New York's Dead Man's Statute does not bar an attorney from defending himself against disciplinary charges for allegedly raiding escrow account funds of a deceased client, the state Court of Appeals held Thursday.
The judges found that attorney Richard A. Zalk was attempting to clear himself of charges by describing an oral agreement he had with his client to keep the escrow funds, not testifying "against the executor, administrator or survivor" of the dead person, as the Dead Man's Statute prohibits.
The New York statute, CPLR §4519, was enacted in 1851. It prohibits the living from testifying about personal transactions with dead people that the decedents cannot refute in court. One of its main purposes, the court noted, was to protect estates and the survivors from the claims of others.
Zalk is contesting a ruling by the Appellate Division, 1st Department, that he be suspended for two years for allegedly using the escrow funds of his late client, Ruth Gellman.
A referee for the Departmental Disciplinary Committee for the First Judicial District held that the Dead Man's Statute does not apply to Zalk's testimony about the agreement the attorney said he had with Gellman. But the 1st Department found that the statute does apply and suspended him for two years without considering his testimony about the oral agreement he insists he had with Gellman prior to her 2000 death.
The Court of Appeals held in Matter of Zalk, 98, that the referee was correct.
"We therefore look to the language of section 4519, and reach the same conclusion as did the referee: although Zalk 'testified as a witness in his own behalf or interest,' ... he did not testify 'against the executor, administrator or survivor' of Mrs. Gellman," the court held in a per curiam ruling. "Rather, he testified against the Disciplinary Committee, which is none of these latter."
The court sent the matter back to the 1st Department for further deliberations. The disciplinary committee had recommended that Zalk be publicly censured, a sanction that was modified by the 1st Department panel in its 4-1 ruling.
Zalk, a solo practitioner in Manhattan specializing in matrimonial, trust and estates and real estate law, was admitted to the Bar in New York in 1969. He secured a stay of the 1st Department's suspension and has continued to practice as his appeal is being heard.
Zalk has an unblemished disciplinary record except for the allegations of wrongdoing in the Gellman matter.
Gellman's two daughters, as administrators of her estate, had challenged Zalk's personal use of the escrow funds in 2003. They argued that they did not know of any oral agreement their mother had made with the attorney before her death allowing him to keep $200,000, which represented a downpayment on a 1998 sale of an apartment house in Westchester County owned by Gellman.
Zalk, who had long done legal work for Gellman and her late husband Arthur, had handled the $2 million sale of the apartment house for Gellman.
Zalk testified before the disciplinary proceeding that he would typically perform legal work for the Gellmans and then charge them afterward for his services. He said he tried to turn down the $200,000 from Gellman, but that she insisted he keep the money and even joked with him a few months before her death about what he was going to spend it on.
According to the court Thursday, Zalk ultimately withdrew about $100,000 from the escrow account for his own use.
Zalk conceded that he did not have an agreement in writing with Gellman to keep the escrow funds, and his attorney Richard Supple acknowledged during oral arguments before the Court of Appeals that it would have been wiser for him to have done so.
The disciplinary committee argued that allowing Zalk to testify about his oral agreement with Ms. Gellman was prohibited by the Dead Man's Statute because it was against the "vital interests" of her daughters. Among those interests is their possible attempt to seek restitution of the escrow account funds through the Lawyers' Fund for Client Protection or a civil suit.
The court ruled that the daughters' interests in a possible later proceeding against Zalk do not preclude his testimony at this point in the disciplinary case about his purported deal with Gellman.
"The Dead Man's Statute only applies to testimony 'against the executor, administrator or survivor' of the deceased," the court ruled. "It does not foreclose testimony that potentially cuts against these parties' interest in a contingent future proceeding."
Supple, of Hinshaw & Culbertson, said Thursday in an interview that, "We're pleased by the Court's ruling that the Dead Man's Statute should not have been used to preclude consideration of Mr. Zalk's credited testimony that he had a fee agreement for the money at issue with his close friend and client."
Naomi F. Goldstein of the Departmental Disciplinary Committee argued against Zalk in the case. She did not immediately return a telephone call for comment Thursday.
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N.Y. Dead Man's Statute Doesn't Bar Attorney's Defense in Disciplinary Case
New York Law Journal
June 13, 2008
