Matter of Allen

[*1] Matter of Allen 2007 NY Slip Op 51264(U) [16 Misc 3d 1104(A)] Decided on May 18, 2007 Supreme Court, Kings County Tomei, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 May 18, 2007
Supreme Court, Kings County

In the Matter of the Judicial Settlement of the Final Accounting of the Property of LILLIAN L. ALLEN Now Deceased.



100270/2002

Albert Tomei, J.

Following a hearing on this contested accounting proceeding in the final accounting of Helen Wells as Temporary Guardian of Lillian Allen, now deceased, the court makes the following findings of facts and conclusions of law:

A temporary guardian may be appointed "upon [a] showing of danger in the reasonably foreseeable future to the health and well being of the alleged incapacitated person, or danger of waste, misappropriation, or loss of property of the alleged incapacitated person" (MHL §81.23[a][1]). The powers and duties of a temporary guardian are limited to those enumerated in the order of appointment (MHL §81.23[a][1]).

"The authority and responsibility of a temporary guardian begins upon the issuance of the commission of temporary guardianship" (MHL §81.23[a][3]). Death of the incapacitated person terminates the guardianship (Velozzi v. Brady, 267 AD2d 695 [3 Dept., 1999]; In re Estate of Baron, 180 Misc 2d 766 [NY Surr., 1999]). However, the guardian does retain the power to provide for the incapacitated person's burial which shall be paid for from the incapacitated person's estate (MHL §81.21[a][14], §81.36[e]). The guardian is also authorized to "pay bills after the death of the incapacitated person provided the authority existed to pay such bills prior to death until a temporary administrator or executor is appointed" (MHL §81.21[a][19]). Upon termination of the appointment, the guardian is authorized to "deliver such property to the personal legally entitled to it" (MHL §81.20[a][6][v]), which has been interpreted to mean that the property may be delivered to the estate representative upon an order of the Surrogate's Court (In re Estate of Baron, 180 Misc 2d. 766 [NY Surr., 1999]; Estate of Irma Paige, NYLJ Aug, 22, 2001 at 19, col. 5. [Surr. Ct., Bronx County]), or as directed in the order approving the final accounting in the guardianship matter (Matter of Elefant, 164 Misc 2d 265 [Sup. Ct., New York County, 1995]).

By order dated January 16, 2003, Justice Douglass appointed Helen Wells as Temporary Guardian of Lillian Allen on the consent of all parties. Ms. Wells was appointed to serve without bond and her powers as Temporary Guardian were: 1) to hire a Geriatric Care Manager to prepare a plan of care to maintain Ms. Allen safely in her home; 2) to pay all necessary expenses relating to maintaining Ms. Allen; and 3) to withdraw up to $50,000 from Ms. Allen's personal checking account to pay the expenses. [*2]

At the guardianship hearing on January 13, 2003, Ms. Wells expressed that Ms. Allen wished to leave her house at 8 Agate Court, Brooklyn to the Concord Baptist Church and that the house was then held in trust for Robert Pincus, Ms. Allen's former financial advisor, pursuant to a Revocable Living Trust executed in March 2000. Mr. Pincus had been accused of stealing money from Ms. Allen's brokerage accounts during the course of his employment with American Express Financial Services (hereinafter Amex). The court directed that Ms. Wells "file the deed," to remove the house from the Trust, but stated that court approval would have to be obtained before the property could be sold. The court also directed Ms. Wells to recover the money from Pincus and/or Amex. The January 16, 2003 order further directed Mr. Pincus to cease all financial activities relating to Ms. Allen's accounts and to turn over all financial records to the Temporary Guardian, and revoked Ms. Allen's Last Will and Testament and Revocable Living Trust, both dated March 7, 2000.[FN1]

On March 1, 2003, Ms. Wells transferred title to 8 Agate Court from the Lillian Allen Revocable Trust to the Concord Baptist Church, retaining a life estate for Ms. Allen. This deed was recorded with the City Register on April 25, 2003. The transfer was done without prior written application to the court and without court authorization.[FN2]

On February 20, 2003, Ellen Flowers, the attorney for the petitioner on the original guardianship application, wrote a letter to the court stating that Ms. Wells' appointment as Temporary Guardian for Ms. Allen violated Part 36 of the Rules of the Chief Judge, adopted in November 2002, because Ms. Wells had appeared at the guardianship hearing as counsel for Ms. Allen and Section 36.2(c)(9) states that "[n]o attorney for an allegedly incapacitated person shall be appointed as guardian to that person, or as counsel to the guardian of that person." As a result, the court consulted with Ms. Wells regarding her appointment and obtained from her the nomination of Podres Spencer, Reverend of Concord Baptist Church, as Successor Guardian. By affirmation of services dated April 13, 2003, and amended affirmation of services dated April 30, 2003, Ms. Wells sought payment for 191.41 hours of work performed both as counsel for Ms. Allen and as Temporary Guardian between December 4, 2002 and April 24, 2003.[FN3] [*3]

These affirmations included 40.25 hours of work on the Amex matter and 15.25 hours for work related to the guardianship petition and January 13, 2003 hearing. The affidavits revealed that Ms. Allen had executed two separate retainers, but disclosed neither the terms of those retainers nor whether any retainer fees had been paid. Copies of the retainers attached to the Referee's report in the instant accounting proceeding reveal that the first was for Ms. Wells to represent Ms. Allen in the guardianship proceeding, and that a $2,500 fee was paid; and that the second was for Ms. Wells to represent Ms. Allen in the Amex matter, for which she was to receive 1/3 of any settlement, with no advance payment.

On May 12, 2003, Ms. Allen executed a Revocable Living Trust, naming Ms. Wells and Ms. Allen as co-Trustees during Ms. Allen's life and Ms. Wells as sole Trustee upon Ms. Allen's death. Ms. Wells testified at the hearing on this matter that she never opened a Trust account and never funded the Trust, but utilized funds in the guardianship account to make payments authorized by the Trust.

By order dated July 10, 2003, the court appointed Reverend Podres Spencer as Guardian of the property of Lillian Allen, directing him to obtain a bond in the amount of $1,085,000.00, and restricting him from expending any more than $8,000 in any given month or making any individual expenditure in excess of $2,500. The order further set the fees for Petitioner's attorney, the court evaluator, the geriatric care manager, and Ms. Wells, and directed that they be paid from Ms. Allen's funds. Ms. Wells was paid $18,400.

By order dated July 21, 2003, Ms. Wells was discharged as Temporary Guardian of Lillian Allen nunc pro tunc from the date of her appointment, and her Commission as Temporary Guardian was rescinded. The order further directed Ms. Wells to submit a final report and account of Ms. Allen's assets within 30 days.

Prior to July 21, 2003, Ms. Wells had opened a guardianship account and transferred into it a total of $59,000 from Ms. Allen's personal bank account, $1,200 in rents from 8 Agate Court, and $11,504.31 in State and Federal Tax refunds, for a total of $71,704.31. Ms. Wells continued to place Ms. Allen's money into the guardianship account after she was relieved as Temporary Guardian. On July 27, 2003, Ms. Wells reached a settlement agreement with Amex and, on July 30, 2003, she deposited the $300,000 settlement check into the guardianship account. Ms. Wells did not seek or obtain court approval of the settlement, which included no provision for the payment of attorneys fees, and did not seek or obtain approval to place the settlement amount into the guardianship account. By checks dated August 1 and 4, 2003, Ms. Wells transferred an additional $15,000 from Ms. Allen's personal bank account into the guardianship account. Ms. Wells thus placed a total of $321,442.12 of Ms. Allen's funds into her guardianship account

(hereinafter Wells guardianship account).[FN4] [*4]

On August 3, 2003, Ms. Allen died. At the time of her death, Rev. Spencer had not yet qualified as Guardian or received his Commission.

On August 14, 2003, two weeks after Ms. Allen's death, Ms. Wells wrote a check to herself from the Wells guardianship account for $100,000, as the payment of her 1/3 retainer on the Amex settlement. She did not seek or obtain the approval of any court, either in the guardianship or the Surrogate's Court, before taking these funds.

On September 13, 2003, one month after Ms. Allen's death, Ms. Wells transferred $137,011.03, the remaining balance in the Wells guardianship account, to a guardianship account set up by Podres Spencer as Guardian for Lillian Allen (hereinafter the Spencer guardianship account). This action was taken without any legal authority as the guardianship had terminated with the death of Ms. Allen, and Rev. Spencer had never received a Commission as guardian, nor was he a duly appointed estate representative.

By checks dated October 17, 2003 and December 30, 2003, Ms. Wells received a total of $40,600 from the Spencer guardianship account, which she placed in a dedicated IOLA

account and utilized for what she deemed to be estate expenditures.[FN5]

By order dated July 13, 2004, Rev. Spencer was directed to file a final account of his tenure as guardian "forthwith." By order dated January 5, 2005, Ms. Wells was ordered to file a final accounting of her tenure as Temporary Guardian within 60 days. On August 6, 2005, Ms. Wells filed an accounting on behalf of Rev. Spencer, which she notarized. This accounting covered the period from January 3, 2003 through June 30, 2005 and accounted for all of Mrs. Allens assets during the period, the majority of which had not been marshaled into the guardianship. The accounting was rejected as it was not in proper form. On February 3, 2006, Ms. Wells filed a second accounting in her own name as Temporary Guardian, listing only total disbursements from the Wells guardianship account. On February 20, 2006, Ms. Wells filed an amended accounting, which consisted of a month-by-month recapitulation of the deposits and debits for the Wells guardianship account. These accountings were also rejected as they were not in proper form.

On January 18, 2006, Ms. Wells filed an affirmation of services covering the period from December 4, 2002 through December 22, 2005, totaling 573.50 hours, and requesting that she be paid $157,712.50 for her services. This affirmation includes all of the hours contained in her 2003 affirmations of service, for which she was previously awarded $18,400. It also lists all work performed after April 24, 2003, both as Temporary Guardian and as counsel for Ms. Allen, including 37.5 hours of work on the Amex matter; and work performed for the estate and on [*5]other litigation.[FN6]On March 3, 2006, Mr. Pincus again moved for an order directing Ms. Wells to file a final accounting in this matter. In her March 13, 2006 response, Ms. Wells attached copies of the February 3 and 20, 2006 accountings. The parties were then directed to appear for a hearing on the accounting before Justice Tomei on March 31, 2006.

At the hearing, this court concluded that none of the accountings submitted by Ms. Wells were in proper form and appointed Bernard Babb as Special Referee to prepare an accounting and a report. The Referee submitted his report and accounting on June 30, 2006, chronologically detailing the expenditures from Ms. Allen's personal account into the Wells guardianship account, and the income and expenditures of the Wells and Spencer guardianship accounts and the IOLA account for the periods between January 26, 2003 and March 31, 2006.

THE ACCOUNTING

A hearing was held on the Referee's report and accounting on October 30, 2006, December 4, 2006, February 5, 2007, March 6, 2007 and March 8, 2007. Based on the evidence adduced at the hearing, the Referee's report and accounting, the supplemental accounting prepared by Ms. Wells' hearing counsel [FN7], and all prior records and proceedings in this case, the court ORDERS as follows:

1) it is ORDERED that Ms. Wells return to the Estate of Lillian Allen the following expenditures which it determines to be improper disbursements from guardianship funds which passed through the Wells guardianship account:[FN8] $100,000.00retainer fee for the Amex matter. Ms. Wells never disclosed the terms of theretainer agreement to the court and did not obtain judicial permission to payherself the retainer out of guardianship funds after the death of Ms. Allen.Moreover, before taking the retainer fee, Ms. Wells had already billed theguardianship and received payment from guardianship funds for 40.25 hoursof work on the Amex matter as part of the $18,400 previously paid . Evenafter taking the retainer, she billed the guardianship for the remaining 37.65hours of work on the Amex matter (as well as billing a second time for thepreviously compensated hours). The court has determined the appropriatelegal fee for her uncompensated work in the Amex matter as set out below.[*6]

$ 8,000.00representing the portion of the $24,150.00 in checks that Ms. Wells wrote to herself from the Wells guardianship account while serving as Temporary Guardian which she gave as a gift to one or more of Ms. Allen's employees shortly before Ms. Allen's death. As Temporary Guardian, Ms. Wells did not have the power to make gifts and was not able to present competent testimony to this court to establish that Ms. Allen had directed that the gifts be made. It should also be noted that each of the employees to whom the gift money was allegedly given had already been compensated from guardianship funds for their work, including overtime pay. The court finds that the remainder of the funds were properly disbursed as salaries and as medical and household expenses.

$ 14,500.00representing the portion of the $34,500 in checks that Ms. Wells wrote to

herself from the Wells guardianship account after she was relieved as Temporary guardian which she used to pay for expenses related to 8 Agate Court after the death of Ms. Allen. These expenses are not proper guardianship expenses, nor is it clear to what extent they may be proper estate expenses as Ms. Allen's life estate in 8 Agate Court lapsed upon her death. The remainder of the funds were properly disbursed as funeral expenses and to pay salaries, medical and household expenses incurred prior to death.

$ 93,547.32representing the following portions of the $137,011.03 transferred from Wells guardianship account to the Spencer guardianship account on September 13, 2003:[FN9]

$78,085.32balance in account on March 13, 2006

$13,900.00total paid to a beneficiary of the May 2003 Trust

$ 1,562.00total paid to workers on October 2, 2003 for moving expenses.

The use of guardianship funds after death to pay legacies in a Living Trust

is improper. Nor are moving expenses incurred two more than two months

after death guardianship expenses. The remainder of the funds appear to be proper estate expenses that the court will not order returned at this time for the reasons outlined below.

$ 33,736.77representing the following portions of the $40,600 placed in Ms. Wells' IOLA account from the Spencer guardianship account:

$10,000.00total paid to beneficiaries of the May 2003 Trust

$ 6,272.50total paid to accountant for final accountings

$ 2,500.00paid to attorney for brief in civil proceeding

$14,964.27balance in account on November 1, 2006 [*7]

As noted above, guardianship funds may not properly be utilized to pay a legacy under a Living Trust. The accountant's fees are disallowed because

the accountant was retained without the court's approval and none of the accountings filed were in the proper form, necessitating the appointment of a Referee to prepare and file the accounting, which expense must be paid from guardianship funds. The funds paid to the attorney for a brief in another legal proceeding may not be charged to the guardianship.

Total:$249,784.09;

2) it is further ORDERED that Ms. Wells return to the guardianship account the following amount paid as a retainer fee for representing Ms. Allen in the original guardianship proceeding:

$2,500.00Ms. Wells never disclosed to the court that she had been paid a $2,500 retainer fee for her work on the guardianship petition when she sought and obtained compensation from guardianship funds for this work as part of the $18,400 previously paid. She is not entitled to be paid twice for these services.

Total: $252,284.09;

3) it is further ORDERED that this total be reduced by the following amounts: $6,562.00representing Ms. Wells' fee for legal services on the Amex matter between April 24, 2003 and July 30, 2003. The court finds that because Ms. Wells obtained a favorable settlement in the Amex matter she is entitled to be paid for all of her legal services in that matter. However, having already sought and obtained payment of the first portion of her legal fees in the matter from the guardianship funds without disclosing that she had been separately retained by Ms. Allen to perform this legal work and was due to be paid for it pursuant to the retainer agreement, and having billed the guardianship for the remainder of her legal services relating to the matter in her most recent affirmation of services, filed on January 18, 2006, years after she took the retainer payment, this court finds that Ms. Wells is limited to the attorneys fees which the court deems appropriate in this guardianship proceeding. Clearly, Ms. Wells is not entitled to be paid twice for the same legal work, particularly not twice from funds belonging to her ward.

and$30,505.00representing the fee of Bernard Babb, Special Referee. The court further ORDERS that before turning any money over to the estate, Ms. Wells is to pay the referees fee as follows: $14,964.27 from the balance in the IOLA account, and the remaining [*8]$15,540.73 from the balance in the Spencer guardianship account.

4) It is therefore ORDERED that Ms. Wells return guardianship funds totaling:

$215,217.09 to be paid to: Gerard Cabrera, Public Administrator of Kings County, asTemporary Administrator of the Estate of Lillian Allen within 60 days ofthis order.

REQUEST FOR ADDITIONAL FEES

In consideration of Ms. Wells' request for additional compensation for her services in this guardianship, the court notes several reasons why additional compensation is not appropriate. First, Ms. Wells in the nearly three years following her discharge as Temporary guardian never produced an acceptable final accounting, in direct contravention of several court orders directing her to do so. Due to her lapse, a Referee was appointed to reconstruct an accounting in her place. The Referee's fees, which must be paid from guardianship funds (MHL §81.33[b],[d],[e]), are a significant added cost to the guardianship proceeding, necessitated only by Ms. Wells' conduct.

Second, in trying to recover funds misappropriated by the financial advisor, Ms. Wells settled the case without having never obtained court approval of the amount and terms of settlement and paid herself from guardianship funds after the death of her ward, without seeking court approval of her fee. Not only had Ms. Wells previously been paid from guardianship funds for a significant portion of her legal work on this matter, but the settlement makes no provision for the payment of her legal fees, a common settlement practice which would have reduced the costs to her ward. Nor is it clear that all of the misappropriated funds were recovered, as the settlement expressly provides for suing the financial advisor personally for additional losses.

Third, Ms. Wells violated her powers as Temporary Guardian by accessing far more of her wards funds than the $50,000 permitted under the court's order. Ms. Wells was permitted to serve without bond in this matter, presumably because she was to have access to limited funds. She then utilized those funds for non-guardianship expenses as outlined above, including paying herself without court approval.

Fourth, she transferred guardianship funds to an unauthorized person after the death of her ward and then accessed those funds to pay non-guardianship expenses as outlined above. Fifth and finally, Ms. Wells has billed her ward twice for the same legal services and has continued to bill for services, even after receiving payment from the court. In addition, Ms. Wells has improperly requested payment from guardianship funds for services performed after the death of her ward and for services performed outside the guardianship.

Any of these actions would constitute a breach of fiduciary duty. In light of these findings, the court concludes that Ms. Wells' actions in this guardianship matter warrant denial of further compensation for her guardianship services after April 24, 2003, other than that awarded for her legal services in the Amex matter.

ESTATE EXPENSES

Because the remaining funds in the guardianship account are to be turned over to the estate and because Ms. Wells was at one time designated the legal representative of the estate by the Surrogate's Court, this court has not directed that she return those portions of the [*9]guardianship funds which she expended for items which appear, at least facially, to be proper estate expenses.[FN10] Notwithstanding the determination that the funds not be returned at this juncture, this court takes no position as to whether any such expense was, in fact, a proper estate expense. That decision is left to the Surrogate's Court, which has jurisdiction to determine such issues.

Finally, although this court has directed the $215,217.09 of the funds marshaled by Ms. Wells into the Wells guardianship account be paid to the estate of Ms. Allen upon its determination that these funds do not represent proper guardianship expenses, this court takes no position as to whether such funds represent legitimate estate expenses. Therefore nothing in this decision should be construed to prevent Ms. Wells from filing as a creditor of the estate for any item that this court has directed she return.

This constitutes the decision and order of the court. Enter Order.

________________________

Hon. Albert Tomei, J.S.C. Footnotes

Footnote 1:On August 4, 2003, the day after Ms. Allen died, the Appellate Division, Second Department, reversed so much of the January 16, 2003 order that revoked the March 2000 Will (In re Lillian Allen, 307 AD2d 921 [2d Dept. 2003]).

Footnote 2:In November 2006, after the initial hearing on this matter, wherein it became clear that the instant court was concerned that the transfer of the property had not been court authorized, Ms. Wells sought and obtained an order from Justice Douglass, signed on November 11, 2006, granting her retroactive permission to transfer the property to the Church. This order was obtained from Justice Douglass after he had recused himself from this guardianship matter by letter dated October 24, 2006.

Footnote 3:The two affirmations of services co-mingled the work performed as counsel and as Temporary Guardian. On April 28, 2003, Ms. Wells filed a separate affirmation for 78.75 hours of legal work; this affirmation included some, but not all, of the legal work included in the other affirmations.

Footnote 4:At the hearing, Ms. Wells conceded that she had withdrawn more than the $50,000 authorized by the court without first obtaining permission from the court, but explained that she had been unable to complete the paperwork seeking permission to access additional funds due to additional work necessitated Ms. Allen's illness in July 2003. She explained that she had placed the Amex settlement into the guardianship account because she was afraid of litigation by Pincus if she placed it into her IOLA account. She did not explain why the Amex settlement funds were not simply deposited into Ms. Allen's personal account, as they were received prior to her death.

Footnote 5:Ms. Wells received two checks from the Spencer guardianship account: a check for $15,000 on November 28, 2003 and a check for $25,600 on December 30, 2003. According to the records of the Surrogate's Court, Kings County, Ms. Wells was granted preliminary letters of probate in April, 2004. On February 20, 2007, The Public Administrator of Kings County filed a notice of appearance in this case as the Temporary Administrator of the estate of Lillian Allen.

Footnote 6:On April 21, 2004, Ms. Wells filed another affirmation of services listing work performed between December 4, 2002 and September 23, 2004. This affirmation included some, but not all, of the work included in the 2003 affirmations of services for which Ms. Wells had already been paid, and some, but not all, of the work included in the 2006 affirmation for the same time period.

Footnote 7:This supplemental accounting itemized the disbursements made from the checks written by Ms. Wells to herself from the Wells guardianship account, and the checks written to Ms. Wells from the Spencer guardianship account and placed into the IOLA account.

Footnote 8:Although this court finds that the laptop computer and camcorder purchased from funds in the Wells guardianship account were legitimate guardianship expenditures, it notes that the items themselves are estate assets which must be accounted for in the estate proceeding.

Footnote 9:This decision does not cover the funds credited to the Spencer guardianship account from any source other than the Wells guardianship account (see Referee's report, pp. 32-33) and takes no position as to whether any such funds were properly expended or whether they can be recovered in the estate proceeding.

Footnote 10:See Referee's report, pp. 32-33, re Spencer guardianship account; Referee's report, pp. 35-36, and 2/5/2007 transcript, pp. 65-66, re IOLA account.