This month's column features a probate fight over a strip joint.
Now that I have your attention, I have to confess that the case, which was reported recently from the Alaska Supreme Court, has little to do with the strip joint itself. In fact, in the written decision it is merely referred to as a “Fairbanks cabaret”. A more cynical individual might suspect that the reason they called it that, and made no reference to the fact that the establishment was fairly well known to be a place where women remove their clothing for the entertainment of the patrons, was because some of the members of the court might have told their wives, in response to questioning about a credit card statement, that it was “just a cabaret”. Of course, I would make no such insinuation.
But the case is interesting for a completely unrelated reason.
Here are the simple facts of the case: this fellow owned the club, and the property it was located on, as well as a 5-plex apartment building. He died, leaving a will which gave everything to his wife. She applied to be the executor, but so did a man who claimed to be a creditor of the estate. When the widow failed to show up for hearings, the judge appointed the creditor as the executor. At the same time, the judge entered an order which required that no distributions were to be made from the estate accounts.
(Actually I should clarify that the case was decided on summary judgment, so there hasn’t been an actual trial. These were the assumed facts of the case, for purposes of the appeal.)
Several years passed, and things went downhill. The club building burned to the ground, and it turned out the executor had not paid the fire insurance. The heat was turned off to the apartment building because the utility bills were not paid, and as a result the pipes froze. Eventually the properties were foreclosed since the property taxes were also not paid. And it turned out the executor had disobeyed the court order and removed funds from the account.
When the widow was finally able to have someone else take over as executor, it was too late to recover the assets. The estate was insolvent. So the estate sued the executor.
But the estate also sued the attorney for the executor. And that is where it gets interesting.
There was no evidence that the attorney actually knew that withdrawals had been made from the estate account. He never asked. The new executor argued that since the attorney represented the estate, he had a duty to the estate and should have made some inquiries, especially since his client was clearly doing a terrible job as executor.
But there is a problem with that, and it is a problem I have run into with probate cases before. Contrary to what most people assume, the attorney does not represent the estate, nor the heirs. The attorney represents the executor. He represents him in his specific function as the executor, but he still represents that specific person.
As a general rule, attorneys are responsible to their clients, not to everyone else. There are exceptions. If I discover that my client is committing fraud, or some other criminal act, in the matters on which I am representing him, I do have a responsibility to address that, and I could potentially be liable if I didn't. But as long as I don't actually know that he is committing a crime or fraud, I don't have a duty to investigate.
Oftentimes when the beneficiaries of an estate are unhappy with the performance of the executor, they want me, as the attorney, to intervene on their behalf. But I can't do that; the executor is my client. And if my client is just delaying, or not doing a very good job of getting things done, but I have seen no evidence of crime or fraud, then there isn't a whole lot I can do about it. I can advise my client to get on the stick, but that's about it.
This is a lot different than what happens in corporate law. If I was the attorney for a corporation, and an officer of the corporation appeared to be doing things which were not in the corporation's best interest, I could go over his head to the company president or to the Board of Directors. But as the attorney for an executor in probate, I have no ability to go over his head (again, with those limited exceptions).
So the lesson to be learned is, if you are the heir of an estate and you are unhappy with the job the executor is doing, don't rely on the lawyer who is handling the probate; get your own lawyer. And also, if your husband owns a strip club and then he dies, you should probably make it a point to show up for hearings.
Kenneth Kirk is an Anchorage estate planning lawyer. Nothing in this article should be taken as legal advice for a specific situation; for specific advice you should consult a professional who can take all the facts into account. And in case any members of the Alaska Supreme Court read the Senior Voice, the insinuation at the beginning of this article was obviously intended as humor. None of you would ever be caught dead in such a place. Somebody must have stolen your credit card number.
