[EDITOR'S NOTE: This case is unpublished as indicated by the issuing court.] JOHN B. RIORDAN, Judge.
Submitted for review and approval is the accounting filed by Daniel D'Amico as executor in the estate of Andrew Peter D'Amico, deceased. The executor seeks approval of his final accounting, computation and payment of his commissions as executor and the commissions of Andrew D'Amico as trustee, the determination and allowance of the fees and expenses of his attorney and accountant, approval of repayment of a loan from Gloria Maria D'Amico and the discharge and release of the executor.
The decedent died a resident of Nassau County, on February 2, 2008. The account as filed shows total charges of $421,603.87 and total credits of $41,258.94, leaving a balance on hand as of February 1, 2010 of $382,121.44.
Waivers of citation and consent to accounting forms have been filed on behalf of all necessary parties, to wit, Andrew D'Amico, Gloria D'Amico, Eben D'Amico, Gabel D'Amico, Nathaniel D'Amico, Richard D'Amico, and Daniel D'Amico [the father] on behalf of infants Madeline D'Amico [DOB 05-01-2000], and Gillian D'Amico [DOB 07-07-2003], and Richard D'Amico [the father] on behalf of infant Daniel D'Amico [DOB 12-05-1992]. Each of the grandchildren, including the three infants, is to receive a specific bequest of $10,000.00 and it appears that there are sufficient funds in the estate to pay these bequests in full (SCPA § 403[b]).
The last will and testament provides that the specific bequests to the infant grandchildren be held in trust with Andrew D'Amico as trustee. As there is no trust accounting before the court, no commissions can be awarded to the trustee in this proceeding. The request to pay such commissions is accordingly denied.
Respecting counsel fees, as described in the affirmation of legal services made by Kim Goldstein of the firm of Gates Goldstein, LLP, counsel to the executor, sworn to on September 14, 2010, counsel expended and billed for approximately 40 hours on this estate, with a billable value of $12,000.00, none of which has been paid and has incurred $350.00 in out of pocket expenses. Counsel expects to expend a further $1,000.00 in legal time through the issuance of the decree and distribution of the estate's assets. Counsel has, however, agreed to accept the sum of $4,000.00 on account of such fees and expenses.
With respect to the issue of attorney's fees, the court bears the ultimate responsibility for approving legal fees that are charged to an estate and has the discretion to determine what constitutes reasonable compensation for legal fees rendered in the course of an estate ( Matter of Stortecky v Mazzone, 85 NY2d 518; Matter of Vitole, 215 AD2d 765 [2d Dept 1995]; Matter of Phelan, 173 AD2d 621, 622 [2d Dept 1991]. While there is no hard and fast rule to calculate reasonable compensation to an attorney in every case, the Surrogate is required to exercise his or her authority "with reason, proper discretion and not arbitrarily" ( Matter of Brehm, 37 AD2d 95, 97 [4th Dept 1971]; see Matter of Wilhelm, 88 AD2d 6, 11-12 [4th Dept 1982]).
In evaluating the cost of legal services, the court may consider a number of factors. These include: the time spent ( Matter of Kelly, 187 AD2d 718 [2d Dept 1992]); the complexity of the questions involved ( Matter of Coughlin, 221 AD2d 676 [3d Dept 1995]); the nature of the services provided ( Matter of Von Hofe, 145 AD2d 424 [2d Dept 1988]); the amount of litigation required ( Matter of Sabatino, 66 AD2d 937 [3d Dept 1978]); the amounts involved and the benefit resulting from the execution of such services ( Matter of Shalman, 68 AD2d 940 [3d Dept 1979]); the lawyer's experience and reputation ( Matter of Brehm, 37 AD2d 95 [4th Dept 1971]); and the customary fee charged by the Bar for similar services ( Matter of Freeman, 34 NY2d 1; Matter of Potts, 123 Misc 346 [Sur Ct, Columbia County 1924], affd 213 App Div 59 [4th Dept 1925], affd 241 NY 593). In discharging this duty to review fees, the court cannot apply a selected few factors which might be more favorable to one position or another but must strike a balance by considering all of the elements set forth in Matter of Potts ( 123 Misc 346 [Sur Ct, Columbia County 1924], affd 213 App Div 59 [4th Dept 1925], affd 241 NY 593), and as re-enunciated in Matter of Freeman ( 34 NY2d 1; see Matter of Berkman, 93 Misc 2d 423 [Sur Ct, Bronx County 1978]). Also, the legal fee must bear a reasonable relationship to the size of the estate ( Matter of Kaufmann, 26 AD2d 818 [1st Dept 1966], affd 23 NY2d 700; Martin v Phipps, 21 AD2d 646 [1st Dept 1964], affd 16 NY2d 594). A sizeable estate permits adequate compensation, but nothing beyond that ( Martin v Phipps, 21 AD2d 646 [1st Dept 1964], affd 16 NY2d 594; Matter of Reede, NYLJ, Oct. 28, 1991, at 37, col 2 [Sur Ct, Nassau County]; Matter of Yancey, NYLJ, Feb.18, 1993, at 28, col 1 [Sur Ct, Westchester County). Moreover, the size of the estate can operate as a limitation on the fees payable ( Matter of McCranor, 176 AD2d 1026 [3rd Dept 1991]; Matter of Kaufmann, 26 AD2d 818 [1st Dept 1966], affd 23 NY2d 700), without constituting an adverse reflection on the services provided.
The burden with respect to establishing the reasonable value of legal services performed rests on the attorney performing those services ( Matter of Potts, 123 Misc 346 [Sur Ct, Columbia County 1924], affd 213 App Div 59 [4th Dept 1925], affd 241 NY 593; see e.g. Matter of Spatt, 32 NY2d 778). Contemporaneous records of legal time spent on estate matters are important to the court in determining whether the amount of time spent was reasonable for the various tasks performed ( Matter of Von Hofe, 145 AD2d 424 [2d Dept 1988]; Matter of Phelan, 173 AD2d 621 [2d Dept 1991]).
Counsel's affirmation, together with the billing reports annexed thereto, detail the legal services provided to the executor. The services include reviewing the will and decedent's files and documents, preparing and filing all necessary documentation for probate, identifying and collecting the decedent's assets, court appearances, telephone conferences, and preparing and filing the accounting and petition for the judicial settlement thereof. Based on the submissions and counsel's agreement to substantially reduce their fees, fees are set at the requested reduced amount of $4,000.00, none of which has been paid.
With respect to the accountant's fees, normally, an accountant's services are not compensable out of estate assets unless there exist unusual circumstances that require the expertise of an accountant ( Matter of Meranus, NYLJ, Mar. 31, 1994, at 37, col 2 (Sur Ct, Suffolk County]). The fee for such services is generally held to be included in the fee of the attorney for the fiduciary ( Matter of Musil, 254 AD 765). "[T]he purpose of this rule is to avoid duplication ( Matter of Schoonheim, 158 AD2d 183 [1st Dept 1990]). Where the legal fees do not include compensation for services rendered by the accountant, there is no duplication and the legal fee is not automatically reduced by the accounting fee ( Matter of Tortora, NYLJ, July 19, 1995, at 26" (Warren's Heaton on Surrogate's Practice § 93.08 [7th ed.]).
Here, CPA Howard Leibowitz has submitted an affidavit requesting fees totaling $875.00, none of which has been paid. The supporting affidavit avers the preparation of various state and federal income and estate tax forms. The work performed was requested by counsel and is not duplicative of the legal services rendered by legal counsel and the requested amount is reasonable. The court accordingly approves the fees in the amount requested.
Repayment of the personal loan from Gloria Maria D'Amico in the sum of $50,000.00 is approved. The accounting is approved subject to audit. The decree shall provide for release of the executor.
The decree previously submitted will be signed if found to be in suitable form.
omm#p972448 P.2d 967, 972-73 (1968).
III. Taxable Events "Within the City"
We first address whether Leggett Piatt's sales of store fixtures to The Gap were taxable as retail sales "within the City" under the City Code. Taxpayers argue that, under the Colorado Uniform Commercial Code (UCC), because the master vendor agreement specified that delivery was F.O.B. place of destination, The Gap did not "acquire" the store fixtures until they were delivered to its retail stores located outside Thornton and, thus, the taxable events occurred outside Thornton and no sales tax should have been levied. Thornton argues that, under the City Code, taxable events occurred in Thornton, because The Gap acquired, or obtained possession of, the goods in Thornton when the goods were loaded onto common carriers hired and paid for by The Gap at Leggett Piatt's loading dock in Thornton. We agree with Thornton and conclude that, under the City Code, the sales transactions were taxable events "within the City."
Thornton is a home rule municipality formed pursuant to article XX, section 6, of the Colorado Constitution. As such, Thornton is constitutionally empowered to adopt a sales tax. Apollo Stereo Music Co. v. City of Aurora, 871 P.2d 1206, 1208 (Colo. 1994); Berman v. City Cnty. of Denver, 156 Colo. 538, 542-44, 400 P.2d 434, 436-37 (1965).
The City Code provides that "[s]ales taxes are required to be imposed and collected from the purchaser or consumer on behalf of the City by any person engaged in business in the City and making a taxable retail sale or completing any other taxable transaction within the City." City Code § 26-388(a)(3)(b) (emphasis added). The City Code requires that a sales tax shall be levied on "the price paid or charged upon the sale [or] purchase . . . of tangible personal property purchased." City Code § 26-389(a)(21). "Purchase, Sale" is defined in the City Code as "the acquisition for any consideration by any person of tangible personal property," which includes property acquired by "[t]ransfer, either conditionally or absolutely, of title or possession or both to tangible personal property." City Code § 26-388(c) (emphasis added). The City Code further states that it is the legislative intent of Thornton
that, for purposes of this Code, every person who is engaged in business in the City, as defined in Section 26-388, and who shall
deliver or cause to be delivered to the purchaser in the City any property or services taxable in this Code is exercising a taxable privilege and shall collect the tax imposed by this Code on the total purchase price of such articles of tangible personal property or taxable services that are purchased, sold, leased or rented at any time by or to every customer or buyer in the manner set forth in this Code.
City Code § 26-386(b) (emphasis added).
Thus, the elements necessary to constitute a "purchase" or "sale" under the City Code are (1) transfer of title or possession, or both of (2) tangible personal property, for (3) consideration. City Code § 26-388(c). Because it is clear that there was a transfer of tangible personal property for consideration, we must determine whether the sales involved a transfer of title or possession to The Gap in Thornton so as to make those transfers taxable retail sales "within the City." See City Code § 26-388(a)(3)(b)
Taxpayers argue that, under the Colorado UCC, because the master vendor agreement specified that the F.O.B. terms were "Destination, Freight Collect," The Gap "acquired" the store fixtures when they were delivered to The Gap's retail stores, which were located outside Thornton, and, thus, the purchase and sale of the goods did not occur "within the City." Because we conclude that at least possession of the goods, if not title to them, was transferred at the loading dock in Thornton, we reject taxpayers' argument.
Section 4-2-401(2), C.R.S. 2010, of the Colorado UCC prescribes when title to merchandise passes to the buyer:
(2) Unless otherwise explicitly agreed, title passes to the buyer at the time and place at which the seller completes his performance with reference to the physical delivery of the goods, despite any reservation of a security interest and even though a document of title is to be delivered at a different time or place; and in particular and despite any reservation of a security interest by the bill of lading:
(a) If the contract requires or authorizes the seller to send the goods to the buyer but does not require him to deliver them at
destination, title passes to the buyer at the time and place of shipment; but
(b) If the contract requires delivery at destination, title passes on tender there.
In addition, the Colorado UCC provides:
(1) Unless otherwise agreed the term F.O.B. (which means "free on board") at a named place . . . is a delivery term under which:
(a) When the term is F.O.B. the place of shipment, the seller must at that place ship the goods in the manner provided in this article (section 4-2-504) and bear the expense and risk of putting them into the possession of the carrier; or
(b) When the term is F.O.B. the place of destination, the seller must at his own expense and risk transport the goods to that place and there tender delivery of them in the manner provided in this article (section 4-2-503).
§ 4-2-319(1)(a)-(b), C.R.S. 2010.
In contrast, transfer of possession of goods is not necessarily dependent upon F.O.B. terms. Transfer of physical possession of goods is a constitutionally permissible taxable event, regardless of technical considerations regarding the time and place of passage of title which might turn on the degree of control short of transfer of physical possession. See McGoldrick v. Berwind-White Coal Mining Co., 309 U.S. 33, 43, 49, 60 S.Ct. 388, 84 L.Ed. 565 (1940) (New York City sales tax was on the "transfer of title or possession, or both," and, thus, a buyer who accepted delivery in the taxing state is not exempt from the sales tax because he came from another state and intended to return to his home state with the goods).
We conclude that the purchase and sale of the store fixtures occurred "within the City" of Thornton. Here, contrary to the terms of the master vendor agreement, the bills of lading and invoices showed that all the sales transactions at issue in this case were actually "F.O.B. Shipping Point," which was Leggett Piatt's loading dock in Thornton. Further, it is undisputed that Leggett Piatt delivered the goods at its loading dock in Thornton to common carriers hired and paid for by The Gap, which then transported the goods to predetermined destinations out-side Thornton. Therefore, the F.O.B. term certainly shows that possession of the goods, if not also acquisition of title, transferred to The Gap at Leggett Piatt's loading dock in Thornton. Accordingly, The Gap at least took possession of the goods "within the City." It also appears that title to the goods passed to The Gap when Leggett Piatt completed its performance by delivering the goods at its loading dock in Thornton to common carriers hired and paid for by The Gap. However, only the transfer of possession of the property was required to justify the imposition of the tax. The record before us indicates that the transfer of possession took place in Thornton and, therefore, a taxable event as defined by the City Code occurred there. See id.
Furthermore, once the transfer of the goods was made in Thornton to trucks hired and paid for by The Gap, exclusive possession of the merchandise was in The Gap, and at no time thereafter did Leggett Piatt exercise any control or direction of the transaction. See Mossberg-Hubbard Div. v. Norberg, 432 A.2d 1176, 1179 (R.I. 1981). Therefore, there is sufficient evidence to support the findings of the district court that the transfer of possession of goods in the instant case occurred in Thornton, regardless of when and where passage of title to the goods occurred. See id.
To the extent taxpayers contend that section 29-2-105(1)(b), C.R.S. 2010, stands for the principle that "sales taxes apply at the destination of the taxable property," we need not address any supposed inconsistency between that section and the City Code, because taxpayers do not argue on appeal that the City Code does not comply with section 29-2-105(1)(b).
IV. Interstate and Intrastate Exemptions
Taxpayers alternatively argue that, even if the sales transactions occurred in Thornton, the exemptions for interstate and intrastate sales under section 26-390(10) and (11)(b) of the City Code apply to the transactions and, thus, Thornton sales tax should not have been imposed. Again, we disagree.
A. Applicability of Exemptions to Sales Transactions Made Between April and June 2005 Under Pre-Amendment Version of Section 26-390
As set forth above, the version of section 26-390 of the City Code applicable to taxpayers' claims for refund of sales taxes imposed between April and June 2005 provided in relevant part that "sales of tangible personal property shall be exempt" from the imposition of sales tax if (1) the sales are "to those who reside or do business" outside Thornton or Colorado; and (2) the articles purchased are to be delivered to the purchaser outside Thornton or Colorado by common, contract or commercial carrier " who is employed to effect delivery by the seller or by the conveyance of the seller or by mail." City Code § 26-390(10), (11)(b) (emphasis added).
The dispute here involves the second element requiring that the common, contract, or commercial carrier must be employed by the seller in order for the interstate and intra-state exemptions to apply. Taxpayers contend that section 26-390 does "not make the exemption contingent on which party (the seller or the purchaser) hired the carrier." Specifically, taxpayers assert that the phrase "by the seller" modifies the term "delivery," and not the term "employed."
The district court disagreed, concluding that, under the plain language of section 26-390(10) and (11)(b), "the exemption and refund are not available unless the common carrier is employed by the seller." The court concluded that, if it were to adopt taxpayers' construction of section 26-390, it would be "possible that sellers and purchasers could easily thwart taxation by the City by consistently delivering purchases through a common carrier hired by the purchaser," noting that "the seller is in the best position to guarantee the final destination of the purchases."
The district court further reasoned that, even if the language in section 26-390(10) and (11)(b) contains a grammatical fault and is therefore ambiguous, the subsequent amendments to the City Code clarified that, for the exemptions to apply, the seller must "hire the common carrier." As amended, section 26-390 provides that the "sales of tangible personal property shall be exempt" from Thornton sales tax if (1) the "sales are to those who reside or do business outside" Thornton or Colorado; and (2) the articles purchased are "delivered to the purchaser outside" Thornton or Colorado " with the seller's vehicle "or by common, contract or commercial carrier " who is employed by the seller to effect delivery to the purchaser." City Code § 26-390(10), (11)(b) (emphasis added). The district court determined that the amendment constituted a "clarification" that "bolster[ed] the intent or goal of the statutory scheme of the [City] Code, and is consistent with the purpose of the exemption, i.e., to prevent items from being delivered outside the City in order to qualify for the exemption and then taken directly back to the City for use."
We agree with the district court's reasoning and analysis of the plain language of the exemptions.
Such interpretation comports with the regulations adopted by Thornton's City Treasurer. See § 26-392(a)(2) ("The City Treasurer, with the approval of the City Manager, shall adopt rules and regulations to aid in the administration and interpretation of this Code."). Regulation 9-13.L, which governs intrastate sales, states:
Any sale of tangible personal property to a purchaser residing or doing business out-side of the City [is] exempt, provided that the delivery thereof is made to such purchaser by a carrier
employed by the vendor, by the conveyance of the seller or vendor, or by mail.
When tangible personal property is located within Thornton at the time of sale and is delivered within the City either to a purchaser or his agent, including but not limited to a common contract or commercial carrier, the transaction is a taxable event, irrespective of where the parties to the contract of sale are located, or where the contract is made or accepted, or where the purchase price is paid.
(Emphasis added.)
Regulation 9-13.C, which governs interstate commerce and shipments out of state, provides in relevant part: "Tangible personal property located within the City at the time of sale and delivered within the City to the purchaser or his agent, is taxable, irrespective of the ultimate destination of the property sold." It further sets forth the following exemption, which is similar to the exemptions in the pre-amendment version of section 26-390:
Tangible personal property located within the City at the time of sale which is delivered to the purchaser by the vendor or by
a common carrier employed to effect delivery by the vendor to a destination, and for use, outside of the City and State is not taxable.
The vendor's sales tickets which show the name and address of the consignee, the vendor's shipping records, bills of lading or other proof satisfactory to the City Treasurer must be retained to substantiate any exemption allowed for sales in interstate commerce.
(Emphasis added.)
Department of Revenue Sales and Use Tax Regulation 201-4:39-26-704.2(4) contains substantially similar language to Regulation 9-13.C:
Sales of tangible personal property located within this state at the time of sale and delivered to the purchaser by the vendor
or by common carrier to a destination outside this state for use outside this state are not taxable.
Vendor's shipping records, bills of lading, or other proof satisfactory to the executive director must be retained to substantiate any exemption allowed for such sales in interstate commerce.
1 Code Colo. Regs. 201-4:39-26-704.2(4).
By referring solely to the vendor's sales tickets and shipping records, the second sentence in both regulations modifies the first and makes clear that, if a common carrier is used to effect delivery, the exemption applies only if the common carrier is employed by the vendor or seller. If the exemption was also intended to apply in circumstances where, as here, the purchaser employed the common carrier to effect delivery of the goods, there would be no reason for the regulations' exclusive reference to the vendor's sales tickets and shipping records; rather, the regulations seemingly would have referred to the purchaser's sales tickets and shipping records in addition to the vendor's sales tickets and shipping records.
The reason for this interpretation is simple, practical, and fair. Where an out-of-state consumer purchases goods in Thornton and then pays for the goods to be shipped from Thornton to an out-of-state location, such sale clearly takes place in Thornton, and the purchasing consumer pays sales tax. However, if a vendor in Thornton ships goods to an out-of-state purchaser with its own vehicle or hires a common carrier to ship the goods, the sale takes place out of state at the point of destination (i.e., F.O.B. destination) and is not subject to Thornton sales tax. In either situation, few could question the fairness of fixing the taxable event at the point of sale or the practicality of using the bills of lading as proof of the point of sale.
Furthermore, subsequent clarification of ambiguous legislation is one accepted aid to the discovery of legislative intent. Frank M. Hall Co. v. Newsom, 125 P.3d 444, 451 (Colo. 2005); see also Douglas Cnty. Bd. of Equalization v. Fid. Castle Pines, Ltd., 890 P.2d 119, 125 (Colo. 1995); Rick-strew v. People, 822 P.2d 505, 508 (Colo. 1991). This is so especially where the amendment was adopted soon after the interpretive controversy arose and was for the purpose of making plain what the legislation had been all along. Newsom, 125 P.3d at 451 (citing 1A Norman J. Singer, Sutherland Statutory Construction § 22:30, at 380 (6th ed. 2000)). Here, after Leggett Piatt's January 2006 refund claim, Thornton responded quickly and decisively to correct any ambiguity in the City Code provisions. Within months, Thornton adopted the August 2006 amendment, clarifying that, in order for the exemption to apply under section 26-390(10) or (11)(b), the purchased articles must be "delivered to the purchaser outside" Thornton or Colorado " with the seller's vehicle "or by common, contract or commercial carrier " who is employed by the seller to effect delivery to the purchaser." City Code § 26-390(10), (11)(b) (emphasis added). It thus made clear its original intent that a common carrier be hired and paid for by the seller, by moving the phrase "by the seller" immediately after "employed." Section 26-390(10) and (11)(b) now remove any doubt that Thornton intends to exempt from sales tax only those interstate and intrastate sales where the articles are delivered to the purchaser (1) with the seller's vehicle or (2) by common, contract, or commercial carrier who is employed by the seller. See Newsom, 125 P.3d at 451. Thus, here, because Leggett Piatt delivered the goods, F.O.B. shipping point, at its loading dock to a common carrier that was employed by The Gap, which then delivered the goods to destinations outside Thornton and Colorado, the exemptions under section 26-390(10) and (11)(b) do not apply.
B. Applicability of Exemptions to Sales Transactions Made in October 2007 Under Amended Version of Section 26-390
Taxpayers do not appear to dispute, and we agree, that the amended version of section 26-390 applies to the October 2007 sale transaction, and that under that version of section 26-390, the October 2007 sale transaction is not exempted from sales tax.
V. Commerce Clause Challenge to Sales Tax
Taxpayers next assert that Thornton's sales tax assessment violates the Commerce Clause of the United States Constitution, U.S. Const. art. I, § 8, cl. 3. We perceive no violation.
As we previously determined, the sales transactions took place in Thornton. Thus, the transactions did not constitute interstate commerce, and the Commerce Clause is not implicated. See C A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383, 389, 114 S.Ct. 1677, 128 L.Ed.2d 399 (1994) (the threshold inquiry in dormant Commerce Clause analysis is whether interstate commerce is even at issue); cf. AT T Commc'ns of Mountain States, Inc. v. State, 778 P.2d 677, 682 (Colo. 1989) (state telephone services tax statute did not violate or even implicate the Commerce Clause of the Federal Constitution, as such statute limited taxation to intrastate telephone services). In any event, the City Code explicitly exempts from sales tax those sales transactions that are consummated out of state, thereby avoiding Commerce Clause implications. Specifically, when a seller, who is engaged in business in Thornton, uses its own vehicle or employs a common carrier to deliver goods to an out-of-state purchaser (i.e., F.O.B. destination), the sale and purchase of the goods takes place out of state and, thus, a transaction in interstate commerce occurs, which would be exempt under the City Code. See City Code § 26-390(10).
VI. Due Process Clause Challenge to Sales Tax
Taxpayers also assert that, because "no connection exists between Thornton and The Gap or between Thornton and The Gap's purchases of store fixtures delivered by carriers to The Gap at its stores located outside of Thornton," Thornton's sales tax assessment violates the Due Process Clauses of the Fourteenth Amendment to the United States Constitution, U.S. Const. Amend. XIV, § 1, and article II, section 25 of the Colorado Constitution. For the same reasons stated above, we reject taxpayers' assertion.
VII. Multiple Taxation
Finally, we note that the joined cities have not appealed the district court's ruling that they are required to refund the sales taxes imposed on the same transactions that were taxed by Thornton. Thus, we do not address any issue related to multiple taxation.
The judgment is affirmed.
Judge ROMAN and Judge TERRY concur.