Article 81

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This is a common question from clients involved in litigation – – especially estate litigation. As a general rule, a party cannot recover attorney’s fees for successfully prosecuting or defending a lawsuit. This is the “American Rule,” and it is engrained in our legal system. New York courts are wary of deviating from the American Rule, and will only do so under certain circumstances, such as (1) where the dispute litigated arises out of a contract, and the contract expressly provides for recovery of attorney’s fees; or, (2) where an applicable statute or rule expressly and unambiguously permits recovery of attorney’s fees.

Award of Legal Fees Pursuant to Contract

Sometimes, parties to a contract will agree that the “prevailing party” to any litigation arising out of the contract may recover legal fees incurred in the litigation. This begs the question – – what does “prevailing party” mean? The courts have defined a “prevailing party” as the party that succeeded on the central relief sought, or prevailed on the central claims advanced and received a substantial remedy.

Once the court identifies the “prevailing party” it will fix the legal fee. The attorneys for the “prevailing party” will apply for an award of fees and the court will permit recovery of a reasonable legal fee after considering several factors. Some courts have held that the most important factor in fixing the reasonable legal fee of a “prevailing party” is the “degree of success obtained.”  It follows that a “prevailing party” who achieved only modest success on its claims advanced and relief sought should not recover the same measure of legal fees as a prevailing party who achieved total victory on all claims advanced and requests for relief.

In deference to the American Rule, the courts narrowly construe contracts that provide for recovery of legal fees. In some cases, attorneys have attempted to recover attorney’s fees for their time and effort in making an application for an award of fees. However, the courts have made it clear that legal fees for time and effort incurred in making a legal fee application will not be awarded absent unmistakably clear language in the contract permitting recovery of same.  

Award of Legal Fees Pursuant to Statute

There are statutes in various contexts that provide for an award of attorney’s fees. Like contractual fee shifting provisions, such statutes have been narrowly construed.

With respect to estates and trusts, the fiduciary stands in a unique position. The fiduciary who incurs legal fees in discharging his or her fiduciary responsibilities may pay such fees from the estate (to the extent that they are reasonable and always subject to court review). For example, a nominated executor generally may pay legal fees incurred in seeking the probate of the decedent’s will from the decedent’s estate. Legal fees incurred by an executor or trustee who files a formal judicial accounting with the court seeking approval and discharge, and litigates over objections in the accounting proceeding, are also generally a proper charge to the estate. The Surrogate’s Court considers the following factors in fixing a fiduciary’s attorney’s fees: (1) the time and labor required; (2) the difficulty of the questions involved, and the skill required to handle the problems presented; (3) the lawyer’s experience, ability and reputation; (4) the amount involved and benefit resulting to the client from the services; (5) the customary fee charged by the Bar for similar services; (6) the contingency or certainty of compensation; (7) the results obtained; and, (8) the responsibility involved.

In certain litigations, where a beneficiary’s attorney brings a benefit to the estate, the Surrogate’s Court may grant an award of fees from the estate.

Moreover, as my colleagues, and others, have observed, in certain instances, the Surrogate’s Court may direct the source of payment of legal fees of the fiduciary to beneficiaries or distributees depending on several factors, namely: (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 the individual beneficiaries from the outcome of the underlying proceeding; (3) the extent of the individual beneficiary’s participation in the proceeding; (4) the good (or bad) faith of the beneficiary; (5) whether there was justifiable doubt regarding the fiduciary’s conduct; (6) the relative interest of the objecting beneficiary in the estate; and (7) the effect of allocating fees on the interest of the individual beneficiary. Thus, where one beneficiary objects to a fiduciary’s administration of the estate, and those objections are without merit, the legal fees incurred in connection with defending such objections may be charged against the objecting beneficiary’s share of the estate.

Mental Hygiene Law Article 81 governs guardianships, and allows for a petitioner’s legal fees to be paid from the assets of the incapacitated person where the petitioner secures the appointment of a guardian for an incapacitated person or otherwise brings a benefit to the incapacitated person (MHL 81.16 [f]). It further allows reasonable legal fees incurred by a movant who succeeds in removing a guardian for cause (MHL 81.35). Further, it permits charging a petitioner with the attorney’s fees incurred by court-appointed counsel for an alleged incapacitated person where the petition is dismissed or withdrawn (MHL 81.10[f]). Like all statutory provisions that provide for an award of legal fees, these provisions are narrowly construed. For example, MHL 81.10 [f] only allows recovery of legal fees of court-appointed counsel for an alleged incapacitated person; the courts have rejected an expansive view of Mental Hygiene Law 81.10 [f] to allow recovery of the legal fees of an alleged incapacitated person’s retained counsel.

Finally, the courts will sometimes shift attorney’s fees and costs as a sanction for frivolous litigation conduct.  Allegations of frivolous litigation conduct have become common to the point of being meaningless – – it has become the standard practice for some attorneys to seek sanctions against parties and attorneys who disagree in good faith on a point of law, or who dare to adduce evidence in defense of a cause of action that contradicts or refutes the allegations forming the basis of that cause of action. However, the courts will occasionally shift fees for truly frivolous litigation conduct.

As the problem of elder abuse has become increasingly prevalent in recent years, so too has the need to protect elders who suffer abuse, whether physical, mental, or financial, at the hands of the individuals to whom they have entrusted their care and affairs (see Campbell v Thomas, 73 AD3d 103, 104 [2d Dept 2010]). Recent case law demonstrates that elderly individuals can fall prey to their much younger caregivers who secretly marry the elderly in the hopes of benefiting from their estates (see id.; Matter of Berk, 71 AD3d 883, 883-86 [2d Dept 2010]; Matter of Kaminester, 26 Misc3d 227, 235-37 [Sur Ct, New York County 2009]). For family members who are aware of such abuse, one solution may be to commence an Article 81 guardianship proceeding and to seek to have the marriage revoked by a guardianship court (see Mental Hygiene Law 81.29).

Under Mental Hygiene Law 81.29, an Article 81 guardianship court “may modify, amend, or revoke . . . any contract [including one involving a marriage] made while the person was incapacitated” (see Mental Hygiene Law 81.29). In this regard, the Appellate Division, Second Department, has held that a marriage may be revoked when the evidence shows that one of the parties to the marriage “was ‘incapable of understanding the nature, effect, and consequences of the marriage’” at the time that it occurred (Matter of Joseph S., 25 AD3d 804, 806 [2d Dept 2006]). The factors that the guardianship court considers in determining whether to revoke a marriage include, among other things, the differences in the purported spouses’ ages; whether the spouses cohabited; whether there was a change in residency; whether the spouses wore wedding rings; and whether there is any evidence of financial exploitation of the incapacitated spouse (see Matter of I.I.R., 21 Misc.3d 1136[A], at *2 [Sup Ct, Nassau County 2008]).

Matter of Carmen R. is instructive (see 15 Misc3d 1116[A], at *1-6 [Sup Ct, Westchester County 2007]). There, the petitioner, the alleged incapacitated person’s daughter and duly appointed Temporary Personal Needs Guardian, made an application for the annulment of her eighty-nine year-old mother’s marriage to her fifty-seven year-old chauffeur (see id.).  

At an evidentiary hearing, Westchester County Supreme Court Justice Peter J. Rosato heard testimony from, among others, the alleged incapacitated person’s physician, which established that she suffered from severe dementia, among other ailments, and could not understand any marriage ceremony; from the alleged incapacitated person, which demonstrated that she knew her alleged spouse, but could not remember his last name or any marriage to him; and from the alleged incapacitated person’s daughter, which suggested that the alleged spouse concealed the “marriage” from her, evidenced the fact that the alleged spouse was her mother’s chauffer, not her friend, and flatly contradicted the alleged spouse’s claim that he had lived with the incapacitated person for more than a decade (see id.). Justice Rosato also heard testimony from the alleged spouse which demonstrated that the first time he publicly disclosed the marriage was on an immigration application to have his daughter admitted to the United States from Ecuador; that he had been collecting thousands of dollars in rent from the tenants of property owned by the alleged incapacitated person; and that he had previously been arrested for violating a temporary restraining order that prohibited him from having contact with the alleged incapacitated person (see id.).

Based upon the testimony and other evidence before the court, Justice Rosato granted the petitioner’s application for an annulment of the marriage between her mother and the chauffer (see id.). In doing so, Justice Rosato explained that “[i]t [was] abundantly clear, on the evidence adduced upon the hearing held herein, that the [alleged incapacitated person] did not possess the requisite mental capacity to marry” (id.). Justice Rosato also found that the marriage was a product of fraud arising from the purported spouse’s desire to gain entry into this country for his daughter who was living in Ecuador until after the marriage (see id.). Accordingly, Justice Rosato granted the petitioner’s application to annul the marriage (see id.).

Of course, an annulment in the context of an Article 81 proceeding is only feasible where the relatives of an allegedly incapacitated person are aware of the marriage prior to the person’s death. Where the marriage is concealed until after the person dies, however, other remedies may exist outside the context of Article 81 (see Jaclene D’Agostino, “Appellate Division Cites Equitable Factors In Denying Entitlement To Elective Share”)

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The newly elected Surrogate for Nassau County, Edward W. McCarty III, recently issued a decision in what appears to be a gut-wrenching case involving an infant decedent. In the Estate of Jessica Fernandes, Surrogate McCarty attempts to get to the bottom of two commonly encountered issues in an infant decedent’s estate, that is 1) who should serve as administrator of the decedent’s estate; and 2) whether one of the decedent’s parents should be barred from receiving estate assets. 

In most estates, the answer to the question of who will serve as fiduciary is straightforward. Where a decedent dies having executed a last will and testament, the will identifies the nominated executor (or co-executors). The nominated executor will serve unless the Court finds that he or she is ineligible to serve for the reasons set forth in SCPA § 707. Every person interested in the estate has the opportunity, pursuant to SCPA § 709, to object to the appointment of the nominated executor. Where a person dies intestate, a person interested in the estate may object to the appointment of an administrator on one or more of the grounds set forth in SCPA § 707. Article 10 of the SCPA governs the order of priority of who is entitled to serve as an administrator of an intestate estate. 

In Fernandes, the decedent was a 12 year-old girl who succumbed to respiratory failure. She had been incapacitated since birth, and her mother had been appointed her personal needs guardian, as well as co-guardian of her property along with an attorney, pursuant to Article 81 of the New York Mental Hygiene Law. The decedent had recovered in excess of $3.5 million in the settlement of a medical malpractice action.   All else being equal, the decedent’s mother and father have equal priority to serve as administrator of her estate pursuant to SCPA § 1001, and the Court may appoint, in its discretion, one or both of them.

Following the decedent’s death, her mother petitioned for letters of administration and requested that the decedent’s father be disqualified, pursuant to EPTL § 4-1.4, from taking an intestate share of decedent’s estate on the basis of his alleged failure to provide for, and abandonment of, the decedent. The decedent’s father struck back, denying that he had abandoned the decedent, objecting to the decedent’s mother’s appointment as administrator of the decedent’s estate pursuant to SCPA § 707 on the grounds that the decedent’s mother had engaged in fraud and dishonesty, and cross-petitioning for letters of administration. The decedent’s mother appears to have also alleged that the decedent’s father is a non-domiciliary alien and thus ineligible to serve as administrator pursuant to SCPA § 707 (1) (c), and that he cannot read or write in English, and that the Court should thus, in its discretion, find him ineligible to serve pursuant to SCPA § 707 (2). The decedent’s mother also alleged that decedent’s father’s open hostility to her rendered him ineligible to serve. 

Judge McCarty’s decision indicates that he is poised to address the factual allegations that the parties have made. He explained that summary judgment was inappropriate; the papers before him left several issues of fact to be resolved at a hearing (the hearing may have already been held). Aside from untangling the issue of the decedent’s father’s immigration status, it seems that the Surrogate will be faced with determining whether each of the decedent’s parents can read and write in the English language, and, if not, whether this should affect their ability to serve. In this inquiry, he may be informed by a recent decision from the Surrogate’s Court, New York County, Matter of Torbibio.   

Moreover, while dishonesty is one of the grounds set forth in SCPA § 707 (e) as a basis to render someone ineligible to receive letters, dishonesty as contemplated by the statute is not dishonesty in answering questions such as “how big was that fish that you caught last fall?” but, as the First Department recently explained, dishonesty in money matters from which a reasonable apprehension may be entertained that the funds of the estate would not be safe in the hands of the contemplated fiduciary.   As for the decedent’s mother’s claim that the decedent’s father’s hostility renders him ineligible, as countless Surrogate’s Court practitioners have explained to their clients, mere hostility is simply not enough. It is well-settled that an individual will only be barred from being appointed fiduciary where friction or hostility interferes with the proper administration of the estate, and future cooperation is unlikely. 

Barring a settlement, it appears that the Court will reach the second issue, whether the decedent’s father should be disqualified from sharing in the decedent’s estate, at the close of discovery. His decision contains a granular analysis of disputes among the parties as to documentary discovery – the kind of analysis that is helpful to lawyers when they get down to the task of drafting demands for documents.       

Last year, we posted an entry on Matter of Berk, 20 Misc 3d 691 (Sur Ct, Kings County 2008), a decision in which the court granted an elective share to a surviving spouse notwithstanding evidence that the marriage to the decedent, who was 99 years old at the time, occurred under highly questionable circumstances. The court’s rationale was that the marriage was voidable, not void. The Surrogate held that because the marriage was not invalidated prior to the decedent’s death, the right of election could not be disturbed.

In Matter of Kaminester, 2009 NY Slip Op 29429 (Sur Ct, New York County), the court addressed a similar set of facts, but with one distinguishing factor: prior to his death, the decedent had been adjudicated incapacitated in an Article 81 proceeding. This fact allowed for an entirely different result than that reached in Berk.

 

In Kaminester, the decedent’s estate sought a determination as to the validity of the elective share pursuant to SCPA §1421. As in Berk, the marriage remained a secret until the decedent’s death, and occurred mere months prior thereto. But in this case, the marriage also occurred two and a half months after a Texas court appointed a temporary guardian for the decedent, and during the pendency of an Article 81 proceeding in New York. Within the context of the Article 81, a temporary restraining order had been imposed with respect to removing the decedent from the State, among other things. The Article 81 proceeding resulted in the appointment of a temporary guardian, and a stipulation on the record that the decedent lacked capacity to marry. The decedent’s new “wife” was in the courtroom with her attorney at the time of the stipulation, but neither one revealed the existence of the couple’s recent marriage.

 

Notably, during this time period, the beneficiary designation on the decedent’s life insurance policy, worth over $1 million, was changed to favor his new “wife.” In addition, a deed was executed transferring the decedent’s Westhampton property to the couple as joint tenants with right of survivorship.

 

The “wife” filed a notice of election within weeks of the decedent’s death. Thereafter, the executor of his estate sought an order from the Article 81 court to hold her in contempt for violating its TRO. In response, the court invoked Section 81.29(d) of the Mental Hygiene Law, and “revoked and voided” the marriage, the designation of the “wife” as beneficiary on the decedent’s life insurance, and the deed that transferred to her a joint tenancy interest in his Westhampton property. The First Department affirmed these portions of the Article 81 court’s decision, accepting the posthumous voidance of the decedent’s marriage.

 

Surrogate Glen of New York County subsequently addressed the issue of the elective share, and thus the validity of the marriage, in light of these events. She discussed Section 7 of the Domestic Relations Law (“DRL”), the statute that had been relied upon in Berk, and compared it to Section 81.29(d) of the Mental Hygiene Law (“MHL”). DRL §7 provides that a marriage involving an individual “incapable of consenting to a marriage for want of understanding” is voidable, and becomes a nullity as of the date it is annulled. In contrast, Section 81.29(d) of the MHL “permits the court that appoints an article 81 guardian for an incapacitated person to “’revoke any previously executed . . . contract. . . . made by the incapacitated person prior to the appointment of the guardian if the court finds that the previously executed . . . contract. . . was made by the person was incapacitated’” (Matter of Kaminester, 2009 NY Slip Op 29429 at *5). Thus, the Article 81 adjudication was the lynchpin of the Kaminester decision.

 

In her decision, the Surrogate questioned whether the legislature had intended MHL §81.29(d) to override DRL §7. She also recognized that while she was bound by the First Department’s determination, the Second Department had previously taken the position that it had inherent power to override DRL § 7 by posthumously voiding a marriage due to the decedent’s mental incapacity (see Campbell v Thomas,36 AD3d 576 [2d Dept 2007]).   Nonetheless, because of the First Department’s determination that the decedent’s marriage had been void ab initio as a result of his incapacity, the Surrogate opined that there existed no right to an elective share.

 

Notably, the result in Kaminester rendered the marriage in issue void, as opposed to voidable, which was the characterization in Berk. A voidable marriage is a nullity upon the court’s declaration, whereas a void marriage is deemed to never have existed. This distinction was based upon the fact that there had been an Article 81 adjudication in Kaminester, allowing for the application of MHL §81.29(d) after the decedent’s death.