Lawyer must pay estate for his own legal fees

A lawyer who hired another lawyer when questions were raised about his handling of a decedent’s estate will have to cover some of the legal fees from his own pocket.

A Charlottesville circuit judge this month disallowed payment from the estate of portions of the executor’s legal bills.

Judge Richard E. Moore explained his reasoning in a letter opinion in In re: Estate of Denommé (VLW 016-8-049).

Robert T. Denommé died May 24, 2011. He had been a University of Virginia French professor for 27 years before his 1997 retirement, according to his obituary.

Attorney James N. Deinlein of Charlottesville had long served as Denommé’s lawyer and qualified as executor of the estate.

Charlottesville Commissioner of Accounts Edward H. Bain Jr. questioned Deinlein about some of the expenses charged to the estate.

Bain inquired about having the estate pay Deinlein’s old legal bills, some going back seven years before Denommé’s death. Bain challenged Deinlein’s making an unsecured loan from the estate to himself as trustee for an unrelated trust. Bain also questioned time spent on the sale of a real estate parcel.

When Deinlein hired a lawyer for counsel on his responses, Bain cautioned him that any new legal expenses incurred were not allowable expenses of the estate.

Bain took some of the issues off the table, however. Bain declined to pursue the matter of the unsecured loan, since there had been no loss to the estate. Because the residuary beneficiary did not object, Bain also did not pursue Deinlein’s expenses and fees used to make the house marketable.

The old legal bills remained in contention.

Through his lawyer, Gregory M. Johnson of Charlottesville, Deinlein explained that he provided estate planning services to Denommé from 2004 to Denommé’s death in 2011.

Deinlein said he simply had the estate pay his invoices for past legal services and contended the statute of limitations did not bar the obligations because the undertaking had not terminated.

Bain – the commissioner – demanded that Deinlein restore $17,295.92 to the estate. He contended Deinlein could have responded to his concerns without hiring a lawyer, and he said the new legal charges were out of proportion to the complexity of the estate.

Deinlein contended the legal fees were a legitimate expense of the estate.

Need for advice

Reviewing Virginia decisions, Moore said the pertinent questions were (1) whether the attorneys’ fees were reasonably necessary to further the interests of the estate and beneficiaries or just for the benefit of the executor, and (2) whether the executor was acting prudently and in good faith when he retained additional legal services.

Moore said Bain was correct to question the payment of old legal bills, the unsecured loan and the expenses of preparing the property for sale. Even though the commissioner did not pursue all of the matters, Moore said he could not conclude any of the issues were resolved in Deinlein’s favor.

Moore allowed payment of Deinlein’s legal expenses for addressing questions about the real estate marketing expenses. The judge said evidence indicated Deinlein was “acting in good faith to try to get the property sold.”

But Moore disallowed billing the estate for defending Deinlein on the other two matters – the unsecured loan and the payment of old legal bills.

“It is my view that the Executor’s retaining of counsel as to those two matters was not necessary to the administration of the estate – both were past events – and was primarily, if not solely, for the benefit and protection of himself,” Moore wrote.

The judge said he would require Deinlein to refund to the estate any attorney’s fees paid from the trust attributable to any legal advice regarding the unsecured loan and the old legal bills.

Because not all the bills were readily delineated between the issues, Moore ordered refund of two thirds of a portion of the fees.

Deinlein would be ordered to repay a total of $10,320, according to Moore’s opinion letter.

Bain declined to comment on the ruling. “The opinion speaks for itself,” he said.

Johnson did not respond to a request for comment as of press time