A Pennsylvania lawyer who was paid for legal services by the daughter of an incapacitated woman is under no obligation to return that money to the estate, despite an Orphans' Court's finding that the fee was paid using funds that were unlawfully transferred to the daughter.
By Zack Needles
In In re Carol Shiner Rosenbloom, an Incapacitated Person, a three-judge panel of the Superior Court unanimously ruled Feb. 14 to vacate an order of the Allegheny County Orphans’ Court requiring attorney Margie Hammer of Lieber Hammer Huber & Paul in Pittsburgh to return $65,000 in legal fees to the estate of her former client, Carol Shiner Rosenbloom.
In a memorandum opinion, Superior Court Judge Deborah Kunselman said Orphans’ Courts have “no authority under the Probate, Estates, and Fiduciaries Code (PEFC) to force a person to give money to an estate, if, as here, the money does not belong to the estate.”
Kunselman was joined by Judges John Bender and Dan Pellegrini.
According to Kunselman’s opinion, the Orphans’ Court, acting on a petition by the guardian of Rosenbloom’s estate, determined that Rosenbloom’s daughter Kate had exerted undue influence in convincing her mother to transfer investment accounts worth $283,000 to her.
The Orphans’ Court ordered Kate to return that money to the estate, but also required Hammer to return $65,000 in legal fees Kate had paid her for work Hammer had done on behalf of Kate and Rosenbloom, according to Kunselman.
The Orphans’ Court reasoned that it had not approved the payment to Hammer and that, since neither Hammer nor Kate could show that the fees were paid using Kate’s money and not Rosenbloom’s, the fee needed to be returned to the estate.
But the Superior Court panel said the Orphans’ Court “did not find that attorney Hammer exerted undue influence over Ms. Rosenbloom, that she overcharged for her legal service, that she failed to render proper service, or that she in anyway defrauded Ms. Rosenbloom.”
“Instead, the Orphans’ Court relied on the argument of the guardian, namely that Kate’s payments to attorney Hammer violated Section 5536(a) of the PEFC. We disagree,” Kunselman said, noting that Section 5536(a) only gives the Orphans’ Court authority over funds within the estate and not funds that lie outside “‘the income or principal of the estate of an incapacitated person.’”
Kunselman said the section likewise does not permit the Orphans’ Court to order payment of funds into an incapacitated person’s estate from a third-party transaction.
“Here, the Orphans’ Court ordered Kate to refund the full $283,000 to the estate, as an invalid, inter vivos gift from Ms. Rosenbloom to Kate,” Kunselman said. ”However, under Section 5536(a), the court could not go beyond Kate to recover estate funds that Kate may have subsequently transferred to third parties, including attorney Hammer.”
Kunselman also said the $65,000 paid to Hammer was neither principal nor income of Rosenbloom’s estate.
“Contrary to the belief of the orphans’ court and the guardian, attorney Hammer had no obligation to petition that court to be paid for services to Kate and Ms. Rosenbloom, when those services predated the decree of incapacity and were paid for by Kate,” Kunselman said. “Regardless of how Kate obtained the money she paid attorney Hammer, those funds had been passed to a third party and, thus, may not be acquired under Section 5536(a) of the PEFC.”
Reached for comment, counsel for Hammer, James Lieber of Lieber Hammer, said, ”The main thing is it’s a fair decision and I was pleased that the Superior Court made clear what has always been clear, which is that the Orphans’ Court has jurisdiction over the pertinent individual’s estate but not over third parties.”
Counsel for the guardian, Frederick Frank of Frank, Gale, Bails, Murcko & Pocrass in Pittsburgh, could not immediately be reached for comment.
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Court: Attorney Doesn't Have to Return $65K Legal Fee to Estate