Opinion
B190949
5-3-2007
Estate of HARRY SHELDON TEMKIN, Deceased. LOUIS BERNSTEIN, as Administrator, Petitioner and Appellant, v. JAMIE SCHLOSS et al., Claimants and Respondents.
Oldman, Cooley, Sallus, Gold, Birnberg & Coleman and David Coleman for Petitioner and Appellant. Jamie R. Schloss, in pro. per., for Claimant and Respondent Jamie R. Schloss. Law Offices of Michael G. York and Michael G. York, in pro. per., for Claimant and Respondent Michael G. York.
NOT TO BE PUBLISHED
Appellant Louis Bernstein (appellant), the administrator for the estate of Harry Sheldon Temkin (the estate), appeals from the trial courts order authorizing the payment of $1,500 in extraordinary fees incurred by appellant in administering the estate and requiring appellant to pay, out of the assets of the estate, $10,000 to respondent Jamie Schloss (Schloss) and $16,000 to respondent Michael York (York). The trial court disallowed appellants claim for additional fees and expenses, including the $885 per annum cost of a bond premium, and certain filing fees and publication fees. Appellant contends the trial court abused its discretion by under-compensating him for fees and expenses incurred in administering the estate, and that the courts order violates the provisions of Probate Code section 11420 and inequitably shifts fees and costs to other creditors and beneficiaries of the estate. Schloss filed a motion to dismiss the appeal because appellant failed to account for the $27,500, as ordered by the trial court and requested sanctions against appellant in the amount of $3,445 for bringing a frivolous appeal.
All further statutory references are to the Probate Code.
The trial court did not abuse its discretion by disallowing appellants claim for additional fees and denying appellant reimbursement for filing and publication fees, nor did the courts order violate the provisions of section 11420. The trial court erred, however, by denying appellant reimbursement of the reasonable cost of the bond premium, which appellant was entitled to under section 8486. We reverse the order denying reimbursement of the cost of the bond premium and remand the matter to the trial court to modify its order to reimburse appellant for the reasonable cost of the bond premium and to reapportion the payments from the estate to appellant and York accordingly. We affirm the order in all other respects. We deny Schlosss motion to dismiss the appeal and request for sanctions.
Schloss may seek recourse in the trial court for appellants alleged failure to account. (§ 11050.)
BACKGROUND
The sole asset of the estate is $27,500 in cash obtained by Schloss, an attorney, when he settled a lawsuit on behalf of the decedent, Harry Sheldon Temkin (Temkin). Shortly after the lawsuit settled, several people asserted claims to the settlement funds, including Martha Kaplan (Kaplan), a judgment creditor of Temkins, and Schloss, who asserted a claim for more than $10,000 in unpaid attorney fees.
Schloss filed an action to determine the validity and priority of the claims asserted (the Proceeds Action). Shortly before the Proceeds Action proceeded to trial, Temkin and Schloss entered into a settlement agreement, pursuant to which Schloss agreed to compromise his fee claim for $10,000 and Temkin agreed that Schlosss attorney lien was valid as of April 13, 2001. In May 2004, the trial court in the Proceeds Action ruled that Kaplan had no claim with respect to the $ 27,500. Kaplan appealed the judgment.
That judgment was subsequently affirmed on appeal.
In June 2004, York, an attorney who had represented Temkin in litigation against Kaplan, asserted a claim for unpaid legal fees. Temkin died on June 9, 2004, and appellant subsequently was appointed administrator of the estate. Kaplan, Schloss and York each filed claims against the estate for $ 127,385.07, $10,000.00, and $54,193.16, respectively. Appellant filed a motion to have the $27,500, which was being held in Schlosss client trust account, released to the estate, and the trial court ordered Schloss to do so.
In August 2005, appellant filed a petition seeking instruction on the validity and priority of the claims asserted against the estate and requesting payment of $5,022.50 in administrative fees and costs. At the time of the hearing on the petition, the parties had agreed that Schloss and York were the only two legitimate claimants to the funds, and that Schlosss claim had priority over Yorks. The only remaining issue was whether appellants claim for fees and expenses had priority over Yorks claim.
After hearing argument from the parties, the trial court authorized the payment of $1,500 to appellant as compensation for extraordinary services in administering the estate, and ordered appellant to make the following payments, in the following order of priority: $10,000 to Schloss; $1,500 to appellant; and $16,000 to York. The trial court disallowed appellants claim for additional fees and denied appellant reimbursement of $272.50 in filing fees, $780 in publication fees, and the $885 per annum cost of a bond required under section 8480, subdivision (a). This appeal followed.
DISCUSSION
A. Administrative Fees and Expenses
Under section 10811, the administrator of a decedents estate may receive compensation for "extraordinary services" in administering the estate to the extent approved by the probate court. "Allowance of such compensation is not mandatory [citation], but is discretionary with the probate court. [Citation.]" (Estate of Gopcevic (1964) 228 Cal.App.2d 280, 282.) In allowing or disallowing a claim for extraordinary fees under section 10811, "`"the trial court necessarily takes into consideration the value of the estate, the work performed by the attorney in the routine administration thereof, and the amount to which the attorney would be legally entitled, calculated according to the provisions of the Probate Code, and if the sum allowed by law appears to be a reasonable compensation, even though the attorney may have performed some extraordinary services, it is within the sound discretion of the trial court to disallow claims for extra compensation. . . ." [Citation.]" (Estate of Stevenson (2006) 141 Cal.App.4th 1074, 1091.)
Section 10811, subdivision (a) provides: "Subject to the provisions of this part, in addition to the compensation provided by Section 10810, the court may allow additional compensation for extraordinary services by the attorney for the personal representative in an amount the court determines is just and reasonable." A "personal representative" is defined under section 58 to include the administrator of an estate. In addition to compensation for "extraordinary" services, an administrator is also entitled to "ordinary" statutory compensation under section 10810. (Prob. Code, §§10800, 10810; Estate of Hilton (1996) 44 Cal.App.4th 890, 915.) Ordinary statutory compensation is not at issue in this case.
The administrator of an estate may also be reimbursed for necessary estate administration expenses, including "necessary expenses in the care, management, preservation, and settlement of the estate." (§ 11004.) In addition, "if the personal representative takes possession of property reasonably believed to be property of the estate, which later turns out not to be property of the estate, the representative may be awarded reasonable compensation for services rendered in connection with the protection and maintenance of such property upon a finding that those services `were of benefit to the estate." (Ross, Cal. Practice Guide: Probate (The Rutter Group 2006) ¶ 16:286, p. 16-89; § 9651.) Included among these expenses is the cost of the bond the administrator is required to provide at the time of his or her appointment. (See § 8480, subd. (a).)
The trial courts decision to allow or disallow compensation for extraordinary services, and its determination concerning the reasonableness and necessity of an expense, is within the courts broad discretion and will not be disturbed on appeal absent a clear abuse of discretion. (Estate of Fraysher (1956) 47 Cal.2d 131, 136; Estate of Bonaccorsi (1999) 69 Cal.App.4th 462, 470-471; Estate of Turino (1970) 8 Cal.App.3d 642, 648.)
Appellant contends the trial court abused its discretion by disallowing more than $6,000 in attorney fees as compensation for extraordinary services and by declining appellants request that he be reimbursed for $272.50 in filing fees, a $780 publication fee, and the $885 per annum cost of a bond premium. The record discloses no abuse of discretion in the trial courts determination regarding the attorney fees, filing fees, and publication fee. The sole asset of the estate was the $27,500 in settlement proceeds, with respect to which Schloss asserted a claim for $10,000 and York a claim for the balance. The claims asserted exceed the value of the asset. Once those claims were satisfied, nothing would remain in the estate. The trial court properly concluded that appellants efforts with regard to that asset had done little to benefit the estate and awarded compensation and reimbursement commensurate with the benefit conferred. The trial court did not abuse its discretion by awarding appellant $1,500 in extraordinary fees, and by disallowing the balance of appellants claim for fees, the $272.50 in filing fees, and the $780 publication fee. (Estate of Stevenson, supra, 141 Cal.App.4th at p. 1091; Estate of Turino, supra, 8 Cal.App.3d at p. 648.)
The trial court erred, however, by denying appellants request for reimbursement for the reasonable cost of the bond required by section 8480. Section 8486 requires such reimbursement: "The personal representative shall be allowed the reasonable cost of the bond for every year it remains in force." It was not within the trial courts discretion to deny reimbursement of that expense.
Appellant argues that the trial courts order disallowing his claim for additional fees and expenses "has the inequitable effect of shifting costs and expenses to other creditors and the beneficiaries." Because there are no other assets in the estate from which these fees and costs may be deducted, other creditors and beneficiaries are unaffected by the trial courts order. Appellant further argues that denying him reimbursement for the disallowed costs effectively makes him personally liable for those expenses, and that the trial court lacked the authority to do so. It is within the trial courts discretion, however, to deny reimbursement of expenditures it determines were not reasonable or necessary in the administration of the estate, and that determination will not be disturbed on appeal absent a manifest abuse of discretion. (Estate of Turino, supra, 8 Cal.App.3d at p. 648.)
B. Priority of Payment
Under section 11420, compensation for extraordinary services is an administrative expense and is accorded the highest priority among payments from the estate. (Estate of Stevenson, supra, 141 Cal.App.4th at p. 1090.) Section 11420 "sets forth a seven-item ranking of priority in which decedents debts, expenses of administration and charges against the estate are to be paid.[] The statutory ranking is intended to provide for preferential rights in the event the estate is not sufficiently solvent to fully discharge all of its obligations." (Ross, Cal. Practice Guide: Probate, supra, ¶ 16:361, p. 16-110.) Appellant contends the trial courts order disallowing certain extraordinary attorney fees was contrary to the provisions of section 11420, interpreting the statute to require the trial court to award appellant all of his requested fees and expenses. But that is not what the statute provides. "[S]ection 11420 controls only the priority of payment, that is, the order in which various types of expenses are paid, not the amount. . . . It does not govern how much anyone is to be paid or how any particular amount is to be calculated." (Estate of Stevenson, supra, 141 Cal.App.4th at p. 1090.) The trial court in this case ordered that the parties be paid in the following order of priority: Schloss, appellant, and York. That order of priority was consistent with the provisions of section 11420.
Section 11420 prescribes the following order of priority for payments from the estate: (1) expenses of administration; (2) obligations secured by a mortgage, deed of trust, or other lien, including a judgment lien, so far as they may be paid out of the proceeds of the property subject to the lien; (3) funeral expenses; (4) expenses of past illness; (5) family allowance; (6) wage claims; and (7) general debts, including judgments not secured by a lien and all other debts not included in a prior class. (§ 11420, subd. (a).) The statute further provides that, "With respect to obligations secured by mortgage, deed of trust, or other lien, including, but not limited to, a judgment lien, only those expenses of administration incurred that are reasonably related to the administration of that property by which obligations are secured shall be given priority over these obligations." (§ 11420, subd. (a)(1).)
DISPOSITION
We reverse the trial courts order denying appellant reimbursement of the per annum cost of the bond required by section 8480. We remand the matter to the trial court determine the reasonable per annum cost of the bond, to modify the order to reimburse appellant for the reasonable cost of the bond for every year it has remained in effect, and to reapportion the payments to be made from the estate to appellant and York accordingly. We affirm the order in all other respects. We deny Schlosss request for sanctions. All parties will bear their respective costs on appeal.
We concur:
BOREN, P. J.
DOI TODD, J.