Archive for September, 2008

Estate’s former attorney disqualified from representing client in action to remove executor

Friday, September 5th, 2008

A court rules that attorneys for estates necessarily have an attorney-client relationship with the estate’s executor. This disqualifies an estate’s former attorney from later representing another client in an action to remove the executor.

In his capacity as the executor of the estate, Frank Harris retained an attorney, Joseph Brady, to assist in the administration of the estate. Counsel represented the estate for one year, until his representation was terminated. Thereafter, a beneficiary of the estate petitioned the court to remove the executor named under the will and to appoint her instead. The challenger was represented by the former attorney of the estate who was terminated.

The executor challenged the petition and moved to disqualify the challenger’s counsel, asserting that Mr. Brady’s former representation of the estate created an impermissible conflict with his new client. Mr. Brady opposed the petition, arguing that no conflict existed because in representing the estate, he represented only the estate and not the estate’s executor.

The Court disagrees with Mr. Brady’s argument that he represented the estate and not the executor. “When attorneys state they are appearing on behalf of an estate,” the court writes, “such a statement is technically incorrect because the attorney is representing the personal representative of the estate, and not the estate itself or the beneficiaries of the estate.” Accordingly, an impermissible conflict of interest exists and the court grants the motion to disqualify Mr. Brady as counsel for petitioner.

Agent with power to gift under POA cannot make unlimited gifts or change retirement beneficiaries

Friday, September 5th, 2008

A recent appeals court rules that a durable power of attorney that allows the agent to “make gifts” does not accord the power to change retirement plan beneficiaries or to make large gifts of personal property absent specific authorization in the document.  In this case, Ronald Slomski executed a power of attorney naming his mother, Rita Slomski, as attorney-in-fact. The document authorized the attorney-in-fact to “make gifts” but it did not contain further instructions regarding gifting powers. Shortly before Mr. Slomski died, his mother, acting under the power of attorney, changed the beneficiary designation on his retirement account from his step-children to his siblings. She also used the document to distribute some $115,000 of Mr. Slomski’s assets to his siblings. Mrs. Slomski claimed that she was acting on her son’s instructions.

Mr. Slomski’s step-daughters and his estate sued Mrs. Slomski, claiming that she lacked the proper authorization to make gifts. They argued that Pennsylvania law requires that a power of attorney specifically grant the authority to make unlimited gifts. Mrs. Slomski maintained that the statute grants an attorney-in-fact broad powers to manage bank accounts and retirement plans and that the change in beneficiaries should not count as a “gift.” The trial court ruled that Mrs. Slomski had the power to change the beneficiary designations but not to make the large distribution to the siblings. Both sides appealed.

The Court found that the power of attorney does not grant Mrs. Slomski the power to make unlimited gifts or to change the beneficiaries of the retirement plan. Citing the statute’s requirement that a power of attorney specifically authorize even limited gift making, the court says “if the phrase ‘to make gifts’ is insufficient to vest an agent with the authority to make limited gifts, it is clearly insufficient to vest an agent with the broader authority to make unlimited gifts.”

Foreclosing Bank Denied Legal Fees and Costs

Friday, September 5th, 2008

In a foreclosure, a plaintiff cannot recover counsel fees against a homeowner or borrower in foreclosure actions prior to filing the foreclosure complaint.  

A recent decision has been rendered by the Appellate Division clarifying when a foreclosing plaintiff can recover counsel fees in a foreclosure action.  

The New Jersey Appellate Division of the Superior Court ruled that the Fair Foreclosure Act which references the New Jersey Rules is a specific limitation on the amount of attorney’s fees a lender can recover.   New Jersey court rules bar the recovery of any amount of attorneys fees unless a Court rule expressly permits those fees.   It was clear to the Court that attorney’s fees to the lender are permitted only when the lender actually files a foreclosure complaint and not before.   The case is significant because in many instances lenders will impose counsel fees and costs incurred prior to the filing of a foreclosure complaint.   This practice has been seldom challenged but with this decision, lenders will no longer be able to charge counsel fees as a condition to reinstating the mortgage unless it has filed a complaint and then has agreed to settle with the defaulting borrower.

For more information contact Bonnie Wright, Esq. at bwright@hnlawfirm.com