Payment of Estate Attorney-Fee Expenses

The Court of Appeals has extended the Owrutsky rule to estate litigation expenses, including tort cases undertaken by an estate. Anyone practicing estates and trusts law knows (or had better know) Attorney Grievance Comm' v. Owrutsky, 322 Md. 334 (1991). It holds that a lawyer "has no right to [estate] funds, either as a commission or as an attorney's fee, unless and until an approval pursuant to §7-601 or §7-602 of the Estates and Trusts Article...has been obtained from the Orphans' Court."

Since the Court of Appeals rendered its opinion in Owrutsky, that the payment of such fees "cannot be tolerated," new §7-604 permits payments with the consent of all interested persons and creditors with open claims if the commissions and attorney's fees do not exceed the commissionable amount provided by the statute. Thus, the Owrutsky rule stands for the proposition that §7-601 and 7-602 payments must be pursuant to Orphans' Court approval or appropriate consents filed with the Register of Wills.

Owrutsky, however, applied only to commissions and fees as compensation for administering an estate. (See, for example, §7-602 (c) linking the attorney's compensation to the maximum permitted as commissions.) A separate section governs costs of litigation, including counsel fees for litigation. Section 7-603 provides that a personal representative shall be entitled to litigation expenses if he or she prosecutes or defends and action in good faith. National Wildlife Fed'n v. Foster, 83 Md. App. 484 (1990). Indeed, §7-401(y) gives a personal representative the power, without approval of any court, to prosecute or defend litigation. One would suppose that the personal representative may pay the costs associated with exercising that authority.

Not so says the Court of Appeals in Beyer v. Morgan State University, ____ Md. _____ (6/10/02). A fee petition must be filed whether the attorney is requesting fees for estate administration or for litigation.

In Beyer, the decedent was shot by the Baltimore City police. The estate brought a survival action against the police and paid attorney fees and expenses in connection with the suit (which it eventually lost). Morgan State University was a specific legatee who learned of the fees and objected. [Morgan State University was never notified by the estate of payment of the fees or of a petition for fees filed after payment to the attorney was made – this lack of notification raised separate issues.]

The Court lumped litigation expenses into the Owrutsky rule governing §7-601 and 7-602:

"[Beyer] has no authority or discretion to use Estate funds to pay Keating's legal fee, to her personal benefit, without the prior approval of the Orphans' Court. Her conduct, like that of the lawyer in Owrutsky, amounted to an appropriation of Estate funds in clear violation of her fiduciary duties...The Owrutsky analogy is extremely apt here, where the petitioner breached her fiduciary duty to give notice and secure approval before expending estate assets... See Md. Code, §7-101(a) of the Estates and Trusts Article (mandating that Personal Representatives are fiduciaries, and as such, they must fairly consider the interests of all interested persons and creditors."

The Court is sending a clear signal: a personal representative must get all fees approved by the Orphans' Court regardless of the nature of the work involved before paying counsel fees (unless, presumably, the fees are by consent under §7-604).