"). This document is highly suspect (Respondent's Ex. D). It is a three-page typed document, dated April 9, 2002 prepared by Taylor and addressed to Clarke. Nowhere in the body of the typewritten portion of the document does it even mention Phillips by name or Clarke's POAs. This document had never previously been produced in this eight-year old proceeding. Pursuant to the terms of that agreement Clarke (not Phillips' estate) agreed to compensate Taylor at an hourly rate of $250 per hour or $2,500 per week for "matters related to include but not limited to certain business and personal issues regarding various properties, landlord tenant issues, corporate concerns, negotiate mortgages as well as negotiations with City/State agencies and representation for the sale of properties." The retainer makes absolutely no mention of representing Phillips in this case. The only place where Phillips' name emerges is at the signature line where Clarke signed his name. Clarke or Taylor wrote in "as power of attorney for John L Phillips" next to Clarke's signature. While there is no direct evidence to establish the retainer is a fraudulent document produced by Taylor and Clarke to bolster their unbelievable claims, all of the surrounding circumstances makes this document highly dubious at best. Even assuming the document is legitimate, Clarke was obligated to pay Taylor's counsel fees, not Phillips pursuant to the clear terms of that retainer. That being the case, Taylor had no legal authority to take guardianship funds based upon this purported retainer agreement.
Taylor admits in her March 10, 2008 affirmation in opposition to Coen's final account that she took $197,416.08 for legal fees from guardianship funds "for legal fees attributed to work performed for IP 2002-2003." At trial, she offered no specificity with respect to the legal work she performed as Phillips' attorney which entitled her to approximately $200,000 in guardianship funds or offered any financial documents to support her claim. What exactly she purports to have done to earn $2,500 a week in counsel fees from the IP's funds for seventy-four straight weeks remains a mystery. In paying herself counsel fees without any prior court approval, Taylor made herself final arbiter of the reasonableness of her fees. This self-dealing conduct clearly conflicted with her fiduciary obligation as guardian. She also paid herself $12,416.08 in excess of what she would have been entitled to under the retainer agreement, assuming it was a valid agreement. She was only entitled to $185,000 in counsel fees, not the $197,416.08 she took ($2,500.00 x 74 weeks = $185,000).
It may also have been improper for her to have submitted an affirmation instead of an affidavit since she is a suspended attorney.
See page 13 of Taylor's affirmation.
Taylor's misconduct in paying herself counsel fees from guardianship funds is so egregious that she must be surcharged for misappropriating those funds. It is unfortunately very difficult to pinpoint the exact amount she took from the guardianship accounts for "legal fees" based upon the documentary evidence in the record. Checks she wrote to herself from A/C #442 (the guardianship checking account) and from her IOLA account were introduced into evidence (Court Examiner's Exhibit 10). A careful review of those checks indicate Taylor wrote seven checks to herself from A/C #442 totaling $90,000 in which the checks state "retainer" or "Legal Fees." The remaining checks introduced into evidence were blank in the memo portion of the checks or had some other designation. There is only one check from Taylor's IOLA account which she designated "retainer," the rest of them are blank. The problem with the IOLA account is that Taylor commingled the $81,000 down payment deposit she received from the sale of 132-140 with funds not related to Phillips. It is therefore very difficult to ascertain from the checks introduced into evidence from the IOLA account the source of the funds for those checks. The checks proffered by the court examiner which he attributes to "retainer" or "legal fees" total $200,805 (Court Examiner Ex. 10, 1-23). Given the difficulty in establishing the precise amount of money Taylor took for legal fees, the court will surcharge her $197,416.08, the amount she admits taking from guardianship funds "for legal fees performed for IP 2002-2003."
Court Examiner;'s Ex 10 sequentially numbered Documents 5, 10, 11,12, 13 21 and 22.
Court Examiner's Ex 10, sequentially numbered Documents 2, 16, 17, 18, 19, 20.
Court Examiner's Ex 10, sequentially numbered Document 15.
Court Examiner's Ex 10, sequentially numbered Documents 3, 4,7,8,9,14 and 23.
See page 13 of Taylor's affirmation.
Taylor will also be surcharged an additional $52,500 for guardian funds she paid herself without court approval as a "broker's commission" for the sale of 132-140. According to Taylor, the retainer agreement with Clarke also allowed her to receive a 6% commission from the sale of Phillips' properties. Taylor had no broker's license at the time she paid herself this "commission." More to the point, she did not sell 132-140, it was sold at a court-supervised auction! You cannot pay yourself a broker's commission for property you did not sell.
Court Examiners Ex 10, Document number 6.
Next, the court must consider whether to surcharge Taylor for dissipating guardianship assets by renovating property utilizing guardianship funds for property Phillips did not own. In the year 2000, Phillips conveyed 155 Herkimer Street to Franklyn Radix. Phillips was living in squalor at 155 Herkimer Street at the commencement of the guardianship proceeding. As guardian, Taylor sought to renovate an apartment at 155 Herkimer Street for the benefit of Phillips who was very unhappy in the nursing home. Taylor moved to set aside Phillip's conveyance of that property to Radix on the basis that Phillips was incapacitated at the time of the conveyance. Meanwhile, Radix defaulted on a mortgage on the property and as a result, Alliance Funding, the lender commenced a foreclosure proceeding against Radix. The property was sold at a foreclosure auction to Gurpal Cheema, a bona fide purchaser, for $390,000 in December 2004. Jules Martin Haas, the court-appointed referee transferred a referee's deed to Cheema for 155 Herkimer Street on December 1, 2004. Taylor was not aware the property had been conveyed to Cheema until after she spent approximately $120,000 of guardianship funds to renovate that property in November 2005, eleven months after Cheema took title to the property.
Guardian's Exhibit 11
Taylor breached her fiduciary duties by failing to exercise due diligence which would have revealed the sale of the property to Cheema in the foreclosure proceeding. She formulated the plan to have Phillips live at that location. It was incumbent on her to be aware of the ownership status of that property before she sank $120,000 of guardian funds to renovate that property. A simple search of the ACRIS system would have revealed the transfer of title of the property to Cheema in December 2004.
Taylor hired Hamilton Jones a/k/a Jay Hamilton (Hamilton), an unlicensed contractor to perform the renovations at 155 Herkimer Street. Hamilton was Taylor's former client with whom she had shared office space. Coen introduced into evidence a document Taylor provided to him which purported to be a competing estimate for the renovation work at 155 Herkimer Street (Court Examiner's Exhibit 9). A careful scrutiny of that estimate reveals that the alleged competitor, "Lexus Construction" shared the same exact address and telephone number as Hamilton. Hamilton's renovation work was abruptly halted by Cheema when he discovered Hamilton and other workers on his property. Hamilton and his crew were summarily dispatched from the property by the police. Coincidentally, Hamilton testified that his records of the renovation work were also destroyed when a steam pipe burst at his place of business. Taylor overall paid Hamilton $82,700 to renovate property the IP no longer owned.
Taylor also paid Charrisse Howell, her daughter and David L. McIntyre, her son-in-law $35,000 of guardianship funds for unspecified work at 155 Herkimer Street. A check for $30,000 was drawn on November 15, 2005 (#1467 from A/C #442) payable to "David L. McIntyre or Charrisse Howell" with the notation "for 155 Herkimer St." Another check for $5,000 was drawn on November 22, 2005 (#1486 from A/C #442) payable to "Charrisse Howell or Larry McIntyre" with the notation "D S Home Improvement." At trial, Taylor failed to explain what those charges covered, nor were Howell or McIntyre called to testify about those fees. Taylor also paid her son, Daniel Howell $2,515.37 in guardianship funds to monitor Hamilton's progress in the renovation of 155 Herkimer Street (Court Examiner's Exhibit 14).
Court Exhibit 1, Coen's Final Account, Schedule G, p. 19.
Taylor dissipated guardianship funds by failing to exercise due diligence. She breached her fiduciary duty by spending $120,215.37 in renovation fees for property that did not belong to Phillips and is accordingly surcharged for that amount.
Court Examiner Exhibit 8, sequentially numbered documents 3,4,5,6,7; Court Examiner Exhibit 11, sequentially numbered documents 19, 20 and 25.
Taylor used guardianship funds to pay her mortgage. On May 18, 2004, she withdrew $1,332.78 and wrote a check to "Brighton Way LLC," in the amount of $2,500 from A/C #442, the guardianship checking account. Brighton Way LLC is her mortgage holder. Taylor had no authority from the court to pay her mortgage from guardianship funds. She is therefore surcharged an additional $3,832.78 for deducting unauthorized compensation from the assets of Phillips' estate.
Court Examiner Exhibit 13.
As previously noted, Taylor hired her relatives to perform services for the IP. She retained the services of her mother, Audrey Edwards and Anna Taylor, her sister-in-law, to help care for Phillips. In January 2004, Phillips was discharged from a nursing home in the Bronx. Taylor then placed Phillips in Edwards' care. She is a retired licenced practical nurse. Edwards testified that she took care of Phillips. She dressed him, gave him his medication and took him to doctors' appointments. She allowed Phillips to use a vacant apartment in her home which she would normally rent for approximately $1,400 per month. Phillips stayed with Edwards for six months. While the court was aware Edwards was caring for Phillips, Taylor never disclosed to the court that Edwards was her mother.
According to Edwards, Taylor didn't discuss the issue of her compensation. Edwards kept records but testified that she turned them over to Taylor. Taylor paid Edwards a total of $56,750.
Court Examiner Exhibit 6, sequentially number documents 1, 2,3,4,5,6; Court Examiner Exhibit 7, sequentially number documents 1 and 2; Court Examiner exhibit 11, sequentially number documents 10, 14, 17, 21.
Taylor also paid Anna Taylor a total of $14,610 as a home attendant for Phillips. Anna Taylor testified that she took care of Phillips in the Edwards' home starting in February 2004 until July 2004. She also kept him company when he was moved to a nursing home. Taylor compensated her at a rate of $600 per week for approximately twenty-two weeks. Taylor overpaid her $2,000 which Anna Taylor testified she returned to Taylor. Taylor failed to explain what became of those sums.
Court Examiner Exhibit 3, sequentially number documents 1 thru 11; Court Examiner Exhibit 4; Court Examiner Exhibit 11 and 12.
There is no question that Edwards and Anna Taylor provided valuable services to Phillips and they were entitled to be compensated. The court credits their testimony. The parties challenging these expenditures have failed to establish that they were overly compensated for their services since no one introduced a standard by which to measure their compensation.
That said, Taylor breached her fiduciary duties in this instance by failing to inform the court she had hired relatives, and by failing to maintain records of the services her relatives were providing to Phillips. She also failed to provide her relatives with 1099's for their compensation. Court approval should have been sought prior to hiring her relatives. As aptly noted by Coen, by hiring relatives, simple logic dictated monitoring of hours, pay rates, and documentation of services, more so than with an arms length transaction with a stranger. While the court will not surcharge Taylor for hiring her mother and sister-in-law to care for Phillips, Taylor has forfeited any compensation as guardian for, among other things, failing to inform the court or keep proper records of the financial transactions she engaged in with relatives and friends utilizing Phillips' funds.
Taylor has failed to fully account for the proceeds she received for the down payment from the sale of 132-140 ($81,000) which she placed in her IOLA account. Coen introduced twenty checks, totaling $51,815.37, written out of the IOLA account which he attributes to guardianship funds. Of that amount $12,500 constitutes payments to Edwards for caring for Phillips. As noted above, Taylor shall not be surcharged for those sums, leaving a balance of $68,500 ($81,000 — $12,500) which must be addressed. Taylor spent $18,515.37 from her IOLA account to renovate 155 Herkimer Street and has been surcharged in the amount of $120,215.37 for those expenses. Therefore, the $18,515.37 taken from her IOLA account for the renovations at 155 Herkimer shall by subsumed by the $120,215.37 surcharge. Similarly, Coen attributes $20,800 in payments from the IOLA account to counsel fees she improperly paid herself. That sum shall be subsumed by the $197,416.08 surcharge imposed by the court for improperly paying herself those funds. Of the $81,000 down payment, $51,815.37 ($12,500 + $18,515.37 + $20,800) has been identified. That leaves a remaining unaccounted balance of $29,184.63. Taylor is surcharged for that amount.
Court Examiner Exhibit 6, sequentially number documents 4,5 and 6.
Court Examiner Exhibit 11, sequentially number documents 16,19,20 and 21 and Court Examiner Exhibit 14.
Court Examiner Exhibit 10, sequentially number documents 3,4,7,8,14,15, and 23.
According to Coen's report, Taylor also took a number of cash withdrawals from the guardianship accounts from November 24, 2003 to March 1, 2006, totaling $57,491.23. The withdrawal slips were not introduced into evidence at the hearing except for the cash withdrawal slips relating to her mortgage payments with IP funds. She has already been surcharged for those amounts. While the record as it stands does not support a further surcharge due to the cash withdrawals, the court nevertheless finds that Taylor breached her fiduciary duties by failing to maintain accurate receipts and records to justify those cash withdrawals. Accordingly, this breach constitutes an additional basis to deny her any compensation whatsoever for her three-year tenure as Phillips' interim successor guardian.
Accordingly, based upon the foregoing it is hereby
Ordered, that Taylor shall be surcharged in the amount of $197,416.08 for counsel fees for which she was not entitled to; and it is further
Ordered, that Taylor shall be surcharged in the amount of $52,500 for fees she took as "brokers commission" from the sale of 132-140; and it is further
Ordered, that Taylor shall be surcharged $120,215.37 for dissipating guardianship funds by using those assets to renovate property not owned by Phillips' estate; and it is further
Ordered, that Taylor shall be surcharged $3,832.78 for utilizing guardianship funds to pay her mortgage; and it is further
Ordered, that Taylor shall be surcharged $29,184.63 as the unaccounted balance of the down payment from the sale of 132-140; and it is further
Ordered, that Phillips' estate shall receive a money judgment against Taylor for the total sum of $403,148.86 plus statutory interest of 9% commencing from the date of the judgment; and it is further
Ordered, that Taylor's application for compensation for her work as interim successor guardian is denied in its entirety in view of the breach of her fiduciary duty; and it is further
Ordered, that Coen's motion to judicially settle the final account of Phillips' estate is granted, as set forth herein.
This constitutes the Decision and Order of the Court. The successor guardian of the property is directed to submit a judgment.