October 8, 2008
IN THE MATTER OF THE ESTATE OF RONALD M. SALZER, DECEASED.
On appeal from the Superior Court of New Jersey, Chancery Division, Probate Part, Bergen County, Docket No. P-080-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 15, 2008
Before Judges Reisner, Sapp-Peterson and Alvarez.
Beverly Flowers, the former guardian of decedent Ronald M. Salzer and the former administratrix ad prosequendum of his estate, appeals from a Probate Part order entered April 30, 2007, awarding her $7,000 in termination commissions plus $585 in expenses, but denying her claim for additional commissions and counsel fees. Salzer's Estate has cross-appealed from the award of the termination commissions and expenses. We modify the judgment to $6000 in termination commissions plus expenses, and affirm as modified.
These are the most pertinent facts. On August 19, 2003, decedent Ronald M. Salzer (Salzer) was critically injured in an automobile accident when, as a pedestrian walking in New York City, he was struck by a motor vehicle owned and operated by Herwin M. Abel. Salzer was placed on life support and never regained consciousness.
At the time of the accident, Salzer, a disbarred New Jersey attorney who had served four years in prison in the late 1990s for misappropriation of his clients' funds, was divorced, had no children, and was estranged for over ten years from his two brothers. Aside from his brothers, Salzer had no living relatives. After his release from prison, Salzer moved into the home of Beverly Milgram Flowers, a semi-retired attorney whom Salzer had known for over two decades. Salzer resided with Flowers and her family from some time shortly after his release from prison until the accident on August 19, 2003.
On September 11, 2003, Flowers applied to become Salzer's guardian. The application was opposed by Salzer's ex-wife, Janet Salzer, who submitted a cross-complaint for guardianship. The Probate judge appointed a guardian ad litem, who recommended that Flowers be appointed Salzer's guardian, based on her longstanding friendship with him and Janet's lack of contact with Salzer in the preceding four years. On November 24, 2003, the court appointed Flowers as Salzer's guardian.
On December 23, 2003, Flowers filed a complaint for personal injury on Salzer's behalf against Abel. Litigation proceeded, and a $300,000 settlement was reached between the parties.*fn1 Flowers confirmed the settlement by signing a release on February 12, 2004. Two days later, on February 14, 2004, Salzer died as a result of his injuries.
Since the guardianship terminated with Salzer's death and Abel's insurance company had not yet forwarded the settlement check, Flowers moved to be appointed administratrix ad prosequendum on behalf of Salzer's estate, pending the appointment of an executor. On April 7, 2004, the trial court granted the motion, temporarily appointing Flowers "Administratrix ad Prosequendum of the Estate of Ronald M. Salzer, until a complaint and permanent appointment of administration of the estate is made."*fn2
Salzer died testate; however, the will in effect at the time of his death had been drafted before his divorce from Janet. Thus, although Janet was named as the sole residual beneficiary and Executrix of the will, she was disqualified by statute from taking anything under the will or from serving as Executrix. Instead, Marilyn Aden, Janet's sister and the alternate Executrix named under the will, was appointed to serve in Janet's stead. Aden received letters testamentary from the Bergen County Surrogate on October 4, 2004.
By letter dated October 31, 2005, Flowers sent a "revised final bill" to Elizabeth M. Haag, Esq., the Estate's attorney, seeking a six percent "guardian's commission" of $21,457, plus $585 in itemized expenses incurred in filing the guardianship and related costs. Haag declined to pay the commission, primarily because the estate was likely to be insolvent, and suggested instead that Flowers file an application with the court.
In February 2006, Aden filed a Complaint for Insolvency, along with an Order to Show Cause requiring "that all creditors, . . . and others said to be the persons in interest herein, show cause . . . why final judgment should not be rendered directing that the estate of said Ronald M. Salzer be adjudged insolvent." The reason for the insolvency appeared to be federal and state tax obligations in the amount of $676,109.32 and $86,796.80, respectively, which accounted for more than 80% of the approximately $900,000 in claims outstanding against the estate at the time of Salzer's death. The insolvency petition listed Flowers as a person interested in the estate but not as a creditor.
After the petition was filed, Flowers filed a claim for commissions for her work in bringing in $350,000 in settlement monies, which constituted virtually all of the Estate's assets. Consistent with her earlier letter to Haag, Flowers requested a total of $22,042: an income commission of $21,457, plus $585 in expenses. On April 7, 2006, the Probate judge entered a Judgment of Insolvency, declaring Flowers' commission claim to be "unsecured and subordinate to the [governmental] tax claims" on the estate. The court also declined to approve Flowers' request for commissions as Salzer's guardian.
The Probate judge denied Flowers' first motion for reconsideration, citing her failure "to meet the standard set out in Cummings [ v. Bahr, 295 N.J. Super. 374 (App. Div. 1996)]." The judge specifically stated that Flowers failed to assert any new statutory information or arguments that would affect the prior decision. Further, she [did] not point to any new case law that would support her claim of payment for private guardians. Nor [did] Flowers indicate that the court erred in considering her claim by ignoring substantial evidence.
As a result, the motion court concluded that "Flowers failed to meet the narrowly construed criteria for reconsideration."
After the denial of her first motion for reconsideration, Flowers retained counsel and filed a second motion for reconsideration through counsel. After oral argument on September 8, 2006, the judge stated,
This [c]court has said on the record plainly, a couple of times, that if there's a principled way to compensate Miss Flowers . . . for her efforts under the statute, it would happily do so but under the arguments that are being advanced by Miss Flowers . . . , she simply was not entitled to be a priority creditor of an insolvent Estate for the reasons that I've set forth in the last appearance.
I'll take it under advisement and we'll see if there's a way that it can be done.
Thereafter, a second hearing on this motion was held on April 3, 2007. At that hearing, the court again heard oral argument as to whether Flowers was entitled to priority status for her claimed guardianship commissions. Reversing his previous position on the matter, the judge awarded a termination corpus commission of $7000, based on a corpus amount of $350,000. The judge indicated that this was an equitable remedy, stating:
I can't solve all of the problems of the world. I think I made it plain, if somebody could build me a bridge to find me [a way] to make an award, I could do it. [Flowers' attorney] has built me a sufficient bridge that I'm prepared to say that as creator of this fund, call it a finders fee, call it a commission, call it an attempt to do what ought to have been done. At the very same time I will provide that Miss Flowers shall receive as a priority commission payment in the amount of $7000, which is two percent of the entire [$350,000].
That's payment in full. I'm not a hundred percent satisfied that if this goes up that the Appellate Division will sustain my determination to award that amount of money, but if she's paid that amount of money, it won't be an unjust result.
On April 30, 2007, the court entered an Order granting the $7000 award and discharging Flowers as guardian and administratrix ad prosequendum, plus an additional $585 to Flowers for expenses.*fn3
Flowers has presented the following arguments in support of her appeal:
POINT I: THE COURT BELOW FAILED TO CONSIDER THE IRREGULAR MANNER IN WHICH THE EXECUTRIX OBTAINED CONTROL OVER THE "FUND IN COURT" BY RETAINING THE GUARDIAN'S ATTORNEY OF RECORD. POINT II: THE COURT EXCEEDED THE SCOPE OF ITS AUTHORITY WHEN IT DENIED THE GUARDIAN OF RONALD SALZER HER "ABSOLUTE" RIGHT TO STATUTORY INCOME COMMISSIONS.
POINT III: THE COURT FAILED TO CONSIDER THAT THE SURROGATE'S "MANUAL FOR GUARDIANS" MAY HAVE ACTED AS AN ESTOPPEL TO THE COURT DENYING INCOME COMMISSION TO THE GUARDIAN. POINT IV: THE COURT ERRED WHEN IT AWARDED TERMINATION CORPUS COMMISSIONS BUT FAILED TO AWARD ANNUAL CORPUS COMMISSIONS.
POINT V: THE COURT'S DECISION TO AWARD TERMINATION CORPUS COMMISSIONS WAS CORRECT AS A MATTER OF LAW.
POINT VI: EVEN ASSUMING ARGUENDO THAT N.J.S.A. 3B:22-2 CONTROLLED THE PAYMENT OF GUARDIANSHIP COMMISSIONS, THE COURT ERRED WHEN IT FOUND THAT GUARDIANSHIP COMMISSIONS [WERE] NOT ENTITLED TO PRIORITY UNDER THE STATUTE.
POINT VII: THE COURT BELOW IMPROPERLY PERMITTED THE EXECUTRIX TO ARGUE THE PRIORITY OF ESTATE CREDITORS DESPITE HER LACK OF STANDING, WHICH STANDING THE EXECUTRIX ALSO LACKS ON APPEAL.
POINT VIII: THE COURT ERRED WHEN IT FAILED TO PROTECT THE RIGHTS OF THE COURT-APPOINTED GUARDIAN, WHEN ADVISED THE GUARDIAN'S ATTORNEY OF RECORD HAD BEEN CONFLICTED OUT OF THE MATTER BY THE EXECUTRIX.
POINT IX: THE COURT ERRED WHEN IT FAILED TO AWARD THE GUARDIAN HER COUNSEL FEES FROM THE "FUND IN COURT" THAT SHE CREATED.
The Estate presents the following points in support of the cross-appeal:
POINT III: THE TRIAL COURT ERRED IN GRANTING MS. FLOWERS['] MOTION FOR RECONSIDERATION AND PROVIDING TERMINATION COMMISSIONS.
1. The Trial Court Itself Acknowledged That The Second Motion For Reconsideration Was Improper
2. Ms. Flowers' Claim Of An Equitable Lien Is Not Supported By Fact Of Law
We review the trial judge's decision to grant Flowers' reconsideration motion under an abuse of discretion standard. See Cummings v. Bahr, 295 N.J. Super. 374, 389 (App. Div. 1996). On the other hand, we engage in de novo review of the trial court's decision on the legal issue of Flowers' entitlement to commissions, expenses, and counsel fees. See Manalapan Realty v. Manalapan Twp. Comm., 140 N.J. 366, 378 (1995).
Having reviewed the record, we conclude that the trial judge did not abuse his discretion in agreeing to reconsider the issue of commissions. Flowers' application presented a somewhat unusual legal issue and we cannot fault the judge for being willing to take another look at it. We also conclude that, with one minor exception, the judge was correct in awarding a termination commission.
The statute controlling a guardian's right to income commissions provides that "[c]ommissions in the amount of 6% may be taken without court allowance on all income received by the fiduciary." N.J.S.A. 3B:18-24. The statute further provides that income withheld for taxes is nonetheless included in the calculation of the guardian's commission. Ibid.
Clearly, the word "income" in section 24 is used in its ordinarily-understood sense, i.e., money actually "received" by the guardian, except for money withheld for taxes. Ibid. In this case, while the personal injury settlement was final in the sense that it was enforceable, none of the money or "income" from that settlement was actually received while Flowers was acting as Salzer's guardian. Hence, she was not entitled to an income commission on the settlement proceeds and her claim to $21,457 in income commissions was properly rejected. Moreover, although Flowers contends on this appeal that she is entitled to $1100 in annual corpus commissions pursuant to N.J.S.A. 3B:18-25, she did not preserve this claim before the trial court and may not present the issue for the first time on appeal. Neider v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973).
We reach a different result with respect to her claim for termination commissions. Unlike income commissions, termination commissions are based on "assets," including but not limited to income. The termination commission statute provides in relevant part:
In addition to the annual commissions on corpus, upon termination of the trust or guardianship, or upon distribution of assets from the trust or guardianship, the fiduciary may take a commission on corpus distributed, including accumulated income which has been invested by the fiduciary. The value of the corpus for the purpose of computing the commissions shall be the "presumptive value" or, at the option of the fiduciary, the value at the time of distribution . . . [N.J.S.A. 3B:18-28 (emphasis added).]
The wording of the statute indicates that "assets" includes but is not limited to "income." Moreover, if termination commissions were only based on "income," no special valuation techniques would be required.
We find further support for this conclusion in Matter of Reutlinger, 140 N.J. 231 (1995). There the Court held that termination commissions under N.J.S.A. 3B:18-28 "are calculated on the basis of a corpus that includes real estate and other property left unsold at the termination of the guardianship." Id. at 241. The Court rejected an argument that termination commissions could only be awarded on assets reduced to cash during the guardianship: "There is no requirement that the assets actually be sold or otherwise 'handled' by the fiduciary. The commission is triggered by either termination of the guardianship or distribution of assets prior to termination." Id. at 235. In this case, there is no doubt that the $300,000 settlement was finalized and enforceable when Flowers signed the release. Like a piece of real estate, an agreement to settle a personal injury lawsuit is an asset. It can be sold to a settlement broker for value or turned into cash through an enforcement action if the obligor will not pay. See N.J.S.A. 2A:16-64; Owen v. CNA Insurance, 167 N.J. 450, 458 (2001) ("New Jersey law generally permits the assignment of settlement proceeds unless the parties have expressly agreed otherwise."); Berkowitz v. Haigood, 256 N.J. Super. 342, 346 (Law Div. 1992) ("proceeds derived from a settlement of a claim for personal injuries" are assignable).
Based on our construction of the guardianship commission statutes, we conclude that, like the real estate in Reutlinger, supra, the $300,000 settlement of the personal injury lawsuit was an "asset" on which Flowers was entitled to collect a termination commission. That settlement was finalized and enforceable at the latest on the date Flowers signed the release, two days before Salzer's death. The fact that the insurance company did not actually send the settlement check until a later date does not change our conclusion that the settlement was an asset. Moreover, Flowers did not waive her right to the commission by failing to take her commission at the time her right to the commission accrued. See N.J.S.A. 3B:18-26.
On the other hand the $50,000 PIP claim was not settled until after Flowers ceased to be Salzer's guardian and the executrix was appointed. Therefore, that settlement was never an "asset" of the guardianship estate and Flowers was not entitled to a termination commission on the $50,000. Thus, we vacate the $1000 commission awarded to Flowers on this amount.
Although it is a closer question, we further conclude that since Flowers' activities on Salzer's behalf produced the only significant estate assets and since she served as administratrix ad prosequendum while the $300,000 was collected, her commissions, like those of the executrix, should be deemed administration expenses of the estate entitled to priority in the insolvency matter.*fn4 See N.J.S.A. 3B:22-2; Nat'l State Bank v. Nadeau, 57 N.J. Super. 53, 79 (App. Div. 1959) (including "executors' commissions" within category of "administration expenses"); Lloyd v. Rowe, 20 N.J.L. 680, 685 (Sup. Ct. 1846). Moreover, while it is perhaps an imperfect analogy, we also conclude that although Flowers had no contract with any of the parties having a claim on the estate, since Flowers' action as a guardian created the estate fund, she should be considered to have an equitable lien for her termination commissions which attached to the settlement check prior to its inclusion in the estate. See In re Hoffman, 63 N.J. 69, 77 (1973).
We find no merit in any of the parties' remaining arguments on the appeal and cross-appeal, and we conclude their contentions do not warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). In particular, we find no basis on which to award Flowers counsel fees for her litigation to collect the commissions. The fee was not incurred to create the $300,000 fund from which Flowers seeks payment. See R. 4:42-9(2); Shilowitz v. Shilowitz, 115 N.J. Super. 165, 188 (Ch. Div.), modified, 119 N.J. Super. 311 (App. Div.), certif. denied, 62 N.J. 72 (1972).
Accordingly, we modify the award to Flowers to a total of $6585 and we remand to the trial court to enter a judgment in that amount.
Affirmed as modified and remanded.