In the recent Appellate Division case of In Re Sogliuzzo, the Appellate Court awarded counsel fees to the Estate to be paid by Defendant. This was due to the Defendant’s unlawful misappropriation of funds from his elderly mother, which he accomplished by exerting undue influence over her in order to facilitate the transfer of the funds. This case is the inverse of a typical challenge to a Will, wherein counsel fees are paid by the Estate to the contestant.
In this particular matter, which is much less common, the Estate was awarded counsel fees for prosecuting an undue influence action against the wrongdoer pursuant to which it was forced to incur counsel fees and costs in prosecuting the action. The Appellate Court found that Defendant’s exertion of undue influence over his mother, pursuant to which he obtained a substantial financial benefit for himself, met the rationale for an award of counsel fees.
Thus, Defendant was ordered to pay counsel fees to the Estate for the costs it incurred in bringing this action. The Court rationalized that this was the only way to make the estate whole due Defendant’s defalcation.
It should be noted, however, that had the Estate not succeeded with its undue influence claim against Defendant, there would have been no other possibility of recovering the counsel fees. It is only because the Estate was able to prove its claim that it was able to recover counsel fees. As such, an Estate litigation practitioner should consider if they are bringing an undue influence claim against a party on behalf of the Estate, as the Estate may be entitled to an award of counsel fees and costs in prosecuting the action.
Moreover, if the Court also finds that there was a defalcation while the defendant acted in a fiduciary capacity for the decedent, said judgment would not be dischargeable in the U.S. Bankruptcy Court. As such, if you are serving as an executor of the Estate and you are faced with a potential cause of action it is suggested that you consult with experienced counsel.