Matter of Blau

[*1] Matter of Blau 2009 NY Slip Op 51934(U) [24 Misc 3d 1249(A)] Decided on September 15, 2009 Sur Ct, Bronx County Holzman, J. 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 September 15, 2009
Sur Ct, Bronx County

In the Matter of the Estate of Herbert Blau, Deceased



3P2003/B



Peter Vermont, Esq. for Lila Abraham, Executrix

Bahn Herzfeld & Mutler, LLP (Richard L. Herzfeld, Esq., of Counsel) for Muriel Gutman, Objectant

Lee L. Holzman, J.

In this accounting proceeding, the objectant, who receives 37.5% of the residuary estate, filed six objections to the account of the executrix who receives 5% of the residuary estate. No other interested party filed objections, and it appears that the objectant was the only beneficiary who would not consent to a distribution based upon an informal accounting that was prepared for the period from August 25, 2002 through May 13, 2006. Pursuant to a stipulation, the only two objections that were not withdrawn were those relating to attorney's fees and commissions, and the parties waived a hearing.

The decedent died on August 25, 2002. His will was admitted to probate in July, 2005. The account reports "total charges" of $656,149.90 as of August 15, 2007. The attorney's fees reported in the account total $58,900. Although counsel does not specifically state the amount of compensation he is seeking, his affidavit of services reflects that he rendered 351.9 hours of legal services from the inception of the estate through May 31, 2009, for which he is seeking compensation pursuant to his retainer agreement at an hourly rate of $200. He also states that he was paid for all bills that he submitted with the exception of his most recent invoice for $4,200. It further appears that accompanying this bill was a request for an additional retainer of $3,000 to conclude the administration of the estate. Thus, it appears that the total compensation requested by counsel is $73,380 (351.9 x $200 + $3,000).

The parties have spent considerable time and effort on motion practice relating to discovery issues, such as who should pay the charges for copying documents requested by the objectant and the price per page for such copies (Matter of Blau, NYLJ, Feb. 2, 2009, at 29, col 4), and whether the compulsory accounting proceeding instituted by the objectant was abandoned when the objectant failed to settle a decree within 60 days of the decision directing the executrix to account (Matter of [*2]Blau, NYLJ, June 11, 2007, at 35, col 4). The objectant received half of her share of the estate only after she moved to compel distribution and an agreement was reached after a conference with the court. Each side blames the other for causing delay and unnecessary legal work.

With respect to the legal fees charged by counsel for the executrix, the objectant contends that the estate should not be charged for 35 hours in connection with the objections, discovery and distribution issues and 30 hours with respect to the proceeding to compel an accounting because these 65 hours were due to the executrix' failure to properly manage the estate. The objectant further argues that up to 50 hours of legal time should not be charged to the estate because they are attributable to services that were executorial in nature. The objectant asserts that the burden is on the attorney to prove his fees are compensable from the estate, so any entry that includes both compensable and non-compensable work should be denied in its entirety. The objectant takes the extreme position that counsel should not be allowed any compensation from the estate because he attempted to withhold her legacy to coerce her into accepting the accounting without providing documentation to support it.

Counsel counters that the objectant's unreasonableness gave rise to most of the legal fees. He argues that the objectant's withdrawal of most of her objections proves that she pursued frivolous issues which caused him to spend time defending against them. Counsel further notes that even if some of the work was executorial, all the services "were absolutely necessary to the administration of the estate;" and the executrix, a woman in her 80s, relied heavily upon him to help her for reasons including that her husband was institutionalized with Alzheimer's disease at the time of her appointment.

The reasonableness of legal compensation awarded to counsel for the fiduciary of an estate is within the sound discretion of the surrogate's court (Stortecky v Mazzone, 85 NY2d 518, 525-526 [1995]; Matter of Phelan, 173 AD2d 621 [1991]). Retainer agreements for estate matters are frequently based upon an agreed hourly rate. Nonetheless, "[t]he timeclock approach . . . is, most certainly, not that to be exclusively employed" in fixing reasonable counsel fees in estate matters (Matter of Snell, 17 AD2d 490, 494 [1962]).The factors the court is to consider in determining appropriate legal fees are set forth in Matter of Freeman (34 NY2d 1, 9 [1974]) and Matter of Potts (213 App Div 59 [1925], affd 241 NY 593 [1925]). The fact that a fiduciary is unable to perform the duties of the position does not justify employing an attorney to fulfill those duties at the expense of the estate (see Matter of McCranor, 176 AD2d 1026 [1991], citing Matter of Smith, 154 Misc 53, 55 [1935]). Items that are executorial in nature cannot be charged to the estate as legal fees (Matter of Ellis, 277 AD2d 102 [2000]; Matter of Mergentime, 207 AD2d 452 [1994]).

Although the court has no reason to doubt that counsel spent the number of hours he alleges and notes that his hourly rate is at the lower end of what is usually charged by attorneys in this area for the services performed herein, he cannot be compensated at any rate for executorial services or for spending significantly more time on issues than warranted based, inter alia, upon their complexity and the amount involved. This is especially true where, as here, those who are, in effect, paying most of the legal fee are beneficiaries who did not enter into a retainer agreement with counsel.

The court appreciates that more services were required in this estate than in a very simple estate as a result of the following: (1) the need to address a few relatively modest claims and tax issues; (2) the need to obtain jurisdiction over the decedent's unknown distributees in the probate proceeding; and (3) the need to prepare a formal account and defend against the objections thereto. [*3]Furthermore, the objectant cannot complain about the time that counsel reasonably spent defending against the objections that ultimately were withdrawn.

Here, it would take extraordinary circumstances, such as an exceptional result in a complex matter, to warrant counsel's requested fee of $73,380, which equals 11.2% of this estate with "total charges" of $656,149.90. No such extraordinary circumstances are presented. To the contrary, counsel spent an unreasonable number of hours in opposing both the request for a formal accounting and for the production of records which clearly had to be produced. He haggled with opposing counsel over who should pay for the cost of photocopying documents in his possession and the charge for each page. In addition, he failed to produce his time records or to make any distribution to the objectant until those issues were presented before the court. Furthermore, although counsel and the executrix could not be faulted for holding a reasonable sum in reserve to cover any possible expenses until such time as the account was judicially settled, there was no justification for the time that counsel spent trying to withhold the objectant's entire legacy until she agreed to settle. The executorial services that counsel performed included being involved with jewelry of limited value, the decedent's mail, the decedent's cable service, and surrendering the decedent's apartment. The court finds that counsel spent approximately 25% more time than he should have in this estate on the following: (1) rendering services that were executorial rather than legal; (2) rendering services on issues that should have been conceded; and (3) spending more time on an issue than was warranted by its complexity or the amount involved.

Accordingly, based upon a consideration of all of the factors in fixing counsel's compensation (Matter of Freeman, 34 NY2d at 9), counsel is awarded compensation in the sum of $52,500 for all legal services rendered and to be rendered from the inception of this estate to the entry of a decree judicially settling the account and making the distributions directed therein. The award of this fee from estate assets is without prejudice to counsel's right, if any, to recover a portion of his disallowed fee from the executrix.

With respect to the commissions objection, "statutory commissions must be awarded in the absence of mathematical error in their computation or allegations of misconduct amounting to dereliction, complete indifference or other comparable acts of misfeasance"(Matter of Drier, 245 AD2d 787, 788 [1997], lv denied 91 NY2d 812 [1998]; see also Matter of Kramer, 78 Misc 2d 662 [1974]). Courts often require evidence of bad faith or gross mismanagement before denying or reducing commissions (see Matter of Palcic, NYLJ, May 18, 2001, at 21, col 1).

The objectant relies upon Matter of Rozycki (144 Misc 2d 741 [1989]) and Matter of Simpson (61 Misc 2d 307 [1969]) in support of her objection that the executrix is not entitled to statutory commissions. Objectant essentially contends that commissions should be disallowed because the executrix and her counsel unreasonably delayed making any distributions to her for a period of almost seven years after the decedent's death. The executrix counters that probate was delayed until July, 2005 because no one had any knowledge about the decedent's distributees, and that the delay thereafter was caused by the objectant's conduct.

Contrary to the contention of each party that the other is solely responsible for the delay in the administration of this estate, the court finds that this is a classic case of "it takes two to tango." The executrix reasonably tried to conclude this estate with an informal accounting, and with the exception of the objectant, all other interested parties were willing to accept the informal accounting. Moreover, after the objectant decided to pursue a formal accounting, she waited approximately seven [*4]months to settle the order directing the accounting. Thereafter, both sides spent a considerable amount of time arguing about issues both large and small.

Neither of the cases relied upon by the objectant is controlling. In Rozycki (144 Misc 2d at 741), the executor was denied commissions not only because he was the sole party responsible for the delay but also because he failed to account within the time ordered by the court. In Simpson (61 Misc 2d at 307), the executor died after he filed his account but before a decree was entered. Thereafter, his attorney was appointed as successor executor. The court disallowed any commissions to either the deceased executor or the successor, noting, inter alia, the following: (1) awarding commissions was discretionary due to the death of the executor prior to the conclusion of the accounting proceeding; (2) the attorney was compensated for legal services not only in the estate but also in a proceeding involving the committee for the decedent's brother, the sole beneficiary of the estate; and (3) it would be bad precedent to allow small estates to languish for an inordinate amount of time.

Here, the court finds that the executrix has not engaged in the type of egregious conduct that would warrant disallowing or reducing the statutory commissions. Accordingly, the objection seeking such relief is dismissed.

Lastly, and notwithstanding that this was not one of the objections to the account, the objectant seeks interest on her residuary bequest. This request was not properly presented. Furthermore, interest is not awarded under EPTL 11-1.5 to residuary beneficiaries (Matter of Paruch, 161 Misc 2d 526 [1994]; see also Matter of Witherill, 8 Misc 3d 1012 [A] [2005], 2005 NY Sup Op 51062[U] affd 37 AD3d 879 [2007]).

This decision constitutes the order of the court directing the executrix to update her account through September 30, 2009 and to settle a decree judicially settling her account no later than October 30, 2009. Of course, the amended schedule C shall include all payments made to counsel and reflect a credit for the amount that counsel refunded, representing the difference between the amount he was paid and the sum of $52,500 that is awarded herein. This refund shall be made by September 30, 2009, and in the event that counsel fails to do so, interest at the statutory rate shall be added to the amount not refunded from the date that counsel received an amount in excess of the sum awarded herein to the date of repayment. The updated account shall be served upon the objectant together with the proposed decree judicially settling the account.

The Deputy Chief Clerk shall mail a copy of this decision and order to respective counsel.

Proceed accordingly and settle decree.

SURROGATE