Opinion
2009-1961/B.
Decided on March 31, 2011.
Christian N. Valentino, Esq., Woods Oviatt Gilman, LLP, Rochester, New York, Attorneys for the Claimants, Genevieve Christian, Timothy Bayer, Mary Flood, Bryan Bayer, Mark Bayer, Dolores Fabrizi, Mary Grace Read, Janet Wood, Kathleen M. Ricketts, Michael J. Poletto, and Russell D. Poletto.
Stephen R. Silverstein, Esq., Siegel, Kelleher Kahn, LLP, Buffalo, New York, Attorneys for Lawrence C. Territo.
Audrey Cooper, Assistant Attorney General of the State of New York, Rochester, New York, Attorney for ultimate charitable beneficiaries under the Last Will and Testament of Rose P. Poletto (dated October 20, 2005): The Christian Broadcasting Network, Fairport Baptist Homes Endowment Fund, Fairport Fire Department, Fairport Public Library, Perinton Volunteer Ambulance Corporation, Rochester Public Library, St. James Major Church, School of the Holy Childhood, and Eternal World Television Network.
FACTSDecedent died April 17, 2009 survived by one sister, Genevieve A. Christian, and thirteen descendants of pre-deceased siblings: Timothy Bayer, Mary Flood, Bryan Bayer, Mark Bayer, Dolores Fabrizi, Mary Grace Read, Janet Wood, Kathleen M. Ricketts, Michael J. Poletto, Russell D. Poletto, Mary Grace Hogan (Ambs), Charlotte C. Territo, and Lawrence C. Territo. On July 17, 2009, Decedent's nephew Lawrence C.Territo ("Executor") filed a Verified Petition to Probate a Last Will and Testament, dated April 17, 1996, of the Decedent in which he was the nominated Executor and in which he and his two siblings were named as the sole residuary beneficiaries. Lawrence Territo was granted Preliminary Letters Testamentary on October 29, 2009. Included in his Petition for Probate was an assertion by Mr. Territo that, "after a diligent search and inquiry . . . there exists no will, codicil or other testamentary instrument of the decedent later in date." The Petition also listed only the Decedent's one surviving sibling, and the Petitioner and his two sisters, omitting ten of the Decedent's distributees, all cousins of Mr. Territo.
Decedent's one surviving sister, Genevieve Christian, and the ten distributees left out of the Petition for Probate, six nieces and nephews and four great-nieces and nephews of the Decedent ("Objectants"), jointly retained Woods Oviatt Gilman, LLP as counsel and conducted an investigation that ultimately determined that the April 17, 1996 will probated by Lawrence Territo was not the Decedent's Last Will and Testament. Evidence was adduced that the Decedent had executed a Last Will and Testament on July 11, 2000 and subsequently intentionally destroyed it. As the July 11, 2000 will revoked all prior wills of the Decedent, its destruction would, in the absence of a subsequent will, result in the Decedent's property passing pursuant to the laws of intestacy and Mr. Territo not being named as executor. Accordingly, on December 1, 2009, the Objectants filed a Verified Answer to Lawrence Territo's Petition for Probate and Objections to the Probate of the April 17, 1996 Will.
Mr. Territo did not concede to the validity of the July 11, 2000 will, and litigation commenced. Objectants' counsel secured affidavits from the draftsman of the later will, the attorney who oversaw its later destruction, and witnesses to the will's execution and destruction. These parties were then deposed by Mr. Territo's counsel to ascertain if the Decedent was mentally competent, under undue influence, duress, or if her actions were the product of fraud. No evidence of a lack of testamentary capacity was adduced at the five depositions conducted by Executor's counsel. However, Mr. Territo continued to challenge the validity of the later will and claim that Decedent lacked testamentary capacity at its execution, causing a subpoena duces tecum to be issued seeking the Decedent's medical records.
On August 12, 2010, after over a year of litigation regarding the validity of the July 11, 2000 will, when it became apparent that the Objectants were about to file an Administration petition, Lawrence Territo suddenly located and filed a third will of the Decedent, dated October 20, 2005. This will named Mr. Territo as Executor and divided the residuary into two shares, twenty percent to be divided among various charities, and the remaining eighty percent is to be distributed in various shares to ten family members, excluding only four distributees, great-nieces and great-nephews of the Decedent: Timothy Bayer, Mary Flood, Bryan Bayer, and Mark Bayer. While Mr. Territo had vehemently doubted the Decedent's capacity to execute a will in 2000, he did not raise issues of Decedent's competence at the execution of the 2005 will. The October 20, 2005 will was admitted to Probate on November 24, 2010, and Lawrence Territo was issued full Letters Testamentary.
On November 5, 2010, the instant proceeding was commenced when Woods Oviatt Gilman, LLP filed a Petition to Fix and Determine Compensation pursuant to SCPA § 2110, requesting fees in the amount of $24,853.61 and disbursements in the amount of $1,721.39 to be paid from the Estate of Rose P. Poletto, alleging that if not for their efforts, the invalid April 17, 1996 will would have been admitted to probate, unjustly enriching Lawrence C. Territo and his siblings to the detriment of the rightful beneficiaries. The fee requested reflects over 175 hours of attorney and paralegal time incurred since August, 2009.
On January 7, 2011, Verified Objections to the Petition were filed by the Attorney General of the State of New York on behalf of the ultimate charitable beneficiaries under the October 20, 2005 will. The Attorney General alleges that the Objectants acted primarily in their own interest, that their actions did not enlarge the Estate itself, and that they cannot "take credit" for finding the will admitted to Probate. The Attorney General also proposes that if the Objectants' legal fees should be borne by anyone, it is Lawrence Territo, due to his malfeasance. While the Attorney General does not represent the Objectants, and in any case, they do not object to the Petition for legal fees, the Attorney General also raises the argument that to pay the legal fees out of the Estate would result in the potentially unjust result of only the four non-legatee Objectants, great-nieces and nephews Timothy Bayer, Mary Flood, Bryan Bayer, and Mark Bayer, being made whole, while the legacies of the seven legatee Objectants, Genevieve Christian, Dolores Fabrizi, Mary Grace Read, Janet Wood, Kathleen M. Ricketts, Michael J. Poletto, and Russell D. Poletto, would be diminished.
In response to both the Petition and the Objections, Lawrence Territo and his attorney, Stephen R. Silverstein filed Affidavits on January 18, 2011. In his Affidavit, Mr. Territo does not claim to have lacked knowledge regarding the existence of his ten cousins upon the filing of his petition for probate, but denies any wrongdoing, claiming that he was right to question the July 11, 2000 will, as it was "sketchy," contained misspellings, and was allegedly prepared by an attorney whose office was more than fifty miles from the Decedent's home. Additionally, Mr. Territo claims that a copy of the October 20, 2005 will was not among the Decedent's papers, and it was only after an exhaustive review of her records that he found a checkbook ledger notation for a check paid to Douglas W. Whitney, Esq. When contacted, Mr. Whitney disclosed that he had drafted and kept the October 20, 2005 will in his files after providing the Decedent with a copy for her records. Mr. Silverstein's Affidavit reiterates these same claims, and argues that if legal fees are to be awarded from the Estate, the fees should be paid at the hourly rate agreed upon by the Executor and Mr. Silverstein-less than the hourly rate charged by Woods Oviatt Gilman.
For reasons further detailed below, the Court finds that adequate evidence was presented by Objectants' counsel to justify the amount of fees sought. Further, due to the circumstances surrounding the delayed discovery of the proper will, these fees shall be paid in equal shares by the Estate and Mr. Territo personally.
OPINION
I. The Reasonableness of the Fee Award
To assess the reasonableness of the amount of the fees charged, "the court should consider the following factors in reaching its determination: the time and labor required, the difficulty of the questions involved, and the skill required to handle the problems presented; the lawyer's experience, ability and reputation; the amount involved and benefit resulting to the client from the services; the customary fee charged by the Bar for similar services; the contingency or certainty of compensation; the results obtained; and the responsibility involved." Matter of Freeman, 34 NY2d 1, 9, 355 N.Y.S.2d 336, 311 N.E.2d 480 (1974).
Mr. Silverstein argues that the fees, if awarded, should be set at his own hourly rate instead of the hourly rate charged by Woods, Oviatt Gilman. However, due to the discount already given to the Objectants, the average hourly rate actually charged for the documented 175 hours is already considerably less than Mr. Silverstein's rate.
After a review of the affirmation of services included within the Petition, and taking note of the discount already granted the Objectants by Woods Oviatt Gilman, the Court declines to decrease the fees requested.
II. The Court's Discretion to Grant and Determine the Source of Legal Fees
Surrogate's Court Procedure Act (SCPA) section 2110 authorizes the Surrogate to, "fix and determine the compensation of an attorney for services rendered to a fiduciary or to a devisee, legatee, distributee or any person interested," and to direct payment of the fees, "from the estate generally or from the funds in the hands of the fiduciary belonging to any . . . person interested." Further, SCPA § 2301(4) places it within the Court's discretion to provide that costs be "made payable by any party personally." The Attorney General relies heavily on the case Application of Elias, Schewel and Schwartz to argue that the discretion granted the Court by SCPA § 2110 to grant attorneys' fees is limited solely to those instances in which the fees were not incurred primarily for the benefit of a client, and "resulted in a greater distribution than might have otherwise been expected." Application of Elias, Schewel and Schwartz, 55 AD2d 448, 451-452, 390 N.Y.S.2d 739, 742 (4th Dep't 1977). While that is one circumstance under which attorneys' fees may be granted, and importantly, the situation confronted by the court in Application of Elias, Schewel, and Schwartz, it is not exclusive, nor was it contemplated to be so.
The work of the attorneys to whom fees are granted must benefit the estate, but that benefit is not limited solely to a monetary increase in the estate value. For example, establishing the kinship of distributees of the decedent has been considered a benefit to the estate entitling legal fees to be paid from the estate. See, e.g., Matter of White, N.Y.L.J., October 23, 2003, at 33, col. 4 (Surr. Ct. Suffolk Co. 2003) ; Matter of Wiltshire, 4 AD2d 981, 167 N.Y.S.2d 852 (3d Dep't 1957).
As stated in Application of Elias, Schewel, and Schwartz: "The theory which justifies payment by the estate to the attorney of a beneficiary is that the attorney has represented the fiduciary who has defaulted in protecting or collecting the assets of the estate and, therefore, what would have been a proper charge for legal fees if the executor had acted, is a proper charge when the executor fails to act because of an adverse interest, disinclination or neglect." Application of Elias, Schewel and Schwartz, 55 AD2d 448, 451-452, 390 N.Y.S.2d 739, 742 (4th Dep't 1977). While volunteers may not be compensated from the general assets of the estate, "The right of an interested party to act as a Quasi fiduciary arises only of necessity when the fiduciary is unable to act impartially or is unwilling to do so." Id. at 453.
The Attorney General also relies on Matter of Baxter, 196 AD2d 186, 609 N.Y.S.2d 992 (4th Dep't 1994), but the holding in Baxter, while discussing the issue of estate attorneys' fees, dealt specifically with fees for legal services performed solely on behalf of the administrator in a personal capacity-services that "did not benefit or enlarge the estate in any manner." Matter of Baxter, 196 AD2d at 190. The court in Matter of Baxter went on to explain that the payment of legal fees out of the estate is appropriate under SCPA § 2110 in a situation where there are, "interests of the executors adverse to those of the beneficiaries," such that, "the personal interests of the executors cause them and their counsel, in effect, to step aside and permit those whose interests are not inimical to the estate in general to protect the rights of the estate." Id. That is the situation the beneficiaries were presented with here. Had they not acted, the Executor would have caused the wrong will to be probated, resulting in significant financial gain to himself and his siblings. In the absence of a valid will, Mr. Territo and his siblings would have shared in 20% of the residuary Estate pursuant to the laws of intestacy, as opposed to 100% of the residuary as directed by the April 17, 1996 will. Additionally, the bequests to the charitable beneficiaries would have been eliminated or greatly reduced under both the earlier will and the laws of intestacy.
As the ultimate goal of all involved in the probate of a will is to ensure the disposition of the decedent's property in conformance with his or her living wishes, it cannot be said that the actions of the Objectants here did not further that goal and benefit the Estate. The Objectants, "supplied the kinetic force that moved the [fiduciary] to action,"and they should not be punished for their initiative by bearing the burden of services benefitting the other legatees. See Application of Elias, Schewel and Schwartz, 55 AD2d 448, 451-452, 390 N.Y.S.2d 739, 742 (4th Dep't 1977). It would be inequitable for the beneficiaries represented by the Attorney General to receive free legal services establishing their entitlement to any share of the Estate at the expense of the distributees. See, e.g., Matter of Altman, 1 Misc 3d 566, 770 N.Y.S.2d 582 (Surr. Ct. Bronx Co. 2003).The Estate simply would not exist in its current, proper form but for the Objectants' actions. "It is the necessity of the situation which justifies the payment to the attorney of one party by all the others interested in the estate." Application of Elias, Schewel and Schwartz, 55 AD2d 448, 451-452, 390 N.Y.S.2d 739, 742 (4th Dep't 1977).
In a landmark decision, the Court of Appeals recently further clarified the broad discretion granted the Surrogate by SCPA § 2110 by holding that SCPA § 2110 grants the trial court discretion to allocate responsibility for payment of attorney's fees which "the estate is obligated to pay — either from the estate as a whole or from shares of individual estate beneficiaries,"and establishing a "multi-factored assessment" to be used by the trial court in its analysis. Matter of Hyde , 15 NY3d 179 , 933 N.E.2d 194 (2010). In Matter of Hyde, the court overruled its 1971 decision in Matter of Dillon, 28 NY2d 597, 3129 N.Y.S.2d 850 (1971), which prevented lower courts from charging fees against the shares of individual parties. In Hyde, the court relied on the "plain meaning" of SCPA § 2110(2) and returned to flexible "considerations of fairness" that had governed before Matter of Dillon. Id. at 186. While the legal services at issue in the instant case were rendered to distributees and not the fiduciary himself, the situation here is analogous and the framework provided is still instructive.
To guide the court in determining the sources from which legal fees are to be paid, Matter of Hyde outlines the following factors, "none of which should be determinative:"
(1) whether the objecting beneficiary acted solely in his or her own interest or in the common interest of the estate; (2) the possible benefits to individual beneficiaries from the outcome of the underlying proceeding; (3) the extent of an individual beneficiary's participation in the proceeding; (4) the good or bad faith of the objecting beneficiary; (5) whether there was justifiable doubt regarding the fiduciary's conduct; (6) the portions of interest in the estate held by the non-objecting beneficiaries relative to the objecting beneficiaries; and (7) the future interests that could be affected by reallocation of fees to individual beneficiaries instead of to the corpus of the estate generally. Matter of Hyde ,15 NY3d 179, 186-187, 933 N.E.2d 194 (2010).
It is undisputed that Lawrence Territo had primary access to the Decedent's home, personal papers, and safe deposit box while she spent time in a nursing home prior to her death. The Decedent was provided with a copy of the October 20, 2005 Will, and by all accounts kept careful and extensive records. While Mr. Territo avows that he had no knowledge of the October 20, 2005 Will, his unwarranted litigiousness regarding the probate of the July 11, 2000 Will, coupled with the circumstances under which the proper Will was located, and his failure to properly disclose to the Court the existence of his other family members, raise concerns regarding Mr. Territo's good faith in the execution of his fiduciary duties. Not until the eve of the Objectants' filing of an administration petition did Mr. Territo suddenly find' the October 20, 2005 Will, the probate of which, while giving him less than the 2000 Will, would still result in a net gain to him due to the commission due him as Executor.
While, as Mr. Territo points out in his Affidavit to the Court, it is true that a preliminary executor may be entitled to compensation even if the will is denied probate or the preliminary letters are revoked for another reason, the preliminary executor is then entitled only to "such compensation, if any, as the court shall determine to be reasonable and just for the services rendered by him to the estate," based upon property "of which a preliminary executor took possession and then distributed or otherwise disposed of." SCPA 1412(7). As the Decedent's Estate is valued at approximately 1,000,000.00 dollars, a full statutory executor's commission would unarguably exceed any compensation due Mr. Territo for his services to the Estate as Preliminary Executor.
Based on the circumstances, the Court has no choice but to find the ninth hour discovery' of the Decedent's final Will by Mr. Territo to be suspicious. An entire year of litigation preceded that discovery, during which Mr. Territo made numerous claims that the Decedent lacked testamentary capacity, even attempting to obtain medical records to support that claim. However, a will drafted more than five years later, when the Decedent was 89 years old raised no such issues with Mr. Territo. Mr. Territo's self-serving actions raised justifiable doubt' in the eyes of the Objectants, and they acted to the benefit of the Estate as a whole. See, Matter of Hyde, Id.
As for the portion of interest in the Estate held by the non-objecting beneficiaries relative to the objecting beneficiaries; under the final Will, all of the Decedent's legatee family members are entitled to between five and sixteen percent of the residuary. Mr. Territo and his siblings, the only non-objecting beneficiaries, are each entitled to approximately five percent of the residuary, the same amount as three of the objecting beneficiaries.
While the Objectants acted in apparent good faith, with justification, and to the benefit of the Estate as a whole, the Estate should not bear the entire burden of the lengthy litigation. The courts have, in numerous instances, "held a fiduciary liable for the attorney's fees and other expenses incurred by the estate in exposing his misconduct." Birnbaum v. Birnbaum, 157 AD2d 177, 191, 555 N.Y.S.2d 982, 991 (4th Dep't 1990) ( internal citations omitted) ; see also Matter of Rose BB., 35 AD3d 1044, 1045, 826 N.Y.S.2d 791, 793 (3d Dep't 2006) (awarding legal fees to be paid by the fiduciary where he was responsible for "obstructing and prolonging an otherwise uncomplicated proceeding.") The Surrogate's Court is "empowered to charge an administrator personally for legal expenses incurred in establishing the latter's wrongdoing ." Matter of Campbell, 138 AD2d 827, 829, 525 N.Y.S.2d 745, 747 (3d Dep't 1988); see also Matter of Garvin, 256 NY 518, 521-522 (1931); Matter of Graham, 238 AD2d 682, 656 N.Y.S.2d 434 (3d Dep't 1997) (holding that it was not an abuse of the Surrogate's discretion to order a fiduciary to pay the costs of litigation entered into by the estate due to the fiduciary's conduct).
As the Objectants' actions were required due to Mr. Territo's inability to timely produce the proper will of the Decedent, and his voracious opposition to a will that entitled him to a lesser share of the Estate, he should be personally responsible for the costs of that litigation. It is unascertainable what portion of the accrued legal fees are attributable to the location of the proper will and what portion are attributable to the frivolous litigation, so in the interests of equity, the fee shall be split in equal shares among the Estate as a whole and Mr. Territo personally.
Further, Mr. Territo must be removed as Executor pusuant to SCPA 719(10), and shall forfeit any commissions due him for services rendered to the Estate thusfar. See, e.g. Matter of Mason, N.Y.L.J., October 26, 2009, at 28, col. 1 (Surr. Ct. Bronx Co. 2009).
Therefore, in accordance with the above decision it is hereby
ORDERED, ADJUDGED and DECREED that attorneys' fees, costs and expenses in the amount of $13,287.50 be paid by the Estate of Rose P. Poletto to Woods Oviatt Gilman, LLP within thirty days, said funds to be immediately used to reimburse the legal fees, costs and expenses previously paid to Woods Oviatt Gilman, LLP for representation in this matter; and it is further
ORDERED, ADJUDGED and DECREED that attorneys' fees, costs and expenses in the amount of $13,287.50 be paid by Lawrence C. Territo to Woods Oviatt Gilman, LLP within thirty days, said funds to be immediately used to reimburse the legal fees, costs and expenses previously paid to Woods Oviatt Gilman, LLP for representation in this matter; and it is further
ORDERED, ADJUDGED and DECREED that the Letters Testamentary Issued by this Court to Lawrence C. Territo are revoked pusuant to SCPA 719(10), and he shall forfeit receipt of commissions under SCPA Section 2307; and it is further
ORDERED, ADJUDGED and DECREED that upon his qualifying for letters by executing an Oath and Designation, Letters of Administration c.t.a. shall issue to Frank B. Iacovangelo, Esq.; and it is further
ORDERED, ADJUDGED and DECREED that Lawrence C. Territo transfer all Estate assets, records and all other Estate property to Frank B. Iacovangelo, Administrator c.t.a. forthwith; and it is further
ORDERED, ADJUDGED and DECREED that Stephen R. Silverstein, Esq. provide a copy of the Estate file to Frank B Iacovangelo, Esq. forthwith.