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In re Estate of Zagaria

Court of Appeals of Illinois, First District, First Division

September 30, 2013

In re ESTATE OF SAMUEL N. ZAGARIA, JR. John F. Lesch, Thomas V. McCauley and Nisen and Elliott, LLC, Petitioners-Appellees,
v.
Samuel N. Zagaria, Jr., Respondent-Appellant

Appeal from the Circuit Court of Cook County. No. 09 P 3712 Honorable Susan M. Coleman, Judge Presiding.

JUSTICE DELORT delivered the judgment of the court, with opinion. Justice Rochford concurred in the judgment and opinion. Justice Cunningham dissented, with opinion.

OPINION

DELORT, JUSTICE

¶ 1 After Samuel N. Zagaria, Jr. disappeared from all contact with his family and friends for over seven years, a probate court declared that he was "presumed dead" and appointed his sister as administrator of his estate. The main asset transferred into the estate was a stock account worth about $500, 000 that Zagaria had apparently abandoned years before. During the course of the estate administration, attorneys for the administrator serendipitously found him, alive, through a contact at a homeless shelter. The trial court revested him with title to his own assets, but the attorneys who handled the estate administration during his absence later sought compensation for their efforts. The court awarded the fees and ordered Zagaria to pay them from the assets that had been returned to him from the estate. In this case of first impression, we affirm the court below by finding that it did not err in ordering Zagaria to return a portion of the assets to the estate for the purpose of paying the attorney fees.

¶ 2 BACKGROUND

¶ 3 Samuel Zagaria's sister, Joanne Corlett, hired John F. Lesch and Thomas V. McCauley of Nisen & Elliott, LLC (hereinafter, the attorneys) to assist her with her brother's affairs. The attorneys filed a petition for letters of administration upon presumption of death. The petition alleged that there was a long period of unexplained absence during which Zagaria had no dealing with his Merrill Lynch stock brokerage account and no communication with Corlett, nor any other family member. On July 6, 2009, the trial court entered an order finding that Zagaria disappeared from his last known place of residence on August 10, 2000, that he had not been seen or heard from since, and upon diligent inquiry could not be found. The court found that the facts created a presumption in law that Zagaria died intestate on August 10, 2007 and that due notice to all interested persons had been given as required by law. The court issued letters of office of the presumed-dead estate of Zagaria and appointed Corlett as independent administrator. Between July 10, 2009 and July 24, 2009, notice was published that the court had issued letters of office to Corlett. Corlett submitted an administrator's bond in the amount of $625, 000. Corlett is Zagaria's only heir at law.

¶ 4 During the administration of Zagaria's estate, the attorneys prepared Zagaria's missing personal tax returns and recovered unclaimed assets he owned that the State of Illinois was holding. The attorneys also attempted to collect benefits for the estate under an annuity contract between Zagaria and Transamerica Insurance Company, but learned they would have to obtain a "presumed-dead death certificate." The attorneys contacted governmental officials regarding how to obtain such a certificate and through that contact learned that someone had filed an application for public assistance using Zagaria's social security number. The address on the application was that of PADS to Hope, a homeless shelter near Zagaria's last known address (hereinafter, the homeless shelter or the shelter). On December 10, 2009, the attorneys contacted the shelter and were informed someone using the name Samuel Zagaria had visited the shelter. The shelter refused, however, to provide additional information about Zagaria to the attorneys without information about the value of Zagaria's assets. The attorneys, in turn, refused to disclose information regarding the value of Zagaria's assets to the shelter, and communications ceased.

¶ 5 On December 28, 2009, the attorneys, who still had no confirmation whether Zagaria was alive or that someone was falsely using his identity, issued a subpoena to the shelter commanding the executive director to appear and to bring the complete file on "Samuel N. Zagaria, Jr." After receiving the subpoenaed documents, the attorneys learned that a person using Zagaria's identity information last visited the shelter six months earlier, in June 2009. On March 3, 2010, the attorneys wrote the shelter thanking staff for giving this person their contact information, but stating that because no one had contacted the attorneys, they needed the shelter's assistance with making contact. The letter also stated that the attorneys had taken steps to assure that Zagaria's Merrill Lynch account did not escheat to the State and that the funds were being held in an account covered by a surety bond. The letter stated the money should be used for Zagaria's benefit but that "it would seem imprudent to just send a check to an occasional address." On May 12, 2010 the attorneys wrote the shelter again, stating Corlett held substantial funds and would like to meet with Zagaria regarding safeguarding those funds. The letter states that the shelter had previously informed the attorneys that Zagaria did not wish to meet with his sister. The letter suggested a meeting with the attorneys with shelter staff present.

¶ 6 From the record, it appears that the attorneys were not able to confirm that Zagaria was actually alive until June 8, 2010, when they met him face-to-face for the first time, along with Zagaria's counselor, representatives of the shelter, and an attorney whom they understood to represent Zagaria. The discussion centered around protecting Zagaria's assets and providing for his needs. The parties decided the estate should immediately provide $5, 000 for Zagaria's needs and discussed creating a trust. On June 22, 2010, the attorneys wrote to the shelter to inform it of difficulties in securing the funds and to attempt to initiate discussions regarding creating a trust for Zagaria instead of a guardianship.

¶ 7 On August 4, 2010, counsel filed an appearance in the estate case on behalf of Samuel N. Zagaria, Jr. On August 26, 2010, Zagaria, through counsel, filed a motion to revoke letters of administration. The motion requested the court revoke the letters of office issued to Corlett on July 6, 2009, order Corlett to provide a full and complete accounting of the "estate" of Samuel N. Zagaria, Jr., and to grant additional appropriate relief. Counsel attached Zagaria's affidavit stating that he is alive and has one sister, Joanne Corlett of Shelbyville, Indiana. On September 1, 2010, the trial court entered an order revoking the presumption of death and the letters of administration. The court ordered Corlett to provide a full accounting of the estate. The court also ordered Corlett to turn over all funds in the original Merrill Lynch account to Zagaria. The attorneys did not make a request for attorney fees at that time, but they did continue to work to close the estate. The attorneys' billing statement reflects that they sent the final accounting of the estate to the court on November 4, 2010.

¶ 8 On April 21, 2011, the attorneys filed a petition for attorney fees and costs totaling $30, 859.21. The attorneys' services to the estate included, among other things, court appearances, preparation of pleadings to open the estate, preparing individual tax returns for Zagaria for 2001 through 2008, inclusive, and a fiduciary tax return for 2008; contacting the homeless shelter; discussing a guardianship for Zagaria; and meeting with him and speaking to his attorney. The attorneys provided a detailed statement of their time and disbursements, and Zagaria has not challenged the reasonableness of the fees.

¶ 9 On September 6, 2011, Zagaria filed pleadings opposing the fee petition. Zagaria argued, in part, that the attorneys were entitled to no compensation because they breached their fiduciary duty to the estate. Also on September 6, 2011, Zagaria filed a petition to surcharge the attorneys based, in part, on an allegation that the attorneys owed Zagaria a fiduciary duty. On March 8, 2012 the court denied Zagaria's petition to surcharge[1]. Zagaria did not appeal that order.

¶ 10 On April 11, 2012, the trial court entered an order finding that the attorneys' fees and expenses were fair and reasonable for the administration of the estate and imposed a judgment against the estate for $27, 359.21. The attorneys issued a citation to Zagaria to recover assets for the estate to satisfy the judgment. In response, the attorneys received information that Zagaria had a new Merrill Lynch account with a balance of $366, 096, created from the funds in the Merrill Lynch account previously held by the estate. In June 2012, the attorneys filed a motion for turnover of funds to satisfy the fee award judgment pursuant to section 16-1(d) of the Probate Act of 1975 (Probate Act) (755 ILCS 5/16-1(d) (West 2010)).

¶ 11 On June 1, 2012, the trial court entered an agreed order freezing the amount of the judgment in Zagaria's Merrill Lynch account until the court resolved the turnover motion. On August 29, 2012, the trial court allowed the motion for turnover against Zagaria. This appeal only seeks review of the August 29, 2012 order.

¶ 12 Zagaria argues the trial court erred because (1) petitioners failed to show cause to attach his nonprobate assets; (2) his claim to the estate property is superior to the attorneys' claim; and (3) the trial court's order is not supported by any existing law. Alternatively, Zagaria argues that if he is liable for attorney fees incurred in the administration of the estate, the attorneys for the estate owed him a fiduciary duty, and the trial court's finding to the contrary should be reversed.

¶ 13 ANALYSIS

¶ 14 1. Administration of Estates

¶ 15 Although the "decedent" in this case is actually alive, the familiar principles applicable to regular decedents' estates nonetheless establish the framework for our analysis. "The administration of decedents' estates is a creature of statute ." In re Estate of Green, 359 Ill.App.3d 730, 734 (2005). The Probate Act (755 ILCS 5/1-1 et seq. (West 2010)) governs the administration of estates in Illinois. When an individual dies intestate, a qualified individual may assume the duty to settle and distribute the decedent's assets under the supervision of the court. Will v. Northwestern University, 378 Ill.App.3d 280, 292 (2007) ("courts have the responsibility to oversee the administration of estates and to approve the actions of an estate's administrators"). "Thus, the powers of an administrator are derivative of the powers of a court, so that the administrator is essentially acting as an agent of the court pursuant to its control and direction." Id. The administrator assumes this duty after the court issues letters of administration. 755 ILCS 5/9-2 (West 2010). "Anyone desiring to have letters of administration issued on the estate of an intestate decedent shall file a petition therefor in the court of the proper county." 755 ILCS 5/9-4 (West 2010). The administrator has a duty to collect and conserve the personal assets of the estate, convert them into cash, to pay the decedent's debts or obligations, and to distribute the estate to those entitled thereto according to their respective rights. In re Estate of Lis, 365 Ill.App.3d 1, 9 (2006); In re Estate of Cappetta, 315 Ill.App.3d 414, 425 (2000); Will, 378 Ill.App.3d at 292.

¶ 16 In performing her duties, the administrator is entitled to the assistance of an attorney. Estate of Knight v. Knight, 202 Ill.App.3d 258, 261-62 (1990) ("Illinois allows fees for attorneys representing administrators "). Moreover, "[w]hen an executor or administrator in good faith retains an attorney and that attorney has performed services on behalf of the estate, such attorney is entitled to reasonable compensation regardless of the outcome of the litigation or the fact that the executor is eventually removed." (Internal quotation marks omitted.) Baez v. Rosenberg, 409 Ill.App.3d 525, 535 (2011). An attorney's compensation for work performed on behalf of the estate is paid from the estate assets. In re Estate of Goffinet, 318 Ill.App.3d 152, 159 (2001) ("Attorney fees incurred by a representative can only be awarded from the estate where the services are rendered in the interest of and to benefit the estate.").

¶ 17 "The administration of an estate in the probate court is not an action between or among parties, but is in the nature of a proceeding in rem, acting directly on the res, which is the estate of the deceased or the disabled person, and the judgment of the probate court settling the estate is a judgment in rem." In re Estate of Denten, 2012 IL App (2d) 110814, ¶ 42. "Where an estate's personal representative is required to perform a statutory duty, the expense of performing that duty is one of administration and a charge against the corpus of the estate." In re Estate of Ginsberg, 4 Ill.App.2d 138, 144 (1955).

¶ 18 2. Administration of Estates of Absentees

¶ 19 The Probate Act permits administration of an estate upon a legal presumption of death. 755 ILCS 5/9-6 (West 2010). The familiar "seven-year rule" is not established by any Illinois statute, but is a court-made rule established by historical case law. "The presumption of death is raised where (1) a person has disappeared or is continuously absent for seven years from his home without explanation, (2) those persons with whom he would likely communicate have not heard anything from him or about him, and (3) a diligent search has been made at his last known place of abode without obtaining information that he is alive." In re Estate of Morrison, 92 Ill.2d 207, 212 (1982) (citing and reconciling numerous cases). When the presumption of death arises, the absent person is presumed to be dead for all purposes and in all courts. Presbyterian Church of Carlyle v. St. Louis Union Trust Co., 18 Ill.App.3d 713, 720 (1974).

¶ 20 The estate of one legally presumed dead is administered in the same way as the estate of one proved dead by other means. See 18 Robert S. Hunter, Illinois Practice § 109.5 (4th ed. 2007) ("Generally, probating on presumption of death is the same as probating an estate on any other proof of death, with the exception of the manner in which probate is commenced."). Probate of a presumed-decedent's estate is ...


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