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HomeMy WebLinkAbout05-05-82 (2) IN RE: ESTATE OF ROBERT W. IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA ORPHANSr COURT DIVISION ROLAND, JR., CHRISTINA ANN ROLAND and DAVID G. ROLAND, All Minors Over the Age of 14 NO. 232 ORPHANSr 1978 PETITIONERrS SUPPLEMENTAL HEARING MEMORANDUM Background: On April 26, 1982, a hearing was held before the Honorable Dale F. Shughart, President Judge, on the Petition of Commonwealth National Bank to pay certain litigation expenses out of the guardianship accounts of the decedentrs three (3) minor children. During the course of the hearing, your Honorable Court raised the question of the legal authority of the personal representative of decedentrs estate to enter into a legally binding contingent fee agreement for the recovery of wrongful death and survival benefits. The purpose of this Memorandum is to address that particular issue. CLECKNER eo FEAREN ATTORNEYS AT LAW HARRISBURG. PENNSYLVANIA Discussion: Pe"titioner contends that there is ample authority supporting its position that the personal representative of an estate is fully authorized to enter into a contingent fee agreement in litigation of an estate claim. In Shoenberger's Estate, 211 Pa. 99 (1905), an attorney entered into a contingent fee agreement with thl::;! personal representative of the estate for recovery of certain real estate in which decedent was believed to have an ownership claim. Under the agreement, the attorney was entitled to receive fifty percent (50%) of the value of the recovery, plus costs and expenses (but if Defendants were unable to pay costs, the attorney agreed to divide them evenly with the estate). The attorney was successful in recovering certain real estate, and was held to be entitled to his fee pursuant to the agreement. The Court stated as follows on pages 104 and 105: "Under the law of Pennsylvania, which permits an agreement by counsel for contingent compensation (citations omitted) it cannot be doubted that Mr. Blair, having fully performed all that he was employed to do, may recover, from the estate of the decedent, which has reaped the benefit, the stipulated amount. ... The lands would inevitably have been lost if it had not been made . . . and the gain has been very considerable. There was, and could have been, no doubt or misunderstanding as to the terms offered by Mr. Blair, and they were accepted, delib- erately and after the fullest opportunity for consid- eration. The contract was in writing, and bound the lands in the hands of the promisee and of those availing themselves of the benefit of what he did, and taking as volunteers." CLECKNER a FEAREN ATTORNEYS AT LAW HARRlSBURG. PENNSYLVANIA - 2 - See also, Mumma's Appeal, 127 Pa. 474, 18 A. 6 (1889), in which the Supreme Court held that a contingent fee agreement of fifty percent (50%) of the amount of recovery of life insurance proceeds was customary, not unreasonable, and not ultra vires. In Ringler Estate, 36 Somerset L.J. 336 (1979), an attorney was retained by the executor, Somerset Trust Company, to prosecute wrongful death and survival actions on a contingent fee basis. A dispute arose between the executor and the guardian of the estate of decedent's minor child. The executor petitioned the Court for, among other things, approval of the compromise of the wrongful death and survival actions. The Court held that contin- gent fees for litigation in the Orphans' Court Division are proper, and approved the twenty-five percent (25%) contingent fee, stating that "the amount of the fee is within customary limits for such cases and is justified as a charge on the recovery in both death actions of which the minor beneficiary receives the full benefit." Id., pagre 348. In Craig Estate, (No.3), 35 Somerset L.J. 259, 10 D & C 3d 154 (1978), the administrator of decedent's estate retained counsel on a contingent fee basis to file a survival action against dece- dent's slayer. The Court held that the use of the contingent fee agreement in estate litigation is permissible and often appropriate. The Court noted that the higher fee is particularly justified if CLECKNER III FEAREN ATTORNEYS AT LAW HARRISBURG. PENNSYLVANIA - 3 - counsel recovers for the personal representative assets which he otherwise would not have had. The Court further held, citing Section 3311 of the Probate Code, that the expense of litigation conducted by the personal representative in the collection of monies due the estate is an expense of the estate in cases where the estate has a direct and immediate beneficial interest in the issues of the case. The Court stated as follows at 10 D & C 3d 177: "The equity for payment by the estate is clearest and strongest where the litigation au.gments the assets of the estate by bringing into court and subjecting to administration money or property not otherwise part of the estate corpus." The Court ultimately held that a contingent fee of forty percent (40%) of the survival recovery was appropriate. Petitioner contends that the above cases establish the right of' the personal representative to enter into a contingent fee agreement with counsel in cases where the litigation is for the benefit of the estate. Petitioner further contends that this right may be exercised without prior approval of the Court. Section 3311 of the Probate Code provides in part that the personal representative "shall have the right to maintain any action with respect to [the estate] and shall make all reasonable expendit~ures necessary to preserve it.1I Neither that section, nor CLECKNER III FEAREN ATTORNEYS AT LAW HARRISBURG, PENNSYLVANIA - 4 - any of t:he cases cited above, contemplates prior Court approval of the litigation or of the fee arrangement. In fact, in Crawford Estate, 12 D & C 2d 792 (Columbia 1957), the Court suggested that prior approval of a contingent fee agreement of this nature is an improper procedure. If, as Petitioner contends, the contingent fee agreement in this matter is valid and enforceable, then it follows necessarily that the provisions thereof which require the administrator to pay cost:s, filing fees, investigative expenses and general expenses, are also valid. Indeed, any other arrangement with respect to litigation expenses would render the contingent fee agreement invalid. "The courts have agreed in numerous cases, that a contingent fee agreement as a term of which the attorney assumes responsibility for the costs of litigation, is invalid and unen- forceable as offensive to public policy." 7 Am. Jur. 2d, Attorneys-at-Law, ~256, at p., 293; Watkins vs. Sedberry, 261 U.S. 571, 43 S. ct. 411 (1923). Further, Section DRS-103(B) of the Code of Professional Responsibility provides as follows: "While representing a client in connection with contemplated or pending litigation, a lawyer shall not advance or guarantee financial assistance to his client, except that a lawyer may advance or guarantee the expenses of litigation, including court costs, expenses of investigation, expenses of mE~dica 1 examination, and costs of obtaining and presenting evidence, provided the client remains ultimately liable for such expenses." CLECKNER a FEAREN ATTORNEYS AT LAW HARRISBURG. PENNSYLVANIA - 5 - Based upon the foregoing, Petitioner respectfully submits that thl~ contingent fee agreement, including the provisions relatinl~ to litigation expenses, is a valid and enforceable contrac.t. Therefore, Petitioner requests that your Honorable Court grant the relief for which prayer was made in the Petition. In addition to the authority contained in the Petitioner's Hearing Memorandum, Petitioner asks that your Honorable Court consider the fOllowing case as support for the merits of the request. In Borkowski Estate, 109 Montgomery L.R. 446 (1981), the natural mother of two (2) minor children petitioned the Court to appoint a guardian of their estates, and requested, among other things, that a portion of her late husband's life insurance proceeds be used to repair the family residence. The Court noted that the repairs were necessary, and was satisfied that the Petitioner was otherwise unable to borrow the sum neces- sary to do so. The Court stated as follows at page 447: CLECKNER 81 FEAREN ATTORNEYS AT LAW HARRISBURG. PENNSYLVANIA "A diversion of the amount requested (almost half the total fund passing to the minors) is not warranted by the factual situation here pre- sented, and cannot be authorized. However, the circumstances, it is appropriate to authorize the guardian to lend Petitioner the necessary funds to complete the repairs without interest. Such an arrangement, in effect diverts the interest the fund would otherwise produce to Petitioner, but benefits the children by providing them with habitable living accomodations. Should Petitioner avail herself of this, the guardian will secure the repayment thereof by such means as his discretion dictates, including, shoUld he so choose, the - 6 - . , receipt and recording of judgment notes as liens against the property. The notes shall r1equire repayment on sale of the property or at the majority of the minors, whichever shall first occur." In accordance with the foregoing, Petitioner respectfully requests that your Honorable Court grant its Petition upon such terms and conditions as the Court deems just under the circum- stances. Respectfully submitted, CLECKNER l\ND~fEAREN By ./ J. (fIr; ./ ;' -' '" /' -~" < -) ? /1 f.' . {//"I;J 1/, ~ t If". ~ (.., i V---_.. Richard W. Cleckner, Esq. 31 Nortb Second Street Harrisburg, Pa. 17101 (717) 238-1731 (Counsel for Petitioner) CLECKNER a HAREN ATTORNEYS AT LAW HARRISBURG. PENNSYLVANIA - 7 -