Matter of T.GARGARO

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[*1] Matter of Gargaro 2004 NY Slip Op 50646(U) Decided on June 24, 2004 Surrogate's Court, Monroe County Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on June 24, 2004
Surrogate's Court, Monroe County

In the Matter of the Accounting by Russell Artuso and Patrick Artuso as Co-Executor of the Estate of Ida T. Gargaro



2001 DT 01676/A



Miles P. Zatkowsky, Esq. for Russell Artuso and Patrick Atruso, Petitioners and Co-Executors of the Estate of Ida T. Gargaro. David S. Stern, Esq. for Louis Artuso, Joseph Artuso, and Michael Artuso, Objectants and beneficiaries under the Will of the decedent, Ida T. Gargaro.

Edmund A. Calvaruso, J.

On May 7, 1999, the honorable Francis A. Affronti, J.S.C. signed an Order appointing Lifespan, Inc. as Guardian of Ida T. Gargaro pursuant to Article 81 of the Mental Hygiene Law.

Shortly after its appointment as guardian, Lifespan retained Miles P. Zatkowsky to investigate the management of Gargaro's assets by one Tina Bianca, Gargaro's caretaker. On behalf of its ward, Lifespan, represented by Zatkowsky, commenced an action in Supreme Court against Tina Bianca for fraudulent conversion of Gargaro's assets and breach of fiduciary duty. The disposition of the civil matter and subsequent recovery of compensatory damages did not occur until well after Gargaro passed away on March 12, 2000.

Ordinarily, Lifespan's guardianship of Gargaro would have ended upon her death, MHL §81.36; see also Matter of Baron, 180 Misc. 2d 766 (Surr. Ct. New York Co., 1999). However, the guardianship was allowed to continue for the pendency of the civil action by an Order of the Supreme Court dated June 1, 2000. Upon the conclusion of the civil action, a proceeding to terminate the Guardianship was initiated in Supreme Court before the honorable Kenneth Fisher, J.S.C. and subsequently transferred to Surrogate's Court by a Supreme Court Order dated January 21, 2003.

Petitioners filed their Account and Petition for Judicial Settlement on August 29, 2003. Louis Artuso, Joseph Artuso, and Michael Artuso, who along with the Petitioners are nephews of the decedent, filed objections to the Account of the Executors on December 15, 2003.

At issue are the attorney fees claimed by Zatkowsky for the services provided in the Supreme Court action. As stated in the Account, the net proceeds from the Supreme Court action amount to $115,643.78. In Schedule C-A of the Account, which lists the unpaid administrative expenses, the Petitioners indicate the sum of $57,821.89 owed to Zatkowsky for attorney's fees in connection with the Supreme Court action. The Objectants assert that the attorney's fees charged by Zatkowsky under the second retainer agreement are excessive and beyond "the market rate" [*2]for the services provided.

The objections, however, are technically not before the Court as they are unverified, SCPA §303, and signed only by their legal counsel who is without stated authority or personal knowledge of facts asserted in the pleading. CPLR §3020(a).

Nevertheless, given the unusual nature of the 50% contingency within the retainer agreement, the Court is compelled to review the fee.

DECISION

Lifespan, as Guardian for the decedent, initially entered into a retainer agreement with Zatkowsky to commence an action against Tina Bianca, however, that agreement was terminated by virtue of her death. Hart v. Blabey, 286 N.Y. 75 (1941); Matter of Robbins, 61 Misc. 114 (Sup. Ct. Kings Co. 1908).

Zatkowsky sought to continue his representation in the pending civil matter by seeking authorization from the decedent's personal representatives. Estate of Gutchess, 117 A.D. 2d 852 (3rd Dept. 1986); Matter of Maratto's Will, 145 N.Y. 2d 621 (1955). The second retainer agreement is in the form of a letter by Zatkowsky dated October 23, 2000 to the Petitioners. In his letter, Zatkowsky set forth the complexities of the civil action and requested a 50% contingency fee. At the end of the letter, Zatkowsky requested the Petitioners counter-sign the letter to indicate their assent to the agreement. Russell Artuso signed the letter on December 1, 2000; Patrick Artuso's signature also appears on the letter, yet it is not dated.

At the time the agreement was countersigned, neither Patrick nor Russell Artuso had the authority to sign the agreement on behalf of the Estate as neither of them was a fiduciary of the decedent's estate. This Court issued preliminary letters testamentary for the Estate to both Patrick and Russell on November 26, 2001, some eleven months after they signed the retainer agreement. Only after the issuance of the preliminary letters did either of the Petitioners possess the authority to bind the Estate. see SCPA §1412. Therefore, the contingency fee cannot be considered an unpaid administrative expense and should have been characterized as a claim against the Estate.

Nevertheless, Lifespan did sign the second retainer agreement and apparently had authority to do so by the Supreme Court Order dated June 1, 2000, which authorized Lifespan to continue as Guardian despite the death of Gargaro. Absent this unusual conferral of authority to continue to act as a guardian after the ward has passed, there would be no enforceable retainer.

From the beginning, there should be recognition of the traditional authority of the courts to supervise the charging of fees for legal services under the courts' inherent statutory power to regulate the practice of law. People ex rel. Karlin v. Culkin, 248 N.Y. 465(1928); Gair v. Peck, 6 N.Y. 2d 97 (1959); cf. Judiciary Law §§ 474 and 474-a. The enactment of Judiciary §474 and later §474-a formalized the practice of compensating attorneys by way of a contingency agreement. However, contingency fees may be disallowed in spite of the presence of a contingency retainer agreement where the amount becomes large enough to be out of all proportion to the value of the services provided. Gair, supra at 106.

A contingency fee that provides the attorney with 50% of the recovery, such as the agreement presently before the Court, is not unconscionable as a matter of law. Application of Peters, 271 A.D. 518 (3rd Dept. 1947). Furthermore, the rate of compensation fixed by a retainer [*3]will not be condemned merely because the fee seems inordinately large, unless it is so excessive as to suggest that the attorney took advantage of the client. Rogers v. Sound of Music Company, 74 Misc. 2d. 699 (Sup. Ct. New York Co. 1972).

In Matter of Friedman, 136 A.D. 750 (2nd Dept. 1910), a contingency fee agreement of 50% of the amounts recovered was held by the Court to not be fraudulent per se in all instances. However the Second Department stated, "But such a recovery may be such that what was in the first instance a fair contract becomes unfair in its enforcement . . . the recovery may be such that the lawyer's retention of it would be unjustified, and would expose him to the reproach of oppression and overreaching." supra at 752. In Morehouse v. Brooklyn Heights R.R. Co., 185 N.Y. 520 (1906), the Court of Appeals opined "an agreement to pay an attorney one-half of the recovery, where the action was to recover a penalty of $50, would not by any person be considered improper; but, if it was for $500,00, it might be considered improper."

There comes a point where the attorney's fees received under a contingency retainer are large enough to be unenforceable under the circumstances of the case. Gair v. Peck, 6 N.Y. 2d 97 (1959). The resulting fee from the 50% contingency included in the retainer signed by Zatkowsky and the Petitioners is very close to, if not beyond, that point.

It has been said that "an attorney's standing and experience should be the test of his worth, not his checkbook." Bijur v. Purdy, NYLJ 10/7/65, p.15 col. 6. (Sup. Ct. New York Co.). Given the limited assets of the Estate, the Court sets Zatkowsky's fee at $38,547.93, or 33.3% of the recovery of the civil litigation. The Court fixes the fee upon consideration of all the factors enunciated in Matter of Freeman, 34 N.Y. 2d 1 (1974) and also set forth in NYCRR §1200.11, with particular emphasis upon the fees customarily charged in the community for the services provided.

The Court directs that the Executors submit an amended Accounting reflecting both the Court's fixation of the attorney's fee in the Supreme Court action and the claims against the Estate of both Lifespan and the Monroe County Division of Social Services.

This Decision shall constitute an Order of this Court.

Dated:

Rochester, New York __________________________________

Honorable Edmund A. Calvaruso