Committee Clarifies Article 23 of Surrogate’s Court Procedure Act

by Hon. C. Raymond Radigan


After my first report in 1991 as chairman of the EPTL Advisory Committee (Estate, Powers and Trusts Law), in which we focused on the revision of the Right of Election and Descent and Distribution statutes, we recommended an examination and revision of the remaining articles of the EPTL and the Surrogate’s Court Procedure Act (SCPA). Upon the Senate and Assembly’s adoption of the EPTL Advisory Committee’s expanded scope, our committee evolved into the EPTL-SCPA Legislative Advisory Committee (committee).

In my last column (The New York Law Journal, Sept. 29, 2003, at p. 3), I indicated I would review in this column what was set forth in our Second Report with respect to costs, allowances and commissions under SCPA Article 23.

The committee suggested the Legislature implement several new measures in order to enlarge the class of persons to which costs and allowances may be awarded, as well as to clarify the computation of fiduciary commissions. The discussion set forth infra provides an in-depth analysis of the statutory evolution regarding several SCPA Article 23 provisions examined by the committee.

Nominee Fiduciaries
Cost Awards and Expense Allowances. “Costs and allowances in the [Surrogate’s] court shall be awarded solely in accordance with” Article 23 of SCPA. SCPA § 2301(1). In addition, “[a]ny award for costs or an allowance is in all instances discretionary with the court.” SCPA § 2301(2). The New York State Court of Appeals in Stevens v. Cent. Nat’l Bank, 168 NY 560, 61 NE 904 (1960), defined costs as “certain allowances authorized by statute to reimburse the successful party for expenses incurred in prosecuting or defending an action or special proceeding.” Id. Such costs are “in the nature of incidental damages allowed to indemnify a party against the expense of successfully asserting his rights in court.” Id. The Court felt it “unreasonable to hold that the statute impliedly confer[red] the power to award the same costs in favor of and against each party … because it violates the theory upon which costs are allowed ….” Id. While allowances were statutorily provided for, the SCPA did not provide specific instruction as to the amount a court may award.

As to allowances, SCPA § 2302(3)(a) provided that the court may award costs or an allowance to a guardian ad litem, committee or conservator of a disabled person that, either successfully or unsuccessfully, contests the probate of a will and to a party nominated under a decedent’s will as executor that, either successfully or unsuccessfully, propounds such decedent’s will in good faith (please note that the Article 81 Mental Hygiene Law abolished committees and conservators in 1992 and, therefore, the provisions of the statute now apply to Article 81 Guardians). The statute gave the Surrogate complete discretion to render an Order whereby an unsuccessful probate contestant is directed to bear all or part of such contest’s costs and allowances.

Generally, a court would not award legal expenses to an unsuccessful proponent of a decedent’s will. SCPA § 2302(3) provided that the court may order an unsuccessful contestant to bear all or part of the will proponent’s costs and allowances. Unlike SCPA § 2302(4), this provision did not, however, specifically include such proponent’s reasonably incurred legal fees. As such, the committee recommended that the Legislature adopt our suggestion to amend SCPA § 2302(3) to provide the surrogates with “specific authority to award an allowance for reasonable counsel fees incurred by a nominated executor acting in good faith in a contested probate proceeding, either from the estate or from an unsuccessful contestant.” Second Report to the Legislature of the EPTL-SCPA Legislative Advisory Committee; see Warren’s Heaton, Surrogate’s Courts, vol. 14, app. 2, at 31 (6th ed., rev. 2003). In addition, in order to ensure the fulfillment of a major objective of our proposed revision, that is, to discourage frivolous will contests, we recommended that the Legislature specifically authorize the court to assess legal fees against an unsuccessful contestant where such contestant launched the probate contest in bad faith. The Legislature received our suggestions well and adopted these changes to improve economy and support equity within the surrogates’ courts by discouraging the filing of frivolous objections in probate proceedings.

Surrogates’ courts have described current SCPA § 2302(3)(a), as amended pursuant to our recommendations, as “provid[ing] for a variation from the usual rule … that parties normally bear their own legal expense …. The obvious reason for this deviation from the norm is to ensure that competent attorneys will be willing to represent the interests of those seeking to effectuate what may be the valid last wishes of a decedent.” In re Aguilar, NYLJ, Feb. 22, 1995, at 33 (Sur. Ct. Bronx County). The practitioner must note that the statute requires that the unsuccessful proponent seeking to recover counsel fees must have propounded the will in good faith. The Appellate Division, Second Department, in In re Winckler, 234 AD2d 307, 309, 651 NYS2d 69 (2d Dept. 1996), referring to In re Limberg, 281 NY 463, 466, 24 NE2d 127 (1939), explained that a proponent “who procures the execution of a will by fraud and undue influence is not entitled to any commissions … as executor, because the finding of fraud and undue influence is evidence of bad faith.” As such, permitting a proponent of a will who procured such will’s execution by fraud or undue influence to recover attorney’s fees would constitute a ‘” ‘perversion of justice’ because it would allow the proponent of the will to profit by his own wrong.” Id. (quoting In re DiJurico, 134 Misc2d 263, 266, 510 NYS2d 465 (1987)). See also In re Krolnick, NYLJ, Feb. 15, 2002, at 24 (Sur. Ct. Nassau County) (holding that bad faith provision of SCPA § 2302(3)(a) applies equally to recovery of attorney’s fees by proponent who petitions to probate a will that such proponent originally procured by fraud or undue influence).

Fiduciary Commissions
SCPA § 2307 governs the calculation of compensation of fiduciaries other than trustees. In our examination of the statute, we recognized that the courts have long followed the principle that statutory commissions for the receiving and paying out of money by a fiduciary should be viewed as payable one-half for receiving and one-half for paying out. In re Roberts, 3 Johns. Ch. 43 (1817). The surrogates had consistently applied this principle to cases involving fiduciary commissions. See In re Osgood, 119 Misc251, 196 NYS 270 (1922). Retired Surrogate John D. Bennett of Nassau County explained that the courts’ retention of this commission computation method is based mainly on a desire for uniformity and, thereby, ease in administration. In re Fanara, 69 Misc2d 724, 330 NYS2d 445 (Sur. Ct. Nassau County 1972). In addition, Surrogate Bennett, citing In re Roth, 53 Misc2d 1066, 281 NYS2d 225 (Sur. Ct. New York County 1967), explained that “[t]he commissions represent compensation for the entire administration, not merely the first act (receiving) and the last act (paying out). The division of the commission into two parts is merely a convenient way of providing payment.” As the courts had already enunciated the existing rule of law, which required the separate calculation of commissions for receiving and paying out property, the committee sought to provide further clarity on the matter by way of codification. We suggested that the Legislature amend SCPA § 2307 to specifically provide that the commissions computed thereunder should be computed separately for receiving and paying out, at one- half the statutorily designated rates for each. Our recommendation was duly adopted.

In addition to the foregoing, the committee submitted two other recommended revisions to the SCPA regarding fiduciary commissions. One of such recommendations related to commissions payable to fiduciaries other than trustees who share in fees for services, other than those services as executor, rendered to estates of decedents dying after Aug. 31, 1993. Testators often name as fiduciary a person who they expect to perform services in addition to those as nominated executor. Such practice prompted concern among the committee. Upon review of the input of the trusts and estates practitioners, as well as our own personal experiences, we found that testators that nominated such persons to serve as executors often held the mistaken belief that the statutory executors’ commission would cover the fees for the non-executor services provided as well. In response to this, we recommended that, in estates of decedents dying after Aug. 31, 1993, unless the decedent expressly authorized a full commission in a signed writing, such fiduciary sharing in fees for other services rendered to the estate receive only one-half the normal statutory executors’ commission. The Legislature initially rejected this proposal but, soon thereafter, adopted a modified version whereby attorney- draftspersons serving as executors are subject to forfeiture of one-half a commission if such attorney-draftsperson executor does not meet certain disclosure and acknowledgment requirements. See SCPA § 2307-a.

Our other recommendation related to multiple commissions of executors and trustees under wills of persons dying, and lifetime trusts established, after Aug. 31, 1993. Under prior law, three full fiduciary commissions were permitted in estates of greater than $300,000 and trusts greater than $400,000, which three commissions would be shared by the three or more fiduciaries. We viewed such multiplicity as an undue expense to the estate. The committee acknowledged that some testators desired that multiple fiduciaries serve, coupled with the intention that their estates or trusts bear the extra expense. “For example, the testator may nominate multiple fiduciaries to provide different types of expertise … or to give beneficiaries a voice in estate or trust management and to provide checks and balances ….” Second Report to the Legislature of the EPTL-SCPA Legislative Advisory Committee; see Warren’s Heaton, Surrogate’s Courts, vol. 14, app. 2, at 35 (6th ed., rev. 2003). In certain instances, a financial institution may serve as fiduciary whereby such institution will usually only agree to serve if it receives a full commission. In the event that two other natural persons are serving as co- executors, under the then-current law these persons may have been entitled to full commissions for work they likely would have not or did not perform. The committee viewed this as a clear example of waste and, as such, recommended, in relevant part, that multiple fiduciaries under wills of decedents dying after Aug. 31, 1993 not be entitled to more than two total commissions unless the decedent provided otherwise in a signed writing, regardless of the size of the gross estate.

The Legislature adopted the above-described portion of our recommendation related to multiple commissions and codified the same in SCPA § § 2307(5) and 2313.

Multiple fiduciaries under wills of decedents dying after Aug. 31, 1993 are subject to the provisions of SCPA § 2313, which section the Legislature enacted based on the committee’s recommendations. Under this section, executors’ and trustees’ commissions are limited, in most circumstances, to two full commissions to be apportioned among the co-executors or co-trustees. In the event of three or more co-executors, the fiduciaries will only be entitled to share two full statutory commissions apportioned pursuant to the extent of the services rendered by each, unless otherwise agreed to in a writing between the co-executors. Three or more co-executors nominated under the will of a decedent dying after Aug. 31, 1993 will be entitled to three full statutory commissions in one and only one instance, that is, where the decedent expressly provided so in a signed writing, such as the decedent’s will.

The committee, by the above-discussed amendments to SCPA, continued the promotion of its goals of efficient administration without compromising the interests of a decedent’s estate.

Recent Committee Activity
I recently convened a meeting of the committee to discuss the possibility of recommending the enactment of select provisions of the Uniform Trust Code (the UTC), which has been enacted by four states. We reviewed the reports of those who participated in the drafting of the UTC, including the National Conference of Commissioners on Uniform State Laws and the UTC Advisory Committee.

It is proposed that we recommend to the Legislature to adopt that portion of the UTC regarding reforming and modifying wills and trusts, which adopted provisions would become EPTL § 2-1.15. This new section, in part, would grant power to the court, upon petition by a person interested in the proceeding, to reform and modify a decedent’s will or trust, if such petitioner can prove that the instrument does not reflect the testator’s or donor’s intent. This construction provision, analogous to the cy pres rule, would permit the court to effect such modifications and reformations for both tax and non-tax reasons. It is further proposed that we recommend that SCPA § 2302(6) be amended to provide express authority for the court to award attorneys’ fees in certain circumstances under the proposed EPTL § 2-1.15. After careful examination, the committee will determine if it be appropriate to recommend any of the UTC provisions and, if so, such recommendations and findings will comprise a portion of our Sixth Report.

Forthcoming
In my next article I will begin to discuss the committee’s studies, findings and recommendations, contained in our Third Report, regarding the Prudent Investor Act.

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C. Raymond Radigan is former surrogate of Nassau County and of counsel to the Trusts & Estates Department at Ruskin Moscou Faltischek. He also is chairman of the advisory committee to the Legislature on estates powers and trust law and the Surrogate’s Court Procedure Act.  Judge Radigan can be reached at 516-663-6602 or crayradigan@rmfpc.aw-develop.com.
Michael A. DiOrio, Esq., an associate in the Trusts & Estates Department at Ruskin Moscou Faltischek, assisted in the preparation of this article.

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